<PAGE> 1
As filed with the Securities and Exchange Commission on April 9, 1999
Registration No. 333-05265 and 811-07655
------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 | |
Pre-Effective Amendment No. __ | |
Post-Effective Amendment No. 6 |X|
and/or
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940 | |
Amendment No. 9 |X|
(Check appropriate box or boxes)
DRIEHAUS MUTUAL FUNDS
(Exact Name of Registrant as Specified in Charter)
25 EAST ERIE STREET
CHICAGO, ILLINOIS 60611
(Address of Principal Executive Offices, including Zip Code)
MARY H. WEISS, SECRETARY
DRIEHAUS MUTUAL FUNDS
25 EAST ERIE STREET
CHICAGO, ILLINOIS 60611
(Name and Address of Agent for Service)
COPY TO:
CATHY G. O'KELLY
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 NORTH LASALLE STREET
CHICAGO, ILLINOIS 60601
It is proposed that this filing will become effective (check appropriate box):
[ ] Immediately upon filing pursuant to paragraph (b)
[ ] On (date) pursuant to paragraph (b)
[x] 60 days after filing pursuant to paragraph (a) (1)
[ ] On (date) pursuant to paragraph (a) (1)
[ ] 75 days after filing pursuant to paragraph (a) (2)
[ ] On (date) pursuant to paragraph (a) (2) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE> 2
[DRIEHAUS LOGO]
DRIEHAUS MUTUAL FUNDS
25 East Erie Street
Chicago, Illinois 60611
1-800-560-6111
DRIEHAUS INTERNATIONAL GROWTH FUND
DRIEHAUS INTERNATIONAL DISCOVERY FUND
DRIEHAUS EUROPEAN OPPORTUNITY FUND
DRIEHAUS ASIA PACIFIC GROWTH FUND
DRIEHAUS EMERGING MARKETS GROWTH FUND
---------------------------------------------------------------
PROSPECTUS
June 8, 1999
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL AND COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 3
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Overview.................................................... 1
Driehaus International Growth Fund Summary.................. 2
Driehaus International Discovery Fund Summary............... 6
Driehaus European Opportunity Fund Summary.................. 9
Driehaus Asia Pacific Growth Fund Summary................... 11
Driehaus Emerging Markets Growth Fund Summary............... 15
The Funds................................................... 20
Investment Philosophy..................................... 20
Investment Objectives and Principal Investment
Strategies............................................. 20
Driehaus International Growth Fund..................... 20
Driehaus International Discovery Fund.................. 21
Driehaus European Opportunity Fund..................... 21
Driehaus Asia Pacific Growth Fund...................... 22
Driehaus Emerging Markets Growth Fund.................. 23
Related Risks............................................. 23
Portfolio Investments and Other Risk Considerations....... 25
Management of the Funds..................................... 29
Shareholder Information..................................... 31
Net Asset Value........................................... 31
Opening an Account........................................ 31
How to Purchase Shares.................................... 32
How to Redeem Shares...................................... 33
General Redemption Information............................ 33
Shareholder Services and Policies......................... 35
Dividend and Account Policies............................. 35
Distributions and Taxes................................... 35
</TABLE>
<PAGE> 4
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OVERVIEW
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GOAL OF THE DRIEHAUS MUTUAL FUNDS
Each of the Driehaus Mutual Funds strives to increase the value of your
investment (capital appreciation). In other words, each Fund tries to buy stocks
with a potential to appreciate in price. Each Fund has its own strategy for
achieving this goal with a related risk/return profile but employs common growth
techniques. Because stock markets in general, and the individual securities
purchased by the Funds, go down in price as well as up, you may lose money
investing in these Funds. The Funds are specialized investment vehicles and
should be used as part of your overall investment strategy to diversify your
holdings. So please review all the disclosure information carefully.
WHO MAY WANT TO INVEST IN THE FUNDS
These international growth funds may be an appropriate investment if you:
- Want to diversify your portfolio of domestic investments into
international stocks
- Are not looking for current income
- Are prepared to receive taxable long-term and short-term capital gains
- Are willing to accept higher short-term risk in exchange for potential
higher long-term returns
- Want to complement your U.S. holdings through equity investments in
countries outside the United States
- Can tolerate the increased price volatility, currency fluctuations and
other risks associated with non-U.S. securities
- Are investing with long-term goals in mind (such as retirement or
funding a child's education, which may be many years in the future)
THE DRIEHAUS MUTUAL FUNDS ADVISER
Each of the Driehaus Mutual Funds is managed by Driehaus Capital Management,
Inc. (the "Adviser"), a registered investment adviser founded in 1982. The
Adviser currently manages more than $ billion.
INVESTMENT PHILOSOPHY
The Adviser believes that over time revenue and earnings growth are the primary
determinants of equity valuations. Accordingly, the Adviser concentrates its
investments in companies which have demonstrated the ability to rapidly increase
sales and earnings, as well as the potential for continued growth in the future.
The Adviser evaluates the earnings quality of such companies to determine
whether current earnings might indicate future results. [In the case of Internet
related equities, demonstrated earnings growth generally may not have been
achieved. In such cases, the Adviser may consider the future earnings
capabilities of these companies by evaluating the trend of losses.] Factors such
as strong company earnings reports, increased order backlogs, new product
introductions, industry developments[, and relevant industry metrics] alert the
Adviser to potential investments. The Adviser combines this information with its
own technical analyses to reach an overall determination about the
attractiveness of specific securities. To a lesser extent, the Adviser also uses
macroeconomics or country-specific analyses. While the Adviser seeks companies
that have demonstrated superior earnings growth, the Adviser may also purchase
the stock of companies based on the expectation of capital appreciation where
there is no demonstrable record of earnings growth or increasing sales. This
investment philosophy results in high portfolio turnover. High portfolio
turnover in any year may result in payment by a Fund of above-average amounts of
transaction costs and could result in the payment by shareholders of
above-average amounts of taxes on realized investment gains.
<PAGE> 5
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DRIEHAUS INTERNATIONAL GROWTH FUND SUMMARY
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GOAL AND STRATEGY
The Driehaus International Growth Fund seeks to maximize capital appreciation.
To do so, the Fund invests in the stocks of foreign companies. Under normal
market conditions, the Fund invests substantially all (no less than 65%) of its
assets in at least three countries other than the United States. The Fund may
invest a substantial portion of its assets in emerging markets from time to
time.
The Fund uses a growth style of investment by investing in stocks which the
Adviser believes have some or all of the following characteristics:
- Dominant products or market niches
- Improved sales outlook or opportunities
- Demonstrated sales growth and earnings
- Cost restructuring programs which are expected to positively affect
company earnings
- Increased order backlogs, new product introductions, or industry
developments which are expected to positively affect company earnings
The Adviser also considers macroeconomic information and technical information
in evaluating stocks and countries for investment.
PORTFOLIO SECURITIES
The Fund invests primarily in the equity securities of foreign companies. In
general, the Fund invests in companies with market capitalization of over $300
million and will not invest in securities of issuers with market capitalizations
of less than $200 million.
PRINCIPAL RISK FACTORS
The Fund is subject to market risk, which is the possibility that stock prices
overall will decline over short or even long periods. Stock markets tend to move
in cycles, with periods of rising prices and periods of falling prices. These
fluctuations are expected to have a substantial influence on the value of the
Fund. In addition, this is an international fund and, therefore, all the risks
of foreign investment are present:
- Less liquidity
- Greater volatility
- Political instability
- Restrictions on foreign investment and repatriation of capital
- Less complete and reliable information about foreign companies
- Reduced government supervision of some foreign securities markets
- Lower responsiveness of foreign management to shareholder concerns
- Foreign economic problems like the Asian and Emerging Market crises
- Fluctuation in exchange rates of foreign currencies and risks of
devaluation
- The implementation of the "Euro" and the uncertainty of the long-term
acceptance of the currency and the monetary union
- Emerging market risk such as limited trading volume, expropriation,
devaluation or other adverse political or social developments
This is a nondiversified fund; compared to other funds, this Fund may invest a
greater percentage of assets in a particular issuer or a small number of
issuers. As a consequence, the Fund may be subject to greater risks and larger
losses than diversified funds.
2
<PAGE> 6
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DRIEHAUS INTERNATIONAL GROWTH FUND
- --------------------------------------------------------------------------------
PERFORMANCE
The Fund's returns will vary, and you could lose money. The information below
provides an illustration of how the Fund's performance has varied over time. The
bar chart depicts the change in the Fund's performance from year-to-year during
the years indicated. The table compares the Fund's average annual total returns
for the periods indicated to a broad-based securities market index and to an
index of funds with investment objectives similar to those of the Fund. The
Fund's past performance does not necessarily indicate how it will perform in the
future.
ANNUAL RETURNS FOR THE YEARS ENDED DECEMBER 31*
[BAR CHART]
<TABLE>
<CAPTION>
ANNUAL RETURNS
--------------
<S> <C>
'1991' 21.70
'1992' 8.59
'1993' 73.71
'1994' -13.61
'1995' 18.08
'1996' 24.47
'1997' 14.39
'1998' 15.15
</TABLE>
During the period shown in the bar chart, the highest return for a quarter was
26.11% (quarter ended 12/31/93) and the lowest return for a quarter was -19.16%
(quarter ended 9/30/98).
AVERAGE ANNUAL TOTAL RETURNS
(periods ended December 31, 1998)
(data includes reinvestment of dividends)
<TABLE>
<CAPTION>
DRIEHAUS INTERNATIONAL MSCI EAFE LIPPER INTERNATIONAL
GROWTH FUND* INDEX** FUND INDEX***
---------------------- --------- --------------------
<S> <C> <C> <C>
1 Year...................... 15.15% 20.00% 12.66%
5 Years..................... 10.83% 9.19% 8.59%
Since Inception (July 1,
1990)..................... 15.67% 6.91% 8.14%
</TABLE>
- ---------------
* The Driehaus International Growth Fund 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, which was
established on July 1, 1990, was managed following substantially the same
objective, policies and philosophies as are currently followed by the
Driehaus International Growth Fund, successor to the Partnership's assets on
October 28, 1996. The Partnership was not registered under the Investment
Company Act of 1940 ("1940 Act") and thus was not subject to certain
investment and operational restrictions that are imposed by the 1940 Act. If
the Partnership had been registered under the 1940 Act, its performance may
have been adversely affected. The Partnership's performance has been
restated to reflect estimated expenses of the Fund.
** The Morgan Stanley Capital International Europe, Australia and Far East
Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock
markets. It is an unmanaged index composed of a sample of companies
representative of the market structure of 20 European and Pacific Basin
countries.
*** The Lipper International Funds Index is an equally-weighted managed index of
the 30 largest qualifying international funds that invest in securities with
primary trading markets outside of the United States.
3
<PAGE> 7
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DRIEHAUS INTERNATIONAL GROWTH FUND
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
SHAREHOLDER FEES. All Driehaus Mutual Funds are no-load investments, so you will
not pay any shareholder fees (such as sales loads, [redemption fees] or exchange
fees) when you buy or sell shares of the Fund. However, there is a $25 charge
for payments of redemption proceeds by wire (which may be waived for certain
financial institutions, however, certain financial institutions may charge an
account-based service fee).
ANNUAL FUND OPERATING EXPENSES are paid out of the Fund's assets and include
fees for portfolio management, maintenance of shareholder accounts, shareholder
servicing, accounting and other services. You do not pay these fees directly
but, as the Example shows, these costs are borne indirectly by shareholders.
FEES AND EXPENSES OF THE FUND. This table describes the fees and expenses that
you may pay if you buy and hold shares of the Fund.
<TABLE>
<S> <C>
SHAREHOLDER FEES (fees paid directly from your investment)
Maximum Sales Charge Imposed on Purchases................... None
Maximum Deferred Sales Charge............................... None
Maximum Sales Charge Imposed on Reinvested Dividends........ None
Redemption Fee.............................................. %
----
Exchange Fee................................................ None
Maximum Account Fee......................................... None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted
from Fund assets)
Management Fee.............................................. 1.50%
Other Expenses.............................................. 0.50%
----
Total Annual Fund Operating Expenses........................ 2.00%
====
</TABLE>
EXAMPLE: This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the Fund's operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$210 $648 $1,110 $2,388
</TABLE>
4
<PAGE> 8
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- DRIEHAUS INTERNATIONAL GROWTH FUND
- --------------------------------------------------------------------------------
This financial highlights table is intended to help you understand the Fund's
financial performance for the period of the Fund's operations. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Arthur Andersen LLP, whose
report, along with the Fund's financial statements, are included in the annual
report, which is available upon request.
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
FOR THE FOUR-MONTH OCTOBER 28, 1996
PERIOD (COMMENCEMENT OF
SEPTEMBER 1, 1998 FOR THE OPERATIONS)
THROUGH YEAR ENDED THROUGH
DECEMBER 31, 1998 AUGUST 31, 1998 AUGUST 31, 1997
------------------ --------------- ----------------
<S> <C> <C> <C>
Net asset value, beginning of period... $ 12.39 $ 11.90 $ 10.00
INCOME (LOSS) FROM INVESTMENT
OPERATIONS:
Net investment loss.................... (0.04) (0.07) (0.05)
Net gains (losses) on investments (both
realized and unrealized)............. (0.25) 1.77 1.95
-------- -------- --------
Total income (loss) from investment
operations........................... (0.29) 1.70 1.90
-------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income... 0.00 0.00 0.00
Distributions from capital gains
(losses)............................. (0.55) (1.21) 0.00
Returns of capital..................... 0.00 0.00 0.00
-------- -------- --------
Total distributions.................... (0.55) (1.21) 0.00
-------- -------- --------
Net asset value, end of period....... $ 11.55 $ 12.39 $ 11.90
======== ======== ========
Total return........................... (2.04)%(2) 16.50% 19.00%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)... $223,831 $229,088 $180,545
Ratio of expenses to average net
assets(1)(3)......................... 2.00% 1.88% 2.11%
Ratio of net investment loss to average
net assets(1)(3)..................... (1.46)% (0.54)% (0.67)%
Portfolio turnover rate................ 116.28%(2) 219.78% 380.02%(2)
</TABLE>
- ---------------
(1) Annualized.
(2) Not annualized.
(3) Such ratios are after transfer agent fee waivers. PFPC Inc., the
administrative agent and transfer agent, waived a portion of its fees.
5
<PAGE> 9
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DRIEHAUS INTERNATIONAL DISCOVERY FUND SUMMARY
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
The Driehaus International Discovery Fund seeks to maximize capital
appreciation. To do so, the Fund generally invests in the stocks of foreign
companies with market capitalizations of less than $1 billion. Under normal
market conditions, the Fund invests substantially all (no less than 65%) of its
assets in at least three different countries other than the United States. The
Fund may invest a substantial portion of its assets in emerging markets from
time to time.
The Fund uses a growth style of investment by investing in stocks which the
Adviser believes have some or all of the following characteristics:
- Dominant products or market niches
- Improved sales outlook or opportunities
- Demonstrated sales growth and earnings
- Cost restructuring programs which are expected to positively affect
company earnings
- Increased order backlogs, new product introductions, or industry
developments which are expected to positively affect company earnings
The Adviser also considers macroeconomic information and technical information
in evaluating stocks and countries for investment.
PORTFOLIO SECURITIES
The Fund invests primarily in the equity securities of small foreign companies.
In general, the Fund invests in companies with market capitalization of less
than $1 billion. The Fund may invest in companies with limited operating
histories.
PRINCIPAL RISK FACTORS
The Fund is subject to market risk, which is the possibility that stock prices
overall will decline over short or even long periods. Stock markets tend to move
in cycles, with periods of rising prices and periods of falling prices. These
fluctuations are expected to have a substantial influence on the value of the
Fund. In addition, this is an international fund and, therefore, all the risks
of foreign investment are present:
- Less liquidity
- Greater volatility
- Political instability
- Restrictions on foreign investment and repatriation of capital
- Less complete and reliable information about foreign companies
- Reduced government supervision of some foreign securities markets
- Lower responsiveness of foreign management to shareholder concerns
- Foreign economic problems like the Asian and Emerging Market crises
- Fluctuation in exchange rates of foreign currencies and risks of
devaluation
- The implementation of the "Euro" and the uncertainty of the long-term
acceptance of the currency and the monetary union
- Emerging market risk such as limited trading volume, expropriation,
devaluation or other adverse political or social developments
Some emerging markets are currently experiencing a currency crisis and there is
some risk of a spreading crisis. This crisis has caused some countries to
institute currency reform measures which inhibit the free flow of currency out
of their country.
6
<PAGE> 10
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DRIEHAUS INTERNATIONAL DISCOVERY FUND SUMMARY
- --------------------------------------------------------------------------------
The Fund invests in companies that are smaller, less established, with less
liquid markets for their stock and therefore may be riskier investments.
This is a nondiversified fund; compared to other funds, this Fund may invest a
greater percentage of assets in a particular issuer or a small number of
issuers. As a consequence, the Fund may be subject to greater risks and larger
losses than diversified funds.
7
<PAGE> 11
- --------------------------------------------------------------------------------
DRIEHAUS INTERNATIONAL DISCOVERY FUND
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
SHAREHOLDER FEES. All Driehaus Mutual Funds are no-load investments, so you will
not pay any shareholder fees (such as sales loads, [redemption fees] or exchange
fees) when you buy or sell shares of the Fund. However, there is a $25 charge
for payments of redemption proceeds by wire (which may be waived for certain
financial institutions, however, certain financial institutions may charge an
account-based service fee).
ANNUAL FUND OPERATING EXPENSES are paid out of the Fund's assets and include
fees for portfolio management, maintenance of shareholder accounts, shareholder
servicing, accounting and other services. You do not pay these fees directly
but, as the Example shows, these costs are borne indirectly by shareholders.
FEES AND EXPENSES OF THE FUND. This table describes the fees and expenses that
you may pay if you buy and hold shares of the Fund.
<TABLE>
<S> <C>
SHAREHOLDER FEES (fees paid directly from your investment)
Maximum Sales Charge Imposed on Purchases................... None
Maximum Deferred Sales Charge............................... None
Maximum Sales Charge Imposed on Reinvested Dividends........ None
Redemption Fee.............................................. %
Exchange Fee................................................ None
Maximum Account Fee......................................... None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted
from Fund assets)
Management Fee.............................................. 1.50%
Other Expenses.............................................. 4.34%*
-----
Total Annual Fund Operating Expenses........................ 5.84%*
Accounting, Administrative and Transfer Agency Contractual
Fee Waivers............................................... (2.30)%
-----
Net Expenses................................................ 3.54%
=====
</TABLE>
- ---------------
* The Adviser has agreed to absorb other operating expenses to the extent
necessary to ensure that total annual fund operating expenses after all
waivers will not exceed 2.50% of average net assets during 1999.
EXAMPLE: This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the Fund's operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions, your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
- ------ -------
<S> <C>
$613 $1,819
</TABLE>
The Driehaus International Discovery Fund commenced investment operations on
January 4, 1999. Therefore, no financial highlights are included for the Fund's
fiscal year ended December 31, 1998.
8
<PAGE> 12
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DRIEHAUS EUROPEAN OPPORTUNITY FUND SUMMARY
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
The Driehaus European Opportunity Fund seeks to maximize capital appreciation.
To do so, the Fund invests in the stocks of European companies. Under normal
market conditions, the Fund invests substantially all (no less than 65%) of its
assets in European countries. The Fund may invest a substantial portion of its
assets in emerging markets.
The Fund uses a growth style of investment by investing in stocks which the
Adviser believes have some or all of the following characteristics:
- Dominant products or market niches
- Improved sales outlook or opportunities
- Demonstrated sales growth and earnings
- Cost restructuring programs which are expected to positively affect
company earnings
- Increased order backlogs, new product introductions, or industry
developments which are expected to positively affect company earnings
The Adviser also considers macroeconomic information and technical information
in evaluating stocks and countries for investment.
PORTFOLIO SECURITIES
The Fund invests primarily in the equity securities of European companies. The
Fund may invest in companies with limited operating histories.
PRINCIPAL RISK FACTORS
The Fund is subject to market risk, which is the possibility that stock prices
overall will decline over short or even long periods. Stock markets tend to move
in cycles, with periods of rising prices and periods of falling prices. These
fluctuations are expected to have a substantial influence on the value of the
Fund. In addition, this is an international fund and, therefore, all the risks
of foreign investment are present:
- Less liquidity
- Greater volatility
- Political instability
- Restrictions on foreign investment and repatriation of capital
- Less complete and reliable information about foreign companies
- Reduced government supervision of some foreign securities markets
- Lower responsiveness of foreign management to shareholder concerns
- Foreign economic problems like the Asian and Emerging Market crises
- Fluctuation in exchange rates of foreign currencies and risks of
devaluation
- The implementation of the "Euro" and the uncertainty of the long-term
acceptance of the currency and the monetary union
- Emerging market risk such as limited trading volume, expropriation,
devaluation or other adverse political or social developments
This is a nondiversified fund; compared to other funds, this Fund may invest a
greater percentage of assets in a particular issuer or a small number of
issuers. As a consequence, the Fund may be subject to greater risks and larger
losses than diversified funds.
9
<PAGE> 13
- --------------------------------------------------------------------------------
DRIEHAUS EUROPEAN OPPORTUNITY FUND
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
SHAREHOLDER FEES. All Driehaus Mutual Funds are no-load investments, so you will
not pay any shareholder fees (such as sales loads, [redemption fees] or exchange
fees) when you buy or sell shares of the Fund. However, there is a $25 charge
for payments of redemption proceeds by wire (which may be waived for certain
financial institutions, however, certain financial institutions may charge an
account-based service fee).
ANNUAL FUND OPERATING EXPENSES are paid out of the Fund's assets and include
fees for portfolio management, maintenance of shareholder accounts, shareholder
servicing, accounting and other services. You do not pay these fees directly
but, as the Example shows, these costs are borne indirectly by shareholders.
FEES AND EXPENSES OF THE FUND. This table describes the fees and expenses that
you may pay if you buy or hold shares of the Fund.
<TABLE>
<S> <C>
SHAREHOLDER FEES (fees paid directly from your investment)
Maximum Sales Charge Imposed on Purchases................... None
Maximum Deferred Sales Charge............................... None
Maximum Sales Charge Imposed on Reinvested Dividends........ None
Redemption Fee.............................................. %
Exchange Fee................................................ None
Maximum Account Fee......................................... None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted
from Fund assets)
Management Fee.............................................. 1.50%
Other Expenses.............................................. 5.34%*
Total Annual Fund Operating Expenses........................ 6.84%*
Accounting, Administrative and Transfer Agency Contractual
Fee Waivers............................................... (2.99)%
Net Expenses................................................ 3.85%
</TABLE>
- ---------------
* The Adviser has agreed to absorb other operating expenses to the extent
necessary to ensure that the total fund operating expenses after all waivers
will not exceed 2.10% of average net assets during 1999.
EXAMPLE: This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the Fund's operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
- ------ -------
<S> <C>
$718 $2,108
</TABLE>
The Driehaus European Opportunity Fund commenced investment operations on
January 4, 1999. Therefore, no financial highlights are included for the Fund's
fiscal year ended December 31, 1998.
10
<PAGE> 14
- --------------------------------------------------------------------------------
DRIEHAUS ASIA PACIFIC GROWTH FUND SUMMARY
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
The Driehaus Asia Pacific Growth Fund seeks to maximize capital appreciation. To
do so, the Fund invests in the stocks of Asia Pacific companies. Under normal
market conditions, the Fund invests substantially all (no less than 65%) of its
assets in Asia Pacific companies. The Fund invests a substantial portion of its
assets in emerging markets.
The Fund uses a growth style of investment by investing in stocks which the
Adviser believes have some or all of the following characteristics:
- Dominant products or market niches
- Improved sales outlook or opportunities
- Demonstrated sales growth and earnings
- Cost restructuring programs which are expected to positively affect
company earnings
- Increased order backlogs, new product introductions, or industry
developments which are expected to positively affect company earnings
The Adviser also considers macroeconomic information and technical information
in evaluating stocks and countries for investment.
PORTFOLIO SECURITIES
The Fund invests primarily in the equity securities of Asia Pacific companies.
The Fund may invest in companies with limited operating histories.
PRINCIPAL RISK FACTORS
The Fund is subject to market risk, which is the possibility that stock prices
overall will decline over short or even long periods. Stock markets tend to move
in cycles, with periods of rising prices and periods of falling prices. These
fluctuations are expected to have a substantial influence on the value of the
Fund. In addition, this is an international fund and, therefore, all the risks
of foreign investment are present:
- Less liquidity
- Greater volatility
- Political instability
- Restrictions on foreign investment and repatriation of capital
- Less complete and reliable information about foreign companies
- Reduced government supervision of some foreign securities markets
- Lower responsiveness of foreign management to shareholder concerns
- Foreign economic problems like the Asian and Emerging Market crises
- Fluctuation in exchange rates of foreign currencies and risks of
devaluation
- Emerging market risk such as limited trading volume, expropriation,
devaluation or other adverse political or social developments
This is a nondiversified fund; compared to other funds, this Fund may invest a
greater percentage of assets in a particular issuer or a small number of
issuers. As a consequence, the Fund may be subject to greater risks and larger
losses than diversified funds.
11
<PAGE> 15
- --------------------------------------------------------------------------------
DRIEHAUS ASIA PACIFIC GROWTH FUND
- --------------------------------------------------------------------------------
PERFORMANCE
The Fund's returns will vary, and you could lose money. The information below
provides an illustration of how the Fund performed during the 1998 calendar
year, and gives some indication of the risks of an investment in the Fund by
comparing the Fund's performance with a broad measure of market performance and
an index of funds with investment objectives similar to the Fund's. The Fund's
past performance does not necessarily indicate how it will perform in the
future.
ANNUAL RETURNS FOR THE YEAR ENDED DECEMBER 31
[BAR CHART]
<TABLE>
<CAPTION>
ANNUAL RETURNS
--------------
<S> <C>
'1998' -1
</TABLE>
During the period shown in the bar chart, the highest return for a quarter was
19.28% (quarter ended 12/31/98) and the lowest return for a quarter was -14.57%
(quarter ended 6/30/98).
AVERAGE ANNUAL TOTAL RETURNS
(period ended December 31, 1998)
(data includes reinvestment of dividends)
<TABLE>
<CAPTION>
DRIEHAUS ASIA PACIFIC MSCI ASIA LIPPER PACIFIC
GROWTH FUND PACIFIC INDEX* REGION FUNDS INDEX**
--------------------- -------------- --------------------
<S> <C> <C> <C>
1 Year................... -1.00% 2.03% -2.95%
</TABLE>
- ---------------
* The Morgan Stanley Capital International Asia Pacific Index (MSCI 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.
** The Lipper Pacific Region Funds Index is a equally-weighted managed index of
the 10 largest qualifying funds that invest in securities with primary
trading markets concentrated in the Western Pacific Basin or a single country
within this region.
12
<PAGE> 16
- --------------------------------------------------------------------------------
DRIEHAUS ASIA PACIFIC GROWTH FUND
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
SHAREHOLDER FEES. All Driehaus Mutual Funds are no-load investments, so you will
not pay any shareholder fees (such as sales loads, [redemption fees] or exchange
fees) when you buy or sell shares of the Fund. However, there is a $25 charge
for payments of redemption proceeds by wire (which may be waived for certain
financial institutions, however, certain financial institutions may charge an
account-based service fee).
ANNUAL FUND OPERATING EXPENSES are paid out of the Fund's assets and include
fees for portfolio management, maintenance of shareholder accounts, shareholder
servicing, accounting and other services. You do not pay these fees directly
but, as the Example shows, these costs are borne indirectly by shareholders.
FEES AND EXPENSES OF THE FUND. This table describes the fees and expenses that
you may pay if you buy and hold shares of the Fund.
<TABLE>
<S> <C>
SHAREHOLDER FEES (fees paid directly from your investment)
Maximum Sales Charge Imposed on Purchases................... None
Maximum Deferred Sales Charge............................... None
Maximum Sales Charge Imposed on Reinvested Dividends........ None
Redemption Fee.............................................. %
----
Exchange Fee................................................ None
Maximum Account Fee......................................... None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted
from Fund assets)
Management Fee.............................................. 1.50%
Other Expenses.............................................. 6.89%*
----
Total Annual Fund Operating Expenses........................ 8.39%*
Accounting, Administrative and Transfer Agency Contractual
Fee Waivers............................................... (3.15)%
----
Net Expenses................................................ 5.24%
====
</TABLE>
- ---------------
* The Adviser has agreed to absorb other operating expenses to the extent
necessary to ensure that total annual fund operating expenses after all
waivers will not exceed 2.95% of average net assets during 1998 and 1999.
EXAMPLE: This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the Fund's operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$881 $2,543 $4,081 $7,439
</TABLE>
13
<PAGE> 17
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- DRIEHAUS ASIA PACIFIC GROWTH FUND
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the Fund's
financial performance for the period of the Fund's operations. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Arthur Andersen LLP, whose
report, along with the Fund's financial statements, are included in the annual
report, which is available upon request.
<TABLE>
<CAPTION>
FOR THE
FOR THE PERIOD FROM
THREE-MONTH DECEMBER 31, 1997
PERIOD (COMMENCEMENT
OCTOBER 1, 1998 OF OPERATIONS)
THROUGH THROUGH
DECEMBER 31, 1998 SEPTEMBER 30, 1998
----------------- ------------------
<S> <C> <C>
Net asset value, beginning of period................. $ 8.30 $ 10.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment loss.................................. (0.04) (0.02)
Net gains (losses) on investments (both realized and
unrealized)........................................ 1.64 (1.68)
------ -------
Total income (loss) from investment operations....... 1.60 (1.70)
LESS DISTRIBUTIONS:
Dividends from net investment income................. 0.00 0.00
Distributions from capital gains..................... 0.00 0.00
Returns of capital................................... 0.00 0.00
------ -------
Total distributions.................................. 0.00 0.00
------ -------
Net asset value, end of period....................... $ 9.90 $ 8.30
====== =======
Total return(2)...................................... 19.28% (17.00)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)................. $4,965 $ 3,582
Ratio of expenses to average net assets(1)(3)........ 2.95% 2.95%
Ratio of net investment loss to average net
assets(1)(3)....................................... (2.64)% (0.45)%
Portfolio turnover rate(2)........................... 92.40% 283.59%
</TABLE>
- ---------------
(1) Annualized.
(2) Not annualized.
(3) 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 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) after all waivers 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.
14
<PAGE> 18
- --------------------------------------------------------------------------------
DRIEHAUS EMERGING MARKETS GROWTH FUND SUMMARY
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
The Driehaus Emerging Markets Growth Fund seeks to maximize capital
appreciation. To do so, the Fund invests in the stocks of companies in emerging
markets around the world. Under normal market conditions, the Fund invests
substantially all (no less than 65%) of its assets in emerging markets
companies.
The Fund uses a growth style of investment by investing in stocks which the
Adviser believes have some or all of the following characteristics:
- Dominant products or market niches
- Improved sales outlook or opportunities
- Demonstrated sales growth and earnings
- Cost restructuring programs which are expected to positively affect
company earnings
- Increased order backlogs, new product introductions, or industry
developments which are expected to positively affect company earnings
The Adviser also considers macroeconomic information and technical information
in evaluating stocks and countries for investment.
PORTFOLIO SECURITIES
The Fund invests primarily in the equity securities of companies in emerging
markets around the world. The Fund may invest in companies with limited
operating histories.
PRINCIPAL RISK FACTORS
The Fund is subject to market risk, which is the possibility that stock prices
overall will decline over short or even long periods. Stock markets tend to move
in cycles, with periods of rising prices and periods of falling prices. These
fluctuations are expected to have a substantial influence on the value of the
Fund. In addition, this is an international fund and, therefore, all the risks
of foreign investment are present:
- Less liquidity
- Greater volatility
- Political instability
- Restrictions on foreign investment and repatriation of capital
- Less complete and reliable information about foreign companies
- Reduced government supervision of some foreign securities markets
- Lower responsiveness of foreign management to shareholder concerns
- Foreign economic problems like the Asian and Emerging Market crises
- Fluctuation in exchange rates of foreign currencies and risks of
devaluation
- Dependence of emerging market companies upon commodities which may be
subject to economic cycles
- The implementation of the "Euro" and the uncertainty of the long-term
acceptance of the currency and the monetary union
- Emerging market risk such as limited trading volume, expropriation,
devaluation or other adverse political or social developments
Some emerging markets are currently experiencing a currency crisis and there is
some risk of a spreading crisis. This crisis has caused some countries to
institute currency reform measures which inhibit the free flow of currency out
of their country.
15
<PAGE> 19
- --------------------------------------------------------------------------------
DRIEHAUS EMERGING MARKETS GROWTH FUND SUMMARY
- --------------------------------------------------------------------------------
The Fund invests in companies that are smaller, less established, with less
liquid markets for their stock and therefore may be riskier investments.
This is a nondiversified fund; compared to other funds, this Fund may invest a
greater percentage of assets in a particular issuer or a small number of
issuers. As a consequence, the Fund may be subject to greater risks and larger
losses than diversified funds.
16
<PAGE> 20
- --------------------------------------------------------------------------------
DRIEHAUS EMERGING MARKETS GROWTH FUND
- --------------------------------------------------------------------------------
PERFORMANCE
The Fund's returns will vary, and you could lose money. The information below
provides an illustration of how the Fund performed during the 1998 calendar
year, and gives some indication of the risks of an investment in the Fund by
comparing the Fund's performance with a broad measure of market performance and
an index of funds with investment objectives similar to the Fund's. The Fund's
past performance does not necessarily indicate how it will perform in the
future.
ANNUAL RETURNS FOR THE YEAR ENDED DECEMBER 31
[BAR CHART]
<TABLE>
<CAPTION>
ANNUAL RETURNS
--------------
<S> <C>
'1998' -12.7
</TABLE>
During the period shown in the bar chart, the highest return for a quarter was
15.48% (quarter ended 12/31/98) and the lowest return for a quarter was -20.59%
(quarter ended 9/30/98).
AVERAGE ANNUAL TOTAL RETURNS
(period ended December 31, 1998)
(data includes reinvestment of dividends)
<TABLE>
<CAPTION>
DRIEHAUS EMERGING MARKETS MSCI EMERGING LIPPER EMERGING
GROWTH FUND MARKETS FUND INDEX* MARKETS FUNDS INDEX**
------------------------- ------------------- ---------------------
<S> <C> <C> <C>
1 Year............... -12.70% -23.21% -26.87%
</TABLE>
- ---------------
* The Morgan Stanley Capital International Emerging Markets Fund Index (MSCI
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.
** The Lipper Emerging Markets Funds Index is an equally-weighted managed index
of the 30 largest qualifying funds. Funds in this index seek long-term
capital appreciation by investing at least 65% of their total assets in
emerging market equity securities, where "emerging markets" is defined by a
country's per capita GNP or other economic measure.
17
<PAGE> 21
- --------------------------------------------------------------------------------
DRIEHAUS EMERGING MARKETS GROWTH FUND
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
SHAREHOLDER FEES. All Driehaus Mutual Funds are no-load investments, so you will
not pay any shareholder fees (such as sales loads, [redemption fees] or exchange
fees) when you buy or sell shares of the Fund. However, there is a $25 charge
for payments of redemption proceeds by wire (which may be waived for certain
financial institutions, however, certain financial institutions may charge an
account-based service fee).
ANNUAL FUND OPERATING EXPENSES are paid out of the Fund's assets and include
fees for portfolio management, maintenance of shareholder accounts, shareholder
servicing, accounting and other services. You do not pay these fees directly
but, as the Example shows, these costs are borne indirectly by shareholders.
FEES AND EXPENSES OF THE FUND. This table describes the fees and expenses that
you may pay if you buy and hold shares of the Fund.
<TABLE>
<S> <C>
SHAREHOLDER FEES (fees paid directly from your investment)
Maximum Sales Charge Imposed on Purchases................... None
Maximum Deferred Sales Charge............................... None
Maximum Sales Charge Imposed on Reinvested Dividends........ None
Redemption Fee.............................................. %
====
Exchange Fee................................................ None
Maximum Account Fee......................................... None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted
from Fund assets)
Management Fee.............................................. 1.50%
Other Expenses.............................................. 7.65%*
----
Total Annual Fund Operating Expenses........................ 9.15%*
Accounting, Administrative and Transfer Agency Contractual
Fee Waivers............................................... (3.63)%
----
Net Expenses................................................ 5.52%
====
</TABLE>
- ---------------
* The Adviser has agreed to absorb other operating expenses to the extent
necessary to ensure that total annual fund operating expenses after all
waivers will not exceed 2.75% of the average net assets during 1998 and 1999.
EXAMPLE: This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the Fund's operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$961 $2,751 $4,380 $7,838
</TABLE>
18
<PAGE> 22
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- DRIEHAUS EMERGING MARKETS GROWTH FUND
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the Fund's
financial performance for the period of the Fund's operations. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Arthur Andersen LLP, whose
report, along with the Fund's financial statements, are included in the annual
report, which is available upon request.
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
FOR THE THREE-MONTH DECEMBER 31, 1997
PERIOD (COMMENCEMENT OF
OCTOBER 1, 1998 OPERATIONS)
THROUGH THROUGH
DECEMBER 31, 1998 SEPTEMBER 30, 1998
------------------- -------------------
<S> <C> <C>
Net asset value, beginning of period................ $ 7.56 $ 10.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment loss................................. (0.03) (0.03)
Net gains (losses) on investments (both realized and
unrealized)....................................... 1.20 (2.41)
------ -------
Total income (loss) from investment operations...... 1.17 (2.44)
------ -------
LESS DISTRIBUTIONS:
Dividends from net investment income................ 0.00 0.00
Distributions from capital gains.................... 0.00 0.00
Returns of capital.................................. 0.00 0.00
------ -------
Total distributions................................. 0.00 0.00
------ -------
Net asset value, end of period...................... $ 8.73 $ 7.56
====== =======
Total return(2)..................................... 15.48% (24.40)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)................ $4,028 $ 3,487
Ratio of expenses to average net assets(1)(3)....... 2.75% 2.75%
Ratio of net investment loss to average net
assets(1)(3)...................................... (1.23)% (0.49)%
Portfolio turnover rate(2).......................... 82.60% 261.20%
</TABLE>
- ---------------
(1) Annualized.
(2) Not annualized.
(3) 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 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) after all waivers 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.
19
<PAGE> 23
- --------------------------------------------------------------------------------
THE FUNDS
- --------------------------------------------------------------------------------
The Driehaus International Growth Fund, Driehaus International Discovery Fund,
Driehaus European Opportunity Fund, Driehaus Asia Pacific Growth Fund, and
Driehaus Emerging Markets Growth Fund (each a "Fund" and jointly the "Funds")
are each a series of the Driehaus Mutual Funds (the "Trust"), an open-end
management investment company. Driehaus Capital Management, Inc. (the "Adviser")
provides management and investment advisory services to the Funds. Prospective
investors should consider an investment in a Fund as a long-term investment.
There is no assurance that a Fund will meet its investment objective.
INVESTMENT PHILOSOPHY
In addition to the factors noted in the Overview, the Adviser considers numerous
criteria in evaluating countries for investment and determining country and
regional weightings. Such criteria include the current and prospective growth
rates of various economies, interest rate trends, inflation rates, trade
balances and currency trends. The Adviser also reviews technical information on
stock markets. The analysis may also involve considerations specific to a
certain country or region of the world.
INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES
DRIEHAUS INTERNATIONAL GROWTH FUND. The investment objective of the Driehaus
International Growth Fund is to maximize capital appreciation. The Fund seeks to
achieve its objective by investing primarily in the equity securities of foreign
companies. Under normal market conditions, the Fund will invest substantially
all (no less than 65%) of its assets in at least three countries other than the
United States. There are no maximum limitations on the number of countries in
which the Adviser can or must invest at a given time. There are also no specific
limitations on the percentage of assets that may be invested in securities of
issuers located in any one country at a given time. The Fund is a nondiversified
fund. Current dividend income is not an investment consideration, and dividend
income is incidental to the Fund's overall investment objective. The Fund
generally will invest in securities of issuers with market capitalizations of
greater than $300 million and will not invest in securities of issuers with
market capitalizations of less than $200 million. The Fund may also invest in
securities of issuers that, together with any predecessors, have been limited
operating histories.
The securities markets of many developing economies are sometimes referred to as
"emerging markets." Although the amount of the Fund's assets invested in
emerging markets will vary over time, it is expected that a substantial portion
of the Fund's assets will be invested in emerging markets. Currently, emerging
markets generally include every country in the world other than the United
States, Canada, Japan, Australia, New Zealand, Hong Kong, Singapore and most
Western European countries. The Fund is not limited to a specific percentage of
assets that may be invested in a single emerging market country (although at all
times the Fund must be invested in the assets of at least three countries).
Historically, the Fund has invested a substantial portion of its assets in
emerging markets and may do so at any time.
Equity securities include common and preferred stock, bearer and registered
shares, savings shares, warrants or rights or options that are convertible into
common stock, debt securities that are convertible into common stock, depositary
receipts for those securities, and other classes of stock that may exist. The
Fund may purchase foreign securities in the form of sponsored or unsponsored
depositary receipts or other securities representing underlying shares of
foreign issuers. The Fund may purchase depositary receipts, rather than invest
directly in the underlying shares of a foreign issuer, for liquidity, timing or
transaction cost reasons. The Fund may also invest in domestic and foreign
investment companies which, in turn, invest primarily in securities which the
Fund could hold directly.
The Adviser generally intends to remain fully invested. However, as a temporary
defensive measure, the Fund may hold some or all of its assets in cash or cash
equivalents in domestic and foreign currencies, invest in domestic and foreign
money market securities (including repurchase agreements), purchase short-term
debt securities of U.S. or foreign government or corporate issuers, or invest in
money market funds which purchase one or more of the foregoing. The Fund may
also purchase such securities if the Adviser believes they may be necessary to
meet the Fund's liquidity needs. During periods of time when the Fund is
invested defensively, the Fund may not achieve its investment objective.
20
<PAGE> 24
DRIEHAUS INTERNATIONAL DISCOVERY FUND. The investment objective of the Driehaus
International Discovery Fund is to maximize capital appreciation. The Fund seeks
to achieve its objective by investing primarily in the equity securities of
small foreign companies. The Fund generally will invest in securities of issuers
with market capitalizations of $1 billion or less. Under normal market
conditions, the Fund will invest substantially all (no less than 65%) of its
assets in at least three countries other than the United States. There are no
maximum limitations on the number of countries in which the Adviser can or must
invest at a given time. There are also no specific limitations on the percentage
of assets that may be invested in securities of issuers located in any one
country at a given time. The Fund is a nondiversified fund. Current dividend
income is not an investment consideration, and dividend income is incidental to
the Fund's overall investment objective. The Fund may also invest in securities
of issuers with limited operating histories.
The securities markets of many developing economies are sometimes referred to as
"emerging markets." Although the amount of the Fund's assets invested in
emerging markets will vary over time, it is expected that a substantial portion
of the Fund's assets will be invested in emerging markets. Currently, emerging
markets generally include every country in the world other than the United
States, Canada, Japan, Australia, New Zealand, Hong Kong, Singapore and most
Western European countries. The Fund is not limited to a specific percentage of
assets that may be invested in a single emerging market country (although at all
times the Fund must be invested in the assets of at least three countries). The
Fund may invest a substantial portion of its assets in emerging markets at any
time.
Equity securities include common and preferred stock, bearer and registered
shares, savings shares, warrants or rights or options that are convertible into
common stock, debt securities that are convertible into common stock, depositary
receipts for those securities, and other classes of stock that may exist. The
Fund may purchase foreign securities in the form of sponsored or unsponsored
depositary receipts or other securities representing underlying shares of
foreign issuers. The Fund may purchase depositary receipts, rather than invest
directly in the underlying shares of a foreign issuer, for liquidity, timing or
transaction cost reasons. The Fund may also invest in domestic and foreign
investment companies which, in turn, invest primarily in securities which the
Fund could hold directly.
The Adviser generally intends to remain fully invested. However, as a temporary
defensive measure, the Fund may hold some or all of its assets in cash or cash
equivalents in domestic and foreign currencies, invest in domestic and foreign
money market securities (including repurchase agreements), purchase short-term
debt securities of U.S. or foreign government or corporate issuers, or invest in
money market funds which purchase one or more of the foregoing. The Fund may
also purchase such securities if the Adviser believes they may be necessary to
meet the Fund's liquidity needs. During periods of time when the Fund is
invested defensively, the Fund may not achieve its investment objective.
DRIEHAUS EUROPEAN OPPORTUNITY FUND. The investment objective of the Driehaus
European Opportunity Fund is to maximize capital appreciation. The Fund pursues
its objective by investing primarily in the equity securities of European
companies. At least 65% of the Fund's assets will be invested in the equity
securities of European companies. The Fund considers European companies to be
(i) companies organized under the laws of a European country or having
securities which are traded principally on an exchange or over-the-counter in a
European country; or (ii) companies which, regardless of where organized or
traded, have a significant amount of assets located in and/or derive a
significant amount of their revenues from goods purchased or sold, investments
made, or services performed in or with European countries. Currently, European
countries include Albania, Austria, Belarus, Belgium, Bulgaria, the Czech
Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland,
Ireland, Italy, Latvia, Lithuania, Luxembourg, Netherlands, Norway, Poland,
Portugal, Romania, Russia, Slovakia, Spain, Sweden, Switzerland, Turkey, the
Ukraine, the United Kingdom, and the countries of the former Yugoslavia. As the
Eastern European markets develop, the Adviser expects to invest more assets in
that part of Europe. There are no minimum limitations on the number of countries
in which the Adviser can or must invest at a given time. There are no specific
limitations on the percentage of assets that may be invested in securities of
issuers located in any one country at a given time; the Fund may invest
significant assets in any single European country. The Fund is a nondiversified
fund. Current dividend income is not an investment consideration, and dividend
income is incidental to the Fund's overall investment objective. The Fund may
also invest in securities of issuers that have limited operating histories.
The securities markets of many developing economies are sometimes referred to as
"emerging markets." Although the amount of the Fund's assets invested in
emerging markets will vary over time, a substantial portion of the
21
<PAGE> 25
Fund's assets may be invested in emerging markets. Currently, emerging markets
generally include every country in the world other than the United States,
Canada, Japan, Australia, New Zealand, Hong Kong, Singapore and most Western
European countries. The Fund is not limited to a specific percentage of assets
that may be invested in a single emerging market country.
Equity securities include common and preferred stock, bearer and registered
shares, savings shares, warrants or rights or options that are convertible into
common stock, debt securities that are convertible into common stock, depositary
receipts for those securities, and other classes of stock that may exist. The
Fund may purchase foreign securities in the form of sponsored or unsponsored
depositary receipts or other securities representing underlying shares of
foreign issuers. The Fund may purchase depositary receipts, rather than invest
directly in the underlying shares of a foreign issuer, for liquidity, timing or
transaction cost reasons. The Fund may also invest in domestic and foreign
investment companies which, in turn, invest primarily in securities which the
Fund could hold directly.
The Adviser generally intends to remain fully invested. However, as a temporary
defensive measure, the Fund may hold some or all of its assets in cash or cash
equivalents in domestic and foreign currencies, invest in domestic and foreign
money market securities (including repurchase agreements), purchase short-term
debt securities of U.S. or foreign government or corporate issuers, or invest in
money market funds which purchase one or more of the foregoing. The Fund may
also purchase such securities if the Adviser believes they may be necessary to
meet the Fund's liquidity needs. During periods of time when the Fund is
invested defensively, the Fund may not achieve its investment objective.
DRIEHAUS ASIA PACIFIC GROWTH FUND. The investment objective of the Driehaus Asia
Pacific Growth Fund is to maximize capital appreciation. The Fund pursues its
objective by investing primarily in the equity securities of Asia Pacific
companies. At least 65% of the Fund's assets will be invested in the equity
securities of Asia Pacific companies. The Fund considers Asia Pacific companies
to be (i) companies organized under the laws of an Asia Pacific country or
having securities which are traded principally on an exchange or
over-the-counter in an Asia Pacific country; or (ii) companies which, regardless
of where organized or traded, have a significant amount of assets located in
and/or derive a significant amount of their revenues from goods purchased or
sold, investments made, or services performed in or with Asia Pacific countries.
Currently, Asia Pacific countries include Australia, The People's Republic of
China (including Hong Kong), India, Indonesia, Japan, South Korea, Malaysia, New
Zealand, Pakistan, the Philippines, Singapore, Sri Lanka, Taiwan and Thailand.
There are no minimum limitations on the number of countries in which the Adviser
can or must invest at a given time. There are no specific limitations on the
percentage of assets that may be invested in securities of issuers located in
any one country at a given time; the Fund may invest significant assets in any
single Asia Pacific country. The Fund is a nondiversified fund. Current dividend
income is not an investment consideration, and dividend income is incidental to
the Fund's overall investment objective. The Fund may also invest in securities
of issuers that have limited operating histories.
The securities markets of many developing economies are sometimes referred to as
"emerging markets." Although the amount of the Fund's assets invested in
emerging markets will vary over time, it is expected that a substantial portion
of the Fund's assets will be invested in emerging markets. Currently, emerging
markets generally include every country in the world other than the United
States, Canada, Japan, Australia, New Zealand, Hong Kong, Singapore and most
Western European countries. The Fund is not limited to a specific percentage of
assets that may be invested in a single emerging market country.
Equity securities include common and preferred stock, bearer and registered
shares, savings shares, warrants or rights or options that are convertible into
common stock, debt securities that are convertible into common stock, depositary
receipts for those securities, and other classes of stock that may exist. The
Fund may purchase foreign securities in the form of sponsored or unsponsored
depositary receipts or other securities representing underlying shares of
foreign issuers. The Fund may purchase depositary receipts, rather than invest
directly in the underlying shares of a foreign issuer, for liquidity, timing or
transaction cost reasons. The Fund may also invest in domestic and foreign
investment companies which, in turn, invest primarily in securities which the
Fund could hold directly.
The Adviser generally intends to remain fully invested. However, as a temporary
defensive measure, the Fund may hold some or all of its assets in cash or cash
equivalents in domestic and foreign currencies, invest in domestic and foreign
money market securities (including repurchase agreements), purchase short-term
debt securities of U.S. or foreign government or corporate issuers or invest in
money market funds which purchase one or more of the
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<PAGE> 26
foregoing. The Fund may also purchase such securities if the Adviser believes
they may be necessary to meet the Fund's liquidity needs. During periods of time
when the Fund is not fully invested, the Fund may not achieve its investment
objective.
DRIEHAUS EMERGING MARKETS GROWTH FUND. The investment objective of the Driehaus
Emerging Markets Growth Fund is to maximize capital appreciation. The Fund
pursues its objective by investing primarily in the equity securities of
emerging market companies. Emerging market companies are (i) companies organized
under the laws of an emerging market country or having securities which are
traded principally on an exchange or over-the-counter in an emerging market
country; or (ii) companies which, regardless of where organized or traded, have
a significant amount of assets located in and/or derive a significant amount of
their revenues from goods purchased or sold, investments made or services
performed in or with emerging market countries. Currently, emerging markets
include every country in the world other than the United States, Canada, Japan,
Australia, New Zealand, Hong Kong, Singapore and most Western European
Countries. At least 65% of the Fund's assets will be invested in the equity
securities of emerging markets companies. There are also no specific limitations
on the percentage of assets that may be invested in securities of issuers
located in any one country at a given time; the Fund may invest significant
assets in any single emerging market country. The Fund is a nondiversified fund.
Current dividend income is not an investment consideration and dividend income
is incidental to the Fund's overall investment objective. The Fund may also
invest in securities of issuers that have limited operating histories.
Equity securities include common and preferred stock, bearer and registered
shares, savings shares, warrants or rights or options that are convertible into
common stock, debt securities that are convertible into common stock, depositary
receipts for those securities, and other classes of stock that may exist. The
Fund may purchase foreign securities in the form of sponsored or unsponsored
depositary receipts or other securities representing underlying shares of
foreign issuers. The Fund may purchase depositary receipts, rather than invest
directly in the underlying shares of a foreign issuer, for liquidity, timing or
transaction cost reasons. The Fund may also invest in domestic and foreign
investment companies which, in turn, invest primarily in securities which the
Fund could hold directly.
The Adviser generally intends to have remain fully invested. However, as a
temporary defensive measure, the Fund may hold some or all of its assets in cash
or cash equivalents in domestic and foreign currencies, invest in domestic and
foreign money market securities (including repurchase agreements), purchase
short-term debt securities of U.S. or foreign government or corporate issuers,
or invest in money market funds which purchase one or more of the foregoing. The
Fund may also purchase such securities if the Adviser believes they may be
necessary to meet the Fund's liquidity needs. During periods of time when the
Fund is not fully invested, the Fund may not achieve its investment objective.
RELATED RISKS
All investments, including those in mutual funds, have risks. No investment is
suitable for all investors. EACH FUND IS INTENDED FOR LONG-TERM INVESTORS WHO
CAN ACCEPT THE RISKS ENTAILED IN INVESTING IN FOREIGN SECURITIES. Of course,
there can be no assurance that a Fund will achieve its objective. In addition to
the principal risk factors identified earlier in this prospectus for each Fund,
the Funds are subject to the following risks:
FOREIGN SECURITIES AND CURRENCIES. All of the Funds may invest in foreign
securities. Investing outside the United States involves different opportunities
and different risks than domestic investments. The Adviser believes that it may
be possible to obtain significant returns from a Fund's portfolio of foreign
investments and to achieve increased diversification in comparison to a personal
investment portfolio invested solely in United States securities. An investor
may gain increased diversification by adding securities from various foreign
countries (i) which offer different investment opportunities, (ii) that
generally are affected by different economic trends, and (iii) whose stock
markets do not generally move in a manner parallel to United States markets. At
the same time, these opportunities and trends involve risks that may not be
encountered in United States investments.
Investors should understand and consider carefully the greater risks involved in
foreign investing. Investing in foreign securities -- positions which are
generally denominated in foreign currencies -- and utilization of forward
foreign currency exchange contracts involve certain considerations comprising
both risks and opportunities not typically associated with investing in U.S.
securities. These considerations include: fluctuations in exchange rates of
foreign
23
<PAGE> 27
currencies; possible imposition of exchange control regulations or currency
restrictions that would prevent cash from being brought back to the United
States; less public information with respect to issuers of securities; less
governmental supervision of stock exchanges, securities brokers, and issuers of
securities; lack of uniform accounting, auditing and financial reporting
standards; lack of uniform settlement periods and trading practices; less
liquidity and frequently greater price volatility in foreign markets than in the
United States; possible imposition of foreign taxes; possible investment in the
securities of companies in developing as well as developed countries; the
possibility of expropriation or confiscatory taxation, seizure or
nationalization of foreign bank deposits or other assets, establishment of
exchange controls, the adoption of foreign government restrictions and other
adverse political, social or diplomatic developments that could affect
investment in these nations; sometimes less advantageous legal, operational and
financial protections applicable to foreign subcustodial arrangements; and the
historical lower level of responsiveness of foreign management to shareholder
concerns (such as dividends and return on investment).
To the extent portfolio securities are issued by foreign issuers or denominated
in foreign currencies, a Fund's investment performance is affected by the
strength or weakness of the U.S. dollar against these currencies. For example,
if the dollar falls relative to the Japanese yen, the dollar value of a
yen-denominated stock held in the portfolio will rise even though the price of
the stock remains unchanged. Conversely, if the dollar rises in value relative
to the yen, the dollar value of the yen-denominated stock will fall.
EMERGING MARKET RISKS. The Driehaus Emerging Markets Growth Fund invests
primarily in emerging markets. Many of the countries of the Asia Pacific region
still have developing markets and, therefore, the Driehaus Asia Pacific Growth
Fund will have a substantial portion of its assets in emerging markets. However,
the Driehaus International Growth Fund, the Driehaus International Discovery
Fund, and the Driehaus European Opportunity Fund may also invest a substantial
portion of their assets in emerging market securities. The risks described above
for foreign securities, including the risks of nationalization and expropriation
of assets, are typically increased to the extent that a Fund invests in issuers
located in less developed and developing nations. These securities markets are
sometimes referred to as "emerging markets." Investments in securities of
issuers located in such countries are speculative and subject to certain special
risks. The political and economic structures in many of these countries may be
in their infancy and developing rapidly, and such countries may lack the social,
political and economic characteristic of more developed countries. Certain of
these countries have in the past failed to recognize private property rights and
have at times nationalized and expropriated the assets of private companies.
Some countries have inhibited the conversion of their currency to another. The
currencies of certain emerging market countries have experienced devaluation
relative to the U.S. dollar, and continued devaluations may adversely affect the
value of a Fund's assets denominated in such currencies. There is some risk of
currency contagion; the devaluation of one currency leading to the devaluation
of another. As one country's currency experiences "stress," there is concern
that the "stress" may spread to another currency. Many emerging markets have
experienced substantial, and in some periods extremely high, rates of inflation
for many years. Continued inflation may adversely affect the economies and
securities markets of such countries. In addition, unanticipated political or
social developments may affect the value of a Fund's investments in these
countries and the availability to the Fund of additional investments in these
countries. The small size, limited trading volume and relative inexperience of
the securities markets in these countries may make a Fund's investments in such
countries illiquid and more volatile than investments in more developed
countries, and the Fund may be required to establish special custodial or other
arrangements before making investments in these countries. There may be little
financial or accounting information available with respect to issuers located in
these countries, and it may be difficult as a result to assess the value or
prospects of an investment in such issuers.
Based upon the apparent correlation between commodity cycles and a country's
securities markets, additional risk may exist.
ASIA PACIFIC REGION RISKS. The Driehaus Asia Pacific Growth Fund invests
primarily in the equity securities of companies in the Asia Pacific region. All
the Funds may invest in this region. Some countries in the Asian Pacific region
have undergone recent well-publicized, but unprecedented economic instability.
Certain issuers absorbed substantial losses due to adverse changes in the
financial conditions or the market's assessment of particular issuers. Moreover,
the currencies of some countries in the region underwent rapid devaluation
prompting governmental efforts to stabilize the currency. While the Adviser
believes that this situation presents an opportunity for long-term investors, in
the short-term the stocks of Asia Pacific issuers may remain volatile.
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<PAGE> 28
EUROPEAN RISKS. The Driehaus European Growth Fund invests primarily in the
equity securities in the European region. All the Funds may invest in this
region. Some countries in Europe have recently participated in a well-
publicized effort to form a monetary union, known as the Economic and Monetary
Union ("EMU"), in an effort to, among other things, reduce barriers between
countries and eliminate fluctuations in their currencies. As part of that
monetary union, the eleven participating countries adopted a common currency
called the Euro to be used alongside their local currencies. The conversion was
launched January 1, 1999, and full adaptation will continue for several years.
Accommodating the new currency poses risk as well as benefits and opportunities
to the market participants, banks, investors, companies, and exchanges of the
European region. The full impact of the conversion cannot yet be determined, nor
can the long-term success or failure of the monetary union or currency
conversion be determined. The Adviser and the Funds' other key external parties
are taking steps to address euro-related issues. However, they can give no
assurance that the conversion will not have an adverse effect on the Funds'
investments and operations.
DIVERSIFICATION. Each Fund is nondiversified, meaning that it is not limited in
the proportion of its assets that it may invest in the obligations of a single
issuer or in a single country. Each Fund will, however, comply with
diversification requirements imposed by the Internal Revenue Code for
qualification as a regulated investment company. As a nondiversified fund, each
Fund may invest a greater proportion of its assets in the securities of a small
number of issuers, and may be subject to greater risk and substantial losses as
a result of changes in the financial condition or the market's assessment of the
issuers.
YEAR 2000. The investment management and advisory services provided to the Funds
by the Adviser and the Funds' custodian and the services provided to
shareholders by the administrator/transfer agent depend on the smooth
functioning of their computer systems. Many computer software systems in use
today cannot recognize the year 2000, but revert to 1900 or some other date, due
to the manner in which dates were encoded and calculated. That failure could
have a negative impact on the handling of securities trades, pricing and account
services. The Adviser, the custodian, and the administrator/transfer agent have
been actively working on necessary changes to their own computer systems to
prepare for the year 2000 and expect that their systems will be adapted before
that date, but there can be no assurance that they will be successful, or that
interactions with other non-complying computer systems will not impair their
services at that time.
In addition, it is possible that the markets for securities in which the Funds
invests may be detrimentally affected by computer failures throughout the
financial services industry beginning January 1, 2000. Improperly functioning
trading systems may result in settlement problems and liquidity issues. The
Adviser considers the impact of issuers' year 2000 preparedness on earnings
growth as just one of many factors in security selection. The extent to which
the Adviser inquires into a particular issuer's year 2000 preparedness depends
on various factors, including the size of a Fund's holdings in the security, the
perceived significance of the year 2000 problem to the issuer's business, and
the industry in which the company operates. The Adviser believes that the year
2000 issue can have a positive and negative impact on company earnings. For
example, the year 2000 presents growth opportunities for companies engaged in
year 2000 consulting and remediation. Conversely, the year 2000 problem can
negatively affect the earnings growth rates for companies that manufacture
hardware and distribute software applications that are not currently year 2000
compliant. Earnings of individual issuers will also be affected by remediation
costs, which may be substantial and may be reported inconsistently in U.S. and
foreign financial statements. Accordingly, the investments of the Funds may be
adversely affected.
PORTFOLIO INVESTMENTS AND OTHER RISK CONSIDERATIONS
There are specific restrictions on each Fund's investments. Such restrictions
are detailed in the Statement of Additional Information. Each Fund may utilize
from time to time one or more of the investment practices described below to
assist it in reaching its investment objective. These practices involve
potential risks which are summarized below. In addition, the Statement of
Additional Information contains more detailed or additional information about
certain of these practices, the potential risks and/or the limitations adopted
by each Fund to help manage such risks.
SMALL AND MEDIUM-SIZED COMPANIES. Each of the Funds may invest in the securities
of small- and medium-sized companies. While small- and medium-sized companies
generally have the potential for rapid growth, the securities of these companies
often involve greater risks than investments in larger, more established
companies because small- and medium-sized companies may lack the management
experience, financial resources, product diversification and
25
<PAGE> 29
competitive strengths of larger companies. In addition, in many instances the
securities of small- and medium-sized companies are traded only over-the-counter
or on a regional securities exchange, and the frequency and volume of their
trading is substantially less than is typical of larger companies. Therefore,
the securities of small- and medium-sized companies may be subject to greater
and more abrupt price fluctuations and, for large sales, a Fund may have to sell
such holdings at discounts from quoted prices or make a series of small sales
over an extended period of time.
CURRENCY HEDGING. Due to the investments in foreign securities, the value of a
Fund in U.S. dollars is subject to fluctuations in the exchange rate between
foreign currencies and the U.S. dollar. When, in the opinion of the Adviser, it
is desirable to limit or reduce exposure in a foreign currency, the Funds may
enter into a forward currency exchange contract to sell such foreign currency
(or another foreign currency that acts as a proxy for that currency) ("forward
currency contract"). Through the contract, the U.S. dollar value of certain
underlying foreign portfolio securities can be approximately matched by an
equivalent U.S. dollar liability. This technique is known as "currency hedging."
By locking in a rate of exchange, currency hedging is intended to moderate or
reduce the risk of change in the U.S. dollar value of a Fund during the period
of the forward contract. A default on a contract would deprive a Fund of
unrealized profits or force the Fund to cover its commitments for purchase or
sale of currency, if any, at the current market price.
The use of forward currency contracts (for transaction or portfolio hedging)
will not eliminate fluctuations in the prices of portfolio securities or prevent
loss if the price of such securities should decline. In addition, such forward
currency contracts will diminish the benefit of the appreciation in the U.S.
dollar value of that foreign currency.
SETTLEMENT TRANSACTIONS. A Fund trading a foreign security is usually required
to settle the purchase transaction in the relevant foreign currency or receive
the proceeds of the sale in that currency. At or near the time of the
transaction, a Fund may wish to lock in the U.S. dollar value at the exchange
rate or rates then prevailing between the U.S. dollar and the currency in which
the security is denominated. Transaction hedging may be accomplished on a
forward basis, whereby a Fund purchases or sells a specific amount of foreign
currency, at a price set at the time of the contract, for receipt or delivery at
either a specified date or at any time within a specified time period.
Transaction hedging also may be accomplished by purchasing or selling such
foreign currencies on a "spot," or cash, basis. In so doing, a Fund will attempt
to insulate itself against possible losses and gains resulting from a change in
the relationship between the U.S. dollar and the foreign currency during the
period between the date the security is purchased or sold and the date on which
payment is made or received and the transaction settled. Similar transactions
may be entered into by using other currencies. A Fund may also settle certain
trades in U.S. dollars. The use of currency transactions can result in a Fund
incurring losses as a result of a number of factors, including the imposition of
exchange controls, suspension of settlements or the inability to deliver or
receive a specified currency.
DERIVATIVES. In seeking to achieve its desired investment objective, provide
additional revenue or hedge against changes in security prices, interest rates
or currency fluctuations, each Fund may: (1) purchase and write both call
options and put options on securities, indices and foreign currencies; (2) enter
into interest rate, index and foreign currency futures contracts; (3) write
options on such futures contracts; (4) purchase other types of forward or
investment contracts linked to individual securities, indices or other
benchmarks; and (5) enter into various equity or interest rate transactions,
such as swaps, caps, floors or collars, and may enter into various currency
transactions such as forward currency contracts, currency futures contracts,
currency swaps or options on currencies ("derivatives"). (For these purposes,
forward currency contracts are not considered "derivatives.") Each Fund may
write a call or put option only if the option is covered. As the writer of a
covered call option, each Fund forgoes, during the option's life, the
opportunity to profit from increases in market value of the security covering
the call option above the sum of the premium and the exercise price of the call.
There can be no assurance that a liquid market will exist when a Fund seeks to
close out a position. In addition, because futures positions may require low
margin deposits, the use of futures contracts involves a high degree of leverage
and may result in losses in excess of the amount of the margin deposit.
The successful use of derivatives depends on the Adviser's ability to correctly
predict changes in the levels and directions of movements in currency exchange
rates, security prices, interest rates and other market factors affecting the
derivative itself or the value of the underlying asset or benchmark. In
addition, correlations in the performance of an underlying asset to a derivative
may not be well established. Finally, privately negotiated and over-the-counter
derivatives may not be as well regulated and may be less marketable than
exchange-traded derivatives.
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<PAGE> 30
ILLIQUID SECURITIES. Each Fund may invest up to 15% of its net assets in
illiquid securities. Not readily marketable, they include restricted securities
and repurchase obligations maturing in more than seven days. Certain restricted
securities that may be resold to institutional investors under Rule 144A of the
Securities Act of 1933 and Section 4(2) commercial paper may be deemed liquid
under guidelines adopted by the Fund's Board of Trustees. The absence of a
trading market can make it difficult to ascertain a market value for illiquid or
restricted securities. Disposing of illiquid or restricted securities may
involve time-consuming negotiations and legal expenses, and it may be difficult
or impossible for a Fund to sell them promptly at an acceptable price.
CONVERTIBLE SECURITIES. While convertible securities purchased by the Funds are
frequently rated investment grade, a Fund also may purchase unrated convertible
securities or convertible securities rated below investment grade if the
securities meet the Adviser's other investment criteria. Each Fund does not
currently intend to invest more than 5% of its total assets in below investment
grade convertible securities. Convertible securities rated below investment
grade (a) tend to be more sensitive to interest rate and economic changes, (b)
may be obligations of issuers who are less creditworthy than issuers of higher
quality convertible securities, and (c) may be more thinly traded due to such
securities' being less well known to investors than either common stock or
conventional debt securities. As a result, the Adviser's own investment research
and analysis tends to be more important in the purchase of such securities than
other factors.
DEBT SECURITIES. Each Fund may invest up to 35% of its total assets in
nonconvertible debt securities. Investments in such debt securities are limited
to those that are rated within the four highest grades (generally referred to as
"investment grade") assigned by a nationally or internationally recognized
statistical rating organization. Investments in unrated debt securities are
limited to those deemed to be of comparable quality by the Adviser. Securities
in the fourth-highest grade may possess speculative characteristics. If the
rating of a security held by the Fund is lost or reduced below investment grade,
the Fund is not required to dispose of the security. The Adviser will, however,
consider that fact in determining whether the Fund should continue to hold the
security. The risks inherent in a debt security depend primarily on its term and
quality, as well as on market conditions. A decline in the prevailing levels of
interest rates generally increases the value of debt securities. Conversely, an
increase in rates usually reduces the value of debt securities.
PORTFOLIO TURNOVER. A Fund's annual turnover rate indicates changes in its
portfolio investments. A Fund will not consider portfolio turnover rate a
limiting factor in making investment decisions consistent with its investment
objective and policies. It is anticipated that the Funds will each experience
high rates of portfolio turnover. High portfolio turnover in any year will
result in payment by a Fund of above-average amounts of transaction costs and
could result in the payment by shareholders of above-average amounts of taxes on
realized investment gains. Under normal market conditions, only securities that
increase in value shortly after purchase and that generally continue to increase
in value (although they may experience temporary stagnant or declining periods)
will be retained by the Funds. Securities sold by a Fund may be purchased again
at a later date if the Adviser perceives that the securities are again "timely."
In addition, portfolio adjustments will be made when conditions affecting
relevant markets, particular industries or individual issues warrant such
action. In light of these factors and the historical volatility of foreign
growth stocks, the Funds are likely to experience high portfolio turnover rates,
but portfolio turnover rates may vary significantly from year to year. The
portfolio turnover rate for the Driehaus International Growth Fund, Driehaus
Asia Pacific Growth Fund and Driehaus Emerging Markets Growth Fund are noted in
each Fund's Financial Highlights in the Summary. The Portfolio turnover rates
for the Driehaus International Discovery Fund and the Driehaus European
Opportunity Fund are expected to be over 250% and 200%, respectively. Portfolio
turnover may also be affected by sales of portfolio securities necessary to meet
cash requirements for redemptions of shares.
INVESTMENT COMPANIES. The Funds may each invest in domestic and foreign
investment companies. Some countries may not permit direct investment by outside
investors. Investments in such countries may only be permitted through foreign
government-approved or government-authorized investment vehicles, which may
include other investment companies. In addition, it may be less expensive and
more expedient for a Fund to invest in a foreign investment company in a country
that permits direct foreign investment; similarly, a Fund may invest in a money
market fund in order to receive a higher rate of return or to be more
productively invested than would be possible through direct investment in money
market instruments. Investing through such vehicles may involve layered fees or
expenses. The Funds do not intend to invest in such investment companies unless,
in the judgment of the Adviser, the potential benefits of such investments
justify the payment of any associated fees or expenses.
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<PAGE> 31
REPURCHASE AGREEMENTS. Each Fund may invest in repurchase agreements, provided
that it will not invest more than 15% of its net assets in repurchase agreements
maturing in more than seven days and any other illiquid securities. A repurchase
agreement involves the sale of securities to a Fund, with the concurrent
agreement of the seller to repurchase the securities at the same price plus an
amount representing interest at an agreed-upon interest rate within a specified
period of time, usually less than one week, but, on occasion, at a later time.
Repurchase agreements entered into by a Fund will be fully collateralized and
will be marked-to-market daily. In the event of a bankruptcy or other default of
a seller of a repurchase agreement, a Fund could experience both delays in
liquidating the underlying securities and losses, including: (a) possible
decline in the value of the collateral during the period while the Fund seeks to
enforce its rights thereto; (b) possible subnormal levels of income and lack of
access to income during this period; and (c) expenses of enforcing its rights.
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES; REVERSE REPURCHASE AGREEMENTS. Each
Fund may purchase or sell securities on a when-issued or delayed-delivery basis.
Although the payment and interest terms of these securities are established at
the time the Fund enters into the commitment, the securities may be delivered
and paid for a month or more after the date of purchase, when their value may
have changed. The Fund makes such purchase commitments only with the intention
of actually acquiring the securities, but may sell the securities before
settlement date if the Adviser deems it advisable for investment reasons. Each
Fund may utilize spot and forward foreign currency exchange transactions to
reduce the risk inherent in fluctuations in the exchange rate between one
currency and another when securities are purchased or sold on a when-issued or
delayed-delivery basis.
Each Fund may enter into reverse repurchase agreements with banks and securities
dealers. A reverse repurchase agreement is a repurchase agreement in which a
Fund is the seller of, rather than the investor in, securities and agrees to
repurchase them at an agreed-upon time and price. Use of a reverse repurchase
agreement may be preferable to a regular sale and later repurchase of securities
because it avoids certain market risks and transaction costs.
At the time a Fund enters into a binding obligation to purchase securities on a
when-issued basis or enters into a reverse repurchase agreement, liquid assets
(cash, U.S. Government securities or other "high-grade" debt obligations) of the
Fund having a value at least as great as the purchase price of the securities to
be purchased will be segregated on the books of the Fund and held by the
custodian throughout the period of the obligation. The use of these investment
strategies, as well as borrowing under a line of credit, may increase net asset
value fluctuation.
LENDING PORTFOLIO SECURITIES. Each Fund may lend its portfolio securities to
broker-dealers and banks, provided that it may not lend securities if, as a
result, the aggregate value of all securities loaned would exceed 331/3% of its
total assets. Any such loan must be continuously secured by collateral (cash or
U.S. Government securities). In the event of bankruptcy or other default of the
borrower, a Fund could experience delays in both liquidating the loan collateral
and recovering the loaned securities and losses.
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- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUNDS
- --------------------------------------------------------------------------------
TRUSTEES AND ADVISER. The Board of Trustees of the Driehaus Mutual Funds has
overall management responsibility. See the Statement of Additional Information
for the names of and additional information about the trustees and officers. The
Adviser, Driehaus Capital Management, Inc., 25 East Erie Street, Chicago,
Illinois 60611, is responsible for providing investment advisory and management
services to the Funds, subject to the direction of the Board of Trustees. The
Adviser is registered as an investment adviser under the Investment Advisers Act
of 1940. The Adviser was organized in 1982 and currently manages over $
billion in assets.
Each Fund pays the Adviser a monthly investment management fee as follows. These
fees are higher than the fees paid by most mutual funds.
<TABLE>
<CAPTION>
AS A PERCENTAGE OF
FUND AVERAGE DAILY NET ASSETS
---- ------------------------
<S> <C>
Driehaus International Growth Fund 1.50%
Driehaus Asia Pacific Growth Fund 1.50%
Driehaus Emerging Markets Growth Fund 1.50%
Driehaus International Discovery Fund 1.50%
Driehaus European Opportunity Fund 1.50%
</TABLE>
PORTFOLIO MANAGER -- DRIEHAUS INTERNATIONAL GROWTH FUND. William R. Andersen, a
Senior Vice President of the Adviser, has managed the Driehaus International
Growth Fund since the commencement of operations in October of 1996. Prior to
the Driehaus International Growth Fund's commencement of operations, Mr.
Andersen was the portfolio manager for the Driehaus International Large Cap
Fund, L.P. from its inception in July 1990. Mr. Andersen has primary
responsibility for making all investment decisions on behalf of the Driehaus
International Growth Fund. He is assisted by the research department which
employs specialists in various markets, including Western Europe, Asia Pacific,
Canada and emerging markets. In addition to the Funds, Mr. Andersen is the
portfolio manager for three Canadian mutual funds, including a global fund. As
the Adviser's chief investment officer for international investing, Mr. Andersen
oversees all international investing. He does not, however, supervise or
participate in investment decision-making for the Driehaus Asia Pacific Growth
Fund, the Driehaus Emerging Markets Growth Fund, or the Driehaus European
Opportunity Fund. Mr. Andersen will periodically review the asset allocation of
the Driehaus International Discovery Fund.
Mr. Andersen was born in 1959 and is a graduate of Stanford University, where he
received a B.A. in economics in 1981. In 1985, Mr. Andersen received his M.B.A.
from the University of Chicago, where he concentrated in finance. Mr. Andersen
is a Chartered Financial Analyst. Mr. Andersen has been employed by Driehaus
Securities Corporation ("DSC") and the Adviser since 1985. From 1985 to 1989,
Mr. Andersen was employed by DSC as a security analyst and, as such, was
responsible for several industry groups in which DSC maintained investments for
clients. In May 1989, while continuing to act as a senior investment analyst for
DSC, Mr. Andersen became a portfolio manager for the Adviser.
PORTFOLIO MANAGER -- DRIEHAUS ASIA PACIFIC GROWTH FUND. Mr. Eric J. Ritter has
managed the Fund since its inception. Mr. Ritter, an Asia Pacific analyst with
the Adviser, has responsibility for making all investment decisions on behalf of
the Fund.
Mr. Ritter was born in 1963 and received his B.A. in economics from the State
University of New York at Oswego in 1984. He earned a master's degree in
international relations from Columbia University in 1987. Thereafter, Mr. Ritter
worked as a consultant in Hong Kong in 1987-88, consulting primarily with
Fortune 500 companies on investment and market strategy for Asia. From late 1988
to 1990, he worked for Baring Securities as an equity analyst conducting
research on listed companies in Singapore and Malaysia. Mr. Ritter then moved
back to the United States to work in equity research and sales, covering the
Southeast Asia markets, for Crosby Securities and W.I. Carr, both registered
broker-dealers, prior to joining the Adviser in June 1996.
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<PAGE> 33
PORTFOLIO MANAGER -- DRIEHAUS EMERGING MARKETS GROWTH FUND; CO-PORTFOLIO
MANAGER -- DRIEHAUS INTERNATIONAL DISCOVERY FUND. Mr. Emery R. Brewer has
managed the Driehaus Emerging Markets Growth Fund since its inception. Mr.
Brewer, an emerging markets analyst with the Adviser, has responsibility for
making all investment decisions on behalf of the Driehaus Emerging Markets
Growth Fund and for the non-European portion of the Driehaus International
Discovery Fund.
Mr. Brewer was born in 1963 and received his B.S. in economics from the
University of Utah in 1986. From 1987 to 1988, he worked as a securities broker
at Wilson Davis & Co., focusing primarily on NASDAQ listed companies. From 1989
to 1990, he worked for Dean Witter Reynolds as a broker, focusing primarily on
equity and fixed-income investments. After earning his M.B.A. from the
University of Rochester in 1992, he worked as an adviser to the capital markets
group of Investicini Banka (the third largest bank in and former investment bank
of the Czech Republic), focusing primarily on valuation and analysis of Czech
companies. Mr. Brewer became a consultant to the Adviser in 1993 prior to
joining the Adviser as an international securities analyst in November 1994.
PORTFOLIO MANAGER -- DRIEHAUS EUROPEAN OPPORTUNITY FUND; CO-PORTFOLIO
MANAGER -- DRIEHAUS INTERNATIONAL DISCOVERY FUND. Ms. Lynette Schroeder has
managed the Driehaus European Opportunity Fund since its inception. Prior to the
Driehaus European Opportunity Fund's commencement of operations, Ms. Schroeder
was also the portfolio manager for the Driehaus Western European Growth Fund,
L.P. from August 1997 to December 1998. Ms. Schroeder, a European analyst for
the Adviser, has responsibility for making all investment decisions on behalf of
the Driehaus European Opportunity Fund and for the European portion of the
Driehaus International Discovery Fund.
Ms. Schroeder was born in 1962 and received her B.A. in political science from
the University of Chicago in 1985. She earned her M.B.A. from the University of
Virginia -- Darden School of Business in 1992. Her investment experience began
at Scudder, Stevens and Clark where she worked on European research from
1993-1995. Thereafter, she joined Lexington Asset Management where she worked as
a European companies analyst during 1995-1997. She joined the Adviser in 1997.
CO-PORTFOLIO MANAGERS -- DRIEHAUS INTERNATIONAL DISCOVERY FUND. Mr. Emery Brewer
and Ms. Lynette Schroeder are co-portfolio managers of the Fund. Mr. Andersen
will periodically review the asset allocation of the Fund.
DISTRIBUTOR. Driehaus Securities Corporation, ("DSC"), an affiliate of the
Adviser, acts as the distributor of the Trust's shares pursuant to a
Distribution Agreement dated December 31, 1998, without any sales concessions or
charges to the Fund or to its shareholders. DSC is located at 25 East Erie
Street, Chicago, Illinois 60611, and is wholly-owned by Richard H. Driehaus. DSC
also executes portfolio transactions for the Funds pursuant to procedures
approved by the Board.
ADMINISTRATOR. PFPC Inc. ("PFPC") is the administrator for the Funds. In such
capacity, PFPC assists the Funds in all aspects of their administration and
operation, including certain accounting services.
TRANSFER AGENT. PFPC is the agent of the Funds for the transfer of shares,
disbursement of dividends and maintenance of shareholder accounting records.
CUSTODIAN. The Chase Manhattan Bank (the "Custodian") is the custodian for the
Funds. Foreign securities are maintained in the custody of foreign banks and
trust companies that are members of the Custodian's Global Investor Services or
foreign depositories used by such members.
30
<PAGE> 34
- --------------------------------------------------------------------------------
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
NET ASSET VALUE
Each Fund's net asset value is determined as of the regular close of the New
York Stock Exchange ("NYSE") (3:00 p.m., Central time) on each day the NYSE is
open for trading. Purchases and redemptions are made at a Fund's net asset value
per share next calculated after receipt of your purchase order and payment in
good form. Net asset value per share is determined by dividing the difference
between the values of its assets and liabilities by the number of its shares
outstanding. Because foreign securities markets may operate on days that are not
business days in the United States, the value of a Fund's holdings may change on
days when you will not be able to purchase or redeem the Funds' shares.
OPENING AN ACCOUNT
1) Read this prospectus carefully.
2) The Funds have the following minimum investments (These minimums may be
waived at the discretion of DSC.):
<TABLE>
<CAPTION>
MINIMUM INDIVIDUAL MINIMUM
MINIMUM INITIAL RETIREMENT ACCOUNT SUBSEQUENT
FUND INVESTMENT INVESTMENT INVESTMENT
---- --------------- ------------------ ----------
<S> <C> <C> <C>
Driehaus International Growth
Fund $100,000 $100,000 $20,000
Driehaus International Discovery
Fund $ 10,000 $ $
Driehaus European Opportunity
Fund $ 10,000 $ $
Driehaus Asia Pacific Growth
Fund $ 10,000 $ $
Driehaus Emerging Markets Growth
Fund $ 10,000 $ $
</TABLE>
3) Complete the appropriate parts of the New Account Application, carefully
following the instructions. If you have questions, please contact
Shareholder Services at 1-800-560-6111.
4) Include the appropriate Fund number (see table below) on the "payable to"
line of your check or in your wire instructions.
<TABLE>
<CAPTION>
- --------------------------------------------------------------
FUND NAME FUND NUMBER
<S> <C>
- --------------------------------------------------------------
Driehaus International Growth Fund #001
- --------------------------------------------------------------
Driehaus Asia Pacific Growth Fund #002
- --------------------------------------------------------------
Driehaus Emerging Markets Growth Fund #003
- --------------------------------------------------------------
Driehaus International Discovery Fund #004
- --------------------------------------------------------------
Driehaus European Opportunity Fund #005
- --------------------------------------------------------------
</TABLE>
5) Individual Retirement Accounts (IRAs) may also be set up. For an
application, contact Shareholder Services. Investors should also read the
IRA Disclosure Statement and Bank Custodial Agreement for further details on
eligibility, service fees and tax implications.
31
<PAGE> 35
HOW TO PURCHASE SHARES
The Funds do not permit market timing. Do not invest in the Funds if you are a
market-timer. As money is shifted in and out of a Fund, the Fund incurs expenses
for buying and selling securities. These costs are borne by all Fund
shareholders, including long-term investors who do not generate such costs.
Therefore, the Fund has adopted the following policies to discourage short-term
trading:
- The Funds reserve the right to reject any purchase request--including
exchanges from other Driehaus Funds--that it regards as disruptive to
the efficient management of the Funds. This could be because of the
timing of the investment or because of a history of excessive trading by
the investor.
- The Funds reserve the right to limit to the number of times that you can
exchange into and out of a Fund.
- The Funds reserve the right to stop offering shares at any time.
1) BY MAIL. Make your check payable to the Fund of your choice. For purchases
of $1 million or more, a certified check, bank check, or wire transfer is
required. If you are adding to your existing account, fill out the
detachable investment slip from an account statement or indicate your Fund
account number and the name(s) in which the account is registered directly
on the check. Send to:
<TABLE>
<S> <C>
REGULAR MAIL: OVERNIGHT DELIVERY:
Driehaus Mutual Funds Driehaus Mutual Funds
c/o PFPC Inc. c/o PFPC Inc.
P.O. Box 8855 400 Bellevue Parkway
Wilmington, DE 19899-8855 Suite 108
Wilmington, DE 19809-3710
</TABLE>
2) BY WIRE TRANSFER. Call Shareholder Services at 1-800-560-6111 to initiate
your purchase. Then wire your investment to:
PNC Bank, NA
ABA #031-000-053
Credit: Driehaus Purchase Account
Bank Account #: 86-1108-2419
Fund #: ( ) (see the table above)
Further Credit: (Shareholder name and account number)
If you are opening an account, please promptly complete and mail the New
Account Application to the Funds at the address under "BY MAIL." Please
call Shareholder Services to obtain your account number.
3) PURCHASES THROUGH FINANCIAL INSTITUTIONS. Investors may purchase (or redeem)
shares through investment dealers or other financial institutions. The
institutions may charge for their services or place limitations on the
extent to which investors may use the services offered by the Driehaus
Mutual Funds. There are no charges or limitations imposed by Driehaus Mutual
Funds, other than those described in this prospectus, if shares are
purchased (or redeemed) directly from Driehaus Mutual Funds or DSC.
Financial institutions that enter into a sales agreement with DSC or are
designated by the Driehaus Mutual Funds' Board of Trustees (including
Charles Schwab Co., Inc.) may accept purchase and redemption orders on
behalf of the Funds. If communicated in accordance with the terms of such
sales agreement, a purchase or redemption order will be deemed to have been
received when such financial institution accepts such order. All orders
will be priced at a Fund's net asset value next computed after they are
accepted by such designated financial institution, provided that such
orders are communicated in accordance with the terms of the applicable
sales agreement.
Certain broker-dealers, financial institutions or other service providers
that have entered into an agreement with the DSC or Driehaus Mutual Funds
may enter purchase orders on behalf of their customers by phone, with
payment to follow within several days as specified in the agreement. Such
purchase orders will be effected at the net asset value next determined
after receipt of the telephone purchase order. It is the responsibility of
the
32
<PAGE> 36
broker-dealer, financial institution or other service provider to place the
order on a timely basis. If payment is not received within the time
specified in the agreement, the broker-dealer, financial institution or
other service provider could be held liable for any resulting fees or
losses.
GENERAL PURCHASE INFORMATION
Shares of each Fund are offered only to residents of states and other
jurisdictions in which the shares are available for purchase. Driehaus Mutual
Funds reserves the right not to accept any purchase order. Driehaus Mutual Funds
also reserves the right to change its investment minimums without notice. For
all purchases, confirmations are sent to the investor in writing except
purchases made by reinvestment of dividends, which will be confirmed quarterly.
"BUYING A DIVIDEND." Unless you are purchasing Fund shares through a
tax-deferred retirement account (such as an IRA) it is not to your advantage to
buy shares of a Fund shortly before it makes a distribution, because doing so
can cost you money in taxes. To avoid "buying a dividend," check a Fund's
distribution schedule (see "Distributions and Taxes") before you invest.
SALES IN ADVANCE OF PURCHASE PAYMENTS. When you place a request to sell shares
for which the purchase money has not yet been collected, the request will be
executed in a timely fashion, but the Fund will not release the proceeds to you
until your purchase payment clears.
HOW TO REDEEM SHARES
1) BY MAIL. Shareholders may sell shares by writing the Funds at the following
address:
<TABLE>
<S> <C>
REGULAR MAIL: OVERNIGHT DELIVERY:
Driehaus Mutual Funds Driehaus Mutual Funds
c/o PFPC Inc. c/o PFPC Inc.
P.O. Box 8855 400 Bellevue Parkway
Wilmington, DE 19899-8855 Suite 108
Wilmington, DE 19809-3710
</TABLE>
Certain requests for redemption must be signed by the shareholder with
signature guaranteed. See "SHAREHOLDER SERVICES AND POLICIES -- SIGNATURE
GUARANTEES."
2) BY TELEPHONE. If you have chosen the telephone redemption privilege, you may
make a telephone redemption request by calling Shareholder Services at
1-800-560-6111 and providing your account number, the exact name of your
account and your social security or taxpayer identification number. The Fund
will then mail a check to your account address or, if you have elected the
wire redemption privilege, wire the proceeds on the following business day.
The Funds reserve the right to suspend or terminate the telephone redemption
privilege at any time.
TELEPHONE TRANSACTIONS. For your protection, telephone requests may be
recorded in order to verify their accuracy. Also for your protection,
telephone transactions are not permitted on accounts whose names or
addresses have changed within the past 30 days. Proceeds from telephone
transactions can only be mailed to the address of record or wired to a bank
account previously designated by you in writing.
3) BY WIRE TRANSFER. If you have chosen the wire redemption privilege, you may
request the Funds to transmit your proceeds by Federal Funds wire to a bank
account previously designated by you in writing. See "GENERAL REDEMPTION
INFORMATION -- EXECUTION OF REQUESTS" below.
4) THROUGH FINANCIAL INSTITUTIONS. If you bought your shares through an
Institution and these shares are held in the name of the Institution, you
must redeem your shares through the Institution. Please contact the
Institution for this service.
GENERAL REDEMPTION INFORMATION
INSTITUTIONAL AND FIDUCIARY ACCOUNT HOLDERS. Institutional and fiduciary account
holders, such as corporations, custodians, executors, administrators, trustees
or guardians, must submit, with each request, a completed certificate of
33
<PAGE> 37
authorization in a form of resolution acceptable to the Fund. The request must
include other supporting legal documents as required from organizations,
executors, administrators, trustees or others acting on accounts not registered
in their names. For more information, please contact Shareholders Services at
1-800-560-6111.
REDEMPTION FEE. A redemption fee of % payable to the Funds is imposed on any
redemption of shares within one year of the date of purchase. This fee is
charged to help compensate the Funds for transaction costs associated with
redemptions. No redemption fee will be imposed to the extent that the net asset
value of the shares redeemed does not exceed (i) the current net asset value of
shares acquired through reinvestment of dividends or capital gain distributions,
plus (ii) increases in the net asset value of an investor's shares above the
dollar amount of all such investor's payments for the purchase of shares held by
the investor at the time of redemption. If the aggregate value of shares
redeemed has declined below their original cost as a result of a Fund's
performance, the applicable redemption fee will be applied to the then-current
net asset value rather than the purchase price.
In determining whether a redemption fee is applicable to a redemption, the
calculation will be made in a manner that results the lowest possible rate. It
will be assumed that the redemption is made first of amounts representing shares
acquired pursuant to the reinvestment of dividends and distributions; then of
amounts representing the increase in net asset value of shares above the total
amount of payments for the purchase of shares made during the preceding year;
then of amounts representing shares purchased more than one year prior to the
redemption; and finally, of amounts representing the cost of shares purchased
within one year prior to the redemption.
CANCELLATION. A shareholder may not cancel or revoke a redemption order once
instructions have been received and accepted. Driehaus Mutual Funds cannot
accept a redemption request that specifies a particular date or price for
redemption or any special conditions.
REDEMPTIONS BY THE FUND. Driehaus Mutual Funds reserves the right to redeem
shares in any account and send the proceeds to the owner if immediately after a
redemption, the shares in the account do not have the Minimum Account Value as
shown below:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
FUND MINIMUM ACCOUNT VALUE
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Driehaus International Growth Fund $50,000
- -----------------------------------------------------------------------
Driehaus International Discovery
Fund $
- -----------------------------------------------------------------------
Driehaus European Opportunity Fund $
- -----------------------------------------------------------------------
Driehaus Asia Pacific Growth Fund $
- -----------------------------------------------------------------------
Driehaus Emerging Markets Growth
Fund $
- -----------------------------------------------------------------------
</TABLE>
A shareholder would be notified that the account is below the minimum and would
be allowed 30 days to increase the account before the request is processed.
EXECUTION OF REQUESTS. If an order is placed prior to the close of regular
trading on the NYSE (3:00 p.m., Central time) on any business day, the purchase
of shares is executed at the net asset value determined as of the closing time
that day. If the order is placed after that time, it will be effected on the
next business day.
A redemption order will be executed at the price which is the net asset value
determined after proper redemption instructions are received (see "HOW TO REDEEM
SHARES"). The redemption price received depends upon the Fund's net asset value
per share at the time of redemption. Therefore, it may be more or less than the
price originally paid for the shares and may result in a realized capital gain
or loss.
The Fund will generally mail payment for shares redeemed within seven days after
proper instructions are received. If requested, the Fund will pay proceeds by
wire, usually by the next business day. Driehaus Mutual Funds is not responsible
for the efficiency of the federal wire system or the shareholder's financial
services firm or bank. The Fund currently charges a shareholder $25 for wire
transfers. The shareholder is responsible for any charges imposed by the
shareholder's firm or bank. Redemptions of shares within 15 days after they have
been purchased by check may be delayed until the payment for the purchase of
those shares has been cleared. Delays may be avoided if shares are purchased by
certified or bank check, or by wire transfer.
34
<PAGE> 38
SHAREHOLDER SERVICES AND POLICIES
EXCHANGING SHARES. Any of the Funds that you have held for 15 days or more may
be exchanged for shares of any other Driehaus Mutual Fund in an identically
registered account, provided the Fund(s) to be acquired is (are) registered for
sale in your state of residence and you have met the minimum initial investment
requirements. Procedures applicable to redemption of a Fund's shares are also
applicable to exchanging shares. If you would like the ability to exchange
shares by telephone, please choose this option when you complete your
application. The Funds reserve the right to limit the number of exchanges
between Funds and to reject any exchange order. The Funds reserve the right to
modify or discontinue the exchange privilege at any time upon 60 days' written
notice. A capital gain or loss for tax purposes may be realized upon an
exchange, depending upon the cost or other basis of shares redeemed.
SIGNATURE GUARANTEES. A signature guarantee assures that a signature is genuine
and protects shareholders from unauthorized account transfers. In addition to
certain signature requirements, a signature guarantee is required in any of the
following circumstances:
- A redemption request is over $50,000.
- A redemption check is to be made payable to anyone other than the
shareholder(s) of record.
- A redemption check is to be mailed to an address other than the address
of record.
- A redemption amount is to be wired to a bank other than one previously
authorized.
At the Funds' discretion, signature guarantees also may be required for other
redemptions. A signature guarantee may be obtained from a domestic bank or trust
company, broker, dealer, clearing agency or savings association who is a
participant in a medallion program recognized by the Securities Transfer
Association. The three recognized medallion programs are the Securities Transfer
Agents Medallion Program (STAMP), the Stock Exchanges Medallion Program (SEMP),
and the New York Stock Exchange, Inc. Medallion Signature Program (MSP).
Signature guarantees which are not part of these programs will not be accepted.
TELEPHONE TRANSACTIONS. Investors may buy (by bank wire), sell and exchange
shares by telephone. Shareholders engaging in telephone transactions should be
aware that they may be forgoing some of the security associated with written
requests. A shareholder may bear the risk of any resulting losses from a
telephone transaction. The Funds will employ reasonable procedures to confirm
that the telephonic instructions are genuine. If the Fund or their service
providers fail to employ these measures, they may be liable for any losses
arising from unauthorized or fraudulent instructions. In addition, the Funds
reserve the right to record all telephone conversations. Please verify the
accuracy of telephone instructions immediately upon receipt of confirmation
statements.
During times of drastic economic or market changes, telephone redemption and
exchange privileges may be difficult to implement. In the event that you are
unable to reach the Funds by telephone, requests may be mailed to the Funds at
the address listed in "HOW TO REDEEM SHARES."
DIVIDEND AND ACCOUNT POLICIES
REINVESTMENT OF DISTRIBUTIONS. Dividends and distributions payable by a Fund are
automatically reinvested in additional shares of the Fund unless the investor
indicates otherwise on the application.
DISTRIBUTIONS AND TAXES
PAYMENT OF DIVIDENDS AND OTHER DISTRIBUTIONS. Each Fund pays its shareholders
dividends from its net investment income, and distributions from any capital
gain net income that it has realized. A capital gain or loss for tax purposes
may be realized upon the redemption or exchange of Fund shares, depending upon
the cost or other basis of shares redeemed. Distributions are generally paid
once a year. Each Fund intends to distribute at least 98% of any net investment
income for the calendar year plus 98% of capital gain net income realized from
the sale of securities net of any realized foreign exchange gains or losses
during the 12 month period ended October 31 in that year, if any. Each Fund
intends to distribute any undistributed net investment income and capital gain
net income in the following year.
35
<PAGE> 39
TAX STATUS OF DIVIDENDS AND OTHER DISTRIBUTIONS. Shareholders will be subject to
federal income tax at ordinary income tax rates on any dividends received that
are derived from investment company taxable income. Distributions of net capital
gain, when designated as such by a Fund are taxable to the shareholder as
long-term capital gains, regardless of how long shares are held. Distributions
are taxable in the year they are paid, whether they are taken in cash or
reinvested in additional shares, except that certain distributions declared in
the last three months of the year and paid in the following January are taxable
as if paid on December 31.
TAXABILITY OF DISTRIBUTIONS
<TABLE>
<CAPTION>
TAX RATE FOR TAX RATE FOR
TYPE OF DISTRIBUTION 15% BRACKET 28% BRACKET OR ABOVE
-------------------- ------------ --------------------
<S> <C> <C>
Income Dividends ordinary income rate ordinary income rate
Short-term Capital Gains ordinary income rate ordinary income rate
Long-term Capital Gains 10% 20%
</TABLE>
Investment income received by each Fund from sources within foreign countries
may be subject to foreign income taxes withheld at the source. The United States
has entered into tax treaties with many foreign countries that entitle each Fund
to a reduced rate of tax or exemption from tax on such income. It is impossible
to determine the effective rate of foreign tax in advance since the amount of a
Fund's assets to be invested within various countries will fluctuate and the
extent to which tax refunds will be recovered is uncertain. Each Fund intends to
operate so as to qualify for treaty-reduced tax rates where applicable.
To the extent that a Fund is liable for foreign income taxes, the Fund may
operate so as to meet the requirements of the U.S. Internal Revenue Code to
"pass through" to the Fund's shareholders foreign income taxes paid, but there
can be no assurance that the Fund will be able to do so. If this election is
made, shareholders will be able to claim a credit or deduction on their income
tax returns for, and will be required to treat as part of the amounts
distributed to them, their pro rata portion of the income taxes paid by the Fund
to foreign countries (which taxes relate primarily to investment income). The
shareholders of the Fund may claim a credit by reason of the Fund's election,
subject to certain limitations imposed by the Code. Also, under the Code, no
deduction for foreign taxes may be claimed by individual shareholders who do not
elect to itemize deductions on their federal income tax returns, although such a
shareholder may claim a credit for foreign taxes and in any event will be
treated as having taxable income in the amount of the shareholder's pro rata
share of foreign taxes paid by the Fund. If a Fund does not make such an
election, the foreign taxes paid by the Fund will reduce the Fund's net
investment income.
BUYING A DISTRIBUTION. A distribution paid shortly after an investor purchases
shares in a Fund will reduce the net asset value of the shares by the amount of
the distribution, which nevertheless will be taxable to the shareholders even
though it represents a return of a portion of the shareholder's investment.
BACKUP WITHHOLDING. The Fund may be required to withhold federal income tax
("backup withholding") at a 31% rate from taxable dividend, capital gain
distributions and redemption proceeds paid to certain shareholders. Backup
withholding may be required if:
- An investor fails to furnish the investor's properly certified social
security or other tax identification number;
- An investor fails to certify that the investor's tax identification
number is correct or that the investor is not subject to backup
withholding due to the under reporting of certain income; or
- The Internal Revenue Service informs the Fund that the investor's tax
identification number is incorrect.
These certifications are contained in the Application that should be completed
and returned when opening an account. Each Fund must promptly pay to the IRS all
amounts withheld. Therefore, it is usually not possible for a Fund to reimburse
a shareholder for amounts withheld. A shareholder may, however, claim the amount
withheld as a credit on the shareholder's federal income tax return.
The foregoing discussion of U.S. and foreign taxation is not intended to be a
full discussion of income tax laws and their effect on shareholders. U.S. and
foreign shareholders should consult their tax advisers as to the tax
consequences of ownership of any Fund shares.
36
<PAGE> 40
- --------------------------------------------------------------------------------
FOR MORE INFORMATION
- --------------------------------------------------------------------------------
More information on these Funds is available without charge, upon request,
including the following:
ANNUAL/SEMI-ANNUAL REPORTS
The annual and semi-annual reports to shareholders describes the Fund's
performance, lists portfolio holdings and contains a letter from the Fund's
Adviser discussing recent market conditions, economic trends and Fund strategies
that significantly affected the Funds' performance during the Funds' last fiscal
year. Management's discussion of Fund performance is incorporated by reference
into this prospectus from the reports to shareholders.
STATEMENT OF ADDITIONAL INFORMATION (SAI).
The SAI provides more details about the Fund and its policies. A current SAI is
on file with the Securities and Exchange Commission and is incorporated by
reference.
TO OBTAIN INFORMATION:
BY TELEPHONE
Call 1-800-560-6111
BY MAIL
Write to:
Driehaus Mutual Funds
P.O. Box 8855
Wilmington, DE 19899-8855
ON THE INTERNET
Text-only versions of fund documents can be
viewed online or downloaded from:
the SEC at http://www.sec.gov
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, D.C. (1-800-SEC-0330) or by sending your request and a duplicating
fee to the SEC's Public Reference Section, Washington, D.C. 20549-6009.
(C)1999, Driehaus Mutual Funds
1940 Act File No. 811-07655
<PAGE> 41
Statement of Additional Information Dated June 8, 1999
DRIEHAUS MUTUAL FUNDS
25 East Erie Street
Chicago, Illinois 60611
1-800-560-6111
DRIEHAUS INTERNATIONAL GROWTH FUND
DRIEHAUS INTERNATIONAL DISCOVERY FUND
DRIEHAUS EUROPEAN OPPORTUNITY FUND
DRIEHAUS ASIA PACIFIC GROWTH FUND
DRIEHAUS EMERGING MARKETS GROWTH FUND
This Statement of Additional Information is not a prospectus, but provides
additional information that should be read in conjunction with the Funds'
prospectus dated June 8, 1999 and any supplements thereto ("Prospectus"). The
Prospectus may be obtained at no charge by telephoning 1-800-560-6111.
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
GENERAL INFORMATION AND HISTORY.......................................................................B-2
PORTFOLIO INVESTMENTS AND RISK CONSIDERATIONS.........................................................B-2
INVESTMENT RESTRICTIONS...............................................................................B-10
PURCHASES AND REDEMPTIONS.............................................................................B-12
NET ASSET VALUE.......................................................................................B-12
MANAGEMENT............................................................................................B-13
PRINCIPAL SHAREHOLDERS................................................................................B-16
INVESTMENT ADVISORY SERVICES..........................................................................B-16
DISTRIBUTOR...........................................................................................B-17
ADMINISTRATOR.........................................................................................B-17
CUSTODIAN.............................................................................................B-18
TRANSFER AGENT........................................................................................B-18
INDEPENDENT PUBLIC ACCOUNTANTS........................................................................B-18
PORTFOLIO TRANSACTIONS................................................................................B-18
ADDITIONAL INCOME TAX CONSIDERATIONS..................................................................B-20
INVESTMENT PERFORMANCE................................................................................B-22
APPENDIX -- RATINGS...................................................................................A-1
</TABLE>
The financial statements appearing in the combined Driehaus International Growth
Fund, Driehaus Asia Pacific Growth Fund, and Driehaus Emerging Markets Growth
Fund Annual Reports to Shareholders for the fiscal year ended December 31, 1998,
and the combined Driehaus International Discovery Fund and Driehaus European
Opportunity Fund Annual Reports to Shareholders for the fiscal year ended
December 31, 1998 (the "Reports") are incorporated herein by reference.
These Reports accompany this document.
<PAGE> 42
GENERAL INFORMATION AND HISTORY
Driehaus International Growth Fund, Driehaus International Discovery Fund,
Driehaus European Opportunity Fund, Driehaus Asia Pacific Growth Fund, and
Driehaus Emerging Markets Growth Fund (individually, a "Fund" and collectively
the "Funds") are each series of the Driehaus Mutual Funds (the "Trust"), an
open-end management investment company. Driehaus Capital Management, Inc. (the
"Adviser") provides management and investment advisory services to each Fund.
The Trust is a Delaware business trust organized under an Agreement and
Declaration of Trust ("Declaration of Trust") dated May 31, 1996. The
Declaration of Trust may be amended by a vote of either the Fund's shareholders
or its trustees. Driehaus Mutual Funds may issue an unlimited number of shares,
in one or more series or classes as its Board of Trustees (the "Board") may
authorize. Currently, five series are authorized and outstanding. In October
1996, the Driehaus International Growth Fund succeeded to the assets of the
Driehaus International Large Cap Fund, L.P. The Driehaus Asia Pacific Growth
Fund and Driehaus Emerging Markets Growth Fund each commenced operations on
December 31, 1997. The Driehaus International Discovery Fund and the Driehaus
European Opportunity Fund commenced operations on December 31, 1998.
Each share of a Fund is entitled to participate pro rata in any dividends and
other distributions declared by the Board on shares of that series, and all
shares of a Fund have equal rights in the event of liquidation of that series.
As a business trust, the Trust is not required to hold annual shareholder
meetings. However, special meetings may be called for purposes such as electing
or removing trustees, changing fundamental policies, or approving an investment
advisory contract. If requested to do so by the holders of at least 10% of the
Trust's outstanding shares, the Trust will call a special meeting for the
purpose of voting upon the question of removal of a trustee or trustees and will
assist in the communication with other shareholders as if the Trust were subject
to Section 16(c) of the Investment Company Act of 1940, as amended (the "1940
Act"). All shares of all series of Driehaus Mutual Funds are voted together in
the election of trustees. On any other matter submitted to a vote of
shareholders, shares are voted in the aggregate and not by individual Funds,
except that shares are voted by an individual Fund when required by the 1940 Act
or other applicable law, or when the Board of Trustees determines that the
matter affects only the interests of one or more Funds, in which case
shareholders of the unaffected Funds are not entitled to vote on such matters.
PORTFOLIO INVESTMENTS AND RISK CONSIDERATIONS
GENERAL INVESTMENT RISKS
As with all investments, at any given time the value of your shares in the
Fund(s) may be worth more or less than the price you paid. The value of your
shares depends on the value of the individual securities owned by the Funds
which will go up and down depending on the performance of the company that
issued the security, general market and economic conditions, and investor
confidence. In addition, the market for securities generally rises and falls
over time usually in cycles. During any particular cycle, an investment style
may be in or out of favor. If the market is not favoring the Funds' style, a
Fund's gains may not be as big, or its losses may be larger than, other equity
funds using different investment styles.
FOREIGN SECURITIES
The Funds invest primarily in foreign securities, which may entail a greater
degree of risk (including risks relating to exchange rate fluctuations, tax
provisions or expropriation of assets) than does investment in securities of
domestic issuers. The Funds may also purchase foreign securities in the form of
American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"),
Global Depositary Receivables ("GDRs") or other securities representing
underlying shares of foreign issuers. Positions in these securities are not
necessarily denominated in the same currency as the common stocks into which
they may be converted. ADRs are receipts typically issued by an American bank or
trust company evidencing ownership of the underlying securities. EDRs and GDRs
are European receipts evidencing a similar arrangement. Generally, ADRs are
designed for the U.S. securities markets and EDRs and GDRS are designed for use
in European and other foreign securities markets. The Funds may invest in
sponsored or unsponsored ADRs.
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ln the case of an unsponsored ADR, each Fund is likely to bear its proportionate
share of the expenses of the depository and it may have greater difficulty in
receiving shareholder communications than it would have with a sponsored ADR.
With respect to equities that are issued by foreign issuers or denominated in
foreign currencies, each Fund's investment performance is affected by the
strength or weakness of the U.S. dollar against these currencies. For example,
if the dollar falls in value relative to the Japanese yen, the dollar value of a
yen-denominated stock held in the Fund will rise even though the price of the
stock remains unchanged. Conversely, if the dollar rises in value relative to
the yen, the dollar value of the yen-denominated stock will fall. (See
discussion of transaction hedging and portfolio hedging under "Currency Exchange
Transactions.")
Risks. Investors should understand and consider carefully the risks involved in
foreign investing. Investing in foreign securities and positions which are
generally denominated in foreign currencies, and utilization of forward currency
contracts involve certain considerations comprising both risks and opportunities
not typically associated with investing in U.S. securities. These considerations
include: fluctuations in exchange rates of foreign currencies; possible
imposition of exchange control regulation or currency restrictions that would
prevent cash from being brought back to the United States; less public
information with respect to issuers of securities; less governmental supervision
of stock exchanges, securities brokers and issuers of securities; lack of
uniform accounting, auditing and financial reporting standards; lack of uniform
settlement periods and trading practices; less liquidity and frequently greater
price volatility in foreign markets than in the United States; possible
imposition of foreign taxes; investment in securities of companies in developing
as well as developed countries; and sometimes less advantageous legal,
operational and financial protections applicable to foreign subcustodial
arrangements.
Although the Funds will try to invest in companies and governments of countries
having stable political environments, there is the possibility of expropriation
or confiscatory taxation, seizure or nationalization of foreign bank deposits or
other assets, establishment of exchange controls, the adoption of foreign
government restrictions, or other adverse political, social or diplomatic
developments that could affect investment in these nations.
Currency Exchange Transactions. Currency exchange transactions may be conducted
either through forward currency contracts ("forward currency contracts") or on a
spot (i.e., cash) basis at the spot rate for purchasing currency prevailing in
the foreign exchange market. Forward currency contracts are contractual
agreements to purchase or sell a specified currency at a specified future date
(or within a specified time period) and price set at the time of the contract.
Forward currency contracts are usually entered into with banks and
broker-dealers, are not exchange traded and are usually for less than one year,
but may be renewed.
Forward currency transactions may involve currencies of the different countries
in which the Funds may invest and serve as hedges against possible variations in
the exchange rate between these currencies. Each Fund's currency transactions
are limited to transaction hedging and portfolio hedging involving either
specific transactions or portfolio positions, except to the extent described
below under "Synthetic Foreign Money Market Positions." Transaction hedging is
the purchase or sale of forward currency contracts with respect to specific
receivables or payables of each Fund accruing in connection with settlement of
the purchase and sale of its portfolio securities. Portfolio hedging is the use
of forward currency contracts with respect to portfolio security positions
denominated or quoted in a particular currency. Portfolio hedging allows the
Adviser to limit or reduce exposure in a foreign currency by entering into a
forward contract to sell such foreign currency (or another foreign currency that
acts as a proxy for that currency) so that the U.S. dollar value of certain
underlying foreign portfolio securities can be approximately matched by an
equivalent U.S. dollar liability. Each Fund may not engage in portfolio hedging
with respect to the currency of a particular country to an extent greater than
the aggregate market value (at the time of making such sale) of the securities
held in its portfolio denominated or quoted in that particular currency, except
that each Fund may hedge all or part of its foreign currency exposure through
the use of a basket of currencies or a proxy currency where such currency or
currencies act as an effective proxy for other currencies. In such a case, each
Fund may enter into a forward contract where the amount of the foreign currency
to be sold exceeds the value of the securities denominated in such currency. The
use of this basket hedging technique may be more efficient and economical than
entering into separate forward currency contracts for each currency held in each
Fund. The Funds may not engage in "speculative" currency exchange transactions.
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At the maturity of a forward contract to deliver a particular currency, each
Fund may either sell the portfolio security related to such contract and make
delivery of the currency, or retain the security and either acquire the currency
on the spot market or terminate its contractual obligation to deliver the
currency by purchasing an offsetting contract with the same currency trader
obligating it to purchase on the same maturity date the same amount of the
currency.
It is impossible to forecast with absolute precision the market value of
portfolio securities at the expiration of a forward contract. Accordingly, it
may be necessary for a Fund to purchase additional currency on the spot market
(and bear the expense of such purchase) if the market value of the security is
less than the amount of currency the Fund is obligated to deliver and if a
decision is made to sell the security and make delivery of the currency.
Conversely, it may be necessary to sell on the spot market some of the currency
received upon the sale of the portfolio security if its market value exceeds the
amount of currency a Fund is obligated to deliver.
If a Fund retains the portfolio security and engages in an offsetting
transaction, the Fund will incur a gain or a loss to the extent that there has
been movement in forward contract prices. If a Fund engages in an offsetting
transaction, it may subsequently enter into a new forward contract to sell the
currency. Should forward prices decline during the period between the Fund's
entering into a forward contract for the sale of a currency and the date it
enters into an offsetting contract for the purchase of the currency, the Fund
will realize a gain to the extent the price of the currency it has agreed to
sell exceeds the price of the currency it has agreed to purchase. Should forward
prices increase, the Fund will suffer a loss to the extent the price of the
currency it has agreed to purchase exceeds the price of the currency it has
agreed to sell. A default on the contract would deprive the Fund of unrealized
profits or force the Fund to cover its commitments for purchase or sale of
currency, if any, at the current market price.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency should rise. Moreover,
it may not be possible for a Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the currency
at a price above the devaluation level it anticipates. The cost to a Fund of
engaging in currency exchange transactions varies with such factors as the
currency involved, the length of the contract period and prevailing market
conditions. Since currency exchange transactions are usually conducted on a
principal basis, no fees or commissions are involved.
Synthetic Foreign Money Market Positions. Each Fund may invest in money market
instruments denominated in foreign currencies. In addition to, or in lieu of,
such direct investment, each Fund may construct a synthetic foreign money market
position by (a) purchasing a money market instrument denominated in one
currency, generally U.S. dollars, and (b) concurrently entering into a forward
contract to deliver a corresponding amount of that currency in exchange for a
different currency on a future date and at a specified rate of exchange. For
example, a synthetic money market position in Japanese yen could be constructed
by purchasing a U.S. dollar money market instrument, and entering concurrently
into a forward contract to deliver a corresponding amount of U.S. dollars in
exchange for Japanese yen on a specified date and at a specified rate of
exchange. Because of the availability of a variety of highly liquid short-term
U.S. dollar money market instruments, a synthetic money market position
utilizing such U.S. dollar instruments may offer greater liquidity than direct
investment in foreign currency money market instruments. The result of a direct
investment in a foreign currency and a concurrent construction of a synthetic
position in such foreign currency, in terms of both income yield and gain or
loss from changes in currency exchange rates, in general should be similar, but
would not be identical because the components of the alternative investments
would not be identical. [Except to the extent a synthetic foreign money market
position consists of a money market instrument denominated in a foreign
currency, a synthetic foreign money market position shall not be deemed a
"foreign security" for purposes of the policy that, under normal conditions, the
Driehaus International Growth Fund and the Driehaus International Discovery Fund
will invest at least 65% of their respective total assets in at least three
countries other than the United States, or for the purposes of the policies that
the Driehaus European Opportunity Fund, the Driehaus Asia Pacific Growth Fund,
and the Driehaus Emerging Markets Growth Fund will invest at least 65% of their
respective total assets in European countries, Asia Pacific companies, and
emerging markets companies, respectively.]
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LENDING OF PORTFOLIO SECURITIES
Subject to restriction (3) under "Investment Restrictions" in this Statement of
Additional Information, each Fund may lend its portfolio securities to
broker-dealers and banks. Any such loan must be continuously secured by
collateral in cash or cash equivalents maintained on a current basis in an
amount at least equal to the market value of the securities loaned by that Fund.
Each Fund would continue to receive the equivalent of the interest or dividends
paid by the issuer on the securities loaned, and would also receive an
additional return that may be in the form of a fixed fee or a percentage of the
collateral. The Fund would have the right to call the loan and obtain the
securities loaned at any time on notice of not more than five business days. The
Fund would not have the right to vote the securities during the existence of the
loan but would call the loan to permit voting of the securities if, in the
Adviser's judgment, a material event requiring a shareholder vote would
otherwise occur before the loan was repaid. In the event of bankruptcy or other
default of the borrower, the Fund could experience both delays in liquidating
the loan collateral or recovering the loaned securities and losses, including
(a) possible decline in the value of the collateral or in the value of the
securities loaned during the period while the Fund seeks to enforce its rights
thereto, (b) possible subnormal levels of income and lack of access to income
during this period, and (c) expenses of enforcing its rights.
REPURCHASE AGREEMENTS
Each Fund may invest in repurchase agreements, provided that it will not invest
more than 15% of net assets in repurchase agreements maturing in more than seven
days and any other illiquid securities. A repurchase agreement is a sale of
securities to the Fund in which the seller agrees to repurchase the securities
at a higher price, which includes an amount representing interest on the
purchase price, within a specified time. In the event of bankruptcy of the
seller, the Fund could experience both losses and delays in liquidating its
collateral.
WARRANTS
The Funds may purchase warrants, which are instruments that give holders the
right, but not the obligation, to buy shares of a company at a given price
during a specified period. Warrants are generally sold by companies intending to
issue stock in the future, or by those seeking to raise cash by selling shares
held in reserve.
SHORT SALES
The Funds may make short sales "against the box." In a short sale, a Fund sells
a borrowed security and is required to return the identical security to the
lender. A short sale "against the box" involves the sale of a security with
respect to which the Fund already owns an equivalent security in kind and
amount. A short sale "against the box" enables each Fund to obtain the current
market price of a security that it desires to sell but is unavailable for
settlement.
RULE 144A SECURITIES
The Funds may purchase securities that have been privately placed but that are
eligible for purchase and sale under Rule 144A under the Securities Act of 1933
(the "1933 Act"). That Rule permits certain qualified institutional buyers, such
as the Funds, to trade in privately placed securities that have not been
registered for sale under the 1933 Act. The Adviser, under the supervision of
the Board of Trustees, will consider whether securities purchased under Rule
144A are illiquid and thus subject to each Fund's restriction of investing no
more than 15% of its net assets in illiquid securities. A determination of
whether a Rule 144A security is liquid or not is a question of fact. In making
this determination, the Adviser will consider the trading markets for the
specific security, taking into account the unregistered nature of a Rule 144A
security. In addition, the Adviser will consider the (1) frequency of trades and
quotes, (2) number of dealers and potential purchasers, (3) dealer undertakings
to make a market, and (4) nature of the security and of marketplace trades
(e.g., the time needed to dispose of the security, the method of soliciting
offers, and the mechanics of transfer). The liquidity of Rule 144A securities
will be monitored and, if as a result of changed conditions, it is determined
that a Rule 144A security is no longer liquid, each Fund's holdings of illiquid
securities would be reviewed to determine what, if any, steps are required to
assure that each Fund does not invest more than 15% of its assets in illiquid
securities. Investing in Rule 144A securities could have the effect of
increasing the amount of a Fund's assets invested in illiquid securities if
qualified institutional buyers are unwilling to purchase such securities.
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LINE OF CREDIT
Subject to restriction (4) under "Investment Restrictions" in this Statement of
Additional Information, Driehaus Mutual Funds has established a line of credit
with a major bank in order to permit borrowing on a temporary basis to meet
share redemption requests in circumstances in which temporary borrowing may be
preferable to liquidation of portfolio securities. Currently the line of credit
is available to the Driehaus International Growth Fund.
PORTFOLIO TURNOVER
Portfolio turnover rate is commonly measured by dividing the lesser of total
purchases or sales for the period under consideration by the average portfolio
value (i.e., the cumulative total investment in the account at the end of each
month, divided by the number of months under consideration).
DERIVATIVES
Consistent with its objective, each Fund may invest in a broad array of
financial instruments and securities, commonly known as derivatives. (For these
purposes, forward currency contracts are not considered "derivatives.") The
Funds may enter into conventional exchange-traded and nonexchange-traded
options, futures contracts, futures options, swaps and similar transactions,
such as caps, floors and collars, involving or relating to currencies,
securities, interest rates, prices or other items. In each case, the value of
the instrument or security is "derived" from the performance of an underlying
asset or a "benchmark" such as a security, an index, an interest rate or a
currency.
Derivatives are most often used to manage investment risk or to create an
investment position indirectly because they are more efficient or less costly
than direct investment that cannot be readily established directly due to
portfolio size, cash availability or other factors. They also may be used in an
effort to enhance portfolio returns.
The successful use of derivatives depends on the Adviser's ability to correctly
predict changes in the levels and directions of movements in currency exchange
rates, security prices, interest rates and other market factors affecting the
derivative itself or the value of the underlying asset or benchmark. In
addition, correlations in the performance of an underlying asset to a derivative
may not be well established. Finally, privately negotiated and over-the-counter
derivatives may not be as well regulated and may be less marketable than
exchange-traded derivatives.
A swap transaction is an individually negotiated, nonstandardized agreement
between two parties to exchange cash flows (and sometimes principal amounts)
measured by different interest rates, exchange rates, indices or prices, with
payments generally calculated by reference to a principal ("notional") amount or
quantity. In general, swaps are agreements pursuant to which a Fund contracts
with a bank or a broker/dealer to receive a return based on or indexed to the
performance of an individual security or a basket of securities. The Fund
usually will enter into swaps on a net basis, i.e., the two payment streams are
netted out in a cash settlement on the payment date or dates specified in the
instrument, with the Fund receiving or paying, as the case may be, only the net
amount of the two payments. The Adviser and the Fund believe such obligations do
not constitute senior securities under the 1940 Act, and, accordingly, will not
treat them as being subject to its borrowing restrictions. Swap contracts are
not traded on exchanges; rather, banks and dealers act as principals in these
markets. As a result, the Fund will be subject to the risk of the inability or
refusal to perform with respect to such contracts on the part of the
counterparties with which the Fund trades. If there is a default by a
counterparty, the Fund may have contractual remedies pursuant to the agreements
related to the transaction. The swap market is generally not regulated by any
governmental authority. Participants in the swap markets are not required to
make continuous markets in the swap contracts they trade.
The Funds intend to use interest rate, currency and index swaps as hedges and
not as speculative investments and will not sell interest rate caps or floors
where it does not own securities or other instruments providing the income
stream the Fund may be obligated to pay. Interest rate swaps involve the
exchange by a Fund with another party of their respective
commitments to pay or receive interest, e.g., an exchange of floating rate
payments for fixed rate payments with respect to a notional amount of principal.
A currency swap is an agreement to exchange cash flows on a notional amount of
two or more currencies based on the relative value differential among them. An
index swap is an agreement to swap cash flows on a notional amount based on
changes in the values of the reference indices. The purchase of a cap
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entitles the purchaser to receive payments on a notional principal amount from
the party selling such cap to the extent that a specified index exceeds a
predetermined interest rate or amount. The purchase of a floor entitles the
purchaser to receive payments on a notional principal amount from the party
selling such floor to the extent that a specified index falls below a
predetermined interest rate or amount. A collar is a combination of a cap and a
floor that preserves a certain return within a predetermined range of interest
rates or values.
With respect to swaps, the Fund will accrue the net amount of the excess, if
any, of its obligations over its entitlements with respect to each swap on a
daily basis and will segregate an amount of cash or liquid securities having a
value equal to the accrued excess. Caps, floors and collars require segregation
of assets with a value equal to the Fund's net obligation, if any.
Options on Securities and Indexes. The Funds may purchase and sell put options
and call options on securities, indexes or foreign currencies in standardized
contracts traded on recognized securities exchanges, boards of trade or similar
entities, or quoted on NASDAQ. The Funds may purchase agreements, sometimes
called cash puts, that may accompany the purchase of a new issue of bonds from a
dealer.
An option on a security (or index) is a contract that gives the purchaser
(holder) of the option, in return for a premium, the right to buy from (call) or
sell to (put) the seller (writer) of the option the security underlying the
option (or the cash value of the index) at a specified exercise price at any
time during the term of the option (normally not exceeding nine months). The
writer of an option on an individual security or on a foreign currency has the
obligation upon exercise of the option to deliver the underlying security or
foreign currency upon payment of the exercise price or to pay the exercise price
upon delivery of the underlying security or foreign currency. Upon exercise, the
writer of an option on an index is obligated to pay the difference between the
cash value of the index and the exercise price multiplied by the specified
multiplier for the index option. (An index is designed to reflect specified
facets of a particular financial or securities market, a specific group of
financial instruments or securities, or certain economic indicators.)
The Funds will write call options and put options only if they are "covered."
For example, in the case of a call option on a security, the option is "covered"
if the Fund owns the security underlying the call or has an absolute and
immediate right to acquire that security without additional cash consideration
(or, if additional cash consideration is required, cash or cash equivalents in
such amount are held in a segregated account by its custodian) upon conversion
or exchange of other securities held in its portfolio.
If an option written by a Fund expires, the Fund realizes a capital gain equal
to the premium received at the time the option was written. If an option
purchased by a Fund expires, the Fund realizes a capital loss equal to the
premium paid.
Prior to the earlier of exercise or expiration, an option may be closed out by
an offsetting purchase or sale of an option of the same series (type, exchange,
underlying security or index, exercise price, and expiration). There can be no
assurance, however, that a closing purchase or sale transaction can be effected
when a Fund desires.
A Fund will realize a capital gain from a closing purchase transaction if the
cost of the closing option is less than the premium received from writing the
option, or, if it is more, a Fund will realize a capital loss. If the premium
received from a closing sale transaction is more than the premium paid to
purchase the option, a Fund will realize a capital gain, or, if it is less, a
Fund will realize a capital loss. The principal factors affecting the market
value of a put or a call option include supply and demand, interest rates, the
current market price of the underlying security or index in relation to the
exercise price of the option, the volatility of the underlying security or index
and the time remaining until the expiration date.
A put or call option purchased by a Fund is an asset of that Fund, valued
initially at the premium paid for the option. The premium received for an option
written by a Fund is recorded as a deferred credit. The value of an option
purchased or written is marked-to-market daily and is valued at the closing
price on the exchange on which it is traded or, if not traded on an exchange or
no closing price is available, at the mean between the last bid and asked
prices.
There are several risks associated with transactions in options. For example,
there are significant differences between the securities markets, the currency
markets, and the options markets that could result in an imperfect correlation
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between these markets, causing a given transaction not to achieve its
objectives. A decision as to whether, when and how to use options involves the
exercise of skill and judgment, and even a well-conceived transaction may be
unsuccessful to some degree because of market behavior or unexpected events.
There can be no assurance that a liquid market will exist when a Fund seeks to
close out an option position. If a Fund were unable to close out an option that
it had purchased on a security, it would have to exercise the option in order to
realize any profit or the option would expire and become worthless. If a Fund
were unable to close out a covered call option that it had written on a
security, it would not be able to sell the underlying security until the option
expired. As the writer of a covered call option on a security, a Fund forgoes,
during the option's life, the opportunity to profit from increases in the market
value of the security covering the call option above the sum of the premium and
the exercise price of the call.
If trading were suspended in an option purchased or written by a Fund, the Fund
would not be able to close out the option. If restrictions on exercise were
imposed, a Fund might be unable to exercise an option it has purchased.
Futures Contracts and Options on Futures Contracts. The Funds may use interest
rate futures contracts, index futures contracts, and foreign currency futures
contracts. An interest rate, index or foreign currency futures contract provides
for the future sale by one party and purchase by another party of a specified
quantity of a financial instrument or the cash value of an index (1) at a
specified price and time. A public market exists in futures contracts covering a
number of indexes (including, but not limited to, the Standard & Poor's 500
Index, the Value Line Composite Index, and the New York Stock Exchange Composite
Index) as well as financial instruments (including, but not limited to, U.S.
Treasury bonds, U.S. Treasury notes, Eurodollar certificates of deposit, and
foreign currencies). Other index and financial instrument futures contracts are
available and it is expected that additional futures contracts will be developed
and traded.
The Funds may purchase and write call and put futures options. Futures options
possess many of the same characteristics as options on securities, indexes and
foreign currencies (discussed above). A futures option gives the holder the
right, in return for the premium paid, to assume a long position (call) or short
position (put) in a futures contract at a specified exercise price at any time
during the period of the option. Upon exercise of a call option, the holder
acquires a long position in the futures contract and the writer is assigned the
opposite short position. In the case of a put option, the opposite is true. A
Fund might, for example, use futures contracts to hedge against or gain exposure
to fluctuations in the general level of stock prices, anticipated changes in
interest rates or currency fluctuations that might adversely affect either the
value of the Fund's securities or the price of the securities that the Fund
intends to purchase. Although other techniques could be used to reduce or
increase the Fund's exposure to stock price, interest rate and currency
fluctuations, the Fund may be able to achieve its exposure more effectively and
perhaps at a lower cost by using futures contracts and futures options.
The Funds will only enter into futures contracts and futures options that are
standardized and traded on an exchange, board of trade or similar entity, or
quoted on an automated quotation system.
The success of any futures transaction depends on the Adviser correctly
predicting changes in the level and direction of stock prices, interest rates,
currency exchange rates and other factors. Should those predictions be
incorrect, a Fund's return might have been better had the transaction not been
attempted; however, in the absence of the ability to use futures contracts, the
Adviser might have taken portfolio actions in anticipation of the same market
movements with similar investment results but, presumably, at greater
transaction costs.
- ----------------
(1) A futures contract on an index is an agreement pursuant to which two
parties agree to take or make delivery of an amount of cash equal to the
difference between the value of the index at the close of the last trading
day of the contract and the price at which the index contract was
originally written. Although the value of a securities index is a function
of the value of certain specified securities, no physical delivery of those
securities is made.
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When a purchase or sale of a futures contract is made by a Fund, the Fund is
required to deposit with its custodian (or broker, if legally permitted) a
specified amount of cash or U.S. Government securities or other securities
acceptable to the broker ("initial margin"). The margin required for a futures
contract is set by the exchange on which the contract is traded and may be
modified during the term of the contract. The initial margin is in the nature of
a performance bond or good faith deposit on the futures contract, which is
returned to the Fund upon termination of the contract, assuming
all contractual obligations have been satisfied. The Fund expects to earn
interest income on its initial margin deposits. A futures contract held by a
Fund is valued daily at the official settlement price of the exchange on which
it is traded. Each day a Fund pays or receives cash, called "variation margin,"
equal to the daily change in value of the futures contract. This process is
known as "marking-to-market." Variation margin paid or received by a Fund does
not represent a borrowing or loan by the Fund but is instead settlement between
the Fund and the broker of the amount one would owe the other if the futures
contract had expired at the close of the previous day. In computing daily net
asset value, each Fund will mark-to-market its open futures positions.
Each Fund is also required to deposit and maintain margin with respect to put
and call options on futures contracts written by it. Such margin deposits will
vary depending on the nature of the underlying futures contract (and the related
initial margin requirements), the current market value of the option and other
futures positions held by the Fund.
Although some futures contracts call for making or taking delivery of the
underlying securities, usually these obligations are closed out prior to
delivery by offsetting purchases or sales of matching futures contracts (same
exchange, underlying security or index and delivery month). If an offsetting
purchase price is less than the original sale price, a Fund realizes a capital
gain, or if it is more, a Fund realizes a capital loss. Conversely, if an
offsetting sale price is more than the original purchase price, a Fund realizes
a capital gain, or if it is less, a Fund realizes a capital loss. The
transaction costs must also be included in these calculations.
There are several risks associated with the use of futures contracts and futures
options. A purchase or sale of a futures contract may result in losses in excess
of the amount invested in the futures contract. In trying to increase or reduce
market exposure, there can be no guarantee that there will be a correlation
between price movements in the futures contract and in the portfolio exposure
sought. In addition, there are significant differences between the securities
and futures markets that could result in an imperfect correlation between the
markets, causing a given transaction not to achieve its objectives. The degree
of imperfection of correlation depends on circumstances such as variations in
speculative market demand for futures, futures options and the related
securities, including technical influences in futures and futures options
trading and differences between the securities markets and the securities
underlying the standard contracts available for trading. For example, in the
case of index futures contracts, the composition of the index, including the
issuers and the weighting of each issue, may differ from the composition of a
Fund's portfolio, and, in the case of interest rate futures contracts, the
interest rate levels, maturities and creditworthiness of the issues underlying
the futures contract may differ from the financial instruments held in a Fund's
portfolio. A decision as to whether, when and how to use futures contracts
involves the exercise of skill and judgment, and even a well-conceived
transaction may be unsuccessful to some degree because of market behavior or
unexpected stock price or interest rate trends.
Futures exchanges may limit the amount of fluctuation permitted in certain
futures contract prices during a single trading day. The daily limit establishes
the maximum amount that the price of a futures contract may vary either up or
down from the previous day's settlement price at the end of the current trading
session. Once the daily limit has been reached in a futures contract subject to
the limit, no more trades may be made on that day at a price beyond that limit.
The daily limit governs only price movements during a particular trading day and
therefore does not limit potential losses because the limit may work to prevent
the liquidation of unfavorable positions. For example, futures prices have
occasionally moved to the daily limit for several consecutive trading days with
little or no trading, thereby preventing prompt liquidation of positions and
subjecting some holders of futures contracts to substantial losses. Stock index
futures contracts are not normally subject to such daily price change
limitations.
There can be no assurance that a liquid market will exist at a time when a Fund
seeks to close out a futures or futures option position. The Fund would be
exposed to possible loss on the position during the interval of inability to
close and would continue to be required to meet margin requirements until the
position is closed. In addition, many of the
B-9
<PAGE> 50
contracts discussed above are relatively new instruments without a significant
trading history. As a result, there can be no assurance that an active secondary
market will develop or continue to exist.
Limitations on Options and Futures. If other options, futures contracts or
futures options of types other than those described herein are traded in the
future, a Fund may also use those investment vehicles, provided the Board of
Trustees determines that their use is consistent with the Fund's investment
objective.
A Fund will not enter into a futures contract or purchase an option thereon if,
immediately thereafter, the initial margin deposits for futures contracts held
by the Fund plus premiums paid by it for open futures option positions, less the
amount by which any such positions are "in-the-money," (2) would exceed 5% of
the Fund's total assets.
When purchasing a futures contract or writing a put option on a futures
contract, a Fund must maintain with its custodian (or broker, if legally
permitted) cash or cash equivalents (including any margin) equal to the market
value of such contract. When writing a call option on a futures contract, a Fund
similarly will maintain with its custodian cash or cash equivalents (including
any margin) equal to the amount by which such option is in-the-money until the
option expires or is closed out by the Fund.
A Fund may not maintain open short positions in futures contracts, call options
written on futures contracts or call options written on indexes if, in the
aggregate, the market value of all such open positions exceeds the current value
of the securities in its portfolio, plus or minus unrealized gains and losses on
the open positions, adjusted for the historical relative volatility of the
relationship between the portfolio and the positions. For this purpose, to the
extent a Fund has written call options on specific securities in its portfolio,
the value of those securities will be deducted from the current market value of
the securities portfolio.
In order to comply with Commodity Futures Trading Commission ("CFTC") Regulation
4.5 and thereby avoid being deemed a "commodity pool operator," a Fund will use
commodity futures or commodity options contracts solely for bona fide hedging
purposes within the meaning and intent of CFTC Regulation 1.3(z), or, with
respect to positions in commodity futures and commodity options contracts that
do not come within the meaning and intent of CFTC Regulation 1.3(z), the
aggregate initial margin and premiums required to establish such positions will
not exceed 5% of the fair market value of the assets of the Fund, after taking
into account unrealized profits and unrealized losses on any such contracts it
has entered into. In the case of an option that is in-the-money at the time of
purchase, the in-the-money amount (as defined in Section 190.01(x) of the CFTC
Regulations) may be excluded in computing such 5%.
INVESTMENT RESTRICTIONS
Each Fund operates under the following fundamental investment restrictions,
which, together with the investment objective and fundamental policies, cannot
be changed without the approval of a "majority of the outstanding voting
securities," which is defined in the 1940 Act to mean the lesser of (i) 67% of a
Fund's shares present at a meeting where more than 50% of the outstanding shares
are present in person or by proxy or (2) more than 50% of a Fund's outstanding
shares. Each Fund may not:
(1) act as an underwriter of securities, except insofar as it may
be deemed an underwriter for purposes of the Securities Act of
1933 on disposition of securities acquired subject to legal or
contractual restrictions on resale;
- ---------------
(2) A call option is "in-the-money" if the value of the futures contract that
is the subject of the option exceeds the exercise price. A put option is
"in-the-money" if the exercise price exceeds the value of the futures
contract that is the subject of the option.
B-10
<PAGE> 51
(2) purchase or sell real estate (although it may purchase
securities secured by real estate or interests therein, or
securities issued by companies which invest in real estate or
interests therein), commodities or commodity contracts, except
that it may enter into (a) futures and options on futures and
(b) forward currency contracts;
(3) make loans, but this restriction shall not prevent the Fund
from (a) buying a part of an issue of bonds, debentures, or
other obligations, (b) investing in repurchase agreements, or
(c) lending portfolio securities, provided that it may not
lend securities if, as a result, the aggregate value of all
securities loaned would exceed 33 1/3% of its total assets
(taken at market value at the time of such loan);
(4) borrow, except that it may (a) borrow up to 33 1/3% of its
total assets, taken at market value at the time of such
borrowing, as a temporary measure for extraordinary or
emergency purposes, but not to increase portfolio income (the
total of reverse repurchase agreements and such borrowings
will not exceed 33 1/3% of its total assets, and the Fund will
not purchase additional securities when its borrowings, less
proceeds receivable from sales of portfolio securities, exceed
5% of its total assets) and (b) enter into transactions in
options, futures and options on futures;
(5) invest in a security if 25% or more of its total assets (taken
at market value at the time of a particular purchase) would be
invested in the securities of issuers in any particular
industry, (3) except that this restriction does not apply to
securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities; or
(6) issue any senior security except to the extent permitted under
the Investment Company Act of 1940.
Each Fund is also subject to the following nonfundamental restrictions and
policies, which may be changed by the Board of Trustees. Each Fund may not:
(a) invest in companies for the purpose of exercising
control or management;
(b) purchase, except for securities acquired as part of a
merger, consolidation or acquisition of assets, more
than 3% of the stock of another investment company
(valued at time of purchase);
(c) mortgage, pledge or hypothecate its assets, except as
may be necessary in connection with permitted
borrowings or in connection with options, futures and
options on futures;
(d) purchase securities on margin (except for use of
short-term credits as are necessary for the clearance
of transactions), or sell securities short unless (i)
the Fund owns or has the right to obtain securities
equivalent in kind and amount to those sold short at
no added cost or (ii) the securities sold are "when
issued" or "when distributed" securities which the
Fund expects to receive in a recapitalization,
reorganization or other exchange for securities the
Fund contemporaneously owns or has the right to
obtain and provided that transactions in options,
futures and options on futures are not treated as
short sales; and
(e) invest more than 15% of its net assets (taken at
market value at the time of a particular investment)
in illiquid securities, including repurchase
agreements maturing in more than seven days.
- -----------------
(3) For purposes of this investment restriction, each
Fund uses industry classifications contained in
Institutional Brokers Estimate System ("I/B/E/S")
Sector Industry Group Classification, published by
I/B/E/S, an institutional research firm.
B-11
<PAGE> 52
PURCHASES AND REDEMPTIONS
Purchases and redemptions are discussed in the Prospectus under the headings
"How to Purchase Shares," "How to Redeem Shares" and "Net Asset Value," and that
information is incorporated herein by reference. The Prospectus discloses that
you may purchase (or redeem) shares through investment dealers or other
institutions. It is the responsibility of any such institution to establish
procedures insuring the prompt transmission to the Fund of any such purchase
order.
Each Fund's net asset value is determined on days on which the New York Stock
Exchange (the "NYSE") is open for trading. The NYSE is regularly closed on
Saturdays and Sundays and on New Year's Day, the third Monday in January, the
third Monday in February, Good Friday, the last Monday in May, Independence Day,
Labor Day, Thanksgiving, and Christmas. If one of these holidays falls on a
Saturday or Sunday, the NYSE will be closed on the preceding Friday or the
following Monday, respectively.
The Trust intends to pay all redemptions in cash and will pay cash for all
redemptions orders, limited in amount with respect to each shareholder of record
during any ninety-day period to the lesser of [$250,000] or one percent of the
net assets of the relevant Fund, as measured at the beginning of such period.
However, redemptions in excess of such limit may be paid wholly or partly by a
distribution in kind of exchange-traded securities. If redemptions were made in
kind, the redeeming shareholders might incur transaction costs in selling the
securities received in the redemptions.
The Trust reserves the right to suspend or postpone redemptions of shares of a
Fund during any period when: (a) trading on the NYSE is restricted, as
determined by the Securities and Exchange Commission, or the NYSE is closed for
other than customary weekend and holiday closings; (b) the Securities and
Exchange Commission has by order permitted such suspension; or (c) an emergency,
as determined by the Securities and Exchange Commission, exists, making disposal
of portfolio securities or valuation of net assets of a Fund not reasonably
practicable.
NET ASSET VALUE
The net asset value of a share of a Fund is calculated by dividing (i) the value
of the securities held by the Fund (i.e., the value of its investments), plus
any cash or other assets, minus all liabilities (including accrued estimated
expenses on an annual basis), by (ii) the total number of outstanding shares of
the Fund. Investment securities, including ADRs, EDRs and GDRs, that are traded
on a stock exchange or on the NASDAQ National Market System are valued at the
last sale price as of the regular close of business on the NYSE (3:00 p.m.
Central time) on the day the securities are being valued, or lacking any sales,
at either (i) the last bid or ask prices or (ii) the mean between the closing
bid and asked prices. Other over-the-counter securities are valued at the mean
between the closing bid and asked prices. Net asset value will not be determined
on days when the NYSE is closed, unless, in the judgment of the Board, the net
asset value of a Fund should be determined on any such day, in which case the
determination will be made at 3:00 P.M. Central time.
In the event that the NYSE or the relevant national securities exchange adopts
different trading hours on a temporary basis, Fund net asset value will be
computed at the close of the exchange.
Trading in securities on most foreign securities exchanges and over-the-counter
markets is normally completed well before the close of the NYSE except
securities trading primarily on Central and South American exchanges. Such
securities are valued at the last sale price as of the regular close of the
relevant exchange. For securities that trade primarily on an exchange that
closes after the NYSE, the price of the security will be determined at 1:00 p.m.
Central time. In addition, foreign securities trading may not take place on all
business days and may occur in various foreign markets on days which are not
business days in domestic markets and on which net asset value is not
calculated. The calculation of net asset value may not take place
contemporaneously with the determination of the prices of portfolio securities
used in such calculation. Events affecting the values of portfolio securities
that occur between the time their prices are determined and the close of the
NYSE will not be reflected in the calculation of net asset value unless the
Adviser, by or under the direction of the Board of Trustees, deems that the
particular event would materially affect net asset value, in which case an
adjustment will be made. Assets or liabilities initially expressed in terms of
foreign
B-12
<PAGE> 53
currencies are translated prior to the next determination of the net asset value
into U.S. dollars at the spot exchange rates at 10:00 a.m. Central time or at
such other rates as the Adviser may determine to be appropriate in computing net
asset value.
Securities and assets for which market quotations are not readily available, or
for which the Adviser's Pricing Committee determines that the foregoing methods
do not accurately reflect current market value, are valued at fair value as
determined in good faith by or under the direction of the Board of Trustees.
Such valuations and procedures will be reviewed periodically by the Board of
Trustees.
The Fund uses pricing services approved by its Board of Trustees. Prices of
equity securities provided by such services represent the last sale price on the
exchange where the security is primarily traded. Exchange rates of currencies
provided by such services are sourced, where possible, from multi-contributor
quotations. Normally, the rate will be based upon commercial interbank bid and
offer quotes. Representative rates are selected for each currency based upon the
latest quotation taken from contributors at short intervals prior to pricing.
Prices of bonds by such services represent evaluations of the mean between
current bid and asked market prices, may be determined without exclusive
reliance on quoted prices and may reflect appropriate factors such as
institution-size trading in similar groups of securities, yield, quality, coupon
rate, maturity, type of issue, individual trading characteristics, indications
of values from dealers and other market data. Such services may use electronic
data processing techniques and/or a matrix system to determine valuations. The
procedures of such services are reviewed periodically by the officers of the
Fund under the general supervision and responsibility of its Board of Trustees,
which may replace a service at any time if it determines that it is in the best
interests of the Funds to do so.
Long-term debt obligations are valued at the mean of representative quoted bid
and asked prices for such securities or, if such prices are not available, at
prices for securities of comparable maturity, quality and type; however, when
the Adviser deems it appropriate, prices obtained for the day of valuation from
a bond pricing service will be used, as discussed below. Debt securities with
maturities of 60 days or less are valued (i) at amortized cost if their term to
maturity from date of purchase is less than 60 days, or (ii) by amortizing, from
the 61st day prior to maturity, their value on the 61st day prior to maturity if
their term to maturity from date of purchase by a Fund is more than 60 days,
unless this is determined by the Fund's Board of Trustees not to represent fair
value. Repurchase agreements are valued at cost plus accrued interest.
U.S. Government securities are traded in the over-the-counter market and are
valued at the mean between the last available bid and asked prices, except that
securities with a demand feature exercisable within one to seven days are valued
at par. Such valuations are based on quotations of one or more dealers that make
markets in the securities as obtained from such dealers, or on the evaluation of
a pricing service.
Options, futures contracts and options thereon, which are traded on exchanges,
are valued at their last sale or settlement price as of the close of such
exchanges or, if no sales are reported, at the mean between the last reported
bid and asked prices. If an options or futures exchange closes later than 3:00
p.m. Central time, the options or futures traded on it are valued based on the
sale price, or on the mean between the bid and ask prices, as the case may be,
as of 3:00 p.m. Central time.
MANAGEMENT
The following table sets forth certain information with respect to the trustees
and executive officers of the Fund:
<TABLE>
<CAPTION>
POSITION(S) PRINCIPAL OCCUPATION(S)
NAME; ADDRESS AGE HELD WITH FUND DURING PAST FIVE YEARS
- ------------- --- -------------- ----------------------
<S> <C> <C> <C>
Richard H. Driehaus*(1),(3) 56 Chairman of the Board; Chairman of the Board and Chief Executive
25 East Erie Street President Officer of the Adviser and Driehaus Securities
Chicago, IL 60611 Corporation; Chief Investment Officer; Portfolio
Manager of the Adviser
</TABLE>
B-13
<PAGE> 54
<TABLE>
<CAPTION>
POSITION(S) PRINCIPAL OCCUPATION(S)
NAME; ADDRESS AGE HELD WITH FUND DURING PAST FIVE YEARS
- ------------- --- -------------- ----------------------
<S> <C> <C> <C>
Francis J. Harmon(2) 56 Trustee Senior Account Executive - Labor Affairs, Blue
9910 South Seeley Avenue Cross-Blue Shield of Illinois
Chicago, IL 60643
Robert F. Moyer(1) 52 Trustee, Senior Vice President and Chief Operating Officer of the
25 East Erie Street President Adviser and Driehaus Securities Corporation
Chicago, IL 60611 since 1995; Senior Vice President, Vice
President and Secretary prior thereto
A.R. Umans(1),(2) 72 Trustee Chairman of the Board and Chief Executive
1400 North 25th Avenue Officer, RHC/Spacemaster Corporation
Melrose Park, IL 60160 (manufacturing corporation)
Daniel F. Zemanek(2) 57 Trustee Consultant, real estate development, since
249 View Street August, 1998; Senior Vice President of Real
Mountain View, CA 94041 Estate, Una Mas Restaurants, Inc., from 1996 to
1998; brokered real estate loans for private and
institutional investors in California from 1991 to
1996; President, Shell Realty, from 1985-1991.
Arthur B. Mellin(3) 55 Advisory Board President, Mellin Securities Incorporated and
190 South LaSalle Street Member Mellin Asset Management, Inc.
Chicago, IL 60603
William R. Andersen 40 Vice President Senior Vice President and portfolio manager of
25 East Erie Street the Adviser; portfolio manager of the Adviser
Chicago, IL 60611 prior thereto
Diane L. Wallace 40 Vice President; Senior Vice President-Operations of the Adviser
25 East Erie Street Treasurer and Driehaus Securities Corporation, since 1996;
Chicago, IL 60611 Vice President prior thereto
Mary H. Weiss 50 Vice President; Vice President, Secretary and Chief Legal
25 East Erie Street Secretary Counsel of the Adviser and Driehaus Securities
Chicago, IL 60611 Corporation since 1995; prior thereto, Assistant
Regional Director, U.S. Securities and Exchange
Commission
Robert H. Buchen 61 Vice President Vice President of marketing/account management
25 East Erie Street of the Adviser and Driehaus Securities
Chicago, IL 60611 Corporation since 1990
Dusko Culafic 40 Assistant Treasurer Vice President and Treasurer of the Adviser and
25 East Erie Street Driehaus Securities Corporation since 1996;
Chicago, IL 60611 Controller prior thereto
Jennifer L. Billingsley 36 Assistant Secretary Attorney with the Adviser since 1996; prior
25 East Erie Street thereto, associate of Sidley & Austin, a law firm
Chicago, IL 60611
</TABLE>
B-14
<PAGE> 55
<TABLE>
<CAPTION>
POSITION(S) PRINCIPAL OCCUPATION(S)
NAME: ADDRESS Age HELD WITH FUND DURING PAST FIVE YEARS
- ------------- --- -------------- ----------------------
<S> <C> <C> <C>
Cathy G. O'Kelly 46 Assistant Secretary Partner, Vedder, Price, Kaufman & Kammholz, a
222 N. LaSalle Street law firm
Chicago, IL 60601
- -----------------
</TABLE>
* Trustee who is an "interested person" of the Fund and of the Adviser, as
defined in the 1940 Act.
1 Member of the Executive Committee of the Board of Trustees, which is
authorized to exercise all powers of the Board with certain statutory
exceptions.
2 Member of the Audit Committee of the Board, which makes recommendations to
the Board regarding the selection of auditors and confers with the auditors
regarding the scope and results of the audit.
3 Mr. Driehaus and Mr. Mellin are brothers-in-law.
The Board of Trustees is comprised of a majority of members who are classified
under the 1940 Act as "non-interested" persons of the Trust and are often
referred to as "independent trustees." In addition to investing in the various
Funds of the Trust, independent trustees may invest in limited partnerships that
are managed by the Adviser and in which employees of the Adviser may also be
invested and affiliates of the Adviser may have a financial interest. The
independent trustees may also from time to time, invest in third party
investment ventures in which affiliates and employees of the Adviser also
invest.
Officers and trustees affiliated with the Adviser serve without any compensation
from the Fund. In compensation for their services to each Fund, trustees who are
not affiliates of the Fund or the Adviser are paid $2,500 for each Board meeting
attended and $500 for each committee meeting attended, and are reimbursed for
out-of-pocket expenses. The Fund has no retirement or pension plans. The
following table sets forth the compensation paid by the Fund during the calendar
year 1998 to each of the non-interested trustees:
COMPENSATION
NAME OF TRUSTEE FROM THE FUND
--------------- -------------
A.R. Umans $ 18,000
Daniel Zemanek $ 18,000
Francis J. Harmon(1) $ 2,500
Arthur B. Mellin(2) $ 18,000
- -----------------
1 Mr. Harmon became a member of the Board of Trustees on December 21,
1998.
2 Mr. Mellin received this compensation in his former capacity as
trustee. He receives no compensation from the Fund in his capacity as
an Advisory Board Member, but is compensated by the Adviser.
As of May 14, 1999, the Fund's officers and trustees as a group owned (or held a
shared investment or voting power with respect to) shares or % of
the Driehaus International Growth Fund, shares or % of the
Driehaus International Discovery Fund, shares or % of the Driehaus
European Opportunity Fund, shares or % of the Driehaus Asia Pacific
Growth Fund, and shares or % of the Driehaus Emerging Markets Growth
Fund.
B-15
<PAGE> 56
PRINCIPAL SHAREHOLDERS
As of May 14, 1999, no persons owned of record or beneficially 5% or more of the
shares of a Fund except the persons indicated below.
<TABLE>
<CAPTION>
NAME AND ADDRESS FUND % OWNED
- ---------------- ---- -------
<S> <C> <C>
Mac & Co. Driehaus International Growth Fund ___%
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, PA 15320-3198
US Bancorp Trust Company Driehaus International Growth Fund ___%
P.O. Box 520
Johnston, PA 15907-0520
Richard H. Driehaus Driehaus Asia Pacific Growth Fund ___%
25 East Erie Street
Chicago, IL 60611
Compass Pass-Through LP Driehaus Asia Pacific Growth Fund ___%
888 S.W. Fifth Avenue
1190 Pioneer Tower
Portland, OR 27204
The Richard H. Driehaus Foundation Driehaus Asia Pacific Growth Fund ___%
25 East Erie Street
Chicago, IL 60611
Driehaus Emerging Markets Growth Fund ___%
The Richard H. Driehaus Foundation
25 East Erie Street
Chicago, IL 60611
Wesley West Long Term Partnership LP Driehaus Emerging Markets Growth Fund ___%
P.O. Box 7
Houston, TX 77001
Wesley West Flexible Partnership Driehaus Emerging Markets Growth Fund ___%
P.O. Box 7
Houston, TX 77001
</TABLE>
INVESTMENT ADVISORY SERVICES
The Adviser is controlled by Richard H. Driehaus, as sole shareholder and chief
executive officer. The principal nature of Mr. Driehaus' business is investment
advisory and brokerage services. The Adviser provides office space and executive
and other personnel to the Fund. The Fund pays all expenses other than those
paid by the Adviser, including but not limited to printing and postage charges
and securities registration and custodian fees and expenses incidental to its
organization.
The advisory agreement provides that neither the Adviser nor any of its
directors, officers, stockholders, agents or employees shall have any liability
to the Fund or any shareholder of the Fund for any error of judgment, mistake of
law or any loss arising out of any investment, or for any other act or omission
in the performance by the Adviser of its duties
B-16
<PAGE> 57
under the agreement, except for liability resulting from willful misfeasance,
bad faith or gross negligence on its part in the performance of its duties or
from reckless disregard by it of its obligations and duties under the agreement.
Any expenses that are attributable solely to the organization, operation or
business of a Fund shall be paid solely out of the Fund's assets. Any expenses
incurred by the Fund that are not solely attributable to a particular series are
apportioned in such manner as the Adviser determines is fair and appropriate,
unless otherwise specified by the Board of Trustees. In return for its services,
the Adviser receives a monthly fee from the Funds, computed and accrued daily,
at an annual rate of 1.5% of average net assets of each Fund. These fees are
higher than the fees paid by most mutual funds. For the fiscal years ended
December 31, 1997 and 1998, the Driehaus International Growth Fund paid fees
under the investment advisory agreement of $2,413,454 and $3,458,926,
respectively. For the fiscal year beginning on the commencement of operations on
January 1, 1998 and ended December 31, 1998, the Driehaus Asia Pacific Growth
Fund and the Driehaus Emerging Markets Growth Fund paid fees under the
investment advisory agreement of $46,727 and $50,832, respectively. The Driehaus
International Discovery Fund and the Driehaus European Opportunity Fund each
commenced investment operations on January 4, 1999, and therefore did not pay
any investment advisory fees during the fiscal year ended December 31, 1998. The
Adviser voluntarily has agreed to 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) until December 31, 1999, will not
exceed 2.95% of the average net assets of the Driehaus Asia Pacific Growth Fund,
2.75% of the average net assets of the Driehaus Emerging Markets Growth Fund,
2.50% of the average net assets of the Driehaus International Discovery Fund,
and 2.10% of the average net assets of the Driehaus European Opportunity Fund.
DISTRIBUTOR
As of December 31, 1998, the Shares of the Funds are distributed by DSC under a
Distribution Agreement with the Trust. The Distribution Agreement has an initial
period of two years and continues in effect thereafter from year to year,
provided such continuance is approved annually (i) by a majority of the trustees
or by a majority of the outstanding voting securities of the Trust, and (ii) by
a majority of the trustees who are not parties to the Agreement or interested
persons of any such party. The Trust has agreed to pay all expenses in
connection with registration of its shares with the Securities and Exchange
Commission and auditing and filing fees in connection with registration of its
shares under the various state blue sky laws and assumes the cost of preparation
of prospectuses and other expenses. The Adviser bears all sales and promotional
expenses, including any payments to DSC for the sales of Fund shares.
As agent, DSC will offer shares of the Fund to investors in states where the
shares are qualified for sale, at net asset value, without sales commissions or
other sales load to the investor. In addition, no sales commission or "12b-1"
payment is paid by the Funds. DSC will offer the Funds' shares only on a
best-efforts basis.
ADMINISTRATOR
PFPC Inc. ("PFPC"), 103 Bellevue Parkway, Wilmington, Delaware 19809, is the
administrator for the Trust. The asset-based fee for administrative and
accounting services for the Driehaus International Growth Fund is:
.125% of the first $200 million of average net assets;
.09% of the next $200 million of average net assets;
.07% of the next $200 million of average net assets; and
.05% of average net assets in excess of $600 million.
The asset-based fee for administration and accounting services for the Driehaus
Asia Pacific Growth Fund, the Driehaus Emerging Market Growth Fund, the Driehaus
International Discovery Fund, and the Driehaus European Opportunity Fund is:
.14% of first $200 million of average net assets;
.09% of next $200 million of average net assets;
.07% of next $200 million of average net assets; and
.05% of average net assets in excess of $600 million.
B-17
<PAGE> 58
There is a minimum monthly fee of $9500 (excluding out of pocket expenses),
which PFPC has agreed to waive for the first twenty-four months of the Driehaus
Asia Pacific Growth Fund, the Driehaus Emerging Markets Growth Fund, the
Driehaus International Discovery Fund, and the Driehaus European Opportunity
Fund.
CUSTODIAN
The Chase Manhattan Bank (successor to Morgan Stanley Trust Company) at One
Pierrepont Plaza, Brooklyn, NY 11201, is the Trust's custodian (the
"Custodian"). It is responsible for holding all securities and cash of the
Funds, receiving and paying for securities purchased, delivering against payment
securities sold, receiving and collecting income from investments and performing
other administrative duties, all as directed by authorized persons. The
Custodian does not exercise any supervisory function in such matters as purchase
and sale of portfolio securities, payment of dividends or payment of expenses of
the Funds.
Portfolio securities purchased in the U.S. are maintained in the custody of the
Custodian or of other domestic banks or depositories. Portfolio securities
purchased outside of the U.S. are maintained in the custody of foreign banks and
trust companies that are members of the Custodian's global custody network and
foreign depositories ("foreign subcustodians"). With respect to foreign
subcustodians, there can be no assurance that a Fund, and the value of its
shares, will not be adversely affected by acts of foreign governments, financial
or operational difficulties of the foreign subcustodians, difficulties and costs
of obtaining jurisdiction over, or enforcing judgments against, the foreign
subcustodians, or application of foreign law to a Fund's foreign subcustodial
arrangements. Accordingly, an investor should recognize that the non-investment
risks involved in holding assets abroad are greater than those associated with
investing in the United States.
The Fund may invest in obligations of the Custodian and may purchase or sell
securities from or to the Custodian.
TRANSFER AGENT
PFPC, 103 Bellevue Parkway, Wilmington, Delaware 19809, is the Funds' transfer
agent, registrar, dividend-disbursing agent and shareholder servicing agent. As
such, PFPC provides certain bookkeeping and data processing services and
services pertaining to the maintenance of shareholder accounts. PFPC will also
waive a portion of its monthly base fee for transfer agency service for the
first twenty-four months of the Driehaus Asia Pacific Growth Fund, the Driehaus
Emerging Markets Growth Fund, the Driehaus International Discovery Fund, and the
Driehaus European Opportunity Fund.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants for Driehaus Mutual Funds are Arthur Andersen
LLP. The accountants audit and report on each Fund's annual financial
statements, review certain regulatory reports and each Fund's federal income tax
returns, and perform other professional accounting, auditing, tax and advisory
services when engaged to do so by Driehaus Mutual Funds.
PORTFOLIO TRANSACTIONS
The Adviser uses the trading room staff of DSC, an affiliate of the Adviser, to
place the orders for the purchase and sale of a Fund's securities and options
and futures contracts. The Adviser's overriding objective in effecting portfolio
transactions is to seek to obtain the best combination of price and execution.
The best net price, giving effect to brokerage commissions, if any, and other
transaction costs, normally is an important factor in this decision, but a
number of other judgmental factors may also enter into the decision. These
include: the Adviser's knowledge (including the knowledge of the trading room
staff of DSC) of negotiated commission rates currently available and other
current transaction costs; the nature of the security being traded; the size of
the transaction; the desired timing of the trade; the activity existing and
expected in the market for the particular security; confidentiality; the
execution, clearance and settlement capabilities of the broker or dealer
selected and others which are considered; the Adviser's knowledge (including the
knowledge of the trading room staff of DSC) of the financial stability of the
broker or dealer selected and such other brokers or dealers; and the Adviser's
knowledge of actual or apparent operational problems of any broker or dealer.
Recognizing the value of these factors, a Fund may pay a brokerage commission in
excess of that which
B-18
<PAGE> 59
another broker or dealer may have charged for effecting the same transaction.
Evaluations of the reasonableness of brokerage commissions, based on the
foregoing factors, are made on an ongoing basis by the Adviser's staff while
effecting portfolio transactions. The general level of brokerage commissions
paid is reviewed by the Adviser and reports are made quarterly to the Board of
Trustees.
Orders may be directed to any broker including, to the extent and in the manner
permitted by applicable law, DSC. Each Fund has been advised that the Adviser
intends to execute most (or all) transactions in securities traded on U.S.
exchanges, including ADRs, through DSC. In order for DSC to effect any such
transaction for a Fund, the commissions, fees or other remuneration received by
DSC must be reasonable and fair, compared to the commissions, fees or other
remuneration paid to other brokers in connection with comparable transactions
involving similar securities, futures or options on futures being purchased or
sold on an exchange during a comparable period of time. This standard would
allow DSC to receive no more than the remuneration that would be expected to be
received by an unaffiliated broker in a commensurate arm's-length transaction.
Furthermore, the Board of Trustees, including a majority of the trustees who are
not "interested" trustees, has adopted procedures that are reasonably designed
to provide that any commissions, fees or other remuneration paid to DSC are
consistent with the foregoing standard. For the fiscal year ended December 31,
1998, the Driehaus International Growth Fund paid brokerage commissions of
$2,465,874 of which $189,819 (7.7%) were paid to DSC, the Driehaus Emerging
Markets Growth Fund paid $80,374, of which $24,269 (30.2%) were paid to DSC, and
the Driehaus Asia Pacific Growth Fund paid $109,369, of which $4,053 (3.7%) were
paid to DSC. The Driehaus International Discovery Fund and the Driehaus European
Opportunity Fund each commenced investment operations on January 4, 1999, and
therefore did not pay any investment advisory fees during the fiscal year ended
December 31, 1998.
With respect to issues of securities involving brokerage commissions, when more
than one broker or dealer (other than DSC) is believed to be capable of
providing the best combination of price and execution with respect to a
particular portfolio transaction for a Fund, the Adviser may select a broker or
dealer that furnishes it with research products or services such as research
reports, subscriptions to financial publications and research compilations,
compilations of securities prices, earnings, dividends and similar data,
computer data bases, quotation equipment and services, research-oriented
computer software and services, and services of economic and other consultants.
Selection of brokers or dealers is not made pursuant to an agreement or
understanding with any of the brokers or dealers; however, the Adviser uses an
internal allocation procedure to identify those brokers or dealers who provide
it with research products or services and the amount of research products or
services they provide, and endeavors to direct sufficient commissions generated
by its clients' accounts in the aggregate, including the Fund, to such brokers
or dealers to ensure the continued receipt of research products or services the
Adviser feels are useful. In certain instances, the Adviser may receive from
brokers and dealers products or services that are used both as investment
research and for administrative, marketing or other nonresearch purposes. In
such instances, the Adviser will make a good faith effort to determine the
relative proportions of such products or services which may be considered as
investment research. The portion of the costs of such products or services
attributable to research usage may be defrayed by the Adviser (without prior
agreement or understanding, as noted above) through brokerage commissions
generated by transactions by clients (including the Fund), while the portions of
the costs attributable to nonresearch usage of such products or services is paid
by the Adviser in cash. No person acting on behalf of the Fund is authorized, in
recognition of the value of research products or services, to pay a commission
in excess of that which another broker or dealer might have charged for
effecting the same transaction. Research products or services furnished by
brokers and dealers may be used in servicing any or all of the clients of the
Adviser, and not all such research products or services are used in connection
with the management of the Fund.
With respect to a Fund's purchases and sales of portfolio securities transacted
with a broker or dealer on a net basis, the Adviser may also consider the part,
if any, played by the broker or dealer in bringing the security involved to the
Adviser's attention, including investment research related to the security and
provided to the Fund.
The Fund may arrange for its custodian to act as a soliciting dealer to accept
any fees available to the custodian as a soliciting dealer in connection with
any tender offer for a Fund's portfolio securities, to the extent consistent
with best price and execution. If such arrangements are made the custodian will
credit any such fees received against its custodial fees.
B-19
<PAGE> 60
ADDITIONAL INCOME TAX CONSIDERATIONS
Each Fund is treated as a separate entity for accounting and tax purposes. Each
Fund intends to comply with the special provisions of the Internal Revenue Code
(known as Subchapter M) that relieve it of federal income tax to the extent its
net investment income and capital gains are currently distributed to
shareholders. In order to qualify for such provisions, each Fund must maintain a
diversified portfolio, which requires that at the close of each quarter (i) at
least 50% of the total value of its total assets be represented by cash or cash
items, Government securities, securities of other regulated investment companies
and securities of other issuers in which not greater than 5% of the Fund's
assets are invested and not more than 10% of the outstanding voting securities
of such issuer are held; and (ii) not more than 25% of the total value of the
total assets of the Fund are invested in the securities (other than Government
securities or the securities of other regulated investment companies) of any one
issuer.
Because dividend and capital gain distributions reduce net asset value, a
shareholder who purchases shares shortly before a record date will, in effect,
receive a return of a portion of his investment in such distribution. The
distribution would nonetheless be taxable to him, even if the net asset value of
shares were reduced below his cost. However, for federal income tax purposes the
shareholder's original cost would continue as his tax basis.
To the extent a Fund invests in foreign securities, it may be subject to
withholding and other taxes imposed by foreign countries. Tax treaties between
certain countries and the United States may reduce or eliminate such taxes.
Investors may be entitled to claim U.S. foreign tax credits with respect to such
taxes, subject to certain provisions and limitations contained in the Internal
Revenue Code. Specifically, if more than 50% of the total value of the Fund's
total assets at the close of any fiscal year consists of stock or securities of
foreign corporations, and the Fund distributes at least 90% of its investment
company taxable income and net tax exempt interest, the Fund may file an
election with the Internal Revenue Service pursuant to which shareholders of the
Fund will be required to (i) include in ordinary gross income (in addition to
taxable dividends actually received) their pro rata shares of foreign income
taxes paid by the Fund even though not actually received, (ii) treat such
respective pro rata shares as foreign income taxes paid by them, and (iii)
deduct such pro rata shares in computing their taxable incomes, or,
alternatively, use them as foreign tax credits, subject to applicable
limitations, against their United States income taxes. Shareholders who do not
itemize deductions for federal income tax purposes will not, however, be able to
deduct their pro rata portion of foreign taxes paid by the Fund, although such
shareholders will be required to include their share of such taxes in gross
income. Shareholders who claim a foreign tax credit may be required to treat a
portion of dividends received from the Fund as separate category income for
purposes of computing the limitations on the foreign tax credit available to
such shareholders. Tax-exempt shareholders will not ordinarily benefit from this
election relating to foreign taxes. Each year, the Fund will notify shareholders
of the amount of (i) each shareholder's pro rata share of foreign income taxes
paid by the Fund and (ii) the portion of Fund dividends which represents income
from each foreign country, if the Fund qualifies to pass along such credit. If a
Fund does not make such an election, the net investment income of that
particular Fund will be reduced and the shareholders will not be able to deduct
their pro rata share of foreign taxes paid by the Fund.
Each Fund's options, futures and foreign currency transactions are subject to
special tax provisions that may accelerate or defer recognition of certain gains
or losses, change the character of certain gains or losses or alter the holding
periods of certain of the Fund's portfolio securities. If a Fund exercises a
call or put option that it holds, the premium paid for the option is added to
the cost basis of the security purchased (call) or deducted from the proceeds of
the security sold (put). For cash settlement options and options on futures
exercised by a Fund, the difference between the cash received at exercise and
the premium paid is a capital gain or loss.
If a call or put option written by a Fund is exercised, the premium is included
in the proceeds of the sale of the underlying security (call) or reduces the
cost basis of the security purchased (put). For cash settlement options and
futures options written by a Fund, the difference between the cash paid at
exercise and the premium received is a capital gain or loss.
Entry into a closing purchase transaction will result in capital gain or loss.
If an option written by a Fund was in-the-money at the time it was written and
the security covering the option was held for more than the long-term holding
period prior to the writing of the option, any loss realized as a result of a
closing purchase transaction will be long-term. The holding period of the
securities covering an in-the-money option will not include the period of time
the option is outstanding.
B-20
<PAGE> 61
If a Fund writes an equity call option (4) other than a "qualified covered call
option," as defined in the Internal Revenue Code, any loss on such option
transaction, to the extent it does not exceed the unrealized gains on the
securities covering the option, may be subject to deferral until the securities
covering the option have been sold.
A futures contract held until delivery results in capital gain or loss equal to
the difference between the price at which the futures contract was entered into
and the settlement price on the earlier of delivery notice date or expiration
date. If a Fund delivers securities under a futures contract, the Fund also
realizes a capital gain or loss on those securities.
For federal income tax purposes, each Fund generally is required to recognize as
income for each taxable year its net unrealized gains and losses as of the end
of the year on futures, futures options and non-equity options positions
("year-end mark-to-market"). Generally, any gain or loss recognized with respect
to such positions (either by year-end mark-to-market or by actual closing of the
positions) is considered to be 60% long-term and 40% short-term, without regard
to the holding periods of the contracts. However, in the case of positions
classified as part of a "mixed straddle," the recognition of losses on certain
positions (including options, futures and futures options positions, the related
securities and certain successor positions thereto) may be deferred to a later
taxable year. Sale of futures contracts or writing of call options (or futures
call options) or buying put options (or futures put options) that are intended
to hedge against a change in the value of securities held by a Fund: (1) will
affect the holding period of the hedged securities; and (2) may cause unrealized
gain or loss on such securities to be recognized upon entry into the hedge.
If a Fund were to enter into a short index future, short index futures option or
short index option position and the Fund's portfolio were deemed to "mimic" the
performance of the index underlying such contract, the option or futures
contract position and the Fund's stock positions would be deemed to be positions
in a mixed straddle, subject to the above-mentioned loss deferral rules.
The Funds may enter into swaps or other notional principal contracts. Payments
made or received pursuant to the terms of a notional principal contract are
divided into two types--periodic payments and nonperiodic payments. Periodic
payments are payments made or received pursuant to a notional principal contract
that are payable at intervals of one year or less during the entire term of the
contract, that are based on certain types of specified indices (which include
objective financial information), and that are based on either a single notional
principal amount or a notional principal amount that varies over the term of the
contract in the same proportion as the notional principal amount that measures
the other party's payments. A nonperiodic payment is any payment made or
received with respect to a notional principal contract that is not a periodic
payment or a termination payment. All taxpayers, regardless of their method of
accounting, must recognize the ratable daily portion of a periodic payment for
the taxable year to which that portion relates. In contrast, a nonperiodic
payment is required to be amortized over the term of the swap by the parties and
is not deducted or included in income when made.
Each Fund distributes to shareholders annually any net capital gains that have
been recognized for federal income tax purposes (including year-end
mark-to-market gains) on options and futures transactions. Such distributions
are combined with distributions of capital gains realized on the Fund's other
investments, and shareholders are advised of the nature of the payments.
A 4% excise tax is imposed on the excess of the required distribution for a
calendar year over the distributed amount for such calendar year. The required
distribution is the sum of 98% of the Fund's net investment income for the
calendar year plus 98% of its capital gain net income net of foreign exchange
losses for the one-year period ending October 31, plus any undistributed net
investment income from the prior calendar year, plus any undistributed capital
gain net income from the one year period ended October 31 in the prior calendar
year, minus any overdistribution in the prior calendar year. For purposes of
calculating the required distribution, foreign currency gains or losses
occurring after October 31 are taken into account in the following calendar
year. The Funds intend to declare or distribute dividends during the appropriate
periods of an amount sufficient to prevent imposition of the 4% excise tax.
- --------
(4) An equity option is defined to mean any option to buy or sell stock, and
any other option the value of which is determined by reference to an index
of stocks of the type that is ineligible to be traded on a commodity
futures exchange (e.g., an option contract on a sub-index based on the
price of nine hotel/casino stocks). The definition of equity option
excludes options on broad-based stock indexes (such as the Standard &
Poor's 500 index).
B-21
<PAGE> 62
A shareholder who redeems shares of a Fund will recognize capital gain or loss
for federal income tax purposes measured by the difference between the value of
the shares redeemed and the basis of the shares. If a shareholder realizes a
loss on the redemption of a Fund's shares and reinvests in shares of the Fund
within 30 days before or after the redemption, the transactions may be subject
to the wash sale rules resulting in a postponement of the recognition of such
loss for federal income tax purposes.
Investment income derived from foreign securities may be subject to foreign
income taxes withheld at the source. Because the amount of the Fund's
investments in various countries will change from time to time, it is not
possible to determine the effective rate of such taxes in advance.
Shareholders who are nonresident aliens are subject to U.S. withholding tax on
ordinary income dividends (whether received in cash or shares) at a rate of 30%
or such lower rate as prescribed by an applicable tax treaty.
Passive Foreign Investment Companies. Each Fund may purchase the securities of
certain foreign investment funds or trusts called passive foreign investment
companies ("PFICs"). In addition to bearing their proportionate share of the
Fund's expenses (management fees and operating expenses), shareholders will also
indirectly bear similar expenses of such PFICs. Capital gains on the sale of
PFIC holdings will be deemed to be ordinary income regardless of how long the
Fund holds its investment. In addition, each Fund may be subject to corporate
income tax and an interest charge on certain dividends and capital gains earned
from PFICs, regardless of whether such income and gains are distributed to
shareholders.
Each Fund intends to treat PFICs as sold on the last day of the Fund's fiscal
year and recognize any gains for tax purposes at that time; losses will not be
recognized. Such gains will be considered ordinary income which the Fund will be
required to distribute even though it has not sold the security and received
cash to pay such distributions.
INVESTMENT PERFORMANCE
Each Fund may quote certain total return figures from time to time. A "Total
Return" on a per share basis is the amount of dividends distributed per share
plus or minus the change in the net asset value per share for a period. A "Total
Return Percentage" may be calculated by dividing the value of a share at the end
of a period by the value of the share at the beginning of the period and
subtracting one. For a given period, an "Average Annual Total Return" may be
computed by finding the average annual compounded rate that would equate a
hypothetical initial amount invested of $1,000 to the ending redeemable value.
Average Annual Total Return is computed as follows: ERV = P(1+T)n
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the
period at the end of the period (or
fractional portion thereof).
Investment performance figures assume reinvestment of all dividends and
distributions and do not take into account any federal, state, or local income
taxes which shareholders must pay on a current basis. They are not necessarily
indicative of future results. The performance of a Fund is a result of
conditions in the securities markets, portfolio management and operating
expenses. Although investment performance information is useful in reviewing a
Fund's performance and in providing some basis for comparison with other
investment alternatives, it should not be used for comparison with other
investments using different reinvestment assumptions or time periods. Of course,
past performance is not indicative of future results.
B-22
<PAGE> 63
Based on the foregoing formula, the average annual total return for the Driehaus
International Growth Fund, the Driehaus Asia Pacific Growth Fund, and the
Driehaus Emerging Markets Growth Fund are as follows:
<TABLE>
<CAPTION>
Average Annual Total Average Annual Total
Return For the Year Return Since Inception
Fund (Date of Inception) ended December 31, 1998 through December 31, 1998
- ------------------------ ----------------------- -------------------------
<S> <C> <C>
Driehaus International Growth Fund 15.15% 15.67%
(October 28, 1996)
Driehaus Asia Pacific Growth Fund -1.00% -1.00%
(December 31, 1997)
Driehaus Emerging Markets Growth Fund -12.70% -12.70%
(December 31, 1997)
</TABLE>
In advertising, sales literature, and other publications, the Funds' performance
may be quoted in terms of total return and average annual total return, which
may be compared with various indices and investments, other performance measures
or rankings, other mutual funds, or indices or averages of other mutual funds.
Each Fund may also use hypothetical returns to be used as an example in a mix of
asset allocation strategies. One such example is reflected in the chart below,
which shows the effect of tax deferral on a hypothetical investment. This chart
assumes that an investor invested $2,000 a year on January 1, for any specified
period, in both a Tax-Deferred Investment and a Taxable Investment, that both
investments earn either 6%, 8% or 10% compounded annually, and that the investor
withdrew the entire amount at the end of the period. (A tax rate of 39.6% is
applied annually to the Taxable Investment and on the withdrawal of earnings on
the Tax-Deferred Investment.)
TAX-DEFERRED INVESTMENT VS. TAXABLE INVESTMENT
<TABLE>
<CAPTION>
INTEREST RATE 6% 8% 10% 6% 8% 10%
-------------
COMPOUNDING YEARS TAX-DEFERRED INVESTMENT TAXABLE INVESTMENT
----------------- ----------------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
1 $ 2,072 $ 2,097 $ 2,121 $ 2,072 $ 2,097 $ 2,121
5 11,178 11,614 12,072 11,141 11,546 11,965
10 24,798 26,820 29,098 24,453 26,165 28,006
15 41,684 47,304 54,099 40,358 44,675 49,514
20 62,943 75,543 91,947 59,362 68,109 78,351
25 90,053 115,177 150,484 82,067 97,780 117,014
30 124,992 171,554 242,340 109,197 135,346 168,852
</TABLE>
Dollar Cost Averaging. Dollar cost averaging is an investment strategy that
requires investing a fixed amount of money in Fund shares at set intervals. This
allows an investor to purchase more shares when prices are low and fewer shares
when prices are high. Over time, this tends to lower the average cost per share.
Like any investment strategy, dollar cost averaging cannot guarantee a profit or
protect against losses in a steadily declining market. Dollar cost averaging
involves uninterrupted investing regardless of share price and therefore may not
be appropriate for every investor.
B-23
<PAGE> 64
APPENDIX -- RATINGS
RATINGS IN GENERAL
A rating of a rating service represents the service's opinion as to the credit
quality of the security being rated. However, the ratings are general and are
not absolute standards of quality or guarantees as to the creditworthiness of an
issuer. Consequently, the Adviser believes that the quality of debt securities
in which the Fund may invest should be continuously reviewed and that individual
analysts give different weights to the various factors involved in credit
analysis. A rating is not a recommendation to purchase, sell or hold a security
because it does not take into account market value or suitability for a
particular investor. When a security has received a rating from more than one
service, each rating should be evaluated independently. Ratings are based on
current information furnished by the issuer or obtained by the rating services
from other sources which they consider reliable. Ratings may be changed,
suspended or withdrawn as a result of changes in or unavailability of such
information, or for other reasons.
The following is a description of the characteristics of ratings of corporate
debt securities used by Moody's Investors Service, Inc. ("Moody's") and Standard
& Poor's Corporation ("S&P").
RATINGS BY MOODY'S
Aaa. Bonds rated Aaa are judged to be the best quality. They carry the smallest
degree of investment risk and are generally referred to as "gilt edge." Interest
payments are protected by a large or exceptionally stable margin and principal
is secure. Although the various protective elements are likely to change, such
changes as can be visualized are unlikely to impair the fundamentally strong
position of such bonds.
Aa. Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group they comprise what are generally known as high grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as in Aaa bonds or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa bonds.
A. Bonds rated A possess many favorable investment attributes and are to be
considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa. Bonds rated Baa are considered as medium grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba. Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B. Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa. Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca. Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
NOTE: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
A-1
<PAGE> 65
RATINGS BY S&P
AAA. Debt rated AAA has the highest rating. Capacity to pay interest and repay
principal is extremely strong.
AA. Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest rated issues only in small degree.
A. Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB. Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than for debt in higher rated categories.
BB, B, CCC, CC, AND C. Debt rated BB, B, CCC, CC or C is regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
debt will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
C1. This rating is reserved for income bonds on which no interest is being paid.
D. Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears. The D rating is also used upon the filing of a
bankruptcy petition if debt service payments are jeopardized.
NOTES:
The ratings from AA to CCC may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within the major rating categories.
Foreign debt is rated on the same basis as domestic debt measuring the
creditworthiness of the issuer; ratings of foreign debt do not take into account
currency exchange and related uncertainties.
The "r" is attached to highlight derivative, hybrid and certain other
obligations that S&P believes may experience high volatility or high variability
in expected returns due to noncredit risks. Examples of such obligations are:
securities whose principal or interest return is indexed to equities,
commodities, or currencies; certain swaps and options; and interest-only and
principal-only mortgage securities. The absence of an "r" symbol should not be
taken as an indication that an obligation will exhibit no volatility or
variability in total return.
A-2
<PAGE> 66
1` DRIEHAUS MUTUAL FUNDS
FORM N-1A
PART C: OTHER INFORMATION
ITEM 23. EXHIBITS
(a) (i) Declaration of Trust of Registrant./1/
(ii) Amendment to Declaration of Trust of Registrant./5/
(b) (i) Bylaws of Registrant./1/
(ii) Amended Bylaws of Registrant./5/
(c) None.
(d) (i) Management Agreement. /2/
(ii) Letter Agreement./4/
(iii) Letter Agreement./5/
(e) Distribution Agreement between Registrant and Driehaus Securities
Corporation dated December 31, 1998.*
(f) None.
(g) (i) Custodian Services Agreement. /2/
(A) Amendment to Custodian Services Agreement./5/
(ii) Delegation Agreement./5/
(h) (i) Transfer Agency Agreement. /2/
(ii) Administration Agreement. /2/
(i) Not Applicable.
(j) Consent of independent accountants.**
(k) Not Applicable.
(l) Investment Letter of initial investor in Driehaus International
Growth Fund. /2/
(m) None.
(n) Not Applicable.
(o) Not Applicable.
(p) (i) Powers of Attorney./3/
(ii) Power of Attorney for Francis J. Harmon./5/
* Filed herewith.
** To be filed by subsequent amendment.
/1/ Incorporated herein by reference to Registrant's initial registration
statement filed on June 5, 1996.
/2/ Incorporated herein by reference to Registrant's Pre-Effective
Amendment No. 1 under the Securities Act of 1933 filed on
October 7, 1996.
<PAGE> 67
(3) Incorporated herein by reference to Registrant's Post-Effective
Amendment No. 2 under the Securities Act of 1933 filed on October 31,
1997.
(4) Incorporated herein by reference to Registrant's Post-Effective
Amendment No. 3 under the Securities Act of 1933 filed on December 29,
1997.
(5) Incorporated by reference to Registrant's Post-Effective Amendment No.
5 under the Securities Act of 1933 filed on December 23, 1998.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Inapplicable.
ITEM 25. INDEMNIFICATION.
Article V of Registrant's Declaration of Trust, filed herewith
as Exhibit 1, provides for the indemnification of Registrant's trustees,
officers, employees and agents against liabilities incurred by them in
connection with the defense or disposition of any action or proceeding in which
they may be involved or with which they may be threatened, while in office or
thereafter, by reason of being or having been in such office, except with
respect to matters as to which it has been determined that they acted with
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of their office ("Disabling Conduct").
Registrant has obtained from a major insurance carrier a
trustees' and officers' liability policy covering certain types of errors and
omissions.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
C-2
<PAGE> 68
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
<TABLE>
<CAPTION>
Other Business, Profession,
Name Position with Adviser Vocation or Employment
- ---- --------------------- ----------------------
<S> <C> <C>
Richard H. Driehaus Chairman of Board, CEO, and Chairman of Board, CEO, and Director
Director of Driehaus Securities Corporation
("DSC")
William R. Andersen Senior Vice President None
Mark Genovise Vice President None
Robert F. Moyer President, COO President, COO of DSC
Diane L. Wallace Senior Vice President-Operations Senior Vice President-
Operations of DSC
Mary H. Weiss Vice President, Secretary, Vice President, Secretary and
General Counsel General Counsel of DSC
Dusko Culafic Vice President and Treasurer Vice President and Treasurer of DSC
</TABLE>
<TABLE>
<CAPTION>
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) Not applicable.
Positions and Offices Positions and
(b) Name with Underwriter Offices with Fund
---- ---------------- -----------------
<S> <C> <C>
Richard H. Driehaus Chairman of Board, CEO, Director Chairman of Board, Trustee, President
Robert F. Moyer President, COO Senior Vice President, Trustee
Diane L. Wallace Senior Vice President - Operations Vice President and Treasurer
Mary H. Weiss Vice President, Secretary, Vice President, Secretary
General Counsel
Dusko Culafic Vice President, Treasurer Assistant Treasurer
</TABLE>
The business address of all of the foregoing individuals is 25 East Erie Street,
Chicago, Illinois 60611.
(c) Not applicable.
C-3
<PAGE> 69
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents are maintained (i) at
the offices of the Registrant, (ii) at the offices of Registrant's investment
adviser, Driehaus Capital Management, Inc., 25 East Erie Street, Chicago,
Illinois 60611, 1 East Erie Street, Chicago, Illinois 60611, and 676 St. Clair,
Chicago, Illinois or (iii) at the offices of Registrant's custodian, The Chase
Manhattan Bank, One Pierrepont Plaza, Brooklyn, NY 11201, transfer agent, PFPC
Inc., 103 Bellevue Parkway, Wilmington, Delaware 19809, or administrator, PFPC
Inc., 103 Bellevue Parkway, Wilmington, Delaware 19809.
ITEM 29. MANAGEMENT SERVICES.
Not applicable.
ITEM 30. UNDERTAKINGS.
Not applicable.
C-4
<PAGE> 70
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Chicago,
State of Illinois, on the 9th day of April, 1999.
DRIEHAUS MUTUAL FUNDS
By: /s/ Richard H. Driehaus
------------------------------------
Richard H. Driehaus, President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities and on the 9th day of April, 1999.
/s/ Richard H. Driehaus
- ----------------------------- President and Trustee
Richard H. Driehaus (Principal Executive Officer)
/s/ Francis J. Harmon**
- ----------------------------- Trustee
Francis J. Harmon
/s/ Robert F. Moyer**
- ----------------------------- Trustee
Robert F. Moyer
/s/ A.R. Umans*
- ----------------------------- Trustee
A.R. Umans
/s/ Daniel F. Zemanek*
- ----------------------------- Trustee
Daniel Zemanek
/s/ Diane L. Wallace
- ----------------------------- Tresaurer (Principal Financial
Diane L. Wallace and Accounting Officer)
* Richard H. Driehaus signs this document pursuant to powers of attorney filed
in Registrant's Post-Effective Amendment No. 2 under the Securities Act of 1933.
/s/ Richard H. Driehaus
- -----------------------------
Richard H. Driehaus
** Mary H. Weiss signs this document pursuant to powers of attorney filed in
Registrant's Post-Effective Amendment No. 2 and Post-Effective Amendment No. 5
under the Securities Act of 1933.
/s/ Mary H. Weiss
- -----------------------------
Mary H. Weiss
<PAGE> 71
EXHIBIT INDEX
DRIEHAUS MUTUAL FUNDS
FORM N-1A REGISTRATION STATEMENT
(e) Distribution Agreement between Registrant and Driehaus Securities
Corporation dated December 31, 1998.
<PAGE> 1
EXHIBIT (e)
DISTRIBUTION AGREEMENT
AGREEMENT made as of this 31st day of December 1998, between DRIEHAUS
MUTUAL FUNDS, a Delaware business trust (hereinafter called the "Trust"), and
DRIEHAUS SECURITIES CORPORATION, an Illinois corporation (hereinafter called the
"Distributor");
W I T N E S S E T H:
In consideration of the mutual covenants hereinafter contained, it is
hereby agreed by and between the parties hereto as follows:
1. The Trust hereby appoints the Distributor as its agent for the
distribution of shares (hereinafter called "shares") of beneficial interest of
any of the Trust's authorized Portfolios in jurisdictions wherein shares of the
Trust may legally be offered for sale; provided, however, that the Trust in its
absolute discretion may issue or sell shares directly to holders of shares of
the Trust upon such terms and conditions and for such consideration, if any, as
it may determine, whether in connection with the distribution of subscription or
purchase rights, the payment or reinvestment of dividends or distributions, or
otherwise.
2. The Distributor hereby accepts appointment as agent for the
distribution of the shares of the Trust and agrees that it will use its best
efforts with reasonable promptness to sell such part of the authorized shares of
the Trust remaining unissued as from time to time be effectively registered
under the Securities Act of 1933 ("Securities Act"), at prices determined as
hereinafter provided and on terms hereinafter set forth, all subject to
applicable federal and state laws and regulations and to the Declaration of
Trust and the By-Laws of the Trust and in accordance with the then effective
registration statement ("Registration Statement") of the Trust under the
Securities Act (and related prospectus).
3. The Trust agrees that it will use its best efforts to keep
effectively registered under the Securities Act for sale as herein contemplated
such shares as the Distributor shall reasonably request and as the Securities
and Exchange Commission shall permit to be so registered.
4. Notwithstanding any other provision hereof, the Trust may
terminate, suspend or withdraw the offering of shares whenever, in its sole
discretion, it deems such action to be desirable.
5. The Distributor will act only on its own behalf as principal in
making agreements with selected dealers or others for the sale and redemption of
shares. The Distributor shall have authority to receive and accept or reject, or
arrange for the receipt and acceptance of, such orders in accordance with the
provisions hereof and the then effective Registration Statement of the Trust.
6. Shares of the Trust offered for sale or sold by the Distributor
shall be so offered or sold at a price per share determined in accordance with
the Trust's then current prospectus relating to the sale of such shares except
as departure from such prices shall be permitted by the rules and
<PAGE> 2
regulations of the Securities and Exchange Commission; provided, however, that
any public offering price for shares of the Trust shall be the net asset value
per share. The net asset value per share shall be determined in the manner and
at the times set forth in the then effective Registration Statement (and related
prospectus) relating to such shares.
7. The price the Trust shall receive for all shares purchased from
the Trust shall be the net asset value used in determining the public offering
price applicable to the sale of such shares.
8. The Distributor shall issue and deliver on behalf of the Trust
(or shall arrange for the issue and delivery of) such confirmations of sales
made by it as agent pursuant to this agreement as may be required. At or prior
to the time of issuance of shares, the Distributor will pay or cause to be paid
to the Trust the amount due the Trust for the sale of such shares. Shares shall
be registered on the transfer books of the Trust in such names and denominatios
as the Distributor may specify.
9. The Trust will execute any and all documents and furnish any and
all information which may be reasonably necessary in connection with the
qualification of its shares for sale in such states as the Distributor may
reasonably request (it being understood that the Trust shall not be required
without its consent to comply with any requirement which in its opinion is
unduly burdensome).
10. The Trust will furnish to the Distributor from time to time such
information with respect to the Trust and its shares as the Distributor may
reasonably request for use in connection with the sale of shares of the Trust.
The Distributor agrees that it will not use or distribute or authorize the use,
distribution or dissemination by others in connection with the sale of such
shares any statements, other than those contained in the Trust's current
prospectus or statement of additional information, except such supplemental
literature or advertising as shall be lawful under federal and state securities
laws and regulations, and that it will furnish the Trust with copies of all such
material.
11. The Distributor shall order shares of the Trust from the Trust
only to the extent that it shall have received purchase orders therefor. The
Distributor will not make, or authorize any others to make, any short sales of
shares of the Trust.
12. The Distributor, as agent of and for the account of the Trust,
may repurchase the shares of the Trust at such prices and upon such terms and
conditions as shall be specified in the current prospectus or statement of
additional information of the Trust.
13. In selling or reacquiring shares of the Trust for the account of
the Trust, the Distributor will in all respects conform to the requirements of
all state and Federal laws and the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., relating to such sale or reacquisition,
as the case may be. The Distributor will observe and be bound by all the
provisions of this Agreement and the Declaration of Trust of the Trust (and of
any fundamental policies adopted by the Trust pursuant to the Investment Company
Act of 1940 and set forth in the Registration Statement, or as to which notice
shall otherwise have been given to the Distributor) which at any time in any way
require, limit, restrict or prohibit or otherwise regulate any action on the
part of the
2
<PAGE> 3
Distributor. Distributor shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Trust or any Portfolio in
connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on its part in
the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement.
14. Distributor will indemnify, defend and hold harmless the Trust,
each Portfolio, the Trust's several officers and trustees and any person who
controls the Trust or any Portfolio within the meaning of Section 15 of the 1933
Act, from and against any losses, claims, damages or liabilities joint or
several, to which any of them may become subject under the 1933 Act or
otherwise, insofar as such losses, claims, damages, or liabilities (or actions
or proceedings in respect hereof) arise out of, or are based upon, any breach of
its duties hereunder, or which arise out of, or are based upon, any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, the Prospectus, any Blue Sky Application or any
application or other document executed by or on behalf of the Trust, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, which
statement or omissions was made in reliance upon or in conformity with
information furnished in writing to the Trust or any of its several officers and
trustees by or on behalf of and with respect to Distributor specifically for
inclusion therein, and will reimburse the Trust, each Portfolio, the Trust's
several officers and trustees, and any person who controls the Trust or any
Portfolio within the meaning of Section 15 of the 1933 Act, for any legal or
other expenses reasonably incurred by any of them in investigating, defending or
preparing to defend any such action, proceeding or claim.
15. The Trust shall assume and pay all charges and expenses of its
operations not specifically assumed or otherwise to be provided by the
Distributor under this Agreement. The Trust will pay or cause to be paid
expenses (including the fees and disbursements of its own counsel) and all taxes
and fees payable to the federal, state or other governmental agencies on account
of the registration or qualification of securities issued by the Trust or
otherwise. The Trust will also pay or cause to be paid expenses incident to the
issuance of shares or beneficial interest, such as the cost of share
certificates, if any, issue taxes, and fees of the transfer agent. The
Distributor will pay all expenses (other than expenses which one or more dealers
may bear pursuant to any agreement with the Distributor) incident to the sale
and distribution of the shares issued or sold hereunder, including, without
limiting the generality of the foregoing, all expenses of printing and
distributing any prospectus and of preparing, printing and distributing or
disseminating any other literature, advertising and selling aids in connection
with the offering of the shares for sale (except that such expenses will not
include expenses incurred by the Trust in connection with the preparation,
type-setting, printing and distribution of any registration statement or report
or other communication to shareholders in their capacity as such) and expenses
of advertising in connection with such offering.
16. This agreement shall become effective on the date hereof and
shall continue in effect until December 31, 2000 and from year to year
thereafter, but only so long as such continuance is approved in the manner
required by the Investment Company Act of 1940. Either party hereto may
terminate this agreement on any date by giving the other party at least six
months prior written notice of such termination specifying the date fixed
therefor. Without prejudice to any other remedies of
3
<PAGE> 4
the Trust in any such event the Trust may terminate this agreement at any time
immediately upon any failure of fulfillment of any of the obligations of the
Distributor hereunder.
17. This agreement shall automatically terminate in the event of its
assignment.
18. Any notice under this agreement shall be in writing, addressed
and delivered or mailed, postage postpaid, to the other party at such address as
such other party may designate for the receipt of such notice.
19. The name "Driehaus Mutual Funds" refers to the trust created and
the trustees, as trustees but not individually or personally, acting from time
to time under a Declaration of Trust dated May 31, 1996, as amended, which is
hereby referred to and a copy of which is on file at the principal office of the
Trust. The trustees, officers, employees and agents of the Trust shall not
personally be bound by or liable under any written obligation, contract,
instrument, certificate or other interest or undertaking of the Trust made by
the trustees or by an officer, employee or agent of the Trust, in his or her
capacity as such, nor shall resort be had to their private property for the
satisfaction of any obligation or claim thereunder. All persons dealing with any
series or class of shares of the Trust may enforce claims against the Trust only
against the assets belonging to such series or class.
20. If any provision of this Agreement is held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement will
not be affected thereby. This Agreement will be binding upon and shall inure to
the benefit of the parties hereto and their respective successors.
21. This Agreement shall be construed in accordance with applicable
federal law and the laws of the State of Illinois (without regard to principals
of conflicts of law).
IN WITNESS WHEREOF, the Trust and the Distributor have each caused this
agreement to be executed on its behalf by an officer thereunto duly authorized
and its seal to be affixed as of the day and year first above written.
DRIEHAUS MUTUAL FUNDS
ATTEST:
______________________________
By:________________________________
Secretary Vice President
DRIEHAUS SECURITIES CORPORATION
ATTEST:
______________________________ By:________________________________
Secretary Vice President
4
