<PAGE> 1
As filed with the Securities and Exchange Commission on April 25, 2000
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. 8 [x]
and/or
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 11 [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, GENERAL COUNSEL
DRIEHAUS CAPITAL MANAGEMENT, INC.
25 E. ERIE STREET
CHICAGO, ILLINOIS 60611
(Name and Address of Agent for Service)
COPY TO:
CATHY G. O'KELLY
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 NORTH LASALLE STREET
CHICAGO, ILLINOIS 60601
It is proposed that this filing will become effective (check appropriate box):
[ ] Immediately upon filing pursuant to paragraph (b)
[x] On May 1, 2000 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a) (1)
[ ] On (date) pursuant to paragraph (a) (1)
[ ] 75 days after filing pursuant to paragraph (a) (2)
[ ] On (date) pursuant to paragraph (a) (2) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE> 2
PROSPECTUS
MAY 1, 2000
DRIEHAUS LOGO
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
Distributed by:
DRIEHAUS SECURITIES CORPORATION
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.................. 10
Driehaus Asia Pacific Growth Fund Summary................... 14
Driehaus Emerging Markets Growth Fund Summary............... 18
The Funds................................................... 22
Investment Philosophy..................................... 22
Investment Objectives and Principal Investment
Strategies............................................. 22
Driehaus International Growth Fund..................... 22
Driehaus International Discovery Fund.................. 23
Driehaus European Opportunity Fund..................... 23
Driehaus Asia Pacific Growth Fund...................... 24
Driehaus Emerging Markets Growth Fund.................. 25
Related Risks............................................. 25
Portfolio Investments and Other Risk Considerations....... 27
Management of the Funds..................................... 31
Shareholder Information..................................... 33
Net Asset Value........................................... 33
Opening an Account........................................ 33
How to Purchase Shares.................................... 34
General Purchase Information.............................. 35
How to Redeem Shares...................................... 35
General Redemption Information............................ 36
Shareholder Services and Policies......................... 37
Dividend and Account Policies............................. 37
Distributions and Taxes................................... 37
</TABLE>
<PAGE> 4
- --------------------------------------------------------------------------------
OVERVIEW
- --------------------------------------------------------------------------------
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 aggressive growth style investing and
investing in 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. As of
March 31, 2000, the Adviser managed approximately $6.4 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 addition, the Adviser
may analyze a foreign firm's value in relation to a domestic firm's value.
Factors such as strong company earnings reports, increased order backlogs, new
product introductions, and industry developments 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
- --------------------------------------------------------------------------------
DRIEHAUS INTERNATIONAL GROWTH FUND SUMMARY
- --------------------------------------------------------------------------------
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 $1.5
billion 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 of
1998
- Fluctuation in exchange rates of foreign currencies and risks of
devaluation
- The uncertainty associated with the long-term acceptance of the "Euro"
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. In addition, from time to time this Fund may have
significant weightings in particular sectors, which may subject the Fund to
greater risks than less sector-concentrated funds.
2
<PAGE> 6
- --------------------------------------------------------------------------------
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
1999 98.94
</TABLE>
During the period shown in the bar chart, the highest return for a quarter was
66.38% (quarter ended 12/31/99) and the lowest return for a quarter was -19.16%
(quarter ended 9/30/98).
AVERAGE ANNUAL TOTAL RETURNS
(periods ended December 31, 1999)
(data includes reinvestment of dividends)
<TABLE>
<CAPTION>
DRIEHAUS INTERNATIONAL MSCI EAFE LIPPER INTERNATIONAL
GROWTH FUND* INDEX** FUND INDEX***
---------------------- --------- --------------------
<S> <C> <C> <C>
1 Year....................... 98.94% 26.96% 37.83%
5 Years...................... 30.96% 12.83% 15.96%
Since Inception (July 1,
1990)...................... 22.46% 8.86% 10.93%
</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 Fund 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
- --------------------------------------------------------------------------------
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.............................................. None
Exchange Fee................................................ None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted
from Fund assets)
Management Fee.............................................. 1.50%
Other Expenses.............................................. 0.32%
----
Total Annual Fund Operating Expenses........................ 1.82%
====
</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>
$191 $590 $1,012 $2,190
</TABLE>
4
<PAGE> 8
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- DRIEHAUS INTERNATIONAL 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 THE
FOR THE FOUR COMMENCEMENT
MONTH PERIOD OF OPERATIONS
FOR THE YEAR SEPTEMBER 1, 1998 FOR THE YEAR OCTOBER 28, 1996
ENDED THROUGH ENDED THROUGH
DECEMBER 31, 1999 DECEMBER 31, 1998 AUGUST 31, 1998 AUGUST 31, 1997
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning
of period................... $ 11.55 $ 12.39 $ 11.90 10.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment loss....... (.13) (0.04) (0.07) (0.05)
Net gains (losses) on
investments (both
realized and
unrealized)............. 11.31 (0.25) 1.77 1.95
-------- -------- -------- --------
Total income (loss)
from investment
operations....... 11.18 (0.29) 1.70 1.90
-------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net
investment income....... -- -- -- --
Distributions from capital
gains................... (1.60) (0.55) (1.21) --
-------- -------- -------- --------
Total
distributions.... (1.60) (0.55) (1.21) --
-------- -------- -------- --------
Net asset value, end of
period.................... $ 21.13 $ 11.55 $ 12.39 $ 11.90
======== ======== ======== ========
Total return................ 98.94% (2.04)%** 16.50% 19.00%**
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in 000's).............. $466,571 $223,831 $229,088 $180,545
Ratio of expenses to
average net assets...... 1.82% 2.00%* 1.88% 2.11%*+
Ratio of net investment
loss to average net
assets.................. (1.03)% (1.46)%* (0.54)% (0.67)%*+
Portfolio turnover........ 273.64% 116.28%** 219.78% 380.02%**
- -----------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Not annualized.
+ Such ratios are after transfer agent fee waivers. PFPC Inc., the transfer
agent, waived a portion of its fee for the first ten months of the Fund's
operations.
5
<PAGE> 9
- --------------------------------------------------------------------------------
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 small
foreign companies with market capitalizations of less than $1.5 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
In general, the Fund invests in the equity securities of small foreign companies
with market capitalization of less than $1.5 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 of
1998
- Fluctuation in exchange rates of foreign currencies and risks of
devaluation
- The uncertainty associated with the long-term acceptance of the "Euro"
and the monetary union
- Emerging market risk such as limited trading volume, expropriation,
devaluation or other adverse political or social developments
Some emerging markets have experienced currency crises, and there is some risk
of future crises. Past crises have caused some countries to institute currency
reform measures which inhibit the free flow of currency out of their country.
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. In addition, from time to time this Fund may have
significant weightings in particular sectors, which may subject the Fund to
greater risks than less sector-concentrated funds.
6
<PAGE> 10
- --------------------------------------------------------------------------------
DRIEHAUS INTERNATIONAL DISCOVERY 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 1999 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 RETURN FOR THE YEAR ENDED DECEMBER 31
[BAR CHART]
<TABLE>
<CAPTION>
ANNUAL RETURNS
--------------
<S> <C>
1999 213.65
</TABLE>
During the period shown in the bar chart, the highest return for a quarter was
89.29% (quarter ended 12/31/99) and the lowest return for a quarter was 8.80%
(quarter ended 3/31/99).
AVERAGE ANNUAL TOTAL RETURNS
(period ended December 31, 1999)
(data includes reinvestment of dividends)
<TABLE>
<CAPTION>
LIPPER INTERNATIONAL
DRIEHAUS INTERNATIONAL MSCI EAFE SMALL CAP FUND
DISCOVERY FUND INDEX* INDEX**
---------------------- --------- --------------------
<S> <C> <C> <C>
1 Year............................... 213.65% 26.96% 62.92%
</TABLE>
- ---------------
* 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 of a sample of companies representative of the market
structure of 20 European and Pacific Basin countries.
** The Lipper International Small Cap Fund Index is an equally-weighted managed
index of the 10 largest qualifying funds that invest at least 65% of assets in
equity securities of non-United States companies with a market capitalization of
less than $1 billion at time of purchase.
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.............................................. None
Exchange Fee................................................ None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted
from Fund assets)
Management Fee.............................................. 1.50%
Other Expenses.............................................. 2.87%
-----
Total Annual Fund Operating Expenses........................ 4.37%
Fees Waived and Reimbursed.................................. (1.97)%
-----
Net Expenses................................................ 2.40%*
=====
</TABLE>
- ---------------
* Through June 30, 2001, for expenses exceeding this amount, the Fund will be
reimbursed.
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 (except for one year of net expenses in each period).
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>
$252 $1,194 $2,145 $4,554
</TABLE>
8
<PAGE> 12
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- DRIEHAUS INTERNATIONAL DISCOVERY 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 YEAR ENDED
DECEMBER 31, 1999
- ---------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period........................ $ 10.00
-------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment loss....................................... (.17)
Net gains (losses) on investments (both realized and
unrealized)............................................ 21.14
-------
Total income (loss) from investment operations.... 20.97
-------
LESS DISTRIBUTIONS:
Dividends from net investment income...................... --
Distributions from capital gains.......................... (2.72)
-------
Total distributions............................... (2.72)
-------
Net asset value, end of period.............................. $ 28.25
=======
Total return...................................... 213.65%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)...................... $26,242
Ratio of expenses to average net assets................... 2.43%+
Ratio of net investment loss to average net assets........ (1.60)%+
Portfolio turnover........................................ 267.86%
- ---------------------------------------------------------------------------------
</TABLE>
+ Such ratios are after administrative agent and transfer agent fee 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) would not exceed the fund's operating expense cap for the first
seventeen months of its operations. For the period from December 31, 1998 (the
commencement of operations) through May 31, 1999 the Fund's operating expense
cap was 2.50% of average net assets. For the period June 1, 1999 through June
30, 2001 the operating expense cap is reduced to 2.40% of the average net
assets.
9
<PAGE> 13
- --------------------------------------------------------------------------------
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 of
1998
- Fluctuation in exchange rates of foreign currencies and risks of
devaluation
- The uncertainty associated with the long-term acceptance of the "Euro"
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. In addition, from time to time this Fund may have
significant weightings in particular sectors, which may subject the Fund to
greater risks than less sector-concentrated funds.
10
<PAGE> 14
- --------------------------------------------------------------------------------
DRIEHAUS EUROPEAN OPPORTUNITY 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 1999 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 RETURN FOR THE YEAR ENDED DECEMBER 31
[BAR CHART]
<TABLE>
<CAPTION>
ANNUAL RETURNS
--------------
<S> <C>
1999 169.9
</TABLE>
During the period shown in the bar chart, the highest return for a quarter was
117.31% (quarter ended 12/31/99) and the lowest return for a quarter was 3.93%
(quarter ended 6/30/99).
AVERAGE ANNUAL TOTAL RETURNS
(period ended December 31, 1999)
(data includes reinvestment of dividends)
<TABLE>
<CAPTION>
MSCI
DRIEHAUS EUROPEAN EUROPE LIPPER EUROPEAN
OPPORTUNITY FUND INDEX* REGION FUND INDEX**
----------------- ------ -------------------
<S> <C> <C> <C>
1 Year..................................... 169.90% 15.89% 27.49%
</TABLE>
- ---------------
* The Morgan Stanley Capital International Europe Index (MSCI Europe Index) is
a recognized benchmark of European stock markets. It is an unmanaged index of a
sample of companies representative of the market structure of 15 European
countries.
** The Lipper European Region Fund Index is an equally-weighted managed index of
the 30 largest qualifying funds that invest in equity securities with primary
trading markets or operations concentrated in the European region or a single
country within this region.
11
<PAGE> 15
- --------------------------------------------------------------------------------
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.............................................. None
Exchange Fee................................................ None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted
from Fund assets)
Management Fee.............................................. 1.50%
Other Expenses.............................................. 3.56%
-----
Total Annual Fund Operating Expenses........................ 5.06%
Fees Waived and Reimbursed.................................. (2.96)%
-----
Net Expenses................................................ 2.10%*
=====
</TABLE>
- ---------------
* Through June 30, 2001, for expenses exceeding this amount, the Fund will be
reimbursed.
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 (except for one year of net expenses in each period).
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>
$221 $1,311 $2,395 $5,075
</TABLE>
12
<PAGE> 16
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- DRIEHAUS EUROPEAN OPPORTUNITY 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 YEAR ENDED
DECEMBER 31, 1999
- ----------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period........................ $ 10.00
-------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment loss....................................... (.11)
Net gains (losses) on investments (both realized and
unrealized)............................................ 17.10
-------
Total income from investment operations........... 16.99
-------
LESS DISTRIBUTIONS:
Dividends from net investment income...................... --
Distributions from capital gains.......................... --
-------
Total distributions............................... --
-------
Net asset value, end of period.............................. $ 26.99
=======
Total return...................................... 169.90%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's)...................... $21,997
Ratio of expenses to average net assets................... 2.10%+
Ratio of net investment loss to average net assets........ (1.26)%+
Portfolio turnover........................................ 214.90%
</TABLE>
- --------------------------------------------------------------------------------
+ Such ratios are after administrative agent and transfer agent fee 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) would not exceed the fund's operating expense cap for the first
seventeen months of its operations. For the period from December 31, 1998 (the
commencement of operations) through June 30, 2001 the Fund's operating expense
cap is 2.10% of average net assets.
13
<PAGE> 17
- --------------------------------------------------------------------------------
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. The Adviser also evaluates
what trends are occurring in the U.S. and seeks to find companies in Asia that
can capitalize on introducing these products in Asia.
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 of
1998
- 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. In addition, from time to time this Fund may have
significant weightings in particular sectors, which may subject the Fund to
greater risks than less sector-concentrated funds.
14
<PAGE> 18
- --------------------------------------------------------------------------------
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 and 1999
calendar years, 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 YEARS ENDED DECEMBER 31
[BAR CHART]
<TABLE>
<CAPTION>
ANNUAL RETURNS
--------------
<S> <C>
1998 -1.00
1999 264.49
</TABLE>
During the period shown in the bar chart, the highest return for a quarter was
64.47% (quarter ended 12/31/99) and the lowest return for a quarter was -14.57%
(quarter ended 6/30/98).
AVERAGE ANNUAL TOTAL RETURNS
(period ended December 31, 1999)
(data includes reinvestment of dividends)
<TABLE>
<CAPTION>
DRIEHAUS ASIA PACIFIC MSCI ASIA LIPPER PACIFIC
GROWTH FUND PACIFIC INDEX* REGION FUND INDEX**
--------------------- -------------- -------------------
<S> <C> <C> <C>
1 Year........................... 264.49% 59.66% 78.34%
Since Inception (December 31,
1997).......................... 89.96% 27.63% 31.56%
</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 Fund Index is an 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.
15
<PAGE> 19
- --------------------------------------------------------------------------------
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.............................................. None
Exchange Fee................................................ None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted
from Fund assets)
Management Fee.............................................. 1.50%
Other Expenses.............................................. 2.46%
----
Total Annual Fund Operating Expenses........................ 3.96%
Fees Waived and Reimbursed.................................. (1.46)%
----
Net Expenses................................................ 2.50%*
====
</TABLE>
- ---------------
* Through June 30, 2001, for expenses exceeding this amount, the Fund will be
reimbursed.
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 (except for one year of net expenses in each period).
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>
$263 $1,117 $1,976 $4,191
</TABLE>
16
<PAGE> 20
- --------------------------------------------------------------------------------
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 PERIOD
FROM THE
FOR THE THREE COMMENCEMENT OF
MONTH PERIOD OPERATIONS
FOR THE YEAR OCTOBER 1, 1998 DECEMBER 31, 1997
ENDED THROUGH THROUGH
DECEMBER 31, 1999 DECEMBER 31, 1998 SEPTEMBER 30, 1998
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period....... $ 9.90 $ 8.30 $ 10.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment loss...................... (.23) (0.04) (0.02)
Net gains (losses) on investments (both
realized and unrealized).............. 25.85 1.64 (1.68)
------- ------ -------
Total income (loss) from
investment operations.......... 25.62 1.60 (1.70)
LESS DISTRIBUTIONS:
Dividends from net investment income..... -- -- --
Distributions from capital gains......... (4.33) -- --
------- ------ -------
Total distributions.............. (4.33) -- --
------- ------ -------
Net asset value, end of period............. $ 31.19 $ 9.90 $ 8.30
======= ====== =======
Total return..................... 264.49% 19.28%** (17.00)%**
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)..... $30,032 $4,965 $ 3,582
Ratio of expenses to average net
assets................................ 2.60%+ 2.95%*+ 2.95%*+
Ratio of net investment loss to average
net assets............................ (1.88)%+ (2.64)%*+ (0.45)%*+
Portfolio turnover....................... 362.55% 92.40%** 283.59%**
</TABLE>
- --------------------------------------------------------------------------------
* Annualized.
** Not annualized.
+ Such ratios are after administrative agent and transfer agent fee 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) would not exceed the fund's operating expense cap for the first
twenty-nine months of its operations. For the period from December 31, 1997 (the
commencement of operations) through May 31, 1999 the Fund's operating expense
cap was 2.95% of average net assets. For the period June 1, 1999 through June
30, 2001 the operating expense cap is reduced to 2.50% of average net assets.
17
<PAGE> 21
- --------------------------------------------------------------------------------
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 of
1998
- 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 uncertainty associated with the long-term acceptance of the "Euro"
and the monetary union
- Emerging market risk such as limited trading volume, expropriation,
devaluation or other adverse political or social developments
Some emerging markets have experienced currency crises and there is some risk of
future crises. Past crises have caused some countries to institute currency
reform measures which inhibit the free flow of currency out of their country.
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. In addition, from time to time this Fund may have
significant weightings in particular sectors, which may subject the Fund to
greater risks than less sector-concentrated funds.
18
<PAGE> 22
- --------------------------------------------------------------------------------
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 and 1999
calendar years, 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 YEARS ENDED DECEMBER 31
[BAR CHART]
<TABLE>
<CAPTION>
ANNUAL RETURNS
--------------
<S> <C>
1998 -12.70
1999 114.16
</TABLE>
During the period shown in the bar chart, the highest return for a quarter was
62.86% (quarter ended 12/31/99) and the lowest return for a quarter was -20.59%
(quarter ended 9/30/98).
AVERAGE ANNUAL TOTAL RETURNS
(period ended December 31, 1999)
(data includes reinvestment of dividends)
<TABLE>
<CAPTION>
DRIEHAUS MSCI LIPPER
EMERGING MARKETS EMERGING MARKETS EMERGING MARKETS
GROWTH FUND FUND INDEX* FUND INDEX**
---------------- ---------------- ----------------
<S> <C> <C> <C>
1 Year.................................. 114.16% 68.82% 68.97%
Since Inception (December 31, 1997)..... 36.74% 13.86% 11.16%
</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 Fund 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.
19
<PAGE> 23
- --------------------------------------------------------------------------------
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.............................................. None
Exchange Fee................................................ None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted
from Fund assets)
Management Fee.............................................. 1.50%
Other Expenses.............................................. 4.89%
----
Total Annual Fund Operating Expenses........................ 6.39%
Fees Waived and Reimbursed.................................. (3.89)%
----
Net Expenses................................................ 2.50%*
====
</TABLE>
- ---------------
* Through June 30, 2001, for expenses exceeding this amount, the Fund will be
reimbursed.
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 (except for one year of net expenses in each period).
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>
$263 $1,625 $2,922 $5,988
</TABLE>
20
<PAGE> 24
- --------------------------------------------------------------------------------
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 THE
FOR THE THREE COMMENCEMENT
MONTH PERIOD OF OPERATIONS
FOR THE YEAR OCTOBER 1, 1998 DECEMBER 31, 1997
ENDED THROUGH THROUGH
DECEMBER 31, 1999 DECEMBER 31, 1998 SEPTEMBER 30, 1998
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period.......... $ 8.73 $ 7.56 $ 10.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment loss......................... (.14) (0.03) (0.03)
Net gains (losses) on investments (both
realized and unrealized).................. 10.05 1.20 (2.41)
------- ------ -------
Total income (loss) from investment
operations.......................... 9.91 1.17 (2.44)
------- ------ -------
LESS DISTRIBUTIONS:
Dividends from net investment income........ -- -- --
Distributions from capital gains............ (.28) -- --
------- ------ -------
Total distributions................... (.28) -- --
------- ------ -------
Net asset value, end of period................ $ 18.36 $ 8.73 $ 7.56
======= ====== =======
Total return.......................... 114.16% 15.48%** (24.40)%**
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in).............. $10,537 $4,028 $ 3,487
Ratio of expenses to average net assets..... 2.58%+ 2.75%*+ 2.75%*+
Ratio of net investment loss to average net
assets.................................... (1.29)%+ (1.23)%*+ (0.49)%*+
Portfolio turnover.......................... 366.53% 82.60%** 261.21%**
</TABLE>
- --------------------------------------------------------------------------------
* Annualized.
** Not annualized.
+ Such ratios are after administrative agent and transfer agent fee 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) would not exceed the fund's operating expense cap for the first
twenty-nine months of its operations. For the period from December 31, 1997 (the
commencement of operations) through May 31, 1999 the Fund's operating expense
cap was 2.75% of average net assets. For the period June 1, 1999 through June
30, 2001 the operating expense cap is reduced to 2.50% of average net assets.
21
<PAGE> 25
- --------------------------------------------------------------------------------
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 in 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 total 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 $1.5 billion 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
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 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 (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.
22
<PAGE> 26
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 $1.5 billion or less. The Fund does not
necessarily sell a security if the Company's market capitalization subsequently
exceeds its market capitalization at the time of purchase and in fact may buy
additional securities to maintain its allocation. Under normal market
conditions, the Fund will invest substantially all (no less than 65%) of its
total 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. Under normal market conditions, at least 65% of the Fund's total
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, Croatia, the Czech Republic, Denmark, Estonia, Finland,
France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Kazakhstan, Latvia,
Lithuania, Luxembourg, the Netherlands, Norway, Poland, Portugal, Romania,
Russia, Slovakia, Slovenia, 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.
23
<PAGE> 27
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 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. Under normal market conditions, at least 65% of the Fund's total
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.
24
<PAGE> 28
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 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. Under normal market conditions, at least 65% of the Fund's total
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 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.
25
<PAGE> 29
Investors should understand and consider carefully the greater risks involved in
foreign investing. Investing in foreign securities -- positions which are
generally denominated in foreign currencies -- and utilization of forward
foreign currency exchange contracts involve certain considerations comprising
both risks and opportunities not typically associated with investing in U.S.
securities. These considerations include: fluctuations in exchange rates of
foreign currencies; possible imposition of exchange control regulations or
currency restrictions that would prevent cash from being brought back to the
United States; less public information with respect to issuers of securities;
less governmental supervision of stock exchanges, securities brokers, and
issuers of securities; lack of uniform accounting, auditing and financial
reporting standards; lack of uniform settlement periods and trading practices;
less liquidity and frequently greater price volatility in foreign markets than
in the United States; possible imposition of foreign taxes; possible investment
in the securities of companies in developing as well as developed countries; the
possibility of expropriation or confiscatory taxation, seizure or
nationalization of foreign bank deposits or other assets, establishment of
exchange controls, the adoption of foreign government restrictions and other
adverse political, social or diplomatic developments that could affect
investment in these nations; 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 recently experienced
devaluation relative to the U.S. dollar, and future 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 Asia Pacific region
underwent during 1997 and 1998 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
26
<PAGE> 30
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 the worst of this crisis has passed and the Asia
Pacific Markets are stabilizing, the stocks of Asia Pacific issuers may remain
volatile.
EUROPEAN RISKS. The Driehaus European Opportunity Fund invests primarily in the
equity securities in the European region. All the Funds may invest in this
region. Some countries in Europe formed 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 risks 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.
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 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.
IMPACT OF CERTAIN INVESTMENTS. The Funds may invest in a variety of securities,
including initial public offerings, derivatives and small technology companies.
Such investments may have a magnified performance impact on a Fund depending on
a Fund's size. A Fund may not experience similar performance as its assets grow
or its investments change.
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.
27
<PAGE> 31
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,
participation notes, 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.
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,
28
<PAGE> 32
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 is noted in each Fund's Financial Highlights in the
Summary. 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.
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
29
<PAGE> 33
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 33 1/3% of its
total assets. Any such loan must be continuously secured by collateral (cash or
U.S. Government securities). In the event of bankruptcy or other default of the
borrower, a Fund could experience delays in both liquidating the loan collateral
and recovering the loaned securities and losses.
30
<PAGE> 34
- --------------------------------------------------------------------------------
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 as of March 31, 2000, managed
approximately $6.4 billion in assets.
Each Fund pays the Adviser an annual investment management fee on a monthly
basis 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 International Discovery Fund 1.50%
Driehaus European Opportunity Fund 1.50%
Driehaus Asia Pacific Growth Fund 1.50%
Driehaus Emerging Markets Growth Fund 1.50%
</TABLE>
PORTFOLIO MANAGER -- DRIEHAUS INTERNATIONAL GROWTH FUND. Mr. 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., the predecessor to Driehaus International
Growth Fund, 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,
and emerging markets. As the Adviser's chief investment officer for
international investing, Mr. Andersen oversees all international investing.
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.
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 shares responsibility for the Driehaus International Discovery
Fund.
31
<PAGE> 35
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 shares responsibility for 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.
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, as amended September 13, 1999,
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.
32
<PAGE> 36
- --------------------------------------------------------------------------------
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
NET ASSET VALUE
Each Fund's net asset value is determined as of the close of the New York Stock
Exchange ("NYSE") (normally 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, which may be waived at the
discretion of DSC:
<TABLE>
<CAPTION>
MINIMUM
MINIMUM MINIMUM MINIMUM SUBSEQUENT
FUND INITIAL SUBSEQUENT INITIAL IRA IRA
FUND NUMBER INVESTMENT INVESTMENT INVESTMENT INVESTMENT
---- ------ ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Driehaus International Growth
Fund #001 $100,000 $20,000 $100,000 $20,000
Driehaus International Discovery
Fund #004 $ 10,000 $ 2,000 $ 2,000 $ 500
Driehaus European Opportunity
Fund #005 $ 10,000 $ 2,000 $ 2,000 $ 500
Driehaus Asia Pacific Growth Fund #002 $ 10,000 $ 2,000 $ 2,000 $ 500
Driehaus Emerging Markets Growth
Fund #003 $ 10,000 $ 2,000 $ 2,000 $ 500
</TABLE>
3) Complete the appropriate sections of the New Account Application, carefully
following the instructions. If you have questions, please contact
Shareholder Services at 1-800-560-6111. Complete the appropriate sections of
the application which apply to signing up for account privileges. By
applying for privileges now, you can avoid the delay of having to submit an
additional application to add privileges.
4) Include the appropriate Fund number (see table above) on the "payable to"
line of your check or in your wire instructions.
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 Custodial Agreement for further details on
eligibility, service fees and tax implications.
33
<PAGE> 37
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 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 Driehaus Mutual Funds. For purchases of
over $100,000, a certified check, bank check, or wire transfer is required.
The Funds do not accept third party checks. Any expense incurred as a result
of a returned check will be borne by the shareholder. 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 and obtain your account number. Then wire your investment to:
PNC Bank, NA
ABA #031-000-053
Credit: Driehaus Purchase Account
Bank Account #: 86-1108-2419
Fund #: ( ) (see section 2 of "OPENING AN
ACCOUNT")
Further Credit: (Shareholder name and 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 telephone, 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 broker-dealer, financial institution or other service provider to place
the order on a timely basis. If payment is
34
<PAGE> 38
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) buying Fund shares at a time
when the Fund has substantial recognized or unrecognized gains 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 for up to $100,000 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 normally on the following business day. However, if it is not in
the best interest of the Funds to do so, the Funds may take up to seven days
to pay proceeds from shares redeemed by telephone. 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, addresses
or wire transfer instructions 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 and not
changed within the past 30 days.
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 and not changed within the
past 30 days. 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.
35
<PAGE> 39
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
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.
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>
- -------------------------------------------------------------------------------------------------
MINIMUM IRA
FUND MINIMUM ACCOUNT VALUE ACCOUNT VALUE
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Driehaus International Growth Fund $50,000 $50,000
- -------------------------------------------------------------------------------------------------
Driehaus International Discovery Fund $ 5,000 $ 1,500
- -------------------------------------------------------------------------------------------------
Driehaus European Opportunity Fund $ 5,000 $ 1,500
- -------------------------------------------------------------------------------------------------
Driehaus Asia Pacific Growth Fund $ 5,000 $ 1,500
- -------------------------------------------------------------------------------------------------
Driehaus Emerging Markets Growth Fund $ 5,000 $ 1,500
- -------------------------------------------------------------------------------------------------
</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 account is redeemed.
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 normally mail payment for shares redeemed within seven days after
proper instructions are received. If requested, the Fund will pay proceeds by
wire, normally by the next business day. However, if it is not in the best
interest of the Funds to do so, the Funds may take up to seven days to pay
proceeds from shares redeemed by wire. 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. Payment for shares redeemed 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.
FREQUENT TRADING. Frequent trading of Fund shares, often in response to
short-term fluctuations in the market, also known as "market timing," is not
permitted. Short-term or excessive trading into and out of a Fund may harm a
Fund's performance by disrupting portfolio management strategies and by
increasing expenses. Accordingly, the Funds reserve the right to reject any
purchase orders, including exchanges, particularly from market timers or
investors who may have a pattern of short-term or excessive trading or whose
trading has been or may be disruptive to a Fund. For these purposes, the Adviser
may consider an investor's trading history in the Funds and accounts under
common ownership or control.
36
<PAGE> 40
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 the purchase and redemption of a Fund's
shares are also applicable to exchanging shares, including the prices that you
receive and pay for the shares you exchange. If you would like the ability to
exchange shares by telephone, please choose this privilege 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 $100,000.
- A redemption check is to be made payable to anyone other than the
shareholder(s) of record or the name has been changed within 30 days of
the request.
- A redemption check is to be mailed to an address other than the address
of record or the address has been changed within 30 days of the request.
- A redemption amount is to be wired to a bank other than one previously
authorized or the wire transfer instructions have been changed within 30
days of the request.
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. Existing shareholders may elect to buy (by bank wire),
sell and exchange shares by telephone on the account application. 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.
UNUSUAL CIRCUMSTANCES. During times of unusual economic or market changes,
telephone redemption and exchange privileges may be difficult to implement. In
addition, in unusual circumstances, any Fund may temporarily suspend the
processing of redemption requests, or may postpone payment of proceeds for up to
seven days or longer as allowed by federal securities laws. 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%
37
<PAGE> 41
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.
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. However, losses
on shares held not longer than six months will be treated as long-term capital
loss to the extent of the long-term capital gain dividend received by the
shareholder. 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 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 if 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
38
<PAGE> 42
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.
39
<PAGE> 43
- --------------------------------------------------------------------------------
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 each 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 each 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:
WWW.DRIEHAUS.COM
the SEC at http://www.sec.gov
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, D.C. (1-202-942-8090) or by sending your request by email at
[email protected] or to the SEC's Public Reference Section, Washington, D.C.
20549-0102 (a duplicating fee is charged).
(C)2000, Driehaus Mutual Funds
1940 Act File No. 811-07655
<PAGE> 44
Statement of Additional Information Dated May 1, 2000
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 May 1, 2000 and any supplements thereto ("Prospectus"). The
Prospectus may be obtained at no charge by telephoning 1-800-560-6111.
TABLE OF CONTENTS
PAGE
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-14
PRINCIPAL SHAREHOLDERS..........................................B-16
INVESTMENT ADVISORY SERVICES....................................B-17
DISTRIBUTOR.....................................................B-18
ADMINISTRATOR...................................................B-18
CUSTODIAN.......................................................B-18
TRANSFER AGENT..................................................B-19
INDEPENDENT PUBLIC ACCOUNTANTS..................................B-19
PORTFOLIO TRANSACTIONS..........................................B-19
ADDITIONAL INCOME TAX CONSIDERATIONS............................B-20
INVESTMENT PERFORMANCE..........................................B-22
APPENDIX - RATINGS...............................................A-1
The financial statements appearing in the combined Driehaus International Growth
Fund, Driehaus Asia Pacific Growth Fund, Driehaus International Discovery Fund,
Driehaus European Opportunity Fund and Driehaus Emerging Markets Growth Fund
Annual Reports to Shareholders for the fiscal year ended December 31, 1999 (the
"Reports") are incorporated herein by reference. These Reports accompany this
document.
<PAGE> 45
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. 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. In 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
B-2
<PAGE> 46
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.
At the maturity of a forward contract to deliver a particular currency, each
Fund may either sell the portfolio security related
B-3
<PAGE> 47
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.
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
B-4
<PAGE> 48
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. 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.
LINE OF CREDIT
Subject to restriction (4) under "Investment Restrictions" in this Statement of
Additional Information, Driehaus Mutual
B-5
<PAGE> 49
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 each of the
Funds.
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.
The Funds may use equity linked certificates/notes/swaps (all derivatives) to
further their investment objectives. Both Driehaus Asia Pacific Growth Fund
and Driehaus Emerging Markets Growth Fund have purchased participation notes
and the other Funds may also. In buying such derivatives, the Funds could be
purchasing bank debt instruments, swaps or certificates that vary in value
based on the value of the underlying benchmark security. The Funds buying such
derivative instruments are subject to the risk of the inability or refusal of
the counterparties in the transaction to perform.
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 entitles the purchaser to
receive payments on a
B-6
<PAGE> 50
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
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.
B-7
<PAGE> 51
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.
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
- -------------------------
(1) A futures contract on an index is an agreement pursuant to which two
parties agree to take or make delivery of an amount of cash equal to the
difference between the value of the index at the close of the last trading
day of the contract and the price at which the index contract was
originally written. Although the value of a securities index is a function
of the value of certain specified securities, no physical delivery of those
securities is made.
B-8
<PAGE> 52
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 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
B-9
<PAGE> 53
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) 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);
- --------------------
(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> 54
(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 without shareholder
approval. 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.
If illiquid securities exceed 15% of a Fund's net assets after the time of
purchase, the Fund will take steps to reduce in an orderly fashion its holdings
of illiquid securities. Because illiquid securities may not be readily
marketable, the portfolio managers may not be able to dispose of them in a
timely manner. As a result, a Fund may be forced to hold illiquid securities
while their price depreciates. Depreciation in the price of illiquid securities
may cause the net asset value of a Fund to decline.
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
- -----------------------
(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. To the extent that categorization by IBES is
"Miscellaneous" or "Other" for an industry, the portfolio manager may
change the industry IBES classification to a more appropriate or specific
industry.
B-11
<PAGE> 55
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 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's Pricing Committee, 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 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 are
valued at fair value determined by the Adviser's Pricing Committee pursuant to
methodologies established in good faith by the Board of Trustees. If the
Adviser's Pricing Committee determines that the foregoing methods do not
accurately reflect current market value, securities and assets are valued at
fair value as determined in good faith by or under the direction of the Board of
Trustees or its Pricing Committee. 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
B-12
<PAGE> 56
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.
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) 57 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
Francis J. Harmon(2) 57 Trustee Senior Account Executive - Labor Affairs, Blue
9910 South Seeley Avenue Cross-Blue Shield of Illinois
Chicago, IL 60643
Robert F. Moyer*(1) 53 Trustee, Senior Vice President and Chief Operating Officer of the
25 East Erie Street President Adviser and Driehaus Securities Corporation
Chicago, IL 60611
A.R. Umans(1), (2) 73 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
</TABLE>
B-13
<PAGE> 57
<TABLE>
<CAPTION>
POSITION(S) PRINCIPAL OCCUPATION(S)
NAME; ADDRESS AGE HELD WITH FUND DURING PAST FIVE YEARS
- ------------- --- -------------- ----------------------
<S> <C> <C> <C>
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.
Arthur B. Mellin(3) 56 Advisory Board President, Mellin Securities Incorporated and
190 South LaSalle Street Member Mellin Asset Management, Inc.
Chicago, IL 60603
William R. Andersen 41 Vice President Senior Vice President, Chief Investment Officer-
25 East Erie Street International and Portfolio Manager of
Chicago, IL 60611 the Adviser; Portfolio Manager of the Adviser
prior thereto
Diane L. Wallace 41 Vice President; Senior Vice President-Operations of the
25 East Erie Street Treasurer Adviser and Driehaus Securities Corporation,
Chicago, IL 60611 since 1996; Vice President prior thereto
Mary H. Weiss 51 Vice President; Vice President, Secretary and Chief Legal
25 East Erie Street Secretary Counsel of the Adviser and Driehaus Securities
Chicago, IL 60611 Corporation
Robert H. Buchen 61 Vice President Vice President of marketing/account
25 East Erie Street management of the Adviser and Driehaus
Chicago, IL 60611 Securities Corporation
Dusko Culafic 41 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 37 Assistant Secretary Senior Attorney with the Adviser since 2000; Attorney
25 East Erie Street with Adviser since 1996; prior thereto, associate of
Chicago, IL 60611 Sidley & Austin, a law firm
</TABLE>
- ------------------
* Trustee who is an "interested person" of the Fund and of the Adviser, as
defined in the 1940 Act.
1 Member of the Executive Committee of the Board of Trustees, which is
authorized to exercise all powers of the Board with certain statutory
exceptions.
2 Member of the Audit Committee of the Board, which makes recommendations to
the Board regarding the selection of auditors and confers with the auditors
regarding the scope and results of the audit.
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.
B-14
<PAGE> 58
Officers and trustees affiliated with the Adviser serve without any compensation
from the Funds. In compensation for their services to each Fund, trustees who
are not affiliates of the Funds 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 Funds have no retirement or pension
plans. The following table sets forth the compensation paid by each Fund during
the calendar year 1999 to each of the non-interested trustees:
<TABLE>
<CAPTION>
COMPENSATION COMPENSATION COMPENSATION
COMPENSATION FROM DRIEHAUS FROM DRIEHAUS COMPENSATION FROM DRIEHAUS TOTAL
FROM DRIEHAUS INTERNATIONAL EUROPEAN FROM DRIEHAUS EMERGING COMPENSATION
INTERNATIONAL DISCOVERY OPPORTUNITY ASIA PACIFIC MARKETS FROM THE
NAME OF TRUSTEE GROWTH FUND Fund FUND GROWTH FUND GROWTH FUND FUNDS
--------------- ------------- ------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
A.R. Umans $5,662 $1,237 $1,191 $1,251 $1,159 $10,500
=======
Daniel Zemanek 5,662 1,237 1,191 1,251 1,159 $10,500
=======
Francis J. Harmon 5,662 1,237 1,191 1,251 1,159 $10,500
=======
</TABLE>
As of March 31, 2000, the Fund's officers, trustees and advisory board members
as a group owned (or held a shared investment or voting power with respect to)
shares of each Fund in the amounts shown according to the percentage shown in
the following table:
<TABLE>
<CAPTION>
Fund # of Shares % owned
---- ----------- -------
<S> <C> <C>
Driehaus International Growth Fund 148,525 0.7%
Driehaus International Discovery Fund 210,200 11.4%
Driehaus European Opportunity Fund 333,092 17.9%
Driehaus Asia Pacific Growth Fund 132,517 10.1%
Driehaus Emerging Markets Growth Fund 121,971 12.7%
</TABLE>
B-15
<PAGE> 59
PRINCIPAL SHAREHOLDERS
As of March 31, 2000, no persons or entities owned of record or, to the Funds'
knowledge, owned beneficially 5% or more of the shares of a Fund except the
persons or entities indicated below.
<TABLE>
<CAPTION>
NAME AND ADDRESS FUND(S) % OWNED
- ---------------- ------- -------
<S> <C> <C>
Charles Schwab & Co., Inc. Driehaus International Growth Fund 16.1%
101 Montgomery Street Driehaus International Discovery Fund 17.5%
San Francisco, CA 94104 Driehaus European Opportunity Fund 20.8%
Driehaus Asia Pacific Growth Fund 39.5%
Driehaus Emerging Markets Growth Fund 5.2%
Mac & Co. Driehaus International Growth Fund 8.0%
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
Iowa State University Foundation Driehaus International Growth Fund 7.6%
3229 Lincoln Way
Ames, IA 50014-7164
US Bancorp Trust Company Driehaus International Growth Fund 5.8%
P.O. Box 520
Johnston, PA 15907-0520
Driehaus Associates Fund Driehaus International Discovery Fund 11.4%
25 East Erie Street
Chicago, IL 60611
Driehaus Companies Profit Sharing Plan Driehaus International Discovery Fund 10.8%
and Trust
25 East Erie Street
Chicago, IL 60611
Richard H. Driehaus Driehaus International Discovery Fund 10.1%
25 East Erie Street Driehaus European Opportunity Fund 16.5%
Chicago, IL 60611 Driehaus Asia Pacific Growth Fund 8.9%
Driehaus Emerging Markets Growth Fund 10.8%
Evangelical Covenant Church Driehaus International Discovery Fund 7.6%
EMP Retirement Plan Driehaus Emerging Markets Growth Fund 12.7%
5154 N. California Avenue
Chicago, IL 60625
National Investor Services Corp. Driehaus International Discovery Fund 6.1%
55 Water Street, 32nd Floor Driehaus European Opportunity Fund 18.8%
New York, NY 10041-3299
Covenant Ministries of Benevolence Corp. Driehaus International Discovery Fund 6.0%
5145 N. California Avenue Driehaus Emerging Markets Growth Fund 9.8%
Chicago, IL 60625
The Richard H. Driehaus Foundation Driehaus Asia Pacific Growth Fund 17.4%
25 East Erie Street Driehaus Emerging Markets Growth Fund 25.4%
Chicago, IL 60611
Wesley West Long Term Partnership LP Driehaus Emerging Markets Growth Fund 11.1%
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
B-16
<PAGE> 60
Mr. Driehaus' business is investment advisory and brokerage services. The
Adviser provides office space and executive and other personnel to the Trust.
The Trust 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 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. The following table shows the
fees paid by each Fund (before any waivers) under the advisory agreement to the
Adviser for each Fund's last three fiscal years, where applicable. The table
also shows each Fund's maximum operating expense based on the Adviser agreeing
to absorb other operating expenses to the extent necessary to ensure that the
total annual fund operating expenses (after all applicable waivers) do not
exceed the percentage of average net assets applicable for each Fund shown.
<TABLE>
<CAPTION>
ADVISORY FEES PAID FOR FISCAL YEARS MAXIMUM OPERATING EXPENSE
--------------------------------------------
FUND NAME 1999 1998 1997 (% OF AVERAGE NET ASSETS)
- --------------------------------------- ------------ ------------ ------------ ----------------------------------------
<S> <C> <C> <C> <C>
Driehaus International Growth Fund $ 4,080,429 $ 3,458,926 $ 2,413,454* 2.25% through October 28, 1998
Driehaus International Discovery Fund $ 146,812 N/A N/A 2.50% through May 31, 1999
2.40% May 31, 1999 through June 30, 2001
Driehaus European Opportunity Fund $ 106,633 N/A N/A 2.10% through June 30, 2001
Driehaus Asia Pacific Growth Fund $ 175,273 $ 46,727 N/A 2.95% through May 31, 1999
2.50% May 31, 1999 through June 30, 2001
Driehaus Emerging Markets Growth Fund $ 93,249 $ 50,832 N/A 2.75% through May 31, 1999
2.50% May 31, 1999 through June 30, 2001
</TABLE>
- -----------------------------
* For the period from October 28, 1996 (commencement of operations) through
August 31, 1997.
The Adviser, the Funds, and the Distributor have each adopted a code of
ethics. Access persons (as defined in the code) are permitted to make personal
securities transactions, subject to requirements and restrictions set forth in
such code of ethics. The code of ethics contains provisions and requirements
designed to identify and address certain conflicts of interest between personal
investment activities and the interests of the Funds. The code of ethics also
prohibits certain types of transactions absent prior approval, imposes time
periods during which personal transactions may not be made in certain
securities, and requires the submission of broker confirmations and reporting of
securities transactions. Exceptions to these and other provisions of the code of
ethics may be granted in particular circumstances after review by appropriate
personnel.
The Adviser manages not only the Funds but other investment accounts.
Simultaneous transactions may occur when several Funds and investment accounts
are managed by the same investment adviser and the same security is suitable for
the investment objective of more than one Fund or investment account. When two
or more investment accounts are simultaneously engaged in the purchase or sale
of the same security, including initial public offerings ("IPOs"), the prices
and amounts are allocated in accordance with procedures believed to be
appropriate and equitable for each investment account. In some cases, this
process could have a detrimental effect on the price or value of the security as
far as each Fund is concerned. In other cases, however, the ability of the Funds
to participate in volume transactions will produce better executions and prices
for the Funds.
DISTRIBUTOR
As of December 31, 1998, the Shares of the Funds are distributed by Driehaus
Securities Corporation ("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,
B-17
<PAGE> 61
without sales commissions or other sales load to the investor. In addition, no
sales commission or "12b-1" fees are 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.
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 International Discovery Fund, and the Driehaus European Opportunity
Fund. For fiscal year 1999, 1998 and 1997, Driehaus International Growth Fund
paid PFPC Inc. administrative fees of $314,358, $248,622 and $203,101,
respectively. For fiscal year 1999, Driehaus International Discovery Fund paid
administrative fees to PFPC Inc. of $13,702. For fiscal year 1999, Driehaus
European Opportunity Fund paid administrative fees to PFPC Inc. of $9,952. For
fiscal year 1999 and 1998, Driehaus Asia Pacific Growth Fund paid administrative
fees to PFPC Inc. of $16,359 and $4,361, respectively. For fiscal year 1999 and
1998, Driehaus Emerging Markets Growth Fund paid PFPC Inc. administrative fees
of $8,703 and $4,745, respectively.
CUSTODIAN
The Chase Manhattan Bank at 3 CMC Metrotech, 8th Floor, Brooklyn, NY 11245, 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
B-18
<PAGE> 62
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 (including the knowledge of the trading room staff of DSC) 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
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. For the fiscal year ended December 31, 1999, the Driehaus
International Growth Fund paid brokerage commissions of $3,892,385 of which
$339,700 (8.7%) were paid to DSC, the Driehaus International Discovery Fund paid
$195,323, of which $18,360 (9.4%) were paid to DSC, the Driehaus European
Opportunity Fund paid $100,884, of which $120 (0.1%) were paid to DSC, the
Driehaus Asia Pacific Growth Fund paid $327,617, of which $5,063 (1.5%) were
paid to DSC, and the Driehaus Emerging Markets Growth Fund paid $156,962, of
which $26,877 (1.7%), were paid to DSC.
With respect to issues of securities involving brokerage commissions, when more
than one broker or dealer (other than DSC) is believed to be capable of
providing the best combination of price and execution with respect to a
particular 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
B-19
<PAGE> 63
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.
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
B-20
<PAGE> 64
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.
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, non-equity options positions and
certain foreign currency contracts ("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 indexes (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.
- -----------------------
(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> 65
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.
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
B-22
<PAGE> 66
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.
Based on the foregoing formula, the average annual total return for each Fund is
as follows:
<TABLE>
<CAPTION>
Average Annual Total Average Annual Total
Return For the Year Return Since Inception
Fund (Date of Inception) ended December 31, 1999 through December 31, 1999
- ------------------------ ----------------------- --------------------------
<S> <C> <C>
Driehaus International Growth Fund 98.94% 22.46%
(October 28, 1996)
Driehaus International Discovery Fund 213.65% 213.65%
(December 31, 1998)
Driehaus European Opportunity Fund 169.90% 169.90%
(December 31, 1998)
Driehaus Asia Pacific Growth Fund 264.49% 89.96%
(December 31, 1997)
Driehaus Emerging Markets Growth Fund 114.16% 36.74%
(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
</TABLE>
B-23
<PAGE> 67
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
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-24
<PAGE> 68
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.
RATINGS BY S&P
A-1
<PAGE> 69
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> 70
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/
(iv) Letter Agreement.*
(e) (i) Distribution Agreement between Registrant and Driehaus
Securities Corporation dated December 31, 1998./6/
(ii) Amended and Restated Distribution Agreement.*
(f) None.
(g) (i) Global Custody Agreement.*
(ii) Delegation Agreement./5/
(h) (i) Transfer Agency Agreement. /2/
(ii) Administration Agreement. /2/
(i) Opinion and Consent of Vedder, Price, Kaufman & Kammholz.*
(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) Code of Ethics.*
(q) (i) Powers of Attorney./3/
(ii) Powers of Attorney.*
* Filed herewith.
/1/ Filed as a part of Registrant's initial registration statement filed on
June 5, 1996.
<PAGE> 71
/2/ Filed as a part of Registrant's Pre-Effective Amendment No. 1 under the
Securities Act of 1933 filed on October 7, 1996.
/3/ Filed as a part of Registrant's Post-Effective Amendment No. 2 under
the Securities Act of 1933 filed on October 31, 1997.
/4/ Filed as a part of Registrant's Post-Effective Amendment No. 3 under
the Securities Act of 1933 filed on December 29, 1997.
/5/ Filed as a part of Registrant's Post-Effective Amendment No. 5 under
the Securities Act of 1933 filed on December 23, 1998.
/6/ Filed as a part of Registrant's Post-Effective Amendment No. 6 under
the Securities Act of 1933 filed on April 9, 1999.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Inapplicable.
ITEM 25. INDEMNIFICATION.
Article V of Registrant's Declaration of Trust, filed as Exhibit (a),
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.
<PAGE> 72
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 Director Chairman of Board, CEO, and 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
Meighan Harahan Vice President None
Theresa Fredrick Assistant Vice President-Operations None
Janet McWilliams Assistant Secretary None
</TABLE>
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) Not applicable.
<TABLE>
<CAPTION>
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
Connie Kreutzer Assistant Vice President None
Theresa Fredrick Assistant Vice President-Operations None
Janet McWilliams Assistant Secretary None
</TABLE>
The business address of all of the foregoing individuals is 25 East Erie Street,
Chicago, Illinois 60611.
(c) Not applicable.
<PAGE> 73
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, 676 St. Clair, Chicago, Illinois 60611, and 17 East Erie,
Chicago, Illinois 60611 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.
<PAGE> 74
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for the effectiveness of this Registration Statement pursuant
to Rule 485(b) under the Securities Act of 1933 and 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 25th day of April, 2000.
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 25th day of April, 2000.
/s/ Richard H. Driehaus President and Trustee
- ------------------------------- (Principal Executive Officer)
Richard H. Driehaus
/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 Treasurer (Principal Financial
- ------------------------------- and Accounting Officer)
Diane L. Wallace
* Robert F. Moyer signs this document pursuant to powers of attorney filed in
Registrant's Post-Effective Amendment No. 2 and Post-Effective Amendment No. 8
under the Securities Act of 1933.
/s/ Robert F. Moyer
- -------------------------------
Robert F. Moyer
<PAGE> 75
EXHIBIT INDEX
DRIEHAUS MUTUAL FUNDS
FORM N-1A REGISTRATION STATEMENT
(d)(iv) Letter Agreement.
(e)(ii) Amended and Restated Distribution Agreement.
(g)(i) Global Custody Agreement.
(i) Opinion and Consent of Vedder, Price, Kaufman & Kammholz.
(j) Consent of Independent Accountants.
(p) Code of Ethics.
(q)(ii) Powers of Attorney.
<PAGE> 1
Exhibit 23(d)(iv)
[Driehaus Logo]
[Letterhead of Driehaus Capital Management, Inc.]
February 16, 2000
Richard H. Driehaus, President
DRIEHAUS MUTUAL FUNDS
25 East Erie Street
Chicago, IL 606011
Re: FEE CAPS
Dear Richard:
This letter is to set forth the agreement between Driehaus Mutual Funds, on
behalf of each of its series discussed below (collectively, the "Funds"), and
Driehaus Capital Management, Inc. ("DCM") regarding the payment of "total annual
fund operating expenses" (as defined in Form N-1A). DCM serves as the investment
adviser to the Funds pursuant to a contract with Driehaus Mutual Funds. As
consideration hereunder, DCM hereby agrees to absorb other operating expenses to
the extent necessary to ensure that total annual fund operating expenses (after
all waivers) will not exceed, for each of the four affected Funds, the
respective amount indicated below:
- Driehaus International Discovery Fund, 2.40%;
- Driehaus European Opportunity Fund, 2.10%;
- Driehaus Asia Pacific Growth Fund, 2.50%; and
- Driehaus Emerging Markets Growth Fund, 2.50%;
of average net assets for the twelve month period ending June 30, 2001.
If the foregoing agreement meets with your approval, then please indicate
Driehaus Mutual Funds agreement and acceptance by execution below.
Very truly yours,
/s/ Robert F. Moyer AGREED AND ACCEPTED:
DRIEHAUS MUTUAL FUNDS
Robert F. Moyer By: /s/ Richard H. Driehaus
President -----------------------------------
Driehaus Capital Management, Inc. Name: Richard H. Driehaus
Title: President
<PAGE> 1
AMENDED AND RESTATED DISTRIBUTION AGREEMENT
AGREEMENT made as of this 13th day of September 1999, 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 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
<PAGE> 2
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 denominations 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 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,
2
<PAGE> 3
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. (a) 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.
(b) Subject to the conditions set forth below, the Trust agrees
to indemnify and hold harmless the Distributor, its officers and employees, and
each person, if any, who controls the Distributor within the meaning of Section
15 of the Securities Act of 1933 and Section 20 of the Securities Exchange Act
of 1934 against any and all loss, liability, claim, damage and expense
whatsoever, jointly and severally, or otherwise (including, but not limited to,
any and all expenses whatsoever reasonably incurred in investigating, defending
or preparing to defend against any litigation, commenced or threatened, or any
claim whatsoever), arising out of or based upon any untrue statement or alleged
untrue statement of a material fact contained in the Trust's Registration
Statement, the prospectus, or statement of additional information or any
amendment or supplement thereof, or any annual or other periodic report or proxy
statement of the Trust, or any other information provided by the Trust in
writing to the Distributor for use in any advertising and/or sales literature on
the Trust's behalf, or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, unless such statement or omission was made in reliance upon and
in conformity with written information with respect to the Distributor expressly
for use in the Trust's Registration Statement, prospectus, statement of
additional information or any amendment or supplement thereof or any annual or
other periodic report or proxy statement of the Trust or any advertising or
sales literature. If any action is brought against the Distributor or any
controlling person thereof in respect of which indemnity may be sought against
the Trust pursuant to the foregoing, the Distributor shall promptly notify the
Trust in writing of the institution of such action. Anything in this
subparagraph to the contrary notwithstanding, the Trust shall not be liable for
any settlement of any such claim or action effected without its written consent,
which shall not be unreasonably withheld. The Trust agrees promptly to notify
the Distributor of the commencement of any litigation or proceedings against the
Trust or
3
<PAGE> 4
any of its officers or directors or controlling persons in connection with the
issue and sale of shares or in connection with the Trust's Registration
Statement, prospectus or statement of additional information, or any annual or
other periodic report or proxy statement or advertising or sales literature of
the Trust.
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 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.
4
<PAGE> 5
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.
ATTEST: DRIEHAUS MUTUAL FUNDS
By:
- ------------------------------ ------------------------------
Mary H. Weiss Robert F. Moyer
Secretary Senior Vice President
ATTEST: DRIEHAUS SECURITIES CORPORATION
By:
- ------------------------------ ------------------------------
Mary H. Weiss Robert F. Moyer
Secretary President
5
<PAGE> 1
[CHASE LOGO]
GLOBAL CUSTODY AGREEMENT
This AGREEMENT is effective May 25, 1999, and is between THE CHASE
MANHATTAN BANK ("Bank") and each of the series of Driehaus Mutual Funds listed
on Appendix 2 hereto, as the same may be amended from time to time (each a
"Customer").
1. CUSTOMER ACCOUNTS.
Bank, acting as "Securities Intermediary" (as defined in Section 15(g)
hereof) shall establish and maintain the following ("Accounts");
(a) a Custody Account (as defined in Section 15(b) hereof) in the
name of Customer for Financial Assets, which shall, except as modified by
Section 15(d) hereof, mean stocks, shares, bonds, debentures, notes, mortgages
or other obligations for the payment of money, bullion, coin and any
certificates, receipts, warrants or other instruments representing rights to
receive, purchase or subscribe for the same or evidencing or representing
any other rights or interests therein and other similar property whether
certificated or uncertificated as may be received by Bank or its Subcustodian
(as defined in Section 3 hereof) for the account of Customer, including as
an "Entitlement Holder" as defined in Section 15(c) hereof); and
(b) an account in the name of Customer ("Deposit Account") for any
and all cash in any currency received by Bank or its Subcustodian for the
account of Customer, which cash shall not be subject to withdrawal by draft or
check.
Customer warrants its authority to: 1) deposit the cash and Financial
Assets (collectively "Assets") received in the Accounts and 2) give Instructions
(as defined in Section 11 hereof) concerning the Accounts. Bank may deliver
Financial Assets of the same class with identical rights and privileges in place
of those deposited in the Custody Account.
Upon written agreement between Bank and Customer, additional Accounts
may be established and separately accounted for as additional Accounts
hereunder.
2. MAINTENANCE OF FINANCIAL ASSETS AND CASH AT BANK AND SUBCUSTODIAN
LOCATIONS.
Unless Instructions specifically require another location acceptable to
Bank:
(a) Financial Assets shall be held in the country or other
jurisdiction in which the principal trading market for such Financial Assets is
located, where such Financial Assets are to be presented for payment or where
such Financial Assets are acquired; and
(b) Cash shall be credited to an account in a country or other
jurisdiction in which such cash may be legally deposited or is the legal
currency for the payment of public or private debts.
Cash may be held pursuant to Instructions in either interest or non-
interest bearing accounts as may be available for the particular currency. To
the extent Instructions are issued and Bank can comply with such
<PAGE> 2
Instructions, Bank is authorized to maintain cash balances on deposit for
Customer with itself or one of its "Affiliates" at such reasonable rates of
interest as may from time to time be paid on such accounts, or in non-interest
bearing accounts as Customer may direct, if acceptable to Bank. For purposes
hereof, the term "Affiliate" shall mean an entity controlling, controlled by, or
under common control with, Bank.
If Customer wishes to have any of its Assets held in the custody of an
institution other than the established Subcustodians as defined in Section 3
(or their securities depositories), such arrangement must be authorized by a
written agreement, signed by Bank and Customer.
3. SUBCUSTODIANS AND SECURITIES DEPOSITORIES.
Bank may act hereunder through the subcustodians listed in Schedule A
hereof with which Bank has entered into subcustodial agreements
("Subcustodians"). Customer authorizes Bank to hold Assets in the Accounts in
accounts which Bank has established with one or more of its branches or
Subcustodians. Bank and Subcustodians are authorized to hold any of the
Financial Assets in their account with any securities depository in which they
participate.
Bank reserves the right to add new, replace or remove Subcustodians.
Customer shall be given reasonable notice by Bank of any amendment to Schedule
A. Upon request by Customer, Bank shall identify the name, address and principal
place of business of any Subcustodian of Customer's Assets and the name and
address of the governmental agency or other regulatory authority that supervises
or regulates such Subcustodian.
4. USE OF SUBCUSTODIAN.
(a) Bank shall identify the Assets on its books as belonging to
Customer.
(b) A Subcustodian shall hold such Assets together with assets
belonging to other customers of Bank in accounts identified on such
Subcustodian's books as custody accounts for the exclusive benefit of customers
of Bank. For purposes of clarity, it is understood that a failure to deliver
out Assets pursuant to Instructions, where such failure constituted a failure
to exercise reasonable care shall result in liability in accordance with the
terms of Section 12 hereof.
(c) Any Assets in the Accounts held by a Subcustodian shall be
subject only to the instructions of Bank or its agent. Any Financial Assets
held in a securities depository for the account of a Subcustodian shall be
subject only to the instructions of such Subcustodian.
(d) Any agreement Bank enters into with a Subcustodian for
holding Bank's customers' assets shall provide that such assets shall not be
subject to any right, charge, security interest, lien or claim of any kind in
favor of such Subcustodian or its creditors except a claim of payment for their
safe custody or administration or, in the case of cash deposits, liens or rights
in favor of creditors of the Subcustodian arising under bankruptcy, insolvency
or similar laws, and that the beneficial ownership of such assets shall be
freely transferable without the payment of money or value other than for safe
custody or administration. Where Securities are deposited by a Subcustodian
with a securities depository, Bank shall cause the Subcustodian to identify on
its books as belonging to Bank, as agent, the Securities shown on the
Subcustodian's account on the books of such securities depository or as
otherwise may be required by such jurisdiction's laws and regulations. The
foregoing shall not apply to the extent of any special agreement or arrangement
made by Customer with any particular Subcustodian.
5. DEPOSIT ACCOUNT TRANSACTIONS.
(a) Bank or its Subcustodians shall make payments from the Deposit
Account upon receipt of Instructions which include all information required by
Bank.
2
<PAGE> 3
(b) In the event that any payment to be made under this Section 5
exceeds the funds available in the Deposit Account, Bank, in its discretion, may
advance Customer such excess amount which shall be deemed a loan payable on
demand, bearing interest at the rate customarily charged by Bank on similar
loans.
(c) If Bank credits the Deposit Account on a payable date, or at
any time prior to actual collection and reconciliation to the Deposit Account,
with interest, dividends, redemptions or any other amount due, Customer shall
promptly return any such amount upon written notification: (i) that such amount
has not been received in the ordinary course of business or (ii) that such
amount was incorrectly credited. If Customer does not promptly return any amount
upon such notification, Bank shall be entitled, upon written notification to
Customer, to reverse such credit by debiting the Deposit Account for the amount
previously credited. Bank or its Subcustodian shall have no duty or obligation
to institute legal proceedings, file a claim or a proof of claim in any
insolvency proceeding or take any other action with respect to the collection
of such amount, but may act for Customer upon Instructions after consultation
with Customer.
6. CUSTODY ACCOUNT TRANSACTIONS.
(a) Financial Assets shall be transferred, exchanged or delivered
by Bank or its Subcustodian upon receipt by Bank of Instructions which include
all information required by Bank. Settlement and payment for Financial Assets
received for, and delivery of Financial Assets out of, the Custody Account may
be made in accordance with the customary or established securities trading or
securities processing practices and procedures in the jurisdiction or market in
which the transaction occurs, including, without limitation, delivery of
Financial Assets to a purchaser, dealer or their agents against a receipt with
the expectation of receiving later payment and free delivery. If there is more
than one standard method of settling institutional securities trades in a given
market, and Instructions are consistent with one of such methods, Chase shall
settle in accordance with such Instructions. Delivery of Financial Assets out of
the Custody Account may also be made in any manner specifically required by
Instructions acceptable to Bank.
(b) Bank, in its discretion, may credit or debit the Accounts on a
contractual settlement date with cash or Financial Assets with respect to any
sale, exchange or purchase of Financial Assets. Otherwise, such transactions
shall be credited or debited to the Accounts on the date cash or Financial
Assets are actually received by Bank and reconciled to the Account, it being
understood that Bank shall act with reasonable promptness to so reconcile.
(i) Bank may reverse credits or debits made to the
Accounts in its discretion if the related transaction fails to
settle within a reasonable period, determined by Bank in its
discretion, after the contractual settlement date for the related
transaction.
(ii) If any Financial Assets delivered pursuant to this
Section 6 are returned by the recipient thereof, Bank may reverse
the credits and debits of the particular transaction at any time.
7. ACTIONS OF BANK.
Bank shall follow Instructions received regarding Assets held in the
Accounts. However, until it receives Instructions to the contrary, Bank
shall:
(a) Present for payment any Financial Assets which are called,
redeemed or retired or otherwise become payable and all coupons and other income
items which call for payment upon presentation, to the extent that Bank or
Subcustodian is actually aware of such opportunities.
(b) Execute in the name of Customer such ownership and other
certificates as may be required to obtain payments in respect of Financial
Assets.
(c) Exchange interim receipts or temporary Financial Assets for
definitive Financial Assets.
3
<PAGE> 4
(d) Appoint brokers and agents for any transaction involving the
Financial Assets, including, without limitation, Affiliates of Bank or any
Subcustodian.
(e) Issue statements to Customer, at times mutually agreed upon,
identifying the Assets in the Accounts.
Bank shall send Customer an advice or notifications of any transfers of
Assets to or from the Accounts. Such statements, advices or notifications shall
indicate the identity of the entity having custody of the Assets. Unless
Customer sends Bank a written exception or objection to any Bank statement
within ninety (90) days of receipt, Customer shall be deemed to have approved
such statement. In such event and absent manifest error, or where Customer has
otherwise approved any such statement, Bank shall, to the extent permitted by
law, be released, relieved and discharged with respect to all matters set forth
in such statement or reasonably implied therefrom.
All collections of funds or other property paid or distributed in
respect of Financial Assets in the Custody Account shall be made at the risk of
Customer. Provided that Bank (or the relevant Subcustodian) has not breached
its standard of care as set forth in Section 12 hereof, Bank shall have no
liability for any loss occasioned by delay in the actual receipt of notice by
Bank or by its Subcustodians of any payment, redemption or other transaction
regarding Financial Assets in the Custody Account in respect of which Bank has
agreed to take any action hereunder.
8. CORPORATE ACTIONS; PROXIES; TAX RECLAIMS.
(a) Corporate Actions. Whenever Bank receives information concerning
the Financial Assets which requires discretionary action by the beneficial
owner of the Financial Assets (other than a proxy), such as subscription
rights, bonus issues, stock repurchase plans and rights offerings, or legal
notices or other material intended to be transmitted to securities holders
("Corporate Actions"), Bank shall give Customer prompt notice of such Corporate
Actions to the extent that Bank's central corporate actions department has
actual knowledge of a Corporate Action in time to notify its customers.
When a rights entitlement or a fractional interest resulting from a
rights issue, stock dividend, stock split or similar Corporate Action is
received which bears an expiration date, Bank shall use reasonable endeavors to
obtain Instructions from Customer or its Authorized Person (as defined in
Section 10 hereof), but if Instructions are not received in time for Bank to
take timely action, or actual notice of such Corporate Action was received too
late to seek Instructions, Bank is authorized to sell such rights entitlement or
fractional interest and to credit the Deposit Account with the proceeds or take
any other action it deems, in good faith, to be appropriate in which case it
shall be held harmless for any such action.
(b) Proxy Voting. Bank shall provide proxy voting services, if
elected by Customer, in accordance with the terms of the proxy voting services
rider hereto. Proxy voting services may be provided by Bank or, in whole or in
part, by one or more third parties appointed by Bank (which may be Affiliates
of Bank).
(c) Tax Reclaims.
(i) Subject to the provisions hereof, Bank shall apply for a
reduction of withholding tax and any refund of any tax paid or tax
credits which apply in each applicable market in respect of income
payments on Financial Assets for Customer's benefit which Bank
believes may be available to Customer.
(ii) The provision of tax reclaim services by Bank is conditional upon
Bank's receiving from Customer or, to the extent the Financial Assets
are beneficially owned by others, from each beneficial owner, A) a
declaration of the beneficial owner's identity and place of residence
and (B) certain other documentation (pro forma copies of which are
available from
4
<PAGE> 5
Bank). Bank shall provide Customer with necessary documentation in a
timely manner so as to enable Customer to use Bank's tax reclaim
services. Customer acknowledges that, if Bank does not receive such
declarations, documentation and information, Bank shall be unable to
provide tax reclaim services.
(iii) Bank shall not be liable to Customer or any third part for any
taxes, fines or penalties payable by Bank or Customer, and shall be
indemnified accordingly, whether these result from the inaccurate
completion of documents by Customer or any third party (other than
Bank or an Affiliate of Bank), or as a result of the provision to Bank
or any third party of inaccurate or misleading information or the
withholding of material information by Customer or any other third
party (other than Bank or an Affiliate of Bank), or as a result of any
delay of any revenue authority or any other matter beyond Bank's
control.
(iv) Bank shall perform tax reclaim services only with respect to
taxation levied by the revenue authorities of the countries notified
to Customer from time to time and Bank may, by notification in
writing, at Bank's absolute discretion, supplement or amend the
markets in which tax reclaim services are offered. Other than as
expressly provided in this subclause, Bank shall have no
responsibility with regard to Customer's tax position or status in any
jurisdiction.
(v) Customer confirms that Bank is authorized to disclose any
information requested by any revenue authority or any governmental
body in relation to Customer or the securities and/or cash held for
Customer. Bank shall advise Customer of such requests where it is
permissible to do so in Bank's reasonable judgement.
(vi) Tax reclaim services may be provided by Bank or, in whole or in
part, by one or more third parties appointed by Bank (which may be
Bank's affiliates); provided that Bank shall be liable for the
performance of any such third party to the same extent as Bank would
have been if Bank had performed such services.
(d) Tax Obligations
(i) Customer confirms that Bank is authorized to, and shall, deduct
from any cash received or credited to the Deposit Account any taxes or
levies required by any revenue or governmental authority for whatever
reason in respect of the Custody Account.
(ii) If Bank does not receive appropriate declarations, documentation
and information that additional United Kingdom taxation shall be
deducted from all income received in respect of the Financial Assets
issued outside the United Kingdom and any applicable United States
withholding tax shall be deducted from income received from the
Financial Assets. Customer shall provide to Bank such documentation and
information as Bank may require in connection with taxation, and
warrants that, when given, this information shall be true and correct
in every respect, not misleading in any way, and contain all material
information. Customer undertakes to notify Bank immediately if any such
information requires updating or amendment. Bank shall promptly notify
Customer of any information required by this subsection or any change
thereto.
(iii) Customer shall be responsible for the payment of all taxes
relating to the Financial Assets in the Custody Account, and Customer
agrees to pay, indemnify and hold Bank harmless from and against any
and all liabilities, penalties, interest or additions to tax with
respect to or resulting from any delay in, or failure by, Bank (1) to
pay, withhold or report any U.S. federal, state or local taxes or
foreign taxes imposed on, or (2) to report interest, dividend or other
income paid or credited to, the Deposit Account, whether such failure
or
5
<PAGE> 6
delay by Bank to pay, withhold or report tax or income is the result of
(x) Customer's failure to comply with the terms of this paragraph, or
(y) Bank's own acts or omissions; provided however, Customer shall not
be liable to Bank for any penalty or additions to tax due as a result
of Bank's failure to pay, withhold or report tax or to report
interest, dividend or other income paid or credited to the Deposit
Account to the extent such failure was the result of Bank's negligent
acts or omissions.
9. NOMINEES.
Financial Assets which are ordinarily held in registered form may be
registered in a nominee name of Bank, Subcustodian or securities depository, as
the case may be. Bank may without notice to Customer cause any such Financial
Assets to cease to be registered in the name of any such nominee and to be
registered in the name of Customer. In the event that any Financial Assets
registered in a nominee name are called for partial redemption by the issuer,
Bank may allot the called portion to the respective beneficial holders of such
class of security in any manner Bank deems to be fair and equitable. Customer
shall hold Bank, Subcustodians, and their respective nominees harmless from any
liability arising directly or indirectly from their status as a mere record
holder of Financial Assets in the Custody Account.
10. AUTHORIZED PERSONS.
As used herein, the term "Authorized Person" means employees or agents
including investment managers as have been designated by written notice from
Customer or its designated agent to act on behalf of Customer hereunder. Such
persons shall continue to be Authorized Persons until such time as Bank receives
Instructions from Customer or its designated agent that any such employee or
agent is no longer an Authorized Person.
11. INSTRUCTIONS.
The term "Instructions" means instructions of any Authorized Person
received by Bank, via telephone, telex, facsimile transmission, bank wire or
other teleprocess or electronic instruction or trade information system
acceptable to Bank which Bank believes in good faith to have been given by
Authorized Persons or which are transmitted with proper testing or
authentication pursuant to terms and conditions which Bank may specify. Unless
otherwise expressly provided, all Instructions shall continue in full force
and effect until canceled or superseded. The term "Instructions" includes,
without limitation, instructions to sell, assign, transfer, deliver, purchase
or receive for the Custody Account, any and all stock, bonds and other
Financial Assets or to transfer funds in the Deposit Account.)
Any Instructions delivered to Bank by telephone shall promptly
thereafter be confirmed in writing by an Authorized Person (which confirmation
may bear the facsimile signature of such Person), but Customer shall hold Bank
harmless for the failure of an Authorized Person to send such confirmation in
writing, the failure of such confirmation to conform to the telephone
instructions received. Either party may electronically record any Instructions
given by telephone, and any other telephone discussions with respect to the
Custody Account. Customer shall be responsible for safeguarding any testkeys,
identification codes or other security devices which Bank shall make available
to Customer or its Authorized Persons.
12. STANDARD OF CARE; LIABILITIES.
(a) Bank shall be responsible for the performance of only such duties
as are set forth herein or expressly contained in Instructions which are
consistent with the provisions hereof as follows:
(i) Notwithstanding any other provisions of this Agreement,
Bank's responsibilities shall be limited to the exercise of reasonable
care with respect to its obligations hereunder. Bank shall only be
liable to Customer for any loss which shall occur as the result of the
failure of a Subcustodian to exercise
6
<PAGE> 7
reasonable care with respect to the safekeeping of such Assets where
such loss results directly from the failure by the Subcustodian to use
reasonable care in the provision of custodial services by it in
accordance with the standards prevailing in its local market or from
the willful default of such Subcustodian in the provision of custodial
services by it. In the event of any loss to Customer which is
compensable hereunder (i.e. a loss arising by reason of willful
misconduct or the failure of Bank or its Subcustodian to use
reasonable care), Bank shall be liable to Customer only to the extent
of Customer's direct damages, to be determined based on the market
value of the property which is the subject of the loss at the date of
discovery of such loss and without reference to any special conditions
or circumstances. Bank shall have no liability whatsoever for any
consequential, special, indirect or speculative loss or damages
(including, but not limited to, lost profits) suffered by Customer in
connection with the transactions and services contemplated hereby and
the relationship established hereby even if Bank has been advised as
to the possibility of the same and regardless of the form of the
action.
(ii) Subject to Bank having selected a Subcustodian with
reasonable care and Bank's duty to use reasonable care in the
monitoring of a Subcustodian's financial condition as reflected in its
published financial statements and other publicly available financial
information, Bank shall not be responsible for the insolvency of any
Subcustodian which is not a branch or Affiliate of Bank. Bank shall
not be responsible for any act, omission, default or the solvency of
any broker or agent which it or a Subcustodian appoints unless such
appointment was made negligently or in bad faith.
(iii) (A) Customer shall indemnify and hold Bank and its
directors, officers, agents and employees (collectively the
"Indemnitees") harmless from and against any and all claims,
liabilities, losses, damages, fines, penalties, and expenses,
including out-of-pocket and incidental expenses and legal fees
("Losses") that may be imposed on, incurred by, or asserted against,
the Indemnitees or any of them for following any instructions or other
directions upon which Bank is authorized to rely pursuant to the terms
of this Agreement. (B) In addition to and not in limitation of the
preceding subparagraph, Customer shall also indemnify and hold the
Indemnitees and each of them harmless from and against any and all
Losses that may be imposed on, incurred by, or asserted against, the
Indemnitees or any of them in connection with or arising out of Bank's
performance under this Agreement, provided the Indemnitees have not
acted with negligence or engaged in willful misconduct. (C) In
performing its obligations hereunder, Bank may rely on the genuineness
of any document which it believes in good faith to have been validly
executed.
(iv) Customer shall pay for and hold Bank harmless from any
liability or loss resulting from the imposition or assessment of any
taxes or other governmental charges, and any related expenses, with
respect to income from or Assets in the Accounts.
(v) Bank shall be entitled to rely, and may act, upon the
advice of counsel (who may be counsel for Customer) on all matters and
shall be without liability for any action reasonably taken or omitted
pursuant to such advice.
(vi) While Bank need not maintain any insurance specifically
for the benefit of Customer, it maintains insurance in such amounts
and of such types as are customarily carried to cover the risks of
loss of Assets held on behalf of its clients whether held with itself,
its branches or subsidiaries worldwide or its Subcustodians.
(vii) Bank shall not be liable for any loss which results from:
1) the general risk of investing, or 2) investing or holding Assets in
a particular country including, but not limited to, losses resulting
from malfunction, interruption of or error in the transmission of
information caused by any machines or system or interruption of
communication facilities, abnormal operating conditions,
nationalization, expropriation or other governmental actions;
regulation of the banking or securities industry; currency
restrictions, devaluations or fluctuations; and market conditions which
prevent the
7
<PAGE> 8
orderly execution of securities transactions or affect the value of
Assets; except that, with respect to the failure of machines, systems,
interruption of communication facilities or abnormal operating
conditions on Bank or a Subcustodian's premises or otherwise within the
control of Bank or a Subcustodian, Bank shall not be so excused to the
extent that such failure was on account of Bank's or the Subcustodian's
(as the case may be) negligence (such as a failure to have had routine
maintenance performed or to have selected equipment reasonably suitable
for the purposes contemplated hereby given, in the case of
Subcustodians, local market practices with respect to such matters).
(viii) Neither party shall be liable to the other for any loss due
to forces beyond their control including, but not limited to strikes or
work stoppages, acts of war (whether declared or undeclared) or
terrorism, insurrection, revolution, nuclear fusion, fission or
radiation, or acts of God.
(b) Consistent with and without limiting the first paragraph of this
Section 12, it is specifically acknowledged that Bank shall have no duty or
responsibility to:
(i) other than in seeking to clarify Instructions which Bank
determines to be ambiguous or otherwise not executable, question
Instructions or make any suggestions to Customer or an Authorized
Person regarding such Instructions;
(ii) supervise or make recommendations with respect to
investments or the retention of Financial Assets;
(ii) advise Customer or an Authorized Person regarding any
default in the payment of principal or income of any security other
than as provided in Section 5(c) hereof;
(iii) evaluate or report to Customer or an Authorized Person
regarding the financial condition of any broker, agent (other than
Subcustodians) or other party to which Financial Assets are delivered
or payments are made pursuant hereto; and
(v) review or reconcile trade confirmations received from
brokers. Customer or its Authorized Persons issuing Instructions shall
bear any responsibility to review such confirmations against
Instructions issued to and statements issued by Bank.
(c) Customer authorizes Bank to act hereunder notwithstanding that
Bank or any of its divisions or Affiliates may have a material interest in a
transaction, or circumstances are such that Bank may have a potential conflict
of duty or interest including the fact that Bank or any of its Affiliates may
provide brokerage services to other customers, act as financial advisor to the
issuer of Financial Assets, act as a lender to the issuer of Financial Assets,
act in the same transaction as agent for more than one customer, have a material
interest in the issue of Financial Assets, or earn profits from any of the
activities listed herein; provided that such material interest or conflict of
duty or interest does not materially and adversely affect Bank's obligations
hereunder.
13. FEES AND EXPENSES.
Customer shall pay Bank for its services hereunder the fees set forth
in Schedule B hereto or such other amounts as may be agreed upon in writing, and
upon pre-approval of Customer, which approval shall not be unreasonably
withheld, together with Bank's reasonable out-of-pocket or incidental expenses,
including, but not limited to, reasonable legal fees. Bank shall have a lien on
and is authorized to charge any Accounts of Customer for any amount owing to
Bank under any provision hereof.
14. MISCELLANEOUS.
8
<PAGE> 9
(a) Foreign Exchange Transactions. To facilitate the administration of
Customer's trading and investment activity, when instructed by specific or
standing Instruction, Bank is authorized to enter into spot or forward foreign
exchange contracts with Customer or an Authorized Person for Customer and may
also provide foreign exchange through its subsidiaries, Affiliates or
Subcustodians. Instructions, may be issued with respect to such contracts but
Bank may establish rules or limitations concerning any foreign exchange facility
made available. In all cases where Bank, its subsidiaries, Affiliates or
Subcustodians enter into a separate master foreign exchange contract with
Customer that covers foreign exchange transactions for the Accounts, the terms
and conditions of that foreign exchange contract, and to the extent not
inconsistent, this Agreement, shall apply to such transactions.
(b) Certification of Residency, etc. Customer certifies that it is a
resident of the United States and shall notify Bank of any changes in residency.
Bank may rely upon this certification or the certification of such other facts
as may be required to administer Bank's obligations hereunder. Customer shall
indemnify Bank against all losses, liability, claims or demands arising directly
or indirectly from any such certifications.
(c) Access to Records. Bank shall allow Customer's independent public
accountant reasonable access to the records of Bank relating to Assets and
Account(s) as is required in connection with their examination of books and
records pertaining to Customer's affairs. Subject to restrictions under
applicable law, Bank shall also obtain an undertaking or other agreement to
permit Customer's independent public accountants reasonable access to the
records of any Subcustodian which has physical possession of any Assets and
Account(s) as may be required in connection with the examination of Customer's
books and records.
(d) Governing Law; Successors and Assigns; Immunity; Captions. THIS
AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED IN NEW YORK and shall not be assignable by
either party, but shall bind the successors in interest of Customer and Bank. To
the extent that in any jurisdiction Customer may now or hereafter be entitled to
claim, for itself or its assets, immunity from suit, execution, attachment
(before or after judgment) or other legal process, Customer and Bank irrevocably
shall not claim, and it hereby waives, such immunity. The captions given to the
sections and subsections of this Agreement are for convenience of reference only
and are not to be used to interpret this Agreement.
(e) Entire Agreement; Applicable Riders. Customer represents that the
Assets deposited in the Accounts are (Check one);
X Investment Company assets subject to certain U.S. Securities and
Exchange Commission rules and regulations;
Other (specify)
This Agreement consists exclusively of this document together with
Schedules A and B, Exhibits I - and the following Rider(s) [Check
applicable rider(s)]:
X INVESTMENT COMPANY
X PROXY VOTING
X SPECIAL TERMS AND CONDITIONS
X Appendix 2
There are no other provisions hereof and this Agreement supersedes
any other agreements, whether written or oral, between the parties. Any
amendment hereto must be in writing, executed by both parties.
9
<PAGE> 10
(f) Severability. In the event that one or more provisions hereof are
held invalid, illegal or unenforceable in any respect on the basis of any
particular circumstances or in any jurisdiction, the validity, legality and
enforceability of such provision or provisions under other circumstances or in
other jurisdictions and of the remaining provisions shall not in any way be
affected or impaired.
(g) Waiver. Except as otherwise provided herein, no failure or delay
on the part of either party in exercising any power or right hereunder operates
as a waiver, nor does any single or partial exercise of any power or right
preclude any other or further exercise, or the exercise of any other power or
right. No waiver by a party of any provision hereof, or waiver of any breach or
default, is effective unless in writing and signed by the party against whom the
waiver is to be enforced.
(h) Representations and Warranties. (i) Customer hereby represents and
warrants to Bank that (A) it has full authority and power to deposit and control
the Financial Assets and cash deposited in the Accounts; (B) it has all
necessary authority to use Bank as its custodian; (C) this Agreement constitutes
its legal, valid and binding obligation, enforceable in accordance with its
terms; (D) it shall have full authority and power to borrow moneys and enter
into foreign exchange transactions; and (E) it has not relied on any oral or
written representation made by Bank or any person on its behalf, and
acknowledges that this Agreement sets out to the fullest extent the duties of
Bank and Customer, (ii) Bank hereby represents and warrants to Customer that:
(A) it has the full power and authority to perform its obligations hereunder,
(B) this Agreement constitutes its legal, valid and binding obligation,
enforceable in accordance with its terms; and (C) that it has taken all
necessary action to authorize the execution and delivery hereof.
(i) Notices. All notices hereunder shall be effective when actually
received. Any notices or other communications which may be required hereunder
are to be sent to the parties at the following addresses or such other addresses
as may subsequently be given to the other party in writing: (a) Bank: The Chase
Manhattan Bank, 4 Chase MetroTech Center, Brooklyn, N.Y. 11245, Attention Global
Investor Services, Investment Management Group; and (b) Customer; Driehaus
Mutual Funds, 25 East Erie St., Chicago, IL 60611, attn: Robert Moyer (phone:
312.587.3800; fax: 312.932.8687.
(j) Termination. This Agreement may be terminated by Customer or Bank
by giving ninety (90) days' written notice to the other, provided that such
notice to Bank shall specify the names of the persons to whom Bank shall deliver
the Assets in the Accounts. If notice of termination is given by Bank, Customer
shall, within sixty (60) days following receipt of the notice, deliver to Bank
Instructions specifying the names of the persons to whom Bank shall deliver the
Assets. In either case Bank shall deliver the Assets to the persons so
specified, after deducting any amounts which Bank determines in good faith to be
owed to it under Section 13. If within sixty (60) days following receipt of a
notice of termination by Bank, Bank does not receive Instructions from Customer
specifying the names of the persons to whom Bank shall deliver the Assets, Bank,
at its election, may deliver the Assets to a bank or trust company doing
business in the State of New York to be held and disposed of pursuant to the
provisions hereof, or to Authorized Persons, or may continue to hold the Assets
until Instructions are provided to Bank.
(k) Money Laundering. Customer warrants and undertakes to Bank for
itself and its agents that all Customer's customers are properly identified in
accordance with U.S. Money Laundering Regulations as in effect from time to
time.
(l) Imputation of certain information. Bank shall not be held
responsible for and shall not be required to have regard to information held by
any person by imputation or information of which Bank is not aware by virtue of
a "Chinese Wall" arrangement. If Bank becomes aware of confidential information
which in good faith it feels inhibits it from effecting a transaction hereunder
Bank may refrain from effecting it.
(m) Separate obligations. With respect to any obligations of a
particular Customer arising hereunder, Bank shall look for payment or
satisfaction of any such obligation solely to that Customer and the Assets of
such Customer and Customer's Accounts to which such obligation relates as though
that Customer
10
<PAGE> 11
had separately contracted with Bank by separate written agreement with respect
to such Accounts. The rights and benefits to which a given Customer is entitled
hereunder shall be solely those of such Customer and no other Customer hereunder
shall receive such benefits. For avoidance of doubt, each Customer or Bank may
terminate this Agreement pursuant to its provisions and the Agreement shall
survive such termination in respect of the remaining Customers that
have not so terminated or been terminated.
(n) Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signature thereto and hereto were upon the same instrument
15. DEFINITIONS.
As used herein, the following terms shall have the meaning hereinafter
stated:
(a) "Certificated Security" shall mean a security that is represented by a
certificate.
(b) "Custody Account" shall mean each Securities custody account on Bank's
records to which Financial Assets are or may be credited pursuant hereto.
(c) "Entitlement Holder" shall mean the person on the records of a
Securities Intermediary as the person having a Securities Entitlement
against the Securities Intermediary.
(d) "Financial Asset" shall mean, as the context requires, either the asset
itself or the means by which a person's claim to it is evidenced, including
a Certificated Security or Uncertificated Security, a security certificate,
or a Securities Entitlement. Financial Assets shall not include cash.
(e) "Securities" shall mean stocks, bonds, rights, warrants and other
negotiable and non-negotiable paper whether issued as Certificated
Securities or Uncertificated Securities and commonly traded or dealt in on
securities exchanges or financial markets, and other obligations of an
issuer, or shares, participations and interests in an issuer recognized in
an area in which it is issued or dealt in as a medium for investment and any
other property as shall be reasonably acceptable to Bank for the Custody
Account.
(f) "Securities Entitlement" shall mean the rights and property interest of
an Entitlement Holder with respect to a Financial Asset as set forth in Part
5 of the Uniform Commercial Code.
(g) "Securities Intermediary" shall mean Bank, a Subcustodian, a securities
depository, and any other financial institution which in the ordinary course
of business maintains custody accounts for others and acts in that capacity.
(h) "Uncertificated Security" shall mean a security that is not represented
by a certificate.
(i) "Uniform Commercial Code" shall mean Article 8 of the Uniform
Commercial Code of the State of New York, as the same may be amended from
time to time.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first-above
11
<PAGE> 12
written.
DRIEHAUS MUTUAL FUNDS (on behalf of each
Series listed on Appendix 2)
By: /s/ Robert F. Moyer
-----------------------------------------
Title: Robert F. Moyer, Senior Vice President
Date: May 24, 1999
THE CHASE MANHATTAN BANK
By: [SIG]
-----------------------------------------
Title: Assistant Vice President
Date: May 24, 1999
12
<PAGE> 13
STATE OF ILLINOIS )
: SS.
COUNTY OF COOK )
On this 24 day of May, 1999, before me personally came Robert F.
Moyer, to me known, who being by me duly sworn, did depose and say that he
resides in Chicago, Illinois, that he is Senior Vice President of Driehaus
Mutual Funds, the entity described in and which executed the foregoing
instrument; and that he signed his name thereto by order of said entity.
/s/ Janet L. McWilliams
-----------------------
Janet L. McWilliams
Notary Public
Sworn to before me this 24
day of May, 1999
Notary OFFICIAL SEAL
JANET L. MCWILLIAMS
NOTARY PUBLIC, STATE OF ILLINOIS
MY COMMISSION EXPIRES: 08/08/03
<PAGE> 14
STATE OF NEW YORK )
: SS.
COUNTY OF NEW YORK )
On this 24th day of May, 1999, before me personally came to me known, who
being by me duly sworn, did depose and say that he/she resides in at Brooklyn,
New York; that he/she is an Assistant Vice President of THE CHASE MANHATTAN
BANK, the corporation described in and which executed the foregoing
instrument; that he/she knows the seal of said corporation, that the seal
affixed to said instrument is such corporate seal, that it was so affixed by
order of the Board of Directors of said corporation, and that he/she signed
his/her name thereto by like order.
/s/ Donald D. George
Notary Public State of
New York No. 01GE6034238
Commission Exp. Oct. 3 2000
Mossau City
Sworn to before me this
day of 24, 1999.
Notary
<PAGE> 15
Investment Company Rider to Global Custody Agreement
Between The Chase Manhattan Bank and
each series of Driehaus Mutual Funds listed on Appendix 2
effective May 25 1999
The following modifications are made to the Agreement:
A. Add a new Section 16 to the Agreement as follows:
"16. COMPLIANCE WITH SEC RULE 17F-5.
(a) Customer's board of directors (or equivalent body) (hereinafter
'Board') hereby delegates to Bank, and, except as to the country or countries as
to which Bank may, from time to time, advise Customer that it does not accept
such delegation, Bank hereby accepts the delegation to it, of the obligation to
perform as Customer's 'Foreign Custody Manager' (as that term is defined in SEC
rule 17f-5(a)(2) s promulgated under the Investment Company Act of 1940, as
amended ("1940 Act")), both for the purpose of selecting Eligible Foreign
Custodians (as that term is defined in SEC rule 17f-5(a)(1), and as the same may
be amended from time to time, or that have otherwise been made exempt pursuant
to an SEC exemptive order) to hold Financial Assets and Cash and of evaluating
the contractual arrangements with such Eligible Foreign Custodians (as set forth
in SEC rule l7f-5(c)(2)); provided that, the term Eligible Foreign Custodian
shall not include any 'Compulsory Depository.' A Compulsory Depository shall
mean a securities depository or clearing agency the use of which is compulsory
because: (1) its use is required by law or regulation, (2) securities cannot be
withdrawn from the depository, or (3) maintaining securities outside the
depository is not consistent with prevailing custodial practices in the country
which the depository serves. Compulsory Depositories used by Bank as of the date
hereof are set forth in Appendix 1-A hereto, and as the same may be amended on
notice to Customer from time to time.
(b) In connection with the foregoing, Bank shall:
(i) provide written reports notifying Customer's Board of the placement of
Financial Assets and Cash with particular Eligible Foreign Custodians and of
any material change in the arrangements with such Eligible Foreign
Custodians, with such reports to be provided to Customer's Board at such
times as the Board deems reasonable and appropriate based on the
circumstances of Customer's foreign custody arrangements (and until further
notice from Customer such reports shall be provided not less than quarterly
with respect to the placement of Financial Assets and Cash with particular
Eligible Foreign Custodians and with reasonable promptness upon the
occurrence of any material change in the arrangements with such Eligible
Foreign Custodians);
(ii) exercise such reasonable care, prudence and diligence in performing as
Customer's Foreign Custody Manager as a person having responsibility for the
safekeeping of Financial Assets and Cash would exercise;
(iii) in selecting an Eligible Foreign Custodian, first have determined that
Financial Assets and Cash placed and maintained in the safekeeping of such
Eligible Foreign Custodian shall be subject to reasonable care, based on the
standards applicable to custodians in the relevant market, after having
considered all factors relevant to the safekeeping of such Financial Assets
and Cash, including, without limitation, those factors set forth in SEC rule
l7f-5(c)(1)(i)-(iv);
(iv) determine that the written contract with the Eligible Foreign
Custodian (or, in the case of an Eligible Foreign Custodians that is a
securities depository or clearing agency, such contract, the rules or
established practices or procedures of the depository, or any combination of
the foregoing) requires that the Eligible Foreign Custodian will provide
reasonable care for Financial Assets and Cash based on
<PAGE> 16
the standards applicable to custodians in the relevant market and that the
contract complies with SEC rule 17f-5(c)(2).
(v) have established a system to monitor the continued appropriateness of
maintaining Financial Assets and Cash with particular Eligible Foreign
Custodians and of the governing contractual arrangements; it being
understood, however, that in the event that Bank shall have determined that
the existing Eligible Foreign Custodian in a given country would no longer
afford Financial Assets and Cash reasonable care and that no other Eligible
Foreign Custodian in that country would afford reasonable care, Bank shall
promptly so advise Customer and shall then act in accordance with the
Instructions of Customer with respect to the disposition of the affected
Financial Assets and Cash.
Subject to (b)(i)-(v) above, Bank is hereby authorized to place and maintain
Financial Assets and Cash on behalf of Customer with Eligible Foreign Custodians
pursuant to a written contract deemed appropriate by Bank.
(c) Except as expressly provided herein, Customer shall be solely
responsible to assure that the maintenance of Financial Assets and Cash
hereunder complies with the rules, regulations, interpretations and exemptive
orders promulgated by or under the authority of the SEC.
(d) Bank represents to Customer that it is a U.S. Bank as defined in Rule
l7f-5(a)(7). Customer represents to Bank that: (1) the Financial Assets and Cash
being placed and maintained in Bank's custody are subject to the 1940 Act, as
the same may be amended from time to time; (2) its Board: (i) has determined
that it is reasonable to rely on Bank to perform as Customer's Foreign Custody
Manager (ii) or its investment adviser shall have determined that Customer may
maintain Financial Assets and Cash in each country in which Customer's Financial
Assets and Cash shall be held hereunder and determined to accept the risks
arising therefrom (including, but not limited to, a country's financial
infrastructure), prevailing custody and settlement practices, laws applicable to
the safekeeping and recovery of Financial Assets and Cash held in custody, and
the likelihood of nationalization, currency controls and the like) (collectively
("Country Risk")). Nothing contained herein shall require Bank to make any
selection or to engage in any monitoring on behalf of Customer that would entail
consideration of Country Risk.
(e) Bank shall provide to Customer such information relating to Country
Risk as is specified in Appendix 1-B hereto. Customer hereby acknowledges that:
(i) such information is solely designed to inform Customer of market conditions
and procedures and is not intended as a recommendation to invest or not invest
in particular markets; and (ii) Bank has gathered the information from sources
it considers reliable, but that Bank shall have no responsibility for
inaccuracies or incomplete information.
B. Add the following after the first sentence of Section 3 of the
Agreement: "At the request of Customer, Bank may, but need not, add to Schedule
A an Eligible Foreign Custodian that is either a bank or a non-Compulsory
Depository where Bank has not acted as Foreign Custody Manager with respect to
the selection thereof. Bank shall notify Customer In the event that it elects to
add any such entity."
C. Add the following language to the end of Section 3 of the Agreement;
"The term Subcustodian as used herein shall mean the following:
(a) a 'U.S, Bank,' which shall mean a U.S. bank as defined in SEC rule
l7f-5(a)(7);
(b) an 'Eligible Foreign Custodian,' which shall mean (i) a banking
institution or trust company, incorporated or organized under the laws of a
country other than the United States, that is regulated as such by that
country's government or an agency thereof, (ii) a majority-owned direct or
indirect subsidiary of a U.S. bank or bank holding company which subsidiary
is incorporated or organized under the laws of a country other than the
United States; (iii) a securities depository or clearing agency,
incorporated or organized under the laws of a country other than the United
States (other than a
2
<PAGE> 17
Compulsory Depository), that acts as a system for the central handling of
securities or equivalent book-entries in that country and that is regulated
by a foreign financial regulatory authority as defined under section
2(a)(50) of the 1940 Act, (iv) a securities depository or clearing agency
organized under the laws of a country other than the United States to the
extent acting as a transnational system for the central handling of
securities or equivalent book-entries, and (v) any other entity that shall
have been so qualified by exemptive order, rule or other appropriate action
of the SEC.
For purposes of clarity, it is agreed that as used in Section 12(a)(i), the term
Subcustodian shall not include any Eligible Foreign Custodian as to which Bank
has not acted as Foreign Custody Manager or any Compulsory Depository."
3
<PAGE> 18
Appendix I-A
COMPULSORY DEPOSITORIES
<PAGE> 19
COMPULSORY SECURITIES DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY DEPOSITORY INSTRUMENT
<S> <C> <C>
ARGENTINA CAJA DE VALORES S.A. Equity, Corporate & Government Debt
COMPULSORY
AUSTRALIA AUSTRACLEAR LTD. Corporate Debt, Money Market & Semi-Government
Debt
COMPULSORY
AUSTRALIA CHESS Equity
(Clearing House Electronic Subregister System)
COMPULSORY
AUSTRALIA RITS Government Debt
(Reserve Bank Information and Transfer System)
COMPULSORY
AUSTRIA OSTERREICHISCHE KONTROLBANK AG Equity, Corporate + Government Debt
COMPULSORY
BELGIUM CIK Equity + Corporate Debt
(Caisse Interprofessionnalle de Depots et de Virements de
Titres s.a.) COMPULSORY
BELGIUM BANQUE NATIONALE DE BELGIQUE Treasury Bills + Government Debt
COMPULSORY
BRAZIL CBLC Equity
(Companhia Brasilelra de Liquidacao e Custodia)
COMPULSORY
BRAZIL CLC Equity
(Camara de Liquidacao e Custodia
COMPULSORY
BRAZIL CETIP Corporate Debt
COMPULSORY
BULGARIA BNB Government Debt
(Bulgaria National Bank)
COMPULSORY
BULGARIA Central Depository A.D. Equity
COMPULSORY
CANADA CDS Equity, Corporate + Government Debt
(The Canadian Depository for Securities Ltd.)
COMPULSORY
CHILE DCV Equity, Corporate + Government Debt
(Deposito Central de Valores) COMPULSORY for government debt securities and for
brokers as of November 1998; will be compulsory for
all market participants during 1999.
CHINA, SSCCRC Equity
SHANGHAI (Shanghai Securities Central Clearing and Registration
Corporation) COMPULSORY
CHINA, SSCC Equity
SHENZHEN (Shenzhen Securities Clearing Company, Limited)
COMPULSORY
</TABLE>
1
<PAGE> 20
COMPULSORY SECURITIES DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY DEPOSITORY INSTRUMENT
<S> <C> <C>
COLOMBIA DCV Government debt issued, guaranteed or administered
(Deposito Central de Velores) by the central bank.
COMPULSORY
COLOMBIA DECEVAL Equity, Corporate + Government Debt
(Deposito Central de Valores)
Voluntary. Due to change in tax status of DECEVAL,
use of DECEVAL is becoming market standard.
CROATIA CDA Equity and listed government debt. (Created in April
(Central Depository Agency) 1997, the CDA is expected to be operational in 1999)
COMPULSORY
CROATIA MINISTRY OF FINANCE REGISTRY & Short-term debt issued by the Ministry of Finance
and National Bank of Croatia National Bank of
Croatia Registry respectively.
COMPULSORY
CZECH SCP Equity + Long-Term Government Debt
REPUBLIC (Stradisko connych papiru)
COMPULSORY
DENMARK VP Equity, Corporate + Government Debt
(Vaerdipapircentralen)
COMPULSORY
EGYPT MISR CLEARING, SETTLEMENT AND DEPOSITORY, Equity
S.A.E.
COMPULSORY
ESTONIA EVK Equity
(Estonian Central Depository for Securities Limited)
COMPULSORY
EUROMARKET CEDEL & EUROCLEAR Euro-Debt
COMPULSORY
FINLAND CSR Equity + Government Debt
(Central Share Registry Finland) COMPULSORY
FRANCE SICOVAM Equity + Corporate Debt
(Societe Interprofessionnelle pour la Compensation des
Veleurs Mobilieres, S.A.) COMPULSORY
GERMANY DBC Equity, Corporate + Government Debt
(Deutsche Boerse Clearing AO)
COMPULSORY
GREECE APOTHETIRIO TITLON A.E. Equity
COMPULSORY
GREECE BANK OF GREECE Government Debt
COMPULSORY
HONG KONG CCASS Equity
(Central Clearing and Settlement System)
COMPULSORY
</TABLE>
2
<PAGE> 21
COMPULSORY SECURITIES DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY DEPOSITORY INSTRUMENT
<S> <C> <C>
HONG KONG CMU Corporate + Government Debt
(Central Moneymarkets Unit)
COMPULSORY
HUNGARY KELER LTD. Equity + Government Debt
COMPULSORY
INDIA NSDL Equity + Corporate Debt
(National Securities Depository Limited)
COMPULSORY
IRELAND CRESTCO LIMITED Equity
COMPULSORY
IRELAND GSO Government Debt
(Gilt Settlement Office)
COMPULSORY
ISRAEL TASE CLEARING HOUSE Equity, Corporate + Government Debt
(Tel Aviv Stock Exchange Clearing House)
COMPULSORY
ITALY MONTE TITOLL S.P.A. Equity + Corporate Debt
COMPULSORY
ITALY BANK OF ITALY Government Debt
COMPULSORY
JAPAN JASDEC Equity
(Japan Securities Depository Center)
VOLUNTARY
JAPAN BANK OF JAPAN Registered Government Debt
COMPULSORY
KAZAHKSTAN CENTRAL SECURITIES DEPOSITORY Mandatory for all equity securities traded on the
Kazahkstan Stock Exchange. Currently all trading is
over the counter.
VOLUNTARY
LATVIA LCD Equity + Government Debt
(Latvian Centel Depository)
COMPULSORY
LEBANON MIDCLEAR Equity
(Custodian and Clearing Center of Lebanon and the
Middle East)
COMPULSORY
LITHUANIA CSDL Equity + Government Debt
(Central Securities Depository of Lithuania)
COMPULSORY
LUXEMBOURG Cedel Bank, s.a. Equity
COMPULSORY
MALAYSIA MCD Equity
(Malaysian Central Depository Snd Bhd)
COMPULSORY
</TABLE>
3
<PAGE> 22
COMPULSORY SECURITIES DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY DEPOSITORY INSTRUMENT
<S> <C> <C>
MAURITIUS CDS Equity
(Central Depository and Settlement Company Limited)
COMPULSORY
MEXICO INDEVAL Equity, Corporate + Government Debt.
(Institution para l Deposito de Valores)
COMPULSORY
MOROCCO MAROCLEAR Equity + Corporate Debt (will be compulsory as of
March 21, 1999)
COMPULSORY
NETHERLANDS NECIGEF Equity, Corp. + Govt. D
(Nederlands Centraal Insituut voor Giraal Effectenverkeer
B.V.)
COMPULSORY
NEW ZEALAND AUSTRACLEAR NEW ZEALAND Equity, Corporate + Government Debt
COMPULSORY
NORWAY VPS Equity, Corporate + Government Debt
(Verdipapirsentralen)
COMPULSORY
OMAN MSM Equity
(Muscat Securities Market)
COMPULSORY
PAKISTAN CDC Equity
(Central Depository Company of Pakistan Limited)
COMPULSORY
PERU CAVALI Equity
(Caja de Valores y Liquidaciones)
COMPULSORY
PHILIPPINES PCD Equity
(Philippine Central Depository Inc.)
COMPULSORY
POLAND NDS Equity, Long-Term Government Debt + Vouchers
(National Securities Depository)
COMPULSORY
POLAND CRT Treasury-Bills
(Central Registry of Treasury-Bills)
COMPULSORY
PORTUGAL INTERBOLSA Equity, Corporate + Government Debt
(Central de Valores Mobiliarios e Sistema de Liquidacao e
Compensacao)
COMPULSORY
ROMANIA SNCDD - RASDAQ Equity
(National Company for Clearing, Settlement and
Depository for Securities)
COMPULSORY
ROMANIA BSE Equity
(Bucharest Stock Exchange Registry)
COMPULSORY
ROMANIA NATIONAL BANK OF ROMANIA Treasury-Bills
COMPULSORY
</TABLE>
4
<PAGE> 23
COMPULSORY SECURITIES DEPOSITORIES
<TABLE>
<CAPTION>
INSTRUMENT
COUNTRY DEPOSITORY
<S> <C> <C>
RUSSIA VNESTORGBANK Ministry of Finance Bonds
COMPULSORY
RUSSIA NATIONAL DEPOSITORY CENTER GKOs are Treasury Bills with three months to one
year maturity; OFZs are Federal Loan bonds with one
to two years' maturity.
COMPULSORY
SINGAPORE CDP Equity + Corporate Debt and Malaysian equities
(Central Depository (Pte.) Ltd.) traded on CLOB
COMPULSORY
SINGAPORE MONETARY AUTHORITY OF SINGAPORE Government Debt
COMPULSORY
SLOVAK SCP Equity + Government Debt
REPUBLIC (Stredisko Cennych Papierov)
COMPULSORY
SLOVAK NATIONAL BANK OF SLOVAKIA Treasury-Bills
REPUBLIC
COMPULSORY
SLOVENIA KDD Equity + Corporate Debt
(The Centraina Klirinsko Depotna Druzba d.d.
COMPULSORY
SOUTH AFRICA CD Corporate + Government Debt
(Central Depository (Pty) Limited)
COMPULSORY
SOUTH KOREA KSD Equity, Corporate + Government Debt
COMPULSORY
SPAIN SCLV Equity + Corporate Debt.
(Servicio de Compensacion y Liquidacion de Valores,
S.A.)
COMPULSORY
SPAIN CBEO Government Debt
(Central Book Entry Office)
COMPULSORY
SRI LANKA CDS Equity
(Central Depository System (Pte) Limited)
COMPULSORY
SWEDEN VPC Equity, Corporate + Government Debt
(Vardepapperscentralen AB)
COMPULSORY
SWITZERLAND SEGA Equity, Corporate + Government Debt
(Schweizerische Effekten-Giro AG)
COMPULSORY
TAIWAN TSCD Equity + Government Debt
(Taiwan Securities Central Depository Co., Ltd.)
COMPULSORY
THAILAND TSDC Equity, Corporate + Government Debt
(Thailand Securities Depository Company Limited)
COMPULSORY
</TABLE>
5
<PAGE> 24
COMPULSORY SECURITIES DEPOSITORIES
<TABLE>
<CAPTION>
<S> <C> <C>
COUNTRY DEPOSITORY INSTRUMENT
TUNISIA STICODEVAM Equity
(Societe Tunislienne Interprofessionnelle pout la
Compensation et le Depot des Valeurs Mobilieres)
COMPULSORY
TUNISIA MINISTRY OF FINANCE Government Debt tradable on the stock exchange
(BTNBs)
COMPULSORY
TUNISIA CENTRAL BANK OF TUNISIA Government Debt not tradable on the stock exchange
(BTCs)
COMPULSORY
TURKEY IMKB TAKAS VE SAKLAMA BANKASL A.S. Equity + Corporate Debt
COMPULSORY
TURKEY CENTRAL BANK OF TURKEY Government Debt
COMPULSORY
UNITED CRESTCO LIMITED Equity + Corp. Debt
KINGDOM
COMPULSORY
UNITED CMO Sterling CDs & CP
KINGDOM (Central Moneymarket Office)
COMPULSORY
UNITED CGO Gilts
KINGDOM (Central Gilts Office)
COMPULSORY
UNITED STATES DTC Equity + Corporate Debt
(Depository Trust Company)
COMPULSORY
UNITED STATES PTC Mortgage Back Debt
Participants Trust Company)
COMPULSORY
UNITED STATES FED BOOK-ENTRY SYSTEM Government Debt
COMPULSORY
ZAMBIA LUSE Equity + Government Debt
(LuSE Central Shares Depository Limited)
COMPULSORY
</TABLE>
6
<PAGE> 25
Appendix 1-B
Information Regarding Country Risk
1. To aid Customer in its determinations regarding Country Risk, Bank
shall furnish annually and upon the initial placing of Financial Assets and Cash
into a country the following information (check items applicable):
A Opinions of local counsel concerning:
X i. Whether applicable foreign law would restrict the access afforded
- --- Customer's independent public accountants to books and records
kept by an eligible foreign custodian located in that country.
X ii. Whether applicable foreign law would restrict the Customer's
- --- ability to recover its Financial Assets and Cash in the event of
the bankruptcy of an Eligible Foreign Custodian located in that
country.
X iii. Whether applicable foreign law would restrict the Customer's
- --- ability to recover Financial Assets that are lost while under the
control of an Eligible Foreign Custodian located in the country.
B. Written information concerning:
X i. The foreseeability of expropriation, nationalization, freezes, or
- --- confiscation of Customer's Financial Assets and Cash.
X ii. Whether difficulties in converting Customer's cash and cash
- --- equivalents to U.S. dollars are reasonably foreseeable.
C. A market report with respect to the following topics:
(i) securities regulatory environment, (ii) foreign ownership
restrictions, (iii) foreign exchange, (iv) securities settlement and
registration, (v) taxation, and (vi) compulsory depositories (including
depository evaluation).
2. To aid Customer in monitoring Country Risk, Bank shall furnish board
the following additional information:
Market flashes, including with respect to changes in the information in
market reports.
<PAGE> 26
Appendix 2
Series of Driehaus Mutual Funds
Each a "Customer"
Driehaus International Growth Fund
Driehaus Asia Pacific Growth Fund
Driehaus Emerging Markets Growth Fund
Driehaus International Discovery Fund
Driehaus European Opportunity Fund
<PAGE> 27
GLOBAL PROXY SERVICE RIDER
To Global Custody Agreement
Between
THE CHASE MANHATTAN BANK
AND
each series of Driehaus Mutual Funds listed on Appendix 2
effective May 25 1999,
1. Global Proxy Services ("Proxy Services") shall be provided for the
countries listed in the procedures and guidelines ("Procedures")
furnished to Customer, as the same may be amended by Bank from time
to time on prior notice to Customer. The Procedures are incorporated by
reference herein and form a part of this Rider.
2. Proxy Services shall consist of those elements as set forth in the
Procedures, and shall include (a) notifications ("Notifications") by
Bank to Customer of the dates of pending shareholder meetings,
resolutions to be voted upon and the return dates as may be received by
Bank or provided to Bank by its Subcustodians or third parties, and (b)
voting by Bank of proxies based on Customer Instructions. Original
proxy materials or copies thereof shall not be provided. Notifications
shall generally be in English and, where necessary, shall be summarized
and translated from such non-English materials as have been made
available to Bank or its Subcustodian. In this respect Bank's only
obligation is to provide information from sources it believes to be
reliable and/or to provide materials summarized and/or translated in
good faith. Bank reserves the right to provide Notifications, or parts
thereof, in the language received. Upon reasonable advance request by
Customer, backup information relative to Notifications, such as annual
reports, explanatory material concerning resolutions, management
recommendations or other material relevant to the exercise of proxy
voting rights shall be provided as available, but without translation,
3. While Bank shall attempt to provide accurate and complete
Notifications, whether or not translated, Bank shall not be liable for
any losses or other consequences that may result from reliance by
Customer upon Notifications where Bank prepared the same in good faith.
4. Notwithstanding the fact that Bank may act in a fiduciary capacity with
respect to Customer under other agreements or otherwise under the
Agreement, in performing Proxy Services Bank shall be acting solely as
the agent of Customer, and shall not exercise any discretion with
regard to such Proxy Services.
5. Proxy voting may be precluded or restricted in a variety of
circumstances, including, without limitation, where the relevant
Financial Assets are: (i) on loan; (ii) at registrar for registration
or reregistration; (iii) the subject of a conversion or other corporate
action; (iv) not held in a name subject to the control of Bank or its
Subcustodian or are otherwise held in a manner which precludes voting;
(v) not capable of being voted on account of local market regulations
or practices or restrictions by the issuer; or (vi) held in a margin or
collateral account.
6. Customer acknowledges that in certain countries Bank may be unable to
vote individual proxies but shall only be able to vote proxies on a net
basis (e.g., a net yes or no vote given the voting instructions
received from all customers).
7. Customer shall not make any use of the information provided hereunder,
except in connection with the funds or plans covered hereby, and shall
in no event sell, license, give or otherwise make the information
provided hereunder available, to any third party, and shall not
directly or indirectly compete with Bank
<PAGE> 28
or diminish the market for Proxy Services by provision of such
information, in whole or in part, for compensation or otherwise, to any
third party.
8. The names of Authorized Persons for Proxy Services shall be furnished
to Bank in accordance with Section 10 of the Agreement. Proxy Services
fees shall be as set forth in Section 13 of the Agreement or as
separately agreed.
2
<PAGE> 29
DOMESTIC AND GLOBAL
SPECIAL TERMS AND CONDITIONS RIDER
Domestic Corporate Actions and Proxies
With respect to domestic U.S. and Canadian Financial Assets (the latter if held
in DTC), the following provisions shall apply rather than the pertinent
provisions of Section 8 of the Agreement and the Global Proxy Service rider:
Bank shall send to Customer or the Authorized Person for a Custody
Account, such proxies (signed in blank, if issued in the name of Bank's
nominee or the nominee of a central depository) and communications with
respect to Financial Assets in the Custody Account as call for voting
or relate to legal proceedings within a reasonable time after
sufficient copies are received by Bank for forwarding to its customers.
In addition, Bank shall follow coupon payments, redemptions, exchanges
or similar matters with respect to Financial Assets in the Custody
Account and advise Customer or the Authorized Person for such Account
of rights issued, tender offers or any other discretionary rights with
respect to such Financial Assets, in each case, of which Bank has
received notice from the issuer of the Financial Assets, or as to which
notice is published in publications routinely utilized by Bank for this
purpose.
<PAGE> 1
EXHIBIT (i)
April 18, 2000
Driehaus Mutual Funds
25 East Erie Street
Chicago, Illinois 60611
Ladies and Gentlemen:
Reference is made to Post-Effective Amendment No. 8 to the Registration
Statement on Form N-1A under the Securities Act of 1933 being filed by Driehaus
Mutual Funds (the "Fund") in connection with the public offering from time to
time of units of beneficial interest, no par value ("Shares"), in the Driehaus
International Growth Fund, the Driehaus International Discovery Fund, the
Driehaus European Opportunity Fund, the Driehaus Asia Pacific Growth Fund, and
the Driehaus Emerging Markets Growth Fund (each, a "Portfolio" and collectively,
the "Portfolios").
We have acted as counsel to the Fund since its inception, and in such
capacity are familiar with the Fund's organization and have counseled the Fund
regarding various legal matters. We have examined such Fund records and other
documents and certificates as we have considered necessary or appropriate for
the purposes of this opinion. In our examination of such materials, we have
assumed the genuineness of all signatures and the conformity to original
documents of all copies submitted to us.
Based upon the foregoing, and assuming that the Fund's Declaration of
Trust dated May 31, 1996, as amended by the Written Instrument Amending Section
2.4 of Article II of the Declaration of Trust dated November 9, 1998 (the
"Declaration of Trust"); the Written Instrument Establishing and Designating the
Driehaus Asia Pacific Growth Fund and the Driehaus Emerging Markets Growth Fund
dated December 18, 1997, the Written Instrument Establishing and Designating the
Driehaus International Discovery Fund dated September 11, 1998, and the Written
Instrument Establishing and Designating the Driehaus European Opportunity Fund
dated November 9, 1998; and the Amended and Restated By-Laws of the Fund dated
June 4, 1996, as amended September 25, 1996, November 9, 1998, and December 21,
1998, are presently in full force and effect and have not been amended in any
respect except as provided in the above-referenced documents and that the
resolutions adopted by the Board of Trustees of the Fund on June 3, 1996,
September 25, 1996, December 18, 1997, September 11, 1998, and November 9, 1998,
relating to organizational matters, securities matters and the issuance of
shares are presently in full force and effect and have not been amended in any
<PAGE> 2
VEDDER PRICE
Driehaus Mutual Funds
April 18, 2000
Page 2
respect, we advise you and opine that (a) the Fund is a validly existing
voluntary association with transferrable shares under the laws of the State of
Delaware and is authorized to issue an unlimited number of Shares in the
Portfolios; and (b) presently and upon such further issuance of the Shares in
accordance with the Fund's Declaration of Trust and the receipt by the Fund of a
purchase price not less than the net asset value per Share, and when the
pertinent provisions of the Securities Act of 1933 and such "blue sky" and
securities laws as may be applicable have been complied with, and assuming that
the Fund continues to validly exist as provided in (a) above, the Shares are and
will be legally issued and outstanding, fully paid and nonassessable.
This opinion is solely for the benefit of the Fund, the Fund's Board of
Trustees and the Fund's officers and may not be relied upon by any other person
without our prior written consent. We hereby consent to the use of this opinion
in connection with said Post-Effective Amendment.
Very truly yours,
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
COK/DAS
<PAGE> 1
EXHIBIT (j)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated February 23, 2000 and to all references to our firm included in or made a
part of this Prospectus and Post-Effective Amendment No. 8 to the Registration
Statement on Form N-1A of the Driehaus Mutual Funds.
/s/ Arthur Andersen LLP
---------------------------
Arthur Andersen LLP
Chicago, Illinois,
April 20, 2000
<PAGE> 1
EXHIBIT (p)
DRIEHAUS CAPITAL MANAGEMENT, INC.
DRIEHAUS SECURITIES CORPORATION
DRIEHAUS MUTUAL FUNDS
CODE OF ETHICS
STATEMENT OF GENERAL POLICY
Driehaus Capital Management, Inc. and Driehaus Securities Corporation
(collectively, the "Firm") seek to foster a reputation for integrity and
professionalism. That reputation is a vital business asset. The confidence and
trust placed in us by investors in the Driehaus Mutual Funds is something that
is highly valued and must be protected. As a result, any activity that creates
even the suspicion of misuse of material non-public information by the Firm or
any of its Employees, which gives rise to or appears to give rise to any breach
of fiduciary duty owed to the Fund, or which creates any actual or potential
conflict of interest between the Fund and the Firm or any of its Employees or
even the appearance of any conflict of interest must be avoided and is
prohibited. At the same time, the Firm believes that individual investment
activities by its officers and Employees should not be unduly prohibited or
discouraged.
Rule 17j-1 under the Investment Company Act of 1940 requires that the
Fund, the Adviser and principal underwriter adopt a code of ethics containing
provisions reasonably necessary to prevent access persons (as defined therein)
from engaging in any act, practice or course of business prohibited by paragraph
(b) of such Rule. Accordingly, this Code of Ethics (the "Code") has been adopted
to ensure that those who have knowledge of the Fund's transactions will not be
able to act thereon to the disadvantage of the Fund. The Code does not purport
comprehensively to cover all types of conduct or transactions which may be
prohibited or regulated by the laws and regulations applicable to the Fund, the
Firm and persons connected with them.
1. DEFINITIONS OF TERMS USED
(a) "Access Persons" means (i) any director, trustee or officer of the
Fund or the Adviser; (ii) any director or officer of DSC who, in
the ordinary course of business, makes, participates in or obtains
information regarding, the purchase or sale of Covered Securities
by the Fund, or whose functions or duties in the ordinary course
of business relate to the making of any recommendation to the Fund
regarding the purchase or sale of Covered Securities; (iii) any
employee of the Fund or the Firm who, in connection with his
regular functions or duties, makes, participates in, or obtains
information regarding the purchase or sale of Covered Securities
by the Fund, or whose functions relate to the making of any
recommendations with respect to the purchases or sales; and (iv)
any natural person in a control relationship to the Fund or the
Adviser who obtains information concerning recommendations made to
the Fund with regard to the purchase or sale of Covered Securities
by the Fund.
(b) "Adviser" means Driehaus Capital Management, Inc.
<PAGE> 2
(c) "Advisory Board Member" means any individual serving as a member
of an Advisory Board appointed by the Board of Trustees of the
Fund.
(d) "Beneficial interest" shall be interpreted in the same manner as
it would be in determining whether a person is subject to the
provisions of Section 16 of the Securities Exchange Act of 1934
and rules thereunder, which includes any interest in which a
person, directly or indirectly, has or shares a direct or indirect
pecuniary interest. A pecuniary interest is the opportunity,
directly or indirectly, to profit or share in any profit derived
from any transaction. Each Firm Employee will be assumed to have a
pecuniary interest, and therefore, beneficial interest or
ownership, in all securities held by the Employee, the Employee's
spouse, all minor children, all dependent adult children and
adults sharing the same household with the Employee (other than
mere roommates) and in all accounts subject to their direct or
indirect influence or control and/or through which they obtain the
substantial equivalent of ownership, such as trusts in which they
are a trustee or beneficiary, partnerships in which they are the
general partner, except where the amount invested by the general
partner is limited to an amount reasonably necessary in order to
maintain the status as a general partner, corporations in which
they are a controlling shareholder, except any investment company,
mutual fund trust or similar entity registered under applicable
U.S. or foreign law, or any other similar arrangement. Any
questions an Employee may have about whether an interest in a
security or an account constitutes beneficial interest or
ownership should be directed to the Firm's General Counsel.
(e) "Beta Testing Accounts" are accounts that are operated to test new
investment strategies and styles and are funded by the Adviser
and/or Employees.
(f) "Bunched" means orders that are aggregated together and placed and
executed as one order. Multiple brokers, ECNs and executions may
be necessary to complete the order.
(g) "Considering for purchase or sale" shall mean when the portfolio
manager communicates that he/she is seriously considering making
such a transaction or when a recommendation to the portfolio
manager to purchase or sell has been made or communicated by an
analyst at the Adviser and, with respect to the analyst making the
recommendation, when such analyst seriously considers making such
a recommendation.
(h) "Covered Security" shall have the meaning set forth in Section
2(a)(36) of the Investment Company Act of 1940, including any
right to acquire such security, such as puts, calls, other options
or rights in such securities, and securities-based futures
contracts, except that it shall not include securities which are
direct obligations of the Government of the United States, shares
issued by registered open-end investment companies, bankers'
acceptances, bank certificates of deposit or commercial paper and
high quality short-term debt instruments, including repurchase
agreements.
2
<PAGE> 3
(i) "Disinterested Trustee" means any trustee of the Fund who is not
an interested person of the Adviser or DSC, is not an officer of
the Fund and is not otherwise an "interested person" of the Fund
as defined in the Investment Company Act of 1940.
(j) "DSC" means Driehaus Securities Corporation, the principal
underwriter of the Fund.
(k) "Employee" means any person employed by the Firm, whether on a
full or part-time basis, and all officers, shareholders and
directors of the Firm.
(l) The "Ethics Committee" shall consist of the General Counsel of the
Firm and two other members appointed by the General Counsel.
(m) "Fund" means the Driehaus Mutual Funds.
(n) "Initial Public Offering" means an offering of securities
registered under the Securities Act of 1933, the issuer of which,
immediately before the registration, was not required to file
reports under Sections 13 or 15(d) of the Securities Exchange Act.
(o) "Investment Personnel" means any employees of the Fund or the
Adviser (or any company in a control relationship to the Fund or
the Adviser) who, in connection with his or her regular functions
or duties, makes or participates in making recommendations
regarding the purchase or sale of securities by the Fund.
Investment Personnel also includes any natural person who controls
the Fund or Adviser and who obtains information concerning
recommendations made to the Fund regarding the purchase or sale of
securities by the Fund.
(p) "Limited Offering" includes private placements and means an
offering that is exempt from registration under Section 4(2) or
Section 4(6) under the Securities Act of 1933 or pursuant to Rule
504, Rule 505, or Rule 506 under the Securities Act.
(q) "Person" means any officer, trustee, director, member of an
advisory board or employee of the Fund, or officer, director or
employee of the Firm.
(r) "Personal benefit" includes any intended benefit for oneself or
any other individual, company, group or organization of any kind
whatsoever except a benefit for the Fund or any other company that
adopts this Code of Ethics, as appropriate.
2. TRANSACTIONS WITH THE CLIENTS
No Person shall sell to, or purchase from, the Fund any security or
other property (except merchandise in the ordinary course of business), in which
such Person has or would acquire a beneficial interest, unless such purchase or
sale involves shares of the Fund.
3
<PAGE> 4
3. DISCLOSURE OF INFORMATION
(a) No Person shall discuss with or otherwise inform others of any
actual or contemplated security transaction by the Fund except in
the performance of employment duties or in an official capacity
and then only for the benefit of the Fund, and in no event for
personal benefit or for the benefit of others.
(b) No Person shall release information to dealers or brokers or
others (except to those concerned with the execution and
settlement of the transaction) as to any changes in Fund
investments, proposed or in process, except (i) upon the
completion of such changes, or (ii) when the disclosure results
from the publication of a prospectus, or (iii) in conjunction with
a regular report to shareholders or to any governmental authority
resulting in such information becoming public knowledge, or (iv)
in connection with any report to which shareholders are entitled
by reason of provisions of the declaration of trust, by-laws,
rules and regulations, contracts or similar documents governing
the operations of the Fund.
4. PREFERENTIAL TREATMENT, GIFTS AND ENTERTAINMENT
No Person shall seek or accept favors, preferential treatment, or any
other personal benefit because of his or her association with the Fund, except
those usual and normal benefits directly provided by the Fund.
No Person shall accept any entertainment, gift or other personal
benefit that may create or appears to create a conflict between the interests of
such Person and the Fund. In addition, investment personnel are prohibited from
receiving any gift or other thing of more than de minimis value from any person
or entity that does business with or on behalf of the Fund. For purposes of this
Code, de minimis is defined as reasonable and customary business entertainment,
such as an occasional dinner, a ticket to a sporting event or the theater, or
comparable entertainment which is neither so frequent nor so extensive as to
raise any question of propriety. Any questions regarding the receipt of any gift
or other personal benefit should be directed to the General Counsel of the Firm.
5. CONFLICTS OF INTEREST
If any Person is aware of a personal interest that is, or might be, in
conflict with the interest of the Fund, that Person should disclose the
situation or transaction and the nature of the conflict to the Ethics Committee
for appropriate consideration.
6. SERVICE AS A DIRECTOR
Investment personnel are prohibited from serving on the boards of
directors of for-profit corporations, business trusts or similar business
entities, whether or not their securities are publicly traded, absent prior
authorization by the Ethics Committee based upon a determination that the board
4
<PAGE> 5
service would be consistent with the interests of the Fund and that adequate
procedures exist to ensure isolation from those making investment decisions.
7. INSIDE INFORMATION
Securities laws and regulations prohibit the misuse of "inside" or
"material non-public" information when trading or recommending securities.
Inside information obtained by any Person from any source must be kept
strictly confidential. All inside information should be kept secure, and access
to files and computer files containing such information should be restricted.
Persons shall not act upon or disclose material non-public or insider
information except as may be necessary for legitimate business purposes on
behalf of the Fund or the Firm as appropriate. Questions and requests for
assistance regarding insider information should be promptly directed to the
General Counsel of the Firm.
Inside information may include, but is not limited to, knowledge of
pending orders or research recommendations, corporate finance activity, mergers
or acquisitions, and other material non-public information that could affect the
price of a security.
Fund and shareholder account information is also confidential and must
not be discussed with any individual whose responsibilities do not require
knowledge of such information.
8. RESTRICTIONS ON PERSONAL SECURITY TRANSACTIONS
No Person shall knowingly take advantage of a corporate opportunity of
the Fund for personal benefit, or take action inconsistent with such Person's
obligations to the Fund. All personal securities transactions must be consistent
with this Code of Ethics and must avoid any actual or potential conflict of
interest or any abuse of any Person's position of trust and responsibility. The
following rules variously apply to all accounts in which a Person has a
beneficial interest:
(a) ALL EMPLOYEES:
(1) Any transaction in a Covered Security in anticipation of a
Fund's transaction ("frontrunning") is prohibited.
(2) No Employee shall purchase or sell any Covered Security which
such Employee knows or has reason to believe that the Firm,
either is purchasing or selling, or is considering for
purchase or sale, for a Fund until either a Fund's
transactions have been completed or consideration of such
transaction is abandoned, except that Employees may purchase
or sell on the same day as a Fund provided that, (i) the
Employee's order is Bunched with the Fund's order, (ii) the
Fund is able to fully complete its order; and (iii) the
Employee receives the average price for the transactions in
that security for that day.
5
<PAGE> 6
(b) INVESTMENT PERSONNEL: In addition to (a) above, no Investment
Personnel shall directly or indirectly acquire a beneficial
ownership in Limited Offering securities or securities in an
Initial Public Offering without the prior consent of the Ethics
Committee. Consideration will be given to whether or not the
opportunity should be reserved for the Fund. The Ethics Committee
will review these proposed investments on a case-by-case basis
except for those circumstances in which advance general approval
may be appropriate because it is clear that conflicts are very
unlikely to arise due to the nature of the opportunity for
investing in the Initial Public Offering or Limited Offering.
(c) PORTFOLIO MANAGERS: In addition to (a) and (b) above, no Fund
portfolio manager may buy or sell a Covered Security within seven
days before or after the Fund portfolio that he or she manages
trades in the Covered Security, except as permitted in subsection
(a)(2) above.
(d) DISINTERESTED TRUSTEES: No Disinterested Trustee shall purchase or
sell, directly or indirectly, any Covered Security in which he or
she has, or by reason of such transaction acquires, any direct or
indirect beneficial ownership or interest when the Disinterested
Trustee knows or has reason to believe that securities of the same
class are being purchased or sold or are being considered for
purchase or sale by the Fund, until such time as the Fund's
transactions have been completed or consideration of such
transaction is abandoned.
(e) RELATED INSTRUMENTS: When anything in this paragraph 8 prohibits
the purchase or sale of a security, it also prohibits the purchase
or sale of any related securities, such as puts, calls, other
options or rights in such securities and securities-based futures
contracts and any securities convertible into or exchangeable for
such security.
(f) BETA TESTING ACCOUNTS: Beta Testing Accounts in which Fund
portfolio managers (in the aggregate) have a 5% or greater
beneficial interest or which are managed by a Fund portfolio
manager shall be treated for purposes of this Code as being
subject to the restrictions applicable to Fund portfolio managers
in subsection (c) above. Beta Testing Accounts in which Employees
have a beneficial interest, but in which Fund portfolio managers
(in the aggregate) have less than a 5% beneficial interest and are
not managed by a Fund portfolio manager, shall be treated for
purposes of this Code as being subject to the restrictions
applicable to Employees in subsection (a) above. Limited Offering
securities and Initial Public Offering securities may not be
purchased for Beta Testing Accounts without the prior consent of
the Ethics Committee.
(g) PROFIT SHARING PLANS: Profit sharing and other qualified plans for
Employees shall be treated for purposes of this Code as being
subject to the restrictions applicable to Employees in subsection
(a) above, provided that Fund portfolio managers (in the
aggregate) have less than a 5% beneficial interest in the plan and
the plan is not managed by a Fund portfolio manager. Limited
Offering securities and Initial Public
6
<PAGE> 7
Offering securities may not be purchased for profit sharing plans
and other savings plans without the prior consent of the Ethics
Committee.
(h) DRIEHAUS ASSOCIATES FUND, L.P.: The Driehaus Associates Fund, L.P.
("Associates Fund"), an Illinois investment partnership, shall be
treated for purposes of this Code as being subject to the
restrictions applicable to Employees in subsection (a) above,
provided that Fund portfolio managers (in the aggregate) have less
than a 5% beneficial interest in the fund and the fund is not
managed by a Fund portfolio manager. Limited Offering securities
and Initial Public Offering securities may not be purchased for
the Associates Fund without the prior consent of the Ethics
Committee.
(i) ADVISORY BOARD MEMBERS: No Advisory Board Member shall purchase or
sell, directly or indirectly, any Covered Security in which he or
she has, or by reason of such transaction acquires, any direct or
indirect beneficial ownership or interest when the Advisory Board
Member knows or has reason to believe that securities of the same
class are being purchased or sold or are being considered for
purchase or sale by the Fund, until such time as the Fund's
transactions have been completed or consideration of such
transaction is abandoned.
(j) DISGORGEMENT: Any Employee who trades in violation of this
paragraph 8 must unwind the trade or disgorge the profits.
(k) EXCEPTIONS:
(1) Under unusual circumstances, such as a personal financial
emergency, employee stock ownership plans, stock option
plans, certain personal trusts or where it is determined that
the purchase or sale is not inconsistent with this Code of
Ethics or the provisions of Rule 17j-1, application for an
exception may be made in advance to the Ethics Committee,
which application may be granted or denied. To request Ethics
Committee consideration of an exception, submit a written
request containing details on your circumstances, reasons for
the exception and exception requested.
(2) Except as otherwise noted herein, this paragraph 8 shall not
apply to transactions involving U.S. Government securities,
bankers' acceptances, bank certificates of deposit,
commercial paper, high quality short-term debt instruments
including repurchase agreements and shares of registered
open-end investment companies, non-volitional purchases and
sales, such as dividend reinvestment programs or "calls" or
redemptions of securities.
7
<PAGE> 8
(3) This paragraph 8 shall not apply to transactions in an
account in which an Employee has a beneficial interest that
are the result of periodic automatic rebalancing of that
account in order to bring the account into conformance with a
model portfolio.
9. REPORTING PROCEDURES
Each applicable Person must follow these procedures for all securities
or accounts in which he or she has a beneficial interest:
(a) REPORTS - ALL ACCESS PERSONS:
(1) Broker confirms and statements: Each Access Person must
provide to the Firm's General Counsel the names of all
securities or commodities brokerage accounts in which that
Access Person has a beneficial interest in Covered
Securities. Before opening any brokerage account, each Access
Person shall submit a completed Securities and Commodities
Brokerage Account Report to the General Counsel of the Firm
and must receive a letter approving the opening of the
account. This letter must be provided to the brokerage firm.
Each Access Person shall cause to be provided on a timely
basis duplicate confirmations of all trades in Covered
Securities referred to in this paragraph 9(a)(1) and copies
of periodic statements for all securities accounts in which
that Access Person has a beneficial interest in Covered
Securities. Such Securities and Commodities Brokerage Account
Reports, duplicate confirmations and periodic statements
shall be directed to the General Counsel of the Firm.
To the extent that a security transaction in which an Access
Person has any beneficial interest or ownership is not
reported on brokerage confirms and statements, such
transaction must be reported to the Firm's General Counsel as
part of the quarterly transactions report set forth in
paragraph 9(a)(2).
(2) Each Access Person shall provide a holdings report within 10
days after becoming an Access Person -- an "Initial Holdings
Report" and annually thereafter -- an "Annual Holdings
Report."1 The Annual Holdings Report shall be current within
30 days of the date of the report. Each Access Person shall
also provide a quarterly transactions report within ten days
after the close of a quarter for each transaction during the
quarter in a Covered Security in which the Access Person had
any beneficial ownership and for
- ------------------
(1) For Persons who are Access Persons at the time of the initial adoption of
this Code, they shall provide their Initial Holdings Report reflecting holdings
as of December 31, 2000 no later than January 30, 2001.
8
<PAGE> 9
each account the Access Person established which held any
securities during the quarter for the benefit of the Access
Person.
All such reports shall be in writing and submitted to the
Firm's General Counsel. Each report shall state the title,
number of shares and principal amount of each Covered
Security in which the Access Person had any beneficial
ownership, the broker/dealer or bank maintaining an account
for the Access Person in which any securities were held for
the benefit of the Access Person, and the date that the
report is submitted by the Access Person. In addition to
these reporting requirements, the quarterly transaction
report must also state the date of the transaction, the
interest rate and maturity date of the Covered Security (if
applicable), the nature of the transaction (i.e., purchase,
sale or other), the purchase or sale price, and the date the
account was established.
(b) EXCEPTIONS TO REPORTING:
(1) Access Persons need not file a quarterly transaction report
if the information would duplicate information that the
General Counsel received in a broker's confirmation or
account statement.
(2) Disinterested Trustee of the Fund who would be required to
make a report solely by being a Trustee, is not required to
make a report unless Section (c) (1) of paragraph 9 applies.
(c) REPORTS - DISINTERESTED TRUSTEES:
(1) A Disinterested Trustee shall provide a quarterly report to
the Ethics Committee of any purchase or sale of any Covered
Security in which such person has, or by virtue of such
transaction acquires, any beneficial interest if at the time
of the transaction the Disinterested Trustee knew, or in the
ordinary course of fulfilling his or her official duties as a
trustee of the Fund should have known that, on the date of
the transaction or within 15 days before or after the
transaction purchase or sale of that class of security was
made or considered for the Fund. The form of the report shall
conform to the provisions of subsection (a)(2) above.
(2) This subsection (c) shall not apply to (i) non-volitional
purchases and sales, such as dividend reinvestment programs
or "calls" or redemptions or (ii) transactions in an account
in which the Disinterested Trustee has no control or
interest.
9
<PAGE> 10
(d) REPORTS - ADVISORY BOARD MEMBERS:
(1) An Advisory Board Member shall report to the Ethics Committee
any purchase or sale of any security in which such person
has, or by virtue of such transaction acquires, any
beneficial interest if at the time of the transaction the
Advisory Board Member knew, or in the ordinary course of
fulfilling his or her official duties as a trustee of the
Fund should have known that, on the date of the transaction
or within 15 days before or after the transaction purchase or
sale of that class of security was made or considered for the
Fund. The form of the report shall conform to the provisions
of subsection (a)(2) above.
(2) This subsection (d) shall not apply to (i) non-volitional
purchases and sales, such as dividend reinvestment programs
or "calls" or redemptions or (ii) transactions in an account
in which the Advisory Board Member has no control or
interest.
(e) REVIEW OF REPORTS:
The General Counsel of the Firm or a designee of the General
Counsel will review reports submitted by Access Persons. The
General Counsel will maintain the names of the persons responsible
for reviewing these reports. No person shall be permitted to
review his own reports. Such reports shall be reviewed by a member
of the Ethics Committee (or such person's designee).
(f) Any report required to be filed shall not be construed as an
admission by the person making such report that he/she has any
direct or indirect Beneficial Ownership in the security to which
the report relates.
10. ETHICS COMMITTEE
The Ethics Committee will take whatever action it deems necessary with
respect to any officer or employee of the Firm or the Fund who violates any
provision of this Code of Ethics, and will inform the Board of any investment
company with respect to which such a violation occurs as to the nature of such
violation and the action taken by the Committee. Any information received by the
Ethics Committee relating to questionable practices or transactions by a
Disinterested Trustee or an Advisory Board Member of the Fund, shall immediately
be forwarded to the Audit Committee of the Fund for that Committee's
consideration and such action as it, in its sole judgment, shall deem warranted.
At least once a year, the Fund, the Adviser and DSC must provide a written
report to the Board of Trustees that describes any issues arising under the Code
or procedures since the last report to the Board of Trustees, including, but not
limited to, information about material violations of the Code or procedures and
sanctions imposed in response to the material violations. The report will also
certify to the Board that the Fund, Adviser and DSC each have adopted procedures
reasonably necessary to prevent Access Persons from violating the Code. The
Report should also include
10
<PAGE> 11
significant conflicts of interest that arose involving the Fund and Adviser's
personal investment policies, even if the conflicts have not resulted in a
violation of the Code. For example, the Fund will report to the Board if a
portfolio manager is a director of a company whose securities are held by the
Fund.
11. RESEARCH REPORTS
The fact that a security has been the subject of a formal or informal
research report shall not, in and of itself, indicate that the security is under
consideration for purchase or sale. No Person shall be considered as knowing,
nor be said to be in a position of knowing, that a security was under
consideration for purchase or sale or that such security had been purchased or
sold solely on the basis of receipt of a research report thereon.
12. CODE REVISIONS
Any material changes to the Code of the Firm will be approved by the
Trustees within six months of such change.
13. RECORDKEEPING REQUIREMENTS
The Firm shall maintain records, at its principal place of business, of
the following: a copy of each Code of Ethics in effect during the past five
years; a record of any violation of the Code and any action taken as a result of
the violation for at least five years after the end of the fiscal year in which
the violation occurs; a copy of each report made by Access Persons as required
in this Code, including any information provided in place of the reports during
the past five years after the end of the fiscal year in which the report is made
or the information is provided; a copy of each trustee report made during the
past five years; a record of all persons required to make reports currently and
during the past five years; a record of all who are or were responsible for
reviewing these reports during the past five years; and, for at least five years
after approval, a record of any decision and the reasons supporting that
decision, to approve an investment personnel's purchase of an Initial Public
Offering or a Limited Offering.
14. CONDITION OF EMPLOYMENT OR SERVICE
All Persons shall conduct themselves at all times in the best interests
of the Fund. Compliance with the Code of Ethics shall be a condition of
employment or continued affiliation with the Fund or the Firm and conduct not in
accordance shall constitute grounds for actions which may include, but are not
limited to, a reprimand, a restriction on activities, disgorgement, termination
of employment or removal from office. All Persons shall certify annually to the
Ethics Committee that they have read and agree to comply in all respects with
this Code of Ethics and that they have disclosed or reported all personal
securities transactions, holdings and accounts required to be disclosed or
reported by this Code of Ethics.
February 28, 2000
11
<PAGE> 12
I acknowledge that I have read the Driehaus Code of Ethics (a copy of
which has been supplied to me, which I will retain for future reference) and
agree to comply in all respects with the terms and provisions thereof. I have
disclosed or reported all personal securities transactions, holdings and
accounts required to be disclosed or reported by this Code of Ethics and have
complied with all provisions of this Code.
----------------------------------
Print Name
- ---------------------------------- ----------------------------------
Date Signature
<PAGE> 1
EXHIBIT (q)(ii)
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes
and appoints Richard H. Driehaus, Robert F. Moyer, Mary H. Weiss, or any of
them, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities to sign the Registration Statement of Driehaus Mutual
Funds, a Delaware business trust, on Form N-1A under the Securities Act of 1933,
as amended, and the Investment Company Act of 1940, as amended, and any or all
amendments thereto, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully as all intents and purposes as he might or could do
in person, hereby ratifying and confirming all said attorney-in-fact and agent
may lawfully do or cause to be done by virtue hereof.
DATED: August 30, 1999
/s/ Daniel F. Zemanek
-----------------------------
Daniel F. Zemanek
<PAGE> 2
EXHIBIT (q)(ii)
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes
and appoints Richard H. Driehaus, Robert F. Moyer, Mary H. Weiss, or any of
them, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities to sign the Registration Statement of Driehaus Mutual
Funds, a Delaware business trust, on Form N-1A under the Securities Act of 1933,
as amended, and the Investment Company Act of 1940, as amended, and any or all
amendments thereto, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully as all intents and purposes as he might or could do
in person, hereby ratifying and confirming all said attorney-in-fact and agent
may lawfully do or cause to be done by virtue hereof.
DATED: August 30, 1999
/s/ A. R. Umans
---------------------------
A. R. Umans
<PAGE> 3
EXHIBIT (q)(ii)
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes
and appoints Richard H. Driehaus, Robert F. Moyer, Mary H. Weiss, or any of
them, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities to sign the Registration Statement of Driehaus Mutual
Funds, a Delaware business trust, on Form N-1A under the Securities Act of 1933,
as amended, and the Investment Company Act of 1940, as amended, and any or all
amendments thereto, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully as all intents and purposes as he might or could do
in person, hereby ratifying and confirming all said attorney-in-fact and agent
may lawfully do or cause to be done by virtue hereof.
DATED: August 30, 1999
/s/ Francis J. Harmon
----------------------------
Francis J. Harmon
