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
SMALL CAP
VALUE FUND
A NO-LOAD FUND
ARTISAN SMALL CAP VALUE FUND invests for long-term capital growth. The Fund
invests primarily in common stocks that appear undervalued relative to earnings,
book value, cash flow or potential earnings growth, and that are issued by small
companies whose outstanding shares have an aggregate market value of less than
$1 billion.
PROSPECTUS
AUGUST 20, 1997
ARTISAN FUNDS, INC.
1000 NORTH WATER STREET, SUITE 1770
MILWAUKEE, WISCONSIN 53202
<PAGE>
CONTENTS
THE FUND AT A GLANCE 4 GOAL; STRATEGY; MANAGEMENT
5 CLOSING THE FUND; WHO MAY
WANT TO INVEST; RISKS AND
RETURNS
EXPENSES AND PERFORMANCE 6 EXPENSES; PERFORMANCE
YOUR ACCOUNT 7 DOING BUSINESS WITH THE
FUND; ELIGIBILITY TO INVEST
AFTER THE FUND IS CLOSED;
HOW TO BUY SHARES
8 WAYS TO SET UP YOUR ACCOUNT
9 MINIMUM INVESTMENTS;
AUTOMATIC INVESTMENT PLAN
11 HOW TO SELL SHARES
SHAREHOLDER AND ACCOUNT 13 STATEMENTS AND REPORTS;
POLICIES SHARE PRICE; PURCHASES
14 REDEMPTIONS; ACCOUNT
REGISTRATION; TELEPHONE
TRANSACTIONS
15 TELEPHONE EXCHANGE PLAN
DIVIDENDS, CAPITAL GAINS, 16 DISTRIBUTION OPTIONS;
AND TAXES TAXES
17 UNDERSTANDING DISTRIBUTIONS
THE FUND IN DETAIL 18 ORGANIZATION; MANAGEMENT
19 EXPENSES
20 THE FUND'S INVESTMENT
PHILOSOPHY
21 SECURITIES, INVESTMENT
PRACTICES AND RISKS; COMMON
STOCKS AND OTHER EQUITY
SECURITIES
22 FOREIGN SECURITIES; CONVERTIBLE
SECURITIES; MANAGING INVESTMENT
EXPOSURE
23 ILLIQUID AND RESTRICTED SECURITIES;
DIVERSIFICATION; LENDING PORTFOLIO
SECURITIES; REPURCHASE
AGREEMENTS; WHEN-ISSUED AND
DELAYED-DELIVERY SECURITIES;
BORROWING
24 OTHER INVESTMENT
COMPANIES; PORTFOLIO TURNOVER
3
<PAGE>
THE FUND AT A GLANCE
- --------------------
GOAL
Artisan Small Cap Value Fund (the "Fund"), one of the series of funds of
Artisan Funds, invests for long-term capital growth.
STRATEGY
The Fund invests primarily in common stocks that appear undervalued relative to
earnings, book value, cash flows or potential earnings growth, and that are
issued by small companies whose outstanding shares have an aggregate market
value of less than $1 billion. It attempts to manage investment risk in the
stocks it purchases by emphasizing investments in businesses that have positive
cash flow, strong balance sheets and business strategies that are economically
sound under ordinary circumstances. Stocks are generally sold when they
approach the Fund's estimate of their enterprise value.
Because the Fund typically invests in companies that are characterized by sparse
Wall Street research coverage, it uses its own detailed screening and research
process. Companies in which the Fund invests usually appear undervalued because
they fall into one of the following general categories:
- - The company operates in an industry category that is cyclical in nature and
is presently out of favor.
- - The company has assets which are not adequately reflected in its market
value.
- - The company has experienced problems leading to a depressed stock price, but
is undergoing or is likely to undergo some change which the Fund believes
will improve its operations.
- - The company is undiscovered or misunderstood by Wall Street analysts.
In addition to emphasizing investments in companies that are undervalued and
represent acceptable investment risks, the Fund attempts to manage portfolio
risk by diversifying its holdings to avoid concentration in any one stock or
industry sector.
MANAGEMENT
Artisan Partners Limited Partnership ("Artisan Partners"), located in
Milwaukee, Wisconsin, San Francisco, California and Atlanta, Georgia, selects
investments for the Fund. Scott C. Satterwhite, vice president of Artisan
Funds, is the portfolio manager and is responsible for the day-to-day management
of the Fund. He makes all investment decisions with the assistance of a team of
Artisan Partners investment research and trading professionals.
Immediately prior to joining Artisan Partners, Mr. Satterwhite was the portfolio
manager of Biltmore Special Values Fund from August 1, 1993 through May 31,
1997, and throughout that period had full discretionary authority over the
selection of investments for that fund. Average annual total returns for the
Biltmore Special Values Fund for the following periods were:
6/1/96 - 5/31/97 (1 YEAR) 25.00%
6/1/94 - 5/31/97 (3 YEARS) 25.95%
8/1/93 - 5/31/97 (3 YEARS, 10 MONTHS) 19.78%
Past performance is not a guarantee of future results, and the
information shown reflects the performance of another fund managed by
Mr. Satterwhite, not the performance of the Fund. The average annual
total returns of the Biltmore Special Values Fund shown are those of
its Class A shares, and do not include the effect of the sales charges
applicable to those shares. If an investor had paid the Class A
sales charge of 4.50% on the first day of each of the above periods,
the average annual total returns for Biltmore Special Values Fund
including that sales charge would have been 19.38%, 24.03% and
18.35%, respectively. Artisan Small Cap Value Fund is a no-load
fund. The
4
<PAGE>
returns achieved by Mr. Satterwhite as portfolio manager of
the Biltmore Special Values Fund reflect the expenses of that fund and
the value of its assets; the expenses of the Fund are estimated to be
higher and the effect of those expenses may result in less favorable
performance. However, actual expenses may be higher or lower than those
estimated.
CLOSING THE FUND
The Fund intends to close to new investors when it reaches approximately $400
million in total assets. The board decided that limiting the Fund's size would
be in the best interests of shareholders because it will allow Artisan Partners
to concentrate the Fund's investments in a manageable number of small companies
without taking too large a position in any single company. For more
information, see page 7.
WHO MAY WANT TO INVEST
Artisan Small Cap Value Fund is designed for investors who want long-term
capital growth rather than income and who have the long-term investment outlook
needed for investing in stocks of small companies. 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 small companies
often involve more volatility than the stocks of larger companies. The Fund
does not pursue income and is not by itself a balanced investment plan.
The Fund will seek to limit risk by investing in undervalued companies;
emphasizing investments in companies that have positive cash flow, strong
balance sheets, and business strategies that are economically sound under
ordinary circumstances; and diversifying its holdings to avoid concentration
in any one stock or industry sector.
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 21 for the types of
investments the Fund may make and "Your Account" on page 7 for how to buy and
redeem shares.
5
<PAGE>
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 (a)................................NONE
Exchange Fee......................................NONE
(a) A shareholder requesting payment of redemption proceeds by wire must pay the
cost of the wire (currently $5).
ANNUAL FUND OPERATING EXPENSES. The Fund pays its own operating expenses,
including a management fee to Artisan Partners. The Fund also incurs other ex-
penses 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 (shown as a percentage of
average net assets):
Management fee 1.00%
12b-1 fee None
Other expenses (after
reimbursement) 1.00%
-----
Total operating expenses 2.00%
=====
Artisan Partners has undertaken to reimburse the Fund for any ordinary operating
expenses in excess of 2.00% of average net assets over each fiscal 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 expenses" is
based on the estimated expenses the Fund expects to incur during its fiscal year
ending June 30, 1998. Without the Adviser's expense reimbursement, "Other
expenses" during that period would be estimated to be 2.12%.
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
After 3 years $65
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.
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).
6
<PAGE>
YOUR ACCOUNT
- ------------
DOING BUSINESS WITH THE FUND
The Fund provides shareholders with service during extended business hours.
To reach the Fund, call 1-800-344-1770.
ELIGIBILITY TO INVEST AFTER THE FUND IS CLOSED
The Fund intends to close to new investors when it reaches approximately $400
million in total assets. If you are a shareholder of the Fund when it closes,
you will be able to make additional investments in the Fund and reinvest your
dividends and capital gain distributions, even after the Fund has closed.
You may open a new account after the Fund is closed only if:
- - you are already a shareholder (in your own name or as a beneficial owner of
shares held in someone else's name);
- - you are transferring or doing a "rollover" into an Artisan Funds IRA from
an employee benefit plan through which you held shares of the Fund (if your
plan doesn't qualify for rollovers you may still open a new account with all
or part of the proceeds of a distribution from the plan);
- - you are in an employee benefit plan sponsored by an institution that also
sponsors (or is an affiliate of an institute that sponsors) another employee
benefit plan account that was a shareholder of the Fund when it closed;
- - you are a director or officer of Artisan Funds, Inc., or a partner or
employee of Artisan Partners, or a member of the immediate family of any of
those people;
- - you are a client of Artisan Partners or you have an existing business
relationship with Artisan Partners and, in the judgment of Artisan Partners,
your investment in the Fund would not adversely affect Artisan Partners'
ability to manage the Fund effectively; or
- - you are a client of a financial advisor or planner who had at least
$500,000 of client assets invested in the Fund, or at least $1 million of
client assets invested in Artisan Funds, as of the date the Fund closed to
new investors.
You may continue to add to your Fund account(s) through the reinvestment of
dividends and distributions from the Fund, and through the purchase of
additional Fund shares. An employee benefit plan which is a Fund shareholder
may continue to buy shares in the ordinary course of the plan's operations even
for new plan participants. An eligible financial adviser or planner may
continue to buy shares for existing and new clients.
The Fund does not intend to resume sales of shares to new investors after it
closes, although the board of directors may decide to re-open at a later date.
Call us at 1-800-344-1770 if you have questions about your eligibility to invest
after the Fund has closed.
The Fund intends to close when it reaches approximately $400 million in total
assets, not on a designated date. SHAREHOLDERS WILL NOT BE INFORMED IN ADVANCE
OF THE DATE ON WHICH THE FUND WILL CLOSE.
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 another of the
Artisan Funds. For more details, see "Telephone Exchange Plan" on page 15.
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);
7
<PAGE>
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
70 1/2 with earned income to invest up to $2,000 per tax year. If your spouse
has less than $2,000 in earned income, he or she may still contribute up to
$2,000 in an IRA, so long as you and your spouse's combined earned income
is at least $4,000.
- - 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 15% of the first $160,000 of compensation 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.
- -------------------------------------------------------------------------------
8
<PAGE>
YOUR ACCOUNT - continued
- - moving money from your bank account by telephone, provided you have elected
this privilege on your new account application;
- - moving an investment from another Artisan 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 13 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.
9
<PAGE>
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 order
application. Make your check or payable to "Artisan Funds" or
money order payable to "Artisan "Artisan Small Cap Value Fund."
Funds" or "Artisan Small Cap Put your account number on your
Value Fund." Third-party checks check.
will not be accepted.
Mail check and form at the bottom
Mail to the address on the new of your account statement (or a
account application. FOR letter) to the address on your
OVERNIGHT DELIVERY: account statement. FOR OVERNIGHT
DELIVERY:
Artisan Funds
c/o Boston Financial Data Services Artisan Funds
2 Heritage Drive c/o Boston Financial Data Services
Quincy, MA 02171 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 on
or more from your identically your new account application,
registered account with another complete the shareholder options
Artisan Fund. form to make investments by phone
from $50 to $25,000 into your
- - You may establish the telephone account and to participate in the
transaction option when you open telephone exchange plan.
an account by electing the option
on your new account application. - 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 - Call 1-800-344-1770 for
instructions on opening an account instructions on adding to an
by wire. 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.
10
<PAGE>
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 13 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.
11
<PAGE>
HOW TO SELL SHARES SPECIAL REQUIREMENTS
NOTE: Some redemptions require signature guarantees. See page 11.
- -------------------------------------------------------------------------------
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.
12
<PAGE>
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.
Some financial institutions that maintain nominee accounts with the Fund for
their clients who own Fund shares charge an
13
<PAGE>
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
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<PAGE>
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.
TELEPHONE EXCHANGE PLAN
The telephone exchange plan permits you to transfer investments among the
Artisan Funds between the hours of 7:00 a.m. and 3:00 p.m., Central time,
on days the NYSE is open for trading. 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.
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. After the Fund has closed to new investors, you will be able to use
the exchange plan to open a new Fund account only if you are eligible to open a
new account directly. See page 7 for information on eligibility to invest.
Each exchange between accounts must be at least $1,000. The price of shares
exchanged among the Artisan Funds is determined at the end of that day's trading
session.
Telephone exchange plan restrictions:
- - To exchange between funds, both 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 another
of the Artisan Funds, you must have previously elected the telephone
transaction option for the fund from which the exchange will be made.
- - Before exchanging into another Artisan 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.
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<PAGE>
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
16
<PAGE>
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 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's net realized long-term gains are paid to you as CAPITAL GAIN
DISTRIBUTIONS.
- -------------------------------------------------------------------------------
17
<PAGE>
THE FUND IN DETAIL
- ------------------
ORGANIZATION
Artisan Small Cap Value Fund is a series of Artisan Funds, Inc. ("Artisan
Funds"), an open-end, diversified 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.
ARTISAN FUNDS IS GOVERNED BY A BOARD OF DIRECTORS which is responsible for pro-
tecting 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 provide 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, 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.
Scott C. Satterwhite, vice president of Artisan Funds, is the Fund's portfolio
manager. Prior to joining Artisan Partners in June 1997, Mr. Satterwhite was
portfolio manager of the Biltmore Special Values Fund and was Senior Vice
President and Manager of Personal Trust Portfolio Management for the Personal
Financial Services Group of Wachovia Bank of North Carolina, N.A. Mr.
Satterwhite is a Chartered Financial Analyst. He has a bachelor's degree from
the University of the South and MBA from Tulane University.
Immediately prior to joining Artisan Partners, Mr. Satterwhite was the portfolio
manager of the Biltmore Special Values Fund, which he managed from August 1,
1993 through May 31, 1997, and throughout that period had full discretionary
authority over the selection of investments for that fund. Average annual total
returns for the Biltmore Special Values Fund for the following periods were:
6/1/96 - 5/31/97 (1 year) 25.00%
6/1/94 - 5/31/97 (3 years) 25.95%
8/1/93 - 5/31/97 (3 years, 10 months) 19.78%
Past performance is not a guarantee of future results, and the information shown
reflects
18
<PAGE>
the performance of another fund managed by Mr. Satterwhite, not the
performance of the Fund. The average annual total returns of the Biltmore
Special Values Fund shown are those of its Class A shares, and do not include
the effect of the sales charges applicable to those shares. If an investor
had paid the Class A sales charge of 4.50% on the first day of each of the
above periods, the average annual total returns for Biltmore Special Values
Fund including that sales charge would have been 19.38%, 24.03% and 18.35%,
respectively. The Artisan Small Cap Value Fund is a no-load fund. The
returns achieved by Mr. Satterwhite as portfolio manager of the Biltmore
Special Values Fund reflect the expenses of that fund and the value of
its assets; the expenses of the Fund are estimated to be higher and the
effect of those expenses may result in less favorable performance. However,
actual expenses may be higher or lower than those estimated.
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-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.
The address of Artisan Partners is 1000 North Water Street, Suite 1770,
Milwaukee, Wisconsin 53202. Artisan Partners also has offices in
San Francisco, California and Atlanta, Georgia.
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.
19
<PAGE>
The Fund in Detail - continued
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
Artisan Small Cap Value Fund invests for long-term capital growth.
The Fund invests primarily in common stocks that appear undervalued relative to
earnings, book value, cash flows or potential earnings growth, and that
are issued by small companies whose outstanding shares have an aggregate market
value of less than $1 billion. It attempts to manage investment risk in the
stocks it purchases by emphasizing investments in businesses that have positive
cash flow, strong balance sheets, and business strategies that are economically
sound under ordinary circumstances. Stocks are generally sold when they
approach the Fund's estimate of their enterprise value.
Because the Fund typically invests in companies that are characterized by sparse
Wall Street research coverage, it uses its own detailed screening and research
process. Companies in which the Fund invests usually appear undervalued because
they fall into one of the following general categories:
- - The company operates in an industry category that is cyclical in nature and
is presently out of favor.
- - The company has assets which are not adequately reflected in its market
value.
- - The company has experienced problems leading to a depressed stock price, but
is or is likely to undergo some change which the Fund believes will improve
its operations.
- - The company is undiscovered or misunderstood by Wall Street analysts.
In addition to emphasizing investments in companies that are undervalued and
represent acceptable investment risks, the Fund attempts to manage portfolio
risk by diversifying its holdings to avoid concentration in any one stock or
industry sector.
The Fund invests primarily in equity securities, including common and preferred
stocks, warrants and other similar rights. The Fund may from time to time
invest up to 10% of its total assets in foreign securities. The Fund also may
invest in other types of securities, such as convertible 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 those securities or practices.
The Fund intends to be substantially fully invested in equity securities in
ordinary circumstances, although the Fund may invest without limit in high-
quality, short-term corporate obligations or government obligations or hold cash
or cash equivalents if Artisan Partners determines that a temporary defensive
position is advisable.
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
20
<PAGE>
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 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.
COMMON STOCKS AND OTHER 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 small cap companies, defined for
this purpose as those companies whose outstanding common stock has a total
market value of less than $1 billion. During some periods, the securities of
small companies, as a class, have performed better than the securities of large
companies, and in some periods they have performed worse. Stocks of small
companies tend to be more volatile and less liquid than stocks of large
companies. Compared to larger companies, small 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.
The Fund may also invest in preferred stocks, and in interests in master limited
partnerships and real estate investment trusts ("REITs"). Preferred stocks
represent an equity interest in a corporation which, compared to common stock,
generally has a preferred return, but more limited appreciation potential. The
Fund's investments in master limited partnerships and REITs are the equity
investments in those entities.
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 of less than $1 billion. The Fund may not
21
<PAGE>
The Fund in Detail - continued
acquire more than 10% of the outstanding voting securities of any one issuer.*
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. Investing in foreign securities may
present economic, market, currency fluctuation, and political risks that are
different, and in some cases greater, than investing in U.S. securities. See
the Fund's Statement of Additional Information for more information.
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.
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."
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.
- --------------------------
*The restriction is "fundamental," which means it cannot be changed without
shareholder approval.
22
<PAGE>
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.*
LENDING PORTFOLIO SECURITIES; REPURCHASE AGREEMENTS; WHEN-ISSUED AND DELAYED-
DELIVERY SECURITIES
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.* 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).*
- ------------------------------
*The restriction is "fundamental," which means it cannot be changed without
shareholder approval.
23
<PAGE>
The Fund in Detail - continued
OTHER INVESTMENT COMPANIES
The Fund may invest in the securities of other 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 less than 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 capital gains and losses. Portfolio
turnover in excess of 100% is considered to be high.
24
<PAGE>
ARTISAN SMALL CAP VALUE FUND
ARTISAN FUNDS, INC.
1000 North Water Street, Suite 1770
Milwaukee, Wisconsin 53202
(414) 390-6100 (800) 344-1770
STATEMENT OF ADDITIONAL INFORMATION
August 20, 1997
Supplemented September 29, 1997
Artisan Small Cap Value 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 August 20, 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 2
Investment Objective and Policies 2
Investment Techniques and Risks 3
Investment Restrictions 17
Performance Information 19
Directors and Officers 22
Investment Advisory Services 25
Portfolio Transactions 26
Purchasing and Redeeming Shares 27
Additional Tax Information 28
Custodian 30
Independent Accountants 30
<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 Small Cap Value Fund invests for long-term capital growth. 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 common stocks that appear undervalued
relative to earnings, book value, cash flows or potential earnings growth,
and that are issued by small companies whose outstanding shares have an
aggregate market value of less than $1 billion. It attempts to manage
investment risk in the stocks it purchases by emphasizing investments in
businesses that have positive cash flow, strong balance sheets, and
business strategies that are economically sound under ordinary
circumstances. Stocks are generally sold when they approach the Fund's
estimate of their enterprise value.
Because the Fund typically invests in companies that are characterized by
sparse Wall Street research coverage, it uses its own detailed screening
and research process. Companies in which the Fund invests usually appear
undervalued because they fall into one of the following general categories:
- The company operates in an industry category that is cyclical in nature
and is presently out of favor.
- The company has assets which are not adequately reflected in its market
value.
- The company has experienced problems leading to a depressed stock price,
but is undergoing or is likely to undergo some change which the Fund
believes will improve its operations.
- The company is undiscovered or misunderstood by Wall Street analysts.
In addition to emphasizing investments in companies that are undervalued
and represent acceptable investment risks, the Fund attempts to manage
portfolio risk by diversifying its holdings to avoid concentration in any
one stock or industry sector.
Artisan Partners believes that there are two distinct approaches to
investing in stocks: growth and value. Artisan Small Cap Value Fund
follows a value approach. Artisan Small Cap
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Fund, another series of Artisan Funds, follows a growth approach. Each of
these two complementary investment approaches has proven its merit over
time, and each can play a significant role in a well-crafted equity
portfolio. For example, growth investors look for companies with above-
average rates of earnings growth, while value investors look for companies
whose stock appear temporarily depressed; many growth investors pay a
premium for stocks, while value investors look for bargains; growth stocks
tend to be more volatile than value stocks; and growth stocks typically
outperform value stocks in strong markets, but underperform them in weak
markets.
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 invest in foreign
securities. The types of investments the Fund may make are discussed in
the following pages.
INVESTMENT TECHNIQUES AND RISKS
Foreign Securities
The Fund may invest up to 25% (but does not expect to invest more than 10%)
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.")
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
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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
Under normal market conditions, the Fund does not intend to invest in debt
securities other than convertible securities. 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.
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.
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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.
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
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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.
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
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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 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.)
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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 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
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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 <F1> 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 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.
--------------------------
<F1> 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 fraction
of the value of certain specified securities, no physical delivery of
those securities is made.
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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 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
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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.
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,"
<F2> would exceed 5% of the Fund's total assets. The Fund currently
----------------------------
<F2> 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.
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intends to limit its use of options and futures so that not more than 5% of
its total assets are at risk.
When purchasing a futures contract or writing a put option on a futures
contract, the Fund must maintain with its custodian or broker, 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%).
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.
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.
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If the Fund writes an equity call option <F3> 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.
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.
The Taxpayer Relief Act of 1997 (the "Act") imposed constructive sale
treatment for Federal income tax purposes on certain hedging strategies
with respect to appreciated securities. Under these rules taxpayers will
recognize gain, but not loss, with respect to securities if they enter
into short sales of "offsetting notional principal contracts" (as defined
by the Act) with respect to, or futures or "forward contracts" (as defined
by the Act) with respect to, the same or substantially identical property,
or if they enter into such transactions and then acquire the same or
substantially indentical property. These changes generally apply to
constructive sales after June 8, 1997. Furthermore, the Secretary of the
Treasury is authorized to promulgate regulations that will treat as
constructive sales certain transactions that have substantially the same
effect as short
---------------------
<F3> 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 that is ineligible to be traded on a commodity futures
exchange (e.g., an option contract on a sub-index based on the price
of nine hotel-casino stocks). The definition of equity option excludes
options on broad-based stock indexes (such as the Standard & Poor's
500 index).
B-13
<PAGE>
sales, offsetting notional principal contracts, and futures or forward
contracts to deliver the same or substantially similar property.
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). 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 addition, for tax years
beginning before August 5, 1997, gains realized on the sale or other
disposition of securities held less than three months must be
less than 30% of the Fund's annual gross income. 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
B-14
<PAGE>
securities. Investing in Rule 144A securities could have the effect of
increasing the amount of 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
B-15
<PAGE>
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.
B-16
<PAGE>
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
B-17
<PAGE>
increase portfolio income and (b) enter into transactions in options,
futures, and options on futures; <F4>
(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;
-----------------------------
<F4> The Fund will not purchase securities when total borrowings by the
Fund are greater than 5% of its net asset value.
B-18
<PAGE>
(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.
(f) under normal market conditions, invest less than 65% of its total assets in
securities of issuers having aggregate common stock market capitalizations
of less than $1 billion, in each case taken at the time of investment.
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:
ERV = P(l+T)n
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, and other competing investment
and deposit products available from or through other financial
institutions. The
B-19
<PAGE>
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.
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 Letter
Barron's Mutual Fund News Service
Boston Herald Mutual Fund Values
Business Week Morningstar Publications
Chicago Tribune Newsweek
Chicago Sun-Times The New York Times
Cleveland Plain Dealer No-Load Fund Investor
CNBC Outstanding Investor Digest
CNN Pension World
Crain's Pensions and Investments
Chicago Business Personal Investor
Consumer Reports Jane Bryant Quinn
Consumer Digest (syndicated column)
Financial World Louis Rukeyser's Mutual Fund
Forbes The San Francisco Chronicle
Fortune Smart Money
Fund Action Stranger's Investment Adviser
Investor's Business Daily 13D Opportunities Report
Kiplinger's Personal Time
Finance Magazine United Mutual Fund Selector
Knight-Ridder USA Today
Los Angeles Times U.S. News and World Report
Milwaukee Business Journal The Wall Street Journal
Milwaukee Journal Sentinel Working Woman
Money Worth
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.
B-20
<PAGE>
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:
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 NASDAQ Industrials
Russell Mid-Cap Value Index (These indexes generally reflect the
Standard & Poor's 500 Stock Index performance of stocks traded in the
Standard & Poor's 400 Industrials indicated markets.)
Standard & Poor's Mid-Cap 400 Index
Wilshire 5000
Wilshire 4500
Wilshire 4000
Wilshire Small-Cap Index
Wilshire Small-Cap Value 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
B-21
<PAGE>
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
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 Managing Director of Artisan
(39) of the Board Partners; prior to founding
and Chief Artisan Partners, president
Executive Officer 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.
B-22
<PAGE>
POSITIONS HELD PRINCIPAL OCCUPATIONS
NAME AND AGE WITH REGISTRANT DURING THE PAST 5 YEARS
- ------------ --------------- -----------------------
Carlene Murphy Ziegler Director and Managing Director of Artisan
(41) 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.
Thomas R. Hefty Director President of United Wisconsin
(49) 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 executive
(56) 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.
B-23
<PAGE>
POSITIONS HELD PRINCIPAL OCCUPATIONS
NAME AND AGE WITH REGISTRANT DURING THE PAST 5 YEARS
- ------------ --------------- -----------------------
Mark L. Yockey Vice President Portfolio manager, Artisan
(41) International Fund; prior to
joining Artisan Partners in
November 1995, 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 Vice President Equity trader for Artisan Partners;
Voss-Reinhardt prior to joining Artisan Partners,
(32) equity trader with Northwestern
Mutual since January 1989, prior
thereto, sales associate with Dean
Witter Reynolds.
Millie Adams Hurwitz Vice President Co-portfolio manager of the Fund
(34) 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.
Scott C. Satterwhite Vice President Portfolio manager, Artisan Small
(40) Cap Value Fund; prior to joining
Artisan Partners in June 1997,
portfolio manager of the Biltmore
Special Values from August 1, 1993
through May 31, 1997 and Senior
Vice President and Manager of
Personal Trust Portfolio Management
for the Personal Financial Services
Group of Wachovia Bank of North
Carolina, N.A.
Andrew C. Stephens Vice President Portfolio manager, Artisan Mid Cap
(33) 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 1933, head
trader, Strong.
B-24
<PAGE>
The business address of the officers and directors affiliated with Artisan
Partners 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.
PENSION OR TOTAL
RETIREMENT ESTIMATED COMPENSATION
BENEFITS ANNUAL FROM ARTISAN
AGGREGATE ACCRUED AS PART BENEFITS MID CAP FUND AND
FROM SMALL OF FUND UPON FUND COMPLEX
NAME OF DIRECTOR CAP VALUE FUND EXPENSES RETIREMENT PAID TO DIRECTORS
- ---------------- -------------- -------- ---------- -----------------
Andrew A. Ziegler $ 0 $ 0 $ 0 $ 0
Carlene Murphy
Ziegler 0 0 0 0
David A. Erne 0 0 0 10,000
Thomas R. Hefty 0 0 0 10,000
Howard B. Witt 0 0 0 10,000
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 August 20, 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. Artisan Partners also has offices at 100
B-25
<PAGE>
Pine Street, Suite 3250, San Francisco, California and Five
Concourse Parkway, Suite 2120, Atlanta, Georgia 30328.
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 any ordinary
operating expenses in excess of 2.00% of average net assets over each
fiscal year.
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 will expire on April 30, 1999, but may be continued
from year to year thereafter 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 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.
B-26
<PAGE>
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 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 or redeemed through certain financial
services companies some of which may charge a transaction fee. The Fund
may authorize from time to time certain financial services companies,
broker-dealers or their designees ("authorized agents") to accept share
purchase and redemption orders on the Fund's behalf. For purchase orders
placed through an authorized agent, a shareholder will pay the Fund's NAV
per share (see "Net Asset Value," below), plus any applicable transaction
charge imposed by the agent, next computed
B-27
<PAGE>
after the receipt of the authorized agent of such purchase order. For
redemption orders placed through an authorized agent, a shareholder will
receive redemption proceeds with reflect the NAV per share next computed
after the receipt by the authorized agent of the redemption order, less
any redemption fees imposed by the agent.
In some instances, an authorized agent or other financial services company
may not charge any transaction fees directly to investors in the Fund.
However, for accounting and shareholder services provided by such company
with respect to Fund shares held by that company for its customers, the
company may charge a fee (currently 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. Share purchase and redemption orders will be priced at the
Fund's net asset value next computed after such orders are received and
accepted by: (i) the Fund; (ii) a broker-dealer or other financial
services company authorized by the Fund to accept purchase and redemption
orders on the Fund's behalf; or (iii) such authorized broker-dealer's
designee. The net asset value of the shares of the Fund is determined 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.
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 transactions in securities
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 of 1986, as
amended (the "Code") and thus not be subject to federal income taxes on
amounts which it distributes to shareholders.
Your distributions will be taxable to you, under income tax law, whether
received in cash or reinvested in additional shares. For federal income tax
purposes, any distribution that is paid in January but was declared in the
prior calendar year is deemed paid in the prior calendar year.
You will be subject to income tax at ordinary rates on income dividends and
distributions of net short-term capital gain. Distributions of net long-
term capital gain will be taxable to you as long-term capital gain
regardless of the length of time you have held your shares.
You will be advised annually as to the source if distributions for tax
purposes. If you are not subject to tax on your income, you will not be
required to pay tax on these amounts.
B-28
<PAGE>
If you realize a loss on the sale of Fund shares held for six months or
less, your short-term loss is recharacterized as long-term to the extent
of any long-term capital gain distributions you have received with
respect to those shares.
The Taxpayer Relief Act of 1997 reduced from 28% to 20% the maximum tax
rate on long-term capital gains. This reduced rate generally applies to
securities held more than 18 months and sold after July 28, 1997, and
securities held for more than one year and sold between May 6, 1997 and
July 29, 1997.
The Fund may be required to withhold federal income tax ("backup
withholding") from certain payments to you, generally redemption
proceeds. Backup withholding may be required if:
- You fail to furnish your properly certified social security
or other tax identification number;
- You fail to certify that your tax identification number is correct
or that you are not subject to backup withholding due to the
underreporting of certain income;
- The IRS informs the Fund that your tax identification number is
incorrect.
These certifications are contained in the application that you complete
when you open your Fund account. The Fund must promptly pay the IRS all
amounts withheld. Therefore, it is not usually possible for the Fund to
reimburse you for amounts withheld. You may, however, claim the amount
withheld as a credit on your federal income tax return.
B-29
<PAGE>
The Fund may purchase the securities of certain foreign investment funds
or trusts called passive foreign investment companies ("PFICs"). In
addition to bearing their proportionate share of the Fund's expenses
(management fees and operating expenses), shareholders will also
indirectly bear similar expenses of PFICs. Capital gains on the sale of
PFIC holdings will be deemed to be ordinary income regardless of how
long the Fund holds its investment. In addition, the Fund may be subject
to corporate income tax and an interest charge on certain dividends and
capital gains earned from PFICs, regardless of whether such income and
gains are distributed to shareholders.
In accordance with tax regulations, the Fund intends to treat securities
in PFICs as sold on the last day of the Fund's fiscal year and recognize
any gains for tax purposes at that time; losses will not be recognized.
Such gains will be considered ordinary income which the Fund will be
required to distribute even though it has not sold the security and
received cash to pay such distributions.
The discussion of taxation above is not intended to be a full discussion
of income tax laws and their effect on shareholders. You are encouraged
to consult your own tax advisor. The foregoing information applies to
U.S. shareholders. Foreign shareholders should consult their tax
advisors as to the tax consequences of ownership of Fund shares.
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.
B-30
