(LOGO)
ARTISAN SMALL CAP
VALUE FUND
PROSPECTUS
AUGUST 20, 1997
(SUPPLEMENTED FEBRUARY 27, 1998)
INVESTMENT MANAGEMENT PRACTICED WITH
INTELLIGENCE AND DISCIPLINE IS AN ART.
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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.
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 are issued by small
companies whose outstanding shares have an aggregate market value of less than
$1 billion.
PROSPECTUS
AUGUST 20, 1997
(SUPPLEMENTED FEBRUARY 27, 1998)
ARTISAN FUNDS, INC.
1000 North Water Street, Suite 1770
Milwaukee, Wisconsin 53202
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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; FINANCIAL HIGHLIGHTS
7 PERFORMANCE
YOUR ACCOUNT 7 DOING BUSINESS WITH THE FUND;
ELIGIBILITY TO INVEST AFTER THE FUND
IS CLOSED
8 HOW TO BUY SHARES; MINIMUM
INVESTMENTS; AUTOMATIC
INVESTMENT PLAN
9 WAYS TO SET UP YOUR ACCOUNT
11 HOW TO SELL SHARES
SHAREHOLDER AND ACCOUNT 13 STATEMENTS AND REPORTS; SHARE PRICE;
POLICIES PURCHASES
14 REDEMPTIONS; ACCOUNT REGISTRATION;
TELEPHONE TRANSACTIONS
15 TELEPHONE EXCHANGE PLAN
DIVIDENDS, CAPITAL GAINS 16 DISTRIBUTION OPTIONS; TAXES
AND 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
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THE FUND AT A GLANCE
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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 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
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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 net 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 is 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 pages 8 and 11 for how to
buy and redeem shares.
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EXPENSES AND PERFORMANCE
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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 (AS A PERCENTAGE OF AVERAGE NET ASSETS). The Fund
pays its own operating expenses, including a management fee to Artisan Partners.
The Fund also incurs other expenses for services such as maintaining shareholder
records and furnishing shareholder statements and reports. The Fund's expenses
are factored into its share price or dividends, are subtracted from the share
price daily and are not charged directly to shareholder accounts.
The Fund expects to incur the following expenses (shown as a percentage of
average net assets):
Management fee 1.00%
12b-1 fee NONE
Other expenses (after reimbursement) 1.00%
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Total operating expenses 2.00%
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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.
FINANCIAL HIGHLIGHTS
The information below shows the results of an investment in the Fund from the
commencement of operations on September 29, 1997 through December 31, 1997.
These results have not been audited.
Period
Ended
December 31,
1997
------------
Net asset value,
beginning of period $10.00
Income from investment operations:
Net investment loss (0.01)
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Net realized and unrealized
gains on securities 0.32
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Total from investment
operations 0.31
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Net asset value,
end of period $10.31
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Total Return* 3.1%
Ratios/supplemental data:
Net assets,
end of period (millions) $27.4
Ratio of expenses to
average net assets** 1.93%
Ratio of net investment loss
to average net assets** (0.12)%
Portfolio turnover rate* 9.40%
Average commission rate
per share $0.0438
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*Not annualized.
**Annualized. The ratios of expenses to average net assets and net investment
loss to average net assets include fees waived by the Adviser. Absent fees
waived by the Adviser, the ratios of expenses to average net assets and net
investment loss to average net assets would have been 2.08% and (0.27)%,
respectively.
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).
YOUR ACCOUNT
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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 net 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 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 adviser or planner who had at least $500,000
of client assets invested with 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
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Your Account - continued
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
net 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);
- - 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.
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WAYS TO SET UP YOUR ACCOUNT
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INDIVIDUAL OR JOINT OWNERSHIP
For your general investment needs
Individual accounts are owned by one person. Joint accounts can have two or
more owners.
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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) provide an attractive means to save
money on a tax-advantaged basis. Regular IRAs allow anyone of legal age and
under 70 1/2 to invest up to $2,000 per tax year. Roth IRAs provide
additional flexibility. While non-deductible, there is no income tax on
qualified withdrawals. Individuals age 70 1/2 and over may contribute.
Minimum withdrawals are not required after age 70 1/2.
- - 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.
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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.
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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.
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HOW TO BUY SHARES
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MAIL
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TO OPEN AN ACCOUNT:
- - Complete and sign the new account application. Make your check or money order
payable to "Artisan Funds" or "Artisan Small Cap Fund." Third-party checks
will not be accepted.
Mail to the address on the new account application.
FOR OVERNIGHT DELIVERY:
Artisan Funds
c/o Boston Financial Data Services
2 Heritage Drive
Quincy, MA 02171
TO ADD TO AN ACCOUNT:
- - Make your check or money order payable to "Artisan Funds" or "Artisan Small
Cap Value Fund." Put your account number on your check.
Mail your check and form at the bottom of your account statement (or a letter)
to the address on your account statement.
FOR OVERNIGHT DELIVERY:
Artisan Funds
c/o Boston Financial Data Services
2 Heritage Drive
Quincy, MA 02171
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PHONE 1-800-344-1770
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TO OPEN AN ACCOUNT:
- - You may not open a new account by phone, except by exchange of $1,000 or more
from your identically registered account in another of the Artisan Funds.
- - You may establish the telephone transaction option when you open an account by
electing the option on your new account application.
TO ADD TO AN ACCOUNT:
- - If you did not elect the telephone transaction option on your new account
application for the Fund or for another of the Artisan Funds, complete the
shareholder options form to make investments by phone from $50 to $25,000
into your account and to participate in the telephone exchange plan.
- - All telephone trades must be placed between 7:00 a.m. and 3:00 p.m. Central
time on days the NYSE is open for trading.
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WIRE
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TO OPEN AN ACCOUNT:
- - Call 1-800-344-1770 for instructions on opening an account by wire.
TO ADD TO AN ACCOUNT:
- - Call 1-800-344-1770 for instructions on adding to an account by wire.
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AUTOMATIC INVESTMENT PLAN
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TO OPEN AN ACCOUNT:
- - If you sign up for the Automatic Investment Plan when you open your account,
the minimum initial investment will be waived.
- - Complete and sign the Automatic Investment Plan section of the new account
application.
TO ADD TO AN ACCOUNT:
- - Sign up for the Automatic Investment Plan on the shareholder options form or
call 1-800-344-1770 for instructions on how to add to your existing account.
10
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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.
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HOW TO SELL SHARES SPECIAL REQUIREMENTS
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NOTE: Some redemptions require signature guarantees. See page 11.
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MAIL
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Individual, Joint Owners, Sole - The letter of instruction must be
Proprietorships, signed by all persons required to
UGMA, UTMA 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.
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PHONE 1-800-344-1770
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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.
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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.
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SYSTEMATIC WITHDRAWALS
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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.
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SHAREHOLDER AND ACCOUNT POLICIES
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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 cancelled 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 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 redemp tions 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 pay ment 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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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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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 591-1/2 years old. After
you are 591-1/2, 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 preceeding 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
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<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.
- -------------------------------------------------------------------------------
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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
protecting the interests of the shareholders of the Fund. The directors are
experienced executives and professionals who meet at regular intervals to
oversee the activities of the Fund, review contractual arrangements with
companies that 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 the 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
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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 returns achieved by Mr.
Satterwhite as portfolio manager of the Biltmore Special Values Fund reflect the
expenses of the 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 the 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.
Lawrence A. Totsky is chief financial officer of Artisan Funds and principal
administrative and financial officer. Prior to joining Artisan Partners in 1998,
Mr. Totsky was Senior Vice President and Director of Mutual Fund Administration
at Strong Capital Management, where he was employed since 1987. Mr. Totsky holds
a B.B.A. from the University of Wisconsin-Milwaukee.
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
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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 categories:
- - The company operated 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 or 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 such 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 invest ment 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 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
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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 pre-
sent 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, theFund 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.
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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.
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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 total assets in
shares of other investment companies and up to 5% of its total 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.
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ARTISAN FUNDS
C/O BOSTON FINANCIAL DATA SERVICES
P.O. BOX 8412
BOSTON, MA 02266-8412
