As filed with the Securities and Exchange Commission April 11, 1997
1933 Act Reg. No. 33-88316
1940 Act File No. 811-8932
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
--------------------------------
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
POST-EFFECTIVE AMENDMENT NO. 6 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 8 [X]
--------------------------------
Artisan Funds, Inc.a
(Registrant)
1000 North Water Street, Suite 1770
Milwaukee, Wisconsin 53202
Telephone Number: (414) 390-6100
Andrew A. Ziegler Janet D. Olsen
Artisan Funds, Inc. Bell, Boyd & Lloyd
1000 North Water Street, #1770 Three First National Plaza, #3300
Milwaukee, Wisconsin 53202 Chicago, Illinois 60602
(Agents for Service)
--------------------------------
Amending Parts A, B, and C and filing Exhibits.
It is proposed that this filing will become effective:
immediately upon filing pursuant to rule 485(b)
---
on pursuant to rule 485(b)
--- -----------------
60 days after filing pursuant to rule 485(a)(1)
---
on pursuant to rule 485(a)(1)
--- -----------------
75 days after filing pursuant to rule 485(a)(2)
---
X on JUNE 25, 1997 pursuant to rule 485(a)(2)
---
Registrant has previously elected to register an indefinite number of its shares
of common stock of the series Artisan Small Cap Fund and Artisan International
Fund pursuant to Rule 24f-2. By this amendment, Registrant elects to register
an indefinite number of shares of common stock of its series designated Artisan
Mid Cap Fund. Registrant filed its Rule 24f-2 Notice for the fiscal year ended
June 30, 1996 on August 27, 1996.
<PAGE>
THIS POST-EFFECTIVE AMENDMENT NO. 6 TO THE REGISTRATION STATEMENT OF ARTISAN
FUNDS, INC. (1933 ACT NO. 33-88316) DOES NOT AFFECT THE SERIES OF ARTISAN
FUNDS, INC. DESIGNATED ARTISAN SMALL CAP FUND OR THE SERIES OF ARTISAN FUNDS,
INC. DESIGNATED ARTISAN INTERNATIONAL FUND. THE PROSPECTUSES AND STATEMENTS OF
ADDITIONAL INFORMATION RELATING TO ARTISAN SMALL CAP FUND AND ARTISAN
INTERNATIONAL FUND ARE THEREFORE NOT INCLUDED IN THIS POST-EFFECTIVE AMENDMENT
NO. 6.
<PAGE>
ARTISAN FUNDS, INC.
Cross-reference sheet pursuant to rule 495(a) of Regulation C
Item Location or Caption
- ---- -------------------
PART A (PROSPECTUS) ARTISAN SMALL CAP FUND
ARTISAN INTERNATIONAL FUND (ORIGINAL SHARES)
ARTISAN INTERNATIONAL FUND (INSTITUTIONAL SHARES)
----------------------------------------------------------------
This post-effective amendment no. 6 to the registration statement of
Artisan Funds, Inc. (1933 Act No. 33-88316) does not affect the series of
Artisan Funds, Inc. designated Artisan Small Cap Fund or Artisan
International Fund. The prospectuses relating to Artisan Small Cap Fund,
Artisan International Fund (Original Shares) and Artisan International Fund
(Institutional Shares) are therefore not included in this post-effective
amendment no. 6.
PART A (PROSPECTUS) - ARTISAN MID CAP FUND
------------------------------------------
1(a)-(b) Front cover
2(a) Expenses and Performance - Expenses
(b)-(c) Contents; The Fund at a Glance
3(a) Not applicable
(b) Not applicable
(c) Expenses and Performance - Performance
(d) Not applicable
4(a)(i) The Fund in Detail - Organization
(ii) The Fund at a Glance; The Fund in Detail - The Fund's Investment
Philosophy; The Fund in Detail - Securities, Investment
Practices, and Risks
(b) The Fund in Detail - Securities, Investment Practices and Risks
(c) The Fund at a Glance - Who May Want to Invest; The Fund in Detail -
The Fund's Investment Philosophy; The Fund in Detail -
Securities; Investment Practice and Risks
5(a) The Fund in Detail - Organization
(b) The Fund in Detail - Organization; The Fund in Detail - Management;
The Fund in Detail - Expenses; Expenses and Performance -
Expenses; Your Account - Doing Business with the Fund
(c) The Fund in Detail - Organization; The Fund in Detail - Management
(d) Not applicable
(e) Your Account - How to Buy Shares; Your Account - How to Sell
Shares; Your Account - Doing Business with the Fund
<PAGE i>
Item Location or Caption
- ---- -------------------
(f) Expenses and Performance - Expenses; The Fund in Detail - Expenses
(g) Not applicable
5A Not applicable
6(a) The Fund in Detail - Organization; Your Account - How to Buy
Shares; Your Account - How to Sell Shares
(b)-(d) Not applicable
(e) Your Account - Doing Business with the Fund; Your Account - How to
Buy Shares; Your Account - How to Sell Shares; Shareholder and
Account Policies - Statements and Reports
(f)-(g) Dividends, Capital Gains, and Taxes
7 Your Account - Doing Business with the Fund; Your Account - How to
Buy Shares; Shareholder and Account Policies - Purchases
(a) Not applicable
(b) Your Account - How to Buy Shares; Shareholder and Account Policies
- Share Price
(c) Not applicable
(d) Your Account - How to Buy Shares
(e)-(f) Not applicable
8(a) Your Account - Doing Business with the Fund; Your Account - How to
Sell Shares; Shareholder and Account Policies - Redemptions
(b) Shareholder and Account Policies - Purchases
(c)-(d) Shareholder and Account Policies - Redemptions
9 Not applicable
<PAGE ii>
Item Location or Caption
- ---- -------------------
PART B (STATEMENT OF ADDITIONAL INFORMATION) - ARTISAN SMALL CAP FUND
- ARTISAN INTERNATIONAL FUND
---------------------------------------------------------------------
This post-effective amendment no. 6 to the registration statement of
Artisan Funds, Inc. (1933 Act No. 33-88316) does not affect the series of
Artisan Funds, Inc. designated Artisan Small Cap Fund and Artisan
International Fund. The statements of additional information relating to
Artisan Small Cap Fund and Artisan International Fund are therefore not
included in this post-effective amendment no. 6.
PART B (STATEMENT OF ADDITIONAL INFORMATION) - ARTISAN MID CAP FUND
-------------------------------------------------------------------
10 Front cover
11 Front cover
12 Part A - Organization
13(a)-(c) Investment Objectives and Policies; Investment Techniques and
Risks; Investment Restrictions
(d) Investment Techniques and Risks
14(a)-(b) Directors and Officers
(c) Not applicable
15(a)-(b) Not applicable
(c) Directors and Officers
16(a)(i) Investment Adviser
(ii) Directors and Officers
(iii) Investment Adviser
(b) Investment Adviser
(c)-(g) Not applicable
(h) Custodian; Independent Accountants
(i) Not applicable
17(a) Portfolio Transactions
(b) Not applicable
(c)-(d) Portfolio Transactions
(e) Not applicable
18(a) The Fund
(b) Not applicable
<PAGE iii>
Item Location or Caption
- ---- -------------------
19(a)-(c) Purchasing and Redeeming Shares
20 Not applicable
21 Not applicable
22(a) Not applicable
(b) Performance Information
23 Not applicable
<PAGE iv>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED [JUNE ,] 1997
--
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET BECOME EFFECTIVE.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. THESE
SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME
THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL
THERE BE ANY SALES OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION, OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION
UNDER THE SECURITIES LAW OF ANY SUCH STATE.
Please read this prospectus before investing, and keep it on file for future
reference. It contains important information, including how the Fund invests
and the services available to shareholders.
A Statement of Additional Information dated the date of this prospectus has been
filed with the Securities and Exchange Commission and is incorporated herein by
reference (is legally considered a part of this prospectus). The Statement of
Additional Information is available free upon request by calling 1-800-344-1770.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
[LOGO] ARTISAN
MID CAP
FUND
A NO-LOAD FUND
ARTISAN MID CAP FUND invests for [maximum] long-term capital growth. The Fund
invests primarily in the common stocks of medium-sized companies.
PROSPECTUS
JUNE 25, 1997
ARTISAN FUNDS, INC.
1000 NORTH WATER STREET, SUITE 1770
MILWAUKEE, WISCONSIN 53202
<PAGE>
CONTENTS
THE FUND AT A GLANCE 4 GOAL, STRATEGY, MANAGEMENT, WHO MAY WANT
TO INVEST AND RISKS AND RETURNS
EXPENSES AND PERFORMANCE 5 EXPENSES AND PERFORMANCE
YOUR ACCOUNT 7 WAYS TO SET UP YOUR ACCOUNT
8 DOING BUSINESS WITH THE FUND, HOW TO BUY
SHARES, MINIMUM INVESTMENTS AND AUTOMATIC
INVESTMENT PLAN
10 HOW TO SELL SHARES
SHAREHOLDER AND ACCOUNT 12 STATEMENTS AND REPORTS, SHARE PRICE AND
POLICIES PURCHASES
13 REDEMPTIONS, ACCOUNT REGISTRATION AND
TELEPHONE TRANSACTIONS
DIVIDENDS, CAPITAL GAINS,
AND TAXES 15 DISTRIBUTION OPTIONS AND TAXES
16 FOREIGN INCOME TAXES AND UNDERSTANDING
DISTRIBUTIONS
THE FUND IN DETAIL 17 ORGANIZATION AND MANAGEMENT
18 EXPENSES AND THE FUND'S INVESTMENT
PHILOSOPHY
20 SECURITIES, INVESTMENT PRACTICES AND
RISKS; EQUITY SECURITIES
21 FOREIGN SECURITIES AND DEBT SECURITIES
22 CONVERTIBLE SECURITIES AND MANAGING
INVESTMENT EXPOSURE
24 ILLIQUID AND RESTRICTED SECURITIES;
DIVERSIFICATION; LENDING PORTFOLIO
SECURITIES; REPURCHASE AGREEMENTS; WHEN-
ISSUED AND DELAYED-DELIVERY SECURITIES;
BORROWING
25 OTHER INVESTMENT COMPANIES AND PORTFOLIO
TURNOVER
<PAGE 1>
THE FUND AT A GLANCE
GOAL
ARTISAN MID CAP FUND (THE "FUND") INVESTS FOR LONG-TERM CAPITAL
GROWTH.
STRATEGY
THE FUND INVESTS PRIMARILY IN THE COMMON STOCKS OF MEDIUM-SIZED COMPANIES.
Medium-sized companies are those whose market capitalizations fall within the
range of companies in the S&P MidCap 400 Index (the "MidCap Index"). As of
December 30, 1996, the MidCap Index included companies with capitalizations
between approximately $200 million and $6.5 billion. The market
capitalization range in which the Fund invests will change as the range of the
companies included in the MidCap Index changes. The Fund looks for companies
that have or are developing identifiable "franchise characteristics", and
whose securities are undervalued because they lack recognition or are out of
favor based on short-term factors.
In seeking companies that have franchise characteristics, the Fund focuses on
companies that have some form of sustainable competitive advantage such as a
proprietary technology or dominant market share. The Fund also emphasizes
companies that are experiencing or expect to experience real growth in the
demand for their goods or services. Fund management also estimates the
intrinsic value of prospective investments to identify those which are
undervalued.
The Fund's management believes that medium-sized companies are an attractive
investment universe because these companies are still small enough to provide
real growth opportunities significantly above that of the general U.S. economy,
but are typically mature enough to have experienced management and multiple
product lines and large enough to have liquid trading markets, thus mitigating
risk. Medium-sized companies also typically have less Wall Street research
coverage than large companies, and are more likely to be priced inefficiently.
MANAGEMENT: Artisan Partners Limited Partnership ("Artisan Partners"),
located in Milwaukee, Wisconsin and San Francisco, California, selects
investments for the Fund. Andrew C. Stephens is the portfolio manager and is
responsible for the day-to-day management of the Fund. Mr. Stephens makes all
investment decisions with the assistance of a team of Artisan Partners
investment research and trading professionals.
WHO MAY WANT TO INVEST
Artisan Mid Cap Fund is designed for patient investors who can afford to
maintain their investments over a relatively long period of time, and who are
seeking a fund which is relatively aggressive. The Fund involves risk and is
not an appropriate investment for conservative investors who are seeking
preservation of capital or income.
RISKS AND RETURNS
Historically, stocks have shown greater growth than other types of securities.
In the short term, however, stock prices may fluctuate widely in response to
company, market or economic news. In addition, the stocks of medium-sized
companies often involve more volatility than the stocks of larger companies.
The value of the Fund's investments and the return it generates vary from day to
day. Performance depends on Artisan Partners' skill in selecting individual
stocks, as well as general market and economic conditions. When you sell your
shares, they may be worth more or less than you paid for them.
See "Securities, Investment Practices and Risks" on page 18 for the types of
investments the Fund may make, and "Your Account" on page 5 for how to buy
and redeem shares.
<PAGE 2>
EXPENSES AND PERFORMANCE
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy or sell shares
of the Fund.
Maximum sales charge on purchases
and reinvested dividends.............................NONE
Deferred sales charge on redemptions.................NONE
Redemption fee.......................................NONE
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS). The
Fund pays its own operating expenses, including a management fee to Artisan
Partners. The Fund also incurs other expenses for services such as maintaining
shareholder records and furnishing shareholder statements and reports. The
Fund's expenses are factored into its share price or dividends, are subtracted
from the share price daily, and are not charged directly to shareholder
accounts.
The Fund expects to incur the following expenses:
Management fee............................... 1.00%
12b-1 fee.................................... None
Other expenses<F1>........................... 1.00%
-----
Total operating expenses..................... 2.00%
=====
- ---------------------------
<F1> A shareholder requesting payment of redemption proceeds by wire must pay
the cost of the wire (currently $5).
Artisan Partners has undertaken to reimburse the Fund for any ordinary operating
expenses in excess of 2.0% of average net assets over each calendar year. The
purpose of the expense table is to help you understand the costs and expenses
associated with investing in the Fund. The estimate of "Other expense" is
based on the estimated expenses the Fund expects to incur during its fiscal year
ending June 30, 1998.
- --------------------------------------------------------------------------------
UNDERSTANDING
EXPENSES
Operating a mutual fund requires paying for portfolio management, shareholder
statements, tax reporting, and other services. These costs are paid from the
Fund's assets; any quoted share price or return is after expenses.
- --------------------------------------------------------------------------------
EXAMPLE: Let's say, hypothetically, that the Fund's annual return is 5% and
that its operating expenses are exactly as shown in the column to the left. For
every $1,000 you invested, here's how much you would have paid in total expenses
if you closed your account after the number of years indicated:
After 1 year..........$21.00
After 3 years.........$64.84
This example illustrates the effect of expenses, but is not meant to suggest
actual or expected costs or returns, all of which may be more or less than those
shown in the example. Because the Fund is new, the above amounts are estimates.
<PAGE 3>
PERFORMANCE
Mutual fund performance is commonly measured as total return. TOTAL RETURN is
the change in value of an investment over a given period, assuming reinvestment
of any dividends and capital gains. Total return reflects the Fund's
performance over a stated period of time. An AVERAGE ANNUAL TOTAL RETURN is a
hypothetical rate of return that, if achieved annually, would have produced the
same total return if performance had been constant over the entire period.
Average annual total return smoothes out variations in performance; it is not
the same as actual year-by-year results.
Total return and average annual total return are based on past results and are
not a prediction of future performance. They do not include the effect of
income taxes paid by shareholders. The Fund may sometimes show its performance
compared to certain performance rankings, averages or stock indexes (described
more fully in the Statement of Additional Information).
<PAGE 4>
WAYS TO SET UP YOUR ACCOUNT
- ---------------------------
INDIVIDUAL OR JOINT OWNERSHIP
For your general investment needs
Individual accounts are owned by one person. Joint accounts can have two or
more owners.
- ------------------------------------------------------------------------------
RETIREMENT
To defer taxes on your retirement savings
Retirement plans allow individuals to defer taxes on investment income and
capital gains. Contributions to these accounts may be tax deductible.
RETIREMENT ACCOUNTS REQUIRE SPECIAL APPLICATIONS WHICH MAY BE OBTAINED BY
CALLING 1-800-344-1770.
- - INDIVIDUAL RETIREMENT ACCOUNTS (IRAS) allow anyone of legal age and under
701/2 with earned income to invest up to $2,000 per tax year.
- - ROLLOVER IRAS retain special tax advantages for certain distributions from
employer-sponsored retirement plans.
- - SIMPLIFIED EMPLOYEE PENSION PLANS (SEP-IRAS) allow small business owners or
those with self-employment income to make tax-deductible contributions of up
to $22,500 per year for themselves and any eligible employees.
- - OTHER RETIREMENT PLANS - The Fund may be used as an investment in other kinds
of retirement plans, including Keogh or corporate profit sharing and money
purchase plans, 403(b) plans and 401(k) plans. All of these accounts need to
be established by the trustee of the plan. The Fund does not offer prototypes
of these plans.
An IRA disclosure statement is delivered in advance of opening any IRA account
and contains information unique to retirement accounts. It also contains a
summary of the custodian fees which may be incurred for set-up and maintenance
of an IRA account.
- ------------------------------------------------------------------------------
GIFT OR TRANSFER TO A MINOR (UGMA, UTMA)
To invest for a minor's education or other future needs
These custodial accounts provide a way to give money to a minor. The account
application should include the child's social security number.
- ------------------------------------------------------------------------------
TRUST OR ESTABLISHED EMPLOYEE BENEFIT OR PROFIT-SHARING PLAN
For money being invested by a trust, employee benefit plan, or profit-sharing
plan
The trust or plan must be established before an account can be opened. The date
of the trust or plan should be included on the new account application.
- ------------------------------------------------------------------------------
BUSINESS OR ORGANIZATION
For investment needs of corporations, associations, partnerships, institutions
or other groups
You will need to send a certified corporate resolution (indicating which
officers are authorized to act) with your application.
<PAGE 5>
YOUR ACCOUNT - CONTINUED
YOUR ACCOUNT
DOING BUSINESS WITH THE FUND
The Fund provides shareholders with service 7 days a week, 24 hours a day.
To reach the Fund, call 1-800-344-1770.
HOW TO BUY SHARES
You can open a new account by:
- - mailing in an application with a check for $1,000 or more, or
- - exchanging $1,000 or more from your existing account with Artisan Small Cap
Fund or Artisan International Fund, other series of Artisan Funds. For more
details, see "Telephone Exchange Plan" on page 12.
AFTER YOUR ACCOUNT IS OPEN, YOU MAY ADD TO IT BY:
- - mailing a check or money order along with the form at the bottom of your
account statement, or a letter (the Fund does not accept third-party checks)
- - moving money from your bank account by telephone, provided you have elected
this privilege on your new account application;
- - moving an investment from Artisan Small Cap Fund or Artisan International
Fund to the Fund by telephone, provided you have elected this privilege;
- - wiring money from your bank; or
- - making automatic investments.
The Fund is a NO-LOAD FUND, which means you pay no sales commissions of any
kind. The price you pay for shares is the net asset value per share next
calculated after your investment is received and accepted. An order is
considered received when the application (for a new account) or information
identifying the account and the money are received. See "Shareholder and
Account Policies" on page 10 for information about share price. The Fund does
not issue share certificates.
MINIMUM INVESTMENTS
- -------------------
TO OPEN AN ACCOUNT $1,000
TO ADD TO AN ACCOUNT $50
MINIMUM BALANCE $500
The initial minimum investment will be waived if you participate in the
Automatic Investment Plan. Because it is very expensive for the Fund to
maintain small accounts (and that cost is borne by all shareholders), the Fund
reserves the right to close your account if the value is less than $500 (or
$1,000 if you discontinued the Automatic Investment Plan before your account
reached $1,000). Before closing a small account, the Fund will notify you and
allow you at least 30 days to bring the value of the account up to the minimum.
AUTOMATIC INVESTMENT PLAN
The Automatic Investment Plan is a convenient way for you to make regular,
systematic investments into your Fund.
Through the Automatic Investment Plan, you purchase shares by transferring money
(minimum of $50 per transaction) from your designated checking or savings
account. Your automatic investment in the Fund will be processed monthly on a
draft date designated by you, between the 3rd and 28th of the month only. The
draft will be made ON OR ABOUT (possibly earlier or later than) the date
requested due to the processing complexities associated with weekends, holidays,
etc. Artisan Funds will not be responsible for non-sufficient funds fees.
<PAGE 6>
HOW TO BUY SHARES
- -----------------
MAIL
- -------------------------------------------------------------------------------
TO OPEN AN ACCOUNT: TO ADD TO AN ACCOUNT:
- - Complete and sign the new account - Make your check or money
application. Make your check or order payable to "Artisan
money order payable to "Artisan Funds" or "Artisan Mid Cap
Funds" or "Artisan Mid Cap Fund." Fund." Put your account
Third-party checks will not be number on your check.
accepted.
Mail check and form at the
Mail to the address on the new bottom of your account
account application. FOR OVERNIGHT statement (or a letter) to
DELIVERY: the address on your account
statement. FOR OVERNIGHT
Artisan Funds DELIVERY:
c/o Boston Financial Data Services
2 Heritage Drive Artisan Funds
Quincy, MA 02171 c/o Boston Financial Data
Services
2 Heritage Drive
Quincy, MA 02171
- -------------------------------------------------------------------------------
PHONE 1-800-344-1770
- ---------------------
TO OPEN AN ACCOUNT: TO ADD TO AN ACCOUNT:
- - You may not open a new account by - If you did not elect the
phone except by exchange of $1,000 telephone transaction option
or more from your identically on your new account
registered Artisan Small Cap Fund or application for the Fund or
Artisan International Fund account. for Artisan Small Cap Fund or
- - You may establish the telephone Artisan International Fund,
transaction option when you open an complete the shareholder
account by electing the option on options form to make
your new account application. investments by phone from $50
to $25,000 into your account
and to participate in the
telephone exchange plan.
- All telephone trades must be
placed between 7:00 a.m. and
3:00 p.m. Central time on
days the NYSE is open for
trading.
- --------------------------------------------------------------------------------
WIRE
- ----
TO OPEN AN ACCOUNT: TO ADD TO AN ACCOUNT:
- - Call 1-800-344-1770 for instructions - Call 1-800-344-1770 for
on opening an account by wire. instructions on adding to an
account by wire.
- --------------------------------------------------------------------------------
AUTOMATIC INVESTMENT PLAN
- -------------------------
TO OPEN AN ACCOUNT: TO ADD TO AN ACCOUNT:
- - If you sign up for the Automatic - Sign up for the Automatic
Investment Plan when you open your Investment Plan on the
account, the minimum initial shareholder options form or
investment will be waived. call 1-800-344-1770 for
instructions on how to add to
- - Complete and sign the Automatic your existing account.
Investment Plan section of the new
account application.
<PAGE 7>
YOUR ACCOUNT - CONTINUED
HOW TO SELL SHARES
You can arrange to take money out of your account at any time by selling
(redeeming) some or all of your shares. Your shares will be sold at the next
net asset value per share (share price) calculated after your order is received
and accepted. See "Shareholder and Account Policies" on page 10 for more
information about share price.
To sell shares in a regular (non-IRA) account, you may use any of the methods
described here. To sell shares in an IRA account, your request must be made in
writing. If you need an IRA distribution form, call us at 1-800-344-1770.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
- - each owner's name and address,
- - the Fund's name,
- - your account number,
- - the dollar amount or number of shares to be redeemed, and
- - the signature of each owner as it appears on the account.
Mail your letter to:
Artisan Funds
c/o Boston Financial Data Services
P.O. Box 8412
Boston, MA 02266-8412
For overnight delivery use:
Artisan Funds
c/o Boston Financial Data Services
2 Heritage Drive
Quincy, MA 02171
CERTAIN REDEMPTION REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE, designed to
protect you and the Fund from fraud. Your request must be made in writing and
include a signature guarantee if any of the following situations applies:
- - you wish to redeem more than $25,000 worth of shares;
- - if you add/change your name or add/remove an owner on your account;
- - if you add/change the beneficiary on your account;
- - the check is being mailed to an address different than one on your account
(record address);
- - the check is being made payable to someone other than the account owner;
- - when you add the telephone redemption option to your existing account;
- - if you transfer the ownership of your account; or you have changed the
address on the account by phone within the last 60 days.
You should be able to obtain a signature guarantee from a bank, broker, dealer,
credit union (if authorized under state law), securities exchange or
association, clearing agency or savings association. A NOTARY PUBLIC CANNOT
PROVIDE A SIGNATURE GUARANTEE.
When purchases are made by check or automatic investment plan, payment of
redemption proceeds may be delayed until the Fund is reasonably certain that
payment for the shares has been collected, which may take as long as 15 days.
<PAGE 8>
HOW TO SELL SHARES SPECIAL REQUIREMENTS
- ------------------------------------------------------------------------------
NOTE: Some redemptions require signature guarantees. See page 8.
- ------------------------------------------------------------------------------
MAIL
- ----
Individual, Joint Owners, Sole - The letter of instruction must
Proprietorships, be signed by all persons
UGMA, UTMA required to sign for
transactions (usually, all
owners of the account) exactly
as their names appear on the
account.
Trust - The letter of
instruction must include
the signatures of all
trustees.
All Others - Call 1-800-344-1770 for
instructions.
- ------------------------------------------------------------------------------
PHONE 1-800-344-1770
- ---------------------
All accounts except IRAs - You automatically have the
telephone redemption option (which
allows you to redeem at least $500
and up to $25,000 worth of shares
per day by phone) unless you
declined it on your new account
application. If you declined the
telephone redemption option, call
1-800-344-1770 for instructions on
how to add it.
- All telephone trades must be
placed between 7:00 a.m. and 3:00
p.m. Central time on days the NYSE
is open for trading.
- ------------------------------------------------------------------------------
WIRE
- ----
All account types except IRAs - We will transmit payment by wire
for a fee (currently $5.00) to a
pre-authorized bank account.
Usually, the funds will arrive at
your bank the next business day.
- ------------------------------------------------------------------------------
SYSTEMATIC WITHDRAWALS
- ----------------------
All account types except IRAs - Sign up for systematic withdrawals
(distributions from your account
at regular intervals in specified
dollar amounts of at least $50) by
calling 1-800-344-1770 for
instructions on how to add this
option.
- You must have at least $5,000 in
your account before you are
eligible to sign up for this
option. If the amount in your
account is not sufficient to meet
a withdrawal, the remaining amount
in the account will be redeemed.
<PAGE 9>
SHAREHOLDER AND ACCOUNT POLICIES
STATEMENTS AND REPORTS
Statements and reports that the Fund sends to you include:
- - Confirmation statements (after every transaction in your account or change
in your account registration);
- - Account statements (quarterly);
- - Annual and semi-annual reports with financial statements; and
- - Year-end tax statements.
We recommend that you keep each quarterly account statement and, especially,
each calendar year-end statement with your other important financial papers
since you may need to refer to them at a later date for tax purposes.
If you need copies of current or preceding year statements call 1-800-344-1770.
Copies of statements for earlier years are available and are subject to a $10
processing fee.
SHARE PRICE
THE FUND IS OPEN FOR BUSINESS each day the New York Stock Exchange ("NYSE") is
open. THE OFFERING PRICE (price to buy one share) and REDEMPTION PRICE (price
to sell one share) are the same and represent the Fund's net asset value per
share calculated at the next Closing Time after receipt of your purchase or
redemption order. Closing Time is the time of the close of regular session
trading on the NYSE, which is usually 3:00 p.m. Central time but is sometimes
earlier.
THE FUND'S NET ASSET VALUE PER SHARE is the value of a single share, and is
computed by adding up the value of the Fund's investments, cash, and other
assets, subtracting its liabilities and then dividing the result by the number
of shares outstanding.
Fund securities and assets are valued primarily on the basis of market
quotations from the primary market in which they are traded or, if quotations
are not readily available, by a method that the board of directors believes
accurately reflects a fair value. Values of foreign securities are translated
from the local currency into U.S. dollars using current exchange rates.
PURCHASES
- - All of your purchases must be made in U.S. dollars and checks must be drawn
on U.S. banks.
- - The Fund does not accept cash, credit cards or third-party checks.
- - If your check or telephone purchase order does not clear, your purchase will
be canceled and you will be liable for any losses or fees the Fund or its
transfer agent incurs.
- - Your ability to make automatic investments and telephone purchases may be
immediately terminated if any item is unpaid by your financial institution.
- - THE FUND RESERVES THE RIGHT TO reject any purchase order. For example, a
purchase order may be refused if, in Artisan Partners' opinion, it is so
large that it would disrupt management of the Fund.
CERTAIN FINANCIAL INSTITUTIONS that have entered into sales agreements with the
Fund may enter confirmed purchase orders or redemption requests on behalf of
customers on an expedited basis, including orders by phone, with payment to
follow no later than the time when the Fund's net asset value is calculated on
the following business day. If payment is not received by that time, the
financial institution could be held liable for resulting fees or losses. These
institutions may impose charges on their clients for their services and those
charges could constitute a significant portion of a smaller account.
<PAGE 10>
Some financial institutions that maintain nominee accounts with the Fund for
their clients who own Fund shares charge an annual fee of up to .35% of the
average net assets held in such accounts for accounting, servicing and
distribution services they provide with respect to the underlying Fund shares.
Those fees are allocated between the Fund and Artisan Partners with the Fund
paying an amount not to exceed a cost approximating the transfer agency expense
that would be incurred by the Fund if the shares held in those nominee accounts
were held directly by the beneficial owners. The balance of the fee, and all
other expenses incurred in the sale and promotion of Fund shares, is paid by
Artisan Partners.
REDEMPTIONS
- - Normally, redemption proceeds will be mailed within seven days after receipt
of the request for redemption.
- - The Fund may hold payment on redemptions until it is reasonably satisfied
that it has received payment for a recent purchase made by check or by an
automatic investment or telephone purchase, which can take up to fifteen
days.
- - If you make a telephone redemption, the Fund will send payment for your
redemption one of three ways: (i) by mail; (ii) by Electronic Funds
Transfer (EFT) to a pre-authorized bank account; or (iii) to your bank
account by wire transfer. The cost of the wire (currently $5.00) will be
deducted from the payment. Your bank also may impose a fee for the incoming
wire. Payment by EFT will usually arrive at your bank two banking days
after your call. Payment by wire is usually credited to your bank account
on the next business day after your call.
- - Redemptions may be suspended or payment dates postponed on days when the
NYSE is closed (other than weekends or holidays), when trading on the NYSE
is restricted or as permitted by the SEC.
If the Fund sends you a check (paying for a redemption, systematic withdrawal
payment, or a dividend or capital gain distribution you elected to receive in
cash) and the check is returned "undeliverable" or remains uncashed for six
months, the check will be canceled and the proceeds will be reinvested in the
Fund at the net asset value per share on the date of cancellation. In addition,
after that six-month period, your systematic withdrawal payments will be
canceled and future withdrawals will occur only when requested, or your cash
election will automatically be changed and future dividends and distributions
will be reinvested in your account.
ACCOUNT REGISTRATION
ADDRESS CHANGES for your account may be made by writing us a letter or by
calling us at 1-800-344-1770. The Fund will send a written confirmation of the
change to both your old and new addresses. No telephone redemptions may be made
for 60 days after a change of address by phone. During those 60 days, a
signature guarantee will be required for any written redemption request unless
your change of address was made in writing with a signature guarantee.
TELEPHONE TRANSACTIONS
YOU MAY INITIATE MANY TRANSACTIONS, INCLUDING EXCHANGES, PURCHASES AND
REDEMPTIONS, BY TELEPHONE. The Fund will not be responsible for any losses
resulting from unauthorized transactions if it follows reasonable procedures
designed to verify the identity of the caller. Those procedures may include
recording the call, requesting additional information and sending written
confirmation of telephone transactions. If the Fund fails to follow reasonable
procedures, the Fund may be responsible for resulting losses.
You should verify the accuracy of telephone transactions immediately upon
receipt of your confirmation statement. If you are unable to reach the Fund by
phone (for example, during periods of unusual market activity), consider placing
your order by mail.
<PAGE 11>
TELEPHONE EXCHANGE PLAN
The telephone exchange plan permits you to transfer investments among your
Artisan Mid Cap Fund account, your Artisan Small Cap Fund account and your
Artisan International Fund account between the hours of 7:00 a.m. and 3:00 p.m.,
Central time, on days the NYSE is open for trading. Artisan Small Cap Fund and
Artisan International Fund are other series of Artisan Funds; the exchange plan
does not apply to Artisan International Institutional Shares, a class of shares
of Artisan International Fund available only to certain institutional investors.
Each exchange between accounts must be at least $1,000. The price of shares
exchanged among the Fund, Artisan Small Cap Fund and Artisan International Fund
is determined at the end of that day's trading session.
Telephone exchange plan restrictions:
- - To exchange between funds, you must have an account with Artisan Mid Cap
Fund and one or both of Artisan Small Cap Fund or Artisan International
Fund. Your accounts must be registered in the same name, address and
taxpayer identification number.
- - To open a Fund account by telephone by exchanging an investment from Artisan
Small Cap Fund or Artisan International Fund, you must have previously
elected the telephone transaction option for that fund.
- - Before exchanging into Artisan Small Cap Fund or Artisan International Fund,
you should carefully read that fund's prospectus which may be obtained by
calling 1-800-344-1770.
- - The exchange of shares may have tax consequences to you.
- - If your account is subject to backup withholding, you may not use the
telephone exchange plan.
- - Because excessive trading can hurt performance and shareholders, Artisan
Funds reserves the right to temporarily or permanently terminate the
telephone exchange plan of any investor who makes excessive use of the plan.
Artisan Funds also may limit the number of transfers per calendar year.
- - Artisan Funds reserves the right to terminate or modify the telephone
exchange plan at any time, but will try to give you prior notice whenever it
is able to do so.
- - Artisan Small Cap Fund is closed to new investors. You may use the exchange
plan to purchase shares of Artisan Small Cap Fund only if you are eligible
to make an investment in that fund, as described in the prospectus of
Artisan Small Cap Fund.
<PAGE 12>
DIVIDENDS, CAPITAL GAINS, AND TAXES
The Fund intends to distribute substantially all of its net income and net
realized capital gains to shareholders at least annually.
DISTRIBUTION OPTIONS
When you open an account, specify on your new account application how you want
to receive your distributions. If you later want to change your distribution
option, you may do so either by a written request or by calling us at 1-800-344-
1770. The Fund offers three options:
- - REINVESTMENT OPTION. Your dividends and capital gain distributions will be
automatically reinvested in additional shares of the Fund. If you do not
indicate a choice on your new account application, your distributions will
be reinvested automatically.
- - INCOME-ONLY OPTION. Your capital gain distributions will be automatically
reinvested, but you will be sent a check for each dividend.
- - CASH OPTION. You will be sent a check for all distributions.
FOR IRA ACCOUNTS, all distributions are automatically reinvested because payment
of distributions in cash would be a taxable distribution from your IRA, and
might be subject to income tax and penalties if you are under 59 1/2 years old.
After you are 59 1/2, you may request payment of distributions in cash which
might be subject to income tax.
When you reinvest, the reinvestment price is the Fund's net asset value per
share at the close of business on the reinvestment date. The mailing of
distribution checks will usually begin on the payment date, which is usually one
week after the ex-dividend date.
TAXES
As with any investment, you should consider how the return on your investment in
the Fund will be taxed. If your account is a tax-deferred account (for example,
an IRA or an employee benefit plan account), the following tax discussion does
not apply. If your account is not a tax-deferred account, however, you should
be aware of the following tax rules:
TAXES ON DISTRIBUTIONS. Distributions are subject to federal income tax, and
also may be subject to state or local taxes. If you live outside the United
States, your distributions also could be taxed by the country in which you
reside.
Your distributions are taxable when they are paid, whether you take them in cash
or reinvest them in additional shares. However, distributions declared in
October, November or December and paid in January to shareholders of record
during the preceding year are taxable as if they were received by you on
December 31.
For federal tax purposes, the Fund's income and short-term capital gain
distributions are taxed as dividends; long-term capital gain distributions are
taxed as long-term capital gains. Every January, the Fund will send you and the
IRS a statement, called a Form 1099, showing the amount of each taxable
distribution you received in the previous calendar year.
TAXES ON TRANSACTIONS. When you redeem shares you will recognize a capital gain
or loss if there is a difference between the cost of your shares and the price
you receive when you sell them.
Whenever you sell shares of the Fund, you will receive a confirmation statement
showing how many shares you sold and at what price. You also will receive a
year-end statement every January reporting, among other things, your average
cost basis in the shares you sold. This will allow you or your tax preparer to
determine whether a redemption resulted in a capital gain or loss and the tax
consequences of that gain or loss (although you or your tax preparer may choose
an alternative method of calculating your basis). However, be sure to keep your
regular account statements; the information they
<PAGE 13>
contain will be essential in verifying the amount of your capital gains or
losses.
When you sign your account application, you will be asked to certify that your
Social Security or taxpayer identification number is correct and that you are
not subject to backup withholding for failing to report income to the IRS. If
you fail to comply with applicable IRS regulations including the certification
procedures described above, the IRS can require the Fund to withhold 31% of your
taxable distributions and redemptions.
FOREIGN INCOME TAXES. Investment income received by the Fund from sources
within foreign countries may be subject to foreign income taxes withheld at the
source. The Fund will not be eligible to make an election to permit you to
claim a foreign tax credit for your share of such taxes because it will not meet
the requirement of having more than 50% of its assets invested in stocks or
securities of foreign corporations. However, the Fund expects such taxes to be
deductible by it in computing its taxable income.
- ------------------------------------------------------------------------------
UNDERSTANDING DISTRIBUTIONS
As a shareholder, you are entitled to your share of the Fund's net income and
any gains realized on its investments. The Fund's income from dividends and
interest and any net realized short-term gain are paid to you as DIVIDENDS.
The Fund realizes long-term capital gains whenever it sells securities held for
more than one year for a higher price than it paid for them. Net realized
long-term gains are paid to you as CAPITAL GAIN DISTRIBUTIONS.
- ------------------------------------------------------------------------------
<PAGE 14>
THE FUND IN DETAIL
ORGANIZATION
Artisan Mid Cap Fund is a series of Artisan Funds, Inc., ("Artisan Funds") an
open-end, management investment company which was incorporated under Wisconsin
law in 1995.
Each share of the Fund has one vote. All shares participate equally in
dividends and other distributions declared by the board of directors, and all
shares of the Fund have equal rights in the event of liquidation of the Fund.
Shares of the Fund have no preemptive, conversion or subscription rights.
THE FUND IS GOVERNED BY A BOARD OF DIRECTORS which is responsible for protecting
the interests of the shareholders of the Fund. The directors are experienced
executives and professionals who meet at regular intervals to oversee the
activities of the Fund, review contractual arrangements with companies that pro-
vide services to the Fund and review performance. A majority of directors are
not otherwise affiliated with the Fund or Artisan Partners.
The Wisconsin Business Corporation Law permits registered investment companies
to operate without an annual meeting of shareholders under specified
circumstances if an annual meeting is not required by the Investment Company Act
of 1940 (the federal securities law that governs the regulation of investment
companies). The Fund has adopted the appropriate provisions in its bylaws and
does not expect to hold an annual meeting in any year in which the election of
directors is not required to be acted on by shareholders. The Fund believes that
not holding shareholder meetings except as otherwise required reduces the Fund's
expenses and enhances shareholder return.
THE FUND MAY HOLD SPECIAL MEETINGS OF SHAREHOLDERS. These meetings may be
called to elect or remove directors, change fundamental policies, approve a
management contract, or for other purposes. The Fund will mail proxy materials
in advance, including a voting card and information about the proposals to be
voted on. You are entitled to one vote for each share of the Fund that you own.
Shareholders not attending these meetings are encouraged to vote by proxy.
MANAGEMENT
The Fund is managed by Artisan Partners Limited Partnership, 1000 North Water
Street, Suite 1770, Milwaukee, Wisconsin 53202, which selects the Fund's
investments and handles its business affairs, under the direction of the board
of directors. Artisan Partners is a limited partnership managed by its general
partner, Artisan Investment Corporation, controlled by Andrew A. Ziegler and
Carlene Murphy Ziegler.
Andrew C. Stephens is the Fund's portfolio manager. Prior to joining Artisan
Partners in March 1997, Mr. Stephens was co-portfolio manager of the Strong
Asset Allocation Fund since February 1993. Mr. Stephens was also a senior
research analyst for the Strong Common Stock Fund and Strong Opportunity Fund
from September 1994 until March 1996. Prior to February 1993, Mr. Stephens
was a head trader for Strong Capital Management, Inc.
Mr. Stephens holds a B.S. from the University of Wisconsin-Madison in
Economics.
Andrew A. Ziegler is a director and chief executive officer of Artisan Funds.
Immediately prior to founding Artisan Partners in 1995, Mr. Ziegler was
president and chief operating officer of Strong/Corneliuson Capital Management,
and president of the Strong Funds; prior thereto, Mr. Ziegler was Executive Vice
President and General Counsel of Strong. From 1986 to 1990, Mr. Ziegler was an
attorney with the law firm of Godfrey & Kahn, S.C., Milwaukee, WI. Mr. Ziegler
holds a B.S. from the University of Wisconsin - Madison and a J.D. from the
University of Wisconsin Law School.
Carlene Murphy Ziegler is a director and the president of Artisan Funds and is
co-
<PAGE 15>
portfolio manager of Artisan Small Cap Fund. Prior to founding Artisan
Partners in 1995, Ms. Ziegler was a co-portfolio manager of Strong Common Stock
Fund and Strong Opportunity Fund. From 1986 to 1991, Ms. Ziegler was a co-
portfolio manager of the SteinRoe Special Fund. Ms. Ziegler holds B.A. and M.A.
degrees from the University of Illinois and an M.B.A. from the University of
Chicago Graduate School of Business. She also is a Chartered Financial Analyst.
John M. Blaser is chief financial officer of Artisan Funds and acts as the
principal administrative and financial officer. Prior to joining Artisan
Partners in 1995, Mr. Blaser was Senior Vice President of Kemper Securities,
Inc. since 1993. Prior thereto, Mr. Blaser was with Price Waterhouse. Mr.
Blaser holds a B.B.A. from the University of Wisconsin - Madison.
State Street Bank and Trust Company ("State Street"), 1776 Heritage Drive,
North Quincy, MA 02171, is the Fund's transfer and dividend disbursing agent.
State Street also serves as the Fund's custodian and accounting agent.
EXPENSES
Like all mutual funds, the Fund pays expenses related to its daily operations.
Expenses paid out of the Fund's assets are reflected in its share price or
dividends.
The Fund pays a MANAGEMENT FEE to Artisan Partners for managing its investments
and business affairs. For services furnished by Artisan Partners, the Fund has
agreed to pay an annual fee of (i) 1% of its average daily net assets up to $500
million; (ii) .975 of 1% of its average daily net assets from $500 to $750
million; (iii) .950 of 1% of its average daily net assets from $750 million to
$1 billion and (iv) .925 of 1% of its average daily net assets over $1 billion.
While the management fee is a significant component of the Fund's annual
operating costs, the Fund has other expenses as well. The Fund pays the fees of
its custodian, transfer agent, fund accountants, independent accountants and
lawyers. It also pays other expenses such as the cost of compliance with
federal and state laws, proxy solicitations, shareholder reports, taxes,
insurance premiums and the fees of directors who are not otherwise affiliated
with the Fund or Artisan Partners.
THE FUND'S INVESTMENT PHILOSOPHY
The Fund invests for long-term capital growth. The Fund invests
primarily in the common stocks of medium-sized companies. Medium-sized
companies are those whose market capitalizations fall within the range of
companies in the S&P MidCap 400 Index (the "MidCap Index"). As of December
30, 1996, the MidCap Index included companies with capitalizations between
approximately $200 million and $6.5 billion. The market capitalization
range in which the Fund invests will changes as the size of the companies
included in the MidCap Index changes.
The Fund's management believes that a share of common stock represents an
ownership interest in the company's future cash flows. Its value is influenced
by an investor's assumptions regarding the growth, safety and predictability of
those cash flows, relative to other, often lower-risk, investment alternatives.
The Fund's management believes that many investors misperceive the quality of
common stocks having certain characteristics. By focusing on a few basic
principles, management believes it can frequently identify companies which are
thus mispriced and will be attractive investments.
The most basic principle the Fund follows is that dominant franchises
help protect a business from some of the effects of competition. Companies that
have some form of sustainable competitive advantage, such as a proprietary
technology or dominant market share, should have a more predictable stream of
future cash flows.
<PAGE 16>
This in turn should produce higher stock valuations over time.
The Fund also emphasizes investments in companies that are experiencing real
growth in demand for their goods and services. Companies that can grow from
the natural demand for their products are in a much better position to leverage
new opportunities and react to marketplace changes. An investor should normally
value the predictability of their cash flow stream more favorably.
Artisan Partners' research involves regularly screening the mid-cap investment
universe to identify companies that can be evaluated as potential investments.
Once an investment candidate is identified, Artisan Partners defines and
researches the key investment issues relating to the particular company by
contacting Wall Street research analysts and company management to discuss the
company's strategy, competitive position and revenue and earnings outlook. If
appropriate, Artisan Partners will then visit the company in person.
If favorably impressed with a company's franchise characteristics and revenue
and earnings growth prospects, Artisan Partners will then estimate its intrinsic
value. This involves assigning a value to the prospective investment's future
cash flows with reference to alternative investments. If the company is selling
at a substantial discount to its intrinsic value, Artisan Partners will prepare
to make an investment. Before purchasing any stock, Artisan Partners will
clearly define an investment thesis including the company's franchise
characteristics, the key investment issues, how the intrinsic value was
determined, and the near-term price objectives. Any new information regarding
the company is evaluated in the context of this investment thesis.
Limiting downside risk is an important part of the Fund's investment process,
particularly when investing in smaller companies. In addition to its intrinsic
value analysis, Artisan Partners also seeks to limit downside risk through broad
diversification of its holdings to avoid concentration in any one stock or
industry. Artisan Partners also continuously monitors its holdings to minimize
the chance of negative surprises.
The Fund invests primarily in equity securities, including common and preferred
stocks, warrants or other similar rights and, in addition, the Fund may from
time to time have significant portions of its portfolio invested in foreign
securities. The Fund also may invest in other types of securities, such as
debt securities, and may engage in certain investment practices such as short
sales "against the box;" however, the Fund does not currently intend to commit
more than 5% of its total assets to investment practices such as short sales
against the box.
The Fund intends to be substantially fully invested in equity securities in
ordinary circumstances, although the Fund may invest without limit in short-term
corporate obligations or government obligations or hold cash or cash equivalents
if Artisan Partners determines that a temporary defensive position is advisable.
See the discussion of debt securities on page 19.
The Fund uses various techniques to increase or decrease its exposure to the
effects of possible changes in security prices, currency exchange rates, or
other factors that affect the value of its portfolio. These techniques include
buying and selling options, futures contracts, and options on futures contracts,
or entering into currency exchange contracts.
Although the Fund does not generally purchase securities with a view to rapid
turnover, there are no limitations on the length of time portfolio securities
must be held. Occasionally, securities purchased on a long-term basis may be
sold within a short period of time after purchase in light of a change in the
circumstances of a particular
<PAGE 17>
company or industry or in general market or economic conditions.
The investment objective of the Fund may be changed by the board of directors
without shareholder approval. If there were such a change, you should consider
whether the Fund would remain an appropriate investment in light of your then
current financial position and needs. The Fund is not intended to present a
balanced investment program.
SECURITIES, INVESTMENT PRACTICES AND RISKS
The following pages contain more detailed information about types of investments
the Fund may make and strategies Artisan Partners may employ in pursuit of the
Fund's investment objective, including information about the risks and
restrictions associated with these instrument types and investment practices.
All investment policies stated throughout this prospectus, other than those
identified as fundamental, can be changed without shareholder approval. A
complete statement of the Fund's investment restrictions is included in the
Statement of Additional Information. Compliance with policies and limitations
is determined at the time of purchase of a security; the Fund is not required
to sell an investment because of a later change in circumstances.
The Fund may not buy all of these instruments or use all of these techniques to
the full extent permitted unless Artisan Partners believes that doing so will
help the Fund achieve its goal. As a shareholder, you will receive semi-annual
and annual reports detailing the Fund's holdings and describing recent
investment practices.
EQUITY SECURITIES
Common stocks represent an equity (ownership) interest in a corporation. This
ownership interest often gives the holder the right to vote on measures
affecting the company's organization and operations. Although common stocks
have a history of long-term growth in value, their prices tend to fluctuate in
the short term.
The Fund invests mostly in the common stock of medium-sized companies, defined
for this purpose as those companies whose outstanding common stock has a total
market value of within the range of the total market values of those companies
included in the MidCap Index, which will vary over time During some periods,
the securities of medium-sized companies, as a class, have performed better than
the securities of large companies, and in some periods they have performed
worse. Stocks of medium-sized companies tend to be more volatile and less
liquid than stocks of large companies (although not as volatile and generally
more liquid than smaller companies). Compared to larger companies, may have a
shorter history of operations, may not have as great an ability to raise
additional capital, may have a less diversified product line making them
susceptible to market pressure and may have a smaller public market for their
shares.
RESTRICTIONS: Under normal circumstances, the Fund will invest at least 65% of
its total assets in securities of issuers with an aggregate common stock market
capitalization within the range of those companies included in the S&P MidCap
400 Stock Index. The Fund may not acquire more than 10% of the outstanding
voting securities of any one issuer.<F2>
FOREIGN SECURITIES
Investments in foreign securities, including American Depository Receipts
("ADRs"), provide opportunities different from those available in the U.S.,
and risks which may be greater in some ways than in U.S. investments. ADRs are
receipts typically issued by an American bank or trust company evidencing
ownership of the underlying securities. See the Fund's Statement of Additional
Information for more information. International investing
- -----------------------
<F2> The restriction is "fundamental," which means it cannot be changed without
shareholder approval.
<PAGE 18>
allows you to achieve greater diversification and to take advantage of changes
in foreign economies and market conditions. From time to time, many foreign
economies have grown faster than the U.S. economy, and the returns on
investments in these countries have exceeded those of similar U.S. investments,
although there can be no assurance that these conditions will continue.
You should understand and consider carefully the greater risks involved in
foreign investing. Investing in foreign securities, positions in which are
generally denominated in foreign currencies, and utilization of forward foreign
currency exchange contracts involve certain risks and opportunities not
typically associated with investing in U.S. securities. These include:
fluctuations in exchange rates of foreign currencies; imposition of exchange
control regulation or currency restrictions that would prevent cash from being
brought back to the United States; less public information with respect to
issuers of securities; less governmental supervision of stock exchanges,
securities brokers, and issuers of securities; different accounting, auditing,
and financial reporting standards; different settlement periods and trading
practices; less liquidity and frequently greater price volatility in foreign
markets than in the United States; imposition of foreign taxes; and sometimes
less advantageous legal, operational, and financial protections applicable to
foreign sub-custodial arrangements. In addition, the costs of investing in
foreign securities is higher than the cost of investing in U.S. securities.
Investing in countries outside the U.S. also involves political risk. A foreign
government might restrict investments by foreigners, expropriate assets, seize
or nationalize foreign bank deposits or other assets, establish exchange
controls, or enact other policies that could affect investment in these nations.
Economies in individual markets may differ favorably or unfavorably from the
U.S. economy in such respects as growth of gross domestic product, rates of
inflation, currency depreciation, capital reinvestment, resource self-
sufficiency and balance of payments positions. Many emerging market countries
have experienced extremely high rates of inflation for many years. That has had
and may continue to have very negative effects on the economies and securities
markets of those countries.
The securities markets of emerging countries are substantially smaller, less
developed, less liquid, and more volatile than the securities markets of the
United States and other more developed countries. Disclosure and regulatory
standards in many respects are less stringent than in the U.S. There also may
be a lower level of monitoring and regulation in emerging markets of traders,
insiders, and investors. Enforcement of existing regulations has been extremely
limited.
RESTRICTIONS: The Fund's investments in foreign securities (including ADRs) are
limited to not more than 25% of its total assets. The Fund does not intend to
invest more than 10% of its total assets in foreign securities.
DEBT SECURITIES
Bonds and other debt instruments are methods for an issuer to borrow money from
investors. The issuer pays the investor a fixed or variable rate of interest,
and must repay the amount borrowed at maturity. Debt securities have varying
degrees of quality and varying levels of sensitivity to changes in interest
rates. In general, an increase in interest rates will decrease the value of
debt securities.
"Investment grade" debt securities are those rated within the four highest
ratings categories of Standard & Poor's Corporation ("S&P") or Moody's
Investors Services, Inc. ("Moody's") or, if unrated, determined by Artisan
Partners to be of comparable quality. Securities rated BBB or
Baa are considered to be medium grade and to have speculative characteristics.
Investment in non-investment grade debt securities is speculative and involves a
high degree of risk.
<PAGE 19>
Lower-rated debt securities (commonly called "junk bonds") are often
considered speculative and involve greater risk of default or price changes due
to changes in the issuer's credit-worthiness. The market prices of these
securities may fluctuate more than higher-rated securities and may decline
significantly in periods of general economic difficulty.
Debt securities in which the Fund may invest in the ordinary course of business,
include intermediate to long-term debt securities issued by corporations or
issued or guaranteed by the U.S. government or its agencies or
instrumentalities. For more information, see the discussion of debt securities
in the Statement of Additional Information.
RESTRICTIONS: The Fund intends to be substantially fully invested in equity
securities in ordinary circumstances. Except when a defensive posture is
considered advisable, the Fund's investments in debt securities will not exceed
35% of the Fund's assets, without regard to their ratings. Investments in debt
securities in excess of 35% of the Fund's assets will be restricted to
investment grade debt securities. The Fund does not intend to invest more than
5% of its net assets in securities rated below investment grade.
CONVERTIBLE SECURITIES
The Fund may invest in convertible securities (securities convertible into
underlying equity securities). In determining whether to purchase a convertible
security, Artisan Partners will consider the same criteria that would be
considered in purchasing the underlying stock. Although convertible securities
purchased by the Fund are frequently rated investment grade, the Fund also may
purchase unrated securities or securities rated below investment grade if the
securities meet Artisan Partners' other investment criteria.
RESTRICTIONS: The Fund does not intend to invest more than 5% of its net assets
in convertible securities.
MANAGING INVESTMENT EXPOSURE
The Fund uses various techniques to increase or decrease its exposure to the
effects of possible changes in security prices, currency exchange rates or other
factors that affect the value of its portfolio. These techniques include buying
and selling derivative securities such as options, futures contracts, or options
on futures contracts or entering into currency exchange contracts. INVESTMENTS
IN DERIVATIVE SECURITIES INVOLVE SIGNIFICANT RISKS AND MAY INCREASE THE
VOLATILITY OF THE FUND.
These techniques are used by Artisan Partners to adjust the risk and return
characteristics of the Fund's portfolio. If Artisan Partners judges market
conditions incorrectly or employs a strategy that does not correlate well with
the Fund's investments or if the counterparty to the transaction does not
perform as promised, the transaction could result in a loss. Use of these
techniques may increase the volatility of the Fund and may involve a small
investment of cash relative to the magnitude of the risk assumed. These
techniques are used by the Fund for hedging, risk management or portfolio
management purposes and not for speculation, although there is no limitation
on the percentage of assets that can be committed to derivative securities.
In addition, particular types of derivative securities are subject to certain
limitations and restrictions described in the Statement of Additional
Information under the heading "Investment Techniques -- Managing Investment
Exposure."
CURRENCY EXCHANGE TRANSACTIONS. A currency exchange transaction may be
conducted either on a spot (i.e., cash) basis at the spot rate for purchasing or
selling currency prevailing in the foreign exchange market or through a forward
currency exchange contract ("forward contract"). A forward contract is an
agreement to purchase or sell a specified currency at a specified future date
(or within a specified time period) and price set at the time of the contract.
Forward contracts are usually entered into with banks and broker-dealers,
<PAGE 20>
are not exchange-traded and are usually for less than one year, but may be
renewed.
Currency exchange transactions may involve currencies of the different countries
in which the Fund may invest and serve as hedges against possible variations in
the exchange rate between these currencies. The Fund's currency transactions
are limited to TRANSACTION HEDGING and PORTFOLIO HEDGING involving either
specific transactions or actual or anticipated positions. Transaction hedging
is the purchase or sale of a forward contract with respect to a specific
receivable or payable of the Fund accruing in connection with the purchase or
sale of portfolio securities. Portfolio hedging is the use of a forward
contract with respect to an actual or anticipated portfolio security position
denominated or quoted in a particular currency. The Fund may engage in
portfolio hedging with respect to the currency of a particular country in
amounts approximating actual or anticipated positions in securities denominated
in such currency. When the Fund owns or anticipates owning securities in
countries whose currencies are linked, Artisan Partners may aggregate such
positions as to the currency hedged. Although forward contracts may be used to
protect the Fund from adverse currency movements, the use of such hedges may
reduce or eliminate the potentially positive effect of currency reevaluations on
the Fund's total return.
OPTIONS AND FUTURES. The Fund may enter into stock index or currency futures
contracts (or options thereon) to hedge a portion of its portfolio, to provide
an efficient means of regulating its exposure to the equity markets or as a
hedge against changes in prevailing levels of currency exchange rates. The Fund
may write covered call options and purchase put and call options on foreign
currencies, securities and stock indices. Futures contracts and options can be
highly volatile and are subject to price movements in underlying securities.
The Fund's attempt to use such investments for hedging purposes may not be
successful and could result in reduction of the Fund's total return. In
addition, the loss from investing in futures transactions is potentially
unlimited and the Fund may be unable to control losses by closing its position
if a liquid secondary market does not exist.
ILLIQUID AND RESTRICTED SECURITIES
Some investments may be determined by Artisan Partners to be illiquid, which
means that they may be difficult to sell promptly at an acceptable price. Other
securities, such as securities acquired in private placements, may be sold only
in compliance with certain legal restrictions. Certain of these securities are
often referred to as Rule 144A securities. Difficulty in selling securities may
result in delays or a loss or may be costly to the Fund. A Rule 144A security
may be treated as liquid if the board of directors of the Fund so determines
based on an analysis of relevant information including trading activity and
availability of reliable price information.
RESTRICTIONS: The Fund may not invest more than 10% of its net assets in
illiquid or restricted securities other than Rule 144A securities.
DIVERSIFICATION
Diversifying the investment portfolio can reduce the risks of investing. This
may include limiting the amount of money invested in any one company or, on a
broader scale, limiting the amount invested in any one industry or country.
RESTRICTIONS: With respect to 75% of its total assets, the Fund may not invest
more than 5% of its total assets in the securities of any one issuer. The Fund
may not invest more than 25% of its total assets in any one industry. These
limitations do not apply to U.S. government securities.<F3>
LENDING PORTFOLIO SECURITIES; REPURCHASE AGREEMENTS; WHEN-ISSUED AND DELAYED-
DELIVERY SECURITIES
- -----------------------
<F3> The restriction is "fundamental," which means it cannot be changed without
shareholder approval.
<PAGE 21>
The Fund may make loans of its portfolio securities to broker-dealers and banks
and may invest in repurchase agreements as a cash management technique. A
repurchase agreement is a sale of securities to the Fund in which the seller
agrees to repurchase the securities at a higher price within a specified time.
The Fund could experience losses or delays in the event of bankruptcy of the
seller of a repurchase agreement.
The Fund may invest also in securities purchased on a when-issued or delayed-
delivery basis. Although the payment terms of these securities are established
at the time the Fund enters into the commitment, the securities may be delivered
and paid for a month or more after the date of purchase, when their value may
have changed. The Fund will make such commitments only with the intention of
actually acquiring the securities, but may sell the securities before settlement
date if it is deemed advisable for investment reasons.
RESTRICTIONS: The Fund may not lend securities if, as a result, the aggregate
value of all securities loaned would exceed one-third of its total
assets.<F4> The Fund does not currently intend to loan more than 5% of its
net assets or to have commitments to purchase when-issued securities in excess
of 5% of its net assets.
BORROWING
Artisan Funds maintains a line of credit with a major bank to permit borrowing
by the Fund on a temporary basis. The Fund will not purchase securities when
total borrowings by the Fund are greater than 5% of its net asset value.
RESTRICTIONS: The Fund may not borrow money, except as a temporary measure for
extraordinary or emergency purposes, and then the aggregate borrowings at any
one time may not exceed 33 1/3% of its total assets (at market).<F4>
OTHER INVESTMENT COMPANIES
Certain markets are closed in whole or in part to equity investments by
foreigners. The Fund may be able to invest in such markets solely or primarily
through governmentally-authorized investment companies.
Investment in another investment company may involve the payment of a premium
above the value of the issuer's portfolio securities and is subject to market
availability. In the case of a purchase of shares of such a company in a public
offering, the purchase price may include an underwriting spread. The Fund does
not intend to invest in other investment companies unless, in the judgment of
Artisan Partners, the potential benefits of such investment justify the payment
of any applicable premium or sales charge. As a shareholder in an investment
company, the Fund would bear its ratable share of that investment company's
expenses, including its advisory and administration fees. At the same time the
Fund would continue to pay its own management fees and other expenses.
RESTRICTIONS: The Fund generally may invest up to 10% of its assets in shares
of other investment companies and up to 5% of its assets in any one investment
company (in each case measured at the time of investment). No investment in
another investment company may represent more than 3% of the outstanding voting
stock of the acquired investment company at the time of investment.
PORTFOLIO TURNOVER
During normal market conditions, it is anticipated that the Fund's portfolio
turnover rate generally will be between 75% and 100%, but may vary significantly
from year to year. Flexibility of investment and emphasis on long-term capital
appreciation may involve greater portfolio turnover than that of mutual funds
that have the objectives of income or maintenance of a balanced investment
position. A higher rate of portfolio turnover may result in increased
transaction expenses and the realization of
<PAGE 22>
capital gains and losses. Portfolio turnover in excess of 100% is considered
to be high.
- -----------------------
<F4> The restriction is "fundamental," which means it cannot be changed without
shareholder approval.
<PAGE 23>
SUBJECT TO COMPLETION
PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION
DATED [JUNE ], 1997
--
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET BECOME EFFECTIVE.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. THESE
SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME
THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS STATEMENT OF ADDITIONAL
INFORMATION SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY NOR SHALL THERE BY ANY SALES OF THESE SECURITIES IN ANY STATE IN
WHICH SUCH OFFER, SOLICITATION, OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION
OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
- --------------------------------------------------------------------------------
ARTISAN FUNDS, INC.
1000 North Water Street, Suite 1770
Milwaukee, Wisconsin 53202
(414) 390-6100
(800) 344-1770
STATEMENT OF ADDITIONAL INFORMATION
June 25, 1997
ARTISAN MID CAP FUND
- --------------------------------------------------------------------------------
Artisan Mid Cap Fund (the "Fund") is a series of Artisan Funds, Inc.
("Artisan Funds"). This statement of additional information is not a
prospectus. It should be read in conjunction with the prospectus of the Fund
dated June 25, 1997 and any supplement to the prospectus. That prospectus can
be obtained without charge by calling or writing to the Fund at the telephone
numbers and address shown above.
TABLE OF CONTENTS
Page
----
Information about the Fund..........................................55
Investment Objective and Policies...................................55
Investment Techniques and Risks.....................................56
Investment Restrictions.............................................80
Performance Information.............................................83
Directors and Officers..............................................88
Investment Advisory Services........................................94
Portfolio Transactions..............................................95
Purchasing and Redeeming Shares.....................................98
Additional Tax Information..........................................99
Custodian...........................................................99
Independent Accountants............................................100
<PAGE>
INFORMATION ABOUT THE FUND
The Fund is a series of Artisan Funds, Inc. ("Artisan Funds"). Artisan
Partners Limited Partnership ("Artisan Partners") provides investment advisory
services to the Fund.
The discussion below supplements the description in the prospectus of the
Fund's investment objectives, policies and restrictions.
INVESTMENT OBJECTIVE AND POLICIES
Artisan Mid Cap Fund invests for long-term capital growth. The
Fund invests primarily in the common stocks of medium-sized companies. Medium-
sized companies are those whose market capitalizations fall within the range of
companies in the S&P MidCap 400 Index (the "MidCap Index"). As of December
30, 1996, the MidCap Index included companies with capitalizations between
approximately $200 million and $6.5 billion. The market capitalization
range in which the Fund invests will change as the range of the companies
included in the MidCap Index changes. The investment objective of the Fund
may be changed by the board of directors without the approval of a "majority
of the outstanding voting securities" (as defined in the Investment Company
Act of 1940) of the Fund.
The Fund invests primarily in equity securities, including common and
preferred stocks, warrants or other similar rights, and convertible securities.
In addition, the Fund may from time to time have significant portions of its
portfolio invested in foreign securities. The Fund also may invest in any other
type of security, including debt securities.
INVESTMENT TECHNIQUES AND RISKS
Foreign Securities
The Fund may invest up to 25% of its total assets in foreign securities
(including American Depository Receipts ("ADRs")), which may entail a greater
degree of risk (including risks relating to exchange rate fluctuations, tax
provisions, or expropriation of assets) than does investment in securities of
domestic issuers. ADRs are receipts typically issued by an American bank or
trust company evidencing ownership of the underlying securities. The Fund may
invest in sponsored or unsponsored ADRs. In the case of an unsponsored ADR, the
Fund is likely to bear its proportionate share of the expenses of the depository
and it may have greater difficulty in receiving shareholder communications than
it would have with a sponsored ADR. The Fund does not intend to invest more
than 5% of its net assets in unsponsored ADRs.
With respect to portfolio securities that are issued by foreign issuers or
denominated in foreign currencies, the Fund's investment performance is affected
by the strength or weakness of the U.S. dollar against these currencies. For
example, if the dollar falls in value relative to the Japanese yen, the dollar
value of a yen-denominated stock held in the portfolio will rise even though the
price of the stock remains unchanged. Conversely, if the dollar rises in value
relative to the yen, the dollar value of the yen-denominated stock will fall.
(See discussion of transaction hedging and portfolio hedging under "Managing
Investment Exposure.")
<PAGE B-2>
Investors should understand and consider carefully the risks involved in
foreign investing. Investing in foreign securities, positions in which are
generally denominated in foreign currencies, and utilization of forward foreign
currency exchange contracts involve certain considerations comprising both risks
and opportunities not typically associated with investing in U.S. securities.
These considerations include: fluctuations in exchange rates of foreign
currencies; possible imposition of exchange control regulation or currency
restrictions that would prevent cash from being brought back to the United
States; less public information with respect to issuers of securities; less
governmental supervision of stock exchanges, securities brokers, and issuers of
securities; lack of uniform accounting, auditing, and financial reporting
standards; lack of uniform settlement periods and trading practices; less
liquidity and frequently greater price volatility in foreign markets than in the
United States; possible imposition of foreign taxes; possible investment in
securities of companies in developing as well as developed countries; and
sometimes less advantageous legal, operational, and financial protections
applicable to foreign sub-custodial arrangements.
Although the Fund will try to invest in companies and governments of
countries having stable political environments, there is the possibility of
expropriation or confiscatory taxation, seizure or nationalization of foreign
bank deposits or other assets, establishment of exchange controls, the adoption
of foreign government restrictions, or other adverse political, social or
diplomatic developments that could affect investment in these nations.
Debt Securities
In pursuing its investment objective, the Fund may invest in debt
securities of corporate and governmental issuers. The risks inherent in debt
securities depend primarily on the term and quality of the obligations in the
Fund's portfolio as well as on market conditions. A decline in the prevailing
levels of interest rates generally increases the value of debt securities, while
an increase in rates usually reduces the value of those securities.
Investments in debt securities by the Fund may be in those that are within
the four highest ratings categories of Standard & Poor's Corporation ("S&P")
or Moody's Investors Services, Inc. ("Moody's") (generally referred to as
"investment grade") or, if unrated, deemed to be of comparable quality by
Artisan Partners. However, the Fund may invest up to 35% of its net assets in
debt securities that are rated below investment grade. The Fund does not
currently intend to invest more than 5% of its net assets in securities rated
below investment grade.
Debt securities in the fourth highest grade may possess speculative
characteristics, and changes in economic conditions are more likely to affect
the issuer's capacity to pay interest and repay principal. If the rating of a
security held by the Fund is lost or reduced below investment grade, the Fund is
not required to dispose of the security, but Artisan Partners will consider that
fact in determining whether the Fund should continue to hold the security.
Securities that are rated below investment grade are considered
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal according to the terms of the obligation and therefore carry
greater investment risk, including the possibility of issuer default and
bankruptcy.
<PAGE B-3>
Defensive Investments
The Fund intends to be substantially fully invested in equity securities in
ordinary circumstances, although the Fund may invest without limit in corporate
or government obligations or hold cash or cash equivalents if Artisan Partners
determines that a temporary defensive position is advisable.
Convertible Securities
Convertible securities include any corporate debt security or preferred
stock that may be converted into underlying shares of common stock. The common
stock underlying convertible securities may be issued by a different entity than
the issuer of the convertible securities. Convertible securities entitle the
holder to receive interest payments paid on corporate debt securities or the
dividend preference on a preferred stock until such time as the convertible
security matures or is redeemed or until the holder elects to exercise the
conversion privilege.
The value of convertible securities is influenced by both the yield of non-
convertible securities of comparable issuers and by the value of a convertible
security viewed without regard to its conversion feature (i.e., strictly on the
basis of its yield) is sometimes referred to as its "investment value." The
investment value of the convertible security will typically fluctuate inversely
with changes in prevailing interest rates. However, at the same time, the
convertible security will be influenced by its "conversion value," which is
the market value of the underlying common stock that would be obtained if the
convertible security were converted. Conversion value fluctuates directly with
the price of the underlying common stock.
By investing in convertible securities, the Fund obtains the right to
benefit from the capital appreciation potential in the underlying stock upon
exercise of the conversion right, while earning higher current income than would
be available if the stock were purchased directly. In determining whether to
purchase a convertible security, Artisan Partners will consider the same
criteria that would be considered in purchasing the underlying stock. Although
convertible securities purchased by the Fund are frequently rated investment
grade, the Fund also may purchase unrated securities or securities rated below
investment grade if the securities meet Artisan Partners' other investment
criteria. Convertible securities rated below investment grade (a) tend to be
more sensitive to interest rate and economic changes, (b) may be obligations of
issuers who are less creditworthy than issuers of higher quality convertible
securities, and (c) may be more thinly traded due to such securities being less
well known to investors than either common stock or conventional debt
securities. As a result, Artisan Partners' own investment research and analysis
tends to be more important in the purchase of such securities than other
factors.
<PAGE B-4>
Managing Investment Exposure
The Fund uses various techniques to increase or decrease its exposure to
the effects of possible changes in security prices, currency exchange rates or
other factors that affect the value of its portfolio. These techniques include
buying and selling options, futures contracts, or options on futures contracts,
or entering into currency exchange contracts.
These techniques are used by Artisan Partners to adjust the risk and return
characteristics of the Fund's portfolio. If Artisan Partners judges market
conditions incorrectly or employs a strategy that does not correlate well with
the Fund's investments, or if the counterparty to the transaction does not
perform as promised, the transaction could result in a loss. Use of these
techniques may increase the volatility of the Fund and may involve a small
investment of cash relative to the magnitude of the risk assumed. These
techniques are used by the Fund for hedging, risk management or portfolio
management purposes and not for speculation.
Currency Exchange Transactions. Currency exchange transactions may be
conducted either on a spot (i.e., cash) basis at the spot rate for purchasing or
selling currency prevailing in the foreign exchange market or through forward
currency exchange contracts ("forward contracts"). Forward contracts are
contractual agreements to purchase or sell a specified currency at a specified
future date (or within a specified time period) and price set at the time of the
contract. Forward contracts are usually entered into with banks, foreign
exchange dealers or broker-dealers, are not exchange traded, and are usually for
less than one year, but may be renewed.
Forward currency transactions may involve currencies of the different
countries in which the Fund may invest, and serve as hedges against possible
variations in the exchange rate between these currencies. Currency transactions
are limited to transaction hedging and portfolio hedging involving either
specific transactions or portfolio positions. Transaction hedging is the
purchase or sale of forward contracts with respect to specific receivables or
payables of the Fund accruing in connection with the purchase and sale of its
portfolio securities. Portfolio hedging is the use of forward contracts with
respect to portfolio security positions denominated or quoted in a particular
currency. Portfolio hedging allows the Fund to limit or reduce exposure in a
foreign currency by entering into a forward contract to sell or buy such foreign
currency (or another foreign currency that acts as a proxy for that currency) so
that the U.S. dollar value of certain underlying foreign portfolio securities
can be approximately matched by an equivalent U.S. dollar liability. The Fund
may not engage in portfolio hedging with respect to the currency of a particular
country to an extent greater than the aggregate market value (at the time of
making such sale) of the securities held in its portfolio denominated or quoted
in that particular currency, except that the Fund may hedge all or part of its
foreign currency exposure through the use of a basket of currencies or a proxy
currency where such currencies or currency act as an effective proxy for other
currencies. In such a case, the Fund may enter into a forward contract where
the amount of the foreign currency to be sold exceeds the value of the
securities denominated in such currency. The use of this basket hedging
technique may be more efficient and economical than entering into separate
forward contracts for each currency held in the Fund. The Fund may not engage
in "speculative" currency exchange transactions.
<PAGE B-5>
At the maturity of a forward contract to deliver a particular currency, the
Fund may either sell the portfolio security related to such contract and make
delivery of the currency, or it may retain the security and either acquire the
currency on the spot market or terminate its contractual obligation to deliver
the currency by purchasing an offsetting contract with the same currency trader
obligating it to purchase on the same maturity date the same amount of the
currency.
It is impossible to forecast with absolute precision the market value of
portfolio securities at the expiration of a forward contract. Accordingly, it
may be necessary for the Fund to purchase additional currency on the spot market
(and bear the expense of such purchase) if the market value of the security is
less than the amount of currency the Fund is obligated to deliver and if a
decision is made to sell the security and make delivery of the currency.
Conversely, it may be necessary to sell on the spot market some of the currency
received upon the sale of the portfolio security if its market value exceeds the
amount of currency the Fund is obligated to deliver.
If the Fund retains the portfolio security and engages in an offsetting
transaction, the Fund will incur a gain or a loss to the extent that there has
been movement in forward contract prices. If the Fund engages in an offsetting
transaction, it may subsequently enter into a new forward contract to sell the
currency. Should forward prices decline during the period between the Fund's
entering into a forward contract for the sale of a currency and the date it
enters into an offsetting contract for the purchase of the currency, the Fund
will realize a gain to the extent the price of the currency it has agreed to
sell exceeds the price of the currency it has agreed to purchase. Should
forward prices increase, the Fund will suffer a loss to the extent the price of
the currency it has agreed to purchase exceeds the price of the currency it has
agreed to sell. A default on the contract would deprive the Fund of unrealized
profits or force the Fund to cover its commitments for purchase or sale of
currency, if any, at the current market price.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency should rise. Moreover,
it may not be possible for the Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the currency
at a price above the devaluation level it anticipates. The cost to the Fund of
engaging in currency exchange transactions varies with such factors as the
currency involved, the length of the contract period, and prevailing market
conditions. Because currency exchange transactions are usually conducted on a
principal basis, no fees or commissions are involved.
Options on Securities and Indexes. The Fund may purchase and sell put
options and call options on securities, indexes or foreign currencies in
standardized contracts traded on recognized securities exchanges, boards of
trade, or similar entities, or quoted on the Nasdaq National Market. The Fund
may purchase agreements, sometimes called cash puts, that may accompany the
purchase of a new issue of bonds from a dealer.
An option on a security (or index) is a contract that gives the purchaser
(holder) of the option, in return for a premium, the right to buy from (call) or
sell to (put) the seller (writer) of
<PAGE B-6>
the option the security underlying the option (or the cash value of the
index) at a specified exercise price at any time during the term of the
option (normally not exceeding nine months). The writer of an option
on an individual security or on a foreign currency has the obligation
upon exercise of the option to deliver the underlying security or
foreign currency upon payment of the exercise price or to pay the exercise price
upon delivery of the underlying security or foreign currency. Upon exercise,
the writer of an option on an index is obligated to pay the difference between
the cash value of the index and the exercise price multiplied by the specified
multiplier for the index option. (An index is designed to reflect specified
facets of a particular financial or securities market, a specific group of
financial instruments or securities, or certain economic indicators.)
The Fund will write call options and put options only if they are
"covered." For example, in the case of a call option on a security, the
option is "covered" if the Fund owns the security underlying the call or has
an absolute and immediate right to acquire that security without additional cash
consideration (or, if additional cash consideration is required, cash or cash
equivalents in such amount are held in a segregated account by its custodian)
upon conversion or exchange of other securities held in its portfolio.
If an option written by the Fund expires, the Fund realizes a capital gain
equal to the premium received at the time the option was written. If an option
purchased by the Fund expires, the Fund realizes a capital loss equal to the
premium paid.
Prior to the earlier of exercise or expiration, an option may be closed out
by an offsetting purchase or sale of an option of the same series (type,
exchange, underlying security or index, exercise price, and expiration). There
can be no assurance, however, that a closing purchase or sale transaction can be
effected when the Fund desires.
The Fund will realize a capital gain from a closing purchase transaction if
the cost of the closing option is less than the premium received from writing
the option, or, if it is more, the Fund will realize a capital loss. If the
premium received from a closing sale transaction is more than the premium paid
to purchase the option, the Fund will realize a capital gain or, if it is less,
the Fund will realize a capital loss. The principal factors affecting the
market value of a put or a call option include supply and demand, interest
rates, the current market price of the underlying security or index in relation
to the exercise price of the option, the volatility of the underlying security
or index, and the time remaining until the expiration date.
A put or call option purchased by the Fund is an asset of the Fund, valued
initially at the premium paid for the option. The premium received for an option
written by the Fund is recorded as a deferred credit. The value of an option
purchased or written is marked-to-market daily and is valued at the closing
price on the exchange on which it is traded or, if not traded on an exchange or
no closing price is available, at the mean between the last bid and asked
prices.
Risks Associated with Options on Securities and Indexes. There are several
risks associated with transactions in options. For example, there are
significant differences between the securities markets, the currency markets,
and the options markets that could result in an imperfect correlation between
these markets, causing a given transaction not to achieve its
<PAGE B-7>
objectives. A decision as to whether, when and how to use options involves the
exercise of skill and judgment, and even a well-conceived transaction may be
unsuccessful to some degree because of market behavior or expected events.
There can be no assurance that a liquid market will exist when the Fund
seeks to close out an option position. If the Fund were unable to close out an
option that it had purchased on a security, it would have to exercise the option
in order to realize any profit or the option would expire and become worthless.
If the Fund were unable to close out a covered call option that it had written
on a security, it would not be able to sell the underlying security until the
option expired. As the writer of a covered call option on a security, the Fund
foregoes, during the option's life, the opportunity to profit from increases in
the market value of the security covering the call option above the sum of the
premium and the exercise price of the call.
If trading were suspended in an option purchased or written by the Fund,
the Fund would not be able to close out the option. If restrictions on exercise
were imposed, the Fund might be unable to exercise an option it has purchased.
Futures Contracts and Options on Futures Contracts. The Fund may use
interest rate futures contracts, index futures contracts, and foreign currency
futures contracts. An interest rate, index or foreign currency futures contract
provides for the future sale by one party and purchase by another party of a
specified quantity of a financial instrument or the cash value of an index<F5>
at a specified price and time. A public market exists in futures contracts
covering a number of indexes (including, but not limited to: the Standard &
Poor's 500 Index, the Value Line Composite Index, the Russell 2000 Index, and
the New York Stock Exchange Composite Index) as well as financial instruments
(including, but not limited to: U.S. Treasury bonds, U.S. Treasury notes,
Eurodollar certificates of deposit, and foreign currencies). Other index and
financial instrument futures contracts are available and it is expected that
additional futures contracts will be developed and traded.
The Fund may purchase and write call and put futures options. Futures
options possess many of the same characteristics as options on securities,
indexes and foreign currencies (discussed above). A futures option gives the
holder the right, in return for the premium paid, to assume a long position
(call) or short position (put) in a futures contract at a specified exercise
price at any time during the period of the option. Upon exercise of a call
option, the holder acquires a long position in the futures contract and the
writer is assigned the opposite short position. In the case of a put option,
the opposite is true. The Fund might, for example, use futures contracts to
hedge against or gain exposure to fluctuations in the general level of stock
prices, anticipated changes in interest rates or currency fluctuations that
might adversely affect
- ---------------------------------------
<F5> A futures contract on an index is an agreement pursuant to which two
parties agree to take or make delivery of an amount of cash equal to the
difference between the value of the index at the close of the last trading
day of the contract and the price at which the index contract was
originally written. Although the value of a securities index is a function
of the value of certain specified securities, no physical delivery of those
securities is made.
<PAGE B-8>
either the value of the Fund's securities or the price of the securities
that the Fund intends to purchase. Although other techniques
could be used to reduce or increase the Fund's exposure to stock price, interest
rate and currency fluctuations, the Fund may be able to achieve its exposure
more effectively and perhaps at a lower cost by using futures contracts and
futures options.
The Fund will only enter into futures contracts and futures options that
are standardized and traded on an exchange, board of trade, or similar entity,
or quoted on an automated quotation system.
The success of any futures transaction depends on Artisan Partners
correctly predicting changes in the level and direction of stock prices,
interest rates, currency exchange rates and other factors. Should those
predictions be incorrect, the Fund's return might have been better had the
transaction not been attempted; however, in the absence of the ability to use
futures contracts, Artisan Partners might have taken portfolio actions in
anticipation of the same market movements with similar investment results but,
presumably, at greater transaction costs.
When a purchase or sale of a futures contract is made by the Fund, the Fund
is required to deposit with its custodian (or broker, if legally permitted) a
specified amount of cash or U.S. Government securities or other securities
acceptable to the broker ("initial margin"). The margin required for a
futures contract is set by the exchange on which the contract is traded and may
be modified during the term of the contract, although the Fund's broker may
require margin deposits in excess of the minimum required by the exchange. The
initial margin is in the nature of a performance bond or good faith deposit on
the futures contract, which is returned to the Fund upon termination of the
contract, assuming all contractual obligations have been satisfied. The Fund
expects to earn interest income on its initial margin deposits. A futures
contract held by the Fund is valued daily at the official settlement price of
the exchange on which it is traded. Each day the Fund pays or receives cash,
called "variation margin," equal to the daily change in value of the futures
contract. This process is known as "marking-to-market." Variation margin
paid or received by the Fund does not represent a borrowing or loan by the Fund
but is instead settlement between the Fund and the broker of the amount one
would owe the other if the futures contract had expired at the close of the
previous day. In computing daily net asset value, the Fund will mark-to-market
its open futures positions.
The Fund is also required to deposit and maintain margin with respect to
put and call options on futures contracts written by it. Such margin deposits
will vary depending on the nature of the underlying futures contract (and the
related initial margin requirements), the current market value of the option,
and other futures positions held by the Fund.
Although some futures contracts call for making or taking delivery of the
underlying securities, usually these obligations are closed out prior to
delivery by offsetting purchases or sales of matching futures contracts (same
exchange, underlying security or index, and delivery month). If an offsetting
purchase price is less than the original sale price, the Fund engaging in the
transaction realizes a capital gain, or if it is more, the Fund realizes a
capital loss. Conversely, if an offsetting sale price is more than the original
purchase price, the Fund engaging
<PAGE B-9>
in the transaction realizes a capital gain, or if it is less, the Fund realizes
a capital loss. The transaction costs must also be included in these
calculations.
Risks Associated with Futures. There are several risks associated with the
use of futures contracts and futures options. A purchase or sale of a futures
contract may result in losses in excess of the amount invested in the futures
contract. In trying to increase or reduce market exposure, there can be no
guarantee that there will be a correlation between price movements in the
futures contract and in the portfolio exposure sought. In addition, there are
significant differences between the securities and futures markets that could
result in an imperfect correlation between the markets, causing a given
transaction not to achieve its objectives. The degree of imperfection of
correlation depends on circumstances such as: variations in speculative market
demand for futures, futures options and the related securities, including
technical influences in futures and futures options trading and differences
between the securities market and the securities underlying the standard
contracts available for trading. For example, in the case of index futures
contracts, the composition of the index, including the issuers and the weighting
of each issue, may differ from the composition of the Fund's portfolio, and, in
the case of interest rate futures contracts, the interest rate levels,
maturities, and creditworthiness of the issues underlying the futures contract
may differ from the financial instruments held in the Fund's portfolio. A
decision as to whether, when and how to use futures contracts involves the
exercise of skill and judgment, and even a well-conceived transaction may be
unsuccessful to some degree because of market behavior or unexpected stock price
or interest rate trends.
Futures exchanges may limit the amount of fluctuation permitted in certain
futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous day's settlement price at the end of the
current trading session. Once the daily limit has been reached in a futures
contract subject to the limit, no more trades may be made on that day at a price
beyond that limit. The daily limit governs only price movements during a
particular trading day and therefore does not limit potential losses because the
limit may work to prevent the liquidation of unfavorable positions. For
example, futures prices have occasionally moved to the daily limit for several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of positions and subjecting some holders of futures contracts to
substantial losses. Stock index futures contracts are not normally subject to
such daily price change limitations.
There can be no assurance that a liquid market will exist at a time when
the Fund seeks to close out a futures or futures option position. The Fund
would be exposed to possible loss on the position during the interval of
inability to close, and would continue to be required to meet margin
requirements until the position is closed. In addition, many of the contracts
discussed above are relatively new instruments without a significant trading
history. As a result, there can be no assurance that an active secondary market
will develop or continue to exist.
Limitations on Options and Futures. If other options, futures contracts,
or futures options of types other than those described herein are traded in the
future, the Fund also may use those investment vehicles, provided the board of
directors determines that their use is consistent with the Fund's investment
objective.
<PAGE B-10>
The Fund will not enter into a futures contract or purchase an option
thereon if, immediately thereafter, the initial margin deposits for futures
contracts held by the Fund plus premiums paid by it for open futures option
positions, less the amount by which any such positions are "in-the-money,"<F6>
would exceed 5% of the Fund's total assets.
When purchasing a futures contract or writing a put option on a futures
contract, the Fund must maintain with its custodian (or broker, if legally
permitted) assets (including any margin) equal to the market value of such
contract. When writing a call option on a futures contract, the Fund similarly
will maintain with its custodian assets (including any margin) equal to the
amount by which such option is in-the-money until the option expires or is
closed out by the Fund.
The Fund may not maintain open short positions in futures contracts, call
options written on futures contracts or call options written on indexes if, in
the aggregate, the market value of all such open positions exceeds the current
value of the securities in its portfolio, plus or minus unrealized gains and
losses on the open positions, adjusted for the historical relative volatility of
the relationship between the portfolio and the positions. For this purpose, to
the extent the Fund has written call options on specific securities in its
portfolio, the value of those securities will be deducted from the current
market value of the securities portfolio.
In order to comply with Commodity Futures Trading Commission Regulation 4.5
and thereby avoid being deemed a "commodity pool operator," the Fund will use
commodity futures or commodity options contracts solely for bona fide hedging
purposes within the meaning and intent of Regulation 1.3(z), or, with respect to
positions in commodity futures and commodity options contracts that do not come
within the meaning and intent of Regulation 1.3(z), the aggregate initial margin
and premiums required to establish such positions will not exceed 5% of the fair
market value of the assets of the Fund, after taking into account unrealized
profits and unrealized losses on any such contracts it has entered into (in the
case of an option that is in-the-money at the time of purchase, the in-the-money
amount (as defined in Section 190.01(x) of the Commission Regulations) may be
excluded in computing such 5%).
As long as the Fund continues to sell its shares in certain states and
applicable state law or regulation so requires, the Fund's options and futures
transactions also will be subject to certain non-fundamental investment
restrictions set forth under "Investment Restrictions" in this statement of
additional information.
Taxation of Options and Futures. If the Fund exercises a call or put
option that it holds, the premium paid for the option is added to the cost basis
of the security purchased (call) or deducted from the proceeds of the security
sold (put). For cash settlement options and futures options exercised by the
Fund, the difference between the cash received at exercise and the premium paid,
plus other capitalized costs of the option, is a capital gain or loss.
- -----------------------------------------
<F6> A call option is "in-the-money" if the value of the futures contract that
is the subject of the option exceeds the exercise price. A put option is
"in-the-money" if the exercise price exceeds the value of the futures
contract that is the subject of the option.
<PAGE B-11>
If a call or put option written by the Fund is exercised, the premium is
included in the proceeds of the sale of the underlying security (call) or
reduces the cost basis of the security purchased (put). For cash settlement
options and futures options written by the Fund, the difference between the cash
paid at exercise, plus other capitalized costs of the option, and the premium
received is a capital gain or loss.
Entry into a closing purchase transaction will result in capital gain or
loss. If an option written by the Fund is in-the-money at the time it was
written and the security covering the option was held for more than the long-
term holding period prior to the writing of the option, any loss realized as a
result of a closing purchase transaction will be long-term. The holding period
of the securities covering an in-the-money option will not include the period of
time the option is outstanding.
If the Fund writes an equity call option<F7> other than a "qualified covered
call option," as defined in the Internal Revenue Code, any loss on such option
transaction, to the extent it does not exceed the unrealized gains on the
securities covering the option, may be subject to deferral until the securities
covering the option have been sold.
A futures contract held until delivery results in capital gain or loss
equal to the difference between the price at which the futures contract was
entered into, plus other capitalized costs of the option, and the settlement
price on the earlier of delivery notice date or expiration date. If the Fund
delivers securities under a futures contract, the Fund also realizes a capital
gain or loss on those securities.
For Federal income tax purposes, the Fund generally is required to
recognize for each taxable year its net unrealized gains and losses as of the
end of the year on futures and non-equity options positions
("year-end mark-to-market"). Generally, any gain or loss recognized with
respect to such positions (either by year-end mark-to-market or by actual
closing of the positions) is considered to be 60% long-term and 40% short-term,
without regard to the holding periods of the contracts. However, in the case of
positions classified as part of a "mixed straddle," the recognition of losses
on certain positions (including options, futures and futures options positions,
the related securities and certain successor positions thereto) may be deferred
to a later taxable year. Sale of futures contracts or writing of call options
(or futures call options) or buying put options (or futures put options) that
are intended to hedge against a change in the value of securities held by the
Fund may affect the holding period of the hedged securities.
- ----------------------------------
<F7> An equity option is defined to mean any option to buy or sell stock, and
any other option the value of which is determined by reference to an index
of stocks of the type that is ineligible to be traded on a commodity
futures exchange (e.g., an option contract on a sub-index based on the
price of nine hotel-casino stocks). The definition of equity option
excludes options on broad-based stock indexes (such as the Standard &
Poor's 500 index).
<PAGE B-12>
If the Fund were to enter into a short index future, short index futures
option or short index option position and the Fund's portfolio were deemed to
"mimic" the performance of the index underlying such contract, the option or
futures contract position and the Fund's stock positions may be deemed to be
positions in a mixed straddle, subject to the above-mentioned loss deferral
rules.
In order for the Fund to qualify for Federal income tax treatment
as a regulated investment company, at least 90% of its gross income
for a taxable year must be derived from qualifying income; i.e., dividends,
interest, income derived from loans of securities, and gains from the sale of
securities or foreign currencies, or other income (including but not limited to
gains from options, futures, or forward contracts). In addition, gains realized
on the sale or other disposition of securities held for less than three months
must be limited to less than 30% of the Fund's annual gross income. Any net
gain realized from futures (or futures options) contracts will be considered
gain from the sale of securities and therefore be qualifying income for purposes
of the 90% requirement. In order to avoid realizing excessive gains on
securities held less than three months, the Fund may be required to defer the
closing out of certain positions beyond the time when it would otherwise be
advantageous to do so.
The Fund intends to distribute to shareholders annually any capital gains
that have been recognized for Federal income tax purposes (including year-end
mark-to-market gains) on options and futures transactions, together with gains
on other Fund investments, to the extent such gains exceed recognized capital
losses and any net capital loss carryovers of the Fund. Shareholders will be
advised of the nature of such capital gain distributions.
This section is not intended to be a full discussion of present or proposed
federal income tax laws and the effect of such laws on the Fund or an investor.
Investors are urged to consult their own tax advisers for a complete review of
the tax ramifications of an investment in the Fund.
Rule 144A Securities
The Fund may purchase securities that have been privately placed but that
are eligible for purchase and sale under Rule 144A under the 1933 Act ("Rule
144A securities'). That Rule permits certain qualified institutional buyers,
including investment companies that own and invest at least $100 million in
securities, to trade in privately placed securities that have not been
registered for sale under the 1933 Act. Artisan Partners, under the supervision
of the board of directors, will consider whether Rule 144A securities are
illiquid and thus subject to the Fund's restriction of investing no more than
10% of its net assets in illiquid securities. A determination of whether a Rule
144A security is liquid or not is a question of fact. In making this
determination, Artisan Partners will consider the trading markets for the
specific security, taking into account the unregistered nature of a Rule 144A
security. In addition, Artisan Partners could consider the (1) frequency of
trades and quotes, (2) number of dealers and potential purchasers, (3) dealer
undertakings to make a market, and (4) nature of the security and of marketplace
trades (e.g., the time needed to dispose of the security, the method of
soliciting offers, and the mechanics of transfer). The liquidity of Rule 144A
securities would be monitored and, if as a result of changed conditions, Artisan
Partners determined that a Rule 144A security is no longer liquid, the Fund's
holdings of illiquid securities would be reviewed to determine what, if any,
steps are required to assure that the Fund does not invest more than 10% of its
assets in illiquid securities. Investing in Rule 144A securities could have the
effect of increasing the amount of
<PAGE B-13>
the Fund's assets invested in illiquid securities if qualified institutional
buyers are unwilling to purchase such securities.
Lending of Portfolio Securities
Subject to restriction (3) under "Investment Restrictions" in this
statement of additional information, the Fund may lend its portfolio securities
to broker-dealers and banks. Any such loan must be continuously secured by
collateral in cash or cash equivalents maintained on a current basis in an
amount at least equal to the market value of the securities loaned by the Fund.
The Fund would continue to receive the equivalent of the interest or dividends
paid by the issuer on the securities loaned, and also would receive an
additional return that may be in the form of a fixed fee or a percentage of the
collateral. The Fund would have the right to call the loan and obtain the
securities loaned at any time on notice of not more than five business days.
The Fund would not have the right to vote the securities during the existence of
the loan but would call the loan to permit voting of the securities if, in
Artisan Partners' judgment, a material event requiring a shareholder vote would
otherwise occur before the loan was repaid. In the event of bankruptcy or other
default of the borrower, the Fund could experience both delays in liquidating
the loan collateral or recovering the loaned securities and losses, including
(a) possible decline in the value of the collateral or in the value of the
securities loaned during the period while the Fund seeks to enforce its rights
thereto, (b) possible subnormal levels of income and lack of access to income
during this period, and (c) expenses of enforcing its rights. The Fund does not
currently intend to loan more than 5% of its net assets.
Repurchase Agreements
Repurchase agreements are transactions in which the Fund purchases a
security from a bank or recognized securities dealer and simultaneously commits
to resell that security to the bank or dealer at an agreed-upon price, date, and
market rate of interest unrelated to the coupon rate or maturity of the
purchased security. Although repurchase agreements carry certain risks not
associated with direct investments in securities, the Fund will enter into
repurchase agreements only with banks and dealers believed by Artisan Partners
to present minimum credit risks in accordance with guidelines approved by the
board of trustees. Artisan Partners will review and monitor the
creditworthiness of such institutions, and will consider the capitalization of
the institution, Artisan Partners' prior dealings with the institution, any
rating of the institution's senior long-term debt by independent rating
agencies, and other relevant factors.
The Fund will invest only in repurchase agreements collateralized at all
times in an amount at least equal to the repurchase price plus accrued interest.
To the extent that the proceeds from any sale of such collateral upon a default
in the obligation to repurchase were less than the repurchase price, the Fund
would suffer a loss. If the financial institution which is party to the
repurchase agreement petitions for bankruptcy or otherwise becomes subject to
bankruptcy or other liquidation proceedings there may be restrictions on the
Fund's ability to sell the collateral and the Fund could suffer a loss.
However, with respect to financial institutions whose bankruptcy or liquidation
proceedings are subject to the U.S. Bankruptcy Code, the Fund intends
<PAGE B-14>
to comply with provisions under such Code that would allow it immediately to
resell such collateral.
When-Issued and Delayed-Delivery Securities; Reverse Repurchase Agreements
The Fund may purchase securities on a when-issued or delayed-delivery
basis. Although the payment and interest terms of these securities are
established at the time the Fund enters into the commitment, the securities may
be delivered and paid for a month or more after the date of purchase, when their
value may have changed. The Fund makes such commitments only with the intention
of actually acquiring the securities, but may sell the securities before
settlement date if Artisan Partners deems it advisable for investment reasons.
The Fund does not currently intend to have commitments to purchase when-issued
securities in excess of 5% of its net assets.
The Fund may enter into reverse repurchase agreements with banks and
securities dealers. A reverse repurchase agreement is a repurchase agreement in
which the Fund is the seller of, rather than the investor in, securities and
agrees to repurchase them at an agreed-upon time and price. Use of a reverse
repurchase agreement may be preferable to a regular sale and later repurchase of
securities because it avoids certain market risks and transaction costs.
However, reverse repurchase agreements will be treated as borrowing and subject
to the Artisan Funds' fundamental limitation on borrowing.
At the time the Fund enters into a binding obligation to purchase
securities on a when-issued or delayed-delivery basis or enters into a reverse
repurchase agreement, assets of the Fund having a value at least as great as the
purchase price of the securities to be purchased will be segregated on the books
of the Fund and held by the custodian throughout the period of the obligation.
The use of these investment strategies, as well as borrowing under a line of
credit as described below, may increase net asset value fluctuation.
Short Sales
The Fund may make short sales "against the box." In a short sale, the
Fund sells a borrowed security and is required to return the identical security
to the lender. A short sale "against the box" involves the sale of a security
with respect to which the Fund already owns an equivalent security in kind and
amount. A short sale "against the box" enables the Fund to obtain the current
market price of a security which it desires to sell but is unavailable for
settlement. The Fund does not currently intend to have commitments to make
short sales "against the box" in excess of 5% of its net assets.
Line of Credit
Artisan Funds maintains a line of credit with a bank in order to permit
borrowing on a temporary basis to meet share redemption requests in
circumstances in which temporary borrowing may be preferable to liquidation of
portfolio securities. Any borrowings under that line of credit by the Fund
would be subject to restriction (4) under "Investment Restrictions" in this
statement of additional information.
<PAGE B-15>
Portfolio Turnover
Although the Fund does not purchase securities with a view to rapid
turnover, there are no limitations on the length of time that portfolio
securities must be held. At times, the Fund may invest for short-term capital
appreciation. Portfolio turnover can occur for a number of reasons such as
general conditions in the securities markets, more favorable investment
opportunities in other securities, or other factors relating to the desirability
of holding or changing a portfolio investment. Because of the Fund's
flexibility of investment and emphasis on growth of capital, it may have greater
portfolio turnover than that of mutual funds that have primary objectives of
income or maintenance of a balanced investment position. The future turnover
rate may vary greatly from year to year. A high rate of portfolio turnover in
the Fund, if it should occur, would result in increased transaction expense,
which must be borne by the Fund. High portfolio turnover also may result in the
realization of capital gains or losses and, to the extent net short-term capital
gains are realized, any distributions resulting from such gains will be
considered ordinary income for Federal income tax purposes. (See "Dividends,
Capital Gains, and Taxes" in the prospectus, and "Additional Tax Information"
in this statement of additional information.)
INVESTMENT RESTRICTIONS
Fundamental Restrictions
Artisan Funds has adopted the following investment restrictions which may
not be changed without the approval of the Fund's shareholders, under which the
Fund may not:
(1) act as an underwriter of securities, except insofar as it may be deemed an
underwriter for purposes of the Securities Act of 1933 on disposition of
securities acquired subject to legal or contractual restrictions on resale;
(2) purchase or sell real estate (although it may purchase securities secured
by real estate or interests therein, or securities issued by companies
which invest in real estate or interests therein), commodities, or
commodity contracts, except that it may enter into (a) futures and options
on futures and (b) forward contracts;
(3) make loans, but this restriction shall not prevent the Fund from (a) buying
a part of an issue of bonds, debentures, or other obligations which are
publicly distributed, or from investing up to an aggregate of 15% of its
total assets (taken at market value at the time of each purchase) in parts
of issues of bonds, debentures or other obligations of a type privately
placed with financial institutions, (b) investing in repurchase agreements,
or (c) lending portfolio securities, provided that it may not lend
securities if, as a result, the aggregate value of all securities loaned
would exceed 33% of its total assets (taken at market value at the time of
such loan);
(4) borrow (including entering into reverse repurchase agreements), except that
it may (a) borrow up to 33 1/3% of its total assets, taken at market value
at the time of such borrowing, as a temporary measure for extraordinary or
emergency purposes, but not to
<PAGE B-16>
increase portfolio income and (b) enter into transactions in options,
futures, and options on futures;<F8>
(5) invest in a security if more than 25% of its total assets (taken at market
value at the time of a particular purchase) would be invested in the
securities of issuers in any particular industry, except that this
restriction does not apply to securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities;
(6) issue any senior security except to the extent permitted under the
Investment Company Act of 1940;
(7) with respect to 75% of its total assets, invest more than 5% of its total
assets, taken at market value at the time of a particular purchase, in the
securities of a single issuer, except for securities issued or guaranteed
by the Government of the U.S. or any of its agencies or instrumentalities
or repurchase agreements for such securities;
(8) acquire more than 10%, taken at the time of a particular purchase, of the
outstanding voting securities of any one issuer.
The Fund's investment objective is not a fundamental restriction and,
therefore, a change in the objective is not subject to shareholder approval.
However, investors in the Fund will receive written notification at least 30
days' prior to any change in the Fund's investment objective.
Non-Fundamental Restrictions
The Fund also is subject to the following non-fundamental restrictions and
policies, which may be changed by the board of directors;
(a) invest in companies for the purpose of exercising control or management;
(b) purchase more than 3% of the stock of another investment company or
purchase stock of other investment companies equal to more than 5% of the
Fund's total assets (valued at time of purchase) in the case of any one
other investment company and 10% of such assets (valued at time of
purchase) in the case of all other investment companies in the aggregate;
any such purchases are to be made in the open market where no profit to a
sponsor or dealer results from the purchase, other than the customary
broker's commission, except for securities acquired as part of a merger,
consolidation, acquisition or reorganization;
(c) invest more than 25% of its total assets (valued at time of purchase) in
securities of foreign issuers;
- -----------------------------
<F8> The Fund will not purchase securities when total borrowings by the Fund are
greater than 5% of its net asset value.
<PAGE B-17>
(d) purchase securities on margin (except for use of short-term credits as are
necessary for the clearance of transactions), or sell securities short
unless (i) the Fund owns or has the right to obtain securities equivalent
in kind and amount to those sold short at no added cost or (ii) the
securities sold are "when issued" or "when distributed" securities which
the Fund expects to receive in recapitalization, reorganization, or other
exchange for securities the Fund contemporaneously owns or has the right to
obtain and provided that transactions in options, futures, and options on
futures are not treated as short sales; or
(e) invest more than 10% of its net assets (taken at market value at the time
of each purchase) in illiquid securities, including repurchase agreements
maturing in more than seven days.
PERFORMANCE INFORMATION
From time to time the Fund may quote total return figures. "Total
Return" for a period is the percentage change in value during the period of an
investment in shares of a fund, including the value of shares acquired through
reinvestment of all dividends and capital gains distributions. "Average Annual
Total Return" is the average annual compounded rate of change in value
represented by the Total Return for the period.
Average Annual Total Return is computed as follows:
n
ERV = P(l+T)
Where: P = a hypothetical initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 investment
made at the beginning of the period, at the end of the
period (or fractional portion thereof)
The Fund imposes no sales charges and pays no distribution expenses.
Income taxes are not taken into account. Performance figures quoted by the Fund
are not necessarily indicative of future results. The Fund's performance is a
function of conditions in the securities markets, portfolio management, and
operating expenses. Although information about past performance is useful in
reviewing the Fund's performance and in providing some basis for comparison with
other investment alternatives, it should not be used for comparison with other
investments using different reinvestment assumptions or time periods.
In advertising and sales literature, the performance of the Fund may be
compared with that of other mutual funds, indexes or averages of other mutual
funds, indexes of related financial assets or data, other accounts or
partnerships managed by Artisan Partners Limited Partners, and other competing
investment and deposit products available from or through other financial insti-
tutions. The composition of these indexes, averages or accounts differs from
that of the Fund. Comparison of the Fund to an alternative investment should
consider differences in features and expected performance.
<PAGE B-18>
All of the indexes and averages noted below will be obtained from the
indicated sources or reporting services, which the Fund generally believes to be
accurate. The Fund also may note its mention (including performance or other
comparative rankings) in newspapers, magazines, or other media from time to
time. However, the Fund assumes no responsibility for the accuracy of such
data. Newspapers and magazines and other media which might mention the Fund
include, but are not limited to, the following:
Atlanta Constitution Mutual Fund News Service
Barron's Mutual Fund Values Morningstar
Boston Herald Publications
Business Week Newsweek
Chicago Tribune The New York Times
Chicago Sun-Times No-Load Fund Investor
Cleveland Plain Dealer Outstanding Investor Digest
CNBC Pension World
CNN Pensions and Investments
Crain's Chicago Business Personal Investor
Consumer Reports Jane Bryant Quinn (syndicated column)
Consumer Digest Louis Rukeyser's Mutual Fund
Financial World The San Francisco Chronicle
Forbes Smart Money
Fortune Stranger's Investment Adviser
Fund Action 13D Opportunities Report
Investor's Business Daily Time
Kiplinger's Personal Finance Magazine United Mutual Fund Selector
Knight-Ridder USA Today
Los Angeles Times U.S. News and World Report
Milwaukee Business Journal Milwaukee The Wall Street Journal
Journal Sentinel Working Woman
Money Worth
Mutual Fund Letter Your Money
When a newspaper, magazine or other publication mentions the Fund, such
mention may include: (i) listings of some or all of the Fund's holdings, (ii)
descriptions of characteristics of some or all of the securities held by the
Fund, including price-earnings ratios, earnings, growth rates and other
statistical information, and comparisons of that information to similar
statistics for the securities comprising any of the indexes or averages listed
above; and (iii) descriptions of the Fund's or a portfolio manager's economic
and market outlook, generally and for the Fund.
The Fund may compare its performance to the Consumer Price Index (All
Urban), a widely recognized measure of inflation.
The performance of the Fund may be compared to the following indexes or
averages:
<PAGE B-19>
Dow-Jones Industrial Average New York Stock Exchange Composite Index
Russell 2000 Small Stock Index American Stock Exchange Composite Index
Russell Mid-Cap Stock Index NASDAQ Composite
Standard & Poor's 500 Stock Index NASDAQ Industrials
Standard & Poor's 400 Industrials (These indexes generally reflect the
Standard & Poor's Mid-Cap 400 Index performance of stocks traded in the
Wilshire 5000 indicated markets.)
Wilshire 4500
Wilshire 4000
Wilshire Small-Cap Index
(These indexes are widely recognized
indicators of general U.S. stock
market results.)
The performance of the Fund also may be compared to the following mutual
fund industry indexes or averages: Value Line Index; Lipper Capital
Appreciation Fund Average; Lipper Growth Funds Average; Lipper Small Company
Growth Funds Average; Lipper General Equity Funds Average; Lipper Equity Funds
Average; Lipper Small Company Growth Fund Index; ICD Aggressive Growth and Long
Term Growth Funds Average; ICD Aggressive Growth Fund Large Index; ICD
Aggressive Growth Fund Small Index; ICD Aggressive Growth Funds Average; ICD All
Equity Funds Average; Morningstar Growth Average; Morningstar Small-Cap Funds
Average; Morningstar Aggressive Growth Average; Morningstar U.S. Diversified
Average; Morningstar Equity Fund Average; Morningstar Hybrid Fund Average;
Morningstar All Equity Funds Average; and Morningstar General Equity Average.
The ICD Indexes reflect the unweighted average total return of the largest
twenty four funds within their respective category as calculated and published
by ICD.
The Lipper Small Company Growth Fund Index reflects the net asset value
weighted total return of the largest thirty growth funds as calculated and
published by Lipper Analytical Services, Inc. ("Lipper"), an independent
service that monitors the performance of more than 1,000 funds.
The Lipper, ICD and Morningstar averages are unweighted averages of total
return performance of mutual funds as classified, calculated and published by
these independent services that monitor the performance of mutual funds. The
Fund also may use comparative performance as computed in a ranking by Lipper or
category averages and rankings provided by another independent service. Should
Lipper or another service reclassify the Fund to a different category or develop
(and place the Fund into) a new category, the Fund may compare its performance
or ranking against other funds in the newly assigned category, as published by
the service. The Fund may compare its performance or ranking against all funds
tracked by Lipper or another independent service.
The Fund may cite its rating, recognition or other mention by Morningstar,
Inc. ("Morningstar") or any other entity. Morningstar proprietary ratings
reflect historical risk-adjusted performance as of the date indicated. The
ratings are subject to change every month. Morningstar ratings are calculated
from the fund's three-, five-, and ten-year average annual
<PAGE B-20>
returns in excess of 90-day Treasury bill returns with appropriate fee
adjustments, and a risk factor that reflects fund performance below 90-day
T-bill returns. Ten percent of the funds in an investment category receive five
stars, 22.5% receive four stars, 35% receive three stars, 22.5% receive two
stars, and 10% receive one star. A high rating reflects either above-average
returns or below-average risk, or both.
To illustrate the historical returns on various types of financial assets,
the Fund may use historical data provided by Ibbotson Associates, Inc.
("Ibbotson"), a Chicago-based investment firm. Ibbotson constructs (or
obtains) very long-term (since 1926) total return data (including, for example,
total return indexes, total return percentages, average annual total returns and
standard deviations of such returns) for the following asset types: common
stocks, small company stocks, long-term corporate bonds, long-term government
bonds, intermediate-term government bonds, U.S. Treasury bills and Consumer
Price Index. The Fund also may use historical data compiled by Prudential
Securities, Inc., or by other similar sources believed by the Fund to be
accurate, illustrating the past performance of small-capitalization stocks,
large-capitalization stocks, common stocks, equity securities, growth stocks
(small-capitalization, large-capitalization, or both) and value stocks (small-
capitalization, large-capitalization, or both).
DIRECTORS AND OFFICERS
Directors and officers of Artisan Funds, and their principal business
occupations during at least the last five (5) years, are shown below. Directors
deemed to be "interested persons" of Artisan Funds for purposes of the 1940
Act are indicated with an asterisk.
POSITIONS HELD PRINCIPAL OCCUPATIONS
NAME AND AGE WITH REGISTRANT DURING THE PAST 5 YEARS
- ------------ --------------- -----------------------
Andrew A. Ziegler Director, Chairman of Managing Director of Artisan
(39) the Board and Chief Partners; prior to founding
Executive Officer Artisan Partners, president
and chief operating officer
of Strong/Corneliuson
Capital Management
("Strong') and president
of the Strong Funds from
1990 to 1994; prior
thereto, attorney with the
law firm of Godfrey & Kahn,
S.C., Milwaukee, WI.
Carlene Murphy Ziegler Director and Managing Director of Artisan
(40) President Partners; co-portfolio
manager, Artisan Small Cap
Fund; prior to founding
Artisan Partners, a co-
portfolio manager of the
Strong Common Stock Fund,
Strong Opportunity Fund and
numerous institutional
small-capitalization equity
portfolios at Strong since
March 1991; prior thereto,
a co-portfolio manager of
the Stein Roe Special Fund.
David A. Erne Director Partner of the law firm
(53) Reinhart, Boerner, Van
Deuren, Norris &
Rieselbach, S.C.,
Milwaukee, WI.
<PAGE B-21>
POSITIONS HELD PRINCIPAL OCCUPATIONS
NAME AND AGE WITH REGISTRANT DURING THE PAST 5 YEARS
- ------------ --------------- -----------------------
Thomas R. Hefty Director President of United
(49) Wisconsin Services, Inc. (a
provider of managed care
and specialty business
services) since 1986 and
chairman of the board and
chief executive officer
since 1991; and chairman of
the board of Blue Cross &
Blue Shield United of
Wisconsin (parent company
of United Wisconsin
Services, Inc.) since 1988
and president since 1982.
Howard B. Witt Director President and chief
(56) executive officer of
Littelfuse, Inc. (a
manufacturer of advanced
circuit protection devices)
since 1990 and chairman of
the board of Littelfuse
since 1993; prior thereto
executive vice president of
Littelfuse; and director of
Franklin Electric Co., Inc.
(a manufacturer of
electronic motors) since
1994.
John M. Blaser Chief Financial Chief financial officer of
(40) Officer, Treasurer Artisan Partners; prior to
and Secretary joining Artisan Partners,
senior vice president with
Kemper Securities, Inc.
since 1993; prior thereto,
with Price Waterhouse.
Mark L. Yockey Vice President Portfolio manager, Artisan
(40) International Fund;
prior to joining
Artisan Partners, portfolio
manager of the United
International Growth Fund
and vice president of
Waddell & Reed (investment
management firm) since
January 1990; prior
thereto, equity analyst for
Waddell & Reed.
Sandra Jean Voss-Reinhardt Vice President Equity trader for Artisan
(32) Partners; prior to joining
Artisan Partners, equity
trader with Northwestern
Mutual since January 1989,
prior thereto, sales
associate with Dean Witter
Reynolds.
<PAGE B-22>
POSITIONS HELD PRINCIPAL OCCUPATIONS
NAME AND AGE WITH REGISTRANT DURING THE PAST 5 YEARS
- ------------ --------------- -----------------------
Millie Adams Hurwitz Vice President Co-portfolio manager of the
(34) Fund since August 1996;
senior analyst of Artisan
Partners' small
capitalization equity
products since February
1995; prior to joining
Artisan Partners, co-
portfolio manager at Stein
Roe & Farnham Incorporated
from 1992 until 1995, and
an analyst with OLC
Corporation from 1989 to
1991.
Andrew C. Stephens Vice President Portfolio Manager, Artisan
( ) Mid Cap Fund; co-manager
-- of Strong Asset
Allocation Fund at Strong,
February 1993 through March
1997, and senior research
analyst for Strong Common
Stock Fund and Strong
Opportunity Fund, September
1994 through March 1996
prior to February 1993,
head trader, Strong.
The address of Mr. Ziegler, Ms. Ziegler, Mr. Blaser, and Ms. Voss-
Reinhardt, Ms. Hurwitz and Mr. Stephens is 1000 North Water Street, Suite 1770,
Milwaukee, Wisconsin 53202. The addresses of the other directors are: Mr. Erne
- - 1000 N. Water Street, Milwaukee, Wisconsin 53202; Mr. Hefty - 401 W. Michigan
Street, Milwaukee, Wisconsin 53203; and Mr. Witt - 800 E. Northwest Highway, Des
Plaines, Illinois 60016.
Mr. Ziegler and Ms. Ziegler are married to each other.
Mr. Ziegler and Ms. Ziegler serve as members of the Executive Committee of
the Board of Directors. The Executive Committee, which meets between regular
meetings of the Board, is authorized to exercise all of the powers of the Board
of Directors.
The only compensation paid to directors and officers of Artisan Funds for
their services as such consists of an annual $5,000 retainer fee (per series of
Artisan Funds) paid to directors who are not interested persons of Artisan Funds
or Artisan Partners. Artisan Funds has no retirement or pension plans.
The following table sets forth compensation paid by the Fund and by Artisan
Funds, Inc. during the fiscal year ended June 30, 1997 to each of the directors
of the Fund.
<PAGE B-23>
TOTAL
COMPENSATION
FROM ARTISAN
PENSION OR ESTIMATED MID CAP FUND
AGGREGATE RETIREMENT ANNUAL AND FUND
COMPENSATION BENEFITS ACCRUED BENEFITS COMPLEX
FROM ARTISAN AS PART OF FUND UPON PAID TO
NAME OF DIRECTOR MID CAP FUND EXPENSES RETIREMENT DIRECTORS
- ---------------- ------------ ---------------- ---------- ------------
Andrew A. Ziegler $ 0 $ 0 $ 0 $ 0
Carlene Murphy
Ziegler 0 0 0 0
David A. Erne 0 0 0 7,500
Thomas R. Hefty 0 0 0 7,500
Howard B. Witt 0 0 0 7,500
No shares of the Fund were outstanding on the date of this Statement of
Additional Information. However, prior to the commencement of public offering
of shares of the Fund, Artisan Partners or one or more of its principals, will
purchase shares of the Fund at an initial price of $10 per share.
INVESTMENT ADVISORY SERVICES
Artisan Partners Limited Partnership ("Artisan Partners") provides
investment advisory services to the Fund pursuant to an Investment Advisory
Agreement dated April 30, 1997 (the "Advisory Agreement"). Artisan Partners
is a Delaware limited partnership. Artisan Investment Corporation was
incorporated on December 7, 1994 for the sole purpose of acting as general
partner of Artisan Partners. Mr. Ziegler and Ms. Ziegler, as officers of
Artisan Investment Corporation, manage Artisan Partners. The principal address
of Artisan Partners is 1000 North Water Street, Suite 1770, Milwaukee, Wisconsin
53202.
In return for its services, the Fund pays Artisan Partners a monthly fee at
the annual rate of 1% of the Fund's average daily net assets up to $500 million;
.975 of 1% of average daily net assets from $500 million up to $750 million;
.950 of 1% of average daily net assets from $750 million to $1 billion; and .925
of 1% of average daily net assets over $1 billion. Artisan Partners has
undertaken to reimburse the Fund for certain expenses, as described in the
prospectus.
The Advisory Agreement provides that Artisan Partners shall not be liable
for any loss suffered by the Fund or its shareholders as a consequence of any
act of omission in connection with investment advisory or portfolio services
under the agreement, except by reason of willful misfeasance, bad faith or gross
negligence on the part of Artisan Partners in the performance of its duties or
from reckless disregard by Artisan Partners of its obligations and duties under
the Advisory Agreement.
The Advisory Agreement may be continued from year to year only so long as
the continuance is approved annually (a) by the vote of a majority of the
directors of the Fund who are not "interested persons" of the Fund or Artisan
Partners cast in person at a meeting called for the purpose of voting on such
approval, and (b) by the board of directors or by the vote of a
<PAGE B-24>
majority (as defined in the 1940 Act) of the outstanding shares of the
portfolio. The Agreement will terminate automatically in the event of its
assignment (as defined in the 1940 Act).
PORTFOLIO TRANSACTIONS
Artisan Partners places the orders for the purchase and sale of the Fund's
portfolio securities and options and futures contracts. Artisan Partners'
overriding objective in effecting portfolio transactions is to seek to obtain
the best combination of price and execution. The best net price, giving effect
to brokerage commissions, if any, and other transaction costs, normally is an
important factor in this decision, but a number of other judgmental factors also
may enter into the decision. These include: Artisan Partners' knowledge of
negotiated commission rates currently available and other current transaction
costs; the nature of the security being traded; the size of the transaction; the
desired timing of the trade; the activity existing and expected in the market
for the particular security; confidentiality; the execution, clearance and
settlement capabilities of the broker or dealer selected and others which are
considered; Artisan Partners' knowledge of the financial stability of the broker
or dealer selected and such other problems of any broker or dealer. Recognizing
the value of these factors, the Fund may pay a brokerage commission in excess of
that which another broker or dealer may have charged for effecting the same
transaction. Evaluations of the reasonableness of brokerage commissions, based
on the foregoing factors, are made on an ongoing basis by Artisan Partners'
staff while effecting portfolio transactions. The general level of brokerage
commissions paid is reviewed by Artisan Partners, and reports are made annually
to the board of directors.
With respect to issues of securities involving brokerage commissions, when
more than one broker or dealer is believed to be capable of providing the best
combination of price and execution with respect to a particular portfolio
transaction for the Fund, Artisan Partners often selects a broker or dealer that
has furnished it with research products or services such as research reports,
subscriptions to financial publications and research compilations, compilations
of securities prices, earnings, dividends, and similar data, and computer data
bases, quotation equipment and services, research-oriented computer software and
services, and services of economic and other consultants. Selection of brokers
or dealers is not made pursuant to an agreement or understanding with any of the
brokers or dealers; however, Artisan Partners uses internal allocation
procedures to identify those brokers or dealers who provide it with research
products or services and the amount of research products or services they
provide, and endeavors to direct sufficient commissions generated by its
clients' accounts in the aggregate, including the Fund, to such brokers or
dealers to ensure the continued receipt of research products or services Artisan
Partners feels are useful. In certain instances, Artisan Partners receives from
brokers and dealers products or services that are used both as investment
research and for administrative, marketing, or other non-research purposes. In
such instances, Artisan Partners makes a good faith effort to determine the
relative proportions of such products or services which may be considered as
investment research. The portion of the costs of such products or services
attributable to research usage may be defrayed by Artisan Partners (without
prior agreement or understanding, as noted above) through brokerage commissions
generated by transactions by clients (including the Fund), while the portions of
the costs attributable to non-research usage of such products or services is
paid by Artisan Partners in cash. No person acting on behalf of the
<PAGE B-25>
Fund is authorized, in recognition of the value of research products or
services, to pay a commission in excess of that which another broker or dealer
might have charged for effecting the same transaction. Research products or
services furnished by brokers and dealers may be used in servicing any or all
of the clients of Artisan Partners and not all such research products or
services are used in connection with the management of the Fund.
With respect to the Fund's purchases and sales of portfolio securities
transacted with a broker or dealer of a net basis, Artisan Partners also may
consider the part, if any, played by the broker or dealer in bringing the
security involved to Artisan Partners' attention, including investment research
related to the security and provided to the Fund.
PURCHASING AND REDEEMING SHARES
Purchases and redemptions are discussed in the prospectus under the
headings "How to Buy Shares," and "How to Sell Shares." All of that
information is incorporated herein by reference.
Shares of the Fund may be purchased through certain financial service
companies without incurring any transaction fee. For accounting and shareholder
servicing services provided by such a company with respect to Fund shares held
by that company for its customers, the company may charge a fee of up to 0.35%
of the annual average value of those accounts. The Fund pays a portion of those
fees not to exceed the estimated fees and expenses that the Fund would pay to
its own transfer agent if the shares of the Fund held by such customers of the
company were registered directly in their names on the books of the Fund's
transfer agent. The balance of those fees is paid by Artisan Partners.
Net Asset Value. The net asset value of the shares of the Fund is deter-
mined as of the close of regular session trading on the New York Stock Exchange
("NYSE") (currently 3:00 p.m., Central time) each day the NYSE is open for
trading. The NYSE is regularly closed on Saturdays and Sundays and on New
Year's Day, the third Monday in February, Good Friday, the last Monday in May,
Independence Day, Labor Day, Thanksgiving, and Christmas. If one of these
holidays falls on a Saturday or Sunday, the NYSE will be closed on the preceding
Friday or the following Monday, respectively. Net asset value will not be
determined on days when the NYSE is closed unless, in the judgment of the board
of directors, net asset value of the Fund should be determined on any such day,
in which case the determination will be made at 3:00 p.m., Central time. The
net asset value per share of the Fund is determined by dividing the value of all
its securities and other assets, less its liabilities, by the number of shares
of the Fund outstanding.
The Fund intends to pay all redemptions in cash and is obligated to redeem
shares solely in cash up to the lesser of $250,000 or one percent of the net
assets of the Fund during any 90-day period for any one shareholder. However,
redemptions in excess of such limit may be paid wholly or partly by a
distribution in kind of readily marketable securities. If redemptions were made
in kind, the redeeming shareholders might incur transaction costs in selling the
securities received in the redemptions.
<PAGE B-26>
The Fund reserves the right to suspend or postpone redemptions of its
shares during any period when: (a) trading on the NYSE is restricted, as
determined by the Commission, if the NYSE is closed for other than customary
weekend and holiday closings; (b) the Commission has by order permitted such
suspension; or (c) an emergency, as determined by the Commission, exists, making
disposal of portfolio securities or valuation of net assets of the Fund not
reasonably practicable.
The Fund and Artisan Partners each have adopted a code of ethics that,
among other things, regulates the personal security transactions of certain
officers, directors, partners and employees of the Fund and Artisan Partners.
ADDITIONAL TAX INFORMATION
Artisan Funds intends for the Fund to qualify as a "regulated investment
company" under Subchapter M of the Internal Revenue Code and thus not be
subject to federal income taxes on amounts which it distributes to shareholders.
CUSTODIAN
State Street Bank & Trust Company ("State Street"), 1776 Heritage Drive,
North Quincy, MA 02171, acts as custodian of the securities and other assets of
the Fund. State Street is responsible for, among other things, safeguarding and
controlling the Fund's cash and securities, handling the receipt and delivery of
securities, and collecting interest and dividends on the Fund's investments.
State Street also performs portfolio accounting services for the Fund. State
Street is not an affiliate of Artisan Partners or its affiliates. State Street
is authorized to deposit securities in securities depositories for the use of
services of sub-custodians.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 100 East Wisconsin Avenue, Milwaukee, Wisconsin 53202
serves as the Fund's independent accountants, providing services including (i)
audit of the annual financial statements; (ii) assistance and consultation in
connection with Securities and Exchange Commission filings; and (iii) review of
the annual income tax returns filed on behalf of the Fund.
<PAGE B-27>
PART C
OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
(a) Financial Statements:
ARTISAN MID CAP FUND
None
ARTISAN SMALL CAP FUND
Part A: Financial Highlights (included in the prospectus of Artisan
Small Cap Fund, which is not affected by, and is therefore omitted
from, this filing)
Part B: The following financial statements, but no other part of the
report, are incorporated by reference to the following portions of
Registrant's annual report to shareholders for the fiscal year ended
June 30, 1996:
- Schedule of Investments at June 30, 1996
- Statement of Assets and Liabilities at June 30, 1996
- Statement of Operations for the Period Ended June 30, 1996
- Statement of Changes in Net Assets for the Year Ended June 30, 1996
and Period Ended June 30, 1995
- Notes to Financial Statements
- Report of Independent Accountants
NOTE: Artisan Small Cap Fund is not affected by, and its prospectus
and statement of additional information are not included in, this
post-effective amendment. Interim unaudited financial statements of
Artisan Small Cap Fund are therefore not included in this post-
effective amendment.
ARTISAN INTERNATIONAL FUND
Part A: Financial Highlights (included in the prospectus of Artisan
International Fund, which is not affected by, and is therefore omitted
from, this filing)
Part B:
AUDITED
The following financial statements, but no other part of the report,
are incorporated by reference to the following portions of
Registrant's annual report to shareholders for the fiscal year ended
June 30, 1996:
<PAGE C-1>
- Schedule of Investments at June 30, 1996
- Statement of Assets and Liabilities at June 30, 1996
- Statement of Operations for the Period Ended June 30, 1996
- Statement of Changes in Net Assets for the Period Ended June 30,
1996
- Notes to Financial Statements
- Report of Independent Accountants
NOTE: the following schedules have been omitted for the following
reasons:
Schedule I - The required information is presented in the Schedules of
Investments at June 30, 1996.
Schedules II, III, IV and V - the required information is not present.
INTERIM UNAUDITED
- Schedule of Investments at December 31, 1996
- Statement of Assets and Liabilities at December 31, 1996
- Statement of Operations for the Period Ended December 31, 1996
- Statement of Changes in Net Assets for the Periods Ended June 30,
1996 and December 31, 1996
- Notes to Financial Statements
NOTE: the following schedules have been omitted for the following
reasons:
Schedule I - The required information is presented in the Schedule of
Investments at December 31, 1996.
Schedules II, III, IV and V - the required information is not present.
NOTE: Artisan International Fund is not affected by, and its
prospectuses and statement of additional information are not included
in, this post-effective amendment. Interim audited financial
statements of Artisan International Fund are therefore not included in
this post-effective amendment.
<PAGE C-2>
(b) Exhibits:
EXHIBIT EDGAR
NUMBER EXHIBIT NO. DESCRIPTION
- ------- ----------- -----------
1.1 EX-99.B1-1 Amended and Restated Articles of Incorporation of the
Registrant. <F9>
1.2 EX-99.B1-2 Articles of Amendment dated October 12, 1995. <F9>
1.3 EX-99.B1-3 Articles of Amendment dated January 16, 1997. <F10>
1.4 EX-99.B1-4 Articles of Amendment dated April [10], 1997
2 EX-99.B2 Bylaws, as amended. <F9>
3 EX-99.B3 None.
4 EX-99.B4 None (Registrant does not issue share certificates.)
5.1 EX-99.B5-1 Investment Advisory Agreement between the Registrant and
Artisan Partners Limited Partnership relating to Artisan
Small Cap Fund. <F9>
5.2 EX-99.B5-2 Investment Advisory Agreement between the Registrant and
Artisan Partners Limited Partnership relating to Artisan
International Fund. <F9>
5.3 EX-99.B5-3 Form of Investment Advisory Agreement between the
Registrant and Artisan Partners Limited Partnership
relating to Artisan Mid Cap Fund.
6 EX-99.B6 None.
7 EX-99.B7 None.
8.1 EX-99.B8-1 Custodian Agreement and Accounting Services Agreement
between the Registrant and State Street Bank and Trust
Company. <F9>
8.2 EX-99.B8-2 Notification to custodian regarding addition of Artisan
Mid Cap Fund.
9.1 EX-99.B9-1 Transfer Agency Agreement between the Registrant and
State Street Bank and Trust Company. <F9>
9.2 EX-99.B9-2 Amendment No. 1 to Transfer Agency Agreement. <F10>
9.3 EX-99.B9-3 Notification to transfer agent regarding addition of
Artisan Mid Cap Fund.
10.1 EX-99.B10-1 Opinion and Consent of Counsel dated March 8, 1995 with
respect to Artisan Small Cap Fund. <F9>
10.2 EX-99.B10-2 Opinion and Consent of Counsel dated October 13, 1995
with respect to Artisan International Fund. <F9>
10.3 EX-99.B10-3 Opinion and Consent of Counsel dated April 10, 1997 with
respect to Artisan Mid Cap Fund.
<PAGE C-3>
EXHIBIT EDGAR
NUMBER EXHIBIT NO. DESCRIPTION
- ------- ----------- -----------
11 EX-99.B-11 Consent of Independent Accountants.
12 EX-99.B-12 None.
13 EX-99.B13 Subscription Agreement between the Registrant and Andrew
A. Ziegler and Carlene Murphy Ziegler relating to
Artisan Small Cap Fund. <F9>
14 EX-99.B14 IRA plan booklet dated March 1995. <F9>
15 EX-99.B15 None.
16 EX-99.B16 Schedule of computation of performance quotations. <F9>
17.1 EX-99.B27-1 Financial Data Schedule of Artisan Small Cap Fund
17.2 EX-99.B27-2 Financial Data Schedule of Artisan International Fund
18 EX-99.B18 Multiple Class Plan pursuant to Rule 18f-3 for Artisan
International Fund.<F10>
19 EX-99.B19 Form of account application.
- ---------------------------
<F9> Incorporated by reference to the exhibit of the same number filed with
post-effective amendment no. 3 to this registration statement.
<F10>Incorporated by reference to the exhibit of the same number filed with
post-effective amendment no. 5 to this registration statement.
ITEM 25. Persons Controlled by or Under Common Control With Registrant.
The Registrant does not consider that there are any persons directly or
indirectly controlling, controlled by, or under common control with, the
Registrant within the meaning of this item, The information in the prospectus
under the caption "The Fund in Detail - Organization - Management" and in the
statement of additional information under the caption "Investment Advisory
Services" is incorporated herein by reference.
ITEM 26. Number of Holders of Securities.
Number of Record
Title of Series and Class Holders at April 4, 1997
- ------------------------- -------------------------
Artisan Small Cap Fund 16,278
Artisan International Fund - International Shares 6,919
Artisan International Fund - International 0
Institutional Shares
Artisan Mid Cap Fund 0
<PAGE C-4>
ITEM 27. Indemnification.
Article VIII of Registrant's Amended Articles of Incorporation (Exhibits
1.1, 1.2, 1.3 and 1.4, which are incorporated herein by reference) provides that
the Registrant shall indemnify and advance expenses to its currently acting and
its former directors and officers to the fullest extent that indemnification of
directors and officers is permitted by the Wisconsin Statutes, and the Board of
Directors may by bylaw, resolution or agreement make further provision for
indemnification of directors, officers, employees and agents to the fullest
extent permitted by the Wisconsin Statutes; provided however, that nothing
therein shall be construed to protect any director or officer of the Registrant
against any liability to the Corporation or its security holders to which he
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers, and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer, or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The Registrant will not advance attorneys' fees or other expenses incurred
by the person to be indemnified unless the Registrant shall have received an
undertaking by or on behalf of such person to repay the advance unless it is
ultimately determined that such person is entitled to indemnification and one of
the following conditions shall have occurred: (i) such person shall provide
security for his undertaking, (ii) the Registrant shall be insured against
losses arising by reason of any lawful advances, or (iii) a majority of the
disinterested, non-party directors of the Registrant, or an independent legal
counsel in a written opinion, shall have determined that based on a review of
readily available facts there is reason to believe that such person ultimately
will be found entitled to indemnification.
Registrant and its directors and officers are insured under a policy of
insurance maintained by Registrant, within the limits and subject to the
limitations of the policy, against certain expenses in connection with the
defense of actions, suits or proceedings, and certain liabilities that might be
imposed as a result of such actions, suits or proceedings, to which they are
parties by reason of being or having been such directors or officers. The
policy expressly excludes coverage for any director or officer whose personal
dishonesty, fraudulent breach of trust, lack of good faith, or intention to
deceive or defraud has been finally adjudicated or may be established or who
willfully fails to act prudently.
<PAGE C-5>
ITEM 28. Business and Other Connections of Investment Adviser.
The information in each prospectus under the caption "The Fund in Detail -
Organization - Management" is incorporated herein by reference. For a
description of other business, profession, vocation or employment of a
substantial nature in which any general partner, managing general partner,
director or officer of Artisan Partners Limited Partnership has engaged during
the last two years for his account or in the capacity of director, officer,
employee, partner or trustee, see the information under the caption "Directors
and Officers" in the statement of additional information.
ITEM 29. Principal Underwriters.
None
ITEM 30. Location of Accounts and Records.
John M. Blaser
Artisan Partners Limited Partnership
1000 North Water Street, Suite 1770
Milwaukee, Wisconsin 53202
ITEM 31. Management Services.
Not applicable.
ITEM 32. Undertakings.
(a) Not applicable.
(b) Registrant undertakes to file a post-effective amendment, using
financial statements of the series designated Artisan Mid Cap Fund,
that need not be certified, no later than 60 days after the end of the
four to six month period after effectiveness of this Registration
Statement.
(c) Registrant undertakes to furnish to each person to whom a prospectus
is delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
(d) Registrant undertakes, if requested to do so by the holders of at
least 10% of the Registrant's outstanding shares, to call a meeting of
shareholders for the purpose of voting upon the question of removal of
a director or directors and to assist in communications with other
shareholders as required by Section 16(c) of the Investment Company
Act of 1940.
<PAGE C-6>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it has duly
caused this amendment to the registration statement be signed on its behalf
by the undersigned, thereunto duly authorized, in the city of Milwaukee and
state of Wisconsin on April 10, 1997.
ARTISAN FUNDS, INC.
By: Andrew A. Ziegler
-----------------
Andrew A. Ziegler
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed below by the following person
in the capacities and on the date indicated.
Name Title Date
/s/ Andrew A. Ziegler Director, Chief Executive )
- ------------------------- Officer (principal executive )
Andrew A. Ziegler officer) )
)
)
/s/ Carlene Murphy Ziegler Director and President )
- -------------------------- )
Carlene Murphy Ziegler )
)
)
/s/ David A. Erne Director )
- ------------------------- )
David A. Erne ) April 10, 1997
)
)
/s/ Thomas R. Hefty Director )
- ------------------------- )
Thomas R. Hefty )
)
)
/s/ Howard B. Witt Director )
- ------------------------- )
Howard B. Witt )
)
)
/s/ John M. Blaser Chief Financial Officer, )
- ------------------------- Treasurer and Secretary )
John M. Blaser (principal financial and )
accounting officer) )
<PAGE C-7>
Index of Exhibits Filed with this Registration Statement
--------------------------------------------------------
EXHIBIT EDGAR
NUMBER EXHIBIT NO. DESCRIPTION
- ------- ----------- -----------
1.4 EX-99.B1-4 Articles of Amendment dated April [10], 1997
5.3 EX-99.B5-3 Form of Investment Advisory Agreement between the
Registrant and Artisan Partners Limited Partnership
relating to Artisan Mid Cap Fund.
8.2 EX-99.B8-2 Notification to custodian regarding addition of
Artisan Mid Cap Fund.
9.3 EX-99.B9-3 Notification to transfer agent regarding addition of
Artisan Mid Cap Fund.
10.3 EX-99.B10-3 Opinion and Consent of Counsel dated April 10, 1997
with respect to Artisan Mid Cap Fund.
11 EX-99.B-11 Consent of Independent Accountants.
17.1 EX-99.B27-1 Financial Data Schedule of Artisan Small Cap Fund
17.2 EX-99.B27-2 Financial Data Schedule of Artisan International Fund
19 EX-99.B19 Form of account application.
EXHIBIT 1.4
AMENDMENT OF AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
ARTISAN FUNDS, INC.
The undersigned Chief Executive Officer of Artisan Funds, Inc. (the
"Corporation"), hereby certifies that in accordance with Section 180.1002 of
the Wisconsin Business Corporation Law and Article IV of the Corporation's
Amended and Restated Articles of Incorporation, as amended (the "Restated
Articles'), the following Amendment was duly adopted to create Artisan Mid Cap
Fund as an additional class of common stock:
"Article IV is hereby amended by deleting Section A of Article IV in its
entirety and replacing it with the following:
'A. The Corporation is authorized to issue 50,000,000,000 shares of common
stock, $.01 par value per share. Subject to the following paragraph, the
authorized shares are classified as follows:
Authorized Number
Class Series of Shares
- ----- ------ -----------------
Artisan Small Cap Fund 5,000,000,000
Artisan International Fund International Shares 5,000,000,000
Artisan International Fund International Institutional
Shares 5,000,000,000
Artisan Mid Cap Fund 5,000,000,000
The remaining 30,000,000,000 shares shall remain unclassified until action
is taken by the Board of Directors pursuant to the following paragraph:'"
This Amendment to the Restated Articles was adopted by the Board of
Directors of the Corporation on April 9, 1997 in accordance with Sections
180.1002 and 180.0602(1)(a) without shareholder approval. Prior to this
Amendment, no shares of the Artisan Mid Cap Fund have been issued.
Executed in duplicate this 9th day of April, 1997
ARTISAN FUNDS, INC.
By: /s/ Andrew A. Ziegler
--------------------------
Andrew A. Ziegler
Chief Executive Officer
This instrument was drafted by:
Scott A. Moehrke
Godfrey & Kahn, S.C.
780 North Water Street
Milwaukee, Wisconsin 53202
EXHIBIT 5.3
ARTISAN FUNDS, INC.
ARTISAN MID CAP FUND
INVESTMENT ADVISORY AGREEMENT
Artisan Funds, Inc., a Wisconsin corporation registered under the
Investment Company Act of 1940 ("1940 Act") as an open-end diversified
management investment company ("Artisan Funds"), and Artisan Partners Limited
Partnership, a Delaware limited partnership registered under the Investment
Advisers Act of 1940 as an investment adviser ("Artisan Partners"), agree
that:
1. ENGAGEMENT OF ARTISAN PARTNERS. Artisan Partners shall manage the
investment and reinvestment of the assets of Artisan Mid Cap Fund, a series of
Artisan Funds ("the Fund"), subject to the supervision of the board of
directors of Artisan Funds, for the period and on the terms set forth in this
agreement. Artisan Partners shall give due consideration to the investment
policies and restrictions and the other statements concerning Fund in Artisan
Fund's articles of incorporation, bylaws, and registration statements under the
1940 Act and the Securities Act of 1933 ("1933 Act"), and to the provisions of
the Internal Revenue Code applicable to Fund as a regulated investment company.
Artisan Partners shall be deemed for all purposes to be an independent
contractor and not an agent of Artisan Fund or the Fund, and unless otherwise
expressly provided or authorized, shall have no authority to act or represent
Artisan Fund or the Fund in any way.
Artisan Partners is authorized to make the decisions to buy and sell
securities, options and futures contracts for the Fund, to place the Fund's
portfolio transactions with broker-dealers, and to negotiate the terms of such
transactions including brokerage commissions on brokerage transactions, on
behalf of the Fund. Artisan Partners is authorized to exercise discretion
within the Fund's policy concerning allocation of its portfolio brokerage, as
permitted by law, including but not limited to section 28(e) of the Securities
Exchange Act of 1934, and in so doing shall not be required to make any
reduction in its investment advisory fees.
Artisan Partners represents that it will notify Artisan Funds of any
change in the membership of Artisan Partners within a reasonable time after any
such change.
2. EXPENSES TO BE PAID BY ARTISAN PARTNERS. Artisan Partners shall
furnish to Artisan Funds, at its own expense, office space and all necessary
office facilities, equipment and personnel for managing that portion of Artisan
Funds' business relating to the Fund. Artisan Partners shall also assume and
pay all other expenses incurred by it in connection with managing the assets of
the Fund, all expenses of marketing shares of the Fund, all expenses of
placement of securities orders and related bookkeeping and one-half of all fees,
dues and other expenses related to membership of Artisan Funds in any trade
association or other investment company organization.
3. EXPENSES TO BE PAID BY ARTISAN FUNDS. Artisan Funds shall pay all
charges of depositories, custodians and other agencies for the safekeeping and
servicing of its cash, securities and other property and of its transfer agents
and registrars and its dividend disbursing and redemption agents, if any; all
expenses in determination of daily price computations; all charges of legal
counsel and of independent accountants; all compensation of directors other than
those affiliated with Artisan Partners and all expenses incurred in connection
with their services to Artisan Funds; all costs of borrowing money; all expenses
of publication of notices and reports to its shareholders and to governmental
bodies or regulatory agencies; all expenses of proxy solicitations of the Fund
or of the board of directors of the Artisan Funds; all expenses of shareholder
meetings; all expenses of typesetting of the Fund's prospectus
<PAGE 1>
and of printing and mailing copies of the prospectus furnished to each
then-existing shareholder or beneficial owner; all taxes and fees payable to
federal, state or other governmental agencies, domestic or foreign, all stamp
or other taxes; all expenses of printing and mailing certificates for shares of
the Fund; all expenses of bond and insurance coverage required by law or deemed
advisable by Artisan Funds' board of directors; all expenses of qualifying and
maintaining qualification of shares of the Fund under the securities laws of
such United States jurisdictions as the Artisan Funds may from time to time
reasonably designate and all expenses of maintaining the registration of Artisan
Funds under the 1933 Act, the 1940 Act and one-half of all fees, dues and other
expenses related to membership of Artisan Funds in any trade association or
other investment company organization. In addition to the payment of expenses,
the Fund also shall pay all brokers' commissions and other charges relative to
the purchase and sale of portfolio securities for the Fund. Any expenses borne
by Artisan Funds that are attributable solely to the organization, operation or
business of the Fund shall be paid solely out of the Fund's assets. Any expense
borne by Artisan Funds that is not solely attributable to the Fund, nor solely
to any other series of shares of Artisan Funds, if applicable, shall be
apportioned in such manner as Artisan Partners determines is fair and
appropriate, or as otherwise specified by the board of directors of Artisan
Funds.
4. COMPENSATION OF ARTISAN PARTNERS. For the services to be rendered
and the charges and expenses to be assumed and to be paid by Artisan Partners
hereunder, the Fund shall pay to Artisan Partners a monthly fee at the annual
rate of 1% of the Fund's average daily net assets up to $500 million; .975 of 1%
of average daily net assets from $500 million to $750 million; .950 of 1% of
average daily net assets from $750 million to $1 billion and .925 of 1% of
average daily net assets over $1 billion.
5. SERVICES OF ARTISAN PARTNERS NOT EXCLUSIVE. The services of
Artisan Partners to the Fund hereunder are not to be deemed exclusive, and
Artisan Partners shall be free to render similar services to others so long as
its services under this agreement are not impaired by such other activities.
6. SERVICES OTHER THAN AS INVESTMENT ADVISER. Artisan Partners (or
an affiliate of Artisan Partners) may act as broker for the Fund in connection
with the purchase or sale of securities by or to the Fund if and to the extent
permitted by procedures adopted from time to time by the board of directors of
Artisan Funds. Such brokerage services are not within the scope of the duties
of Artisan Partners under this agreement, and, within the limits permitted by
law and the board of directors of Artisan Funds, Artisan Partners (or an
affiliate of Artisan Partners) may receive brokerage commissions, fees or other
remuneration from the Fund for such services in addition to its fee for services
as Artisan Partners. Within the limits permitted by law, Artisan Partners may
receive compensation from the Fund for other services performed by it for the
Fund which are not within the scope of the duties of Artisan Partners under this
agreement.
7. LIMITATION OF LIABILITY OF ARTISAN PARTNERS. Artisan Partners
shall not be liable to Artisan Funds or its shareholders for any loss suffered
by Artisan Funds or its shareholders from or as a consequence of any act or
omission of Artisan Partners, or of any of the partners, employees or agents of
Artisan Partners, in connection with or pursuant to this agreement, except by
reason of willful misfeasance, bad faith or gross negligence on the part of
Artisan Partners in the performance of its duties or by reason of reckless
disregard by Artisan Partners of its obligations and duties under this
agreement.
8. DURATION AND RENEWAL. Unless terminated as provided in Section
10, this agreement shall continue in effect until April 30, 1998, and thereafter
from year to year only so long as such continuance is specifically approved at
least annually (a) by a majority of those directors who are not interested
persons of Artisan Funds or of Artisan Partners, voting in person at a meeting
called for the purpose of voting on such approval, and (b) by either the board
of directors of Artisan Fund or vote of
<PAGE 2>
the holders of a "majority of the outstanding shares of the Fund" (which term as
used throughout this agreement shall be construed in accordance with the
definition of "vote of a majority of the outstanding voting securities of a
company" in section 2(a)(42) of the 1940 Act).
9. TERMINATION. This agreement may be terminated at any time,
without payment of any penalty, by the board of directors of Artisan Funds, or
by a vote of the holders of a majority of the outstanding shares of the Fund,
upon 60 days' written notice to Artisan Partners. This agreement may be
terminated by Artisan Partners at any time upon 60 days' written notice to
Artisan Fund. This agreement shall terminate automatically in the event of its
assignment (as defined in Section 2(a)(4) of the 1940 Act).
10. NON-LIABILITY OF DIRECTORS AND SHAREHOLDERS. Any obligation of
Artisan Funds hereunder shall be binding only upon the assets of Artisan Funds
(or applicable series thereof) and shall not be binding upon any director,
officer, employee, agent or shareholder of Artisan Funds. Neither the
authorization of any action by the directors or shareholders of Artisan Funds
nor the execution of this agreement on behalf of Artisan Funds shall impose any
liability upon any director, officer or shareholder of Artisan Partners.
11. AMENDMENT. This agreement may not be amended without the
affirmative vote (a) of a majority of those directors who are not "interested
persons" (as defined in section 2(a)(19) of the 1940 Act) of Artisan Fund or of
Artisan Partners, voting in person at a meeting called for the purpose of voting
on such approval, and (b) of the holders of a majority of the outstanding shares
of the Fund.
Dated: April 10, 1997
ARTISAN FUNDS, INC.
By:/s/ Andrew A. Ziegler
---------------------------------
ARTISAN PARTNERS LIMITED PARTNERSHIP
By: Artisan Investment Corporation
Its general partner
By: /s/ Andrew A. Ziegler
----------------------------------
Andrew A. Ziegler
President
EXHIBIT 8.2
April 10, 1997
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
Ladies and Gentlemen:
This is to advise you that Artisan Funds, Inc. has established a new series
of shares to be known as Artisan Mid Cap Fund. In accordance with the
Additional Funds provision in Section 17 of the Custodian Contract, dated March
7, 1997, Artisan Funds, Inc. hereby requests that you act as Custodian for the
new series under the terms of the Custodian Contract.
Please indicate your acceptance of this appointment as Custodian by
executing three copies of this Letter Agreement, returning two copies to us and
retaining one copy for your records.
ARTISAN FUNDS, INC.
By:
------------------------------------
John M. Blaser
Chief Financial Officer
Agreed to this day of April, 1997
-----
STATE STREET BANK AND TRUST COMPANY
By:
----------------------------------
Name:
--------------------------
Title:
--------------------------
EXHIBIT 9.3
April 10, 1997
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
Ladies and Gentlemen:
This is to advise you that Artisan Funds, Inc. has established a new series
of shares to be known as Artisan Mid Cap Fund. In accordance with the
Additional Funds provision in Article 10 of the Transfer Agency and Service
Agreement dated March 7, 1997, between Artisan Funds, Inc. and State Street Bank
and Trust Company, as amended by Amendment to Transfer Agency and Service
Agreement, dated January 9, 1997, Artisan Funds, Inc. hereby requests that you
act as Transfer Agent for the new series under the terms of the Transfer Agency
and Service Agreement.
Please indicate your acceptance of this appointment as Transfer Agent by
executing three copies of this Letter Agreement, returning two copies to us and
retaining one copy for your records.
ARTISAN FUNDS, INC.
By:
-------------------------------
John M. Blaser
Chief Financial Officer
Agreed to this day of April, 1997
-----
STATE STREET BANK AND TRUST COMPANY
By:
----------------------------------
Name:
--------------------------
Title:
--------------------------
Godfrey & Kahn, S.C.
780 North Water Street
Milwaukee, Wisconsin 53202
(414) 273-3500
April 10, 1997
Artisan Funds, Inc.
1000 North Water Street
Milwaukee, Wisconsin 53202
RE: Artisan Mid-Cap Fund Shares
Ladies/Gentlemen:
We have acted as Wisconsin corporate counsel for you in connection with the
sale by you of an indefinite number of shares of common stock of Artisan Mid-Cap
Fund (the "Mid-Cap Shares") of Artisan Funds, Inc. (the "Company") in the
manner set forth in Post-Effective Amendment No. 6 to the Company's Registration
Statement on Form N-1A (the "Registration Statement"). In connection with
this opinion, we have reviewed: (i) Amendment No. 6 to the Registration
Statement; (ii) the Company's Amended and Restated Articles of Incorporation, as
amended, and By-Laws; (iii) corporate proceedings relative to the authorization
for issuance of the Mid-Cap Shares; and (iv) such other proceedings, documents
and records we have deemed necessary to enable us to render this opinion.
Based upon the foregoing, we are of the opinion that the Mid-Cap Shares,
when sold as contemplated in Amendment No. 6 to the Registration Statement,
shall be duly authorized, validly issued, fully paid and non-assessable, except
to the extent provided in Section 180.0622(2)(b) of the Wisconsin Business
Corporation Law, as interpreted by courts of competent jurisdiction, or any
successor provision to said Section 180.0622(2)(b).
We hereby consent to the use of this opinion as an exhibit to Amendment No.
6 to the Registration Statement. In giving this consent, however, we do not
admit that we are experts within the meaning of Section 11 of the Securities Act
of 1933, as amended, or within the category of persons whose consent is required
by Section 7 of said Act.
Very truly yours,
GODFREY & KAHN, S.C.
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 6 to the registration statement on Form N-1A (the "Registration
Statement") of our reports dated July 30, 1996, relating to the financial
statements and financial highlights appearing in the June 30, 1996 Annual
Reports of Artisan Small Cap Fund and Artisan International Fund (constituting
Artisan Funds, Inc.), which are also incorporated by reference into the
Registration Statement. We also consent to the reference to us under the
heading "Independent Accountants" in the Statement of Additional Information.
Price Waterhouse LLP
Milwaukee, Wisconsin
April 11, 1997
[ARTICLE] 6
[LEGEND]
This schedule contains summary financial information extracted from the
Form N-SAR and the Financial Statements and is qualified in its entirety
by reference to such financial statements.
[/LEGEND]
[CIK] 0000935015
[NAME] Artisan Small Cap Fund
[MULTIPLIER] 1.000
<TABLE>
<S> <C>
[PERIOD-START] JUL-01-1995
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] JUN-30-1996
[PERIOD-END] JUN-30-1996
[INVESTMENTS-AT-COST] 364,044,780
[INVESTMENTS-AT-VALUE] 406,707,890
[RECEIVABLES] 866,897
[ASSETS-OTHER] 127,910
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 407,702,697
[PAYABLE-FOR-SECURITIES] 7,470,689
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 231,419
[TOTAL-LIABILITIES] 7,702,108
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 355,711,272
[SHARES-COMMON-STOCK] 27,259,873
[SHARES-COMMON-PRIOR] 8,617,744
[ACCUMULATED-NII-CURRENT] (2,029,400)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 27,026,370
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 36,295,167
[NET-ASSETS] 400,000,589
[DIVIDEND-INCOME] 1,233,626
[INTEREST-INCOME] 830,428
[OTHER-INCOME] 0
[EXPENSES-NET] 4,093,454
[NET-INVESTMENT-INCOME] (2,029,400)
[REALIZED-GAINS-CURRENT] 27,026,370
[APPREC-INCREASE-CURRENT] 36,295,167
[NET-CHANGE-FROM-OPS] 61,292,137
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 2,110,073
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 25,268,039
[NUMBER-OF-SHARES-REDEEMED] 6,778,168
[SHARES-REINVESTED] 155,258
[NET-CHANGE-IN-ASSETS] 300,731,738
[ACCUMULATED-NII-PRIOR] (56,274)
[ACCUMULATED-GAINS-PRIOR] (425,957)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 2,734,855
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 4,93,454
[AVERAGE-NET-ASSETS] 269,904,246
[PER-SHARE-NAV-BEGIN] 11.52
[PER-SHARE-NII] (0.07)
[PER-SHARE-GAIN-APPREC] 3.32
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] (0.1)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 14.67
[EXPENSE-RATIO] 1.52
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[LEGEND]
This schedule contains summary financial information extracted from the
Form N-SAR and the Financial Statements and is qualified in its entirety by
reference to such financial statements.
[/LEGEND]
[CIK] 0000935015
[NAME] Artisan International Fund
[MULTIPLIER] 1.000
<TABLE>
<S> <C>
[PERIOD-START] DEC-28-1995
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] JUN-30-1996
[PERIOD-END] JUN-30-1996
[INVESTMENTS-AT-COST] 71,186,560
[INVESTMENTS-AT-VALUE] 74,912,275
[RECEIVABLES] 6,485,224
[ASSETS-OTHER] 51,424
[OTHER-ITEMS-ASSETS] 01,424
[TOTAL-ASSETS] 81,448,923
[PAYABLE-FOR-SECURITIES] 9,777,943
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 159,282
[TOTAL-LIABILITIES] 9,937,225
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 66,518,353
[SHARES-COMMON-STOCK] 5,921,803
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 217,111
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 1,047,924
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 3,708,410
[NET-ASSETS] 71,511,698
[DIVIDEND-INCOME] 494,060
[INTEREST-INCOME] 56,582
[OTHER-INCOME] 0
[EXPENSES-NET] 333,531
[NET-INVESTMENT-INCOME] 217,111
[REALIZED-GAINS-CURRENT] 1,047,924
[APPREC-INCREASE-CURRENT] 3,708,410
[NET-CHANGE-FROM-OPS] 4,973,445
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 6,080,442
[NUMBER-OF-SHARES-REDEEMED] 158,639
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 71,511,698
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 133,215
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 333,531
[AVERAGE-NET-ASSETS] 26,791,327
[PER-SHARE-NAV-BEGIN] 10.00
[PER-SHARE-NII] 0.04
[PER-SHARE-GAIN-APPREC] 2.04
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 12.08
[EXPENSE-RATIO] 2.00
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
(LOGO)
ARTISAN INTERNATIONAL FUND
ARTISAN SMALL CAP FUND
ARTISAN MID CAP FUND
ACCOUNT APPLICATION
- - If you need assistance, call 1-800-344-1770, 24 hours.
- - DO NOT USE THIS APPLICATION FOR IRA ACCOUNTS.
- - Mail completed application to:
Artisan Funds, Inc.
c/o Boston Financial Data Services
P.O. Box 8412
Boston, MA 02266-8412
1. ACCOUNT REGISTRATION (check one box)
Please print in CAPITAL LETTERS.
Transfer on
( ) Individual ( ) Joint Account ( ) Death Account
- ---------------------------------------------------------------------------
Owner's Name (first, middle initial, last)
- ---------------------------------------------------------------------------
Joint Owner's Name (first, middle initial, last)
Joint accounts are registered as joint tenants with right of survivorship unless
otherwise specified.
( ) Custodial Account
- ---------------------------------------------------------------------------
Custodian's Name(first, middle initial, last) - one name only
- ---------------------------------------------------------------------------
Minor's Name (first, middle initial, last) - one name only
- ---------------------------------------------------------------------------
Minor's State Minor's Date of Birth
( ) Trust, Corporation, or Other Entity
Refer to the prospectus for required documentation.
- ---------------------------------------------------------------------------
Name of Trustee or Authorized Signer (first, middle initial, last)
- ---------------------------------------------------------------------------
Name of Trust, Corporation, or Other Entity
- ------------------------------------------------
Date of Trust Agreement
2. MAILING ADDRESS
- ---------------------------------------------------------------------------
Street or P.O. Box
- ---------------------------------------------------------------------------
City
- ---------------------------------------------------------------------------
State Zip Code
( )
- ------------------------------------------------
Day Time Telephone Number Extension
( )
- -------------------------------------------------
Evening Telephone Number Extension
You must provide a US resident mailing address to invest in Artisan Funds.
3. SOCIAL SECURITY/TAX ID NUMBER
S.S. # ( )
Tax ID # ( )
----------------------------------------
For INDIVIDUAL OR JOINT ACCOUNTS use owner's Social Security Number.
For CUSTODIAL ACCOUNTS use minor's Social Security Number.
For TRUST, CORPORATION, OR OTHER ENTITY use Tax ID Number.
4. INVESTMENT SELECTION
Please be sure to read the prospectus for each fund you wish to invest in.
The minimum initial investment is $1,000 per fund.
(No minimum if you are using the Automatic Investment Plan)
Artisan Small Cap
Fund (660)* $
-------------------------
Artisan International
Fund (661) $
-------------------------
Artisan Mid Cap
Fund (66 ) $
-
-------------------------
Payment Method:
( ) Check
( ) Wire (Please call 1-800-344-1770 for wiring instructions)
( ) By exchange from my identically registered Artisan Fund*
Account Number
------------------------------------
* The Artisan Small Cap Fund is closed to new investors. Please see the Artisan
Small Cap prospectus for details about "Who Is Eligible to Invest."
5. DISTRIBUTION OPTIONS
If no option is selected, all distributions will be reinvested.
( ) Reinvest dividends and capital gains.
( ) Pay dividends in cash, reinvest capital gains.
( ) Pay dividends and capital gains in cash.
6. TELEPHONE REDEMPTION
You may redeem shares by telephone ($500 minimum) unless you choose NOT
to have that option by checking the box below. The proceeds will be mailed to
your address of record, transferred to your bank account by Electronic Funds
Transfer (EFT), or wired to your bank account.
( ) I do NOT want telephone redemption.
For EFT or wire transactions, you MUST attach a "VOIDED" check on other side.
7. TELEPHONE PURCHASE
You may purchase by telephone shares of any Artisan Fund you are eligible to
purchase with payment by Electronic Funds Transfer (EFT) from your designated
bank account, by checking the box below.
( ) I want telephone purchase.
Please note your telephone purchase will be effected with the following
business day's net asset value as determined by the fund.
continued on back
8. AUTOMATIC INVESTMENT PLAN
To establish electronic transfer of funds from your bank account into an Artisan
Fund in which you are eligible to invest,* complete this section and attach a
check clearly marked "VOID" below. Designate a draft date between the 3rd and
28th day of the month only. The draft will be made on or about the date
requested. Processing delays may occur when your chosen AIP date falls on or
near a weekend or a legal holiday. If no day is indicated, the 15th of the month
will be the draft date. Your bank must be a member of the Automated Clearing
House (ACH).
( ) Yes, I'd like to sign up for Automatic Investment Plan. Transfer funds from
my bank account to the Artisan Fund(s) designated below based on the
following schedule: (choose one box)
( ) Monthly (beginning month/day) ( ) Quarterly (beginning month/day)
( ) Semi-annual (month/month/day) ( ) Annual (month/day)
Indicate which Fund(s) you want to automatically invest in and the amount ($50
monthly minimum per Fund). See prospectus for additional investment minimums.
Artisan Small Cap Fund
-------------------- ------------------
Account # Amount
Artisan International Fund
-------------------- ------------------
Account # Amount
Artisan Mid Cap Fund
-------------------- ------------------
Account # Amount
9. VOIDED CHECK If you selected either sections 6, 7 or 8 you MUST attach a
"VOIDED" check below.
TAPE YOUR VOIDED CHECK HERE.
The following authorization is required for Electronic Funds Transfer (EFT)
transactions: By signing section 10 below, I/we authorize Artisan Funds to
initiate (i) credit entries (deposits) (for telephone redemption with payment by
EFT), (ii) debit entries (withdrawals) (for the Automatic Investment Plan or
telephone purchases with payment by EFT) and (iii) debit or credit entries and
adjustments for any entries made in error to my/our bank account identified
above. This authorization will remain effective until I/we notify Artisan Funds
in writing of its termination and until Artisan Funds has a reasonable time to
act on that termination.
10. SIGNATURE(S)
By signing this form, I certify that:
- - I have received the current Fund prospectus(es) and agree to be bound to
their terms. I have full authority and legal capacity to purchase Fund
shares and establish and use regular privileges.
- - All information and certifications on this application are true and correct.
TAXPAYER IDENTIFICATION NUMBER CERTIFICATION
I certify under penalties of perjury:
- - The Social Security or other Tax Identification Number (TIN) in Section 3 is
correct.
- - If I have not provided a TIN, I have not been issued a number, but have
applied (or will apply) for one. I understand that if I do not provide the
Fund(s) a TIN within 60 days, the Fund(s) will withhold 31% from all my
dividend, capital gain and redemption payments until I provide one.
- - Check one of the following only if applicable:
( ) The IRS has informed me I am subject to backup withholding as a result of
a failure to report all interest or dividend income.
( ) I am a trust or organization that qualifies for the IRS backup
withholding exemption.
The IRS does not require your consent to any provision of this document other
than the certifications required to avoid backup withholding.
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Signature as registered in Section 1 (Owner, Trustee, Custodian, etc.) Date
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Signature as registered in Section 1 (Joint Owner, Co-Trustee, etc.) Date
PLEASE RETURN THIS APPLICATION WITH YOUR CHECK IN THE ENCLOSED ENVELOPE.
THANK YOU FOR YOUR INVESTMENT IN THE ARTISAN FUNDS.
A confirmation of your account set-up will be sent to you shortly.
* The Artisan Small Cap Fund is closed to new investors. Please see the Artisan
Small Cap prospectus for details about "Who Is Eligible to Invest."
