UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-07655
Driehaus Mutual Funds
(Exact name of registrant as specified in charter)
25 East Erie Street
Chicago, IL 60611
(Address of principal executive offices) (Zip code)
Janet L. McWilliams
Driehaus Capital Management LLC
25 East Erie Street
Chicago, IL 60611
(Name and address of agent for service)
Registrant's telephone number, including area code: 312-587-3800
Date of fiscal year end: December 31
Date of reporting period: December 31, 2020
Item 1. Reports to Stockholders.
| (a) | The Reports to Shareholders are attached herewith. |
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Table of Contents
Driehaus Emerging
Markets Growth Fund — Portfolio Managers’ Letter
Dear Fellow
Shareholders,
The Driehaus Emerging Markets Growth Fund (“Fund”) Investor class (DREGX) returned 27.31% and the Institutional class (DIEMX) returned 27.60% for the year ended December 31, 2020. The Fund’s
primary benchmark, the Morgan Stanley Capital International (“MSCI”) Emerging Markets Index (“Benchmark”), returned 18.31% for the year, while the MSCI Emerging Markets Growth Index returned
31.33%.
2020 was the second consecutive positive year for emerging markets (EM) returns and the fourth positive year out of the last five. Global markets rallied sharply in November after initial vaccine results seemed to
exceed expectations, with efficacy rates north of 90%. These positive vaccine results enabled markets to begin discounting a delayed reopening of the global economy in 2021 as new cases continued to rise. On November
9, 2020, the first trading session after the Pfizer vaccine news was released, interest rates spiked higher and there was a violent factor unwind. BofA’s momentum factor index fell 6% on that day, a 10 standard
deviation move. Cyclical, value, and EM stocks also benefitted from the rotation this initiated.
Over the course of 2020, security selection within the communication services, health care and information technology sectors contributed to the Fund’s returns versus the Benchmark. From a geographic
perspective, security selection in China and Taiwan made key contributions to performance versus the Benchmark in the past year.
Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR (Ticker: TSM-US) was a notable contributor to the Fund’s returns for the year. The company is the largest semiconductor foundry in the world. The
company benefitted from robust semiconductor industry demand driven by work-from-home/learn-from-home consumer demand, strong initial sell-through of the new iPhone models, and recovering cyclical demand.
Tencent Holdings Ltd. (Ticker: 700-HK) was also a significant contributor to the Fund’s return. The company is a digital platform and gaming company. The company outperformed as key mobile games posted strong
growth and the company saw a recovery in its ad business coming as China rebounded from COVID-19 lockdowns. The company’s third quarter 2020 results beat expectations but stock performance has been muted since,
likely due to concerns over government regulation after the government scuttled the Ant Group IPO and announced anti-monopoly proposals.
During 2020, the Fund outperformed versus the Benchmark in all sectors. At the country level, positions in India and Brazil detracted from the Fund’s performance relative to the Benchmark and absolute
returns.
Fund holding ICICI Bank Limited Sponsored ADR (Ticker: IBN-US) was a notable detractor from returns. The company is a leading private bank in India. The company was down with the Indian market selloff on the back of
COVID-19 fears, after the disorganization of India made containing the virus more challenging and India was particularly short of key supplies and hospital capacity. Stress on the Indian financial funding markets also
seemed to contribute to selling of this widely held name.
Another significant detractor from the Fund’s return for the year was Oil Company LUKOIL PJSC Sponsored ADR (Ticker: LKOD-GB). The company is a leading Russian oil and gas producer. The company struggled
against the backdrop of a growing oversupply of oil, as mobility trends have struggled to improve throughout the world since the worst of the initial COVID-19-related shock. The company maintains steady production
growth and has limited levers to pull to further improve its unit costs. Consequently, the potential for earnings upgrades has diminished, and the Fund exited its position.
Emerging market equities appear well positioned for 2021. The pace of the vaccine rollout and new strains of COVID-19 complicate the short-term outlook, but we perceive several tailwinds in the medium-term. First,
EM equities have historically exhibited a strong negative correlation with the U.S. dollar. Second, we expect that a rebound in global growth and trade will provide support to EM economies. Finally, low valuation and
light positioning suggest that there is room for further upside.
The U.S. dollar has already depreciated against most major developed and emerging market currency pairs. While there could be some recovery in the currency as domestic growth expectations rebound, we do not expect
any such strength to persist. This is principally a function of US monetary and fiscal policy. Additionally, the U.S. dollar sat at an all-time expensive level on a real effective exchange rate (REER) basis as
recently as May 2020. Economic growth and trade should eventually normalize as the global economy recovers from COVID-19. In addition to a reopening of the global economy, we further believe that growth will be
supported by historically high consumer savings, which are likely to be increased further with more stimulus payments. A shift away from unilateral trade restrictions may also provide further support to the global
economy. These dynamics may bolster manufacturing demand and commodity prices, which are critical drivers of emerging economies.
1
Indeed, macroeconomic data appears to indicate the rebound has already begun. Global manufacturing PMI is in expansionary territory and hit a three-year high at the end of 2020. Exports from Korea and Taiwan, both
dependable indicators of global demand, are growing by double-digits on a year-over-year basis. Finally, certain economists expect the GDP of EM countries to expand by 6.2% in 2021, after falling by 2% in 2020.
The third set of factors that could support EM going forward are light positioning and low valuation. 2020 saw the largest outflows in EM since 2008 as risk-aversion increased during the pandemic. The outflows were
sharpest in the first half of the year but started to turn positive in November after the vaccine announcements.
We do not expect valuation, absolute or relative, to act as a trigger for EM outperformance on its own. But after a decade of underperformance we think there is substantial headroom for EM to outperform as the
global economy rebounds.
Sincerely,
| 
| 
|
| Howard Schwab Lead Portfolio Manager | Chad Cleaver Portfolio Manager | Rich Thies Portfolio Manager |
Performance is historical and does not
represent future results.
Please see the following performance
overview page for index description.
2
Driehaus Emerging
Markets Growth Fund
Performance Overview
(unaudited)
The performance summarized below is historical and does not represent future results. Investment returns and principal value vary, and you may have a gain or loss when you sell shares. Performance data presented
measures the change in the value of an investment in the Fund, assuming reinvestment of all dividends and capital gains. Average annual total return reflects annualized change.
The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The graph compares the results of a $10,000 investment (minimum investment) in
the Fund over the last 10 fiscal year periods, with all dividends and capital gains reinvested, with the indicated indices (and dividends reinvested) for the same period.
| Average Annual Total Returns as of 12/31/20 | 1 Year | 3 Years | 5 Years | 10 Years |
| Driehaus Emerging Markets Growth Fund Investor Class (DREGX) | 27.31% | 10.15% | 15.06% | 6.50% |
| Driehaus Emerging Markets Growth Fund Institutional Class (DIEMX)1 | 27.60% | 10.39% | 15.22% | 6.58% |
| MSCI Emerging Markets Index-N2 | 18.31% | 6.17% | 12.81% | 3.63% |
| MSCI Emerging Markets Growth Index-N3 | 31.33% | 10.33% | 16.23% | 6.21% |
| 1 | The returns for the periods prior to July 17, 2017 (institutional share class inception date) include the performance of the investor share class. |
| 2 | The Morgan Stanley Capital International Emerging Markets Index-Net (MSCI Emerging Markets Index-N) is a market capitalization-weighted index designed to measure equity market performance in emerging markets. Data is in U.S. dollars and is calculated with net dividend reinvestment. Source: Morgan Stanley Capital International Inc. |
| 3 | The Morgan Stanley Capital International Emerging Markets Growth Index-Net (MSCI Emerging Markets Growth Index-N) is a subset of the MSCI Emerging Markets Index and includes only the MSCI Emerging Markets Index stocks which are categorized as growth stocks. Data is in U.S. dollars and is calculated with net dividend reinvestment. Source: Morgan Stanley Capital International Inc. |
3
Driehaus Emerging
Markets Growth Fund
Schedule of
Investments
December 31, 2020
Notes to Financial
Statements are an integral part of this Schedule.
4
Driehaus Emerging
Markets Growth Fund
Schedule of
Investments
December 31, 2020
Notes to Financial
Statements are an integral part of this Schedule.
5
Driehaus Emerging
Markets Growth Fund
Schedule of
Investments
December 31, 2020
| SP ADR | Sponsored American Depositary Receipt |
| 1 | Foreign security denominated and traded in U.S. dollars. |
| 2 | Security is exempt from registration under Rule 144A of the Securities Act of 1933, as amended. The total value of these securities is $89,412,243, which represents 4% of Net Assets (see Note F in the Notes to Financial Statements). |
| 3 | 7 day current yield as of December 31, 2020, is disclosed. |
| * | Non-income producing security. |
Percentages are stated as
a percent of net assets.
| Security Type | Percent of Total Net Assets | |
| Common Stocks | 95.18% | |
| Preferred Stocks | 0.36% | |
| Short Term Investments | 4.26% | |
| Total Investments | 99.80% | |
| Other Assets In Excess of Liabilities | 0.20% | |
| Total Net Assets | 100.00% |
| Regional Weightings | Percent of Total Net Assets | |
| Far East | 71.13% | |
| North America | 13.32% | |
| Europe | 8.06% | |
| South America | 6.42% | |
| Africa | 0.87% |
Notes to Financial Statements are
an integral part of this Schedule.
6
Driehaus Emerging
Markets Growth Fund
Schedule of
Investments
December 31, 2020
Notes to Financial
Statements are an integral part of this Schedule.
7
Driehaus Emerging
Markets Small Cap Growth Fund — Portfolio Managers’ Letter
Dear Fellow
Shareholders,
The Driehaus Emerging Markets Small Cap Growth Fund (“Fund”) returned 33.56% for the year ended December 31, 2020. The Fund’s primary benchmark, the Morgan Stanley Capital International
(“MSCI”) Emerging Markets Small Cap Index (“Benchmark”), returned 19.29% for the same period, and the Fund’s secondary benchmark, the MSCI Emerging Markets Small Cap Growth Index,
returned 25.56%.
Global equity markets closed out 2020 on a strong note, marked by Joe Biden’s victory in the U.S. presidential election, along with the announcement of what appeared to be two highly effective COVID-19
vaccines. Moving into 2021, we remain optimistic on emerging markets (EM) and the alpha generation potential for the small cap segment of the asset class.
First, financial conditions across the globe remain easy, owing to the extraordinary response to COVID-19 by the Federal Reserve, which further accelerated an easing trend that had been in place since early 2019.
Second, China’s economy continues to evolve, no longer being overly reliant on exports or fixed asset investment, but rather taking leadership positions in innovative areas such as technology platforms, electric
vehicles, and renewable energy. This focus on innovation is not only occurring in China, but in many emerging markets, including Korea, Taiwan, India, and Brazil. Third, emerging markets remain underinvested by many
global asset allocators. While the persistent strength of the U.S. dollar represented a headwind for much of the last decade, EM currencies have recently begun to benefit from improving growth and interest rate
differentials relative to developed economies. We believe that the combination of relatively strong economic growth in key EM countries such as China and Taiwan, along with the attractive interest rates found across
much of EM will lend support to capital flows into emerging economies in the year ahead.
Regarding countries, security selection in China and India contributed to the Fund’s performance for 2020. At the sector level, key contributions to performance relative to the Benchmark came from security
selection within the consumer discretionary and industrials sectors.
Ping An Healthcare and Technology Company Limited (Ticker: 1833-HK) was the most significant contributor to the Fund’s returns for the year. The company operates China’s leading telemedicine portal and
has benefited from rapidly increasing patient consultation volumes. Growing discussion surrounding favorable government policy toward reimbursement drove increasing optimism about the company’s ability to
monetize these services faster than expected and by a greater magnitude than previously assumed.
Burger King India Ltd (Ticker: 543248-IN) also made a notable contribution to the Fund’s returns for the year. The company is the sole franchisee of Burger King in India. The IPO in mid-December was highly
successful, as investors were attracted by the attractive store economics and expansion plans, along with the structural growth opportunity in India.
Security selection within the materials and real estate sectors relative to the Benchmark detracted from performance. From a geographic perspective, underweights in South Korea and Turkey were the top detractors.
In regard to detractors, Azul S.A. Sponsored ADR Pfd (Ticker: AZUL-US) was the Fund’s most notable detractor during the year. The company operates an airline in Brazil, with a high degree of routes, in which
they are the only carrier. The COVID-19 downturn in passenger traffic caused a significant hit to earnings, which was magnified by the high degree of financial leverage carried by the company, as well as its natural
sensitivity to a strong Brazilian real.
Cholamandalam Investment and Finance Co. Ltd. (Ticker: 511243-IN) was also a significant detractor from Fund performance for the year. The company is a non-bank financial company based in India with a focus on
commercial vehicle lending. In response to COVID-19, India announced a 21-day lockdown, which negatively impacted demand in Cholamandalam’s key verticals, while local liquidity conditions remained tight.
While 2020 has been a strong year for relative performance by the Fund, we note that the small cap segment of emerging markets has only recently started to outperform large caps for the first time since 2015. We
expect to see an improving performance opportunity for EM small caps in 2021 as investors seek the combination of attractive valuations and growth rates amid an improving macro backdrop. We close out 2020 with a full
pipeline of investment ideas and remain excited about the opportunity set in the space.
We
thank you for investing alongside us in the Driehaus Emerging Markets Small Cap Growth Fund and would like to express our gratitude for your continued confidence in our management capabilities.
8
Sincerely,
|
|
|
|
| Chad Cleaver, CFA Lead Portfolio Manager | Howard Schwab Portfolio Manager | Rich Thies Portfolio Manager |
Performance is historical and does not
represent future results.
Please see the following performance
overview page for index description.
9
Driehaus Emerging
Markets Small Cap Growth Fund
Performance Overview
(unaudited)
The performance summarized below is historical and does not represent future results. Investment returns and principal value vary, and you may have a gain or loss when you sell shares. Performance data presented
measures the change in the value of an investment in the Fund, assuming reinvestment of all dividends and capital gains. Average annual total return reflects annualized change.
The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The graph compares the results of a $10,000 investment (minimum investment) in
the Fund over the last 10 fiscal year periods (which includes performance of the Predecessor Limited Partnership's inception), with all dividends and capital gains reinvested, with the indicated indices (and dividends
reinvested) for the same period.
| Fund Only | Including Predecessor Limited Partnership | |||||
| Average Annual Total Returns as of 12/31/20 | 1 Year | 3 Years | 5 Years | Since Inception (8/22/11 - 12/31/20) | 10 Years | |
| Driehaus Emerging Markets Small Cap Growth Fund (DRESX)1 | 33.56% | 10.72% | 10.25% | 7.50% | 6.71% | |
| MSCI Emerging Markets Small Cap Index-N2 | 19.29% | 2.69% | 8.19% | 4.31% | 2.29% | |
| MSCI Emerging Markets Small Cap Growth Index-N3 | 25.56% | 4.02% | 7.14% | 4.19% | 2.10% | |
| 1 | The Driehaus Emerging Markets Small Cap Growth Fund (the “Fund”) performance shown above includes the performance of the Driehaus Emerging Markets Small Cap Growth Fund, L.P. (the “Predecessor Limited Partnership”), the Fund’s predecessor, for the periods before the Fund’s registration statement became effective. The Predecessor Limited Partnership, which was established on December 1, 2008, was managed with substantially the same investment objective, policies and philosophies as are followed by the Fund. The Fund succeeded to the Predecessor Limited Partnership’s assets on August 22, 2011. The Predecessor Limited Partnership was not registered under the Investment Company Act of 1940, as amended (“1940 Act”), and thus was not subject to certain investment and operational restrictions that are imposed by the 1940 Act. If the Predecessor Limited Partnership had been registered under the 1940 Act, its performance may have been adversely affected. The Predecessor Limited Partnership’s performance has been restated to reflect estimated expenses of the Fund. The returns for the periods prior to August 21, 2014, reflect fee waivers and/or reimbursements without which performance would have been lower. |
| 2 | The Morgan Stanley Capital International Emerging Markets Small Cap Index-Net (MSCI Emerging Markets Small Cap Index-N) is a market capitalization-weighted index designed to measure equity market performance of small cap stocks in emerging markets. Data is in U.S. dollars and is calculated with net dividend reinvestment. Source: Morgan Stanley Capital International Inc. |
| 3 | The Morgan Stanley Capital International Emerging Markets Small Cap Growth Index-Net (MSCI Emerging Markets Small Cap Growth Index-N) is a market capitalization-weighted index designed to measure equity market performance of small cap growth stocks in emerging markets. Data is in U.S. dollars and is calculated with net dividend reinvestment. Source: Morgan Stanley Capital International Inc. |
10
Driehaus Emerging
Markets Small Cap Growth Fund
Schedule of
Investments
December 31, 2020
Notes to Financial
Statements are an integral part of this Schedule.
11
Driehaus Emerging
Markets Small Cap Growth Fund
Schedule of
Investments
December 31, 2020
Notes to Financial
Statements are an integral part of this Schedule.
12
Driehaus Emerging
Markets Small Cap Growth Fund
Schedule of
Investments
December 31, 2020
Notes to Financial
Statements are an integral part of this Schedule.
13
Driehaus Emerging
Markets Small Cap Growth Fund
Schedule of
Investments
December 31, 2020
Notes to Financial
Statements are an integral part of this Schedule.
14
Driehaus Emerging
Markets Opportunities Fund — Portfolio Managers’ Letter
Dear Fellow
Shareholders,
The Driehaus Emerging Markets Opportunities Fund (“Fund”), previously the Driehaus Multi-Asset Growth Economies Fund, returned 30.09% for the year ended December 31, 2020. The Fund outperformed both its
primary Benchmark and secondary Benchmark for the year. The Morgan Stanley Capital International (“MSCI”) Emerging Markets Index (“Benchmark”), returned 18.31% for the year, while the equally
weighted 50% (“MSCI”) Emerging Markets Index and 50% JP Morgan Global Bond Index Emerging Markets Global Diversified returned 10.59%.
The past year revealed a lot about the realities of emerging markets investing. The asset class has long been billed as a story of higher potential gross domestic product (GDP) growth than developed economies,
better demographics and an emerging middle class. All of those things have been true the past several years, and yet, returns have lagged developed market equities significantly. One pushback we have received more
frequently over the past few years on our positive view on emerging market equities surrounded the inevitable slowdown in growth and the fact that China’s growth in particular was slowing quickly. We never
disagreed. In fact, we think perhaps the single most important dynamic over the next 10-20 years for investors is just how much Chinese growth, arguably the single biggest global economic force over the past 20 plus
years, is going to slow. We believe that 2020 revealed that this can be extremely positive for emerging market equities. Much as U.S. topline economic growth has been paltry the past decade and equity returns have
been stellar, the same dynamics seem to be in play for emerging markets.
The year was a strong validation of the Fund’s approach, being able to manage drawdowns in the early part of the year with a higher fixed income allocation and to reduce that exposure once yields and spreads
were low enough to make the non-equity investable universe less attractive, all the while keeping a core focus on growth equities. In 2020, equity security selection in the communication services and healthcare
sectors contributed to the Fund’s return versus the Benchmark. From a country perspective, holdings in China and Singapore made key contributions to performance.
Tencent Holdings Ltd. (ticker: 700-HK) was the most significant contributor to the Fund’s performance. Tencent is a digital platform and gaming company. Tencent’s businesses focus on online gaming,
social media, and cloud computing, and these areas benefited from remote work and a heightened use of digital communications. We believe that the company has a strong gaming pipeline and will continue to gain market
share in the cloud services market.
For
2020, stock selection within the financials and real estate sectors detracted from the Fund’s returns versus the Benchmark. At the country level, equity holdings in South Korea and Slovenia detracted from Fund
performance.
Banco do Brasil S.A. (ticker: BBAS3-BR) was the most significant detractor to the Fund’s performance for the year. The investment was based on an economic recovery in Brazil benefiting the bank’s
earnings through a lending and asset quality recovery. The pandemic quickly changed the outlook for the company’s earnings as provisioning costs skyrocketed in the face of lockdowns. The Fund exited the position
in early 2020.
The non-equity allocations in the Fund generally consist of sovereign bonds and derivatives, including purchased and written options on currencies, interest rate swaps and foreign currency forward contracts. These
positions are primarily utilized to gain exposure to certain market segments, hedge against interest rate fluctuations and manage currency risk in the Fund’s equity holdings.
In 2020, the non-equity positions, in aggregate, slightly detracted from the Fund’s return. From a country perspective, the top non-equity position contributors were in China and Egypt. The top detractors were
in Colombia and Mexico. The Fund ended 2020 with a relatively lower exposure to non-equities. This was due to our perception of tight spreads generally being less attractive than equities. In addition, we view the
diversifying benefit as being reduced due to the likelihood that equity weakness would coincide with an increase in U.S. interest rates. Despite these thoughts, we still do find some idiosyncratic exposures in the
non-equity space to be compelling in both sovereign and credit as well as local currency and U.S. Dollar-denominated debt.
Heading into 2021, we think the most exciting aspect of the emerging markets landscape is still the pace of change in industries like tech hardware, autos, the Internet and renewable energy. We also believe that the
past year has supercharged historical growth trends, and our primary focus remains finding businesses best positioned to benefit in that regard.
We
thank you for investing alongside us in the Driehaus Emerging Markets Opportunities Fund and express our gratitude for your continued confidence in our management capabilities.
15
Sincerely,
|
|
|
| Richard Thies Lead Portfolio Manager | Chad Cleaver Portfolio Manager |
|
| 
|
| Howard Schwab Portfolio Manager | Jonathan Mershimer Assistant Portfolio Manager |
Performance is historical and does not
represent future results.
Please see the following performance
overview page for index description.
16
Driehaus Emerging
Markets Opportunities Fund
Performance Overview
(unaudited)
The performance summarized below is historical and does not represent future results. Investment returns and principal value vary, and you may have a gain or loss when you sell shares. Performance data presented
measures the change in the value of an investment in the Fund, assuming reinvestment of all dividends and capital gains. Average annual total return reflects annualized change.
The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The graph compares the results of a $10,000 investment (minimum investment) in
the Fund since April 10, 2017 (the date of the fund's inception), with all dividends and capital gains reinvested, with the indicated indices (and dividends reinvested) for the same period.
| Average Annual Total Returns as of 12/31/20 | 1 Year | 3 Years | Since Inception (4/10/17 - 12/31/20) |
| Driehaus Emerging Markets Opportunities Fund (DMAGX)1 | 30.09% | 11.17% | 14.64% |
| MSCI Emerging Markets Index-N2 | 18.31% | 6.17% | 10.86% |
| MSCI EM/JP Morgan GBI Blended Index3 | 10.59% | 4.81% | 7.93% |
| 1 | Prior to January 29, 2020, the Driehaus Emerging Markets Opportunities Fund was known as the Driehaus Multi-Asset Growth Economies Fund. The returns for the period reflect fee waivers and/or reimbursements without which performance would have been lower. |
| 2 | The Morgan Stanley Capital International Emerging Markets Index-Net (MSCI Emerging Markets Index-N) is a market capitalization-weighted index designed to measure equity market performance in emerging markets. Data is in U.S. dollars and is calculated with net dividend reinvestment. Source: Morgan Stanley Capital International Inc. |
| 3 | The MSCI EM/JPMorgan GBI Blended Index is an equally weighted benchmark comprised of 50 percent by the Morgan Stanley Capital International Emerging Markets Index-Net (MSCI EM) and 50 percent by the JPMorgan Global Bond Index Emerging Markets Global Diversified (JPMorgan GBI). The MSCI EM is a market capitalization-weighted index designed to measure equity market performance in emerging markets and the JPMorgan GBI tracks debt instruments in the emerging markets. Source: Morgan Stanley Capital International Inc. and JPMorgan. |
17
Driehaus Emerging
Markets Opportunities Fund
Schedule of
Investments
December 31, 2020
Notes to Financial
Statements are an integral part of this Schedule.
18
Driehaus Emerging
Markets Opportunities Fund
Schedule of
Investments
December 31, 2020
Notes to Financial
Statements are an integral part of this Schedule.
19
Driehaus Emerging
Markets Opportunities Fund
Schedule of
Investments
December 31, 2020
Notes to Financial
Statements are an integral part of this Schedule.
20
Driehaus Emerging
Markets Opportunities Fund
Schedule of
Investments
December 31, 2020
Notes to Financial
Statements are an integral part of this Schedule.
21
Driehaus International
Small Cap Growth Fund — Portfolio Managers’ Letter
Dear Fellow
Shareholders,
The Driehaus International Small Cap Growth Fund (“Fund”) returned 29.71% for the year ended December 31, 2020. The Fund’s benchmark, the Morgan Stanley Capital International (“MSCI”)
All Country World ex USA Small Cap Growth Index (“Benchmark”), returned 23.69%.
There is little doubt that 2020 will be remembered as an extraordinary year as global economies shut down to reduce the spread of a deadly pandemic. This resulted in the largest decline in output since the Great
Depression. The speed at which COVID-19 spread around the world surprised policy makers as they initially underestimated the severity of the virus and struggled to slow its growth.
While the first quarter of the year was punctuated by pessimism, that was quickly replaced by optimism as the global economy showed surprising resilience, supported by extraordinary monetary and fiscal policy. Most
global indices returned more than double digits for the year— an outcome few expected during the height of the pandemic.
From a sector perspective, 2020 key contributors to performance versus the Benchmark were the Fund’s holdings in the information technology and consumer discretionary sectors. From a geographical perspective,
holdings in Germany and Japan contributed positively to the performance of the Fund compared to the Benchmark.
Nextdc Limited (Ticker: NXDCF) is an Australian Data Center provider that has been held in the Fund for the last four years and is a beneficiary of the “cloud computing” megatrend. The availability of
high-speed bandwidth, low cost storage and rapid processing speeds has allowed applications to move from distributed “on premise” computing to centralized “cloud computing" hosted by cloud platforms
such as Amazon Web Service and Microsoft Azure. These cloud platforms ultimately sit inside physical data centers, and the company is the leading provider of such real estate in Australia. The company was steadily
growing its capacity to serve customers when the COVID-19 driven “Work from Home” phenomenon drove an inflection in cloud computing demand early in 2020. In fact, within months, the company had sold out of
capacity in its recently launched Sydney and Melbourne facilities, which was expected to take more than a year to book up. With this acceleration in demand and increased visibility, the company was able to raise
capital and announced the construction of two additional facilities. This expansion of the company’s footprint caused the stock to react favorably, and since it was a top position in the Fund at the time, it was
one of the Fund’s top contributors in 2020.
HelloFresh SE (Ticker: HLFFF) is a global leader in meal kits (boxes that are delivered to customers with all food ingredients and recipe instructions to prepare the meal at home). The company holds leading market
positions in the US and numerous European countries, posting strong sales growth in recent years with improving unit economics. As an online pureplay, the company performed well in 2019 and early 2020, with positive
growth inflection following COVID-19. As restrictions on mobility and stay at home restrictions were first implemented in numerous countries in March 2020, the company saw demand acceleration from new and repeat
customers. The continuously strong customer interest allowed the company to significantly outperform expectations with management beating and raising sales and earnings guidance multiple times throughout the year. The
increase in customer numbers significantly improved profitability, and strong cash flows supported sustainable growth and higher valuations.
For 2020, security selection in the materials and financials sectors detracted from the Fund’s performance versus the Benchmark. At the country level, while the United Kingdom and South Korea both contributed
positively to Fund’s absolute performance, these positions detracted from the Fund’s performance versus the Benchmark.
The most significant detractor from returns for the year was Leonardo SpA (Ticker: FINMY). The company is one of the largest helicopter manufacturers globally, with high exposure to defense and offshore oil
exploration. The company had seen years of cash flow headwinds driven partly by internal missteps but also by the nature of their business. As orders and deliveries can be in the billions of dollars, the working
capital swings can be difficult to manage. In 2019, we saw signs that the tide was changing. With high leverage and slightly improving cashflow, the upside potential was substantial. However, at the onset of
coronavirus, companies with weak cashflow and levered balance sheets were hit the hardest. The company’s main manufacturing facility was also in the epicenter of the COVID-19 outbreak in Italy. With zero
visibility on deliveries, plant openings or end market demand from oil majors, the stock declined materially. This led to it being one of the largest detractors for the year.
CAE, Inc. (Ticker: CAE) is the market leading flight simulator manufacturer with a mix of both civil and defense customers. The decade long upward trajectory in air travel volume combined with a structural shortage
of pilots lent itself to an accelerating growth profile for CAE, Inc. The company makes money by selling simulators to airlines and then offering training services. Margins and thus earnings increase when utilization
on the simulators increases. With the onset of COVID-19, airline travel went to basically zero causing material cash burn for the company’s customers (airlines). With
22
no cash and no demand for travel,
the company’s business evaporated in a matter of weeks. Pricing in zero revenue with almost no visibility caused the stock to decline materially in a very short amount of time. This led to it being one of the
largest detractors for the year.
We believe that the prospects for the global economy depend on the extent to which the virus continues to spread and the timing of the vaccine rollout. Projections suggest that most developed economies should have
enough doses to immunize the most vulnerable people and frontline workers by spring and approach herd immunity by mid-year. There are obviously many risks to these projections including vaccine effectiveness,
distribution, and the recent emergence of a more contagious strain in the United Kingdom. It is our expectation that market sentiment will be highly sensitive to these contingencies.
Despite these uncertainties, 2021 begins with expectations of a second half reopening and a V-shaped recovery in global growth as lowered restrictions on activity unlock consumer demand. Both monetary and fiscal
authorities likely will be less active on the margin in 2021 than they were in 2020, although still quite supportive. Central banks may have reached the limits of their effectiveness with interest rates and credit
spreads near lows. Looking forward, fiscal policy will have to take on a proportionally larger role than it has in recent years. Focus will be on whether governments can maintain fiscal policy of a large enough
magnitude to support growth. While there are a number of risks, we foresee a potent set up for a strong recovery with the combination of supportive policy, pent up demand, and potential easing of trade uncertainty.
Broadly, 2021 looks to be a year of strong earnings growth in ex-U.S. markets, and small cap corporates should be a disproportionate beneficiary of that trend.
As
always, we thank you for investing alongside us in the Driehaus International Small Cap Growth Fund and would like to express our gratitude for your continued confidence in our management capabilities.
Sincerely,
| 
| 
|
| Daniel Burr Portfolio Manager | David Mouser Portfolio Manager | Ryan Carpenter Assistant Portfolio Manager |
Performance is historical and does not
represent future results.
Please see the following performance
overview page for index description.
23
Driehaus International
Small Cap Growth Fund
Performance Overview
(unaudited)
The performance summarized below is historical and does not represent future results. Investment returns and principal value vary, and you may have a gain or loss when you sell shares. Performance data presented
measures the change in the value of an investment in the Fund, assuming reinvestment of all dividends and capital gains. Average annual total return reflects annualized change.
The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The graph compares the results of a $10,000 investment (minimum investment) in
the Fund over the last 10 fiscal year periods, with all dividends and capital gains reinvested, with the indicated index (and dividends reinvested) for the same period.
| Average Annual Total Returns as of 12/31/20 | 1 Year | 3 Years | 5 Years | 10 Years |
| Driehaus International Small Cap Growth Fund (DRIOX) | 29.71% | 12.01% | 13.26% | 9.89% |
| MSCI AC World ex USA Small Cap Growth Index-N1 | 23.69% | 8.00% | 10.92% | 6.97% |
| 1 | The Morgan Stanley Capital International All Country World ex USA Small Cap Growth Index-Net (MSCI AC World ex USA Small Cap Growth Index-N) is a market capitalization-weighted index designed to measure equity market performance in global developed markets and emerging markets, excluding the U.S., and is composed of stocks which are categorized as small capitalization growth stocks. Data is in U.S. dollars and is calculated with net dividend reinvestment. Source: Morgan Stanley Capital International Inc. |
24
Driehaus International
Small Cap Growth Fund
Schedule of
Investments
December 31, 2020
Notes to Financial
Statements are an integral part of this Schedule.
25
Driehaus International
Small Cap Growth Fund
Schedule of
Investments
December 31, 2020
Notes to Financial
Statements are an integral part of this Schedule.
26
Driehaus International
Small Cap Growth Fund
Schedule of
Investments
December 31, 2020
Notes to Financial
Statements are an integral part of this Schedule.
27
Driehaus International
Small Cap Growth Fund
Schedule of
Investments
December 31, 2020
Notes to Financial
Statements are an integral part of this Schedule.
28
Driehaus Micro Cap
Growth Fund — Portfolio Managers’ Letter
Dear Fellow
Shareholders,
The Driehaus Micro Cap Growth Fund (the “Fund”) returned 85.60% for the year ended December 31, 2020. This return outperformed the Fund’s benchmark, the Russell Microcap® Growth Index (the
“Benchmark”), which returned 40.13% for the same period.
2020 was certainly a year unlike any other. The global pandemic ended the longest bull market in modern history, caused a severe recession, a bear market and a public health crisis on a global scale. Work, school
and nearly all aspects of daily life were disrupted and went virtual. Political discord and social unrest reached their worst levels in decades. Monetary and fiscal stimulus programs were record setting in size and
scope. The year seemed to get off to a “normal” start, then a near complete economic shutdown and collapse due to social distancing restrictions and quarantines, which were then ultimately followed by a
stunning economic recovery overall (but of course, not for all). This recovery continued into the end of the year despite various levels of continued COVID restrictions remaining in place. Entering 2021, optimism does
appear to be rising, as safe, effective vaccines have been developed in record time.
Along the way, the Russell 2000® Index experienced its worst quarter ever in the first quarter and its best quarter ever in the fourth quarter, to complete the year 2020 up nearly 20%. While the market
consolidated in October ahead of the U.S. national election, it rocketed higher in November and December. The month of November was the strongest month ever for the Russell 2000® Index as it gained 18.4%. Then
the market followed through in December, making the three-month period the best quarter ever for the Russell 2000, up 31.4%.
While the clarity following the U.S. election may have played a role, we believe that the strength over the final two months was primarily due to the robust efficacy of the two leading COVID-19 vaccines reported in
November. COVID had been the dominant theme all year and the prospect of vaccines vanquishing the virus sets up the possibility of a long-awaited economic reopening in 2021.
The potential of these vaccines bolsters our positive outlook as we start the new year. Efficacy of around 95% for the two leading candidates is a near best case scenario. This should result in a much quicker return
to normalcy and a rapid economic reopening. As the vaccines are distributed over the next several months, COVID case levels should decline, perhaps sharply, economic restrictions should ease as we enter the spring and
summer months and ultimately, we should reach herd immunity. The equity market is a forward-looking mechanism and it likely will continue to price in better economic growth and stronger earnings, both of which that
will get a sustained boost from the reopening process.
This sanguine scenario should continue to be bullish for equities, but we don’t believe the recovery path will occur in a straight line. Vaccine distribution and public uptake on a national and global scale
will be difficult and require complicated and coordinated logistics. In the U.S., federal agencies, state and local governments, and many different organizations and companies, in disparate industries, must work
together. The public must also do its part to make the distribution and uptake successful. New COVID variants will need to be addressed and contained. As of early January 2021, after several weeks of distribution, the
rate of uptake is already behind expectations. However, the pace of inoculations is picking up quickly and while there will likely be additional stumbles ahead, the number of vaccines administered should grow
rapidly.
Despite possible short-term volatility, the intermediate-term outlook is quite encouraging as the economy exits a recession and enters what should be a new post-COVID expansion.
For
the year 2020, key contributors to performance versus the Benchmark were the Fund’s selection of holdings in the health care, consumer discretionary and information technology sectors.
SiTime Corporation (ticker: SITM) was the top contributor to Fund performance for the year. SiTime is a micro-electromechanical system (MEMS) based silicon timing solutions manufacturer. The company preannounced
third quarter 2020 earnings above consensus expectations led by design win/shipments into a leading 5G smartphone model that launched in the Fall 2020.
Myokardia, Inc. (ticker: MYOK) also contributed to the Fund’s performance for the year. Myokardia is a biopharmaceutical that develops precision medicine therapies for genetically defined cardiac diseases.
After showing highly significant data that unequivocally demonstrated the safety and efficacy of its lead agent in the late spring, the company was acquired by Bristol Myers Squibb for over a 60% premium.
During the period, only the energy sector detracted from Fund performance. The Fund outperformed versus the Benchmark in all sectors.
29
The holding that detracted the most from the Fund’s return during in 2020 was Ichor Holdings, Ltd. (ticker ICHR). The company engages in designing, engineering, and manufacturing fluid delivery subsystems for
semiconductor capital equipment. In the first quarter of 2020, the company’s manufacturing operations were disrupted by the lockdowns announced in California that severely impacted the first half of 2020 revenue
run rates. Additionally, the company ceded share to its primary competitor as supply chain disruptions in Asia resulted in missed shipments. The Fund sold out of the position as we believe the company’s revenue
recovery will trail its competitors and other semiconductor capital equipment peers coming out of the pandemic.
Skyline Champion Corporation (Ticker: SKY) also detracted from the Fund’s returns. Skyline Champion is the largest independent, publicly traded, factory-built housing company in North America. The company was
a top detractor from performance due to the stock’s significant decline in March when production was halted and much of its dealer customers were closed due to the COVID-19 pandemic. Production has since been
negatively impacted by labor availability issues.
Heading into 2021, we see several key drivers of strong economic and earnings improvement including: massive stimulus, decades-low inventories in many key industries, decades-high levels of savings and household net
worth gains, improving employment and massive pent up consumer demand. We expect these drivers to fuel mid-single digit GDP growth, possibly reaching the 6-7% range, driven by the consumer. Historically, equities do
well in the initial year of a new economic expansion and small caps have historically outperformed large caps during such time.
Overall, we see many dynamic investment opportunities in improving or sustainable industries, many of which fit our investment philosophy of companies exhibiting positive growth inflections, differentiation, market
share gains, growing revenues and expanding margins and earnings, which often lead to expectations being exceeded over time.
Thank you for investing alongside us in the Driehaus Micro Cap Growth Fund. We appreciate your continued confidence in our management capabilities.
Sincerely,
| 
| |
| Jeff James Lead Portfolio Manager | Michael Buck Portfolio Manager | |
| ||
| Prakash Vijayan Assistant Portfolio Manager |
Performance is historical and does not
represent future results.
Please see the following performance
overview page for index description.
30
Driehaus Micro Cap
Growth Fund
Performance Overview
(unaudited)
The performance summarized below is historical and does not represent future results. Investment returns and principal value vary, and you may have a gain or loss when you sell shares. Performance data presented
measures the change in the value of an investment in the Fund, assuming reinvestment of all dividends and capital gains. Average annual total return reflects annualized change.
The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The graph compares the results of a $10,000 investment (minimum investment) in
the Fund over the last 10 fiscal year periods (which includes performance of the Predecessor Limited Partnership), with all dividends and capital gains reinvested, with the indicated index (and dividends reinvested)
for the same period.
| Fund Only | Including Predecessor Limited Partnership | |||||
| Average Annual Total Returns as of 12/31/20 | 1 Year | 3 Years | 5 Years | Since Inception (11/18/13 - 12/31/20) | 10 Years | |
| Driehaus Micro Cap Growth Fund (DMCRX)1 | 85.60% | 37.18% | 30.46% | 23.01% | 20.24% | |
| Russell Microcap® Growth Index2 | 40.13% | 14.04% | 13.08% | 10.11% | 11.57% | |
| 1 | The Driehaus Micro Cap Growth Fund (the “Fund”) performance shown above includes the performance of the Driehaus Micro Cap Fund, L.P. (the “Predecessor Limited Partnership”), one of the Fund’s predecessors, for the periods before the Fund’s registration statement became effective. The Predecessor Limited Partnership, which was established on July 1, 1996, was managed with substantially the same investment objective, policies and philosophies as are followed by the Fund. The Fund succeeded to the Predecessor Limited Partnership’s assets together with the assets of the Driehaus Institutional Micro Cap Fund, L.P. on November 18, 2013. The Predecessor Limited Partnership was not registered under the Investment Company Act of 1940, as amended (“1940 Act”), and thus was not subject to certain investment and operational restrictions that are imposed by the 1940 Act. If the Predecessor Limited Partnership had been registered under the 1940 Act, its performance may have been adversely affected. The Predecessor Limited Partnership’s performance has been restated to reflect estimated expenses of the Fund. The returns for periods prior to November 18, 2016, reflect fee waivers and/or reimbursements without which performance would have been lower. |
| 2 | The Russell Microcap® Growth Index measures the performance of the microcap growth segment of the U.S. equity market. It includes those Russell Microcap companies that are considered more growth oriented relative to the overall market as defined by FTSE Russell's leading style methodology. The Russell Microcap® Growth Index is constructed to provide a comprehensive and unbiased barometer for the microcap growth segment of the market. Data is calculated with net dividend reinvestment. Source: FTSE Russell. |
31
Driehaus Micro Cap
Growth Fund
Schedule of
Investments
December 31, 2020
Notes to Financial
Statements are an integral part of this Schedule.
32
Driehaus Micro Cap
Growth Fund
Schedule of
Investments
December 31, 2020
Notes to Financial
Statements are an integral part of this Schedule.
33
Driehaus Micro Cap
Growth Fund
Schedule of
Investments
December 31, 2020
Notes to Financial
Statements are an integral part of this Schedule.
34
Driehaus Micro Cap
Growth Fund
Schedule of
Investments
December 31, 2020
Notes to Financial
Statements are an integral part of this Schedule.
35
Driehaus Small Cap
Growth Fund — Portfolio Managers’ Letter
Dear Fellow
Shareholders,
The Driehaus Small Cap Growth Fund (“Fund”) Investor class (DVSMX) returned 63.77% and Institutional class (DNSMX) returned 64.39% for the year ended December 31, 2020. This return outperformed the
Fund’s benchmark, the Russell 2000® Growth Index (the “Benchmark”), which returned 34.63% for the same period.
2020 was certainly a year unlike any other. The global pandemic ended the longest bull market in modern history, caused a severe recession, a bear market and a public health crisis on a global scale. Work, school
and nearly all aspects of daily life were disrupted and went virtual. Political discord and social unrest reached their worst levels in decades. Monetary and fiscal stimulus programs were record setting in size and
scope. The year seemed to get off to a “normal” start, then a near complete economic shutdown and collapse due to social distancing restrictions and quarantines, which were then ultimately followed by a
stunning economic recovery overall (but of course, not for all). This recovery continued into the end of the year despite various levels of continued COVID restrictions remaining in place. Entering 2021, optimism does
appear to be rising as safe, effective vaccines have been developed in record time.
Along the way, the Russell 2000® Index experienced its worst quarter ever in the first quarter and its best quarter ever in the fourth quarter, to complete the year 2020 up nearly 20%. While the market
consolidated in October ahead of the U.S. national election, it rocketed higher in November and December. The month of November was the strongest month ever for the Russell 2000® Index as it gained 18.4%. Then
the market followed through in December, making the three-month period the best quarter ever for the Russell 2000, up 31.4%.
While the clarity following the U.S. election may have played a role, we believe that the strength over the final two months was primarily due to the robust efficacy of the two leading COVID-19 vaccines reported in
November. COVID had been the dominant theme all year and the prospect of vaccines vanquishing the virus sets up and the possibility of a long-awaited economic reopening in 2021.
The potential of these vaccines bolsters our positive outlook as we start the new year. Efficacy of around 95% for the two leading vaccines is a near best case scenario. This should result in a much quicker return
to normalcy and a rapid economic reopening. As the vaccines are distributed over the next several months, COVID case levels should decline, perhaps sharply, economic restrictions should ease as we enter the spring and
summer months and ultimately, we should reach herd immunity. The equity market is a forward-looking mechanism and it likely will continue to price in better economic growth and stronger earnings, both of which will
get a sustained boost from the reopening process.
This sanguine scenario should continue to be bullish for equities, but we don’t believe the recovery path will occur in a straight line. Vaccine distribution and public uptake on a national and global scale
are difficult and require complicated and coordinated logistics. In the U.S., federal agencies, state and local governments, and many different organizations and companies, in disparate industries, must work together.
The public must also do its part to make the distribution and uptake successful. New COVID variants will need to be addressed and contained. As of early January 2021, after several weeks of distribution, the rate of
uptake is already behind expectations. However, the pace of inoculations is picking up quickly and while there will likely be additional stumbles ahead, the number of vaccines administered should grow rapidly.
Despite possible short-term volatility, the intermediate-term outlook is quite encouraging as the economy exits a recession and enters what should be a new post-COVID expansion.
For
the year 2020, key contributors to performance versus the Benchmark were the Fund’s selection of holdings in the health care, information technology and consumer discretionary sectors.
Myokardia, Inc. (ticker: MYOK) was the top contributor to Fund performance for the year. Myokardia is a biopharmaceutical that develops precision medicine therapies for genetically defined cardiac diseases. After
showing highly significant data that unequivocally demonstrated the safety and efficacy of its lead agent in the late spring, the company was acquired by Bristol Myers Squibb for over a 60% premium.
Fastly, Inc (ticker: FSLY) also contributed to Fund performance for the year. Fastly is a leading-edge content delivery network (CDN)/Edge compute platform vendor. The company reported strong earnings, guiding to
accelerating revenue growth of 55% year over year for the second quarter of 2020 compared to 38% year over year growth in the first quarter of 2020. These levels exceeded consensus forecasts by between 15% and 20%.
The company saw accelerated adoption of its platform in the e-commerce, gaming and cloud software verticals.
During the period, only the energy sector detracted from Fund performance. The Fund outperformed versus the Benchmark in all sectors.
36
The holding that detracted the most from the Fund’s return during in 2020 was Ichor Holdings, Ltd. (ticker ICHR). The company engages in designing, engineering, and manufacturing fluid delivery subsystems for
semiconductor capital equipment. In the first quarter of 2020, the company’s manufacturing operations were disrupted by the lockdowns announced in California that severely impacted the first half of 2020 revenue
run rates. Additionally, the company ceded share to its primary competitor as supply chain disruptions in Asia resulted in missed shipments. The Fund sold out of the position as we believe the company’s revenue
recovery will trail its competitor and other semiconductor capital equipment peers coming out of the pandemic.
Callaway Golf Company (Ticker: ELY) also detracted from the Fund’s returns. Callaway is a premium golf equipment and active lifestyle company. The company detracted from performance due to the stock’s
significant decline in March when its retail customers temporarily closed due to the COVID-19 pandemic. Callaway’s recent acquisition of Jack Wolfskin resulted in elevated financial leverage and exposure to
China which made the stock particularly vulnerable to concerns about the impact of COVID-19.
Heading into 2021, we see several key drivers of strong economic and earnings improvement including: massive stimulus, decades-low inventories in many key industries, decades-high levels of savings and household net
worth gains, improving employment and massive pent up consumer demand. We expect these drivers to fuel mid-single digit GDP growth, possibly reaching the 6-7% range, driven by the consumer. Historically, equities do
well in the initial year of a new economic expansion and small caps have historically outperformed large caps during such time.
Overall, we see many dynamic investment opportunities in improving or sustainable industries, many of which fit our investment philosophy of companies exhibiting positive growth inflections, differentiation, market
share gains, growing revenues and expanding margins and earnings, which often lead to expectations being exceeded over time.
Thank you for investing alongside us in the Driehaus Small Cap Growth Fund. We appreciate your continued confidence in our management capabilities.
Sincerely,
|
|
| |
| Jeff James Lead Portfolio Manager | Michael Buck Portfolio Manager | |
|
| ||
| Prakash Vijayan Assistant Portfolio Manager |
Performance is historical and does not
represent future results.
Please see the following performance
overview page for index description.
37
Driehaus Small Cap
Growth Fund
Performance Overview
(unaudited)
The performance summarized below is historical and does not represent future results. Investment returns and principal value vary, and you may have a gain or loss when you sell shares. Performance data presented
measures the change in the value of an investment in the Fund, assuming reinvestment of all dividends and capital gains. Average annual total return reflects annualized change.
The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The graph compares the results of a $10,000 investment (minimum investment) in
the Fund over the last 10 fiscal year periods (which includes performance of the Predecessor Partnership), with all dividends and capital gains reinvested, with the indicated index (and dividends reinvested) for the
same period.
| Fund Only | Including Predecessor Limited Partnership | |||||
| Average Annual Total Returns as of 12/31/20 | 1 Year | 3 Years | Since Inception (8/21/17 - 12/31/20) | 5 Years | 10 Years | |
| Driehaus Small Cap Growth Fund Investor Class (DVSMX)1 | 63.77% | 33.39% | 35.87% | 27.98% | 19.81% | |
| Driehaus Small Cap Growth Fund Institutional Class (DNSMX)1 | 64.39% | 33.79% | 36.26% | 28.23% | 19.93% | |
| Russell 2000® Growth Index2 | 34.63% | 16.20% | 19.11% | 16.36% | 13.48% | |
| 1 | The Driehaus Small Cap Growth Fund (“the Fund”) performance shown above includes the performance of the Driehaus Institutional Small Cap, L.P. (the “Predecessor Partnership”), one of the Fund’s predecessors, for the periods before the Fund’s registration statement became effective. The Predecessor Partnership was managed by the same investment team with substantially the same investment objective, policies and philosophies as are followed by the Fund. The Fund succeeded to the Predecessor Partnership’s assets together with the assets of the Driehaus Institutional Small Cap Recovery Fund, L.P., Driehaus Small Cap Recovery Fund, L.P. and Driehaus Small Cap Investors, L.P. (together, the “Limited Partnerships”) on August 21, 2017. The investment portfolios of the Limited Partnerships were identical and therefore had similar performance. The performance of the Predecessor Partnership is shown here because it has been in operation the longest. The Predecessor Partnership was not registered under the Investment Company Act of 1940, as amended (“1940 Act”), and thus was not subject to certain investment and operational restrictions that are imposed by the 1940 Act. If the Predecessor Partnership had been registered under the 1940 Act, its performance may have been adversely affected. The Predecessor Partnership’s performance has not been restated to reflect estimated expenses applicable to each class of shares of the Fund. The returns reflect fee waivers and/or reimbursements without which performance would have been lower. |
| 2 | The Russell 2000® Growth Index measures the performance of the small cap growth segment of the US Equity universe. It includes those Russell 2000® companies with higher price-value ratio and higher forecasted growth values. The Russell 2000® Index is constructed to provide a comprehensive and unbiased barometer for the small cap growth segment of the market. Data is calculated with net dividend reinvestment. Source: FTSE Russell. |
38
Driehaus Small Cap
Growth Fund
Schedule of
Investments
December 31, 2020
Notes to Financial
Statements are an integral part of this Schedule.
39
Driehaus Small Cap
Growth Fund
Schedule of
Investments
December 31, 2020
Notes to Financial
Statements are an integral part of this Schedule.
40
Driehaus Small Cap
Growth Fund
Schedule of
Investments
December 31, 2020
Notes to Financial
Statements are an integral part of this Schedule.
41
Driehaus Small Cap
Growth Fund
Schedule of
Investments
December 31, 2020
Notes to Financial
Statements are an integral part of this Schedule.
42
Driehaus Small/Mid Cap
Growth Fund — Portfolio Managers’ Letter
Dear Fellow
Shareholders,
The Driehaus Small/Mid Cap Growth Fund (the “Fund”) returned 74.23% for the period from inception on May 1, 2020 through December 31, 2020. This return outperformed the Fund’s benchmark, the
Russell 2500® Growth Index (the “Benchmark”), which returned 57.67% for the same period.
2020 was certainly a year unlike any other. The global pandemic ended the longest bull market in modern history, caused a severe recession, a bear market and a public health crisis on a global scale. Work, school
and nearly all aspects of daily life were disrupted and went virtual. Political discord and social unrest reached their worst levels in decades. Monetary and fiscal stimulus programs were record setting in size and
scope. The year seemed to get off to a “normal” start, then a near complete economic shutdown and collapse due to social distancing restrictions and quarantines, which were then ultimately followed by a
stunning economic recovery overall (but of course, not for all). This recovery continued into the end of the year despite various levels of continued COVID restrictions remaining in place. Entering 2021, optimism does
appear to be rising, as safe, effective vaccines have been developed in record time.
Along the way, the Russell 2000® Index experienced its worst quarter ever in the first quarter and its best quarter ever in the fourth quarter, to complete the year 2020 up nearly 20%. While the market
consolidated in October ahead of the US national election, it rocketed higher in November and December. The month of November was the strongest month ever for the Russell 2000® Index as it gained 18.4%. Then the
market followed through in December, making the three-month period the best quarter ever for the Russell 2000, up 31.4%.
While the clarity following the U.S. election may have played a role, we believe that the strength over the final two months was primarily due to the robust efficacy of the two leading COVID-19 vaccines reported in
November. COVID had been the dominant theme all year and the prospect of vaccines vanquishing the virus sets up the possibility of a long-awaited economic reopening in 2021.
The potential of these vaccines bolsters our positive outlook as we start the new year. Efficacy of around 95% for the two leading candidates is a near best case scenario. This should result in a much quicker return
to normalcy and a rapid economic reopening. As the vaccines are distributed over the next several months, COVID case levels should decline, perhaps sharply, economic restrictions should ease as we enter the spring and
summer months and ultimately, we should reach herd immunity. The equity market is a forward-looking mechanism and it likely will continue to price in better economic growth and stronger earnings, both of which that
will get a sustained boost from the reopening process.
This sanguine scenario should continue to be bullish for equities, but we don’t believe the recovery path will occur in a straight line. Vaccine distribution and public uptake on a national and global scale
will be difficult and require complicated and coordinated logistics. In the U.S., federal agencies, state and local governments, and many different organizations and companies, in disparate industries, must work
together. The public must also do its part to make the distribution and uptake successful. New COVID variants will need to be addressed and contained. As of early January 2021, after several weeks of distribution, the
rate of uptake is already behind expectations. However, the pace of inoculations is picking up quickly and while there will likely be additional stumbles ahead, the number of vaccines administered should grow
rapidly.
Despite possible short-term volatility, the intermediate-term outlook is quite encouraging as the economy exits a recession and enters what should be a new post-COVID expansion.
For
the year 2020, key contributors to performance versus the Benchmark were the Fund’s selection of holdings in the information technology, health care, communication services and consumer discretionary sectors.
Myokardia, Inc. (ticker: MYOK) was the top contributor to the Fund’s performance for the year. Myokardia is a biopharmaceutical that develops precision medicine therapies for genetically defined cardiac
diseases. After showing highly significant data that unequivocally demonstrated the safety and efficacy of its lead agent in the late spring, the company was acquired by Bristol Myers Squibb for over a 60% premium.
Roku, Inc. Class A (ticker: ROKU-US) was also a top contributor to Fund performance for the year. Roku is an Over-The-Top (OTT) streaming platform company. Roku reported strong third quarter 2020 earnings in early
November that were broadly better than consensus on all metrics. Additionally, industry reports indicate Roku and HBO Max are near an agreement for content distribution/revenue sharing which validates Roku as industry
leading OTT platform.
During the period, security selection in financials and industrials detracted from the Fund’s performance versus the Benchmark.
43
The holding that detracted the most from the Fund’s return during in 2020 was Global Blood Therapeutics (ticker: GBT). The company develops novel therapies to treat rare diseases, and late in 2019 received FDA
approval to market its first therapy in sickle cell disease. COVID-19 was particularly disruptive to the company’s commercial launch, given the limited ability of their sales organization to meet with physicians
and the reduction in patient office visits due to virus concerns. As a result, Global Blood Therapeutics revenue estimates fell and visibility into product peak sales was reduced, leading to stock price
depreciation.
FTI Consulting (ticker: FCN) also detracted from the Fund’s returns. FTI Consulting is a consultancy that provides advisory services for legal, financial, operational, regulatory, and transactional matters.
The company was experiencing accelerating revenue and earnings growth heading into 2020 with strong demand for restructuring and economic consulting services as well as new talent additions. However, when the COVID
pandemic hit in the first quarter of 2020 it significantly disrupted their consultants’ ability to travel to clients, and the court system shut down preventing many business activities critical to the company to
come to an abrupt halt. For the first time in over a year earnings estimates were revised lower due to a lack of visibility presented by the pandemic, and the stock began to languish. Although demand remained strong,
FTI Consulting’s ability to execute was severely limited for the foreseeable future.
Heading into 2021, we see several key drivers of strong economic and earnings improvement including: massive stimulus, decades-low inventories in many key industries, decades-high levels of savings and household net
worth gains, improving employment and massive pent up consumer demand. We expect these drivers to fuel mid-single digit GDP growth, possibly reaching the 6-7% range, driven by the consumer. Historically, equities do
well in the initial year of a new economic expansion and small caps have historically outperformed large caps during such time.
Overall, we see many dynamic investment opportunities in improving or sustainable industries, many of which fit our investment philosophy of companies exhibiting positive growth inflections, differentiation, market
share gains, growing revenues and expanding margins and earnings, which often lead to expectations being exceeded over time.
Thank you for investing alongside us in the Driehaus Small/Mid Cap Growth Fund. We appreciate your continued confidence in our management capabilities.
Sincerely,
|
|
|
| Jeff James Lead Portfolio Manager | Michael Buck Portfolio Manager |
|
| |
| Prakash Vijayan Assistant Portfolio Manager |
Performance is historical and does not
represent future results.
Please see the following performance
overview page for index description.
44
Driehaus Small/Mid Cap
Growth Fund
Performance Overview
(unaudited)
The performance summarized below is historical and does not represent future results. Investment returns and principal value vary, and you may have a gain or loss when you sell shares. Performance data presented
measures the change in the value of an investment in the Fund, assuming reinvestment of all dividends and capital gains. Average annual total return reflects annualized change.
The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The graph compares the results of a $10,000 investment (minimum investment) in
the Fund since May 1, 2020 (the date of the fund's inception), with all dividends and capital gains reinvested, with the indicated index (and dividends reinvested) for the same period.
| Average Annual Total Returns as of 12/31/20 | Since Inception (5/1/20 - 12/31/20) |
| Driehaus Small/Mid Cap Growth Fund (DSMDX)1 | 74.23% |
| Russell 2500® Growth Index2 | 57.67% |
| 1 | The returns for the period reflect fee waivers and/or reimbursements without which performance would have been lower. |
| 2 | The Russell 2500® Growth Index measures the performance of the small to midcap growth segment of the US Equity universe. It measures the performance of those Russell 2500® Index companies with higher growth earning potential as defined by FTSE Russell’s leading style methodology. The Russell 2500® Growth Index is constructed to provide a comprehensive and unbiased barometer for the small to midcap growth segment of the market. Data is calculated with net dividend reinvestment. Source: FTSE Russell. |
45
Driehaus Small/Mid Cap
Growth Fund
Schedule of
Investments
December 31, 2020
Notes to Financial
Statements are an integral part of this Schedule.
46
Driehaus Small/Mid Cap
Growth Fund
Schedule of
Investments
December 31, 2020
Notes to Financial
Statements are an integral part of this Schedule.
47
Driehaus Small/Mid Cap
Growth Fund
Schedule of
Investments
December 31, 2020
Notes to Financial
Statements are an integral part of this Schedule.
48
Driehaus Small/Mid Cap
Growth Fund
Schedule of
Investments
December 31, 2020
Notes to Financial
Statements are an integral part of this Schedule.
49
Driehaus Event Driven
Fund — Portfolio Managers’ Letter
Dear Fellow
Shareholders,
The Driehaus Event Driven Fund (“Fund”) returned 24.84% for the year ended December 31, 2020. The Fund outperformed, the S&P 500 Index (the “Benchmark”), which returned 18.40% for the
same period, and the FTSE 3-Month T-Bill Index, an additional index against which the Fund’s performance may be compared, which returned 0.58%.
In hindsight, our 2020 macro prediction model got it wrong. This time last year, we failed to predict “global pandemic leads to worldwide market despair followed by liquidity deluge followed by market
euphoria…all before the market considers the U.S. Presidential election.” Despite our lack of precise forecasting (all kidding aside), the Fund – due largely to its multi-asset, hedged composition of
idiosyncratic securities, weathered the storm. As importantly, we opportunistically made a series of attractive investments prior to, during, and after the most extreme market moves.
Within the Fund, the equity catalyst driven theme, which focuses on catalyst driven investments that are expressed predominantly through common stock investments, was the largest contributor for the Fund during
2020. During the year, the strategy generated the majority of its returns across a spectrum of events. Specifically, the Fund benefitted from equity holdings that experienced recapitalizations, regulatory approvals,
and two separate acquisitions of long-time holdings (one in the healthcare industry and one in the financial industry). The Fund capitalized on idiosyncratic events across a number of different industries,
particularly in the healthcare and financial sectors.
The bond with catalyst theme positions, which are event driven investments that are expressed predominantly through corporate loans and bonds, were the second most significant long exposure contributors to
performance during the year. The strategy saw contributions across a number of different corporate credit positions that benefited from companies addressing capital allocation programs, debt repayment, and refinancing
activity. As we head into 2021, this strategy type composes approximately 20% of the Fund’s assets. Based on the team’s belief that the opportunity set in credit will improve during 2021 and 2022, we
expect the Fund’s allocation to this strategy to grow.
Risk arbitrage investments, which strive to capture valuation discrepancies between similar securities, slightly detracted from performance for the year. The Fund continued to utilize a selective approach to risk
arbitrage, focusing on situations that had a line of sight to deal closure, and avoided deals with cross border regulatory risk. The Fund’s exposure in the category included cash tenders with high probabilities
of success, mergers and acquisitions (M&A) with reputable and repeat buyers, and exposures that were strengthened by (downside) valuation support.
Portfolio hedges detracted the most from Fund returns during the year. Sector Exchange Traded Funds (ETF’s) in the healthcare and financials space were used to hedge the Fund’s long single security
exposures in the select industries and detracted from our equity catalyst driven holdings contribution. Portfolio hedges typically utilize sector or market ETFs, as well as options or futures. These securities are
generally used to hedge unwanted exposures, such as to the equity market, foreign currencies or credit risks, or to help dampen market volatility. Portfolio hedges are established at the security, industry, asset
class, or market level depending on our strongest risk adjusted profile.
Within the Fund, we seek volatility below that of the Benchmark. In 2020, Fund volatility was 12.92% versus Benchmark volatility of 34.43%. Additionally, the Fund’s 100-day volatility (at December 31, 2020)
was limited to 53% of the Benchmark’s. Besides reduced volatility, we also seek to provide some diversification from the Benchmark. For 2020, the Fund’s correlation to the Benchmark was 0.59.
While we cannot say precisely when volatility will arise or pinpoint what will cause it in 2021, we are confident that bouts of volatility will continue throughout the upcoming year. With it will come both
opportunities for new investments and the need to protect capital. Importantly, within that context, the key tenets of our investment philosophy remain unchanged, even as portfolio construction tends to consistently
adjust to the ever-changing opportunity set of our investment universe. This is a bedrock foundation of the fund’s multi strategy, multi asset class approach that capitalizes on idiosyncratic situations across
the catalyst spectrum. Today, we believe that the Fund is positioned similarly to how it was this time last year: defensive, yet able to allocate aggressively as attractive opportunities arise.
As
always, we thank you for investing alongside us in the Driehaus Event Driven Fund and appreciate your continued confidence in our management capabilities.
Sincerely,
50
| 
| 
|
| Michael Caldwell Portfolio Manager | Tom McCauley Portfolio Manager | Yoav Sharon Portfolio Manager |
Performance is historical and does not
represent future results.
Please see the following performance
overview page for index description.
51
Driehaus Event Driven
Fund
Performance Overview
(unaudited)
The performance summarized below is historical and does not represent future results. Investment returns and principal value vary, and you may have a gain or loss when you sell shares. Performance data presented
measures the change in the value of an investment in the Fund, assuming reinvestment of all dividends and capital gains. Average annual total return reflects annualized change.
The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The graph compares the results of a $10,000 investment (minimum investment) in
the Fund since August 26, 2013 (the date of the fund's inception), with all dividends and capital gains reinvested, with the indicated indices (and dividends reinvested) for the same period.
| Average Annual Total Returns as of 12/31/20 | 1 Year | 3 Years | 5 Years | Since Inception (8/26/13 - 12/31/20) |
| Driehaus Event Driven Fund (DEVDX)1 | 24.84% | 12.69% | 9.67% | 6.80% |
| S&P 500 Index2 | 18.40% | 14.18% | 15.22% | 14.00% |
| FTSE 3-Month T-Bill Index3 | 0.58% | 1.56% | 1.16% | 0.80% |
| 1 | The returns for the periods prior to March 1, 2014, reflect fee waivers and/or reimbursements without which performance would have been lower. |
| 2 | The S&P 500 Index consists of 500 stocks chosen for market size, liquidity and industry group. It is a market-weighted index, with each stock’s weight in the index proportionate to its market value. |
| 3 | The FTSE 3-Month T-Bill Index is designed to mirror the performance of the 3-month U.S. Treasury Bill. The FTSE 3-Month T-Bill Index is unmanaged and its returns reflect reinvestment of all distributions and changes in market prices. |
52
Driehaus Event Driven
Fund
Schedule of
Investments
December 31, 2020
Notes to Financial
Statements are an integral part of this Schedule.
53
Driehaus Event Driven
Fund
Schedule of
Investments
December 31, 2020
Notes to Financial
Statements are an integral part of this Schedule.
54
Driehaus Event Driven
Fund
Schedule of
Investments
December 31, 2020
Notes to Financial
Statements are an integral part of this Schedule.
55
Driehaus Mutual Funds
Statements of Assets and
Liabilities
December 31, 2020
| Driehaus Emerging Markets Growth Fund | Driehaus Emerging Markets Small Cap Growth Fund | ||
| ASSETS: | |||
| Investments, at cost | $1,416,501,314 | $60,586,126 | |
| Investments securities, at fair value | $2,181,461,136 | $86,073,037 | |
| Short-term securities, at fair value1 | $97,180,178 | $5,338,694 | |
| Warrant securities, at fair value2 | — | — | |
| Foreign currency, at fair value3 | 9,327,040 | 836,672 | |
| Cash | — | — | |
| Receivable for investment securities sold | 21,631,091 | 682,552 | |
| Receivable for foreign taxes | — | 47,948 | |
| Receivable for fund shares sold | 1,179,593 | 7,459 | |
| Receivable for interest and dividends | 3,311,481 | 108,526 | |
| Prepaid expenses | 234,977 | 29,052 | |
| TOTAL ASSETS | 2,314,325,496 | 93,123,940 | |
| LIABILITIES: | |||
| Payable for investment securities sold short, proceeds | — | — | |
| Payable for investment securities sold short, at fair value | — | — | |
| Written options, at fair value4 | — | — | |
| Cash overdraft | — | — | |
| Payable for fund shares redeemed | 9,091,715 | 57,030 | |
| Payable for investment securities purchased | 13,291,971 | 3,153,104 | |
| Payable to affiliate | 1,790,707 | 80,544 | |
| Accrued shareholder services plan fees | 340,189 | — | |
| Accrued administration and accounting fees | 335,077 | 19,993 | |
| Accrued foreign capital gains taxes | 5,927,699 | — | |
| Accrued expenses | 286,796 | 84,023 | |
| TOTAL LIABILITIES | 31,064,154 | 3,394,694 | |
| NET ASSETS | $2,283,261,342 | $89,729,246 | |
| NET ASSETS CONSISTED OF THE FOLLOWING AT DECEMBER 31, 2020: | |||
| Paid-in-capital | $1,412,454,012 | $105,553,998 | |
| Total distributable earnings (deficit) | 870,807,330 | (15,824,752) | |
| NET ASSETS | $2,283,261,342 | $89,729,246 | |
| NET ASSETS | $— | $89,729,246 | |
| SHARES OUTSTANDING (Unlimited shares authorized, no par value) | — | 4,702,711 | |
| NET ASSET VALUE | $— | $19.08 | |
| INVESTOR CLASS SHARES | |||
| NET ASSETS | $951,998,334 | $— | |
| SHARES OUTSTANDING (Unlimited shares authorized, no par value) | 19,391,604 | — | |
| NET ASSET VALUE | $49.09 | $— | |
| INSTITUTIONAL CLASS SHARES | |||
| NET ASSETS | $1,331,263,008 | $— | |
| SHARES OUTSTANDING (Unlimited shares authorized, no par value) | 27,090,377 | — | |
| NET ASSET VALUE | $49.14 | $— | |
| 1 | The cost of short-term securities was $97,180,178, $5,338,694, $5,405,735, $6,012,281, $2,068,996, $4,179,137, $0 and $33,855,341, respectively. |
| 2 | The cost of warrants was $0, $0, $0, $0, $0, $0, $0 and $0, respectively. |
| 3 | The cost of foreign currency was $9,273,258, $836,651, $6, $0, $0, $0, $0 and $0, respectively. |
| 4 | The proceeds of written options was $0, $0, $0, $0, $0, $0, $0 and $376,509, respectively. |
Notes to Financial
Statements are an integral part of this Statement.
56
Driehaus Mutual Funds
Statements of Assets and
Liabilities
December 31, 2020
| Driehaus Emerging Markets Opportunities Fund | Driehaus International Small Cap Growth Fund | Driehaus Micro Cap Growth Fund | Driehaus Small Cap Growth Fund | Driehaus Small/Mid Cap Growth Fund | Driehaus Event Driven Fund | |||||
| $36,447,648 | $204,363,081 | $176,052,553 | $213,300,966 | $11,344,382 | $81,294,247 | |||||
| $50,305,996 | $283,654,733 | $332,401,212 | $352,583,210 | $14,890,679 | $104,515,215 | |||||
| $5,405,735 | $6,012,281 | $2,068,996 | $4,179,137 | $— | $33,855,341 | |||||
| — | — | — | — | — | 648,351 | |||||
| 6 | — | — | — | — | — | |||||
| 354,496 | — | — | — | — | 23,308,432 | |||||
| 1,906 | — | 1,871,519 | 3,124,043 | 93,237 | 221,988 | |||||
| — | — | — | — | — | — | |||||
| 23 | 113,191 | 3,914 | 634,031 | — | 1,844,721 | |||||
| 245,736 | 554,525 | 9,411 | 15,351 | 2,193 | 330,422 | |||||
| 57,494 | 30,811 | 83,991 | 63,692 | 24,439 | 59,743 | |||||
| 56,371,392 | 290,365,541 | 336,439,043 | 360,599,464 | 15,010,548 | 164,784,213 | |||||
| — | — | — | — | — | 14,696,864 | |||||
| — | — | — | — | — | 20,670,254 | |||||
| — | — | — | — | — | 162,667 | |||||
| — | — | — | — | 63,002 | — | |||||
| — | 9,474 | 67,170 | 57,058 | 53,195 | 63,705 | |||||
| 2,986,890 | 1,144,407 | 1,522,736 | 5,012,571 | — | 1,594,551 | |||||
| 36,282 | 237,728 | 350,116 | 173,621 | 7,547 | 117,090 | |||||
| — | — | — | 3,926 | — | — | |||||
| 4,522 | 40,984 | 43,662 | 42,257 | 11,204 | 1,691 | |||||
| 58,616 | — | — | — | — | — | |||||
| 63,624 | 78,433 | 64,395 | 67,005 | 30,114 | 110,131 | |||||
| 3,149,934 | 1,511,026 | 2,048,079 | 5,356,438 | 165,062 | 22,720,089 | |||||
| $53,221,458 | $288,854,515 | $334,390,964 | $355,243,026 | $14,845,486 | $142,064,124 | |||||
| $38,217,798 | $189,656,945 | $154,024,210 | $203,197,014 | $11,298,500 | $119,392,644 | |||||
| 15,003,660 | 99,197,570 | 180,366,754 | 152,046,012 | 3,546,986 | 22,671,480 | |||||
| $53,221,458 | $288,854,515 | $334,390,964 | $355,243,026 | $14,845,486 | $142,064,124 | |||||
| $53,221,458 | $288,854,515 | $334,390,964 | $— | $14,845,486 | $142,064,124 | |||||
| 3,508,387 | 22,941,336 | 16,724,185 | — | 863,488 | 10,195,646 | |||||
| $15.17 | $12.59 | $19.99 | $— | $17.19 | $13.93 | |||||
| $— | $— | $— | $28,087,764 | $— | $— | |||||
| — | — | — | 1,189,219 | — | — | |||||
| $— | $— | $— | $23.62 | $— | $— | |||||
| $— | $— | $— | $327,155,262 | $— | $— | |||||
| — | — | — | 13,699,337 | — | — | |||||
| $— | $— | $— | $23.88 | $— | $— | |||||
Notes to Financial
Statements are an integral part of this Statement.
57
Driehaus Mutual Funds
Statements of
Operations
For the Year Ended
December 31, 2020
| Driehaus Emerging Markets Growth Fund | Driehaus Emerging Markets Small Cap Growth Fund | ||
| INVESTMENT INCOME: | |||
| Interest income | $13,430 | $— | |
| Dividend income1 | 20,919,245 | 1,001,445 | |
| Total investment income | 20,932,675 | 1,001,445 | |
| Expenses: | |||
| Investment advisory fees | 18,239,478 | 732,472 | |
| Shareholder services fees | 1,820,859 | — | |
| Administration fees | 838,131 | 78,196 | |
| Transfer agent fees | 421,149 | 35,665 | |
| Trustees fees | 419,742 | 14,398 | |
| Custody fees | 371,657 | 39,366 | |
| Reports to shareholders | 152,334 | 8,309 | |
| Professional fees | 577,866 | 24,322 | |
| Audit and tax fees | 85,019 | 102,330 | |
| Federal and state registration fees | 50,000 | 22,500 | |
| Chief compliance officer fees | 17,343 | 17,343 | |
| Dividends and interest on short positions | — | — | |
| Interest expense | — | — | |
| Miscellaneous | 204,255 | 22,378 | |
| Total expenses | 23,197,833 | 1,097,279 | |
| Investment advisory fees recoupment (reimbursement) | — | (171,531) | |
| Administration fees waived | — | — | |
| Transfer agent fees waived | — | — | |
| Fees paid indirectly | (135,342) | (2,321) | |
| Net expenses | 23,062,491 | 923,427 | |
| Net investment income (loss) | (2,129,816) | 78,018 | |
| NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS: | |||
| Net realized gain (loss) on transactions from: | |||
| Investments2 | 174,331,353 | 5,549,180 | |
| Warrants | — | — | |
| Securities sold short | — | — | |
| Swaps contracts | — | — | |
| Forward foreign currency contracts | — | — | |
| Foreign currency | (1,637,222) | (238,326) | |
| Net realized gain (loss) on investment transactions | 172,694,131 | 5,310,854 | |
| Change in net unrealized appreciation (depreciation) on: | |||
| Investments3 | 311,159,363 | 14,671,872 | |
| Written options contracts | — | — | |
| Warrants | — | — | |
| Securities sold short | — | — | |
| Swap contracts | — | — | |
| Foreign currency | 38,748 | 51,445 | |
| Foreign currency translations | — | — | |
| Net change in unrealized appreciation (depreciation) on investment transactions | 311,198,111 | 14,723,317 | |
| Net realized and unrealized gain (loss) on investment transactions | 483,892,242 | 20,034,171 | |
| NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS | $481,762,426 | $20,112,189 | |
| 1 | Net of $3,277,964, $100,836, $46,521, $423,141, $0, $1,897, $141, and $0 of non-reclaimable foreign taxes withheld, respectively. |
| 2 | Net realized gain (loss) from security transactions are net of $19,553, $0, $0, $0, $0, $0, $0 and $0 foreign capital gains tax withheld, respectively. |
| 3 | Net unrealized gain (loss) from security transactions are net of $(5,927,699), $(755,551), $(58,616), $0, $0, $0, $0 and $0 foreign capital gains tax withheld, respectively. |
Notes to Financial
Statements are an integral part of this Statement.
58
Driehaus Mutual Funds
Statements of
Operations
For the Year Ended
December 31, 2020
| Driehaus Emerging Markets Opportunities Fund | Driehaus International Small Cap Growth Fund | Driehaus Micro Cap Growth Fund | Driehaus Small Cap Growth Fund | Driehaus Small/Mid Cap Growth Fund* | Driehaus Event Driven Fund | |||||
| $497,786 | $— | $— | $— | $— | $1,907,853 | |||||
| 400,685 | 3,060,850 | 273,253 | 358,966 | 10,532 | 380,563 | |||||
| 898,471 | 3,060,850 | 273,253 | 358,966 | 10,532 | 2,288,416 | |||||
| 327,473 | 2,460,180 | 3,227,705 | 1,369,876 | 29,232 | 1,018,776 | |||||
| — | — | — | 29,370 | — | 120,299 | |||||
| 46,755 | 181,366 | 172,699 | 167,224 | 13,143 | 65,101 | |||||
| 19,236 | 58,661 | 63,405 | 100,961 | 4,223 | 77,726 | |||||
| 6,052 | 58,475 | 59,656 | 31,457 | 709 | 17,401 | |||||
| 30,166 | 41,400 | 44,418 | 35,019 | 22,147 | 20,840 | |||||
| 8,548 | 12,836 | 15,096 | 20,564 | 160 | 21,419 | |||||
| 16,007 | 64,848 | 66,863 | 44,141 | 2,063 | 28,898 | |||||
| 66,625 | 72,468 | 34,760 | 34,779 | 28,782 | 55,279 | |||||
| 31,189 | 24,001 | 22,500 | 37,000 | 12,000 | 32,794 | |||||
| 8,305 | 17,343 | 17,343 | 18,217 | 11,752 | 8,305 | |||||
| — | — | — | — | — | 134,913 | |||||
| — | — | 1,036 | — | — | — | |||||
| 32,237 | 44,831 | 41,141 | 40,360 | 2,295 | 24,403 | |||||
| 592,593 | 3,036,409 | 3,766,622 | 1,928,968 | 126,506 | 1,626,154 | |||||
| (230,617) | — | — | (8,650) | (73,297) | — | |||||
| — | — | — | — | (3,750) | — | |||||
| — | — | — | — | (3,000) | — | |||||
| (1,350) | (14,845) | (65,779) | (33,114) | (60) | (25,355) | |||||
| 360,626 | 3,021,564 | 3,700,843 | 1,887,204 | 46,399 | 1,600,799 | |||||
| 537,845 | 39,286 | (3,427,590) | (1,528,238) | (35,867) | 687,617 | |||||
| 2,311,256 | 31,577,214 | 82,788,200 | 34,651,531 | 238,674 | 9,627,540 | |||||
| — | — | — | — | — | 348,556 | |||||
| — | — | — | — | — | 76,099 | |||||
| 107,987 | — | — | — | — | — | |||||
| 30,199 | — | — | — | — | — | |||||
| (92,648) | (39,625) | — | — | — | — | |||||
| 2,356,794 | 31,537,589 | 82,788,200 | 34,651,531 | 238,674 | 10,052,195 | |||||
| 7,020,977 | 35,373,906 | 81,270,382 | 105,766,133 | 3,546,297 | 20,364,254 | |||||
| — | — | — | — | — | 213,841 | |||||
| — | — | — | — | — | 548,233 | |||||
| — | — | — | — | — | (3,498,846) | |||||
| (26,132) | — | — | — | — | — | |||||
| (382) | 33,104 | — | — | — | — | |||||
| (3,618) | — | — | — | — | — | |||||
| 6,990,845 | 35,407,010 | 81,270,382 | 105,766,133 | 3,546,297 | 17,627,482 | |||||
| 9,347,639 | 66,944,599 | 164,058,582 | 140,417,664 | 3,784,971 | 27,679,677 | |||||
| $9,885,484 | $66,983,885 | $160,630,992 | $138,889,426 | $3,749,104 | $28,367,294 | |||||
| * | For the period from May 1, 2020 (commencement of operations) through December 31, 2020. |
Notes to Financial Statements are
an integral part of this Statement.
59
Driehaus Mutual Funds
Statements of Changes in
Net Assets
| Driehaus Emerging Markets Growth Fund | Driehaus Emerging Markets Small Cap Growth Fund | ||||||
| For the year ended December 31, 2020 | For the year ended December 31, 2019 | For the year ended December 31, 2020 | For the year ended December 31, 2019 | ||||
| INCREASE (DECREASE) IN NET ASSETS: | |||||||
| Operations: | |||||||
| Net investment income (loss) | $(2,129,816) | $15,788,913 | $78,018 | $344,582 | |||
| Net realized gain (loss) on investment transactions | 172,694,131 | 71,686,094 | 5,310,854 | 9,961,191 | |||
| Net change in unrealized appreciation (depreciation) on investment transactions | 311,198,111 | 281,848,637 | 14,723,317 | 10,273,967 | |||
| Net increase (decrease) in net assets resulting from operations | 481,762,426 | 369,323,644 | 20,112,189 | 20,579,740 | |||
| Distributions from distributable earnings to shareholders: | |||||||
| Fund | — | — | (556,757) | (255,325) | |||
| Investor Class Shares | (23,489,434) | (7,060,076) | — | — | |||
| Institutional Class Shares | (32,004,050) | (9,417,880) | — | — | |||
| Total distributions to shareholders | (55,493,484) | (16,477,956) | (556,757) | (255,325) | |||
| Capital share transactions: | |||||||
| Proceeds from shares sold: | |||||||
| Fund | — | — | 42,887,654 | 10,428,657 | |||
| Investor Class | 122,400,329 | 102,153,849 | — | — | |||
| Institutional Class | 339,486,012 | 247,854,903 | — | — | |||
| Reinvestment of distributions: | |||||||
| Fund | — | — | 466,065 | 209,523 | |||
| Investor Class | 22,539,510 | 6,761,528 | — | — | |||
| Institutional Class | 28,589,713 | 6,842,565 | — | — | |||
| Cost of shares redeemed: | |||||||
| Fund | — | — | (35,591,556) | (58,228,599) | |||
| Investor Class | (238,017,663) | (215,941,727) | — | — | |||
| Institutional Class | (209,828,617) | (154,953,413) | — | — | |||
| Redemption fees: | |||||||
| Fund | — | — | 4,205 | 20,320 | |||
| Investor Class | 28,875 | 53,415 | — | — | |||
| Institutional Fund | 29,249 | 46,979 | — | — | |||
| Net increase (decrease) from capital transactions | 65,227,408 | (7,181,901) | 7,766,368 | (47,570,099) | |||
| Total increase (decrease) in net assets | 491,496,350 | 345,663,787 | 27,321,800 | (27,245,684) | |||
| NET ASSETS: | |||||||
| Beginning of period | $1,791,764,992 | $1,446,101,205 | $62,407,446 | $89,653,130 | |||
| End of period | $2,283,261,342 | $1,791,764,992 | $89,729,246 | $62,407,446 | |||
Notes to Financial
Statements are an integral part of this Statement.
60
Driehaus Mutual Funds
Statements of Changes in
Net Assets
| Driehaus Emerging Markets Opportunities Fund | Driehaus International Small Cap Growth Fund | Driehaus Micro Cap Growth Fund | ||||||||
| For the year ended through December 31, 2020 | For the year ended December 31, 2019 | For the year ended December 31, 2020 | For the year ended December 31, 2019 | For the year ended December 31, 2020 | For the year ended December 31, 2019 | |||||
| $537,845 | $947,357 | $39,286 | $1,632,146 | $(3,427,590) | $(3,317,303) | |||||
| 2,356,794 | 333,334 | 31,537,589 | 18,156,966 | 82,788,200 | 50,822,845 | |||||
| 6,990,845 | 5,614,238 | 35,407,010 | 46,116,055 | 81,270,382 | 21,885,605 | |||||
| 9,885,484 | 6,894,929 | 66,983,885 | 65,905,167 | 160,630,992 | 69,391,147 | |||||
| (1,123,080) | (443,723) | (22,403,111) | (1,976,543) | (58,749,898) | (33,768,834) | |||||
| — | — | — | — | — | — | |||||
| — | — | — | — | — | — | |||||
| (1,123,080) | (443,723) | (22,403,111) | (1,976,543) | (58,749,898) | (33,768,834) | |||||
| 26,003,271 | 10,925,869 | 41,526,419 | 44,599,170 | 41,498,846 | 68,729,193 | |||||
| — | — | — | — | — | — | |||||
| — | — | — | — | — | — | |||||
| 1,122,838 | 443,412 | 19,610,183 | 1,754,974 | 40,290,822 | 29,366,777 | |||||
| — | — | — | — | — | — | |||||
| — | — | — | — | — | — | |||||
| (21,710,112) | (10,414,503) | (85,092,052) | (60,484,970) | (118,404,606) | (129,214,201) | |||||
| — | — | — | — | — | — | |||||
| — | — | — | — | — | — | |||||
| — | — | 500 | 406 | 4,638 | 9,243 | |||||
| — | — | — | — | — | — | |||||
| — | — | — | — | — | — | |||||
| 5,415,997 | 954,778 | (23,954,950) | (14,130,420) | (36,610,300) | (31,108,988) | |||||
| 14,178,401 | 7,405,984 | 20,625,824 | 49,798,204 | 65,270,794 | 4,513,325 | |||||
| $39,043,057 | $31,637,073 | $268,228,691 | $218,430,487 | $269,120,170 | $264,606,845 | |||||
| $53,221,458 | $39,043,057 | $288,854,515 | $268,228,691 | $334,390,964 | $269,120,170 | |||||
Notes to Financial
Statements are an integral part of this Statement.
61
Driehaus Mutual Funds
Statements of Changes in
Net Assets
| Driehaus Small Cap Growth Fund | Driehaus Small/Mid Cap Growth Fund | ||||
| For the year ended December 31, 2020 | For the year ended December 31, 2019 | For the period May 1, 2020* through December 31, 2020 | |||
| INCREASE (DECREASE) IN NET ASSETS: | |||||
| Operations: | |||||
| Net investment income (loss) | $(1,528,238) | $(1,140,258) | $(35,867) | ||
| Net realized gain (loss) on investment transactions | 34,651,531 | 21,736,831 | 238,674 | ||
| Net change in unrealized appreciation (depreciation) on investment transactions | 105,766,133 | 30,538,084 | 3,546,297 | ||
| Net increase (decrease) in net assets resulting from operations | 138,889,426 | 51,134,657 | 3,749,104 | ||
| Distributions from distributable earnings to shareholders: | |||||
| Fund | — | — | (202,118) | ||
| Investor Class Shares | (1,620,573) | (640,385) | — | ||
| Institutional Class Shares | (19,908,410) | (9,268,936) | — | ||
| Total distributions to shareholders | (21,528,983) | (9,909,321) | (202,118) | ||
| Capital share transactions: | |||||
| Proceeds from shares sold: | |||||
| Fund | — | — | 17,928,182 | ||
| Investor Class | 13,330,751 | 7,758,179 | — | ||
| Institutional Class | 112,711,149 | 57,398,808 | — | ||
| Reinvestment of distributions: | |||||
| Fund | — | — | 202,118 | ||
| Investor Class | 1,619,229 | 640,385 | — | ||
| Institutional Class | 19,739,575 | 9,197,963 | — | ||
| Cost of shares redeemed: | |||||
| Fund | — | — | (6,831,800) | ||
| Investor Class | (4,531,942) | (7,175,856) | — | ||
| Institutional Class | (77,715,811) | (67,276,279) | — | ||
| Redemption fees: | |||||
| Fund | — | — | — | ||
| Investor Class | 3,223 | 1,112 | — | ||
| Institutional Fund | 6,224 | 17,340 | — | ||
| Net increase (decrease) from capital transactions | 65,162,398 | 561,652 | 11,298,500 | ||
| Total increase (decrease) in net assets | 182,522,841 | 41,786,988 | 14,845,486 | ||
| NET ASSETS: | |||||
| Beginning of period | $172,720,185 | $130,933,197 | $— | ||
| End of period | $355,243,026 | $172,720,185 | $14,845,486 | ||
| * | For the period from May 1, 2020 (commencement of operations) through December 31, 2020. |
Notes to Financial
Statements are an integral part of this Statement.
62
Driehaus Mutual Funds
Statements of Changes in
Net Assets
| Driehaus Event Driven Fund | ||
| For the year ended December 31, 2020 | For the year ended December 31, 2019 | |
| $687,617 | $1,448,301 | |
| 10,052,195 | 4,699,382 | |
| 17,627,482 | 4,010,666 | |
| 28,367,294 | 10,158,349 | |
| (4,729,352) | (2,262,269) | |
| — | — | |
| — | — | |
| (4,729,352) | (2,262,269) | |
| 75,163,713 | 36,050,717 | |
| — | — | |
| — | — | |
| 4,489,499 | 2,071,307 | |
| — | — | |
| — | — | |
| (30,682,059) | (28,238,483) | |
| — | — | |
| — | — | |
| — | — | |
| — | — | |
| — | — | |
| 48,971,153 | 9,883,541 | |
| 72,609,095 | 17,779,621 | |
| $69,455,029 | $51,675,408 | |
| $142,064,124 | $69,455,029 | |
Notes to Financial
Statements are an integral part of this Statement.
63
Driehaus Emerging
Markets Growth Fund — Investor Class
Financial Highlights
| For the year ended December 31, 2020 | For the year ended December 31, 2019 | For the year ended December 31, 2018 | For the year ended December 31, 2017 | For the year ended December 31, 2016 | |||||
| Net asset value, beginning of period | $ 39.53 | $ 31.80 | $ 39.64 | $ 27.98 | $ 26.52 | ||||
| INCOME (LOSS) FROM INVESTMENT OPERATIONS: | |||||||||
| Net investment income (loss) | (0.09)1 | 0.301 | 0.261 | 0.111 | 0.03 | ||||
| Net realized and unrealized gain (loss) on investments | 10.87 | 7.76 | (6.73) | 11.78 | 1.54 | ||||
| Total income (loss) from investment operations | 10.78 | 8.06 | (6.47) | 11.89 | 1.57 | ||||
| LESS DISTRIBUTIONS: | |||||||||
| Net investment income | — | (0.33) | (0.16) | (0.23) | (0.11) | ||||
| Net realized gain | (1.22) | — | (1.21) | — | — | ||||
| Total distributions | (1.22) | (0.33) | (1.37) | (0.23) | (0.11) | ||||
| Redemption fees added to paid-in capital | 0.002 | 0.002 | 0.002 | 0.002 | 0.002 | ||||
| Net asset value, end of period | $ 49.09 | $ 39.53 | $ 31.80 | $ 39.64 | $ 27.98 | ||||
| Total Return | 27.31% | 25.34% | (16.26)% | 42.52% | 5.88% | ||||
| RATIOS/SUPPLEMENTAL DATA: | |||||||||
| Net assets, end of period (000’s) | $ 951,998 | $ 863,535 | $ 791,656 | $ 1,266,365 | $ 1,335,873 | ||||
| Ratio of total expenses before reimbursements, waivers, recoupments and/or fees paid indirectly to average net assets | 1.39% | 1.41% | 1.38% | 1.54% | 1.65% | ||||
| Ratio of total expenses net of reimbursements, waivers, recoupments and/or fees paid indirectly to average net assets3 | 1.38% | 1.40% | 1.37% | 1.53% | 1.63% | ||||
| Ratio of net investment income (loss) (including interest expense) net of reimbursements, waivers, recoupments and/or fees paid indirectly to average net assets3 | (0.24)% | 0.85% | 0.69% | 0.33% | 0.11% | ||||
| Portfolio turnover | 203% | 167% | 218% | 176% | 232% |
| 1 | Net investment income (loss) per share has been calculated using the average shares method. |
| 2 | Amount represents less than $0.01 per share. |
| 3 | Such ratios are net of fees paid indirectly (see Note C in the Notes to Financial Statements). The ratio for the Fund includes the effect of fees paid indirectly which impacted the ratio by 0.02%, 0.01%, 0.01%, 0.01%, and 0.01% for the years 2016, 2017, 2018, 2019, and 2020. |
Notes to Financial Statements are
an integral part of this Schedule.
64
Driehaus Emerging
Markets Growth Fund — Institutional Class
Financial Highlights
| For the year ended December 31, 2020 | For the year ended December 31, 2019 | For the year ended December 31, 2018 | For the period July 17, 2017 through December 31, 2017 | ||||
| Net asset value, beginning of period | $ 39.48 | $ 31.76 | $ 39.61 | $ 34.85 | |||
| INCOME (LOSS) FROM INVESTMENT OPERATIONS: | |||||||
| Net investment income (loss) | (0.01)1 | 0.381 | 0.32 | 0.121 | |||
| Net realized and unrealized gain (loss) on investments | 10.89 | 7.75 | (6.71) | 4.92 | |||
| Total income (loss) from investment operations | 10.88 | 8.13 | (6.39) | 5.04 | |||
| LESS DISTRIBUTIONS: | |||||||
| Net investment income | — | (0.41) | (0.25) | (0.28) | |||
| Net realized gain | (1.22) | — | (1.21) | — | |||
| Total distributions | (1.22) | (0.41) | (1.46) | (0.28) | |||
| Redemption fees added to paid-in capital | 0.002 | 0.002 | 0.002 | 0.002 | |||
| Net asset value, end of period | $ 49.14 | $ 39.48 | $ 31.76 | $ 39.61 | |||
| Total Return | 27.60% | 25.60% | (16.08)% | 14.47%3 | |||
| RATIOS/SUPPLEMENTAL DATA: | |||||||
| Net assets, end of period (000’s) | $ 1,331,263 | $ 928,230 | $ 654,445 | $ 513,135 | |||
| Ratio of total expenses before reimbursements, waivers, recoupments and/or fees paid indirectly to average net assets | 1.17% | 1.20% | 1.17% | 1.17%4 | |||
| Ratio of total expenses net of reimbursements, waivers, recoupments and/or fees paid indirectly to average net assets5 | 1.16% | 1.19% | 1.16% | 1.16%4 | |||
| Ratio of net investment income (loss) (including interest expense) net of reimbursements, waivers, recoupments and/or fees paid indirectly to average net assets5 | (0.02)% | 1.07% | 0.89% | 0.71%4 | |||
| Portfolio turnover | 203% | 167% | 218% | 176%3 |
| 1 | Net investment income (loss) per share has been calculated using the average shares method. |
| 2 | Amount represents less than $0.01 per share. |
| 3 | Not annualized. |
| 4 | Annualized. |
| 5 | Such ratios are net of fees paid indirectly (see Note C in the Notes to Financial Statements). The ratio for the Fund includes the effect of fees paid indirectly which impacted the ratio by 0.01% for the years 2017, 2018, 2019, and 2020. |
Notes to Financial
Statements are an integral part of this Schedule.
65
Driehaus Emerging
Markets Small Cap Growth Fund
Financial Highlights
| For the year ended December 31, 2020 | For the year ended December 31, 2019 | For the year ended December 31, 2018 | For the year ended December 31, 2017 | For the year ended December 31, 2016 | |||||
| Net asset value, beginning of period | $ 14.38 | $ 10.80 | $ 14.21 | $ 10.66 | $ 11.85 | ||||
| INCOME (LOSS) FROM INVESTMENT OPERATIONS: | |||||||||
| Net investment income (loss) | 0.02 | 0.06 | (0.04)1 | 0.021 | (0.03)1 | ||||
| Net realized and unrealized gain (loss) on investments | 4.80 | 3.58 | (3.37) | 3.53 | (1.14) | ||||
| Total income (loss) from investment operations | 4.82 | 3.64 | (3.41) | 3.55 | (1.17) | ||||
| LESS DISTRIBUTIONS: | |||||||||
| Net investment income | (0.12) | (0.06) | — | — | (0.02) | ||||
| Total distributions | (0.12) | (0.06) | — | — | (0.02) | ||||
| Redemption fees added to paid-in capital | — | 0.002 | 0.002 | 0.002 | 0.002 | ||||
| Net asset value, end of period | $ 19.08 | $ 14.38 | $ 10.80 | $ 14.21 | $ 10.66 | ||||
| Total Return | 33.56% | 33.71% | (24.00)% | 33.30% | (9.97)% | ||||
| RATIOS/SUPPLEMENTAL DATA: | |||||||||
| Net assets, end of period (000’s) | $ 89,729 | $ 62,407 | $ 89,653 | $ 271,146 | $ 261,387 | ||||
| Ratio of total expenses before reimbursements, waivers, recoupments and/or fees paid indirectly to average net assets | 1.72% | 1.80%3 | 2.27%3 | 1.82% | 1.75% | ||||
| Ratio of total expenses net of reimbursements, waivers, recoupments and/or fees paid indirectly to average net assets4 | 1.45%5 | 1.45%3,5 | 2.26%3 | 1.80% | 1.73% | ||||
| Ratio of net investment income (loss) (including interest expense) net of reimbursements, waivers, recoupments and/or fees paid indirectly to average net assets4 | 0.12%5 | 0.52%5 | (0.30)% | 0.15% | (0.26)% | ||||
| Portfolio turnover | 248% | 220% | 207% | 243% | 240% |
| 1 | Net investment income (loss) per share has been calculated using the average shares method. |
| 2 | Amount represents less than $0.01 per share. |
| 3 | Ratio of expenses to average net assets includes interest expense of 0.01% for the year ended December 31, 2019, and less than 0.005% for the year ended December 31, 2018. The interest expense is from utilizing the line of credit (see Note G in the Notes to Financial Statements). |
| 4 | Such ratios are net of fees paid indirectly (see Note C in the Notes to Financial Statements). The ratio for the Fund includes the effect of fees paid indirectly which impacted the ratio by 0.02%, 0.02%, 0.02%, 0.01%, and 0.00% for the years 2016, 2017, 2018, 2019, and 2020. |
| 5 | Such ratios are after prior administrative and transfer agent waivers and adviser expense reimbursements, when applicable. BNY Mellon Investment Servicing (US) Inc., the administrative agent and transfer agent, waived a portion of its fees beginning with the Fund’s commencement of operations, August 22, 2011. Effective December 31, 2020, the Adviser contractually agreed to waive its investment advisory fee or absorb other operating expenses to the extent necessary to ensure that total annual Fund operating expenses (other than interest, taxes, brokerage commissions, dividends and interest on short sales, other investment-related expenses, acquired fund fees and expenses, and extraordinary expenses such as litigation and other expenses not incurred in the ordinary course of the Fund’s business) would not exceed the Fund’s operating expense cap of 1.24% of average daily net assets until April 30, 2023. From November 1, 2018, to December 31, 2020, the annual operating expense limitation was 1.45%. |
Notes to Financial
Statements are an integral part of this Schedule.
66
Driehaus Emerging
Markets Opportunities Fund
Financial Highlights
| For the year ended December 31, 2020 | For the year ended December 31, 2019 | For the year ended December 31, 2018 | For the period April 10, 2017* through December 31, 2017 | ||||
| Net asset value, beginning of period | $ 11.94 | $ 9.93 | $ 11.54 | $ 10.00 | |||
| INCOME (LOSS) FROM INVESTMENT OPERATIONS: | |||||||
| Net investment income (loss) | 0.16 | 0.29 | 0.24 | 0.17 | |||
| Net realized and unrealized gain (loss) on investments | 3.43 | 1.86 | (1.77) | 1.94 | |||
| Total income (loss) from investment operations | 3.59 | 2.15 | (1.53) | 2.11 | |||
| LESS DISTRIBUTIONS: | |||||||
| Net investment income | (0.11) | (0.14) | — | (0.16) | |||
| Net realized gain | (0.25) | — | (0.08) | (0.41) | |||
| Total distributions | (0.36) | (0.14) | (0.08) | (0.57) | |||
| Redemption fees added to paid-in capital | — | — | — | 0.001 | |||
| Net asset value, end of period | $ 15.17 | $ 11.94 | $ 9.93 | $ 11.54 | |||
| Total Return | 30.09% | 21.64% | (13.22)% | 21.14%2 | |||
| RATIOS/SUPPLEMENTAL DATA: | |||||||
| Net assets, end of period (000’s) | $ 53,221 | $ 39,043 | $ 31,637 | $ 43,183 | |||
| Ratio of total expenses before reimbursements, waivers, recoupments and/or fees paid indirectly to average net assets | 1.62% | 1.89% | 2.05% | 2.04%3 | |||
| Ratio of total expenses net of reimbursements, waivers, recoupments and/or fees paid indirectly to average net assets4 | 0.99%5 | 1.23%5 | 1.75%5 | 1.75%3,5 | |||
| Ratio of net investment income (loss) (including interest expense) net of reimbursements, waivers, recoupments and/or fees paid indirectly to average net assets4 | 1.47% | 2.67% | 2.19% | 2.12%3 | |||
| Portfolio turnover | 135% | 155% | 169% | 99%2 |
| * | Fund commenced operations on May 1, 2020. |
| 1 | Amount represents less than $0.01 per share. |
| 2 | Not annualized. |
| 3 | Annualized. |
| 4 | Such ratios are net of fees paid indirectly (see Note C in the Notes to Financial Statements). The expense ratio impacts of fees paid indirectly were 0.00% for the years 2018, 2019, and 2020. |
| 5 | Effective May 1, 2019, the Adviser contractually agreed to waive its investment advisory fee or absorb other operating expenses to the extent necessary to ensure that total annual Fund operating expenses (other than interest, taxes, brokerage commissions, dividends and interest on short sales, other investment-related expenses, acquired fund fees and expenses, and extraordinary expenses such as litigation and other expenses not incurred in the ordinary course of the Fund’s business) would not exceed the Fund’s operating expense cap of 0.99% of average daily net assets until April 30, 2022. Prior to May 1, 2019, the annual operating expense limitation was 1.75%. |
Notes to Financial
Statements are an integral part of this Schedule.
67
Driehaus International
Small Cap Growth Fund
Financial Highlights
| For the year ended December 31, 2020 | For the year ended December 31, 2019 | For the year ended December 31, 2018 | For the year ended December 31, 2017 | For the year ended December 31, 2016 | |||||
| Net asset value, beginning of period | $ 10.52 | $ 8.13 | $ 11.39 | $ 9.33 | $ 10.08 | ||||
| INCOME (LOSS) FROM INVESTMENT OPERATIONS: | |||||||||
| Net investment income (loss) | 0.01 | 0.06 | (0.02)1 | (0.04) | (0.02) | ||||
| Net realized and unrealized gain (loss) on investments | 3.10 | 2.41 | (1.92) | 3.88 | (0.61) | ||||
| Total income (loss) from investment operations | 3.11 | 2.47 | (1.94) | 3.84 | (0.63) | ||||
| LESS DISTRIBUTIONS: | |||||||||
| Net investment income | (0.08) | (0.01) | — | — | — | ||||
| Net realized gain | (0.96) | (0.07) | (1.32) | (1.78) | (0.12) | ||||
| Total distributions | (1.04) | (0.08) | (1.32) | (1.78) | (0.12) | ||||
| Redemption fees added to paid-in capital | 0.002 | 0.002 | 0.002 | 0.002 | 0.002 | ||||
| Net asset value, end of period | $ 12.59 | $ 10.52 | $ 8.13 | $ 11.39 | $ 9.33 | ||||
| Total Return | 29.71% | 30.41% | (16.92)% | 41.44% | (6.22)% | ||||
| RATIOS/SUPPLEMENTAL DATA: | |||||||||
| Net assets, end of period (000’s) | $ 288,855 | $ 268,229 | $ 218,430 | $ 325,361 | $ 270,401 | ||||
| Ratio of total expenses before reimbursements, waivers, recoupments and/or fees paid indirectly to average net assets | 1.23% | 1.24% | 1.50% | 1.73% | 1.72% | ||||
| Ratio of total expenses net of reimbursements, waivers, recoupments and/or fees paid indirectly to average net assets3 | 1.23% | 1.24% | 1.49% | 1.71% | 1.70% | ||||
| Ratio of net investment income (loss) (including interest expense) net of reimbursements, waivers, recoupments and/or fees paid indirectly to average net assets3 | 0.02% | 0.65% | (0.21)% | (0.44)% | (0.15)% | ||||
| Portfolio turnover | 104% | 96% | 118% | 143% | 151% |
| 1 | Net investment income (loss) per share has been calculated using the average shares method. |
| 2 | Amount represents less than $0.01 per share. |
| 3 | Such ratios are net of fees paid indirectly (see Note C in the Notes to Financial Statements). The ratio for the Fund includes the effect of fees paid indirectly which impacted the ratio by 0.02%, 0.02%, 0.01%, 0.00%, and 0.00% for the years 2016, 2017, 2018, 2019, and 2020. |
Notes to Financial
Statements are an integral part of this Schedule.
68
Driehaus Micro Cap
Growth Fund
Financial Highlights
| For the year ended December 31, 2020 | For the year ended December 31, 2019 | For the year ended December 31, 2018 | For the year ended December 31, 2017 | For the year ended December 31, 2016 | |||||
| Net asset value, beginning of period | $ 12.95 | $ 11.11 | $ 14.44 | $ 12.65 | $ 10.74 | ||||
| INCOME (LOSS) FROM INVESTMENT OPERATIONS: | |||||||||
| Net investment income (loss) | (0.20) | (0.16) | (0.19) | (0.18)1 | (0.11)1 | ||||
| Net realized and unrealized gain (loss) on investments | 11.20 | 3.90 | 0.55 | 3.26 | 2.02 | ||||
| Total income (loss) from investment operations | 11.00 | 3.74 | 0.36 | 3.08 | 1.91 | ||||
| LESS DISTRIBUTIONS: | |||||||||
| Net investment income | — | (0.02) | — | — | — | ||||
| Net realized gain | (3.96) | (1.88) | (3.69) | (1.29) | — | ||||
| Total distributions | (3.96) | (1.90) | (3.69) | (1.29) | — | ||||
| Redemption fees added to paid-in capital | 0.002 | 0.002 | 0.002 | 0.002 | 0.002 | ||||
| Net asset value, end of period | $ 19.99 | $ 12.95 | $ 11.11 | $ 14.44 | $ 12.65 | ||||
| Total Return | 85.60% | 33.89% | 3.88% | 24.30% | 17.78% | ||||
| RATIOS/SUPPLEMENTAL DATA: | |||||||||
| Net assets, end of period (000’s) | $ 334,391 | $ 269,120 | $ 264,607 | $ 322,533 | $ 396,590 | ||||
| Ratio of total expenses before reimbursements, waivers, recoupments and/or fees paid indirectly to average net assets | 1.46% | 1.48% | 1.44%3 | 1.45%3 | 1.48% | ||||
| Ratio of total expenses net of reimbursements, waivers, recoupments and/or fees paid indirectly to average net assets4 | 1.43% | 1.43% | 1.42%3 | 1.43%3 | 1.44%5 | ||||
| Ratio of net investment income (loss) (including interest expense) net of reimbursements, waivers, recoupments and/or fees paid indirectly to average net assets4 | (1.33)% | (1.32)% | (1.19)% | (1.33)% | (1.00)%5 | ||||
| Portfolio turnover | 141% | 165% | 156% | 177% | 180% |
| 1 | Net investment income (loss) per share has been calculated using the average shares method. |
| 2 | Amount represents less than $0.01 per share. |
| 3 | Ratio of expenses to average net assets includes interest expense of less than 0.005% for the years ended December 31, 2018 and 2017. The interest expense is from utilizing the line of credit (see Note G in the Notes to Financial Statements). |
| 4 | Such ratios are net of fees paid indirectly (see Note C in the Notes to Financial Statements). The ratio for the Fund includes the effect of fees paid indirectly which impacted the ratio by 0.04%, 0.02%, 0.02%, 0.05%, and 0.03% for the years 2016, 2017, 2018, 2019, and 2020. |
| 5 | Such ratios are after administrative and transfer agent waivers and adviser expense reimbursements, when applicable. BNY Mellon Investment Servicing (US) Inc., the prior administrative agent and transfer agent, waived a portion of its fees beginning with the Fund’s commencement of operations, November 18, 2013. The Adviser contractually agreed to waive its investment advisory fee or absorb other operating expenses to the extent necessary to ensure that total annual 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 of 1.70% of average daily net assets until November 17, 2016. |
Notes to Financial
Statements are an integral part of this Schedule.
69
Driehaus Small Cap
Growth Fund — Investor Class
Financial Highlights
| For the year ended December 31, 2020 | For the year ended December 31, 2019 | For the year ended December 31, 2018 | For the period August 21, 2017 through December 31, 2017 | ||||
| Net asset value, beginning of period | $ 15.37 | $ 11.66 | $ 11.62 | $ 10.00 | |||
| INCOME (LOSS) FROM INVESTMENT OPERATIONS: | |||||||
| Net investment income (loss) | (0.18)1 | (0.13) | (0.12)1 | (0.04)1 | |||
| Net realized and unrealized gain (loss) on investments | 9.98 | 4.81 | 0.48 | 1.86 | |||
| Total income (loss) from investment operations | 9.80 | 4.68 | 0.36 | 1.82 | |||
| LESS DISTRIBUTIONS: | |||||||
| Net investment income | — | — | — | — | |||
| Net realized gain | (1.55) | (0.97) | (0.33) | (0.20) | |||
| Total distributions | (1.55) | (0.97) | (0.33) | (0.20) | |||
| Redemption fees added to paid-in capital | — | 0.002 | 0.01 | — | |||
| Net asset value, end of period | $ 23.62 | $ 15.37 | $ 11.66 | $ 11.62 | |||
| Total Return | 63.77% | 40.25% | 3.33% | 18.18%3 | |||
| RATIOS/SUPPLEMENTAL DATA: | |||||||
| Net assets, end of period (000’s) | $ 28,088 | $ 10,899 | $ 7,538 | $ 1,344 | |||
| Ratio of total expenses before reimbursements, waivers, recoupments and/or fees paid indirectly to average net assets | 1.35% | 1.59% | 2.57% | 7.86%4 | |||
| Ratio of total expenses net of reimbursements, waivers, recoupments and/or fees paid indirectly to average net assets5 | 1.20%6 | 1.17%6 | 1.18%6 | 1.20%4,6 | |||
| Ratio of net investment income (loss) (including interest expense) net of reimbursements, waivers, recoupments and/or fees paid indirectly to average net assets5 | (1.04)%4,6 | (0.95)%4,6 | (0.87)%4,6 | (0.94)%4,6 | |||
| Portfolio turnover | 164% | 206% | 193% | 66%3 |
| 1 | Net investment income (loss) loss per share has been calculated using the average share method. |
| 2 | Amount represents less than $0.01 per share. |
| 3 | Not annualized. |
| 4 | Annualized. |
| 5 | Such ratios are net of fees paid indirectly (see Note C in the Notes to Financial Statements). The ratio for the Fund includes the effect of fees paid indirectly which impacted the ratio by 0.00%, 0.02%, 0.03%, and 0.02% for the years 2017, 2018, 2019, and 2020. |
| 6 | Such ratios are after administrative and transfer agent waivers and adviser expense reimbursements, when applicable. BNY Mellon Investment Servicing (US) Inc., the prior administrative agent and transfer agent, waived a portion of its fees beginning with the Fund’s commencement of operations, August 21, 2017. The Adviser contractually agree to waive its investment advisory fee or absorb other operating expenses to the extent necessary to ensure that total annual operating expenses for the Investor Class (other than interest, taxes, brokerage commissions and other portfolio transaction expenses, capital expenditures, and extraordinary expenses) would not exceed the Investor Class’s operating expense cap of 1.20% of average daily net assets until April 30, 2021. |
Notes to Financial Statements are
an integral part of this Schedule.
70
Driehaus Small Cap
Growth Fund — Institutional Class
Financial Highlights
| For the year ended December 31, 2020 | For the year ended December 31, 2019 | For the year ended December 31, 2018 | For the period August 21, 2017 through December 31, 2017 | ||||
| Net asset value, beginning of period | $ 15.47 | $ 11.70 | $ 11.63 | $ 10.00 | |||
| INCOME (LOSS) FROM INVESTMENT OPERATIONS: | |||||||
| Net investment income (loss) | (0.11)1 | (0.10) | (0.08)1 | (0.03)1 | |||
| Net realized and unrealized gain (loss) on investments | 10.07 | 4.84 | 0.39 | 1.86 | |||
| Total income (loss) from investment operations | 9.96 | 4.74 | 0.39 | 1.83 | |||
| LESS DISTRIBUTIONS: | |||||||
| Net investment income | — | — | — | — | |||
| Net realized gain | (1.55) | (0.97) | (0.33) | (0.20) | |||
| Total distributions | (1.55) | (0.97) | (0.33) | (0.20) | |||
| Redemption fees added to paid-in capital | — | 0.002 | 0.01 | — | |||
| Net asset value, end of period | $ 23.88 | $ 15.47 | $ 11.70 | $ 11.63 | |||
| Total Return | 64.39% | 40.62% | 3.59% | 18.28%3 | |||
| RATIOS/SUPPLEMENTAL DATA: | |||||||
| Net assets, end of period (000’s) | $ 327,155 | $ 161,821 | $ 123,395 | $ 38,631 | |||
| Ratio of total expenses before reimbursements, waivers, recoupments and/or fees paid indirectly to average net assets | 0.80% | 0.89% | 1.04% | 1.48%4 | |||
| Ratio of total expenses net of reimbursements, waivers, recoupments and/or fees paid indirectly to average net assets5 | 0.81%6 | 0.92%6 | 0.93%6 | 0.95%4,6 | |||
| Ratio of net investment income (loss) (including interest expense) net of reimbursements, waivers, recoupments and/or fees paid indirectly to average net assets5 | (0.64)%6 | (0.70)%6 | (0.62)%6 | (0.69)%4,6 | |||
| Portfolio turnover | 164% | 206% | 193% | 66%3 |
| 1 | Net investment income (loss) loss per share has been calculated using the average share method. |
| 2 | Amount represents less than $0.01 per share. |
| 3 | Not annualized. |
| 4 | Annualized. |
| 5 | Such ratios are net of fees paid indirectly (see Note C in the Notes to Financial Statements). The ratio for the Fund includes the effect of fees paid indirectly which impacted the ratio by 0.00%, 0.02%, 0.03%, and 0.01% for the years 2017, 2018, 2019, and 2020. |
| 6 | Such ratios are after administrative and transfer agent waivers and adviser expense reimbursements and recoupments, when applicable. BNY Mellon Investment Servicing (US) Inc., the prior administrative agent and transfer agent, waived a portion of its fees beginning with the Fund’s commencement of operations, August 21, 2017. The Adviser contractually agreed to waive its investment advisory fee or absorb other operating expenses to the extent necessary to ensure that total annual operating expenses for the Institutional Class (other than interest, taxes, brokerage commissions and other portfolio transaction expenses, capital expenditures, and extraordinary expenses) would not exceed the Institutional Class’s operating expense cap of 0.95% of average daily net assets until April 30, 2021. |
Notes to Financial
Statements are an integral part of this Schedule.
71
Driehaus Small/Mid Cap
Growth Fund
Financial Highlights
| For the period May 1, 2020* through December 31, 2020 | |
| Net asset value, beginning of period | $ 10.00 |
| INCOME (LOSS) FROM INVESTMENT OPERATIONS: | |
| Net investment income (loss) | (0.04) |
| Net realized and unrealized gain (loss) on investments | 7.47 |
| Total income (loss) from investment operations | 7.43 |
| LESS DISTRIBUTIONS: | |
| Net investment income | — |
| Net realized gain | (0.24) |
| Total distributions | (0.24) |
| Net asset value, end of period | $ 17.19 |
| Total Return | 74.23%1 |
| RATIOS/SUPPLEMENTAL DATA: | |
| Net assets, end of period (000’s) | $ 14,845 |
| Ratio of total expenses before reimbursements, waivers, recoupments and/or fees paid indirectly to average net assets | 2.58%2 |
| Ratio of total expenses net of reimbursements, waivers, recoupments and/or fees paid indirectly to average net assets3 | 0.95%2,4 |
| Ratio of net investment income (loss) (including interest expense) net of reimbursements, waivers, recoupments and/or fees paid indirectly to average net assets3 | (0.73)%2,4 |
| Portfolio turnover | 96%1 |
| * | Fund commenced operations on May 1, 2020. |
| 1 | Not annualized. |
| 2 | Annualized. |
| 3 | Such ratios are net of fees paid indirectly (see Note C in the Notes to Financial Statements). The ratio for the Fund includes the effect of fees paid indirectly which impacted the ratio by 0.00%. |
| 4 | Such ratios are after administrative and transfer agent waivers and adviser expense reimbursements, when applicable. BNY Mellon Investment Servicing (US) Inc., the prior administrative agent and transfer agent, and The Northern Trust Company, the current administrative agent and transfer agent, waived a portion of its fees beginning with the Fund’s commencement of operations, May 1, 2020. The Adviser contractually agreed to waive its investment advisory fee or absorb other operating expenses to the extent necessary to ensure that total annual 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 of 0.95% of average daily net assets until May 1, 2023. |
Notes to Financial
Statements are an integral part of this Schedule.
72
Driehaus Event Driven
Fund
Financial Highlights
| For the year ended December 31, 2020 | For the year ended December 31, 2019 | For the year ended December 31, 2018 | For the year ended December 31, 2017 | For the year ended December 31, 2016 | |||||
| Net asset value, beginning of period | $ 11.55 | $ 9.99 | $ 10.79 | $ 10.34 | $ 9.85 | ||||
| INCOME (LOSS) FROM INVESTMENT OPERATIONS: | |||||||||
| Net investment income (loss) | 0.12 | 0.26 | 0.25 | 0.02 | 0.02 | ||||
| Net realized and unrealized gain (loss) on investments | 2.74 | 1.69 | (0.69) | 0.43 | 0.59 | ||||
| Total income (loss) from investment operations | 2.86 | 1.95 | (0.44) | 0.45 | 0.61 | ||||
| LESS DISTRIBUTIONS: | |||||||||
| Net investment income | (0.17) | (0.39) | (0.36) | — | (0.09) | ||||
| Net realized gain | (0.31) | — | — | — | — | ||||
| Tax return of capital | — | — | — | — | (0.03) | ||||
| Total distributions | (0.48) | (0.39) | (0.36) | — | (0.12) | ||||
| Net asset value, end of period | $ 13.93 | $ 11.55 | $ 9.99 | $ 10.79 | $ 10.34 | ||||
| Total Return | 24.84% | 19.53% | (4.03)% | 4.35% | 6.25% | ||||
| RATIOS/SUPPLEMENTAL DATA: | |||||||||
| Net assets, end of period (000’s) | $ 142,064 | $ 69,455 | $ 51,675 | $ 165,648 | $ 256,482 | ||||
| Ratio of total expenses before reimbursements, waivers, recoupments and/or fees paid indirectly to average net assets | 1.59% | 1.93% | 1.90% | 1.77% | 2.03% | ||||
| Ratio of total expenses net of reimbursements, waivers, recoupments and/or fees paid indirectly to average net assets1,2 | 1.57% | 1.90% | 1.88% | 1.76% | 2.01% | ||||
| Ratio of net investment income (loss) (including dividends and interest on short positions and interest expense) net of reimbursements, waivers, recoupments and/or fees paid indirectly to average net assets1,2 | 0.67% | 2.63% | 2.57% | 0.48% | 0.78% | ||||
| Portfolio turnover | 136% | 111% | 101% | 198% | 246% |
| 1 | The ratio for the fund includes the effect of dividends and interest on short positions, and interest expense which increased the expense ratios by 0.59%, 0.31%, 0.31%, 0.30%, and 0.13% for the years 2016, 2017, 2018, 2019, and 2020. |
| 2 | Such ratios are net of fees paid indirectly (see Note C in the Notes to Financial Statements). The ratio for the fund includes the effect of fees paid indirectly which impacted the expense ratios by 0.02%, 0.01%, 0.02%, 0.03%, and 0.02% for the years 2016, 2017, 2018, 2019, and 2020. |
Notes to Financial Statements are
an integral part of this Schedule.
73
Driehaus Mutual Funds
Notes to Financial
Statements
A. ORGANIZATION
AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The Driehaus Mutual Funds (the “Trust”) is an open-end registered management investment company under the Investment Company Act of 1940 (the "1940 Act"), as amended, organized as a Delaware statutory
trust, with eight separate series currently in operation. The Trust was organized under an Agreement and Declaration of Trust dated May 31, 1996, as subsequently amended and restated as of June 6, 2013, and amended as
of June 4, 2015, and may issue an unlimited number of full and fractional units of beneficial interest (shares) without par value. The eight series (each a “Fund”, and collectively, the
“Funds”) included in this report are as follows:
| Fund | Commencement of Operations |
| Emerging Markets Growth Fund | 12/31/97 |
| Emerging Markets Small Cap Growth Fund | 08/22/11 |
| Emerging Markets Opportunities Fund | 04/10/17 |
| International Small Cap Growth Fund | 09/17/07 |
| Micro Cap Growth Fund | 11/18/13 |
| Small Cap Growth Fund | 08/21/17 |
| Small/Mid Cap Growth Fund | 05/01/20 |
| Event Driven Fund | 08/26/13 |
The Emerging Markets Growth Fund and Small Cap Growth Fund each offer two classes of shares, designated as Institutional Class and Investor Class. Each class of shares represents an interest in the same portfolio of
investments of the respective Fund and voting privileges with respect to the Fund in general. Each class of shares has exclusive voting rights with respect to any matters involving only that class. The classes of each
Fund pay pro rata the costs of management of that Fund’s portfolio, including the investment advisory fee. Each class of a Fund bears the cost of its own transfer agency and shareholder servicing arrangements,
and any other class-specific expenses, which will result in differing expenses by class.
The
investment objective of each Fund is to maximize capital appreciation.
The
Emerging Markets Growth Fund seeks to achieve its objective by investing primarily in equity securities of emerging markets companies.
The
Emerging Markets Small Cap Growth Fund seeks to achieve its objective by investing primarily in equity securities of small capitalization emerging markets companies.
The
Emerging Markets Opportunities Fund seeks to maximize total return.
The
International Small Cap Growth Fund seeks to achieve its objective by investing primarily in equity securities of smaller capitalization non-U.S. companies exhibiting strong growth characteristics.
The
Micro Cap Growth Fund seeks to achieve its objective by investing primarily in equity securities of micro capitalization U.S. companies exhibiting strong growth characteristics.
The
Small Cap Growth Fund seeks to achieve its objective by investing primarily in equity securities of U.S. small capitalization companies.
The
Small/Mid Cap Growth Fund seeks to achieve its objective by investing primarily in equity securities of U.S. small/medium capitalization companies.
The
Event Driven Fund seeks to provide positive returns over full market cycles.
The presentation of financial statements in conformity with U.S. generally accepted accounting principles ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported amounts of income and expenses. Actual results may differ from those estimates. The Funds, which are investment companies within the
scope of Financial Accounting Standards Board (“FASB”) Accounting Standards Update ("ASU") 2013-08, follow accounting and reporting guidance under FASB Accounting Standards Codification Topic 946, Financial Services-Investment Companies.
74
Driehaus Mutual Funds
Notes to Financial
Statements — (Continued)
Securities Valuation
Investments in securities traded on a national securities exchange, including exchange-traded futures and options, are valued at the last reported sales or settlement price on the day of valuation and are generally
classified as level 1. Exchange-traded securities for which no sale was reported are valued at the most recent closing bid price from the exchange the security is primarily traded on and are generally classified as
level 1. Equity certificates are valued at the last sale price of the underlying security as of the close of the primary exchange. Long-term U.S. fixed income securities are valued at the representative quoted bid
price when held long or the representative quoted ask price if sold short or, if such prices are not available, at prices for securities of comparable maturity, quality and type or as determined by an independent
pricing service. Long-term non-U.S. fixed income securities are valued at the mean of the representative quoted bid and ask prices when held long or sold short or, if such prices are not available, at prices for
securities of comparable maturity, quality and type or as determined by an independent pricing service. The pricing service provider may employ methodologies that utilize actual market transactions, broker-dealer
supplied valuations or other techniques. Such techniques generally consider factors such as composite security prices, yields, maturities, call features, credit ratings and developments relating to specific
securities, in arriving at valuations. Fixed income securities are generally classified as level 2. The fair value analysis includes an analysis of the value of any unfunded commitments.
Short-term investments with remaining maturities of 60 days or less at the time of purchase are stated at amortized cost, which approximates fair value. If amortized cost does not approximate fair value, short-term
securities are reported at fair value. These securities are generally classified as level 2. Swaps, forward foreign currency contracts and other financial derivatives are valued daily, primarily by an independent
pricing service using pricing models and are generally classified as level 2. The pricing models use inputs that are observed from actively quoted markets such as issuer details, indices, spreads, interest rates,
yield curves, dividends and exchange rates. If valuations are not available from the independent pricing service or values received are deemed not representative of fair value, values will be obtained from a
third-party broker-dealer or counterparty. Investments initially valued in currencies other than the U.S. dollar are converted to the U.S. dollar using exchange rates obtained from an independent pricing service. In
addition, for the Emerging Markets Growth Fund, Emerging Markets Small Cap Growth, Emerging Markets Opportunities Fund, and International Small Cap Growth Fund, if quotations are not readily available, if the values
have been materially affected by events occurring after the closing of a foreign market, or if there has been a movement in the U.S. market that exceeds a certain threshold, assets may be valued at fair value as
determined in good faith by or under the direction of the Trust’s Board of Trustees. Events that may materially affect asset values that could cause a fair value determination include, but are not limited to:
corporate announcements relating to a specific security; natural and other disasters which may impact an entire market or region; and political and other events which may be global or impact a particular country or
region. The frequency with which these procedures are used cannot be predicted and may be utilized to a significant extent. To the extent utilized, securities would be classified as level 2 in the hierarchy described
below.
Securities for which market quotations are not readily available are valued at fair value as determined in good faith in accordance with procedures established by or under the direction of the Trust’s Board of
Trustees and are generally classified as level 3. Under these procedures, the Funds primarily employ a market-based approach, which may use related or comparable assets or liabilities, recent transactions, market
multiples, book values and other relevant information for the investment to determine the fair value of the investment. In addition, level 3 investments in certain early stage companies may be valued based upon
initial transaction prices with management conducting ongoing assessments to determine whether new information is available to support a fair value adjustment. The information management may consider in its ongoing
assessments may include, but are not limited to, actual or upcoming financing or third-party sale transactions, current or forecasted performance, or regulatory approval status updates. It is possible that estimated
values may differ significantly from the values that would have been used had a ready market existed for the investments, and such differences could be material.
Each Fund is subject to fair value accounting standards that define fair value, establish the framework for measuring fair value and provide a three-level hierarchy for fair valuation based upon the inputs to the
valuation as of the measurement date. The three levels of the fair value hierarchy are as follows:
Level 1 – quoted prices for active markets for identical securities
Level 2 – significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)
75
Driehaus Mutual Funds
Notes to Financial
Statements — (Continued)
Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments).
The
following is a summary of the inputs used to value the Emerging Markets Growth Fund’s investments as of December 31, 2020:
| Assets* | Total Value at December 31, 2020 | Level 1 Quoted Price | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | ||||
| Common Stocks | ||||||||
| Africa | $19,989,374 | $19,989,374 | $— | $— | ||||
| Europe | ||||||||
| France | 27,157,245 | 27,157,245 | — | — | ||||
| Germany | 39,934,815 | — | 39,934,815 | — | ||||
| Hungary | 18,275,758 | — | 18,275,758 | — | ||||
| Netherlands | 14,645,288 | 14,645,288 | — | — | ||||
| Poland | 15,457,155 | — | 15,457,155 | — | ||||
| Russia | 54,665,298 | 54,665,298 | — | — | ||||
| Switzerland | 13,995,354 | — | 13,995,354 | — | ||||
| Far East | ||||||||
| China | 840,875,617 | 840,875,617 | — | — | ||||
| India | 286,027,756 | 286,027,756 | — | — | ||||
| Indonesia | 31,130,450 | — | 31,130,450 | — | ||||
| Japan | 12,768,574 | — | 12,768,574 | — | ||||
| Singapore | 11,454,133 | 11,454,133 | — | — | ||||
| South Korea | 220,816,096 | — | 220,816,096 | — | ||||
| Taiwan | 220,916,135 | 220,916,135 | — | — | ||||
| North America | 206,895,185 | 206,895,185 | — | — | ||||
| South America | ||||||||
| Argentina | 32,809,184 | 32,809,184 | — | — | ||||
| Brazil | 105,498,221 | 19,895,941 | 85,602,280 | — | ||||
| Preferred Stocks | ||||||||
| South America | ||||||||
| Brazil | 8,149,498 | — | 8,149,498 | — | ||||
| Short Term Investments | 97,180,178 | 97,180,178 | — | — | ||||
| Total | $2,278,641,314 | $1,832,511,334 | $446,129,980 | $— |
The
following is a summary of the inputs used to value the Emerging Markets Small Cap Growth Fund’s investments as of December 31, 2020:
| Assets* | Total Value at December 31, 2020 | Level 1 Quoted Price | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | ||||
| Common Stocks | ||||||||
| Africa | $764,609 | $764,609 | $— | $— | ||||
| Europe | ||||||||
| Poland | 1,353,435 | — | 1,353,435 | — | ||||
| Russia | 2,156,385 | 2,156,385 | — | — | ||||
| United Kingdom | 990,873 | 990,873 | — | — | ||||
| Far East | ||||||||
| China | 23,212,564 | 23,212,564 | — | — |
76
Driehaus Mutual Funds
Notes to Financial
Statements — (Continued)
| Assets* | Total Value at December 31, 2020 | Level 1 Quoted Price | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | ||||
| India | $17,555,669 | $17,555,669 | $— | $— | ||||
| Indonesia | 1,542,309 | — | 1,542,309 | — | ||||
| Kazakhstan | 1,046,313 | 1,046,313 | — | — | ||||
| South Korea | 7,312,201 | — | 7,312,201 | — | ||||
| Taiwan | 12,010,999 | 12,010,999 | — | — | ||||
| Thailand | 873,138 | 873,138 | — | — | ||||
| Vietnam | 3,700,357 | — | 3,700,357 | — | ||||
| North America | 3,881,464 | 3,881,464 | — | — | ||||
| South America | ||||||||
| Argentina | 406,931 | 406,931 | — | — | ||||
| Brazil | 6,592,973 | — | 6,592,973 | — | ||||
| Preferred Stocks | ||||||||
| South America | ||||||||
| Brazil | 2,672,817 | 612,352 | 2,060,465 | — | ||||
| Short Term Investments | 5,338,694 | 5,338,694 | — | — | ||||
| Total | $91,411,731 | $68,849,991 | $22,561,740 | $— |
The
following is a summary of the inputs used to value the Emerging Markets Opportunities Fund’s investments as of December 31, 2020:
| Assets* | Total Value at December 31, 2020 | Level 1 Quoted Price | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | ||||
| Common Stocks | ||||||||
| Argentina | $779,514 | $779,514 | $— | $— | ||||
| Brazil | 1,749,225 | 382,461 | 1,366,764 | — | ||||
| Canada | 635,020 | 635,020 | — | — | ||||
| China | 13,607,473 | 13,607,473 | — | — | ||||
| France | 651,546 | 651,546 | — | — | ||||
| India | 4,799,009 | 4,799,009 | — | — | ||||
| Indonesia | 403,641 | — | 403,641 | — | ||||
| Japan | 231,051 | — | 231,051 | — | ||||
| Kazakhstan | 346,947 | 346,947 | — | — | ||||
| Mexico | 752,785 | 752,785 | — | — | ||||
| Netherlands | 314,712 | 314,712 | — | — | ||||
| Poland | 622,624 | — | 622,624 | — | ||||
| Russia | 1,141,918 | 1,141,918 | — | — | ||||
| Singapore | 319,276 | 319,276 | — | — | ||||
| South Africa | 967,937 | 967,937 | — | — | ||||
| South Korea | 5,512,883 | — | 5,512,883 | — | ||||
| Sweden | 635,613 | 635,613 | — | — | ||||
| Taiwan | 6,093,065 | 6,093,065 | — | — | ||||
| United States | 911,843 | 911,843 | — | — | ||||
| Preferred Stocks | 587,704 | 587,704 | — | — | ||||
| Short Term Investments | 5,405,735 | 5,405,735 | — | — |
77
Driehaus Mutual Funds
Notes to Financial
Statements — (Continued)
| Assets* | Total Value at December 31, 2020 | Level 1 Quoted Price | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | ||||
| Sovereign Bonds | $9,242,210 | $— | $9,242,210 | $— | ||||
| Total | $55,711,731 | $38,332,558 | $17,379,173 | $— |
The
following is a summary of the inputs used to value the International Small Cap Growth Fund’s investments as of December 31, 2020:
| Assets* | Total Value at December 31, 2020 | Level 1 Quoted Price | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | ||||
| Common Stocks | ||||||||
| Europe | ||||||||
| Austria | $4,373,529 | $— | $4,373,529 | $— | ||||
| Belgium | 4,178,600 | 4,178,600 | — | — | ||||
| Denmark | 6,626,666 | 1,558,226 | 5,068,440 | — | ||||
| Finland | 12,571,648 | — | 12,571,648 | — | ||||
| France | 11,188,376 | 11,188,376 | — | — | ||||
| Germany | 24,708,327 | 7,712,835 | 16,995,492 | — | ||||
| Ireland | 4,677,092 | 4,677,092 | — | — | ||||
| Italy | 1,573,273 | — | 1,573,273 | — | ||||
| Luxembourg | 3,764,607 | — | 3,764,607 | — | ||||
| Netherlands | 13,326,977 | 13,326,977 | — | — | ||||
| Norway | 3,474,968 | — | 3,474,968 | — | ||||
| Sweden | 14,700,000 | — | 14,700,000 | — | ||||
| Switzerland | 12,431,546 | — | 12,431,546 | — | ||||
| United Kingdom | 60,334,588 | 60,334,588 | — | — | ||||
| Far East | ||||||||
| Australia | 5,324,454 | 5,324,454 | — | — | ||||
| China | 2,543,387 | 2,543,387 | — | — | ||||
| Japan | 47,340,632 | — | 47,340,632 | — | ||||
| South Korea | 9,297,097 | — | 9,297,097 | — | ||||
| Taiwan | 4,783,883 | 4,783,883 | — | — | ||||
| Middle East | 1,702,740 | 1,702,740 | — | — | ||||
| North America | 29,805,157 | 29,805,157 | — | — | ||||
| South America | 3,950,014 | — | 3,950,014 | — | ||||
| Preferred Stocks | ||||||||
| Europe | 977,172 | — | 977,172 | — | ||||
| Short Term Investments | 6,012,281 | 6,012,281 | — | — | ||||
| Total | $289,667,014 | $153,148,596 | $136,518,418 | $— |
The
following is a summary of the inputs used to value the Micro Cap Growth Fund’s investments as of December 31, 2020:
| Assets* | Total Value at December 31, 2020 | Level 1 Quoted Price | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | ||||
| Common Stocks | $332,401,212 | $332,401,212 | $— | $— |
78
Driehaus Mutual Funds
Notes to Financial
Statements — (Continued)
| Assets* | Total Value at December 31, 2020 | Level 1 Quoted Price | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | ||||
| Short Term Investments | $2,068,996 | $2,068,996 | $— | $— | ||||
| Total | $334,470,208 | $334,470,208 | $— | $— |
The
following is a summary of the inputs used to value the Small Cap Growth Fund’s investments as of December 31, 2020:
| Assets* | Total Value at December 31, 2020 | Level 1 Quoted Price | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | ||||
| Common Stocks | $352,583,210 | $352,583,210 | $— | $— | ||||
| Short Term Investments | 4,179,137 | 4,179,137 | — | — | ||||
| Total | $356,762,347 | $356,762,347 | $— | $— |
The
following is a summary of the inputs used to value the Small/Mid Cap Growth Fund’s investments as of December 31, 2020:
| Assets* | Total Value at December 31, 2020 | Level 1 Quoted Price | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | ||||
| Common Stocks | $14,890,679 | $14,890,679 | $— | $— | ||||
| Total | $14,890,679 | $14,890,679 | $— | $— |
The following is a summary of the inputs used to value the Event Driven Fund’s investments as of December 31, 2020:
| Assets* | Total Value at December 31, 2020 | Level 1 Quoted Price | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | ||||
| Common Stocks | $76,550,586 | $76,550,586 | $— | $— | ||||
| Convertible Corporate Bonds | 2,793,347 | — | 2,793,347 | — | ||||
| Convertible Preferred Stocks | 0 | — | — | 0 | ||||
| Corporate Bonds | 19,516,517 | — | 19,516,517 | — | ||||
| Master Limited Partnerships | 1,452,737 | 1,452,737 | — | — | ||||
| Preferred Stocks | 1,241,528 | — | 1,241,528 | — | ||||
| Private Preferred Stocks | 2,960,500 | — | — | 2,960,500 | ||||
| Short Term Investments | 33,855,341 | 33,855,341 | — | — | ||||
| Warrants | 648,351 | 644,745 | 3,606 | — | ||||
| Total | $139,018,907 | $112,503,409 | $23,554,998 | $2,960,500 |
| Liabilities* | ||||||||
| Common Stocks Sold Short | $(2,291,628) | $(2,291,628) | $— | $— | ||||
| Exchange-Traded Funds Sold Short | (18,378,626) | (18,378,626) | — | — | ||||
| Written Options | (162,667) | (162,667) | — | — | ||||
| Total | $(20,832,921) | $(20,832,921) | $— | $— |
| * | See Schedule of Investments for industry breakout. |
79
Driehaus Mutual Funds
Notes to Financial
Statements — (Continued)
The
following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value in the Event Driven Fund:
| Investments, at Value | |
| Balance as of December 31, 2019 | $412,500 |
| Realized gain (loss) | — |
| Change in net unrealized appreciation (depreciation) | 1,549,728 |
| Purchases | 1,001,878 |
| Sales | — |
| Transfers in and/or out of Level 3 | (3,606) |
| Balance as of December 31, 2020 | $2,960,500 |
As of December 31, 2020, the Event Driven Fund held Level 3 investments in General Motors Corp. senior convertible preferred stock and Elevation Oncology, Inc. (formerly 14ner Oncology, Inc.) private preferred
stock, valued in good faith in accordance with procedures established by or under the direction of the Trust’s Board of Trustees. As a part of the ongoing restructuring of General Motors, any value previously
ascribed to these holdings has been transferred to the General Motors Co. Motors Liquidation Co. GUC Trust common stock, which is freely and actively traded, and therefore the senior convertible preferred stock was
fair valued at $0. The Elevation Oncology, Inc. private preferred stock was valued using a market approach as adjusted based on a recent round of financing for the Series B Preferred Shares of Elevation Oncology, Inc.
As of December 31, 2020, the Event Driven Fund's investment in X4 Pharmaceuticals, Inc. warrant contracts transferred from Level 3 to Level 2 because the security was valued using a market available bid price. The
following table summarizes the quantitative inputs and assumptions used for items categorized as Level 3 of the fair value hierarchy as of December 31, 2020:
| Financial Assets | Fair Value at December 31, 2020 | Valuation Technique(s) | Unobservable Inputs | Price/Range | ||||
| Convertible Preferred Stocks | $0 | Cash available in relation to claim | Estimated recovery | — | ||||
| Private Preferred Stocks | $2,960,500 | Market approach | Transaction price | $1.91 |
Securities Sold Short
The Event Driven Fund is engaged in selling securities short, which obligates it to replace a borrowed security by purchasing it at market price at the time of replacement. The Fund incurs a loss if the price of the
security increases between the date of the short sale and the date on which the Fund replaces the borrowed security. The Fund realizes a gain if the price of the security declines between those dates. Gains are
limited to the price at which the Fund sold the security short, while losses are potentially unlimited in size.
The Fund is required to establish a margin account with the broker lending the security sold short. While the short sale is outstanding, the broker retains the proceeds of the short sale and the Fund must maintain a
deposit with the broker consisting of cash and securities having a value equal to a specified percentage of the value of the securities sold short. Such deposit is included in “Collateral held at custodian for
the benefit of brokers” in the Statement of Assets and Liabilities. The Fund is obligated to pay any dividends or interest due on securities sold short. Such dividends and interest are recorded as an expense to
the Fund in the Statement of Operations.
Federal Income Taxes
No provision is made for Federal income taxes since each Fund has elected to be taxed as a "regulated investment company" under Subchapter M of the Internal Revenue Code (the "Code") and has made and declared all
the required distributions to its shareholders in amounts sufficient to relieve each Fund from all or substantially all Federal income and excise taxes under provisions of current Federal tax law.
80
Driehaus Mutual Funds
Notes to Financial
Statements — (Continued)
Each Fund is subject to accounting standards that establish a minimum threshold for recognizing, and a system for measuring, the benefits of a tax position taken or expected to be taken in a tax return. Taxable
years ending 2020, 2019, 2018, and 2017 remain open to Federal and state audit. As of December 31, 2020, management has evaluated the application of these standards to each Fund, and has determined that no provision
for income tax is required in each Fund's financial statements for uncertain tax provisions. The Funds recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the
Statements of Operations. During the year, the funds did not incur any interest or penalties. The Funds may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may
be recoverable. Foreign taxes are provided for based on the Funds' understanding of the tax rules and regulations that exist in the foreign markets in which they invest.
The amount of dividends and distributions from net investment income and net realized capital gains are determined in accordance with Federal income tax regulations, which may differ from United States Generally
Accepted Accounting Principles ("U.S. GAAP").
For the year ended December 31, 2020, reclassifications were recorded to distributable earnings (deficit) and paid-in capital for any permanent tax differences. These reclassifications relate primarily to foreign
currency losses, sales of passive foreign investment companies ("PFIC"), net operating losses and foreign capital gain taxes paid. Results of operations and net assets were not affected by these reclassifications.
| Emerging Markets Growth Fund | Emerging Markets Small Cap Growth Fund | Emerging Markets Opportunities Fund | International Small Cap Growth Fund | ||||
| Paid-in capital | $— | $— | $— | $— | |||
| Total distributable earnings (deficit) | — | — | — | — |
| Micro Cap Growth Fund | Small Cap Growth Fund | Small/Mid Cap Growth Fund | Event Driven Fund | ||||
| Paid-in capital | $— | $95 | $— | $— | |||
| Total distributable earnings (deficit) | — | (95) | — | — |
Accumulated capital losses represent net capital loss carryovers that may be available for an unlimited period to offset future realized capital gains and thereby reduce future capital gains distributions. Capital
loss carryovers retain the character of the original loss. The following table shows the amounts of capital loss carryovers, if any, by each of the applicable Funds as of December 31, 2020:
| Not Subject to Expiration | ||||
| Fund | Short-Term | Long-Term | ||
| Emerging Markets Growth Fund | $— | $— | ||
| Emerging Markets Small Cap Growth Fund | (40,064,535) | — | ||
| Emerging Markets Opportunities Fund | — | — | ||
| International Small Cap Growth Fund | — | — | ||
| Micro Cap Growth Fund | — | — | ||
| Small Cap Growth Fund | — | — | ||
| Small/Mid Cap Growth Fund | — | — | ||
| Event Driven Fund | — | — | ||
During the year ended December 31, 2020, the Emerging Markets Small Cap Growth Fund, Emerging Markets Opportunities Fund and Event Driven Fund utilized $4,854,249, $702,292, $1,364,303 of capital loss carryforwards,
respectively.
81
Driehaus Mutual Funds
Notes to Financial
Statements — (Continued)
Distributions to
Shareholders
The
tax character of distributions paid during the years ended December 31, 2020, and December 31, 2019, were as follows:
| Fund | Year | Ordinary Income | Long-Term Capital Gain | Return of Capital | Total Distributions | |||||
| Emerging Markets Growth Fund | 2020 | $16,886,001 | $38,607,483 | $— | $55,493,484 | |||||
| 2019 | 15,701,188 | 776,768 | — | 16,477,956 | ||||||
| Emerging Markets Small Cap Growth Fund | 2020 | 556,757 | — | — | 556,757 | |||||
| 2019 | 255,325 | — | — | 255,325 | ||||||
| Emerging Markets Opportunities Fund | 2020 | 379,497 | 743,583 | — | 1,123,080 | |||||
| 2019 | 443,723 | — | — | 443,723 | ||||||
| International Small Cap Growth Fund | 2020 | 3,163,154 | 19,239,957 | — | 22,403,111 | |||||
| 2019 | 343,991 | 1,632,552 | — | 1,976,543 | ||||||
| Micro Cap Growth Fund | 2020 | 10,322,938 | 48,426,960 | — | 58,749,898 | |||||
| 2019 | — | 33,768,834 | — | 33,768,834 | ||||||
| Small Cap Growth Fund | 2020 | 2,296,873 | 19,232,110 | — | 21,528,983 | |||||
| 2019 | — | 9,909,321 | — | 9,909,321 | ||||||
| Small/Mid Cap Growth Fund | 2020 | 202,118 | — | — | 202,118 | |||||
| Event Driven Fund | 2020 | 2,341,243 | 2,388,109 | — | 4,729,352 | |||||
| 2019 | 2,262,269 | — | — | 2,262,269 |
As
of December 31, 2020, the components of net assets on a tax basis were as follows:
| Emerging Markets Growth Fund | Emerging Markets Small Cap Growth Fund | Emerging Markets Opportunities Fund | International Small Cap Growth Fund | ||||
| Undistributed ordinary income | $81,648,785 | $49,512 | $866,309 | $14,658,561 | |||
| Undistributed long-term capital gain | 43,094,847 | — | 422,136 | 5,877,643 | |||
| Accumulated earnings | 124,743,632 | 49,512 | 1,288,445 | 20,536,204 | |||
| Paid-in capital | 1,412,454,012 | 105,553,998 | 38,217,798 | 189,656,945 | |||
| Accumulated capital and other losses | — | (40,064,535) | — | — | |||
| Unrealized appreciation (depreciation) on investments, securities, sold short, options and futures contracts | 746,063,698 | 24,190,271 | 13,715,215 | 78,661,366 | |||
| Net assets | $2,283,261,342 | $89,729,246 | $53,221,458 | $288,854,515 |
82
Driehaus Mutual Funds
Notes to Financial
Statements — (Continued)
| Micro Cap Growth Fund | Small Cap Growth Fund | Small/Mid Cap Growth Fund | Event Driven Fund | ||||
| Undistributed ordinary income | $17,444,131 | $10,719,716 | $49,767 | $1,178,844 | |||
| Undistributed long-term capital gain | 12,077,255 | 5,136,799 | — | 4,433,042 | |||
| Accumulated earnings | 29,521,386 | 15,856,515 | 49,767 | 5,611,886 | |||
| Paid-in capital | 154,024,211 | 203,197,014 | 11,298,500 | 119,392,644 | |||
| Accumulated capital and other losses | — | — | — | — | |||
| Unrealized appreciation (depreciation) on investments, securities, sold short, options and futures contracts | 150,845,367 | 136,189,497 | 3,497,219 | 17,059,594 | |||
| Net assets | $334,390,964 | $355,243,026 | $14,845,486 | $142,064,124 |
The aggregate cost of investments and the composition of unrealized appreciation and depreciation on investments and net unrealized appreciation and/or depreciation on derivatives for Federal income tax purposes as
of December 31, 2020, were as follows:
| Fund | Basis | Gross Appreciation | Gross Depreciation | Net Appreciation/ Depreciation | ||||
| Emerging Markets Growth Fund | $1,526,719,817 | $756,297,592 | $(4,376,095) | $751,921,497 | ||||
| Emerging Markets Small Cap Growth Fund | 66,485,623 | 25,177,967 | (251,859) | 24,926,108 | ||||
| Emerging Markets Opportunities Fund | 41,937,367 | 13,929,386 | (155,022) | 13,774,364 | ||||
| International Small Cap Growth Fund | 211,033,936 | 79,484,673 | (851,595) | 78,633,078 | ||||
| Micro Cap Growth Fund | 183,624,841 | 154,057,609 | (3,212,242) | 150,845,367 | ||||
| Small Cap Growth Fund | 220,572,850 | 137,456,434 | (1,266,937) | 136,189,497 | ||||
| Small/Mid Cap Growth Fund | 11,393,460 | 3,531,570 | (34,351) | 3,497,219 | ||||
| Event Driven Fund | 101,126,391 | 25,511,173 | (8,451,578) | 17,059,595 |
The
differences between book-basis and tax-basis unrealized appreciation are attributable primarily to the tax deferral of losses on wash sales and PFIC mark-to-market.
Foreign Currency Spot
Contracts
The Funds enter into foreign currency spot contracts to facilitate transactions in foreign currency denominated securities. These spot contracts are typically open for 2 to 5 days, depending on the settlement terms
of the underlying security transaction. On December 31, 2020, the Funds had foreign currency spot contracts outstanding under which they are obligated to exchange currencies at specified future dates. The net
unrealized appreciation or depreciation on spot contracts is reflected as receivable for investment securities sold or payable for investment securities purchased in the Statements of Assets and Liabilities.
Foreign Currency
Translation
The
value of securities, currencies and other assets and liabilities not denominated in U.S. dollars are translated into U.S. dollar values based upon the current rates of exchange on the date of the Funds’
valuations.
Net realized foreign exchange gains or losses which are reported by the Funds result from currency gains and losses on transaction hedges arising from changes in exchange rates between the trade and settlement dates
on forward contract transactions, and the difference between the amounts accrued for dividends, interest, and foreign taxes and the amounts actually received or paid in U.S. dollars for these items. Net unrealized
foreign exchange gains and losses result from changes in the U.S. dollar value of assets and liabilities (other than investments in securities), which are denominated in foreign currencies, as a result of changes in
exchange rates.
83
Driehaus Mutual Funds
Notes to Financial
Statements — (Continued)
Net realized gain (loss) on foreign currency contracts on portfolio hedges result from the use of forward contracts to hedge portfolio positions denominated or quoted in a particular currency in order to reduce or
limit exposure in that currency.
The Funds do not isolate that portion of the results of operations which results from fluctuations in foreign exchange rates on investments. These fluctuations are included with the net realized gain (loss) on
investments and the net change in unrealized appreciation (depreciation) on investments.
Indemnifications
Under the Trust’s organizational documents, the officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, in the normal course
of business, the Trust enters into contracts that provide general indemnifications to other parties. A Fund’s maximum exposure under these agreements is unknown as this would involve future claims that may be
made against a Fund that have not yet occurred. However, the Funds have not had prior claims or losses pursuant to these contracts and expect the risk of loss to be remote.
Recent Accounting
Pronouncements
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) “Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”), which provides optional temporary financial reporting relief
from the effect of certain types of contract modifications due to the planned discontinuation of the London Interbank Offered Rate (“LIBOR”) and other interbank-offered based reference rates as of the end
of 2021. The new guidance is effective for certain reference rate-related contract modifications that occur during the period March 12, 2020 through December 31, 2022, and the adoption of ASU 2020-04 is elective.
Management is currently evaluating the impact, if any, of applying ASU 2020-04.
In October 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2020-08, "Codification Improvements to Subtopic 310-20, Receivables - Nonrefundable Fees and Other Costs". This ASU amends FASB ASU 2017-08, Premium Amortization on Purchased Callable Debt
Securities, which provides guidance related to the amortization period for certain purchase callable debt securities held at a premium. ASU 2020-08 addresses premium amortization for callable debt securities with
multiple call dates, clarifying that an entity should reevaluate whether a callable debt security purchased at a premium is in scope for each reporting period. ASU 2020-08 is effective for fiscal years, and interim
periods within those fiscal years, beginning after December 15, 2020, and should be applied on a prospective basis as of the beginning of the period of adoption for existing or newly purchased debt securities. At this
time, management is still evaluating the implications of these changes on the financial statements.
Securities Transactions,
Income and Commitments
The Trust records security transactions on trade date. Dividend income is recognized on the ex-dividend date, and interest income is recognized on an accrual basis. Premiums on securities are amortized over the
period remaining until first call date, if any, or if none, the remaining life of the security and discounts are accreted over the remaining life of the security for financial reporting purposes. Withholding taxes on
foreign dividends and interest have been provided for in accordance with the Trust’s understanding of the applicable country’s tax rules and rates.
Pursuant to the terms of certain of the senior unsecured loan agreements, certain Funds may have unfunded loan commitments, which are callable on demand. Each such Fund will have available with its custodian, cash
and/or liquid securities having an aggregate value at least equal to the amount of the unfunded senior loan commitments. At December 31, 2020, the Funds had no unfunded senior loan commitments.
Certain Funds may invest in early-stage companies that may require additional contributions or funding if certain performance milestones are met. Management continuously assesses whether these companies will achieve
these performance milestones and considers the impact of these commitments as they become due. Additionally, in connection with certain investments a Fund may provide commitments for future investments. At December
31, 2020, the Funds had no such outstanding commitments.
84
Driehaus Mutual Funds
Notes to Financial
Statements — (Continued)
B. INVESTMENTS IN
DERIVATIVES
Certain Funds use derivative instruments such as swaps, futures, options, swaptions, and forward foreign currency contracts in connection with their respective investment strategies. During the period January 1,
2020, through December 31, 2020, the Emerging Markets Opportunities Fund primarily utilized: 1) interest rate swaps to hedge against interest rate fluctuation and enable the parties involved to exchange fixed and
floating cash flows; 2) credit default swaps as alternatives to direct investments to manage exposure to specific sectors/markets/industries and/or credit events and manage volatility; and 3) forward foreign currency
contracts to manage currency risk in portfolio holdings. During the period January 1, 2020, through December 31, 2020, the Event Driven Fund primarily utilized: 1) options, including warrants, to both hedge exposure
and provide exposure to certain market segments or specific securities; and 2) forward foreign currency contracts to manage currency risk in portfolio holdings. Detail regarding each derivative type is included
below.
Swap Contracts
The Emerging Markets Opportunities Fund and Event Driven Fund engage in various swap transactions, including forward rate agreements and interest rate, currency, volatility, index, and total return swaps, primarily
to manage duration and yield curve risk, or as alternatives to direct investments. Swaps that are centrally cleared are exposed to the creditworthiness of the clearing organizations (and, consequentially, that of
their members generally, banks and broker-dealers) involved in the transaction. Centrally cleared swaps are valued daily and unrealized gains or losses are recorded in a variation margin account. The Fund receives
from or pays to the clearing organization a specified amount of cash based upon changes in the variation margin account. When a contract is closed, the Fund recognizes a realized gain or loss.
Interest rate swaps are agreements between two parties to exchange cash flows based on a notional principal amount. A Fund may elect to pay a fixed rate and receive a floating rate or receive a fixed rate and pay a
floating rate on a notional principal amount. The net interest received or paid on interest rate swap agreements is accrued daily as interest income/expense. Interest rate swaps are marked-to-market daily using fair
value estimates provided by an independent pricing service. Changes in value, including accrued interest, are recorded as changes in net unrealized appreciation (depreciation) on the Statements of Operations.
Unrealized appreciation is reported as an asset and unrealized depreciation is reported as a liability on the Statements of Assets and Liabilities. Gains or losses are realized upon termination of the contracts. The
risk of loss under a swap contract may exceed the amount recorded as an asset or a liability.
Total return swap contracts are arrangements to exchange a market or security linked return for a periodic payment, based on a notional principal amount, in order to hedge sector exposure and to manage exposure to
specific sectors or industries and/or to gain exposure to specific markets/countries and to specific sectors/industries. To the extent that the total return of the security, index, or other financial measure
underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty. Total return swap contracts are marked to
market daily based upon quotations from market makers and the change, if any, is recorded as a change in net unrealized appreciation (depreciation) on the Statements of Operations. Unrealized appreciation is reported
as an asset and unrealized depreciation is reported as a liability on the Statements of Assets and Liabilities. Payments received or made are recorded as realized gains or losses. Gains or losses are realized upon
termination of the contracts. Each Fund’s maximum risk of loss from counterparty risk is the fair value of the contract.
Volatility swaps are forward contracts on the future realized volatility of an underlying instrument. Volatility swaps are generally used to speculate on future volatility levels, trade the spread between realized
and implied volatility or hedge volatility exposure of other positions. Changes in value are recorded as changes in net unrealized appreciation (depreciation) on the Statements of Operations. Unrealized gains are
reported as an asset and unrealized losses are reported as a liability on the Statements of Assets and Liabilities. Gains or losses are realized upon termination of the contracts. The risk of loss under a volatility
swap contract is dependent upon the volatility of the underlying instrument.
Under the terms of a credit default swap, one party acts as a guarantor receiving a periodic payment that is a fixed percentage applied to a notional amount. In return, the party agrees to purchase the notional
amount of the underlying instrument, at par, if a credit event occurs during the term of the contract. A Fund may enter into credit default swaps in which the Fund acts as guarantor (a seller of protection), and may
enter into credit default swaps in which the counterparty acts as guarantor (a buyer of protection). Premiums paid to or by the Funds are accrued daily and included
85
Driehaus Mutual Funds
Notes to Financial
Statements — (Continued)
in net realized gain (loss) on
swap contracts. The contracts are marked-to-market daily using fair value estimates provided by an independent pricing service. Changes in value are recorded as unrealized appreciation (depreciation) on the Statements
of Operations. Unrealized gains are reported as an asset and unrealized losses are reported as a liability on the Statements of Assets and Liabilities. Gains or losses are realized upon termination of the contracts.
The risk of loss under a swap contract may exceed the amount recorded as an asset or a liability. The notional amount of a swap contract is the reference amount pursuant to which the counterparties make payments. For
swaps in which the referenced obligation is an index, in the event of default of any debt security included in the corresponding index, the Fund pays or receives the percentage of the corresponding index that the
defaulted security comprises (1) multiplied by the notional value and (2) multiplied by the ratio of one minus the ratio of the market value of the defaulted debt security to its par value.
Risks associated with swap contracts include changes in the returns of underlying instruments and/or interest rates, failure of the counterparties to perform under the contracts’ terms and the possible lack of
liquidity with respect to the contracts. For centrally cleared swap contracts, counterparty risk is limited due to the role of the clearinghouse. Credit default swaps can involve greater risks than if an investor had
invested in the reference obligation directly since, in addition to general market risks, credit default swaps are subject to counterparty credit risk, leverage risk, hedging risk, correlation risk, and liquidity
risk. The Funds disclose swap contracts on a gross basis, with no netting of contracts held with the same counterparty.
Options Contracts
The Funds may use options contracts, which include warrants, to hedge downside risk, produce incremental earnings or protect against market changes in the value of equities or interest rates. The Funds may write
covered call and put options on futures, swaps, securities, or currencies the Funds own or in which they may invest. Writing put options tends to increase a Fund’s exposure to the underlying instrument. Writing
call options tends to decrease a Fund’s exposure to the underlying instrument. When a Fund writes a call or put option, an amount equal to the premium received is recorded as a liability and subsequently marked
to market to reflect the current value of the option written. These liabilities are reflected as written options outstanding in the Schedule of Investments. Premiums received from writing options that expire are
treated as realized gains. Premiums received from writing options that are exercised or closed are added to the proceeds or offset against amounts paid on the underlying future, swap, security or currency transaction
to determine the realized gain or loss. A Fund, as a writer of an option, has no control over whether the underlying future, swap, security, or currency may be sold (call) or purchased (put) and, as a result, bears
the market risk of an unfavorable change in the price of the future, swap, security, or currency underlying the written option. The risk exists that a Fund may not be able to enter into a closing transaction because
of an illiquid market. In addition, to the extent a Fund purchases an over-the-counter (“OTC”) option, it is subject to credit risk that the counterparty to the trade does not perform under the
contract’s terms. The Funds are not subject to credit risk on OTC options written as the counterparty has already performed its obligation by paying the premium at the inception of the contract.
The Funds may also purchase put and call options. Purchasing call options tends to increase a Fund’s exposure to the underlying instrument. Purchasing put options tends to decrease a Fund’s exposure to
the underlying instrument. A Fund pays a premium, which is included in its Schedule of Investments as an investment and subsequently marked-to-market to reflect the current value of the option. Premiums paid for
purchasing options that expire are treated as realized losses. The risk associated with purchasing put and call options is limited to the premium paid. Premiums paid for purchasing options that are exercised or closed
are added to the amounts paid or offset against the proceeds on the underlying future, swap, security or currency transaction to determine the realized gain or loss. When entering into purchased option contracts, a
Fund bears the risk of securities prices moving unexpectedly, in which case, a Fund may not achieve the anticipated benefits of the purchased option contracts; however, the risk of loss is limited to the premium
paid.
Forward Foreign Currency
Contracts
Certain Funds use forward foreign currency contracts to manage foreign currency, to produce incremental earnings or to hedge existing positions. A forward foreign currency contract involves an obligation to purchase
or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. These contracts are principally
traded in the inter-bank market conducted directly between currency traders (usually large commercial banks) and their customers.
86
Driehaus Mutual Funds
Notes to Financial
Statements — (Continued)
The market value of a forward foreign currency contract fluctuates with changes in currency exchange rates. Outstanding forward foreign currency contracts are valued daily at current market rates and the resulting
change in market value is recorded as change in net unrealized appreciation or depreciation on the Statements of Operations. When a forward foreign currency contract is settled, the Fund records a realized gain or
loss equal to the difference between the value at the time the forward foreign currency contract was opened and the value at the time it was settled. A forward foreign currency contract may involve market risk in
excess of the unrealized appreciation (depreciation) reflected on the Statements of Assets and Liabilities. In addition, the Funds could be exposed to credit risk if the counterparties are unable or unwilling to meet
the terms of the contracts or market risk if the value of the foreign currency changes unfavorably.
Equity Certificates
Certain Funds may invest in equity certificates, which allow the Funds to participate in the appreciation (depreciation) of the underlying security without actually owning the underlying security. These instruments
are purchased pursuant to an agreement with a financial institution and are valued at a calculated market price based on the value of the underlying security in accordance with the agreement. These equity certificates
are subject to the credit risk of the issuing financial institution. There is no off-balance sheet risk associated with equity certificates and the Funds’ potential loss is limited to the purchase price of the
securities. The Funds are exposed to credit risk associated with the counterparty to the transaction, which is monitored by the Funds’ management on a periodic basis. A Fund’s equity certificates are not
subject to any master netting agreement.
Derivative Investment
Holdings Categorized by Risk Exposure
Each Fund is subject to the FASB’s “Disclosures about Derivative Instruments and Hedging Activities” (the “Derivatives Statement”). The Derivatives Statement amends and expands
disclosures about derivative instruments and hedging activities. The Derivatives Statement is intended to improve financial reporting about derivative instrument by requiring enhanced disclosures to enable investors
to better understand how and why the Fund uses derivative instruments, how these derivative instruments are accounted for and their effects on the Funds’ financial position and results of operations. Each Fund's
derivative holdings do not qualify for hedge accounting treatment and as such are recorded at current fair value.
The
following table sets forth the fair value and the location in the Statements of Assets and Liabilities of the Event Driven Fund’s derivative contracts by primary risk exposure as of December 31, 2020:
| Asset derivatives | ||||
| Risk exposure category | Statements of Assets and Liabilities location | Fair Value | ||
| Equity contracts | Warrant securities, at fair value | $648,351 | ||
| Total | $648,351 | |||
| Liabilities derivatives | ||||
| Risk exposure category | Statements of Assets and Liabilities location | Fair Value | ||
| Equity contracts | Written Options outstanding, at fair value | $162,667 | ||
| Total | $162,667 | |||
87
Driehaus Mutual Funds
Notes to Financial
Statements — (Continued)
The
following table sets forth the Emerging Markets Opportunities Fund’s net realized gain (loss) by primary risk exposure and by type of derivative contract for the year ended December 31, 2020:
| Amount of net realized gain (loss) on derivatives | ||||||
| Risk exposure category | ||||||
| Derivative | Currency contracts | Interest rate contracts | Total | |||
| Forward foreign currency contracts | $30,199 | $— | $30,199 | |||
| Swap contracts | — | 107,987 | 107,987 | |||
| Total | $30,199 | $107,987 | $138,186 | |||
The
following table sets forth the Event Driven Fund’s net realized gain (loss) by primary risk exposure and by type of derivative contract for the year ended December 31, 2020:
| Amount of net realized gain (loss) on derivatives | ||||
| Risk exposure category | ||||
| Derivative | Equity contracts | Total | ||
| Warrant contracts | $348,556 | $348,556 | ||
| Total | $348,556 | $348,556 | ||
The
following table sets forth Emerging Markets Opportunities Fund’s change in net unrealized appreciation (depreciation) by primary risk exposure and by type of derivative contract for the year ended December 31,
2020:
| Change in net unrealized appreciation (depreciation) on derivatives | ||||
| Risk exposure category | ||||
| Derivative | Interest rate contracts | Total | ||
| Swap contracts | $(26,132) | $(26,132) | ||
| Total | $(26,132) | $(26,132) | ||
The gross notional amount and/or the number of contracts for the Emerging Markets Opportunities Fund as of December 31, 2020, are included on the Schedule of Investments. The quarterly average values of derivative
investments for the year ended December 31, 2020 is set forth in the table below:
| Quarterly Derivative Averages | ||||
| Derivative | Quarterly Average | $ Amount/ Number | ||
| Swap contracts | gross notional amount | $14,911,277 | ||
| Forward foreign currency contracts - Long | gross notional amount | $732,644 | ||
| Forward foreign currency contracts - Short | gross notional amount | $736,335 | ||
88
Driehaus Mutual Funds
Notes to Financial
Statements — (Continued)
The
following table sets forth the Event Driven Fund’s change in net unrealized appreciation (depreciation) by primary risk exposure and by type of derivative contract for the year ended December 31, 2020:
| Change in net unrealized appreciation (depreciation) on derivatives | ||||
| Risk exposure category | ||||
| Derivative | Equity contracts | Total | ||
| Warrant contracts | $548,233 | $548,233 | ||
| Written options contracts | 213,841 | 213,841 | ||
| Total | $762,074 | $762,074 | ||
The gross notional amount and/or the number of contracts for the Event Driven Fund as of December 31, 2020, are included on the Schedule of Investments. The quarterly average values of derivative investments for the
year ended December 31, 2020, is set forth in the table below:
| Quarterly Derivative Averages | ||||
| Derivative | Quarterly Average | $ Amount/ Number | ||
| Written options contracts | number of contracts | (212) | ||
| Warrant contracts | number of contracts | 167,376 | ||
Disclosures about
Offsetting Assets and Liabilities
The Funds are party to various agreements, including International Swaps and Derivatives Association Agreements and related Credit Support Annexes (“Master Netting Agreements” or “MNA”),
which govern the terms of certain transactions with select counterparties. MNAs are designed to reduce counterparty risk associated with the relevant transactions by establishing credit protection mechanisms and
providing standardization as a means of improving legal certainty. As MNAs are specific to the unique operations of different asset types, they allow each Fund to close out and net its total exposure to a counterparty
in the event of default with respect to all of the transactions governed under a single agreement with that counterparty. MNAs can also help reduce counterparty risk by specifying collateral posting requirements at
pre-arranged exposure levels. Securities and cash pledged as collateral are reflected as assets in the Statements of Assets and Liabilities as either a component of "Investment securities at fair value" or "Collateral
held at custodian for the benefit of brokers".
For financial reporting purposes, the Funds do not offset financial assets and financial liabilities that are subject to MNAs or similar arrangements on the Statements of Assets and Liabilities. The settlement of
futures contracts, swap contracts and exchange-traded purchased options is guaranteed by the clearinghouse or exchange the instrument is traded on and is not subject to arrangements with particular counterparties.
None of these instruments were subject to MNAs at December 31, 2020.
C. INVESTMENT
ADVISORY FEES, TRANSACTIONS WITH AFFILIATES, AND ADMINISTRATIVE FEES
Richard H. Driehaus is Chairman of Driehaus Capital Management LLC (“DCM” or the “Adviser”), a registered investment adviser. As of December 31, 2020, Richard H. Driehaus held a controlling
interest in the Emerging Markets Opportunities Fund and substantial, non-controlling interests in certain other Funds.
DCM serves as the Funds’ investment adviser. In return for its services to the Funds, DCM receives monthly fees. Emerging Markets Growth Fund pays the Adviser a monthly fee computed and accrued daily at an
annual rate of 1.05% on the first $1.5 billion and 0.75% in excess of $1.5 billion of the Fund’s average daily net assets. Effective December 31, 2020, Emerging Markets Small Cap Growth Fund pays the Adviser a
monthly fee computed and accrued daily at the annual rate of 1.10% of the Fund’s average daily net assets. Prior to December 31, 2020, the Fund paid an annual rate of 1.15%. Emerging Markets Opportunities Fund
pays the Adviser a management fee on a monthly basis of 0.90% of average daily net assets. International Small Cap Growth Fund pays the Adviser a monthly fee computed and accrued daily at an
89
Driehaus Mutual Funds
Notes to Financial
Statements — (Continued)
annual rate of 1.00% of the
Fund’s average daily net assets. Micro Cap Growth Fund pays the Adviser a monthly fee computed and accrued daily at an annual rate of 1.25% of the Fund’s average daily net assets. Small Cap Growth Fund and
Small/Mid Cap Growth pays the Adviser a monthly fee computed and accrued daily at an annual rate of 0.60% of the Fund’s average daily net assets. Event Driven Fund pays the Adviser an annual management fee on a
monthly basis of 1.00% of the Fund’s average daily net assets.
Effective December 31, 2020, the Adviser entered into a contractual agreement to cap Emerging Markets Small Cap Growth Fund’s annual operating expenses (other than interest, taxes, brokerage commissions,
dividends and interest on short sales and other portfolio transaction expenses and extraordinary expenses such as litigation and other expenses not incurred in the ordinary course of the Fund’s business) at
1.24% of average daily net assets until April 30, 2023. Prior to December 31, 2020, the cap was 1.45%. DCM is entitled to recoupment for previously waived fees and reimbursed expenses to the extent that the
Fund’s expense ratio remains below the operating expense cap in place at the time of the waiver and the current operating expense cap for a period not to exceed three years from the date on which the waiver or
reimbursement was made. For the year ended December 31, 2020, DCM waived fees for Emerging Markets Small Cap Growth Fund totaling $171,531 under this agreement.
DCM entered into a contractual agreement to cap the Emerging Markets Opportunities Fund’s annual ordinary operating expenses (other than interest, taxes, brokerage commissions, dividends and interest on short
sales, other investment-related costs, acquired fund fees and expenses, and extraordinary expenses such as litigation and other expenses not incurred in the ordinary course of the Fund’s business) at 0.99% of
average daily net assets until April 30, 2022. DCM is entitled to recoupment for previously waived fees and reimbursed expenses to the extent that the Fund’s expense ratio remains below the operating expense cap
in place at the time of the waiver and the current operating expense cap for a period not to exceed three years from the date on which the waiver or reimbursement was made. For the year ended December 31, 2020, DCM
waived fees for Emerging Markets Opportunities Fund totaling $230,617 under this agreement.
DCM has entered into a contractual agreement to cap Small Cap Growth Fund’s annual operating expenses (other than interest, taxes, brokerage commissions, dividends and interest on short sales and other
portfolio transaction expenses and extraordinary expenses such as litigation and other expenses not incurred in the ordinary course of the Fund’s business) at 1.20% of average daily net assets for the Investor
Class and 0.95% of average daily net assets for the Institutional Class until April 30, 2021. DCM is entitled to recoupment for previously waived fees and reimbursed expenses to the extent that the Fund’s
expense ratio remains below the operating expense cap in place at the time of the waiver and the current operating expense cap for a period not to exceed three years from the date on which the waiver or reimbursement
was made. For the year ended December 31, 2020, DCM waived fees for the Investor Class shares of the Small Cap Growth Fund totaling $18,154 and recouped fees for the Institutional Class shares of the Small Cap Growth
Fund totaling $9,504 under this agreement.
DCM entered into a contractual agreement to cap Small/Mid Cap Growth Fund’s annual operating expenses (other than interest, taxes, brokerage commissions, dividends and interest on short sales and other
portfolio transaction expenses and extraordinary expenses such as litigation and other expenses not incurred in the ordinary course of the Fund’s business) at 0.95% of average daily net assets until May 1, 2023.
For a period of three years subsequent to the Fund’s commencement of operations on May 1, 2020, DCM is entitled to recoupment of previously waived fees and reimbursed expenses to the extent that the expense
ratio remains below the operating expense cap in place at the time of the waiver and the current operating expense cap for a period not to exceed three years from the date on which the waiver or reimbursement was
made. For the year ended December 31, 2020, DCM waived fees for Small/Mid Cap Growth Fund totaling $73,297 under this agreement.
90
Driehaus Mutual Funds
Notes to Financial
Statements — (Continued)
The
table below indicates the amount of fees available for recoupment by DCM in future periods:
| Year Ended December 31 | Emerging Markets Small Cap Growth Fund | Emerging Markets Opportunities Fund | Small Cap Growth Fund* | Small/Mid Cap Growth Fund | ||||
| 2021 | $— | $119,889 | $34,463 | $— | ||||
| 2022 | 227,780 | 234,125 | 31,856 | — | ||||
| 2023 | 171,531 | 230,617 | 18,154 | 73,297 | ||||
| Total | $399,311 | $584,631 | $84,473 | $73,297 |
| *Amount of fees available for recoupment for the Small Cap Growth Fund is for the Investor Class. All fees have been recouped by the Institutional Class as of December 31, 2020. |
The Emerging Markets Growth Fund incurred $18,239,478 for investment advisory fees during the year ended December 31, 2020, of which $1,790,707 was payable to DCM at December 31, 2020. The Emerging Markets Small Cap
Growth Fund incurred $732,472 for investment advisory fees during the year ended December 31, 2020, of which $80,544 was payable to DCM at December 31, 2020. The Emerging Markets Opportunities Fund incurred $327,473
for investment advisory fees during the year ended December 31, 2020, of which $36,282 was payable to DCM at December 31, 2020. The International Small Cap Growth Fund incurred $2,460,180 for investment advisory fees
during the year ended December 31, 2020, of which $237,728 was payable to DCM at December 31, 2020. The Micro Cap Growth Fund incurred $3,227,705 for investment advisory fees during the year ended December 31, 2020,
of which $350,116 was payable to DCM at December 31, 2020. The Small Cap Growth Fund incurred $1,369,876 for investment advisory fees during the year ended December 31, 2020, of which $173,621 was payable to DCM at
December 31, 2020. The Small/Mid Cap Growth Fund incurred $29,232 for investment advisory fees during the period May 1, 2020, through December 31, 2020, of which $7,547 was payable to DCM at December 31, 2020. The
Event Driven Fund incurred $1,018,776 for investment advisory fees during the year ended December 31, 2020, of which $117,090 was payable to DCM at December 31, 2020.
The Funds direct certain portfolio trades, subject to obtaining the best price and execution, to brokers who have agreed to pay a portion of the Funds’ operating expenses using part of the commissions
generated. For the year ended December 31, 2020, these arrangements reduced the expenses of Emerging Markets Growth Fund, Emerging Markets Small Cap Growth Fund, Emerging Markets Opportunities Fund, International
Small Cap Growth Fund, Micro Cap Growth Fund, Small Cap Growth Fund, Small/Mid Cap Growth Fund and Event Driven Fund by $135,342 (0.6%), $2,321 (0.2%), $1,350 (0.2%), $14,845 (0.5%), $65,779 (1.8%), $33,114 (1.7%),
$60 (0.1%) and $25,355 (1.6%), respectively.
The Funds are permitted to purchase or sell securities from or to certain affiliated funds under specified conditions outlined in procedures adopted by the Board of Trustees. The procedures have been designed to
ensure that any purchase or sale of securities by a Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment adviser (or affiliated investment
advisers), common trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under these procedures, each transaction is effected at the current market price to minimize trading
costs, where permissible. For the year ended December 31, 2020, the Funds engaged in purchases and sales of securities, pursuant to Rule 17a-7 of the 1940 Act, as follows:
| Fund | Purchases | Sales | Net Realized Gain (Loss) | |||
| Event Driven Fund | $1,386,307 | $— | $— |
Effective January 1, 2020, the Adviser entered into a Fee Reimbursement Agreement (“Agreement”) with the Emerging Markets Growth Fund, the Small Cap Growth Fund, and the Event Driven Fund. Under the
Agreement, the Funds reimburse the Adviser for certain fees paid to intermediaries who provide shareholder administrative and/or
91
Driehaus Mutual Funds
Notes to Financial
Statements — (Continued)
sub-transfer agency services to
the Funds. The amount to be reimbursed will not exceed 0.25% of the average daily net assets held by such intermediaries. The amounts incurred and payable to the Adviser during the period January 1, 2020, through
December 31, 2020, are as follows:
| Fund | Shareholder services plan fees | Accrued shareholder services plan fees | ||
| Emerging Markets Growth Fund | $ 1,820,859 | $ 340,189 | ||
| Small Cap Growth Fund | 29,370 | 3,926 | ||
| Event Driven Fund | 120,299 | — |
Certain officers of the Trust are also officers of DCM. The Funds pay a portion of the Chief Compliance Officer’s salary. No other officers received compensation from the Funds during the period January 1,
2020, through December 31, 2020. The Independent Trustees are compensated for their services to the Trust and such compensation is reflected as Trustees’ fees in the Statements of Operations.
Prior to June 1, 2020, UMB Fund Services, Inc. (“UMBFS”) served as the Funds’ administrative and accounting agent and transfer agent for the Emerging Markets Opportunities and the Event Driven
Fund. Prior to August 1, 2020, The Bank of New York Mellon served as the administrative and accounting agent and BNY Mellon Investment Servicing (US) Inc. served as the transfer agent for the Emerging Markets Growth
Fund, the Emerging Markets Small Cap Growth Fund, the International Small Cap Growth Fund, the Micro Cap Growth Fund, the Small Cap Growth Fund and the Small/Mid Cap Growth Fund. Effective June 1, 2020, and August 1,
2020, respectively, The Northern Trust Company (“Northern”) serves as fund accounting and administration services provider and transfer agent for all of the Funds. Under the terms of the Fund
Administration and Accounting Services Agreement, Northern is entitled to receive fees, computed daily and payable monthly, based upon the average daily net assets of each Fund. The fees, excluding out of pocket
expenses, range between 0.0175% and 0.045% of average daily net assets. For its services as Transfer Agent, Northern receives a fee, computed daily and payable monthly, based upon the average daily net assets of each
Fund. The fees, excluding out of pocket expenses, range between 0.002% and 0.0175% of average daily net assets of each Fund.
D. INVESTMENT
TRANSACTIONS
Purchases and sales of investment securities (excluding derivatives, short-term securities and U.S. government obligations) for the period January 1, 2020, through December 31, 2020 and the period May 1, 2020
through December 31, 2020 for the Small/Mid Cap Growth Fund were as follows:
| Fund | Purchases | Sales | ||
| Emerging Markets Growth Fund | 3,495,322,912 | 3,516,198,886 | ||
| Emerging Markets Small Cap Growth Fund | 154,927,417 | 149,613,640 | ||
| Emerging Markets Opportunities Fund | 50,784,264 | 46,820,141 | ||
| International Small Cap Growth Fund | 246,191,156 | 278,597,825 | ||
| Micro Cap Growth Fund | 361,302,198 | 458,127,057 | ||
| Small Cap Growth Fund | 411,125,942 | 371,153,881 | ||
| Small/Mid Cap Growth Fund | 18,221,234 | 7,114,532 | ||
| Event Driven Fund | 126,233,339 | 118,962,666 |
The
Funds had no purchases and sales of U.S. government obligations for the period January 1, 2020, through December 31, 2020.
92
Driehaus Mutual Funds
Notes to Financial
Statements — (Continued)
E. CAPITAL SHARE
TRANSACTIONS
For
the years ended December 31, 2020 and 2019, transactions in capital shares (authorized shares unlimited) were as follows:
| Emerging Markets Growth Fund | Emerging Markets Small Cap Growth Fund | Emerging Markets Opportunities Fund | |||||||||
| 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | ||||||
| Fund | |||||||||||
| Shares issued | — | — | 2,543,003 | 874,262 | 1,794,696 | 920,608 | |||||
| Shares reinvested | — | — | 24,896 | 14,891 | 75,459 | 37,514 | |||||
| Shares redeemed | — | — | (2,203,816) | (4,849,550) | (1,630,784) | (873,645) | |||||
| Net increase (decrease) | — | — | 364,083 | (3,960,397) | 239,371 | 84,477 | |||||
| Investor Class | |||||||||||
| Shares issued | 3,204,978 | 2,872,532 | — | — | — | — | |||||
| Shares reinvested | 465,885 | 172,532 | — | — | — | — | |||||
| Shares redeemed | (6,122,971) | (6,094,234) | — | — | — | — | |||||
| Net increase (decrease) | (2,452,108) | (3,049,170) | — | — | — | — | |||||
| Institutional Class | |||||||||||
| Shares issued | 8,365,858 | 7,006,838 | — | — | — | — | |||||
| Shares reinvested | 590,331 | 174,824 | — | — | — | — | |||||
| Shares redeemed | (5,376,101) | (4,277,922) | — | — | — | — | |||||
| Net increase (decrease) | 3,580,088 | 2,903,740 | — | — | — | — | |||||
| Total net increase (decrease) | 1,127,980 | (145,430) | — | — | — | — | |||||
| International Small Cap Growth Fund | Micro Cap Growth Fund | Small Cap Growth Fund | |||||||||
| 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | ||||||
| Fund | |||||||||||
| Shares issued | 3,883,897 | 4,710,527 | 3,395,804 | 5,178,977 | — | — | |||||
| Shares reinvested | 1,581,466 | 169,235 | 2,060,912 | 2,292,488 | — | — | |||||
| Shares redeemed | (8,019,361) | (6,242,924) | (9,518,280) | (10,513,427) | — | — | |||||
| Net increase (decrease) | (2,553,998) | (1,363,162) | (4,061,564) | (3,041,962) | — | — | |||||
| Investor Class | |||||||||||
| Shares issued | — | — | — | — | 692,425 | 526,045 | |||||
| Shares reinvested | — | — | — | — | 68,699 | 42,020 | |||||
| Shares redeemed | — | — | — | — | (281,205) | (505,115) | |||||
| Net increase (decrease) | — | — | — | — | 479,919 | 62,950 | |||||
| Institutional Class | |||||||||||
| Shares issued | — | — | — | — | 6,900,456 | 3,970,530 | |||||
| Shares reinvested | — | — | — | — | 828,350 | 599,613 | |||||
| Shares redeemed | — | — | — | — | (4,491,029) | (4,651,842) | |||||
| Net increase (decrease) | — | — | — | — | 3,237,777 | (81,699) | |||||
| Total net increase (decrease) | — | — | — | — | 3,717,696 | (18,749) | |||||
93
Driehaus Mutual Funds
Notes to Financial
Statements — (Continued)
| Small/Mid Cap Growth Fund | Event Driven Fund | ||||
| 2020 | 2020 | 2019 | |||
| Fund | |||||
| Shares issued | 1,246,622 | 6,365,985 | 3,126,556 | ||
| Shares reinvested | 11,603 | 325,090 | 181,217 | ||
| Shares redeemed | (394,737) | (2,509,836) | (2,468,451) | ||
| Net increase (decrease) | 863,488 | 4,181,239 | 839,322 | ||
| Investor Class | |||||
| Shares issued | — | — | — | ||
| Shares reinvested | — | — | — | ||
| Shares redeemed | — | — | — | ||
| Net increase (decrease) | — | — | — | ||
| Institutional Class | |||||
| Shares issued | — | — | — | ||
| Shares reinvested | — | — | — | ||
| Shares redeemed | — | — | — | ||
| Net increase (decrease) | — | — | — | ||
| Total net increase (decrease) | — | — | — | ||
F. RESTRICTED
SECURITIES
Restricted securities are securities that are not registered for sale under the Securities Act of 1933, as amended, or applicable foreign law and that may be resold only in transactions exempt from applicable
registration. Restricted securities include Rule 144A securities which may be sold normally to qualified institutional buyers. At December 31, 2020, the Funds held restricted securities as denoted on the Schedule of
Investments.
G. LINE OF
CREDIT
The Funds obtained a committed line of credit in the amount of $50,000,000. The line of credit is available primarily to meet large, unexpected shareholder redemptions subject to certain restrictions. Interest is
charged at a rate per annum equal to the Federal Funds Rate in effect at the time of the borrowings plus 1.5%, or 1.75%, whichever is greater. There is a commitment fee of 0.10% of the excess of the $50,000,000
committed amount over the sum of the average daily balance of any loans, which is allocated amongst the Funds. The Micro Cap Growth Fund utilized the line of credit during the periods June 25, 2020, to June 26, 2020,
and September 10, 2020, to September 11, 2020. For the period June 25, 2020, to June 26, 2020, the average daily loan balance outstanding on days where borrowings existed was $7,000,000 and the weighted average
interest rate was 1.58%. For the period September 10, 2020 to September 11, 2020, the average daily loan balance outstanding on days where borrowings existed was $15,000,000 and the weighted average interest rate was
1.75%. The interest expense, which is included on the Statements of Operations, was $1,036 for the Micro Cap Growth Fund.
H. FOREIGN
INVESTMENT RISKS
To the extent a Fund invests in foreign securities, it may entail risks due to the potential for political and economic instability in the countries where the issuers of these securities are located. In addition,
foreign exchange fluctuations could affect the value of positions held. These risks are generally intensified in emerging markets.
I. REDEMPTION
FEES
Certain Funds may charge a redemption fee of 2.00% of the redemption amount for shares redeemed within 60 days of purchase. The redemption fees are recorded in paid-in capital and reflected in the Statements of
Changes in Net Assets.
94
Driehaus Mutual Funds
Notes to Financial
Statements — (Continued)
J. SUBSEQUENT
EVENTS
Events or transactions that occurred after the date of this report through the date the report was issued have been evaluated for potential impact to the financial statements. There are no subsequent events that
require recognition or disclosure in the financial statements.
95
Report of Independent
Registered Public Accounting Firm
To the Shareholders
and the Board of Trustees of the Driehaus Mutual Funds
Opinion on the Financial
Statements
We have audited the accompanying statements of assets and liabilities of the Driehaus Mutual Funds (the "Trust") (comprising of Driehaus Emerging Markets Growth Fund, Driehaus Emerging Markets Small Cap Growth Fund,
Driehaus Emerging Markets Opportunities Fund, Driehaus International Small Cap Growth Fund, Driehaus Micro Cap Growth Fund, Driehaus Small Cap Growth Fund, Driehaus Small/Mid Cap Growth Fund and Driehaus Event Driven
Fund (collectively referred to as the “Funds”), including the schedules of investments, as of December 31, 2020, and the related statements of operations and changes in net assets, and the financial
highlights for each of the periods indicated in the table below and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in
all material respects, the financial position of each of the Funds comprising the Driehaus Mutual Funds at December 31, 2020, and the results of their operations, changes in net assets and financial highlights for
each of the periods indicated in the table below, inconformity with U.S. generally accepted accounting principles.
| Individual fund constituting the Driehaus Mutual Funds | Statement of operations | Statement of changes in net assets | Financial highlights | |||
| Driehaus Emerging Markets Growth FundDriehaus Emerging Markets Small Cap Growth FundDriehaus International Small Cap Growth FundDriehaus Micro Cap Growth FundDriehaus Event Driven Fund | For the year ended December 31, 2020 | For each of the two years in the period ended December 31, 2020 | For each of the five years in the period ended December 31, 2020 | |||
| Driehaus Emerging Markets Opportunities Fund | For the year ended December 31, 2020 | For each of the two years in the period ended December 31, 2020 | For each of the three years in the period ended December 31, 2020 and the period from April 10, 2017 (commencement of operations) through December 31, 2017 | |||
| Driehaus Small Cap Growth Fund | For the year ended December 31, 2020 | For each of the two years in the period ended December 31, 2020 | For each of the three years in the period ended December 31, 2020 and the period from August 21, 2017 (commencement of operations) through December 31, 2017 | |||
| Driehaus Small/Mid Cap Growth Fund | For the period May 1, 2020 (commencement of operations) through December 31, 2020 | |||||
Basis for Opinion
These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on each of the Fund’s financial statements based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit
96
Report of Independent
Registered Public Accounting Firm — (Continued)
of the Trust’s internal
control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness
of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2020, by
correspondence with the custodians, agent banks, others and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the
auditor of one or more Driehaus investment companies since 2002.
Chicago, Illinois
February 25, 2021
97
Interested and
Independent Trustees of the Trust
The following table sets forth certain information with respect to the Trustees of the Trust as of December 31, 2020:
| Name, Address and Year of Birth | Position(s) Held with the Trust | Term of Office and Length of Time Served | Principal Occupation(s) During the Past 5 Years | Other Directorships Held by Trustee During the Past 5 Years | |||||
| Interested Trustee:* | |||||||||
| Stephen T. Weber Driehaus Capital Management LLC 25 East Erie Street Chicago, IL 60611 YOB: 1963 | Trustee and President | Since Dec. 2020 Since Feb. 2020 | President and Head of Distribution of the Adviser since February 2020; Director of Sales and Relationship Management of the Adviser from 2006 through February 2020; President and Chief Executive Officer of Driehaus Securities LLC from 2018 through 2019. | None. | |||||
| Independent Trustees: | |||||||||
| Daniel F. Zemanek c/o Driehaus Capital Management LLC 25 East Erie Street Chicago, IL 60611 YOB: 1942 | Trustee and Chair | Since 1996 Since 2014 | Retired; President of Ludan, Inc. (real estate development services specializing in senior housing) from April 2008 to December 2014. | None. | |||||
| Theodore J. Beck c/o Driehaus Capital Management LLC 25 East Erie Street Chicago, IL 60611 YOB: 1952 | Trustee and Vice Chair | Since 2012 Since June 2020 | Retired; President and Chief Executive Officer, National Endowment for Financial Education, 2005 to July 2018. | None. | |||||
| Francis J. Harmon c/o Driehaus Capital Management LLC 25 East Erie Street Chicago, IL 60611 YOB: 1942 | Trustee | Since 1998 | Retired; Consultant, Great Lakes Advisors, Inc. from January 2020 to December 2020; Relationship Manager, Great Lakes Advisors, Inc. through December 2019. | None. | |||||
| Dawn M. Vroegop c/o Driehaus Capital Management LLC 25 East Erie Street Chicago, IL 60611 YOB: 1966 | Trustee | Since 2012 | Private Investor. | Independent Trustee, Brighthouse Funds Trust I since December 2000 and Brighthouse Funds Trust II since May 2009 | |||||
| Christopher J. Towle, CFA c/o Driehaus Capital Management LLC 25 East Erie Street Chicago, IL 60611 YOB: 1957 | Trustee | Since 2016 | Retired; Partner, Portfolio Manager, Director of High Yield and Convertible Securities, Lord Abbett & Co. 1987 to 2014. | Independent Trustee, Brighthouse Funds Trust I and Brighthouse Funds Trust II, each from April 2018 to August 2019. | |||||
* Mr. Weber became President on February
24, 2020 and a Trustee on December 3, 2020. Mr. Weber is an “interested person” of the Trust and the Adviser, as defined in the 1940 Act, because he is an officer of the Adviser.
Number of portfolios in complex overseen
by all Trustees is eight.
98
Officers of the Trust
The
following table sets forth certain information with respect to the officers of the Trust.
| Name, Address and Year of Birth | Position(s) Held with the Trust | Length of Time Served | Principal Occupation(s) During Past 5 Years | |||
| Stephen T. Weber 25 East Erie Street Chicago, IL 60611 YOB: 1970 | President | Since Feb. 2020 | President and Head of Distribution of the Adviser since February 2020; Director of Sales and Relationship Management of the Adviser from 2006 through February 2020; President and Chief Executive Officer of Driehaus Securities LLC from 2018 through 2019. | |||
| Robert M. Kurinsky 25 East Erie Street Chicago, IL 60611 YOB: 1972 | Vice President and Treasurer | Since 2019 | Chief Operating Officer of the Adviser since February 2020, Chief Financial Officer and Treasurer of the Adviser since January 2019; Treasurer and Chief Financial Officer of Driehaus Securities LLC from January 2019 through December 2019; Treasurer, Secretary and Chief Legal Officer of the Keeley Funds, Inc. through December 2018; President and Chief Operating Officer of Keeley-Teton Advisors, LLC from March 2017 to December 2018; Treasurer and Secretary of Joley Corp. and Keeley Holdings, Inc. through February 2017; Secretary, Treasurer, Chief Financial Officer and General Counsel of Keeley Asset Management Corp. through February 2017; Secretary, Treasurer, Chief Financial Officer and General Counsel of Keeley Investment Corp. through February 2017. | |||
| Janet L. McWilliams 25 East Erie Street Chicago, IL 60611 YOB: 1970 | Assistant Vice President and Chief Legal Officer | Since 2007 Since 2012 | General Counsel and Secretary of the Adviser and Driehaus Securities LLC since 2012; General Counsel and Secretary of Driehaus Securities LLC through December 2019. | |||
| Anne S. Kochevar 25 East Erie Street Chicago, IL 60611 YOB: 1963 | Chief Compliance Officer and Anti-Money Laundering Compliance Officer | Since 2019 | Chief Compliance Officer of the Adviser since July 2019; Anti-Money Laundering Compliance Officer of Driehaus Securities LLC from July 2019 to December 2019; Chief Compliance Officer of Confluence Investment Management from January 2018 to June 2019; and Chief Compliance Officer of Henderson Global Investors U.S. from November 2014 to January 2018. | |||
| Todd M. Young 333 South Wabash Avenue Chicago, IL 60604 YOB: 1983 | Secretary | Since August 2020 | Senior Consultant of the Northern Trust Company since July 2019; Associate Director and Fund Accounting and Regulatory Policies Manager of UBS Asset Management (Americas) Inc. from December 2017 to July 2019; Senior Accountant of William Blair & Company from May 2015 to December 2017. | |||
| Malinda M. Sanborn 25 East Erie Street Chicago, IL 60611 YOB: 1965 | Assistant Treasurer | Since August 2020 | Director of Fund Administration of the Advisor since August 2014. | |||
| Christina E. Algozine 25 East Erie Street Chicago, IL 60611 YOB: 1985 | Assistant Secretary | Since 2019 | Assistant Secretary of the Adviser since January 2019; Assistant Secretary of Driehaus Securities LLC from January 2019 to December 2019; Senior Attorney, Aegon USA Investment Management, LLC from December 2014 to January 2019; Head of Corporate Strategy and Support, Aegon USA Investment Management, LLC from April 2015 to January 2017. |
The
Statement of Additional Information for Driehaus Mutual Funds contains more detail about the Trust’s Trustees and officers and is available upon request, without charge. For further information, please call
1-800-560-6111.
99
Fund Expense Examples
(unaudited)
As a mutual fund shareholder, you may incur two types of costs: (1) transaction costs, including sales charges; redemption fees; and exchange fees and (2) ongoing costs, including management fees; distribution
(12b-1) and/or service fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of
investing in other mutual funds.
The
example is based on an investment of $1,000 invested at the beginning of the period and held for the entire six month period ended December 31, 2020.
Actual Expenses
The first line of the table below (“Actual”) provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to
estimate the expense that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line
under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the tables below (“Hypothetical”) provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of
return of 5% per year before expenses, which is not the Fund’s actual return. You may use this information to compare the ongoing costs of investing in the Fund versus other funds. To do so, compare this 5%
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges, redemption fees or exchange fees. Therefore, the
second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your
costs would have been higher.
| Emerging Markets Growth Fund — Investor Class | ||||||
| Beginning Account Value July 1, 2020 | Ending Account Value December 31, 2020 | Expenses Paid During Six Months Ended December 31, 2020* | ||||
| Actual | $1,000.00 | $1,319.10 | $7.58 | |||
| Hypothetical Example, assuming a 5% return before expenses | $1,000.00 | $1,018.60 | $6.60 | |||
| Emerging Markets Growth Fund — Institutional Class | ||||||
| Beginning Account Value July 1, 2020 | Ending Account Value December 31, 2020 | Expenses Paid During Six Months Ended December 31, 2020* | ||||
| Actual | $1,000.00 | $1,320.10 | $6.59 | |||
| Hypothetical Example, assuming a 5% return before expenses | $1,000.00 | $1,019.46 | $5.74 | |||
100
Fund Expense Examples
(unaudited) — (Continued)
| Emerging Markets Small Cap Growth Fund | ||||||
| Beginning Account Value July 1, 2020 | Ending Account Value December 31, 2020 | Expenses Paid During Six Months Ended December 31, 2020* | ||||
| Actual | $1,000.00 | $1,301.20 | $8.39 | |||
| Hypothetical Example, assuming a 5% return before expenses | $1,000.00 | $1,017.85 | $7.35 | |||
| Emerging Markets Opportunities Fund | ||||||
| Beginning Account Value July 1, 2020 | Ending Account Value December 31, 2020 | Expenses Paid During Six Months Ended December 31, 2020* | ||||
| Actual | $1,000.00 | $1,282.40 | $5.74 | |||
| Hypothetical Example, assuming a 5% return before expenses | $1,000.00 | $1,020.11 | $5.08 | |||
| International Small Cap Growth Fund | ||||||
| Beginning Account Value July 1, 2020 | Ending Account Value December 31, 2020 | Expenses Paid During Six Months Ended December 31, 2020* | ||||
| Actual | $1,000.00 | $1,363.20 | $7.19 | |||
| Hypothetical Example, assuming a 5% return before expenses | $1,000.00 | $1,019.05 | $6.14 | |||
| Micro Cap Growth Fund | ||||||
| Beginning Account Value July 1, 2020 | Ending Account Value December 31, 2020 | Expenses Paid During Six Months Ended December 31, 2020* | ||||
| Actual | $1,000.00 | $1,579.20 | $9.14 | |||
| Hypothetical Example, assuming a 5% return before expenses | $1,000.00 | $1,018.05 | $7.15 | |||
| Small Cap Growth Fund — Investor Class | ||||||
| Beginning Account Value July 1, 2020 | Ending Account Value December 31, 2020 | Expenses Paid During Six Months Ended December 31, 2020* | ||||
| Actual | $1,000.00 | $1,487.70 | $7.69 | |||
| Hypothetical Example, assuming a 5% return before expenses | $1,000.00 | $1,018.95 | $6.24 | |||
101
Fund Expense Examples
(unaudited) — (Continued)
| Small Cap Growth Fund — Institutional Class | ||||||
| Beginning Account Value July 1, 2020 | Ending Account Value December 31, 2020 | Expenses Paid During Six Months Ended December 31, 2020* | ||||
| Actual | $1,000.00 | $1,490.70 | $4.95 | |||
| Hypothetical Example, assuming a 5% return before expenses | $1,000.00 | $1,021.17 | $4.01 | |||
| Small/Mid Cap Growth Fund | ||||||
| Beginning Account Value July 1, 2020 | Ending Account Value December 31, 2020 | Expenses Paid During Six Months Ended December 31, 2020* | ||||
| Actual | $1,000.00 | $1,430.50 | $5.80 | |||
| Hypothetical Example, assuming a 5% return before expenses | $1,000.00 | $1,020.36 | $4.82 | |||
| Event Driven Fund | ||||||
| Beginning Account Value July 1, 2020 | Ending Account Value December 31, 2020 | Expenses Paid During Six Months Ended December 31, 2020* | ||||
| Actual | $1,000.00 | $1,197.80 | $8.67 | |||
| Hypothetical Example, assuming a 5% return before expenses | $1,000.00 | $1,017.24 | $7.96 | |||
* Expenses are equal to the Funds’ annualized expense ratios for the six-month period in the table below multiplied by the average account value over the period, multiplied by the
number of days in the most recent fiscal half-year (184), then divided by 366 to reflect the half-year period. These amounts exclude the reduction in expenses for fees paid indirectly and may differ from the
Fund’s annualized ratio shown in the Financial Highlights.
| Emerging Markets Growth Fund – Investor Class | 1.30% |
| Emerging Markets Growth Fund – Institutional Class | 1.13% |
| Emerging Markets Small Cap Growth Fund | 1.45% |
| Emerging Markets Opportunities Fund | 1.00% |
| International Small Cap Growth Fund | 1.21% |
| Micro Cap Growth Fund | 1.41% |
| Small Cap Growth Fund – Investor Class | 1.23% |
| Small Cap Growth Fund – Institutional Class | 0.79% |
| Small/Mid Cap Growth Fund | 0.95% |
| Event Driven Fund | 1.57% |
102
Shareholder Information
(unaudited)
TAX INFORMATION FOR THE
YEAR ENDED DECEMBER 31, 2020
We
are providing this information as required by the Internal Revenue Code. The amounts shown may differ from those elsewhere in this report because of differences between tax and financial reporting requirements.
The
Funds designate the following amounts as a long-term capital gain distribution:
| Emerging Markets Growth Fund | Emerging Markets Small Cap Growth Fund | Emerging Markets Opportunities Fund | International Small Cap Growth Fund | |||
| $38,607,483 | $— | $743,583 | $19,239,957 |
| Micro Cap Growth Fund | Small Cap Growth Fund | Small/Mid Cap Growth Fund | Event Driven Fund | |||
| $48,426,960 | $19,232,110 | $— | $2,388,109 |
For
taxable non-corporate shareholders, the following percentages of income represent qualified dividend income subject to the 15% rate category:
| Emerging Markets Growth Fund | Emerging Markets Small Cap Growth Fund | Emerging Markets Opportunities Fund | International Small Cap Growth Fund | |||
| —% | 63.85% | 69.62% | 100.00% |
| Micro Cap Growth Fund | Small Cap Growth Fund | Small/Mid Cap Growth Fund | Event Driven Fund | |||
| —% | —% | —% | 18.30% |
For
taxable non-corporate shareholders, the following percentages of short-term capital gains represent qualified dividend income subject to the 15% rate category:
| Emerging Markets Growth Fund | Emerging Markets Small Cap Growth Fund | Emerging Markets Opportunities Fund | International Small Cap Growth Fund | |||
| 84.46% | —% | —% | 76.91% |
| Micro Cap Growth Fund | Small Cap Growth Fund | Small/Mid Cap Growth Fund | Event Driven Fund | |||
| 2.46% | 10.71% | 3.45% | —% |
For
corporate shareholders, the following percentages of income and short-term capital gains qualified for the dividends-received deduction:
| Emerging Markets Growth Fund | Emerging Markets Small Cap Growth Fund | Emerging Markets Opportunities Fund | International Small Cap Growth Fund | |||
| —% | —% | 0.20% | —% |
| Micro Cap Growth Fund | Small Cap Growth Fund | Small/Mid Cap Growth Fund | Event Driven Fund | |||
| —% | —% | —% | 11.55% |
103
Shareholder Information
(unaudited) —
PROXY VOTING POLICIES
AND PROCEDURES AND PROXY VOTING RECORD
A
description of the Funds’ policies and procedures with respect to the voting of proxies relating to the Funds’ portfolio securities is available without charge, upon request, by calling 1-800-560-6111.
This information is also available on the Funds’ website at http://www.driehaus.com.
Information regarding how the Funds voted proxies related to portfolio securities during the 12-month period ended June 30, 2020, is available without charge, upon request, by calling 1-800-560-6111. This
information is also available on the Securities and Exchange Commission’s (“SEC”) website at http://www.sec.gov.
HOW TO OBTAIN QUARTERLY
PORTFOLIO HOLDINGS
Each Fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form NPORT. The Funds’ Form NPORT is available electronically on the SEC’s
website at http://www.sec.gov. Each Fund’s complete quarterly schedule of portfolio holdings is also available on the Fund’s website at http://www.driehaus.com.
104
Board Considerations in
Connection with the Annual Review of the Investment Advisory Agreement
The Board of Trustees of Driehaus Mutual Funds (the “Trust”), including a majority of the Trustees who are not “interested persons” (as defined in the Investment Company Act of 1940, as
amended) (the “Independent Trustees”), approved the renewal of the investment advisory agreement (the “Agreement”) with Driehaus Capital Management LLC (the “Adviser”) for Driehaus
Emerging Markets Growth Fund (DREGX/DIEMX), Driehaus Emerging Markets Small Cap Growth Fund (DRESX), Driehaus International Small Cap Growth Fund (DRIOX), Driehaus Micro Cap Growth Fund (DMCRX), Driehaus Small Cap
Growth Fund (DVSMX/DNSMX), Driehaus Event Driven Fund (DEVDX) and Driehaus Emerging Markets Opportunities Fund (DMAGX) (each a “Fund” and collectively, the “Funds”) on September 10, 2020 for an
additional one-year term ending September 30, 2021. As part of its review process, the Board requested and evaluated all information it deemed reasonably necessary to evaluate the Agreement. The Board reviewed
comprehensive materials received from the Adviser and from independent legal counsel. The Board also received extensive information throughout the year regarding performance and operating results of each Fund. The
Independent Trustees held a conference call with their independent legal counsel in advance of September 10, 2020 to review the materials provided in response to their request and identified areas for further response
by Fund management. Following receipt of further information from Fund management, the Independent Trustees, represented by independent legal counsel, met independent of Fund management to consider renewal of the
Agreement for each Fund. After their consideration of all the information received, the Independent Trustees presented their findings and their recommendation to renew the Agreement.
In connection with the contract review process, the Board considered the factors discussed below, among others. The Board also considered that the Adviser has managed each Fund for an extended period or since
inception, and the Board believes that a long-term relationship with a capable, conscientious adviser is in the best interests of each Fund. The Board considered, generally, that shareholders invested in each Fund,
knowing that the Adviser managed the Fund and knowing the investment advisory fee schedule.
Nature, Quality and Extent of Services. The Board considered the nature, extent and quality of services provided under the Agreement, including portfolio management services and certain administrative services. The Board
considered the experience and skills of senior management and investment personnel, the resources made available to such personnel, the ability of the Adviser to attract and retain high-quality personnel, and the
organizational depth of the Adviser. The Board also considered the Trust’s compliance with legal and regulatory requirements, as well as the Adviser’s handling of portfolio brokerage, and noted the
Adviser’s process for evaluating best execution. The Board noted the Adviser’s role in overseeing the Funds’ other service providers, including the Adviser’s review of expenses. The Board
considered the Adviser’s risk management strategies and the process developed by the Adviser for analyzing, reviewing and assessing risk exposure for the Funds. The Board also considered the Funds’ process
for fair valuation of portfolio securities and noted the Board’s review of Fund valuation matters throughout the year.
The Board received and considered performance information provided for each Fund (and share class, as applicable), comparing it to the performance of a peer universe of funds (the “Performance Universe”)
and a peer group of funds, as applicable, compiled by Broadridge Financial Solutions (“Broadridge”) using data from Morningstar, Inc., an independent provider of mutual fund data
(“Morningstar”) and to each Fund’s primary benchmark index, as identified in reports to shareholders. The Board noted that the Adviser represented that, because the Funds’ performance can be
volatile over shorter time periods, for Funds with longer performance records, it was also meaningful to analyze the performance over rolling time periods. The Board reviewed rolling performance for all the Funds for
1-year, 3-year and 5-year periods, as applicable, over the life of each applicable Fund relative to its benchmark and noted that, in a majority of the time periods measured, each Fund outperformed its benchmark index.
With respect to Driehaus Event Driven Fund, the Board noted the Adviser’s statements that the Fund’s benchmark is more representative for long-only funds and that the HFRX Event Driven Index is more
representative of Driehaus Event Driven Fund than its benchmark index. The Board also reviewed performance for Driehaus Event Driven Fund for the 1-, 3- and 5-year and year-to-date periods, relative to the HFRX Event
Driven Index and noted the Fund outperformed the HFRX Event Driven Index for the 3-and 5-year and year-to-date periods, but underperformed the HFRX Event Driven Index for the 1-year period. The Board also noted that
the rolling performance information for Driehaus International Small Cap Growth Fund, Driehaus Emerging Markets Small Cap Growth Fund, Driehaus Micro Cap Growth Fund and Driehaus Small Cap Growth Fund included the
performance of each Fund’s predecessor limited partnership. Because the predecessor limited partnerships did not operate as mutual funds and were not subject to certain investment and operational restrictions,
the Board factored those differences into its evaluation of such Funds’ longer-term performance information. The Board also considered whether investment results were consistent with each Fund’s investment
objective and policies.
105
As to the specific Funds, the Board considered that, as of June 30, 2020, Driehaus Emerging Markets Growth Fund’s (Investor Shares) performance was in the first quintile of its Performance Universe for each
period reviewed (the first quintile being the best performers and the fifth quintile being the worst performers). The Board noted that Driehaus Emerging Markets Growth Fund (Investor Shares) outperformed its benchmark
index, the MSCI Emerging Markets Index, for the 1-, 3-, 5- and 10-year periods. The Board further noted that, as of June 30, 2020, Driehaus Emerging Markets Growth Fund’s (Institutional Shares) performance was
in the first quintile of its Performance Universe for the 1-year and since-inception periods (the Fund’s Institutional Shares inception date was July 17, 2017) and that Driehaus Emerging Markets Growth Fund
(Institutional Shares) outperformed its benchmark index for the 1-year and since-inception periods.
The Board considered that, as of June 30, 2020, although Driehaus Emerging Markets Small Cap Growth Fund’s performance was in the fourth quintile of its Performance Universe for the 5-year period, the
Fund’s performance was in the first quintile of its Performance Universe for the 1- and 3-year and since-inception periods (the Fund’s inception date was August 22, 2011). In addition, the Board noted that
Driehaus Emerging Markets Small Cap Growth Fund outperformed its benchmark index, the MSCI Emerging Markets Small Cap Index, for each period reviewed.
The Board considered that, as of June 30, 2020, Driehaus International Small Cap Growth Fund’s performance was in the first quintile of its Performance Universe for the since-inception period (the Fund’s
inception date was September 17, 2007) and in the second quintile for the 1-, 3-, 5- and 10-year periods. The Board noted that Driehaus International Small Cap Growth Fund outperformed its benchmark index, the MSCI
All Country World ex USA Small Cap Growth Index, for each period reviewed.
The Board considered that, as of June 30, 2020, Driehaus Micro Cap Growth Fund’s performance was in the first quintile of its Performance Universe for the 1-, 3- and 5-year and since-inception periods (the
Fund’s inception date was November 18, 2013). In addition, the Board noted that Driehaus Micro Cap Growth Fund outperformed its benchmark index, the Russell Microcap Growth Index, for each period reviewed.
The Board considered that, as of June 30, 2020, Driehaus Small Cap Growth Fund’s (Investor Shares and Institutional Shares) performance was in the first quintile of its Performance Universe for the 1-year and
since-inception periods (the Fund’s inception date was August 21, 2017). The Board noted that Driehaus Small Cap Growth Fund (Investor Shares and Institutional Shares) outperformed its benchmark index, the
Russell 2000 Growth Index, for the 1-year and since-inception periods.
The Board considered that, as of June 30, 2020, Driehaus Event Driven Fund’s performance was in the first quintile of its Performance Universe for the 1-, 3- and 5-year and since-inception periods (the
Fund’s inception date was August 26, 2013). The Board noted that Driehaus Event Driven Fund underperformed its primary benchmark index, the S&P 500 Index, for each period reviewed. The Board considered that
the Fund’s objective of a positive return over a full market cycle had been met and that the Fund’s volatility target, as measured by having a standard deviation of two-thirds or less than that of the S&
P 500 Index, had been met for each of the 1- and 3-year periods.
The Board considered that, as of June 30, 2020, Driehaus Emerging Markets Opportunities Fund’s performance was in the first quintile of its Performance Universe for the 1- and 3- year and since-inception
periods (the Fund’s inception date was April 10, 2017). The Board noted that Driehaus Emerging Markets Opportunities Fund outperformed its primary benchmark index, the MSCI Emerging Markets Index, for the 1- and
3-year and since-inception periods.
As
to the Funds in general, the Board concluded that the Adviser had consistently implemented its investment philosophy, and that over the long term, the investment philosophy produces value for shareholders.
On
the basis of this evaluation and its ongoing review of investment results, the Board concluded that the nature, quality and extent of services provided by the Adviser supported renewal of the Advisory Agreement for
each Fund.
Fees. The Board considered each Fund’s contractual management fee rate, operating expenses and total expense ratio as of December 31, 2019 as compared to peer expense group information
based on data compiled by Broadridge using data from Morningstar as of the most recent fiscal year end of each fund in the peer group (with the fifth quintile being the highest fee). The Board noted that Driehaus
Small Cap Growth Fund’s (Investor Shares and Institutional Shares) contractual management fee rate was in the first quintile of its peer group, that Driehaus Emerging Markets Small Cap Growth Fund’s,
Driehaus Event Driven Fund’s and Driehaus Emerging Markets Opportunities Fund’s contractual management fee rates were in the second quintile of their respective peer groups, that Driehaus Emerging Markets
Growth Fund’s (Investor Shares and Institutional Shares) and Driehaus International Small Cap Growth Fund’s contractual management fee rates were in the fourth quintile of their respective peer groups and
Driehaus Micro Cap Growth Fund’s contractual management fee rate was in the fifth quintile of its peer group. In addition, the Board implemented a new advisory fee rate for the Driehaus Emerging Markets Small
Cap Growth Fund, effective December 31, 2020, which
106
lowered the Fund’s advisory
fee rate from 1.15% to 1.10%, noting that the Fund’s advisory fee would rank in the 61st percentile of the Morningstar peer group as of September 30, 2020 and the change in fee would not diminish the quality or
quantity of services the Adviser provides to the Fund.
The Board also considered that for the fiscal year ended December 31, 2019, Driehaus International Small Cap Growth Fund’s and Driehaus Emerging Markets Opportunities Fund’s total expense ratios were in
the first quintile of their respective peer groups, Driehaus Emerging Markets Growth Fund’s (Investor Shares), Driehaus Emerging Markets Small Cap Growth Fund’s, Driehaus Small Cap Growth Fund’s
(Investor Shares and Institutional Shares) and Driehaus Event Driven Fund’s total expense ratios were in the second quintile of their respective peer groups, Driehaus Micro Cap Growth Fund’s total expense
ratio was in the fourth quintile of its peer group and Driehaus Emerging Markets Growth Fund’s (Institutional Shares) total expense ratio was in the fifth quintile of its peer group. In addition, the Board
considered the expense reimbursement arrangement with the Adviser for Driehaus Emerging Markets Small Cap Growth Fund, Driehaus Small Cap Growth Fund (Investor Shares and Institutional Shares) and Driehaus Emerging
Markets Opportunities Fund. Effective on December 31, 2020, the Board reduced the Driehaus Emerging Markets Small Cap Growth Fund’s expense ratio from 1.45% to 1.24%, noting the new expense ratio would be in the
83rd percentile of the Morningstar peer group.
The Board also considered the Funds’ advisory fee rates as compared to fees charged by the Adviser for similarly managed institutional accounts and sub-advised unaffiliated mutual funds, as applicable. With
respect to institutional accounts and other mutual funds, the Board noted that the mix of services provided, the level of responsibility, the legal, reputational and regulatory risks and the resources required under
the Agreement were significantly greater as compared to the Adviser’s obligations for managing or sub-advising the other accounts and mutual funds. In considering the reasonableness of the advisory fees, the
Board took into account the Adviser’s substantial human and technological resources devoted to investing for the Funds, the relatively small amount of assets under management and the limited capacity of the
investment style in certain Funds. In addition, the Board noted that the Adviser’s directed brokerage program had resulted in a total of approximately $333,000 in directed brokerage credits during calendar year
2019, which were used to reduce expenses of the Funds.
On
the basis of the information reviewed, the Board concluded that the advisory fee schedule for each Fund was reasonable in light of the nature and quality of services provided by the Adviser.
Profitability. The Board reviewed information regarding revenues received by the Adviser under the Agreement from each Fund and discussed the Adviser’s methodology in allocating its costs to the
management of the Funds. The Board considered the estimated costs to the Adviser of managing the Funds. The Board noted that Driehaus Micro Cap Growth Fund is currently closed to new investors in order to maintain
assets at a level that the Adviser believes is prudent, which limits the Fund’s profitability to the Adviser. The Board also noted that the Funds do not have a Rule 12b-1 fee or shareholder service fee (except
for Investor Shares of Driehaus Emerging Markets Growth Fund, Driehaus Small Cap Growth Fund and Driehaus Event Driven Fund), that the Adviser’s affiliate, Driehaus Securities LLC (“DS LLC”), served
as distributor of the Funds during calendar year 2019 without compensation, and that DS LLC (through December 31, 2019) or the Adviser (after December 31, 2019) provides compensation to intermediaries for distribution
of the Funds’ shares and for shareholder and administrative services to shareholders, the expense of which is reimbursed by the Adviser, except for Driehaus Emerging Markets Growth Fund (Investor Shares),
Driehaus Small Cap Growth Fund (Investor Shares) and Driehaus Event Driven Fund, which reimburse the Adviser under a Shareholder Services Plan (the “Plan”) for certain amounts paid for shareholder services
covered under the Plan. The Board concluded that, based on the profitability calculated for the Trust as well as for the Funds individually (noting Driehaus Emerging Markets Opportunities Fund operated at a loss), the
profitability was not excessive in light of the nature, extent and quality of the services provided to the Funds.
Economies of Scale. In considering the reasonableness of the advisory fee, the Board considered whether there are economies of scale with respect to the management of the Funds and whether the Funds benefit
from any such economies of scale. Given the current size of the Funds and the capacity constraints of their investment styles, as well as the fee waivers for certain of the Funds, the Board concluded that the advisory
fee rates under the Advisory Agreement are reasonable and reflect an appropriate sharing of any such economies of scale.
Other Benefits to the Adviser and its Affiliates. The Board also considered the character and amount of other incidental benefits received by the Adviser and its affiliates. The Board noted that payments to the Adviser (DS LLC prior to
January 1, 2020) under the Plan are in reimbursement of payments made to intermediaries for shareholder services. The Board also considered benefits to the Adviser related to soft dollar allocations. The Board
concluded that the advisory fees were reasonable in light of any fall-out benefits.
107
Based on all of the information considered and the conclusions reached, the Board determined that the terms of the Advisory Agreement continue to be fair and reasonable and that the continuation of the Advisory
Agreement is in the best interests of each Fund. No single factor was determinative in the Board’s analysis.
108
| (b) | Not applicable. |
Item 2. Code of Ethics.
| (a) | The registrant, as of the end of the period covered by this report, has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. |
| (b) | No response required. |
| (c) | There have been no amendments, during the period covered by this report, to a provision of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics description. |
| (d) | The registrant has not granted any waivers, including an implicit waiver, from a provision of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, that relates to one or more of the items set forth in paragraph (b) of this item. |
| (e) | Not applicable. |
| (f) | The registrant’s Code of Ethics for Principal Executive and Financial Officers was filed as Exhibit 12(a)(1) to the registrant’s Certified Shareholder Report on Form N-CSR, Accession Number 0001193125-12-093739, on March 2, 2012, and is incorporated herein by reference. |
Item 3. Audit Committee Financial Expert.
The registrant’s Board of Trustees has designated Christopher J. Towle as an audit committee financial expert. Christopher J. Towle is “independent,” as defined by this Item 3. Mr. Towle is a CFA charterholder and his relevant experience includes prior audit committee experience, experience reviewing financial statements, performing company specific financial analysis and creating financial models, as well as coursework in accounting.
Item 4. Principal Accountant Fees and Services.
| (a) | Audit Fees |
For the fiscal years ended December 31, 2020 and 2019, Ernst & Young LLP, the registrant’s principal accountant (“E&Y”), billed the registrant $249,000 and $376,800, respectively, for professional services rendered for the audit of the registrant’s annual financial statements or services that are normally provided in connection with statutory and regulatory filings.
| (b) | Audit-Related Fees |
For the fiscal years ended December 31, 2020 and 2019, E&Y billed the registrant $0 and $0, respectively, for assurance and related services that are reasonably related to the performance of the audit of the registrant’s financial statements and that are not reported above.
For engagements that Driehaus Capital Management LLC, the registrant’s investment adviser (“DCM”), or Driehaus Securities LLC, the registrant’s distributor (“DS”), entered into with E&Y for fiscal years 2020 and 2019, E&Y provided no audit-related services to DCM or DS that were for engagements directly related to the registrant’s operations and financial reporting.
| (c) | Tax Fees |
For the fiscal years ended December 31, 2020 and 2019, E&Y billed the registrant $95,750 and $113,375 respectively, for professional services rendered for tax compliance, tax advice, and tax planning. Such services consisted of review of the registrant’s income tax returns and tax distribution requirements and analysis related to foreign tax liabilities and passive foreign investment company status. The Audit Committee pre-approved all tax services that E&Y provided to the registrant.
For fiscal years 2020 and 2019, E&Y provided no tax services to DCM or DS that were for engagements directly related to the registrant’s operations and financial reporting.
| (d) | All Other Fees |
For the fiscal years ended December 31, 2020 and 2019, E&Y billed the registrant $0 and $0, respectively, for products and services provided, other than the services reported above.
For fiscal years 2020 and 2019, E&Y provided no other services to DCM or DS that were for engagements directly related to the registrant’s operations and financial reporting.
| (e)(1) | Audit Committee Pre-Approval Policies and Procedures |
Pursuant to registrant’s Audit Committee Charter (the “Charter”), the Audit Committee is responsible for pre-approving any engagement of the principal accountant to provide non-prohibited services to the registrant, including the fees and other compensation to be paid to the principal accountant, to the extent required by Rule 2-01(c)(7) of Regulation S-X. The Chairperson of the Audit Committee may grant pre-approval for such engagements of $5,000 or less. All such delegated pre-approvals will be presented to the Audit Committee no later than the next Audit Committee meeting.
Pursuant to the Charter, the Audit Committee is also responsible for pre-approving any engagement of the principal accountant, including the fees and other compensation to be paid to the principal accountant, to provide non-audit services to the registrant’s investment adviser (or any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant), if the engagement relates directly to the operations and financial reporting of the registrant, to the extent required by Rule 2-01(c)(7) of Regulation S-X. The Chairperson of the Audit Committee may grant pre-approval for engagements of $5,000 or less. All such delegated pre-approvals will be presented to the Audit Committee no later than the next Audit Committee meeting.
| (e)(2) | The percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X is 0%. |
| (f) | Not applicable. |
| (g) | Non-Audit Fees |
For the fiscal years ended December 31, 2020 and 2019, E&Y billed the registrant $95,750 and $113,375, respectively, in aggregate non-audit fees. For the fiscal years ended December 31, 2020 and 2019, E&Y billed DCM or DS $0 and $0, respectively, in aggregate non-audit fees.
(h) Not applicable.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Investments.
| (a) | Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form. |
| (b) | Not applicable. |
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant’s board of directors, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item.
Item 11. Controls and Procedures.
| (a) | The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)). |
| (b) | There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d))) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Not applicable.
Item 13. Exhibits.
| (a)(2) | Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 906 of the Sarbanes- Oxley Act of 2002 are attached hereto. |
| (a)(3) | Not applicable. |
| (a)(4) | Not applicable. |
| (b) | Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350) are attached hereto. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| (Registrant) | Driehaus Mutual Funds | |
| By (Signature and Title) | /s/ Stephen T. Weber | |
| Stephen T. Weber, President | ||
| (principal executive officer) | ||
| Date | March 3, 2021 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By (Signature and Title) | /s/ Stephen T. Weber | |
| Stephen T. Weber, President | ||
| (principal executive officer) | ||
| Date | March 3, 2021 | |
| By (Signature and Title) | /s/ Robert M. Kurinsky | |
| Robert M. Kurinsky, Vice President and Treasurer | ||
| (principal financial officer) | ||
| Date | March 3, 2021 |
.