ARTISAN FUNDS, INC.
SUPPLEMENT DATED JULY 1, 2000
TO PROSPECTUS DATED OCTOBER 29, 1999
ARTISAN SMALL CAP VALUE FUND - NEW CO-MANAGER
JAMES C. KIEFFER has been named portfolio co-manager of Artisan Small Cap Value
Fund as of July 1, 2000. Mr. Kieffer is a Vice President of Artisan Funds and
has been a Managing Director of Artisan Partners Limited Partnership, the Fund's
investment adviser ("Artisan Partners") since March 2000. Prior to joining
Artisan Partners as a research analyst in 1997, Mr. Kieffer was a research
analyst at the investment firm McColl Partners (1996-1997). Mr. Kieffer began
his investment career at Wachovia Corporation working with Scott Satterwhite
(portfolio manager of the Artisan Small Cap Value Fund since inception) from
1989 to 1996, initially as a personal trust portfolio manager and later as a
general equities and small-cap value research analyst in the institutional
portfolio group. Mr. Kieffer holds a BA degree in Economics from Emory
University and is a Chartered Financial Analyst.
ARTISAN SMALL CAP VALUE FUND CLOSES TO MOST NEW INVESTORS
The Artisan Small Cap Value Fund closed to most new investors on June 30, 2000,
after reaching its announced closing level of $250 million in assets under
management. The Fund will accept new accounts from investors who satisfy new
account eligibility requirements. Eligibility is discussed in following section
"Who is Eligible to Invest in a Closed Artisan Fund?" and on our website,
www.artisanfunds.com.
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WHO IS ELIGIBLE TO INVEST IN A CLOSED ARTISAN FUND?
The Artisan Small Cap Value Fund is closed to most new investors and the Artisan
Small Cap Fund has announced that it intends to close to most new investors when
it reaches approximately $300 million in total assets. The following eligibility
criteria will apply to a Fund when it closes.
If you are a shareholder in a Fund when it closes, you may make additional
investments in that Fund and reinvest your dividends and capital gain
distributions, even though the Fund has closed.
You may open a new account in a closed Fund only if:
- you are already a shareholder (in your own name or as beneficial owner of
shares held in someone else's name) of that Fund;
- you are a shareholder with combined balances of $100,000 in any of the
Artisan Funds (in your own name or as beneficial owner of shares held in
someone else's name);
- your business or other organization is already a shareholder of the Fund and
you are opening an account for an employee benefit plan sponsored by that
organization or an affiliated organization;
- you are transferring or doing a "rollover" into a Fund 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 an employee benefit plan sponsored by an institution that also
sponsors (or is an affiliate of an institution that sponsors) another
employee benefit plan account that is a shareholder of the Fund as of the
date the Fund closed;
- you are a director or officer of Artisan Funds, or a partner or employee of
Artisan Partners, or a member of the immediate family of any of those people;
continued on back page
<PAGE>
- 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 with the Fund or at least $1,000,000 of client
assets invested with Artisan Funds as of the date on which the Fund closed,
or at the time of your application.
You may continue to add to your existing Fund account(s) through the
reinvestment of dividends and distributions from the Fund, and through the
purchase of additional Fund shares, even after the Fund closes. An employee
benefit plan that 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 advisor or planner may continue to buy shares for existing
and new clients.
Call us at 800.344.1770 if you have questions about your ability to invest, or
visit our website at www.artisanfunds.com.
ORGANIZATION. Each Artisan Fund is a series of Artisan Funds, Inc. Artisan
International Fund and Artisan Mid Cap Fund are divided into two share classes.
Information for the Artisan International Fund (Institutional Shares) and
Artisan Mid Cap Fund (Institutional Shares) is available under separate
prospectuses.
HOUSEHOLDING. We reduce the number of duplicate prospectuses, annual and semi-
annual reports you receive by sending only one copy of each to those addresses
shared by two or more accounts. Call us at 800.344.1770 to request individual
copies of these documents. We will begin sending you individual copies thirty
days after receiving your request.
TO OPEN AN ACCOUNT AND ADD TO AN ACCOUNT. Third-party and starter checks will no
longer be accepted when opening a new account or making additional investments
in a Fund.
THE FUNDS' INVESTMENTS IN VARIOUS INDUSTRIES AND SECTORS. The percentage of each
Fund's assets invested in various industries and sectors will vary from time to
time depending on the portfolio management team's perception of investment
opportunities. Investments in particular industries or sectors may be more
volatile than the overall stock market. For example, technology, science and
communications are rapidly changing fields, and stocks of these companies may be
subject to more abrupt or erratic market movements than the stock market in
general. Consequently, a higher percentage of holdings in a particular industry
or sector may have the potential for a greater impact on the Fund.
<PAGE>
(ARTISAN LOGO)
ARTISAN FUNDS
INVESTMENT MANAGEMENT PRACTICED WITH
INTELLIGENCE AND DISCIPLINE IS AN ART
PROSPECTUS
ARTISAN INTERNATIONAL FUND
(INTERNATIONAL SHARES)
ARTISAN MID CAP FUND
ARTISAN SMALL CAP FUND
ARTISAN SMALL CAP VALUE FUND
OCTOBER 29, 1999
<PAGE>
ARTISAN FUNDS
PROSPECTUS
ARTISAN INTERNATIONAL FUND
(INTERNATIONAL SHARES)
ARTISAN MID CAP FUND
ARTISAN SMALL CAP FUND
ARTISAN SMALL CAP VALUE FUND
OCTOBER 29, 1999
Each Artisan Fund is 100% no-load. The Fund pays its own operating expenses,
including the investment management fee. You pay no commissions, no 12b-1 fees,
and no hidden charges or expenses.
ARTISAN FUNDS, INC.
P.O. Box 8412
Boston, MA 02266-8412
Be sure to read this prospectus before you invest. And please keep it on file
for future reference.
It presents essential facts about the Artisan Funds, including investment
strategies, management fees and services available to you as an investor.
If you have a question about any part of the prospectus, please call the number
below. An Artisan Funds representative will be happy to help you.
------------
800.344.1770
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You may also obtain more information about Artisan Funds on our website at
www.artisanfunds.com.
The Securities and Exchange Commission has not approved any fund's shares or
determined whether this prospectus is accurate or complete. Anyone who tells you
otherwise is committing a crime.
<PAGE>
TABLE OF CONTENTS
To help make investing with Artisan Funds a pleasant experience for you, we've
designed this document to serve as an easy reference tool. For your convenience,
here are the topics you'll find in the following pages...
Goal, Strategy & Philosophy................................2
Artisan International Fund...............................2
Artisan Mid Cap Fund.....................................4
Artisan Small Cap Fund...................................6
Artisan Small Cap Value Fund.............................8
Risks You Should Consider.................................10
Year 2000 & Euro Information..............................12
Total Return for Each Calendar Year.......................13
Average Annual Total Returns..............................14
Artisan Funds' Fees & Expenses............................15
How Do I Know if an Artisan Fund is Right for Me?.........16
Artisan Funds' Financial Highlights.......................17
Organization, Management & Management Fees................21
Investing with Artisan Funds..............................23
How to Buy Shares.........................................24
Who is Eligible to Invest in a Closed Artisan Fund?.....25
Automatic Investment Plan (AIP).........................27
How to Sell Shares........................................28
Systematic Withdrawals..................................29
What Type of Account Would You Like?......................30
Shareholder & Account Procedures..........................32
Statements and Reports..................................32
Website.................................................32
Share Price.............................................32
Purchases...............................................33
Minimum Balances........................................34
Authorized Agents.......................................34
Redemptions.............................................35
Signature Guarantees....................................36
Account Registration....................................37
Telephone Transactions..................................37
Telephone Exchange Plan.................................38
Dividends, Capital Gains & Taxes..........................38
Distribution Options....................................39
Taxes...................................................39
1
<PAGE>
ARTISAN INTERNATIONAL FUND
GOAL, STRATEGY & PHILOSOPHY
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GOAL
Artisan International Fund seeks maximum long-term capital growth.
The Fund may change this goal without the approval of shareholders.
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STRATEGY & PHILOSOPHY
Under normal circumstances, the Fund invests at least 65% of its total assets in
stocks of foreign companies.
Through its own research process, the Fund invests in a broadly diversified
portfolio of international growth stocks, concentrating on industries or
investment themes that present accelerating growth prospects and companies that
capitalize on that growth. The Fund's investment strategy focuses on stock
selection.
Artisan Partners', the adviser to the Fund, research method also looks at
industry selection, theme selection and country selection. It favors countries
and regions with improving or rapidly expanding economies. To determine economic
growth, it assesses factors such as gross domestic product growth, corporate
profitability, current account and currency issues, interest rates, economic
climate and social change. Having identified favorable areas, it eliminates
those whose stock markets appear to be overvalued.
In countries where the economic and market conditions provide attractive
valuations, Artisan Partners seeks companies that seem well positioned for
strong, sustainable growth. As the first step to security selection, Artisan
Partners narrows its focus to industries or themes likely to experience
meaningful growth. It focuses on well-managed companies with above-average
financial characteristics, increasing earnings per share and dominant
2
<PAGE>
or increasing market share in strong industries. Having isolated promising
companies, Artisan Partners then purchases those whose stocks are attractively
valued.
- Under ordinary circumstances, the Fund is fully invested in common stocks. At
times, however, Artisan Partners may determine that market or economic
conditions warrant a temporary defensive position. During those periods, the
Fund's assets may not be invested in accordance with its strategy and the Fund
may not achieve its investment objective. In this case, the Fund may hold up
to 100% of its assets in cash, cash equivalents, or short-term government or
corporate obligations.
- Changes in security prices, currency exchange rates and other factors can
affect the portfolio's value.
Artisan Partners may decide to sell a stock when a company's valuation
approaches its growth rate, changing circumstances affect the original reasons
for a company's purchase, a company exhibits deteriorating fundamentals or more
attractive alternatives exist.
For more information call 800.344.1770 or visit our website at
WWW.ARTISANFUNDS.COM
3
<PAGE>
ARTISAN MID CAP FUND
GOAL, STRATEGY & PHILOSOPHY
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GOAL
Artisan Mid Cap Fund seeks maximum long-term capital growth.
The Fund may change this goal without the approval of shareholders.
------------------------------------------------------------------------------
STRATEGY & PHILOSOPHY
The Fund invests primarily in the common stocks of medium-sized companies.
A medium-sized company is one whose total stock market value falls within the
range of companies in the S&P 400 MidCap Index. As of September 30, 1999, this
index included companies with capitalizations between approximately $235 million
and $12.9 billion. Over time, the capitalization range of the companies in the
Index will change. As it does, the size of the companies in which the Fund
invests may change.
- The Fund prefers to invest in companies with "franchise" characteristics.
These could be a proprietary technology, dominant market share or some other
form of sustainable competitive advantage.
The Fund also favors companies with predictable streams of cash flow through
real growth in demand for their products or services. Such companies are well-
positioned to leverage opportunities in their markets.
If Artisan Partners, the adviser to the Fund, is impressed with a company's
competitive position and prospects for growth, it then defines and researches
key investment issues. It also estimates the company's intrinsic value, and
will generally buy the stock only if it sells below that estimate.
4
<PAGE>
- Under ordinary circumstances, the Fund is fully invested in common stocks. At
times, however, Artisan Partners may determine that market or economic
conditions warrant a temporary defensive position. During those periods, the
Fund's assets may not be invested in accordance with its strategy and the Fund
may not achieve its investment objective. In this case, the Fund may hold up
to 100% of its assets in cash, cash equivalents, or short-term government or
corporate obligations.
The Fund may engage in active and frequent trading to achieve its principal
investment strategies. A higher rate of portfolio turnover may result in
increased transaction expenses and the realization of capital gains or losses.
Artisan Partners may decide to sell a stock when its intrinsic value targets are
met, changing circumstances affect the original reasons for a company's
purchase, a company exhibits deteriorating fundamentals or more attractive
alternatives exist.
For more information call 800.344.1770 or visit our website at
WWW.ARTISANFUNDS.COM
5
<PAGE>
ARTISAN SMALL CAP FUND<F1>
GOAL, STRATEGY & PHILOSOPHY
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GOAL
Artisan Small Cap Fund invests for maximum long-term capital growth.
The Fund may change this goal without the approval of shareholders.
------------------------------------------------------------------------------
STRATEGY & PHILOSOPHY
Under normal circumstances, the Fund invests at least 65% of its assets
in the common stocks of small companies. The Fund considers a "small" company
one whose total stock market value is less than $1.5 billion.
The Fund's focus is on well-managed companies with sustainable growth prospects
whose stocks appear undervalued, either because they lack investor recognition
or are temporarily out of favor.
The Fund's investment approach rests on a few basic beliefs.
Stocks that are underfollowed or under-researched by Wall Street tend
to be less efficiently priced because of lack of attention by investors.
Investors demand a premium for the risk of incomplete information.
By doing its own research, Artisan Partners, the adviser to the Fund, attempts
to reduce this risk and realize the premium returns.
Through its research, Artisan Partners analyzes a company's operating history,
financial health, competitive position and prospects for growth. And through
face-to-face meetings it assesses the quality of management - a critical factor
in small company success.
Artisan Partners also estimates a company's intrinsic value. It does so to
determine if a prospective investment is undervalued, and if so, to what degree.
This emphasis on stock valuation relative to growth prospects sets the Fund
apart from pure "growth" or "value" funds. Thus, the Fund's style can be
characterized as "growth at a reasonable price" or "growth/value blend."
6
<PAGE>
Under ordinary circumstances, the Fund is substantially fully invested in common
stocks. At times, however, Artisan Partners may determine that market or
economic conditions warrant a temporary defensive position. During those
periods, the Fund's assets may not be invested in accordance with its strategy
and the Fund may not achieve its investment objective. In this case, the Fund
may hold up to 100% of its assets in cash, cash equivalents, or short-term
government or corporate obligations.
In choosing to take a temporary defensive position, the Fund would be trying to
avoid losses. If, however, the choice proved to be wrong, the Fund would have a
harder time achieving its goal of long-term capital growth.
The Fund may engage in active and frequent trading to achieve its principal
investment strategies. A higher rate of portfolio turnover may result in
increased transaction expenses and the realization of capital gains or losses.
Artisan Partners may decide to sell a stock when its intrinsic value targets are
met, changing circumstances affect the original reasons for a company's
purchase, more attractive alternatives exist or a company's market cap exceeds
$1.5 billion.
<F1> PLEASE NOTE: Artisan Small Cap Fund reopened to purchases by new investors
effective April 1, 1999. The Fund intends to close again to new investors
when it reaches about $300 million in total assets. See "Who is Eligible
to Invest in a Closed Artisan Fund?" on page 25 for new account
eligibility criteria.
For more information call 800.344.1770 or visit our website at
WWW.ARTISANFUNDS.COM
7
<PAGE>
ARTISAN SMALL CAP VALUE FUND<F1>
GOAL, STRATEGY & PHILOSOPHY
------------------------------------------------------------------------------
GOAL
Artisan Small Cap Value Fund seeks long-term capital growth. This goal may be
changed without the approval of shareholders.
------------------------------------------------------------------------------
STRATEGY & PHILOSOPHY
The Fund invests primarily in companies with a total stock market value of less
than $1.5 billion.
- The Fund purchases a stock only at what Artisan Partners, the adviser to the
Fund, considers a bargain price...a price that - because of market forces -
is greatly below the value of the business as determined by Artisan Partners.
- In looking for bargains, Artisan Partners uses its own research process. The
focus is on individual companies, rather than on trends in the economy or
securities markets.
- Artisan Partners' research may uncover companies that have one or more of the
following characteristics:
TURNAROUNDS. At times, the Fund invests in companies that have
had poor results, but that Artisan Partners believes will be able to
substantially improve.
UNDISCOVERED OR UNSPONSORED STOCKS. There need not be something wrong with a
company to qualify it as a bargain. Sometimes a company may simply be little
known to the investing public. Small companies typically have little or no
coverage by Wall Street analysts, so they often lack a following among
investors and become undervalued.
COMPANIES WITH HIDDEN ASSETS. Undervalued real estate, unrecognized business
lines and other "hidden" assets may not be given enough credit by investors,
thus providing investment opportunities for the Fund.
8
<PAGE>
COMPANIES IN THE PROCESS OF MAJOR CHANGE. A company's stock may not reflect
positive change in the business until it shows up in financial results. The
Fund tries to invest ahead of this broad recognition, which, logically, can
cause the stock's price to rise.
- For the Fund to purchase a stock, a bargain price alone is not enough.
To provide an additional margin of safety, Artisan Partners looks for two
other attributes:
FINANCIAL STRENGTH. Artisan Partners favors companies with little debt and
positive cash flow.
FAVORABLE ECONOMICS. A company with acceptable returns on capital and free
cash over its business cycle is less likely to experience eroding values over
the long term.
Under ordinary circumstances, the Fund remains fully invested in equity
securities. At times, however, Artisan Partners may determine that market or
economic conditions warrant a temporary defensive position. During those
periods, the Fund's assets may not be invested in accordance with its strategy
and the Fund may not achieve its investment objective. In this case, the Fund
may hold up to 100% of its assets in cash, cash equivalents, or short-term
government or corporate obligations.
Artisan Partners may decide to sell a stock when its target value is realized,
companies exhibit deteriorating margins of safety or more attractive
alternatives exist.
<F1> PLEASE NOTE: Artisan Small Cap Value Fund intends to close to new investors
when it reaches about $250 million in total assets. This is a change from
the intended closing level of $400 million previously announced. See "Who
is Eligible to Invest in a Closed Artisan Fund" on page 25 for new account
eligibility criteria.
For more information call 800.344.1770 or visit our website at
WWW.ARTISANFUNDS.COM
9
<PAGE>
RISKS YOU SHOULD CONSIDER
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RISKS APPLICABLE TO ALL FUNDS
All of the Artisan Funds invest primarily in common stocks. Over time, 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. When you sell your shares, they may be worth more or less than
you paid for them. You can lose money by investing in a Fund.
The Funds do not pursue income, and are not, alone or together, a balanced
investment plan. In addition, there can be no assurance that they will achieve
their investment goals.
Below are the principal investment risks of each Fund.
------------------------------------------------------------------------------
ARTISAN INTERNATIONAL FUND
- Foreign stocks as an asset class may underperform U.S. stocks.
- Foreign stocks tend to be more volatile than U.S. stocks.
- Investments in foreign securities (including American Depository Receipts, or
"ADRs") are subject to risks. These risks include currency exchange rate
fluctuation; less available public information about the issuers of
securities; less stringent regulatory standards; lack of uniform accounting,
auditing and financial reporting standards; and country risks including less
liquidity, high inflation rates, unfavorable economic practices, and political
instability.
- The Fund tries to lower the risks inherent in foreign investing through a
highly selective investment strategy and broad diversification by country,
industry and company.
------------------------------------------------------------------------------
ARTISAN MID CAP FUND
- Stocks of medium-sized companies tend to be more volatile than those of large
companies.
- Relative to large companies, medium-sized companies typically have analyst
coverage by fewer Wall Street firms. For this reason, they are more likely to
be trading at prices that reflect incomplete or inaccurate information.
10
<PAGE>
- During some periods, stocks of mid-sized companies, as an asset class, have
underperformed the stocks of small and large companies.
- The Fund tries to lower the risks of investing in medium-sized companies
through broad diversification by industry and company, as well as continuous
monitoring of each holding.
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ARTISAN SMALL CAP FUND
- Historically, small company stocks have tended to outperform those
of large companies over the long-term. However, during some periods, stocks of
small companies as an asset class have under-performed the stocks of large
companies.
- Stocks of small companies tend to be more volatile and less liquid than stocks
of large companies. Small companies may have a shorter history of operations,
less access to additional financing, and a less diversified product line -
making them more susceptible to market pressures.
- Since small-caps can be more volatile and less liquid than other stocks, the
Fund pays special attention to the management of risk. It seeks to limit risk
by choosing companies with positive cash flows and sustainable growth
prospects, and by diversifying its holdings. The Fund monitors each holding
closely, evaluating new information relative to the original reasons for
investing.
------------------------------------------------------------------------------
ARTISAN SMALL CAP VALUE FUND
- Historically, small company stocks have tended to outperform those
of large companies over the long-term. However, during some periods, stocks of
small companies as an asset class have under-performed the stocks of large
companies.
- Stocks of small companies tend to be more volatile and less liquid than stocks
of large companies. Small companies may have a shorter history of operations,
less access to additional financing, and a less diversified product line -
making them more susceptible to market pressures.
- Value stocks may fall out of favor with investors and may underperform other
asset types during given periods.
For more information call 800.344.1770 or visit our website at
WWW.ARTISANFUNDS.COM
11
<PAGE>
YEAR 2000 INFORMATION
As you may be aware, some of today's computer systems cannot process date-
related information because they are not programmed to distinguish between the
year 2000 and the year 1900 (commonly referred to as the Year 2000 or Y2K
problem).
Artisan Partners is working closely with its service providers to ensure the
proper functioning of the computer systems on which the Funds depend for smooth
operation.
Based on a review of internal and external systems to date, Artisan Partners
does not anticipate any material impact due to the Year 2000 problem. There can
be no assurances, however, that the steps taken by Artisan Partners will be
sufficient to avoid any adverse impact on the Funds.
EURO INFORMATION
On January 1, 1999, eleven of the fifteen member states of the European Union
had their currency exchange rates irrevocably fixed to a single European
currency, the Euro. The Euro has become legal tender in those countries from
that date. National currencies will continue to circulate until they are
replaced by Euro coins and bank notes on July 1, 2002. The pending unification
of European currency and the decision of certain countries not to participate
may create uncertainty in the European markets and thereby increase volatility
of the various currencies and securities. The European securities markets also
may become less liquid.
Artisan International Fund invests in securities denominated in the Euro and the
exchange rate between the Euro and the U.S. dollar will have
a significant impact on the value of the Fund's investments. With the advent of
the Euro, the participating countries in the European Monetary Union can no
longer follow independent monetary policies. This may limit a country's ability
to respond to economic downturns or political upheavals, and consequently reduce
the value of an investment in foreign securities. These risks could affect
Artisan International's investments and performance, as detailed under "European
Currency Unification" in the Statement of Additional Information.
12
<PAGE>
TOTAL RETURN FOR EACH CALENDAR YEAR
The risks of investing in the Funds are illustrated in the following bar charts
that show returns achieved year to year, and tables that compare each Fund's
average annual total returns for the periods listed to a market index.
ARTISAN INTERNATIONAL FUND
(BAR CHART APPEARS HERE)
1996 34.37%
1997 3.46%
1998 32.18%
Since inception (12/28/95), the Fund's highest and lowest quarterly returns were
24.86% and (18.83)%, respectively, for the quarters ended December 31, 1998, and
September 30, 1998. The year-to-date return as of September 30, 1999, was
21.59%.
ARTISAN MID CAP FUND
(BAR CHART APPEARS HERE)
1998 33.37%
Since inception (6/27/97), the Fund's highest and lowest quarterly returns were
30.78% and (10.54)%, respectively, for the quarters ended December 31, 1998, and
September 30, 1998. The year-to-date return as of September 30, 1999, was
14.69%.
ARTISAN SMALL CAP FUND
(BAR CHART APPEARS HERE)
1996 11.86%
1997 22.67%
1998 -13.47%
Since inception (3/28/95), the Fund's highest and lowest quarterly returns were
16.32% and (25.99)%, respectively, for the quarters ended June 30, 1997, and
September 30, 1998. The year-to-date return as of September 30, 1999, was
(1.52)%.
ARTISAN SMALL CAP VALUE FUND
(BAR CHART APPEARS HERE)
1998 -5.76%
Since inception (9/29/97), the Fund's highest and lowest quarterly returns were
21.44% and (20.15)%, respectively, for the quarters ended June 30, 1999, and
September 30, 1998. The year-to-date return as of September 30, 1999, was
11.05%.
For more information call 800.344.1770 or visit our website at
WWW.ARTISANFUNDS.COM
13
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS
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FOR THE 12 MONTH PERIOD FROM INCEPTION
FUND ENDED 12/31/98 THROUGH 12/31/98
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ARTISAN INTERNATIONAL FUND 32.18% 22.37%
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Morgan Stanley Capital
International, Inc.
(MSCI) EAFE Index<F1> 20.00% 8.99%<F2>
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Fund inception date: 12/28/95. All returns reflect reinvested dividends.
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FOR THE 12 MONTH PERIOD FROM INCEPTION
FUND ENDED 12/31/98 THROUGH 12/31/98
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ARTISAN MID CAP FUND 33.37% 42.44%
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S&P 400 MidCap Index<F3> 19.11% 24.27%
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Fund inception date: 6/27/97. All returns reflect reinvested dividends.
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FOR THE 12 MONTH PERIOD FROM INCEPTION
FUND ENDED 12/31/98 THROUGH 12/31/98
------------------------------------------------------------------------------
ARTISAN SMALL CAP FUND -13.47% 12.85%
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Russell 2000 Index<F4> -2.55% 15.30%
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Fund inception date: 3/28/95. All returns reflect reinvested dividends.
------------------------------------------------------------------------------
FOR THE 12 MONTH PERIOD FROM INCEPTION
FUND ENDED 12/31/98 THROUGH 12/31/98
------------------------------------------------------------------------------
ARTISAN SMALL CAP VALUE FUND -5.76% -2.26%
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Russell 2000 Value Index<F5> -6.45% -3.51%
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Fund inception date: 9/29/97. All returns reflect reinvested dividends.
<F1> Morgan Stanley Capital International, Inc. (MSCI) EAFE Index is unmanaged
and includes companies throughout the world, excluding the U.S. and Canada,
in proportion to world stock market capitalization.
<F2> The average annual total return for the EAFE Index, when used in comparison
to the Fund's inception date, is calculated started 12/31/95.
<F3> The S&P 400 MidCap Index is an unmanaged, market-weighted index of 400
mid-cap companies.
<F4> Russell 2000 Index is an unweighted index of small companies, formed by
taking the largest 3,000 companies and eliminating the largest 1,000
companies.
<F5> The Russell 2000 Value Index measures the performance of those companies in
the Russell 2000 Index with lower price-to-book ratios and lower forecasted
growth values.
14
<PAGE>
ARTISAN FUNDS' FEES & EXPENSES
Below are the fees and expenses that you pay if you buy and hold shares in an
Artisan Fund.
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SHAREHOLDER FEES PAID DIRECTLY FROM YOUR INVESTMENT:
Sales charge (load) on purchases..............................None
Exchange fee..................................................None
Redemption fee................................................None
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ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS:
------------------------------------------------------------------------------
EXPENSE INTERNATIONAL MID CAP SMALL CAP SMALL CAP VALUE
------------------------------------------------------------------------------
Management Fee 0.99% 1.00% 1.00% 1.00%
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12b-1 Fee None None None None
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Other Expenses 0.39% 1.12% 0.37% 0.66%
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Total Operating Expenses 1.38% 2.12%<F1> 1.37% 1.66%
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<F1> Artisan Partners has undertaken to reimburse Artisan Mid Cap Fund to the
extent that the Fund's total operating expenses exceed 2.00% of its
average daily net assets. Total operating expenses as shown in the table
above do not include Artisan Partners' expense reimbursement pursuant to
that undertaking.
EXAMPLE. This example is intended to help you compare the cost of investing in
an Artisan Fund with that of investing in other mutual funds. The example
assumes you invest $10,000 for the time periods indicated, earn a 5% return each
year, and that operating expenses remain constant.
------------------------------------------------------------------------------
TIME PERIOD INTERNATIONAL MID CAP SMALL CAP SMALL CAP VALUE
------------------------------------------------------------------------------
1 year $140 $215 $139 $169
------------------------------------------------------------------------------
3 years $437 $664 $434 $523
------------------------------------------------------------------------------
5 years $755 $1,139 $750 $902
------------------------------------------------------------------------------
10 years $1,657 $2,452 $1,646 $1,965
------------------------------------------------------------------------------
This example is for illustration only. It is not meant to suggest actual or
expected costs or returns, which may be more or less than the amounts shown.
For more information call 800.344.1770 or visit our website at
WWW.ARTISANFUNDS.COM
15
<PAGE>
HOW DO I KNOW IF AN ARTISAN FUND
IS RIGHT FOR ME?
These are some of the potential rewards of investing in a Fund:
------------------------------------------------------------------------------
ARTISAN INTERNATIONAL FUND
- From time to time, many foreign economies have grown faster than our own
(though some have not), and the returns on investments in these countries have
exceeded those of similar U.S. investments.
- Foreign markets can offer opportunities that are unavailable domestically.
Thus, international investing brings you greater diversification and enables
you to take advantage of changes in foreign economies and equity markets.
------------------------------------------------------------------------------
ARTISAN MID CAP FUND
- Medium-sized companies can offer attractive investment characteristics. They
are typically small enough to have higher growth potential than the general
U.S. economy, mature enough to have seasoned management and established,
multiple product lines, and large enough to have liquid trading markets.
------------------------------------------------------------------------------
ARTISAN SMALL CAP FUND AND ARTISAN SMALL CAP VALUE FUND
- Small companies tend to have better growth potential than large companies, and
are less likely to be broadly recognized.
- Over time, small-cap stocks have outperformed large-cap stocks.
------------------------------------------------------------------------------
INVESTING WITH ARTISAN MAY BE SUITABLE FOR YOU IF:
- You want to invest for maximum long-term growth, rather than income.
- You are a patient investor, and able to maintain your investment over a
relatively long period of time.
- You understand the specific risks of investing in a particular market
segment - small-caps, mid-caps, value-based stocks or foreign stocks.
16
<PAGE>
ARTISAN FUNDS' FINANCIAL HIGHLIGHTS
The following tables are intended to help you understand each Fund's financial
performance since it began operations. Certain information reflects financial
results for a single Fund share. Total returns represent the rate you would have
earned (or lost) on an investment, assuming reinvestment of all dividends and
distributions. This information has been audited by PricewaterhouseCoopers LLP,
independent accountants, whose report, along with each Fund's financial
statements, is included in the annual report and the Statement of Additional
Information, which are available on request. For each year shown, all
information is for the fiscal year ended June 30.
-------------------------------------------------------------------------------
INTERNATIONAL FUND
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Period Ended
6/30/99 6/30/98 6/30/97 6/30/96
International International International International
For a share outstanding throughout each period Shares Shares Shares Shares<F1>
------- ------- ------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $16.25 $14.48 $12.08 $10.00
Income from investment operations:
Net investment income 0.08<F2> 0.06<F2> 0.07 0.04
Net realized and unrealized gains on securities
and foreign currency transactions 2.62 3.04 2.44 2.04
------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 2.70 3.10 2.51 2.08
------- ------- ------- -------
DISTRIBUTIONS PAID TO SHAREHOLDERS:
Net investment income (0.04) (0.20) (0.02) _
Net realized gains on investment transactions (0.24) (1.13) (0.09) _
------- ------- ------- -------
Total distributions paid to shareholders (0.28) (1.33) (0.11) _
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $18.67 $16.25 $14.48 $12.08
======= ======= ======= =======
Total return 17.4% 24.1% 20.9% 20.8%<F3>
Ratios/supplemental data:
Net assets, end of period (millions) $943.9<F5> $414.5<F5> $449.2 $71.5
Ratio of expenses to average net assets 1.38% 1.45% 1.61% 2.50%<F4>
Ratio of net investment income to average
net assets 0.59% 0.37% 1.07% 1.60%<F4>
Portfolio turnover rate 79.41% 109.42% 103.66% 57.00%<F3>
<F1> For the period from commencement of operations (December 28, 1995) through
June 30, 1996.
<F2> Computed based on average shares outstanding.
<F3> Not annualized.
<F4> Annualized.
<F5> Does not include assets represented by Institutional Shares, which were
first offered for sale on July 1, 1997.
</TABLE>
For more information call 800.344.1770 or visit our website at
WWW.ARTISANFUNDS.COM
17
<PAGE>
ARTISAN FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
-------------------------------------------------------------------------------
MID CAP FUND
-------------------------------------------------------------------------------
Year Year Period
For a share outstanding Ended Ended Ended
throughout each period 6/30/99 6/30/98 6/30/97<F1>
-------- -------- -----------
Net asset value, beginning of period $13.69 $10.00 $10.00
Income from investment operations:
Net investment loss (0.16)<F5> (0.08) _
Net realized and unrealized
gains on securities 4.41 4.56 _
------- ------ ------
TOTAL FROM INVESTMENT OPERATIONS 4.25 4.48 _
------- ------ ------
DISTRIBUTIONS PAID TO SHAREHOLDERS:
Net realized gains on
investment transactions (1.27) (0.79) _
------- ------ ------
NET ASSET VALUE, END OF PERIOD $16.67 $13.69 $10.00
======= ======= =======
Total return 35.8% 46.1% 0.0%<F2>
Ratios/supplemental data:
Net assets, end of period
(millions) $43.3 $12.8 $1.8
Ratio of expenses to average
net assets 2.00%<F4> 2.00%<F4> 0.00%<F3>
Ratio of net investment loss
to average net assets (1.13)%<F4> (0.77)%<F4> 0.00%<F3>
Portfolio turnover rate 202.84% 235.65 0.00%<F2>
<F1> For the period from commencement of operations (June 27, 1997) through
June 30, 1997.
<F2> Not annualized.
<F3> Annualized.
<F4> The ratios of expenses to average net assets and net investment loss to
average net assets exclude fees paid by the Adviser. Absent fees paid by
the Adviser, the ratios of expenses to average net assets and net
investment loss to average net assets would have been 2.12% and (1.25)%
for the year ended June 30, 1999 and 3.64% and (2.41)% for the year ended
June 30, 1998, respectively.
<F5> Computed based on average shares outstanding
18
<PAGE>
ARTISAN FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
-------------------------------------------------------------------------------
SMALL CAP FUND
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Year Year Year Period
Ended Ended Ended Ended Ended
For a share outstanding throughout each period 6/30/99 6/30/98 6/30/97 6/30/96 6/30/95<F1>
-------- --------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $14.66 $15.11 $14.67 $11.52 $10.00
Income from investment operations:
Net investment loss (0.08) (0.10) (0.04) (0.07) (0.01)
Net realized and unrealized gain (loss) on
investments (2.53) 2.23 1.55 3.32 1.53
------- ------- ------- ------ ------
TOTAL FROM INVESTMENT OPERATIONS (2.61) 2.13 1.51 3.25 1.52
------- ------- ------- ------ ------
DISTRIBUTIONS PAID TO SHAREHOLDERS:
Net realized gains on investment transactions (0.96) (2.58) (1.07) (0.10) _
------- ------- ------- ------ ------
NET ASSET VALUE, END OF PERIOD $11.09 $14.66 $15.11 $14.67 $11.52
======= ======= ======= ====== ======
Total return (17.0)% 14.7% 11.3% 28.3% 15.2%<F2>
Ratios/supplemental data:
Net assets, end of period (millions) $174.6 $304.1 $267.8 $400.0 $99.3
Ratio of expenses to average net assets 1.37% 1.33% 1.41% 1.52% 2.00%<F3>
Ratio of net investment income to average
net assets (0.67)% (0.74)% (0.73)% (0.75)% (0.59)%<F3>
Portfolio turnover rate 155.38% 134.67% 87.18% 105.19% 9.28%<F2>
<F1> For the period from commencement of operations (March 28, 1995) through
June 30, 1995.
<F2> Not annualized.
<F3> Annualized.
</TABLE>
For more information call 800.344.1770 or visit our website at
WWW.ARTISANFUNDS.COM
19
<PAGE>
ARTISAN FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
-------------------------------------------------------------------------------
SMALL CAP VALUE FUND
-------------------------------------------------------------------------------
Year Period
Ended Ended
June 30, June 30,
For a share outstanding throughout each period 1999 1998<F1>
------ --------
Net asset value, beginning of period $11.37 $10.00
Income from investment operations:
Net investment loss (0.03) (0.03)
Net realized and unrealized gains on securities (0.21)<F4> 1.40
------- ------
TOTAL FROM INVESTMENT OPERATIONS (0.24) 1.37
------- ------
DISTRIBUTIONS PAID TO SHAREHOLDERS:
Net realized gains on investment transactions (0.54) _
------- ------
NET ASSET VALUE, END OF PERIOD $10.59 $11.37
======= ======
Total return (1.0)% 13.7%<F2>
Ratios/supplemental data:
Net assets, end of period (millions) $77.8 $47.2
Ratio of expenses to average net assets 1.66% 1.93%<F3>
Ratio of net investment loss to average
net assets (0.45)% (0.50)%<F3>
Portfolio turnover rate 49.29% 52.58%<F2>
<F1> For the period from commencement of operations (September 29, 1997)
through June 30, 1998.
<F2> Not annualized.
<F3> Annualized.
<F4> The amount shown may not correlate with the aggregate gains and losses of
portfolio securities due to the timing of subscriptions and redemptions
of fund shares
20
<PAGE>
ORGANIZATION, MANAGEMENT & MANAGEMENT FEES
ORGANIZATION. Each Artisan Fund is a series of Artisan Funds, Inc.
Artisan International Fund is divided into two share classes. Information for
the Artisan International Fund (Institutional Shares) is available under
separate prospectus.
MANAGEMENT. Each Artisan Fund is managed by Artisan Partners Limited Partnership
(Artisan Partners), which selects the Fund's investments and handles its
business affairs under the direction of the board of directors. Artisan Partners
was organized in 1994 and, as of September 30, 1999, manages approximately $3.1
billion for Artisan Funds and institutional clients. Artisan Partners is a
limited partnership managed by its general partner, Artisan Investment
Corporation. The address is: Artisan Partners, 1000 North Water Street, Suite
1770, Milwaukee, Wisconsin 53202-3197.
ARTISAN INTERNATIONAL FUND
MARK L. YOCKEY, portfolio manager, is a Managing Director of Artisan Partners
and a Vice President of Artisan Funds. He joined Artisan Partners in 1995. From
1990 to 1995, Mr. Yockey was portfolio manager of United International Growth
Fund and a Vice President of Waddell & Reed, Inc. Prior to assuming fund
management responsibilities, he served as an equity analyst with Waddell & Reed.
Mr. Yockey holds BA and MBA degrees from Michigan State University and is a
Chartered Financial Analyst.
ARTISAN MID CAP FUND
ANDREW C. STEPHENS, portfolio manager, is a Managing Director of Artisan
Partners and a Vice President of Artisan Funds. He joined Artisan Partners in
1997. From 1993 to 1997, Mr. Stephens was portfolio co-manager of the Strong
Asset Allocation Fund. From 1994 to 1996, he served as senior research analyst
for the Strong Common Stock Fund and Strong Opportunity Fund.
Mr. Stephens holds a BS degree in Economics from the University of Wisconsin -
Madison.
For more information call 800.344.1770 or visit our website at
WWW.ARTISANFUNDS.COM
21
<PAGE>
ARTISAN SMALL CAP FUND
CARLENE MURPHY ZIEGLER, portfolio co-manager, is a Managing Director
of Artisan Partners and a Director of Artisan Funds. Prior to founding Artisan
Partners in 1994, she was portfolio co-manager of Strong Common Stock Fund and
Strong Opportunity Fund.
Ms. Ziegler holds BA and MA degrees from the University of Illinois and an MBA
from the University of Chicago Graduate School of Business. She is a Chartered
Financial Analyst and has been a frequent member of the Barron's Roundtable.
MARINA T. CARLSON, portfolio co-manager, is a Managing Director of Artisan
Partners and a Vice President of Artisan Funds. Prior to joining Artisan
Partners, she was employed by Strong Capital Management, Inc., where she served
as manager of Strong Mid Cap Disciplined Fund (from its inception in December
1998 through March 1999) and co-manager of Strong Opportunity Fund and Strong
Common Stock Fund (from 1993 through December 30, 1998).
Ms. Carlson holds a BBA in Finance from Drake University and an MBA in Finance
from DePaul University. She is a Chartered Financial Analyst.
ARTISAN SMALL CAP VALUE FUND
SCOTT C. SATTERWHITE, portfolio manager, is a Managing Director of Artisan
Partners and a Vice President of Artisan Funds. Prior to joining Artisan
Partners in 1997, Mr. Satterwhite was Senior Vice President and portfolio
manager at Wachovia Corporation. From 1993 to 1997, Mr. Satterwhite was
portfolio manager of the Biltmore Special Values Fund in addition to being a
personal trust portfolio manager and manager of the Georgia Personal Trust
Portfolio Group.
Mr. Satterwhite earned his BA degree from the University of the South and MBA
from Tulane University. He is a Chartered Financial Analyst.
22
<PAGE>
MANAGEMENT FEES
Each Fund pays a management fee to Artisan Partners for serving as its
investment adviser and providing administrative services. The fee is determined
as a percentage of average daily net assets. For the fiscal year ended June 30,
1999, the management fees paid by the Funds were:
Artisan International Fund.............0.99%
Artisan Mid Cap Fund...................1.00%
Artisan Small Cap Fund.................1.00%
Artisan Small Cap Value Fund...........1.00%
INVESTING WITH ARTISAN FUNDS
Each Artisan Fund is 100% no-load. The Fund pays its own operating expenses,
including the investment management fee. You pay no commissions, no 12b-1 fees,
and no hidden charges or expenses.
MINIMUM INVESTMENTS
To open an account $1,000<F1>
To add to an account $50
Minimum balance required $500
<F1>THE FUND WILL WAIVE THE INITIAL MINIMUM OF $1,000 IF YOU INVEST THROUGH THE
AUTOMATIC INVESTMENT PLAN, EXPLAINED LATER ON PAGE 27.
For more information call 800.344.1770 or visit our website at
WWW.ARTISANFUNDS.COM
23
<PAGE>
HOW TO BUY SHARES
------------------------------------------------------------------------------
MAIL
TO OPEN AN ACCOUNT:
Complete and sign the new account application. Mail it to the address on the
application, along with your check or money order for $1,000 or more. Make you
check or money order payable to "Artisan Funds" or to the name of the fund in
which you are investing. Third-party checks will not be accepted.
TO ADD TO AN ACCOUNT:
Put your account number on a check or money order for $50 or more. Make your
check or money order payable to "Artisan Funds" or to the name of the fund in
which you are investing. Mail it, along with the form at the bottom of your
account statement, to the address on your account statement. Third-party checks
will not be accepted.
DELIVERY:
FOR REGULAR MAIL DELIVERY: FOR OVERNIGHT DELIVERY:
Artisan Funds Artisan Funds
P.O. Box 8412 c/o Boston Financial
Boston, MA 02266-8412 66 Brooks Drive
Braintree, MA 02184
800.344.1770
------------------------------------------------------------------------------
TELEPHONE 800.344.1770
TO OPEN AN ACCOUNT:
You may open a new account by telephone only 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 by electing it on
your new account application. If you did not do so, please request and complete
the shareholder options form available at www.artisanfunds.com or by calling
800.344.1770.
24
<PAGE>
TO ADD TO AN ACCOUNT:
The telephone transaction option enables you to add from $50 to $25,000 to your
account by telephone. It also lets you exchange among Artisan Funds by
telephone.
You may elect the telephone transaction option on your application or - at a
later date - by completing the shareholder options form.
------------------------------------------------------------------------------
WIRE
TO OPEN AN ACCOUNT:
Please call 800.344.1770 for instructions on opening an account by wire.
TO ADD TO AN ACCOUNT:
Please call 800.344.1770 for instructions on adding to an account by wire.
WHO IS ELIGIBLE TO INVEST IN A CLOSED ARTISAN FUND?
The Artisan Small Cap Fund and the Artisan Small Cap Value Fund
have announced that they intend to close to most new investors when they reach
approximately $300 million and $250 million in total assets, respectively. The
following eligibility criteria will apply to both Funds when they are closed.
If you are a shareholder in a Fund when it closes, you may make additional
investments in that Fund and reinvest your dividends and capital gain
distributions, even though the Fund has closed.
You may open a new account in a closed Fund only if:
- you are already a shareholder (in your own name or as beneficial owner of
shares held in someone else's name) of that Fund;
- you are a shareholder with combined balances of $100,000 in any of the
Artisan Funds (in your own name or as beneficial owner of shares held in
someone else's name);
- your business or other organization is already a shareholder of the Fund and
you are opening an account for an employee benefit plan sponsored by that
organization or an affiliated organization;
For more information call 800.344.1770 or visit our website at
WWW.ARTISANFUNDS.COM
25
<PAGE>
- you are transferring or doing a "rollover" into a Fund 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 an employee benefit plan sponsored by an institution that
also sponsors (or is an affiliate of an institution that sponsors) another
employee benefit plan account that is a shareholder of the Fund when it
closes;
- you are a director or officer of Artisan Funds, 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 with the Fund or at least $1,000,000 of client
assets invested with Artisan Funds on or before the Fund closes, or at the
time of your application.
You may continue to add to your existing Fund account(s) through the
reinvestment of dividends and distributions from the Fund, and through the
purchase of additional Fund shares, even after the Fund closes. 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 advisor or planner may continue to buy shares for existing
and new clients.
Call us at 800.344.1770 if you have questions about your ability to invest.
26
<PAGE>
AUTOMATIC INVESTMENT PLAN (AIP)
This service is a convenient way to make regular, systematic investments into
your Artisan Fund. Once a month, you purchase shares by transferring money from
your designated checking or savings account directly into your Artisan Fund.
Simply decide how much you want to invest (the monthly minimum is $50) and the
day (between the 3rd and the 28th) that you want the transfer to take place.
The rest is automatic. There are no telephone calls to make, no monthly forms to
complete, no trips to the post office. And you're not locked in. If you wish to
discontinue the AIP, just notify us in writing.
TO OPEN AN ACCOUNT:
Complete and sign the account application including the Automatic Investment
Plan section of your account application.
If you choose the Automatic Investment Plan when you open your account, the
minimum initial investment will be waived.
TO ADD TO AN ACCOUNT:
To add this convenient feature to your Artisan Fund account, please call
800.344.1770 or visit our website at www.artisanfunds.com for a shareholder
options form.
For more information call 800.344.1770 or visit our website at
WWW.ARTISANFUNDS.COM
27
<PAGE>
HOW TO SELL SHARES
You may request to take money out of your account at any time by selling some or
all of your shares. You will receive the share price calculated after your order
is received by the Fund or its authorized agent.
Some redemptions require SIGNATURE GUARANTEES. See page 36.
The following procedures apply ONLY TO NON-IRA ACCOUNTS. To sell shares in an
IRA, you must send us both a letter of instruction as described below and an IRA
distribution form. You may request the form by calling 800.344.1770 or by
visiting our website at www.artisanfunds.com.
------------------------------------------------------------------------------
MAIL
INDIVIDUAL, JOINT OWNERS, SOLE PROPRIETORSHIPS, UGMA AND UTMA
Mail a letter of instruction including: the Fund's name; your account number;
each owner's name and address; the dollar amount or number of shares to be sold;
and the signature of each owner as it appears on the account.
TRUST
All Trustees must sign the letter of instruction.
FOR REGULAR MAIL DELIVERY: FOR OVERNIGHT DELIVERY:
Artisan Funds Artisan Funds
P.O. Box 8412 c/o Boston Financial
Boston, MA 02266-8412 66 Brooks Drive
Braintree, MA 02184
ALL OTHERS
Call 800.344.1770 for instructions.
------------------------------------------------------------------------------
TELEPHONE 800.344.1770
Available to all account types except IRAs
With the telephone redemption option, you can sell from $500 to $25,000 worth of
shares per day by telephone. You automatically have this option unless you
declined it on your account application. If you did decline and would like to
add it, call 800.344.1770 or visit our website at www.artisanfunds.com for a
shareholder options form.
28
<PAGE>
-----------------------------------------------------------------------------
WIRE
Available to all account types except IRAs
We will transmit payment by wire to a pre-authorized bank account. Usually, the
funds will arrive at your bank the next business day after Artisan Funds
receives your redemption request. This option is available to you if you
enclosed a voided check with your account application or have subsequently
completed a shareholder options form to have this featured added to your Artisan
Funds account. The fee for this service is currently $5.00 per wire transaction.
SYSTEMATIC WITHDRAWALS
Available to all account types except IRAs
This service lets you withdraw a set amount from your account at regular
intervals. To be eligible for systematic withdrawal, you must have at least
$5,000 in your Artisan Fund Account. You must withdraw at least $50 per
transaction. If you'd like to add this option, please call us at 800.344.1770 or
visit our website at www.artisanfunds.com for a shareholder options form.
For more information call 800.344.1770 or visit our website at
WWW.ARTISANFUNDS.COM
29
<PAGE>
WHAT TYPE OF ACCOUNT WOULD YOU LIKE?
------------------------------------------------------------------------------
RETIREMENT ACCOUNTS REQUIRE A SPECIAL APPLICATION.
Please call us at 800.344.1770 or visit www.artisanfunds.com to request one.
------------------------------------------------------------------------------
INDIVIDUAL OR JOINT OWNERSHIP
These are intended for your general investment needs. Individual accounts are
owned by one person. Joint accounts can have two or more owners.
------------------------------------------------------------------------------
GIFT OR TRANSFER TO A MINOR (UGMA, UTMA)
These custodial accounts let you give money to a minor for any purpose. This
gift is irrevocable, and the minor gains control of the account once he/she
reaches the age of majority. Your application should include the minor's social
security number.
------------------------------------------------------------------------------
TRUST FOR ESTABLISHED EMPLOYEE BENEFIT OR PROFIT-SHARING PLAN
The trust or plan must be established before you can open an account. Please
include the date of the trust or plan on the application.
------------------------------------------------------------------------------
BUSINESS OR ORGANIZATION
This account is for a corporation, association, partnership or similar
institution. Along with your application, please enclose a certified corporate
resolution that indicates which officers are authorized to act.
------------------------------------------------------------------------------
RETIREMENT
A retirement account enables you to defer taxes on investment income and capital
gains. Your contributions may be tax-deductible.
- INDIVIDUAL RETIREMENT ACCOUNT (IRA). You may invest up to $2,000 per
tax year in an IRA if you are of legal age, under 70 1/2 and have "earned"
(non-investment) income. 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 your
combined earned income is at least $4,000 and you file a joint return.
30
<PAGE>
- ROTH IRA. Compared to the traditional IRA, the Roth IRA has different
eligibility requirements and tax treatment. If you're a single taxpayer with
adjusted gross income up to $95,000, you may contribute up to $2,000
per year - or up to $4,000 per year if you're married with adjusted gross
income up to $150,000 per year and you file a joint return. You also must have
earned income equal to your contributions, as with a traditional IRA, but you
can contribute to a Roth IRA even if you are over 70 1/2. Your contributions
to a Roth IRA are not tax-deductible. But your withdrawals are not taxable if
you've held your IRA for at least five years and are at least 59 1/2,
disabled, or use the proceeds (up to $10,000) to purchase a first home.
The amount you can contribute to a Roth IRA in any year is reduced by the
amount you contribute to a traditional IRA, and vice-versa.
- ROLLOVER IRA. This plan offers you special tax advantages for certain
distributions from employer-sponsored retirement plans.
- SIMPLIFIED EMPLOYEE PENSION PLAN (SEP-IRA). If you have a small business or
self-employment income, this plan lets you make annual tax-deductible
contributions of up to 15% of the first $160,000 of compensation for you and
any eligible employees.
- OTHER RETIREMENT PLANS. You may also use an Artisan Fund for Keogh, profit
sharing and money purchase plans, 403(b) plans and 401(k) plans. The plan
trustee must establish the appropriate account; Artisan Funds does not offer
prototype plans.
The above is just a summary of the types of retirement accounts available. When
we send your retirement-account application, we will include an IRA Disclosure
Statement. It contains more detailed information about the requirements for
specific retirement accounts, including a summary of the custodian fees which
you may incur for account set-up and maintenance.
FOR MORE INFORMATION ABOUT THE TAX ADVANTAGES AND CONSEQUENCES OF THESE VARIOUS
IRAS AND RETIREMENT PLAN ACCOUNTS, PLEASE CONSULT YOUR TAX ADVISOR.
For more information call 800.344.1770 or visit our website at
WWW.ARTISANFUNDS.COM
31
<PAGE>
SHAREHOLDER & ACCOUNT PROCEDURES
STATEMENTS AND REPORTS
As an Artisan Fund investor, you will receive:
- Confirmation statements - after every transaction in your account or change in
your account registration.
- Quarterly account statements.
- Annual and semi-annual reports with financial statements.
- Year-end tax statements.
We suggest you keep each quarterly and year-end account statement with your
other important financial papers. You may need them for tax purposes.
If you need copies of statements, call 800.344.1770 or visit our website at
www.artisanfunds.com. Copies of this year's or last year's statements are free
of charge; for earlier years, there is a $10 processing fee.
WEBSITE (WWW.ARTISANFUNDS.COM)
Our website at www.artisanfunds.com is a good source of information on the
Artisan Funds. You can obtain a prospectus, an application or other important
forms, as well as periodic reports and updates on the Funds.
SHARE PRICE
Each Artisan Fund is open for business every day the New York Stock Exchange
("NYSE") is open. Shares will not be priced on days when the NYSE is closed.
Each Artisan Fund buys and sells its shares each day, at the net asset value per
share.
A Fund's NET ASSET VALUE PER SHARE is the value of a single share. It is
computed by totaling the Fund's investments, cash, and other assets, subtracting
its liabilities, then dividing the result by the number of shares outstanding.
The net asset value is computed daily at the NYSE closing time usually 3:00 p.m.
Central Time, but sometimes earlier.
Fund securities and assets are valued chiefly by quotations from the primary
market in which they are traded. If quotations are not readily
32
<PAGE>
available, they are valued by a method that the board of directors believes
reflects a fair value.
Values of foreign securities are translated from local currencies into U.S.
dollars using current exchange rates. With respect to foreign securities -
traded primarily on foreign exchanges - a Fund's share price may change on days
when the Fund is not open for purchase or sale.
PURCHASES
- Your purchases must be in U.S. dollars, and your checks must be drawn on U.S.
banks.
- The Funds do not accept cash, credit cards or third-party checks.
- If your check or telephone purchase order does not clear, your purchase will
be cancelled. You will also be liable for any resulting losses or fees a Fund
or its transfer agent incurs.
- The price you pay for shares is the net asset value per share next calculated
after your investment is received. An order is considered received when
the Fund or its authorized agent receives and accepts an application or
appropriate instruction along with the intended investment if applicable.
- A Fund may reject any purchase order it deems inappropriate for example, one
that appears so large that it would disrupt management of the Fund, or an
order from someone ineligible to invest.
- A holiday, weekend or other interruption can affect the normal processing of
an investment. Thus, in the Automatic Investment Plan (AIP), your monthly
investment may be transferred from your bank to your Fund account either
earlier or later than the date you selected. Artisan Funds will not be
responsible for non-sufficient funds fees. If your AIP does not clear, your
purchase will be cancelled. You will also be liable for any resulting losses
or fees a Fund or its transfer agent incurs.
- A Fund may immediately terminate your ability to make automatic investments
and telephone purchases if an item is not paid by your financial institution.
For more information call 800.344.1770 or visit our website at
WWW.ARTISANFUNDS.COM
33
<PAGE>
MINIMUM BALANCES
It is very expensive for a Fund to maintain small accounts, and that cost is
borne by all the Fund's investors. For this reason, each Fund reserves the right
to close your account if its value falls below $500. However, before closing a
small account, the Fund would notify you and give you at least 30 days to bring
your account's value up to the minimum.
If you discontinue an Automatic Investment Plan before your account reaches
$1,000, that account may also be closed.
If you participate in systematic withdrawal and your account has insufficient
funds to meet a withdrawal, the amount remaining will be completely redeemed.
AUTHORIZED AGENTS
The Fund may authorize certain financial services companies, broker-dealers or
other authorized agents to accept share purchase and redemption orders on the
Fund's behalf. If you buy shares through an authorized agent, you will pay the
Fund's net asset value per share plus any transaction charge imposed by the
agent.
It is possible that an authorized agent may not charge you a direct transaction
fee. It may, however, charge a fee for accounting and shareholder services that
it provides to the Fund on your behalf. This fee may be a percentage - currently
up to 0.35% - of the annual average value of accounts for which the authorized
agent provides services. The Fund's portion of this fee does not exceed what it
would normally pay if your shares were registered directly with its own transfer
agent. Artisan Partners pays the balance of the fee.
34
<PAGE>
REDEMPTIONS
- Normally, redemption proceeds will be mailed to you within seven days after
receipt and acceptance of your redemption request.
- If you have recently made a purchase, the Fund may withhold redemption
proceeds until it is reasonably satisfied that it has received payment. This
confirmation process can take up to fifteen days.
_ If you make a telephone redemption, the Fund will send payment in 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
which (currently $5.00) will be deducted from the payment. Your bank also may
impose a fee for the incoming wire or incoming EFT. 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, other
than weekends or holidays, the NYSE is closed, its trading is restricted or as
permitted by the Securities and Exchange Commission (SEC).
- If you place a redemption order through an authorized agent, your redemption
proceeds will reflect the net asset value per share next computed after the
agent's receipt of your order, less any redemption fees imposed by the agent.
If a Fund sends you a check - for a redemption, systematic withdrawal payment or
cash distribution - that is returned "undeliverable" or remains uncashed for six
months, the Fund will cancel the check and reinvest the proceeds in your Fund at
the net asset value per share on the date of cancellation. And, if applicable,
the Fund will (a) cancel your systematic withdrawal payments, honoring
withdrawals only by request and (b) automatically reinvest your future dividends
and capital gains, even if you had elected cash payment.
Each Fund intends to pay all redemptions in cash. During any 90-day period for
any one shareholder, a Fund is obligated to redeem shares solely in cash up to
the lesser of $250,000 or 1% of the Fund's net assets. Redemptions in excess of
these limits may be paid wholly or partly by an in-kind distribution of
securities.
For more information call 800.344.1770 or visit our website at
WWW.ARTISANFUNDS.COM
35
<PAGE>
SIGNATURE GUARANTEES
To protect you and your Fund from fraud, the following redemption requests and
account changes must be submitted in writing and include a signature guarantee:
- If 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.
- If you ask that a check be mailed to an address other than the one on your
account.
- If you ask that a check be made payable to someone other than the account
owner.
- If you wish to add the telephone redemption option to your existing account.
- If you wish to transfer the ownership of your account.
- If you have changed the address on your account by phone within the last 60
days.
You should be able to obtain a signature guarantee from a bank, broker-dealer,
securities exchange or association, clearing agency, savings association or
credit union if authorized under state law. A NOTARY PUBLIC CANNOT PROVIDE A
SIGNATURE GUARANTEE.
EACH OWNER'S SIGNATURE MUST BE GUARANTEED SEPARATELY. FOR EXAMPLE, A JOINT
ACCOUNT WITH TWO OWNERS WOULD REQUIRE TWO SIGNATURE GUARANTEES.
36
<PAGE>
ACCOUNT REGISTRATION
If you wish to change the address on your account, call us at 800.344.1770. Your
Fund will send a written confirmation of the change to both your old and new
addresses.
We prefer that a change of address request be submitted in writing with a
signature guarantee. If you make your request by phone, we will not honor a
telephone redemption for the following 60 days. During that period, we will
require written redemption requests with signature guarantees.
TELEPHONE TRANSACTIONS
You may perform many transactions - including exchanges, purchases and
redemptions - by telephone.
You may place telephone trades only during the hours that the NYSE
is open for business (generally weekdays between 7:00 a.m. and 3:00 p.m. Central
Time).
To prevent unauthorized transactions in your account, your Fund will take
precautions designed to verify the identity of every caller. It may record a
call, request more information and send written confirmation of telephone
transactions. If the Fund fails to follow reasonable precautions, it may be
considered responsible for resulting losses.
You should verify the accuracy of each telephone transaction as soon as you
receive your confirmation statement.
For more information call 800.344.1770 or visit our website at
WWW.ARTISANFUNDS.COM
37
<PAGE>
TELEPHONE EXCHANGE PLAN
This plan permits you to transfer investments among the Artisan Funds. Each
exchange between accounts must be at least $1,000. The price of shares exchanged
is determined at the end of that day's trading session.
Please note: An exchange is a sale and may have tax consequences for you.
TELEPHONE EXCHANGE PLAN RESTRICTIONS:
- If you wish to exchange between Funds, be sure both accounts are registered in
the same name, with the same address and taxpayer identification number.
- You may open a Fund account by telephone exchange from another Artisan Fund
account only if you previously chose the telephone transaction option for the
Fund from which you want to make the exchange.
- If your account is subject to backup withholding, you may not use the
telephone exchange plan.
- Excessive trading can hurt both performance and shareholders. Thus, if you
make excessive use of the telephone exchange plan, Artisan Funds may terminate
your access to the plan or limit the number of transfers you can make in a
calendar year.
- Artisan Funds reserves the right to terminate or modify the telephone exchange
plan at any time. If Artisan Funds finds it necessary to do either, it will
try to notify you in advance.
DIVIDENDS, CAPITAL GAINS & TAXES
As a shareholder in an Artisan Fund, you are entitled to your share of its net
income and any gains realized on its investments. Each Fund intends to
distribute substantially all of its net income and net realized capital gains to
investors at least annually.
38
<PAGE>
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to receive
your distributions. If you later want to change, you may either submit a written
request or call us at 800.344.1770.
Each Fund offers three options:
REINVESTMENT OPTION. Your dividends and capital gain distributions will be
reinvested in additional shares of the Fund. If you do not indicate a choice on
your application, we will automatically reinvest your distributions.
INCOME-ONLY OPTION. We will automatically reinvest your capital gain
distributions, but send you a check for dividends.
CASH OPTION. We will send you a check for all distributions.
In IRA accounts, all distributions are automatically reinvested. Otherwise, they
could be subject to income tax and penalties. After you are 59 1/2, you may
request payment of distributions in cash, although these too 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.
TAXES
As you should with any investment, consider how the return on your investment in
a Fund will be taxed. If your investment is a tax-deferred account - an IRA, for
example - the following tax discussion does not apply.
TAXES ON DISTRIBUTIONS. Distributions are subject to federal income tax, and may
be subject to state or local taxes. If you are a U.S. citizen residing outside
the United States, your distributions may also be taxed by the country in which
you reside.
For more information call 800.344.1770 or visit our website at
WWW.ARTISANFUNDS.COM
39
<PAGE>
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 are taxable as if you received
them 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. The tax rate of a capital gain depends on the
length of time that the Fund held the asset it sold.
Given their objectives and strategies, each of the Artisan Funds will chiefly
produce capital gains distributions, as opposed to current income. Every
January, each of your Funds will send you and the IRS a statement - called Form
1099 - showing the amount of every taxable distribution you received in the
previous calendar year.
TAXES ON TRANSACTIONS. When you redeem shares, you will experience 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. You may be subject to tax.
Whenever you sell shares of a 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 that reports, among other things, your average
cost basis of the shares you sold. This will allow you or your tax preparer to
determine the tax consequences of each redemption. However, be sure to keep your
regular account statements; their information will be essential in verifying the
amount of your capital gains or losses.
To invest, you must be a U.S. resident with a Social Security or taxpayer
identification number. When you sign your account application, you must 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 this procedure, the IRS can require the Fund to
withhold 31% of your taxable distributions and redemptions.
40
<PAGE>
For more detail on the Artisan Funds, you may request the Statement of
Additional Information, which is incorporated herein by reference.
You can find more information about a Fund's investments in its annual and semi-
annual reports to shareholders. These documents discuss the market conditions
and investment strategies that significantly affected the Fund's performance
during its most recent fiscal period.
For a free copy of any of these documents, call 800.344.1770. Also call this
number if you have a question or would like to receive other information about
an Artisan Fund. You may also obtain copies of the reports to shareholders and
other information about the Artisan Funds on the Artisan Funds' website at
www.artisanfunds.com.
Information about the Funds, including the Statement of Additional Information,
is also available to you through the Securities and Exchange Commission. You can
review and copy Fund documents at the Commission's Public Reference Room, 450
5th St., N.W., Washington, D.C. 20549-6009. The telephone number there is
800.SEC.0330.
You may also request Fund documents by accessing the Commission's website at:
http://www.sec.gov.
And you may obtain copies for a fee by writing to: Securities and Exchange
Commission, Public Reference Section, 450 5th St., N.W., Washington, D.C. 20549-
6009.
811-8932
(ARTISAN LOGO) ARTISAN FUNDS
INVESTMENT MANAGEMENT PRACTICED WITH
INTELLIGENCE AND DISCIPLINE IS AN ART
For more information call 800.344.1770 or visit our website at
WWW.ARTISANFUNDS.COM
<PAGE>
(Artisan Logo)
Prospectus
ARTISAN INTERNATIONAL FUND
(Institutional Shares)
October 29, 1999
Supplemented July 1, 2000
Artisan International Fund offers two classes of shares. Institutional Shares
are offered by this prospectus to institutional investors including, but not
limited to, employee benefit plans, endowments, foundations, trusts,
corporations and individuals able to meet the Fund's minimum investment
requirement of $2 million.
An investment in the Fund is 100% no-load, which means you pay no sales
charges. You also pay no 12b-1 fees. However, you bear your share of annual
fund operating expenses (including the investment management fee) which are
deducted from Fund assets.
ARTISAN FUNDS, INC.
Suite 1770
1000 North Water Street
Milwaukee, WI 53202-3197
Be sure to read this prospectus before you invest. And please keep it on file
for future reference.
This prospectus presents essential facts about the Fund, including investment
strategies, management fees and services available to you as an investor.
If you have a question about any part of this prospectus, please call the number
below. An Artisan Funds representative will be happy to help you.
1-800-399-1770
-----------------
The Securities and Exchange Commission has not approved any fund's shares or
determined whether this prospectus is accurate or complete. Anyone who tells you
otherwise is committing a crime.
<PAGE>
TABLE OF CONTENTS
Important Legal Information.......................Cover
Goal, Strategy & Philosophy...........................2
Risks You Should Consider.............................3
Year 2000 Information.................................3
Euro Information......................................4
Total Return for Calendar Year........................5
Average Annual Total Returns..........................6
Fees & Expenses.......................................6
Who is Eligible to Invest?............................7
The Fund's Financial Highlights.......................8
Organization, Management & Management Fee.............9
Investing with the Fund..............................10
Minimum Investments.............................10
How to Buy Shares....................................11
How to Sell Shares...................................13
Shareholder & Account Policies.......................15
Statements & Reports............................15
Share Price.....................................15
Dividends, Capital Gains & Taxes................16
Distribution Options............................16
Taxes...........................................16
1
<PAGE>
GOAL, STRATEGY & PHILOSOPHY
------------------------------------------------------------------------------
GOAL
Artisan International Fund seeks maximum long-term capital growth. The Fund may
change this goal without the approval of shareholders.
------------------------------------------------------------------------------
STRATEGY & PHILOSOPHY
Under normal circumstances, the Fund invests at least 65% of its total assets in
stocks of foreign companies.
Through its own research process, the Fund invests in a broadly diversified
portfolio of international growth stocks, concentrating on industries or
investment themes that present accelerating growth prospects and companies that
capitalize on that growth. The Fund's investment strategy focuses on stock
selection.
Artisan Partners', the adviser to the Fund, research method also looks at
industry selection, theme selection and country selection. It favors
countries and regions with improving or rapidly expanding economies. To
determine economic growth, it assesses factors such as gross domestic product
growth, corporate profitability, current account and currency issues,
interest rates, economic climate and social change. Having identified
favorable areas, it eliminates those whose stock markets appear to be
overvalued.
In countries where the economic and market conditions provide attractive
valuations, Artisan Partners seeks companies that seem well positioned for
strong, sustainable growth. As the first step to security selection, Artisan
Partners narrows its focus to industries or themes likely to experience
meaningful growth. It focuses on well-managed companies with above-average
financial characteristics, increasing earnings per share and dominant or
increasing market share in strong industries. Having isolated promising
companies, Artisan Partners then purchases those whose stocks are
attractively valued.
- Under ordinary circumstances, the Fund is fully invested in common stocks. At
times, however, Artisan Partners may determine that market or economic
conditions warrant a temporary defensive position. During those periods, the
Fund's assets may not be invested in accordance with its strategy and the
Fund may not achieve its investment objective. In this case, the Fund may
hold up to 100% of its assets in cash, cash equivalents, or short-term
government or corporate obligations.
- Changes in security prices, currency exchange rates and other factors can
affect the portfolio's value.
Artisan Partners may decide to sell a stock when a company's valuation
approaches its growth rate, changing circumstances affect the original reasons
for a company's purchase, a company exhibits deteriorating fundamentals or more
attractive alternatives exist.
2
<PAGE>
PRINCIPAL RISKS YOU SHOULD CONSIDER
The Fund invests primarily in common stocks. Over time, 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.
When you sell your shares, they may be worth more or less than you paid for
them. You can lose money by investing in the Fund.
The Fund does not pursue income and is not a balanced investment plan. In
addition, there can be no assurance that it will achieve its investment goal.
The percentage of the Fund's assets invested in various industries and sectors
will vary from time to time depending on the portfolio management team's
perception of investment opportunities. Investments in particular industries
or sectors may be more volatile than the overall stock market. For example,
technology, science and communications are rapidly changing fields, and
stocks of these companies may be suject to more abrupt or erratic market
movements than the stock market in general. Consequently, a higher percentage
of holdings in a particular industry or sector may have the potential for a
greater impact on the Fund.
Below are the principal investment risks of the Fund.
- Foreign stocks as an asset class may underperform U.S. stocks.
- Foreign stocks tend to be more volatile than U.S. stocks.
- Investments in foreign securities (including American Depository Receipts,
or "ADRs") are subject to risks. These risks include: currency exchange rate
fluctuation; less available public information about the issuers of
securities; less stringent regulatory standards; lack of uniform accounting,
auditing and financial reporting standards; and country risks including less
liquidity, high inflation rates, unfavorable economic practices and
political instability.
- The Fund tries to lower the risks inherent in foreign investing through a
highly selective investment strategy and broad diversification by country,
industry and company.
YEAR 2000 INFORMATION
As you may be aware, some of today's computer systems cannot process date-
related information because they are not programmed to distinguish between the
year 2000 and the year 1900 (commonly referred to as the Year 2000 or Y2K
problem).
Artisan Partners is working closely with its service providers to ensure the
proper functioning of the computer systems on which the Fund depends for smooth
operation. Based on a review of internal and external systems to-date,
Artisan Partners does not anticipate any material impact due to the Year 2000
problem. There can be no assurances, however, that the steps taken by Artisan
Partners will be sufficient to avoid any adverse impact on the Fund.
3
<PAGE>
EURO INFORMATION
On January 1, 1999, eleven of the fifteen member states of the European Union
had their currency exchange rates irrevocably fixed to a single European
currency, the Euro. The Euro has become legal tender in those countries from
that date. National currencies will continue to circulate until they are
replaced by Euro coins and bank notes on July 1, 2002. The pending unification
of European currency and the decision of certain countries not to participate
may create uncertainty in the European markets and thereby increase volatility
of the various currencies and securities. The European securities markets also
may become less liquid.
The Fund invests in securities denominated in the Euro and the exchange rate
between the Euro and the U.S. dollar will have a significant impact on the value
of the Fund's investments. With the advent of the Euro, the participating
countries in the European Monetary Union can no longer follow independent
monetary policies. This may limit a country's ability to respond to economic
downturns or political upheavals, and consequently reduce the value of an
investment in foreign securities. These risks could affect the Fund's
investments and performance, as detailed under "European Currency Unification"
in the Statement of Additional Information.
4
<PAGE>
INVESTMENT RETURNS
The bar chart and table below illustrate certain risks of investing in the
Institutional Shares of the Fund. The bar chart shows the return achieved during
1998 and the table compares the Institutional Shares' average annual total
return for the periods listed to a market index.
TOTAL RETURN - CALENDAR YEAR
ARTISAN INTERNATIONAL FUND - INSTITUTIONAL SHARES
1998 32.51%
Since inception on July 1, 1997, the highest and lowest quarterly returns for
the Institutional Shares were 25.04% and (18.86)% for the quarters ended
December 31, 1998 and September 30, 1998, respectively. The year-to-date return
as of September 30, 1999 was 21.82%.
5
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS
------------------------------------------------------------------------
FOR THE 12 MONTH
PERIOD FROM INCEPTION
ENDED 12/31/98 THROUGH 12/31/98
------------------------------------------------------------------------
ARTISAN INTERNATIONAL FUND 32.51% 16.74%
(INSTITUTIONAL SHARES)
------------------------------------------------------------------------
Morgan Stanley Capital 20.00% 6.43%
International Europe,
Australasia and Far East
Index (EAFE)<F1>
------------------------------------------------------------------------
Institutional Share class inception date: 7/1/97. All returns reflect
reinvested dividends.
<F1> Morgan Stanley Capital International (MSCI) EAFE Index is unmanaged and
includes companies throughout the world, excluding the U.S. and Canada, in
proportion to world stock market capitalization.
FEES & EXPENSES
Below are the fees and expenses that you will pay if you buy and hold
Institutional Shares of the Fund.
------------------------------------------------------------------------------
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Sales charge (load) on purchases......None
Exchange fee..........................None
Redemption fee........................None
6
<PAGE>
------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
THAT ARE DEDUCTED FROM FUND ASSETS
------------------------------------------------------
EXPENSE INTERNATIONAL FUND
(INSTITUTIONAL SHARES)
------------------------------------------------------
MANAGEMENT FEE 0.99%
------------------------------------------------------
12B-1 FEE None
------------------------------------------------------
OTHER EXPENSES 0.18%
------------------------------------------------------
TOTAL OPERATING EXPENSES 1.17%
------------------------------------------------------
EXAMPLE. This example is intended to help you compare the cost of investing in
Institutional Shares of the Fund with that of investing in other mutual funds.
The example assumes you invest $10,000 for the time periods indicated, earn a 5%
return each year, and that operating expenses remain constant.
-----------------------------------------------------
TIME PERIOD INTERNATIONAL FUND
(INSTITUTIONAL SHARES)
-----------------------------------------------------
1 YEAR $119
-----------------------------------------------------
3 YEARS $372
-----------------------------------------------------
5 YEARS $644
-----------------------------------------------------
10 YEARS $1,420
-----------------------------------------------------
This example is for illustration only. It is not meant to suggest actual or
expected costs or returns, which may be more or less than the amounts shown.
WHO IS ELIGIBLE TO INVEST?
Institutional Shares are designed for institutional investors who are able to
meet the high minimum investment requirements, who want maximum long-term
capital growth rather than income, and who have the long-term investment outlook
needed for investing in the stocks of foreign companies.
TO REDUCE COSTS, INSTITUTIONAL SHARES ARE NOT AVAILABLE FOR SALE IN ALL STATES.
TO FIND OUT IF INSTITUTIONAL SHARES ARE AVAILABLE OR CAN BE MADE AVAILABLE IN
YOUR STATE, OR TO OBTAIN AN APPLICATION, CALL 1-800-399-1770. SEE "HOW TO BUY
SHARES."
7
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
The following table is intended to help you understand the Fund's financial
performance since it began operations as it relates to Institutional Shares.
Certain information reflects financial results for a single Institutional Share.
Total return represents the rate you would have earned (or lost) on an
investment, assuming reinvestment of all dividends and distributions. This
information has been audited by PricewaterhouseCoopers LLP, independent
accountants, whose report, along with the Fund's financial statements, is
included in the annual report and the Statement of Additional Information, which
are available on request.
YEAR ENDED YEAR ENDED
For a share outstanding throughout the period 6/30/99 6/30/98
------- -------
Net asset value, beginning of period $16.26 $14.48
Income from investment operations:
Net investment income 0.11<F1> 0.09<F1>
Net realized and unrealized gains on
securities and foreign currency transactions 2.62 3.04
----- -----
TOTAL FROM INVESTMENT OPERATIONS 2.73 3.13
----- -----
Distributions paid to shareholders:
Net investment income (0.05) (0.22)
Net realized gains on
investment transactions (0.24) (1.13)
----- -----
Total distributions paid to shareholders (0.29) (1.35)
----- -----
NET ASSET VALUE, END OF PERIOD $18.70 $16.26
====== ======
Total return 17.6% 24.4%
Ratios/supplemental data:
Net assets, end of period (millions) $179.6<F2> $82.6<F2>
Ratio of expenses to average net assets 1.17% 1.25%
Ratio of net investment income to
average net assets 0.68% 0.68%
Portfolio turnover rate 79.41% 109.42%
<F1> Computed based on average shares outstanding.
<F2> Does not include assets represented by International Shares, which are
offered to retail investors by a separate prospectus.
8
<PAGE>
ORGANIZATION, MANAGEMENT & MANAGEMENT FEE
ORGANIZATION. The Fund is a series of Artisan Funds, Inc. The Fund offers two
classes of shares - International Shares and Institutional Shares. This
prospectus describes Institutional Shares. International Shares are offered to
retail investors through a separate prospectus.
MANAGEMENT. The Fund is managed by Artisan Partners Limited Partnership (Artisan
Partners), which selects the Fund's investments and handles its business affairs
under the direction of the board of directors. Artisan Partners was organized in
1994 and, as of September 30, 1999, manages approximately $3.1 billion for
Artisan Funds and institutional clients. Artisan Partners is a limited
partnership managed by its general partner, Artisan Investment Corporation. The
address is: Artisan Partners, 1000 North Water Street, Suite 1770, Milwaukee,
Wisconsin 53202-3197.
MARK L. YOCKEY, CFA, Portfolio Manager, is a Managing Director of Artisan
Partners and a Vice President of Artisan Funds. He joined Artisan Partners in
1995. From 1990 to 1995, Mr. Yockey was portfolio manager of United
International Growth Fund and a Vice President of Waddell & Reed, Inc. Prior to
assuming fund management responsibilities, he served as an equity analyst with
Waddell & Reed.
Mr. Yockey holds BA and MBA degrees from Michigan State University and holds the
Chartered Financial Analyst designation.
MANAGEMENT FEE. The Fund pays a management fee to Artisan Partners for serving
as its investment adviser and providing administrative services. The fee is
determined as a percentage of average daily net assets. For the fiscal year
ended June 30, 1999, the management fee paid by the Fund was at the annual rate
of 0.99%.
9
<PAGE>
INVESTING WITH THE FUND
THE FUND IS 100% NO-LOAD, which means you pay no sales charges. You also pay
no 12b-1 fees. However, you bear your share of annual fund operating expenses
(including the investment management fee) which are deducted from Fund assets.
--------------------------------------------------------------------------------
MINIMUM INVESTMENTS
To open an account........$2,000,000
To add to an account........$100,000
Minimum balance required..$2,000,000
Each account must separately meet the minimum investment requirements applicable
to Institutional Shares. The Fund reserves the right to close your account if
the value is less than $2 million, unless the reduction in value is due solely
to market depreciation. Before closing an account below this level, the Fund
will notify you and allow you at least 30 days to bring the value of the account
up to the minimum.
10
<PAGE>
HOW TO BUY SHARES
APPLICATIONS FOR INSTITUTIONAL SHARES ARE ONLY MADE AVAILABLE THROUGH ARTISAN
DISTRIBUTORS LLC BY CALLING 1-800-399-1770. Institutional Shares may be
purchased by check or wire. There are no sales commissions or underwriting
discounts.
------------------------------------------------------------------------------
BY WIRE
You may purchase shares by instructing your bank to wire money to Artisan Funds'
custodian bank. Your bank may charge you a fee for sending the wire. IF YOU ARE
OPENING A NEW ACCOUNT BY WIRE TRANSFER, YOU MUST FIRST TELEPHONE ARTISAN
DISTRIBUTORS LLC AT 1-800-399-1770 TO REQUEST AN ACCOUNT NUMBER AND FURNISH YOUR
TAX IDENTIFICATION NUMBER. Artisan Funds will not be responsible for the
consequences of delays, including delays in the banking or Federal Reserve wire
systems.
Wire transfer instructions are:
State Street Bank and Trust Company
Attn: Mutual Funds
Boston, MA 02110
Routing #0110-0002-8
Credit to Artisan International Institutional Fund 662
Deposit DDA 9905-088-2
------------------------------------------------------------------------------
BY CHECK
To make an initial purchase of shares by check, complete and sign the Share
Purchase Application and send it to one of the following addresses with a check
for the total purchase amount payable to "Artisan Funds":
REGULAR MAIL OVERNIGHT DELIVERY
------------ ------------------
Artisan Funds Artisan Funds
c/o Boston Financial Data Services c/o Boston Financial Data Services
P.O. Box 8412 66 Brooks Drive
Boston, MA 02266-8412 Braintree, MA 02184
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SUBSEQUENT INVESTMENTS
You may make subsequent investments by wire transfer using the instructions
given above, or by submitting a check, along with either the stub from your Fund
account confirmation statement or a note indicating the amount of the purchase,
your account number, and the name in which your account is registered. ARTISAN
FUNDS WILL NOT ACCEPT CASH, DRAFTS, THIRD PARTY CHECKS, OR CHECKS DRAWN ON BANKS
OUTSIDE OF THE UNITED STATES. If your order to purchase Institutional Shares is
canceled because your check does not clear, you will be responsible for any
resulting loss incurred by the Fund.
11
<PAGE>
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PURCHASE PRICE & EFFECTIVE DATE
Each purchase of Institutional Shares is made at the net asset value applicable
to Institutional Shares (see "Share Price") next determined after receipt by the
Fund of the check or wire transfer of funds in payment of the purchase.
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GENERAL
Artisan Funds cannot accept a purchase order specifying a particular purchase
date or price per share. Each purchase order must be accepted by an authorized
officer of Artisan Funds or its transfer agent and is not binding until accepted
and entered on the books of the Fund. Once your purchase order has been
accepted, you may not cancel or revoke it; however, you may redeem the shares.
Artisan Funds reserves the right not to accept any purchase order that it
determines not to be in the best interest of the Fund or the Fund's
shareholders.
12
<PAGE>
HOW TO SELL SHARES
You may redeem all or any part of your Institutional Shares upon your written
request delivered to Artisan Funds' transfer agent at one of the following
addresses:
REGULAR MAIL OVERNIGHT DELIVERY
------------ ------------------
Artisan Funds Artisan Funds
c/o Boston Financial Data Services c/o Boston Financial Data Services
P.O. Box 8412 66 Brooks Drive
Boston, MA 02266-8412 Braintree, MA 02184
Your redemption request must:
- identify the Fund and give your account number;
- specify the number of shares or dollar amount to be redeemed;
- be accompanied by a corporate resolution or other authorization in the case
of a redemption by a corporation, trust, partnership or other entity, as
described below; and
- be signed in ink by a duly authorized officer of the shareholder.
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EVIDENCE OF AUTHORITY
Redemption requests by a corporation, trust, partnership or other entity must be
accompanied by evidence of authority of the person or persons signing the
redemption request to so act.
In the case of a corporation, the request must be signed in the name of the
corporation by an officer whose title must be stated, and must be accompanied by
a by-law provision or resolution of the board of directors, certified within 60
days, authorizing the officer to so act. A redemption request from a partnership
or a trust must be signed in the name of the partnership or trust by a general
partner or a trustee and include a signature guarantee. If the trustee is not
named in the account registration, a redemption request by a trust must also
include evidence of the trustee's appointment, such as a certified copy of the
relevant portions of the trust instrument. Under certain circumstances, before
the shares can be redeemed, additional documents may be required in order to
verify the authority of the person seeking to redeem.
13
<PAGE>
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GENERAL REDEMPTION POLICIES
You may not cancel or revoke your redemption order once your instructions have
been received and accepted. Artisan Funds cannot accept a redemption request
that specifies a particular date or price for redemption or any special
conditions. PLEASE CALL 1-800-399-1770 IF YOU HAVE ANY QUESTIONS ABOUT
REQUIREMENTS FOR A REDEMPTION BEFORE SUBMITTING YOUR REQUEST. Artisan Funds
reserves the right to require a properly completed Application before making
payment for shares redeemed.
The price at which your redemption order will be executed is the net asset value
next determined after proper redemption instructions are received. See "Share
Price." Because the redemption price you receive depends upon the net asset
value per share of Institutional Shares at the time of redemption, it may be
more or less than the price you originally paid for the shares and may result in
a realized capital gain or loss.
Artisan Funds will generally wire transfer the proceeds of your redemption to
the bank account designated in your purchase application. If you attempt to
redeem shares within 15 days after they have been purchased by check, Artisan
Funds may delay payment of the redemption proceeds to you until it can verify
that payment for the purchase of those shares has been (or will be) collected.
To reduce such delays, Artisan Funds recommends that your purchase be made by
Federal funds wire through your bank.
Shares in any account you maintain with Artisan Funds may be redeemed to the
extent necessary to reimburse Artisan Funds for any loss it sustains that is
caused by you (such as losses from uncollected checks or any Fund liability
under the Internal Revenue Code provisions on backup withholding relating to
your account).
14
<PAGE>
SHAREHOLDER & ACCOUNT POLICIES
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STATEMENTS & REPORTS
As a Fund investor, you will receive:
- Confirmation statements - after every transaction in your account or change
in your account registration;
- Quarterly account statements;
- Annual and semi-annual reports with financial statements;
- Year-end tax statements.
We suggest you keep each quarterly and year-end account statement with your
other important financial papers. You may need them for tax purposes.
If you need copies of statements, call 1-800-399-1770. Copies of this year's or
last year's statements are free of charge; for earlier years, there is a $10
processing fee.
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SHARE PRICE
The Fund is open for business every day the New York Stock Exchange ("NYSE") is
open. Institutional Shares will not be priced on days when the NYSE is closed.
The Fund buys and sells Institutional Shares each day at the net asset value per
Institutional Share.
The NET ASSET VALUE PER INSTITUTIONAL SHARE is the value of a single
Institutional Share. It is computed by totaling the Institutional Shares' pro
rata share of the value of the Fund's investments, cash and other assets,
subtracting the Institutional Shares' pro rata share of the value of the Fund's
liabilities and the liabilities specifically allocated to Institutional Shares,
then dividing the result by the number of Institutional Shares outstanding. The
net asset value is computed daily at the NYSE closing time - usually 3:00 p.m.
central time, but sometimes earlier.
Fund securities and assets are valued chiefly by quotations from the primary
market in which they are traded. If quotations are not readily available, they
are valued by a method that the board of directors believes reflects a fair
value.
Values of foreign securities are translated from local currencies into U.S.
dollars using current exchange rates. With respect to foreign securities -
traded primarily on foreign exchanges - the price of Institutional Shares may
change on days when the Fund is not open for purchase or sale.
15
<PAGE>
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DIVIDENDS, CAPITAL GAINS & TAXES
AS A SHAREHOLDER IN THE FUND, YOU ARE ENTITLED TO YOUR SHARE OF ITS NET INCOME
AND ANY GAINS REALIZED ON ITS INVESTMENTS. The Fund intends to distribute
substantially all of its net income and net realized capital gains to investors
at least annually.
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DISTRIBUTION OPTIONS
When you open an account, specify on your Application how you want to receive
your distributions. If you want to change your distribution option at a later
date, you may either submit a written request or call us at 1-800-399-1770.
The Fund offers three options:
REINVESTMENT OPTION. Your dividends and capital gain distributions will be
reinvested in additional shares of the Fund. If you do not indicate a choice on
your Application, we will automatically reinvest your distributions.
INCOME-ONLY OPTION. We will automatically reinvest your capital gain
distributions but send you a check for dividends.
CASH OPTION. We will send you a check for all distributions.
When you reinvest, the reinvestment price is the net asset value per
Institutional Share at the close of business on the reinvestment date. The
mailing of distribution checks will usually begin on the payment date.
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TAXES
As you should with any investment, consider how the return on your investment in
the Fund will be taxed. If your investment is in a tax-deferred account - an
employee benefit plan account, for example - the following tax discussion does
not apply.
TAXES ON DISTRIBUTIONS. Distributions are subject to federal income tax, and may
be subject to state or local taxes. If you are a U.S. citizen residing outside
the United States, your distributions may also 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 are taxable as if you received
them 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. The tax rate of a capital gain depends on the
length of time that the Fund held the asset it sold.
Given its objective and strategy, the Fund will chiefly produce capital gains
distributions, as opposed to current income. Every January, the Fund will send
you and the IRS
16
<PAGE>
a statement - called Form 1099 - showing the total amount of taxable
distributions you received in the previous calendar year.
TAXES ON TRANSACTIONS. When you redeem shares, you will experience 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. You may be subject to tax.
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 that reports, among other things, your average
cost basis of the shares you sold. This will allow you or your tax preparer to
determine the tax consequences of each redemption. However, be sure to keep your
regular account statements; their information will be essential in verifying the
amount of your capital gains or losses.
To invest, you must be a U.S. resident with a Social Security or taxpayer
identification number. When you sign your account Application, you must 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 this procedure, the IRS can require the Fund to
withhold 31% of your taxable distributions and redemptions.
17
<PAGE>
For more detail on the Fund, you may request the Statement of Additional
Information, which is incorporated herein by reference.
You can find more information about the Fund's investments in its annual and
semi-annual reports to shareholders. These documents discuss the market
conditions and investment strategies that significantly affected the Fund's
performance in its most recent fiscal period.
For a free copy of any of these documents, call 1-800-399-1770. Also call this
number if you have a question or would like to receive other information about
the Fund.
Information about the Fund, including the Statement of Additional Information,
is available to you through the Securities and Exchange Commission. You can
review and copy Fund documents at the Commission's Public Reference Room, 450
5th St., N.W., Washington, D.C. 20549-6009. The telephone number there is 1-800-
SEC-0330.
You may also request Fund documents by accessing the Commission's Internet
website at http://www.sec.gov.
And you may obtain copies for a fee by writing to: Securities and Exchange
Commission, Public Reference Section, 450 5th St., N.W., Washington, D.C. 20549-
6009.
811-8932
(Artisan Logo)
ARTISAN FUNDS
INVESTMENT MANAGEMENT PRACTICED WITH
INTELLIGENCE AND DISCIPLINE IS AN ART.
18
<PAGE>
(PICTURE)
(LOGO) ARTISAN FUNDS
INVESTMENT MANAGEMENT PRACTICED WITH
INTELLIGENCE AND DISCIPLINE IS AN ART.
PROSPECTUS
(INVESTOR SHARES)
ARTISAN INTERNATIONAL FUND
ARTISAN MID CAP FUND
ARTISAN SMALL CAP FUND
ARTISAN SMALL CAP VALUE FUND
OCTOBER 29, 1999
SUPPLEMENTED JULY 1, 2000
<PAGE>
ARTISAN FUNDS
PROSPECTUS
(INVESTOR SHARES)
ARTISAN INTERNATIONAL FUND
ARTISAN MID CAP FUND
ARTISAN SMALL CAP FUND
ARTISAN SMALL CAP VALUE FUND
OCTOBER 29, 1999
SUPPLEMENTED JULY 1, 2000
Each Artisan Fund is 100% no-load, which means you pay no sales charges to
purchase or redeem your shares. You also pay no 12b-1 fees. However, you bear
your share of annual fund operating expenses (including the investment
management fee) which are deducted from Fund assets.
ARTISAN FUNDS, INC.
P.O. Box 8412
Boston, MA 02266-8412
Be sure to read this prospectus before you invest. And please keep it on file
for future reference.
It presents essential facts about the Artisan Funds, including investment
strategies, management fees and services available to you as an investor.
If you have a question about any part of the prospectus, please call the number
below. An Artisan Funds representative will be happy to help you.
-------------
800.344.1770
-------------
You may also obtain more information about Artisan Funds on our
website: WWW.ARTISANFUNDS.COM.
The SECURITIES AND EXCHANGE COMMISSION has not approved any fund's shares or
determined whether this prospectus is accurate or complete. Anyone who tells you
otherwise is committing a crime.
<PAGE>
TABLE OF CONTENTS
To help make investing with Artisan Funds a pleasant experience for you, we've
designed this document to serve as an easy reference tool. For your
convenience, here are the topics you'll find in the following pages...
Goal, Strategy & Philosophy .............................. 2
Artisan International Fund ............................. 2
Artisan Mid Cap Fund ................................... 4
Artisan Small Cap Fund ................................. 6
Artisan Small Cap Value Fund ........................... 8
Risks You Should Consider ............................... 10
Euro Information ........................................ 12
Total Return for Each Calendar Year ..................... 13
Average Annual Total Returns ............................ 14
Artisan Funds' Fees & Expenses .......................... 15
How Do I Know if an Artisan Fund is Right for Me? ....... 16
Artisan Funds' Financial Highlights ..................... 17
Organization, Management & Management Fees .............. 21
Investing with Artisan Funds ............................ 23
How to Buy Shares ....................................... 24
Who is Eligible to Invest in a Closed Artisan Fund? ... 25
Automatic Investment Plan (AIP) ....................... 27
How to Sell Shares ...................................... 28
Systematic Withdrawals ................................ 29
What Type of Account Would You Like? .................... 30
Shareholder & Account Procedures ........................ 32
Statements and Reports ................................ 32
Website ............................................... 32
Share Price ........................................... 32
Purchases ............................................. 33
Minimum Balances ...................................... 34
Authorized Agents ..................................... 34
Redemptions ........................................... 35
Signature Guarantees .................................. 36
Account Registration .................................. 37
Telephone Transactions ................................ 37
Telephone Exchange Plan ............................... 38
Dividends, Capital Gains & Taxes ........................ 38
Distribution Options .................................. 39
Taxes ................................................. 39
<PAGE>
(PICTURE)
ARTISAN INTERNATIONAL FUND
GOAL, STRATEGY & PHILOSOPHY
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GOAL
Artisan International Fund seeks maximum long-term capital growth. The Fund may
change this goal without the approval of shareholders.
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STRATEGY & PHILOSOPHY
Under normal circumstances, the Fund invests at least 65% of its total assets in
stocks of foreign companies.
Through its own research process, the Fund invests in a broadly diversified
portfolio of international growth stocks, concentrating on industries or
investment themes that present accelerating growth prospects and companies that
capitalize on that growth. The Fund's investment strategy focuses on stock
selection.
Artisan Partners', the adviser to the Fund, research method also looks at
industry selection, theme selection and country selection. It favors countries
and regions with improving or rapidly expanding economies. To determine economic
growth, it assesses factors such as gross domestic product growth, corporate
profitability, current account and currency issues, interest rates, economic
climate and social change. Having identified favorable areas, it eliminates
those whose stock markets appear to be overvalued.
In countries where the economic and market conditions provide attractive
valuations, Artisan Partners seeks companies that seem well positioned for
strong, sustainable growth. As the first step to security selection, Artisan
Partners narrows its focus to industries or themes likely to experience
meaningful growth. It focuses on well-managed companies with above-average
financial characteristics, increasing earnings per share and dominant
2
<PAGE>
or increasing market share in strong industries. Having isolated promising
companies, Artisan Partners then purchases those whose stocks are attractively
valued.
- Under ordinary circumstances, the Fund is fully invested in common stocks. At
times, however, Artisan Partners may determine that market or economic
conditions warrant a temporary defensive position. During those periods, the
Fund's assets may not be invested in accordance with its strategy and the
Fund may not achieve its investment objective. In this case, the Fund may
hold up to 100% of its assets in cash, cash equivalents, or short-term
government or corporate obligations.
- Changes in security prices, currency exchange rates and other factors can
affect the portfolio's value.
Artisan Partners may decide to sell a stock when a company's valuation
approaches its growth rate, changing circumstances affect the original reasons
for a company's purchase, a company exhibits deteriorating fundamentals or more
attractive alternatives exist.
For more information call 800.344.1770 or visit our website at
WWW.ARTISANFUNDS.COM
3
<PAGE>
(PICTURE)
ARTISAN MID CAP FUND
GOAL, STRATEGY & PHILOSOPHY
-----------------------------------------------------------------------------
GOAL
Artisan Mid Cap Fund seeks maximum long-term capital growth.
The Fund may change this goal without the approval of shareholders.
-----------------------------------------------------------------------------
STRATEGY & PHILOSOPHY
The Fund invests primarily in the common stocks of medium-sized companies.
A medium-sized company is one whose total stock market value falls within the
range of companies in the S&P 400 MidCap Index. As of September 30, 1999, this
index included companies with capitalizations between approximately $235 million
and $12.9 billion. Over time, the capitalization range of the companies in the
Index will change. As it does, the size of the companies in which the Fund
invests may change.
- The Fund prefers to invest in companies with "franchise" characteristics.
These could be a proprietary technology, dominant market share or some other
form of sustainable competitive advantage.
The Fund also favors companies with predictable streams of cash flow through
real growth in demand for their products or services. Such companies are
well-positioned to leverage opportunities in their markets.
If Artisan Partners, the adviser to the Fund, is impressed with a company's
competitive position and prospects for growth, it then defines and researches
key investment issues. It also estimates the company's intrinsic value, and
will generally buy the stock only if it sells below that estimate.
4
<PAGE>
- Under ordinary circumstances, the Fund is fully invested in common stocks. At
times, however, Artisan Partners may determine that market or economic
conditions warrant a temporary defensive position. During those periods, the
Fund's assets may not be invested in accordance with its strategy and the
Fund may not achieve its investment objective. In this case, the Fund may
hold up to 100% of its assets in cash, cash equivalents, or short-term
government or corporate obligations.
The Fund may engage in active and frequent trading to achieve its principal
investment strategies. A higher rate of portfolio turnover may result in
increased transaction expenses and the realization of capital gains or losses.
Artisan Partners may decide to sell a stock when its intrinsic value targets are
met, changing circumstances affect the original reasons for a company's
purchase, a company exhibits deteriorating fundamentals or more attractive
alternatives exist.
For more information call 800.344.1770 or visit our website at
WWW.ARTISANFUNDS.COM
5
<PAGE>
(PICTURE)
ARTISAN SMALL CAP FUND<F1>
GOAL, STRATEGY & PHILOSOPHY
-----------------------------------------------------------------------------
GOAL
Artisan Small Cap Fund invests for maximum long-term capital growth. The Fund
may change this goal without the approval of shareholders.
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STRATEGY & PHILOSOPHY
Under normal circumstances, the Fund invests at least 65% of its assets
in the common stocks of small companies. The Fund considers a "small" company
one whose total stock market value is less than $1.5 billion.
The Fund's focus is on well-managed companies with sustainable growth prospects
whose stocks appear undervalued, either because they lack investor recognition
or are temporarily out of favor.
The Fund's investment approach rests on a few basic beliefs.
Stocks that are underfollowed or under-researched by Wall Street tend
to be less efficiently priced because of lack of attention by investors.
Investors demand a premium for the risk of incomplete information.
By doing its own research, Artisan Partners, the adviser to the Fund, attempts
to reduce this risk and realize the premium returns.
Through its research, Artisan Partners analyzes a company's operating history,
financial health, competitive position and prospects for growth. And through
face-to-face meetings it assesses the quality of management - a critical factor
in small company success.
Artisan Partners also estimates a company's intrinsic value. It does so to
determine if a prospective investment is undervalued, and if so, to what degree.
This emphasis on stock valuation relative to growth prospects sets the Fund
apart from pure "growth" or "value" funds. Thus, the Fund's style can be
characterized as "growth at a reasonable price" or "growth/value blend."
6
<PAGE>
Under ordinary circumstances, the Fund is substantially fully invested in common
stocks. At times, however, Artisan Partners may determine that market or
economic conditions warrant a temporary defensive position. During those
periods, the Fund's assets may not be invested in accordance with its strategy
and the Fund may not achieve its investment objective. In this case, the Fund
may hold up to 100% of its assets in cash, cash equivalents, or short-term
government or corporate obligations.
In choosing to take a temporary defensive position, the Fund would be trying to
avoid losses. If, however, the choice proved to be wrong, the Fund would have a
harder time achieving its goal of long-term capital growth.
The Fund may engage in active and frequent trading to achieve its principal
investment strategies. A higher rate of portfolio turnover may result in
increased transaction expenses and the realization of capital gains or losses.
Artisan Partners may decide to sell a stock when its intrinsic value targets are
met, changing circumstances affect the original reasons for a company's
purchase, more attractive alternatives exist or a company's market cap exceeds
$1.5 billion.
<F1> PLEASE NOTE: Artisan Small Cap Fund reopened to purchases by new investors
effective April 1, 1999. The Fund intends to close again to most new
investors when it reaches about $300 million in total assets. See "Who is
Eligible to Invest in a Closed Artisan Fund?" on page 25 for new account
eligibility criteria.
For more information call 800.344.1770 or visit our website at
WWW.ARTISANFUNDS.COM
7
<PAGE>
(PICTURE)
ARTISAN SMALL CAP VALUE FUND<F1>
GOAL, STRATEGY & PHILOSOPHY
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GOAL
Artisan Small Cap Value Fund seeks long-term capital growth. This goal may be
changed without the approval of shareholders.
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STRATEGY & PHILOSOPHY
The Fund invests primarily in companies with a total stock market value of less
than $1.5 billion.
- The Fund purchases a stock only at what Artisan Partners, the adviser to the
Fund, considers a bargain price...a price that - because of market forces - is
greatly below the value of the business as determined by Artisan Partners.
- In looking for bargains, Artisan Partners uses its own research process. The
focus is on individual companies, rather than on trends in the economy or
securities markets.
- Artisan Partners' research may uncover companies that have one or more of the
following characteristics:
TURNAROUNDS. At times, the Fund invests in companies that have
had poor results, but that Artisan Partners believes will be able to
substantially improve.
UNDISCOVERED OR UNSPONSORED STOCKS. There need not be something wrong with a
company to qualify it as a bargain. Sometimes a company may simply be little
known to the investing public. Small companies typically have little or no
coverage by Wall Street analysts, so they often lack a following among
investors and become undervalued.
COMPANIES WITH HIDDEN ASSETS. Undervalued real estate, unrecognized business
lines and other "hidden" assets may not be given enough credit by investors,
thus providing investment opportunities for the Fund.
8
<PAGE>
COMPANIES IN THE PROCESS OF MAJOR CHANGE. A company's stock may not reflect
positive change in the business until it shows up in financial results. The
Fund tries to invest ahead of this broad recognition, which, logically, can
cause the stock's price to rise.
- For the Fund to purchase a stock, a bargain price alone is not enough.
To provide an additional margin of safety, Artisan Partners looks for two
other attributes:
FINANCIAL STRENGTH. Artisan Partners favors companies with little debt and
positive cash flow.
FAVORABLE ECONOMICS. A company with acceptable returns on capital and free cash
over its business cycle is less likely to experience eroding values over the
long term.
Under ordinary circumstances, the Fund remains fully invested in equity
securities. At times, however, Artisan Partners may determine that market or
economic conditions warrant a temporary defensive position. During those
periods, the Fund's assets may not be invested in accordance with its strategy
and the Fund may not achieve its investment objective. In this case, the Fund
may hold up to 100% of its assets in cash, cash equivalents, or short-term
government or corporate obligations.
Artisan Partners may decide to sell a stock when its target value is realized,
companies exhibit deteriorating margins of safety or more attractive
alternatives exist.
<F1> PLEASE NOTE: Artisan Small Cap Value Fund closed to most new investors on
June 30, 2000. Please refer to the "Who is Eligible to Invest in a Closed
Artisan Fund" on page 25 for new account eligibility criteria.
For more information call 800.344.1770 or visit our website at
WWW.ARTISANFUNDS.COM
9
<PAGE>
(PICTURE)
RISKS YOU SHOULD CONSIDER
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RISKS APPLICABLE TO ALL FUNDS
All of the Artisan Funds invest primarily in common stocks. Over time, 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. When you sell your shares, they may be worth more or less than
you paid for them. You can lose money by investing in a Fund.
The percentage of each Fund's assets invested in various industries and sectors
will vary from time to time depending on the portfolio management team's
perception of investment opportunities. Investments in particular industries or
sectors may be more volatile than the overall stock market.
For example, technology, science and communications are rapidly changing fields,
and stocks of these companies may be subject to more abrupt or erratic market
movements than the stock market in general. Consequently, a higher percentage
of holdings in a particular industry or sector may have the potential for a
greater impact on the Fund.
The Funds do not pursue income, and are not, alone or together, a balanced
investment plan. In addition, there can be no assurance that they will achieve
their investment goals.
Below are the principal investment risks of each Fund.
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ARTISAN INTERNATIONAL FUND
- Foreign stocks as an asset class may underperform U.S. stocks.
- Foreign stocks tend to be more volatile than U.S. stocks.
- Investments in foreign securities (including American Depository Receipts, or
"ADRs") are subject to risks. These risks include currency exchange rate
fluctuation; less available public information about the issuers of
securities; less stringent regulatory standards; lack of uniform accounting,
auditing and financial reporting standards; and country risks including less
liquidity, high inflation rates, unfavorable economic practices, and political
instability.
10
<PAGE>
- The Fund tries to lower the risks inherent in foreign investing through a
highly selective investment strategy and broad diversification by country,
industry and company.
-----------------------------------------------------------------------------
ARTISAN MID CAP FUND
- Stocks of medium-sized companies tend to be more volatile than those of large
companies.
- Relative to large companies, medium-sized companies typically have analyst
coverage by fewer Wall Street firms. For this reason, they are more likely to
be trading at prices that reflect incomplete or inaccurate information.
- During some periods, stocks of mid-sized companies, as an asset class, have
underperformed the stocks of small and large companies.
- The Fund tries to lower the risks of investing in medium-sized companies
through broad diversification by industry and company, as well as continuous
monitoring of each holding.
-------------------------------------------------------------------------------
ARTISAN SMALL CAP FUND
- Historically, small company stocks have tended to outperform those
of large companies over the long-term. However, during some periods, stocks of
small companies as an asset class have under-performed the stocks of large
companies.
- Stocks of small companies tend to be more volatile and less liquid than stocks
of large companies. Small companies may have a shorter history of operations,
less access to additional financing, and a less diversified product line -
making them more susceptible to market pressures.
- Since small-caps can be more volatile and less liquid than other stocks, the
Fund pays special attention to the management of risk. It seeks to limit risk
by choosing companies with positive cash flows and sustainable growth
prospects, and by diversifying its holdings. The Fund monitors each holding
closely, evaluating new information relative to the original reasons for
investing.
For more information call 800.344.1770 or visit our website at
WWW.ARTISANFUNDS.COM
11
<PAGE>
(PICTURE)
RISKS YOU SHOULD CONSIDER (continued)
-----------------------------------------------------------------------------
ARTISAN SMALL CAP VALUE FUND
- Historically, small company stocks have tended to outperform those
of large companies over the long-term. However, during some periods, stocks of
small companies as an asset class have under-performed the stocks of large
companies.
- Stocks of small companies tend to be more volatile and less liquid than stocks
of large companies. Small companies may have a shorter history of operations,
less access to additional financing, and a less diversified product line -
making them more susceptible to market pressures.
- Value stocks may fall out of favor with investors and may underperform other
asset types during given periods.
EURO INFORMATION
On January 1, 1999, eleven of the fifteen member states of the European Union
had their currency exchange rates irrevocably fixed to a single European
currency, the Euro. The Euro has become legal tender in those countries from
that date. National currencies will continue to circulate until they are
replaced by Euro coins and bank notes on July 1, 2002. The pending unification
of European currency and the decision of certain countries not to participate
may create uncertainty in the European markets and thereby increase volatility
of the various currencies and securities. The European securities markets also
may become less liquid.
Artisan International Fund invests in securities denominated in the Euro and the
exchange rate between the Euro and the U.S. dollar will have
a significant impact on the value of the Fund's investments. With the advent of
the Euro, the participating countries in the European Monetary Union can no
longer follow independent monetary policies. This may limit a country's ability
to respond to economic downturns or political upheavals, and consequently reduce
the value of an investment in foreign securities. These risks could affect
Artisan International's investments and performance, as detailed under "European
Currency Unification" in the Statement of Additional Information.
12
<PAGE>
TOTAL RETURN FOR EACH CALENDAR YEAR
The risks of investing in the Funds are illustrated in the following bar charts
that show returns achieved year to year, and tables that compare each Fund's
average annual total returns for the periods listed to a market index.
ARTISAN INTERNATIONAL FUND
(BAR CHART)
1996 34.37%
1997 3.46%
1998 32.18%
Since inception (12/28/95), the Fund's highest and lowest quarterly returns were
24.86% and (18.83)%, respectively, for the quarters ended December 31, 1998, and
September 30, 1998. The year-to-date return as of September 30, 1999, was
21.59%.
ARTISAN MID-CAP FUND
(BAR CHART)
1998 33.37%
Since inception (6/27/97), the Fund's highest and lowest quarterly returns were
30.78% and (10.54)%, respectively, for the quarters ended December 31, 1998, and
September 30, 1998. The year-to-date return as of September 30, 1999, was
14.69%.
ARTISAN SMALL-CAP FUND
(BAR CHART)
1996 11.86%
1997 22.67%
1998 -13.47%
Since inception (3/28/95), the Fund's highest and lowest quarterly returns were
16.32% and (25.99)%, respectively, for the quarters ended June 30, 1997, and
September 30, 1998. The year-to-date return as of September 30, 1999, was
(1.52)%.
ARTISAN SMALL-CAP VALUE FUND
(BAR CHART)
1998 -5.76%
Since inception (9/29/97), the Fund's highest and lowest quarterly returns were
21.44% and (20.15)%, respectively, for the quarters ended June 30, 1999, and
September 30, 1998. The year-to-date return as of September 30, 1999, was
(11.05)%.
For more information call 800.344.1770 or visit our website at
WWW.ARTISANFUNDS.COM
13
<PAGE>
(PICTURE)
AVERAGE ANNUAL TOTAL RETURNS
----------------------------------------------------------------------------
FOR THE 12 MONTH PERIOD FROM INCEPTION
FUND ENDED 12/31/98 THROUGH 12/31/98
----------------------------------------------------------------------------
ARTISAN INTERNATIONAL FUND 32.18% 22.37%
----------------------------------------------------------------------------
Morgan Stanley Capital
International, Inc. (MSCI)
EAFE Index<F1> 20.00% 8.99%<F2>
----------------------------------------------------------------------------
Fund inception date: 12/28/95. All returns reflect reinvested dividends.
----------------------------------------------------------------------------
FOR THE 12 MONTH PERIOD FROM INCEPTION
FUND ENDED 12/31/98 THROUGH 12/31/98
----------------------------------------------------------------------------
ARTISAN MID CAP FUND 33.37% 42.44%
----------------------------------------------------------------------------
S&P 400 MidCap Index<F3> 19.11% 24.27%
----------------------------------------------------------------------------
Fund inception date: 6/27/97. All returns reflect reinvested dividends.
----------------------------------------------------------------------------
FOR THE 12 MONTH PERIOD FROM INCEPTION
FUND ENDED 12/31/98 THROUGH 12/31/98
----------------------------------------------------------------------------
ARTISAN SMALL CAP FUND -13.47% 12.85%
----------------------------------------------------------------------------
Russell 2000 Index<F4> -2.55% 15.30%
----------------------------------------------------------------------------
Fund inception date: 3/28/95. All returns reflect reinvested dividends.
----------------------------------------------------------------------------
FOR THE 12 MONTH PERIOD FROM INCEPTION
FUND ENDED 12/31/98 THROUGH 12/31/98
----------------------------------------------------------------------------
ARTISAN SMALL CAP VALUE FUND -5.76% -2.26%
----------------------------------------------------------------------------
Russell 2000 Value Index<F5> -6.45% -3.51%
----------------------------------------------------------------------------
Fund inception date: 9/29/97. All returns reflect reinvested dividends.
<F1> Morgan Stanley Capital International, Inc. (MSCI) EAFE Index is unmanaged
and includes companies throughout the world, excluding the U.S. and Canada,
in proportion to world stock market capitalization.
<F2> The average annual total return for the EAFE Index, when used in comparison
to the Fund's inception date, is calculated started 12/31/95.
<F3> The S&P 400 MidCap Index is an unmanaged, market-weighted index of 400 mid-
cap companies.
<F4> Russell 2000 Index is an unweighted index of small companies, formed by
taking the largest 3,000 companies and eliminating the largest 1,000
companies.
<F5> The Russell 2000 Value Index measures the performance of those companies in
the Russell 2000 Index with lower price-to-book ratios and lower forecasted
growth values.
14
<PAGE>
ARTISAN FUNDS' FEES & EXPENSES
Below are the fees and expenses that you pay if you buy and hold shares in an
Artisan Fund.
-----------------------------------------------------------------------------
SHAREHOLDER FEES PAID DIRECTLY FROM YOUR INVESTMENT:
Sales charge (load) on purchases........ None
Exchange fee............................ None
Redemption fee.......................... None
-----------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS:
-----------------------------------------------------------------------------
EXPENSE INTERNATIONAL MID CAP SMALL CAP SMALL CAP VALUE
-----------------------------------------------------------------------------
MANAGEMENT FEE 0.99% 1.00% 1.00% 1.00%
-----------------------------------------------------------------------------
2B-1 FEE None None None None
-----------------------------------------------------------------------------
OTHER EXPENSES 0.39% 1.12% 0.37% 0.66%
-----------------------------------------------------------------------------
TOTAL OPERATING
EXPENSES 1.38% 2.12%<F1> 1.37% 1.66%
-----------------------------------------------------------------------------
<F1> Artisan Partners has undertaken to reimburse Artisan Mid Cap Fund to the
extent that the Fund's total operating expenses exceed 2.00% of its average
daily net assets. Total operating expenses as shown in the table above do
not include Artisan Partners' expense reimbursement pursuant to that
undertaking.
EXAMPLE. This example is intended to help you compare the cost of investing
in an Artisan Fund with that of investing in other mutual funds. The
example assumes you invest $10,000 for the time periods indicated, earn a
5% return each year, and that operating expenses remain constant.
TIME PERIOD INTERNATIONAL MID CAP SMALL CAP SMALL CAP VALUE
-----------------------------------------------------------------------------
1 YEAR $ 140 $ 215 $ 139 $ 169
-----------------------------------------------------------------------------
3 YEARS $ 437 $ 664 $ 434 $ 523
-----------------------------------------------------------------------------
5 YEARS $ 755 $1,139 $ 750 $ 902
-----------------------------------------------------------------------------
10 YEARS $ 1,657 $2,452 $ 1,646 $ 1,965
-----------------------------------------------------------------------------
This example is for illustration only. It is not meant to suggest actual or
expected costs or returns, which may be more or less than the amounts shown.
For more information call 800.344.1770 or visit our website at
WWW.ARTISANFUNDS.COM
15
<PAGE>
(PICTURE)
HOW DO I KNOW IF AN ARTISAN FUND
IS RIGHT FOR ME?
These are some of the potential rewards of investing in a Fund:
-----------------------------------------------------------------------------
ARTISAN INTERNATIONAL FUND
- From time to time, many foreign economies have grown faster than our own
(though some have not), and the returns on investments in these countries have
exceeded those of similar U.S. investments.
- Foreign markets can offer opportunities that are unavailable domestically.
Thus, international investing brings you greater diversification and enables
you to take advantage of changes in foreign economies and equity markets.
-----------------------------------------------------------------------------
ARTISAN MID CAP FUND
- Medium-sized companies can offer attractive investment characteristics. They
are typically small enough to have higher growth potential than the general
U.S. economy, mature enough to have seasoned management and established,
multiple product lines, and large enough to have liquid trading markets.
-----------------------------------------------------------------------------
ARTISAN SMALL CAP FUND AND ARTISAN SMALL CAP VALUE FUND
- Small companies tend to have better growth potential than large companies,
and are less likely to be broadly recognized.
- Over time, small-cap stocks have outperformed large-cap stocks.
-----------------------------------------------------------------------------
INVESTING WITH ARTISAN MAY BE SUITABLE FOR YOU IF:
- You want to invest for maximum long-term growth, rather than income.
- You are a patient investor, and able to maintain your investment over a
relatively long period of time.
- You understand the specific risks of investing in a particular market
segment-small-caps, mid-caps, value-based stocks or foreign stocks.
16
<PAGE>
ARTISAN FUNDS' FINANCIAL HIGHLIGHTS
The following tables are intended to help you understand each Fund's financial
performance since it began operations. Certain information reflects financial
results for a single Fund share. Total returns represent the rate you would have
earned (or lost) on an investment, assuming reinvestment of all dividends and
distributions. This information has been audited by PricewaterhouseCoopers LLP,
independent accountants, whose report, along with each Fund's financial
statements, is included in the annual report and the Statement of Additional
Information, which are available on request. For each year shown, all
information is for the fiscal year ended June 30.
-----------------------------------------------------------------------------
INTERNATIONAL FUND
-----------------------------------------------------------------------------
For a share outstanding Year Ended Year Ended Year Ended Period Ended
throughout each period 6/30/99 6/30/98 6/30/97 6/30/96<F1>
--------- ---------- ---------- -----------
Net asset value, beginning of
period $16.25 $14.48 $12.08 $10.00
Income from investment
operations:
Net investment income 0.08<F2> 0.06<F2> 0.07 0.04
Net realized and unrealized
gains on securities and
foreign currency
transactions 2.62 3.04 2.44 2.04
----- ------ ----- -----
TOTAL FROM INVESTMENT OPERATIONS 2.70 3.10 2.51 2.08
----- ------ ----- -----
DISTRIBUTIONS PAID TO
SHAREHOLDERS:
Net investment income (0.04) (0.20) (0.02) -
Net realized gains on
investment transactions (0.24) (1.13) (0.09) -
------- ------- ------ ------
Total distributions paid to
shareholders (0.28) (1.33) (0.11) -
====== ========= ======= =======
NET ASSET VALUE, END OF PERIOD $18.67 $16.25 $14.48 $12.08
====== ======== ======= =======
Total return 17.4% 24.1% 20.9% 20.8%<F3>
Ratios/supplemental data:
Net assets, end of period
(millions) $943.9 $414.5 $449.2 $71.5
Ratio of expenses to average
net assets 1.38% 1.45% 1.61% 2.50%<F4>
Ratio of net investment income
to average net assets 0.59% 0.37% 1.07% 1.60%<F4>
Portfolio turnover rate 79.41% 109.42% 103.66% 57.00%<F3>
<F1> For the period from commencement of operations (December 28, 1995) through
June 30, 1996.
<F2> Computed based on average shares outstanding.
<F3> Not annualized.
<F4> Annualized.
For more information call 800.344.1770 or visit our website at
WWW.ARTISANFUNDS.COM
17
<PAGE>
(PICTURE)
ARTISAN FUNDS' FINANCIAL HIGHLIGHTS (continued)
-----------------------------------------------------------------------------
MID CAP FUND
-----------------------------------------------------------------------------
For a share outstanding throughout each period Year Year Period
Ended Ended Ended
6/30/99 6/30/98 6/30/97<F1>
------- ------- -----------
Net asset value, beginning of period $13.69 $10.00 $10.00
Income from investment operations:
Net investment loss (0.16)<F5> (0.08) -
Net realized and unrealized gains on
securities 4.41 4.56 -
----- ------ -----
TOTAL FROM INVESTMENT OPERATIONS 4.25 4.48 -
----- ------ -----
DISTRIBUTIONS PAID TO SHAREHOLDERS:
Net realized gains on investment
transactions (1.27) (0.79) -
------ ------ -----
NET ASSET VALUE, END OF PERIOD $16.67 $13.69 $10.00
====== ====== ======
Total return 35.8% 46.1% 0.0%<F2>
Ratios/supplemental data:
Net assets, end of period (millions). $43.3 $12.8 $1.8
Ratio of expenses to average net assets 2.00%<F4> 2.00%<F4> 0.00%<F3>
Ratio of net investment loss to average
net assets (1.13)%<F4>(0.77)%<F4> 0.00%<F3>
Portfolio turnover rate 202.84% 235.65 0.00%<F2>
<F1> For the period from commencement of operations (June 27, 1997) through
June 30, 1997.
<F2> Not annualized.
<F3> Annualized.
<F4> The ratios of expenses to average net assets and net investment loss to
average net assets exclude fees paid by the Adviser. Absent fees paid by
the Adviser, the ratios of expenses to average net assets and net
investment loss to average net assets would have been 2.12% and (1.25)%
for the year ended June 30, 1999 and 3.64% and (2.41)% for the year ended
June 30, 1998, respectively.
<F5> Computed based on average shares outstanding
18
<PAGE>
ARTISAN FUNDS' FINANCIAL HIGHLIGHTS (continued)
-------------------------------------------------------------------------------
SMALL CAP FUND
-------------------------------------------------------------------------------
For a share outstanding Year Year Year Year Period
throughout each period Ended Ended Ended Ended Ended
6/30/99 6/30/98 6/30/97 6/30/96 6/30/95<F1>
------- ------- ------- ------- ---------
Net asset value, beginning of
period $14.66 $15.11 $14.67 $11.52 $10.00
Income from investment operations:
Net investment loss (0.08) (0.10) (0.04) (0.07) (0.01)
Net realized and unrealized gain
(loss) on investments (2.53) 2.23 1.55 3.32 1.53
------ ---- ---- ---- -----
TOTAL FROM INVESTMENT OPERATIONS (2.61) 2.13 1.51 3.25 1.52
------ ---- ---- ---- -----
DISTRIBUTIONS PAID TO
SHAREHOLDERS:
Net realized gains on investment
transactions (0.96) (2.58) (1.07) (0.10) -
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $11.09 $14.66 $15.11 $14.67 $11.52
====== ====== ====== ====== ======
Total return (17.0)% 14.7% 11.3% 28.3% 15.2%<F2>
Ratios/supplemental data:
Net assets, end of period
(millions) $174.6 $304.1 $267.8 $400.0 $99.3
Ratio of expenses to average
net assets 1.37% 1.33% 1.41% 1.52% 2.00%<F3>
Ratio of net investment income to
average net assets (0.67)% (0.74)%(0.73)% (0.75)% (0.59)%<F3>
Portfolio turnover rate 155.38% 134.67% 87.18% 105.19% 9.28%<F2>
<F1> For the period from commencement of operations (March 28, 1995) through
June 30, 1995.
<F2> Not annualized.
<F3> Annualized.
For more information call 800.344.1770 or visit our website at
WWW.ARTISANFUNDS.COM
19
<PAGE>
(PICTURE)
ARTISAN FUNDS' FINANCIAL HIGHLIGHTS (continued)
-------------------------------------------------------------------------------
SMALL CAP VALUE FUND
-------------------------------------------------------------------------------
For a share outstanding throughout Year Period
each period Ended Ended
June 30, June 30,
1999 1998<F1>
------- -----------
Net asset value, beginning of
period $11.37 $10.00
Income from investment operations:
Net investment loss (0.03) (0.03)
Net realized and unrealized
gains on securities (0.21)<F4> 1.40
------ ---------
TOTAL FROM INVESTMENT OPERATIONS (0.24) 1.37
------ ---------
DISTRIBUTIONS PAID TO SHAREHOLDERS:
Net realized gains on investment
transactions (0. 54) -
------- ---------
NET ASSET VALUE, END OF PERIOD $10.59 $11.37
======= =========
Total return (1.0)% 13.7%<F2>
Ratios/supplemental data:
Net assets, end of period
(millions) $77.8 $47.2
Ratio of expenses to average
net assets 1.66% 1.93%<F3>
Ratio of net investment loss
to average net assets (0.45)% (0.50)%<F3>
Portfolio turnover rate 49.29% 52.58<F2>
<F1> For the period from commencement of operations (September 29, 1997) through
June 30, 1998.
<F2> Not annualized.
<F3> Annualized.
<F4> The amount shown may not correlate with the aggregate gains and losses of
portfolio securities due to the timing of subscriptions and redemptions of
fund shares
20
<PAGE>
ORGANIZATION, MANAGEMENT & MANAGEMENT FEES
ORGANIZATION. Each Artisan Fund is a series of Artisan Funds, Inc. Artisan
International Fund and Artisan Mid Cap Fund are divided into two share classes.
Information for the Artisan International Fund (Institutional Shares) and
Artisan Mid Cap Fund (Institutional Shares) is available under separate
prospectuses.
MANAGEMENT. Each Artisan Fund is managed by Artisan Partners Limited Partnership
(Artisan Partners), which selects the Fund's investments and handles its
business affairs under the direction of the board of directors. Artisan Partners
was organized in 1994 and, as of September 30, 1999, manages approximately $3.1
billion for Artisan Funds and institutional clients. Artisan Partners is a
limited partnership managed by its general partner, Artisan Investment
Corporation. The address is: Artisan Partners, 1000 North Water Street, Suite
1770, Milwaukee, Wisconsin 53202-3197.
ARTISAN INTERNATIONAL FUND
MARK L. YOCKEY, portfolio manager, is a Managing Director of Artisan Partners
and a Vice President of Artisan Funds. He joined Artisan Partners
in 1995. From 1990 to 1995, Mr. Yockey was portfolio manager of United
International Growth Fund and a Vice President of Waddell & Reed, Inc. Prior to
assuming fund management responsibilities, he served as an equity analyst with
Waddell & Reed.
Mr. Yockey holds BA and MBA degrees from Michigan State University and is a
Chartered Financial Analyst.
ARTISAN MID CAP FUND
ANDREW C. STEPHENS, portfolio manager, is a Managing Director of Artisan
Partners and a Vice President of Artisan Funds. He joined Artisan Partners
in 1997. From 1993 to 1997, Mr. Stephens was portfolio co-manager of the Strong
Asset Allocation Fund. From 1994 to 1996, he served as senior research analyst
for the Strong Common Stock Fund and Strong Opportunity Fund.
Mr. Stephens holds a BS degree in Economics from the University of Wisconsin-
Madison.
For more information call 800.344.1770 or visit our website at
WWW.ARTISANFUNDS.COM
21
<PAGE>
(PICTURE)
ARTISAN SMALL CAP FUND
CARLENE MURPHY ZIEGLER, portfolio co-manager, is a Managing Director
of Artisan Partners and a Director of Artisan Funds. Prior to founding Artisan
Partners in 1994, she was portfolio co-manager of Strong Common Stock Fund and
Strong Opportunity Fund.
Ms. Ziegler holds BA and MA degrees from the University of Illinois and an MBA
from the University of Chicago Graduate School of Business. She is a Chartered
Financial Analyst and has been a frequent member of the Barron's Roundtable.
MARINA T. CARLSON, portfolio co-manager, is a Managing Director of Artisan
Partners and a Vice President of Artisan Funds. Prior to joining Artisan
Partners in 1999, she was employed by Strong Capital Management, Inc., where she
served as manager of Strong Mid Cap Disciplined Fund (from its inception in
December 1998 through March 1999) and co-manager of Strong Opportunity Fund and
Strong Common Stock Fund (from 1993 through December 30, 1998).
Ms. Carlson holds a BBA in Finance from Drake University and an MBA in Finance
from 3 University. She is a Chartered Financial Analyst.
ARTISAN SMALL CAP VALUE FUND
SCOTT C. SATTERWHITE, portfolio co-manager, is a Managing Director of Artisan
Partners and a Vice President of Artisan Funds. Prior to joining Artisan
Partners in 1997, Mr. Satterwhite was Senior Vice President and portfolio
manager at Wachovia Corporation. From 1993 to 1997, Mr. Satterwhite was
portfolio manager of the Biltmore Special Values Fund in addition to being a
personal trust portfolio manager and manager of the Georgia Personal Trust
Portfolio Group.
Mr. Satterwhite earned his BA degree from the University of the South and MBA
from Tulane University. He is a Chartered Financial Analyst.
JAMES C. KIEFFER, portfolio co-manager, is a Managing Director of Artisan
Partners and a Vice President of Artisan Funds since 2000. Prior to joining
Artisan Partners as a research analyst in 1997, Mr. Kieffer was a research
analyst at
22
<PAGE>
the investment firm McColl Partners from 1996 to 1997.
Mr. Kieffer began his investment career at Wachovia Corporation working
with Scott Satterwhite from 1989 to 1996, initially as a personal trust
portfolio manager and later as a general equities and small-cap value research
analyst in the institutional portfolio group. Mr. Kieffer holds a BA degree in
Economics from Emory University and is a Chartered Financial Analyst.
MANAGEMENT FEES
Each Fund pays a management fee to Artisan Partners for serving as its
investment adviser and providing administrative services. The fee is determined
as a percentage of average daily net assets. For the fiscal year ended June 30,
1999, the management fees paid by the Funds were:
Artisan International Fund.............0.99%
Artisan Mid Cap Fund...................1.00%
Artisan Small Cap Fund.................1.00%
Artisan Small Cap Value Fund ..........1.00%
INVESTING WITH ARTISAN FUNDS
Each Artisan Fund is 100% no-load, which means you pay no sales charges to
purchase or redeem your shares. You also pay no 12b-1 fees. However, you bear
your share of annual fund operating expenses (including the investment
management fee) which are deducted from Fund assets.
MINIMUM INVESTMENTS
To open an account.....................$1,000<F1>
To add to an account..........................$50
Minimum balance required.....................$500
<F1> The Fund will waive the initial minimum of $1,000 if you invest through the
Automatic Investment Plan, explained later on page 27.
For more information call 800.344.1770 or visit our website at
WWW.ARTISANFUNDS.COM
23
<PAGE>
(PICTURE)
HOW TO BUY SHARES
------------------------------------------------------------------------------
MAIL
To open an account:
Complete and sign the new account application. Mail it to the address
on the application, along with your check or money order for $1,000 or more.
Make your check or money order payable to "Artisan Funds" or to the name of the
fund in which you are investing. Third-party and starter checks will not be
accepted.
To add to an account:
Put your account number on a check or money order for $50 or more. Make your
check or money order payable to "Artisan Funds" or to the name of the fund in
which you are investing. Mail it, along with the form at the bottom of your
account statement, to the address on your account statement. Third-party and
starter checks will not be accepted.
DELIVERY:
FOR REGULAR MAIL DELIVERY: FOR OVERNIGHT DELIVERY:
Artisan Funds Artisan Funds
P.O. Box 8412 c/o Boston Financial
Boston, MA 02266-8412 66 Brooks Drive
Braintree, MA 02184
800.344.1770
------------------------------------------------------------------------------
TELEPHONE 800.344.1770
TO OPEN AN ACCOUNT:
You may open a new account by telephone only 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 by electing it on
your new account application. If you did not do so, please request and complete
the shareholder options form available at www.artisanfunds.com or by calling
800.344.1770.
24
<PAGE>
TO ADD TO AN ACCOUNT:
The telephone transaction option enables you to add from $50 to $25,000 to your
account by telephone. It also lets you exchange among Artisan Funds by
telephone.
You may elect the telephone transaction option on your application or - at a
later date - by completing the shareholder options form.
------------------------------------------------------------------------------
WIRE
TO OPEN AN ACCOUNT:
Please call 800.344.1770 for instructions on opening an account by wire.
TO ADD TO AN ACCOUNT:
Please call 800.344.1770 for instructions on adding to an account by wire.
WHO IS ELIGIBLE TO INVEST IN A CLOSED ARTISAN FUND?
Artisan Small Cap Value Fund is closed to most new investors and Artisan Small
Cap Fund has announced that it intends to close to most new investors when it
reaches approximately $300 million in total assets. The following eligibility
criteria applies to a Fund when it is closed.
If you are a shareholder in a Fund when it closes, you may make additional
investments in that Fund and reinvest your dividends and capital gain
distributions, even though the Fund has closed.
You may open a new account in a closed Fund only if:
- you are already a shareholder (in your own name or as beneficial owner of
shares held in someone else's name) of that Fund;
- you are a shareholder with combined balances of $100,000 in any of the
Artisan Funds (in your own name or as beneficial owner of shares held in
someone else's name);
- your business or other organization is already a shareholder of the Fund and
you are opening an account for an employee benefit plan sponsored by that
organization or an affiliated organization;
For more information call 800.344.1770 or visit our website at
WWW.ARTISANFUNDS.COM
25
<PAGE>
- you are transferring or doing a "rollover" into a Fund 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 an employee benefit plan sponsored by an institution that also
sponsors (or is an affiliate of an institution that sponsors) another
employee benefit plan account that is a shareholder of the Fund as of the
date the Fund closed;
- you are a director or officer of Artisan Funds, 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 with the Fund or at least $1,000,000 of client
assets invested with Artisan Funds as of the date on which the Fund closed,
or at the time of your application.
You may continue to add to your existing Fund account(s) through the
reinvestment of dividends and distributions from the Fund, and through the
purchase of additional Fund shares, even after the Fund closes. 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 advisor or planner may continue to buy shares for existing
and new clients.
Call us at 800.344.1770 if you have questions about your ability to invest.
26
<PAGE>
AUTOMATIC INVESTMENT PLAN (AIP)
This service is a convenient way to make regular, systematic investments into
your Artisan Fund. Once a month, you purchase shares by transferring money from
your designated checking or savings account directly into your Artisan Fund.
Simply decide how much you want to invest (the monthly minimum is $50) and the
day (between the 3rd and the 28th) that you want the transfer to take place.
The rest is automatic. There are no telephone calls to make, no monthly forms to
complete, no trips to the post office. And you're not locked in. If you wish to
discontinue the AIP, just notify us in writing.
TO OPEN AN ACCOUNT:
Complete and sign the account application including the Automatic Investment
Plan section of your account application.
If you choose the Automatic Investment Plan when you open your account, the
minimum initial investment will be waived.
TO ADD TO AN ACCOUNT:
To add this convenient feature to your Artisan Fund account, please call
800.344.1770 or visit our website at www.artisanfunds.com for a shareholder
options form.
For more information call 800.344.1770 or visit our website at
WWW.ARTISANFUNDS.COM
27
<PAGE>
(PICTURE)
HOW TO SELL SHARES
You may request to take money out of your account at any time by selling some or
all of your shares. You will receive the share price calculated after your order
is received by the Fund or its authorized agent.
Some redemptions require signature guarantees. See page 36.
The following procedures apply only to non-IRA accounts. To sell shares in an
IRA, you must send us both a letter of instruction as described below and an IRA
distribution form. You may request the form by calling 800.344.1770 or by
visiting our website at www.artisanfunds.com.
--------------------------------------------------------------------------------
MAIL
INDIVIDUAL, JOINT OWNERS, SOLE PROPRIETORSHIPS, UGMA AND UTMA
Mail a letter of instruction including: the Fund's name; your account number;
each owner's name and address; the dollar amount or number of shares to be sold;
and the signature of each owner as it appears on the account.
TRUST
All Trustees must sign the letter of instruction.
FOR REGULAR MAIL DELIVERY: FOR OVERNIGHT DELIVERY:
Artisan Funds Artisan Funds
P.O. Box 8412 c/o Boston Financial
Boston, MA 02266-8412 66 Brooks Drive
Braintree, MA 02184
ALL OTHERS
Call 800.344.1770 for instructions.
-------------------------------------------------------------------------------
TELEPHONE 800.344.1770
Available to all account types except IRAs
With the telephone redemption option, you can sell from $500 to $25,000 worth of
shares per day by telephone. You automatically have this option unless you
declined it on your account application. If you did decline and would like to
add it, call 800.344.1770 or visit our website at www.artisanfunds.com for a
shareholder options form.
28
<PAGE>
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WIRE
Available to all account types except IRAs
We will transmit payment by wire to a pre-authorized bank account. Usually, the
funds will arrive at your bank the next business day after Artisan Funds
receives your redemption request. This option is available to you if you
enclosed a voided check with your account application or have subsequently
completed a shareholder options form to have this featured added to your
Artisan Funds account. The fee for this service is currently $5.00 per wire
transaction.
SYSTEMATIC WITHDRAWALS
Available to all account types except IRAs
This service lets you withdraw a set amount from your account at regular
intervals. To be eligible for systematic withdrawal, you must have at least
$5,000 in your Artisan Fund Account. You must withdraw at least $50 per
transaction. If you'd like to add this option, please call us at 800.344.1770 or
visit our website at www.artisanfunds.com for a shareholder options form.
For more information call 800.344.1770 or visit our website at
WWW.ARTISANFUNDS.COM
29
<PAGE>
(PICTURE)
WHAT TYPE OF ACCOUNT WOULD
YOU LIKE?
-----------------------------------------------------------------------------
RETIREMENT ACCOUNTS REQUIRE A SPECIAL APPLICATION.
Please call us at 800.344.1770 or visit www.artisanfunds.com to request one.
-----------------------------------------------------------------------------
INDIVIDUAL OR JOINT OWNERSHIP
These are intended for your general investment needs. Individual accounts are
owned by one person. Joint accounts can have two or more owners.
------------------------------------------------------------------------------
GIFT OR TRANSFER TO A MINOR (UGMA, UTMA)
These custodial accounts let you give money to a minor for any purpose. This
gift is irrevocable, and the minor gains control of the account once he/she
reaches the age of majority. Your application should include the minor's social
security number.
--------------------------------------------------------------------------------
TRUST FOR ESTABLISHED EMPLOYEE BENEFIT OR PROFIT-SHARING PLAN
The trust or plan must be established before you can open an account. Please
include the date of the trust or plan on the application.
-------------------------------------------------------------------------------
BUSINESS OR ORGANIZATION
This account is for a corporation, association, partnership or similar
institution. Along with your application, please enclose a certified corporate
resolution that indicates which officers are authorized to act.
-------------------------------------------------------------------------------
RETIREMENT
A retirement account enables you to defer taxes on investment income and capital
gains. Your contributions may be tax-deductible.
- Individual Retirement Account (IRA). You may invest up to $2,000 per tax year
in an IRA if you are of legal age, under 70 1/2 and have "earned" (non-
investment) income. 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 your combined
earned income is at least $4,000 and you file a joint return.
30
<PAGE>
- ROTH IRA. Compared to the traditional IRA, the Roth IRA has different
eligibility requirements and tax treatment. If you're a single taxpayer with
adjusted gross income up to $95,000, you may contribute up to $2,000 per year
- or up to $4,000 per year if you're married with adjusted gross income up to
$150,000 per year and you file a joint return. You also must have earned
income equal to your contributions, as with a traditional IRA, but you can
contribute to a Roth IRA even if you are over 70 1/2. Your contributions to a
Roth IRA are not tax-deductible. But your withdrawals are not taxable if
you've held your IRA for at least five years and are at least 59 1/2,
disabled, or use the proceeds (up to $10,000) to purchase a first home. The
amount you can contribute to a Roth IRA in any year is reduced by the amount
you contribute to a traditional IRA, and vice-versa.
- ROLLOVER IRA. This plan offers you special tax advantages for certain
distributions from employer-sponsored retirement plans.
- SIMPLIFIED EMPLOYEE PENSION PLAN (SEP-IRA). If you have a small business or
self-employment income, this plan lets you make annual tax-deductible
contributions of up to 15% of the first $160,000 of compensation for you and
any eligible employees.
- OTHER RETIREMENT PLANS. You may also use an Artisan Fund for Keogh, profit
sharing and money purchase plans, 403(b) plans and 401(k) plans. The plan
trustee must establish the appropriate account; Artisan Funds does not offer
prototype plans.
The above is just a summary of the types of retirement accounts available. When
we send your retirement-account application, we will include an IRA Disclosure
Statement. It contains more detailed information about the requirements for
specific retirement accounts, including a summary of the custodian fees which
you may incur for account set-up and maintenance.
FOR MORE INFORMATION ABOUT THE TAX ADVANTAGES AND CONSEQUENCES OF THESE VARIOUS
IRAS AND RETIREMENT PLAN ACCOUNTS, PLEASE CONSULT YOUR TAX ADVISOR.
For more information call 800.344.1770 or visit our website at
WWW.ARTISANFUNDS.COM
31
<PAGE>
(PICTURE)
SHAREHOLDER & ACCOUNT PROCEDURES
STATEMENTS AND REPORTS
As an Artisan Fund investor, you will receive:
- Confirmation statements - after every transaction in your account or change in
your account registration.
- Quarterly account statements.
- Annual and semi-annual reports with financial statements. We reduce the number
of duplicate annual and semi-annual reports you receive by sending only one
copy of each to those addresses shared by two or more accounts. Call us at
800.344.1770 to request individual copies of these documents. We will begin
sending individual copies thirty days after receiving your request.
- Year-end tax statements.
We suggest you keep each quarterly and year-end account statement with your
other important financial papers. You may need them for tax purposes.
If you need copies of statements, call 800.344.1770 or visit our website at
www.artisanfunds.com. Copies of this year's or last year's statements are free
of charge; for earlier years, there is a $10 processing fee.
WEBSITE (WWW.ARTISANFUNDS.COM)
Our website at www.artisanfunds.com is a good source of information on the
Artisan Funds. You can obtain a prospectus, an application or other important
forms, as well as periodic reports and updates on the Funds.
SHARE PRICE
Each Artisan Fund is open for business every day the New York Stock Exchange
("NYSE") is open. Shares will not be priced on days when the NYSE is closed.
Each Artisan Fund buys and sells its shares each day, at the net asset value per
share.
A Fund's NET ASSET VALUE PER SHARE is the value of a single share. It is
computed by totaling the Fund's investments, cash, and other assets,
subtracting its liabilities, then dividing the result by the number of shares
outstanding. The net asset value is computed daily at the NYSE closing time -
usually 3:00 p.m. Central Time, but sometimes earlier.
32
<PAGE>
Fund securities and assets are valued chiefly by quotations from the primary
market in which they are traded. If quotations are not readily available, they
are valued by a method that the board of directors believes reflects a fair
value.
Values of foreign securities are translated from local currencies into U.S.
dollars using current exchange rates. With respect to foreign securities -
traded primarily on foreign exchanges - a Fund's share price may change on days
when the Fund is not open for purchase or sale.
PURCHASES
- Your purchases must be in U.S. dollars, and your checks must be drawn on U.S.
banks.
- The Funds do not accept cash, credit cards or third-party checks.
- If your check or telephone purchase order does not clear, your purchase will
be cancelled. You will also be liable for any resulting losses or fees a Fund
or its transfer agent incurs.
- The price you pay for shares is the net asset value per share next calculated
after your investment is received. An order is considered received when the
Fund or its authorized agent receives and accepts an application or
appropriate instruction along with the intended investment if applicable.
- A Fund may reject any purchase order it deems inappropriate _ for example, one
that appears so large that it would disrupt management of the Fund, or an
order from someone ineligible to invest.
- A holiday, weekend or other interruption can affect the normal processing of
an investment. Thus, in the Automatic Investment Plan (AIP), your monthly
investment may be transferred from your bank to your Fund account either
earlier or later than the date you selected. Artisan Funds will not be
responsible for non-sufficient funds fees. If your AIP does not clear, your
purchase will be cancelled. You will also be liable for any resulting losses
or fees a Fund or its transfer agent incurs.
- A Fund may immediately terminate your ability to make automatic investments
and telephone purchases if an item is not paid by your financial institution.
For more information call 800.344.1770 or visit our website at
WWW.ARTISANFUNDS.COM
33
<PAGE>
(PICTURE)
MINIMUM BALANCES
It is very expensive for a Fund to maintain small accounts, and that cost is
borne by all the Fund's investors. For this reason, each Fund reserves the right
to close your account if its value falls below $500. However, before closing a
small account, the Fund would notify you and give you at least 30 days to bring
your account's value up to the minimum.
If you discontinue an Automatic Investment Plan before your account reaches
$1,000, that account may also be closed.
If you participate in systematic withdrawal and your account has insufficient
funds to meet a withdrawal, the amount remaining will be completely redeemed.
AUTHORIZED AGENTS
The Fund may authorize certain financial services companies, broker-dealers or
other authorized agents to accept share purchase and redemption orders on the
Fund's behalf. If you buy shares through an authorized agent, you will pay the
Fund's net asset value per share plus any transaction charge imposed by the
agent.
It is possible that an authorized agent may not charge you a direct transaction
fee. It may, however, charge a fee for accounting and shareholder services that
it provides to the Fund on your behalf. This fee may be a percentage -
currently up to 0.35% - of the annual average value of accounts for which the
authorized agent provides services. The Fund's portion of this fee does not
exceed what it would normally pay if your shares were registered directly with
its own transfer agent. Artisan Partners pays the balance of the fee.
34
<PAGE>
REDEMPTIONS
- Normally, redemption proceeds will be mailed to you within seven days after
receipt and acceptance of your redemption request.
- If you have recently made a purchase, the Fund may withhold redemption
proceeds until it is reasonably satisfied that it has received payment. This
confirmation process can take up to fifteen days.
- If you make a telephone redemption, the Fund will send payment in 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 which (currently $5.00) will be deducted from the payment. Your bank
also may impose a fee for the incoming wire or incoming EFT. 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, other
than weekends or holidays, the NYSE is closed, its trading is restricted or as
permitted by the Securities and Exchange Commission (SEC).
- If you place a redemption order through an authorized agent, your redemption
proceeds will reflect the net asset value per share next computed after the
agent's receipt of your order, less any redemption fees imposed by the agent.
If a Fund sends you a check - for a redemption, systematic withdrawal payment
or cash distribution - that is returned "undeliverable" or remains uncashed
for six months, the Fund will cancel the check and reinvest the proceeds in
your Fund at the net asset value per share on the date of cancellation. And,
if applicable, the Fund will (a) cancel your systematic withdrawal payments,
honoring withdrawals only by request and (b) automatically reinvest your
future dividends and capital gains, even if you had elected cash payment.
- Each Fund intends to pay all redemptions in cash. During any 90-day period for
any one shareholder, a Fund is obligated to redeem shares solely in cash up to
the lesser of $250,000 or 1% of the Fund's net assets. Redemptions in excess
of these limits may be paid wholly or partly by an in-kind distribution of
securities.
For more information call 800.344.1770 or visit our website at
WWW.ARTISANFUNDS.COM
35
<PAGE>
(PICTURE)
SIGNATURE GUARANTEES
To protect you and your Fund from fraud, the following redemption requests and
account changes must be submitted in writing and include a signature guarantee:
- If 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.
- If you ask that a check be mailed to an address other than the one on your
account.
- If you ask that a check be made payable to someone other than the account
owner.
- If you wish to add the telephone redemption option to your existing account.
- If you wish to transfer the ownership of your account.
- If you have changed the address on your account by phone within the last 60
days.
You should be able to obtain a signature guarantee from a bank, broker-dealer,
securities exchange or association, clearing agency, savings association or
credit union if authorized under state law. A NOTARY PUBLIC CANNOT PROVIDE A
SIGNATURE GUARANTEE.
EACH OWNER'S SIGNATURE MUST BE GUARANTEED SEPARATELY. FOR EXAMPLE, A JOINT
ACCOUNT WITH TWO OWNERS WOULD REQUIRE TWO SIGNATURE GUARANTEES.
36
<PAGE>
ACCOUNT REGISTRATION
If you wish to change the address on your account, call us at 800.344.1770. Your
Fund will send a written confirmation of the change to both your old and new
addresses.
We prefer that a change of address request be submitted in writing with a
signature guarantee. If you make your request by phone, we will not honor a
telephone redemption for the following 60 days. During that period, we will
require written redemption requests with signature guarantees.
TELEPHONE TRANSACTIONS
You may perform many transactions - including exchanges, purchases and
redemptions - by telephone.
You may place telephone trades only during the hours that the NYSE is open for
business (generally weekdays between 7:00 a.m. and 3:00 p.m. Central Time).
To prevent unauthorized transactions in your account, your Fund will take
precautions designed to verify the identity of every caller. It may record a
call, request more information and send written confirmation of telephone
transactions. If the Fund fails to follow reasonable precautions, it may be
considered responsible for resulting losses.
You should verify the accuracy of each telephone transaction as soon as you
receive your confirmation statement.
For more information call 800.344.1770 or visit our website at
WWW.ARTISANFUNDS.COM
37
<PAGE>
(PICTURE)
TELEPHONE EXCHANGE PLAN
This plan permits you to transfer investments among the Artisan Funds. Each
exchange between accounts must be at least $1,000. The price of shares exchanged
is determined at the end of that day's trading session.
Please note: An exchange is a sale and may have tax consequences for you.
TELEPHONE EXCHANGE PLAN RESTRICTIONS:
- If you wish to exchange between Funds, be sure both accounts are registered
in the same name, with the same address and taxpayer identification number.
- You may open a Fund account by telephone exchange from another Artisan Fund
account only if you previously chose the telephone transaction option for the
Fund from which you want to make the exchange.
- If your account is subject to backup withholding, you may not use the
telephone exchange plan.
- Excessive trading can hurt both performance and shareholders. Thus, if you
make excessive use of the telephone exchange plan, Artisan Funds may terminate
your access to the plan or limit the number of transfers you can make in a
calendar year.
- Artisan Funds reserves the right to terminate or modify the telephone exchange
plan at any time. If Artisan Funds finds it necessary to do either, it will
try to notify you in advance.
DIVIDENDS, CAPITAL GAINS & TAXES
As a shareholder in an Artisan Fund, you are entitled to your share of its net
income and any gains realized on its investments. Each Fund intends to
distribute substantially all of its net income and net realized capital gains to
investors at least annually.
38
<PAGE>
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to receive
your distributions. If you later want to change, you may either submit a written
request or call us at 800.344.1770.
Each Fund offers three options:
REINVESTMENT OPTION. Your dividends and capital gain distributions will be
reinvested in additional shares of the Fund. If you do not indicate a choice on
your application, we will automatically reinvest your distributions.
INCOME-ONLY OPTION. We will automatically reinvest your capital gain
distributions, but send you a check for dividends.
CASH OPTION. We will send you a check for all distributions.
In IRA accounts, all distributions are automatically reinvested. Otherwise, they
could be subject to income tax and penalties. After you are 59 1/2, you may
request payment of distributions in cash, although these too 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.
TAXES
As you should with any investment, consider how the return on your investment
in a Fund will be taxed. If your investment is a tax-deferred account - an IRA,
for example - the following tax discussion does not apply.
TAXES ON DISTRIBUTIONS. Distributions are subject to federal income tax, and may
be subject to state or local taxes. If you are a U.S. citizen residing outside
the United States, your distributions may also be taxed by the country in which
you reside.
For more information call 800.344.1770 or visit our website at
WWW.ARTISANFUNDS.COM
39
<PAGE>
(PICTURE)
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 are taxable as if you
received them 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. The tax rate of a capital gain depends on the
length of time that the Fund held the asset it sold.
Given their objectives and strategies, each of the Artisan Funds will chiefly
produce capital gains distributions, as opposed to current income. Every
January, each of your Funds will send you and the IRS a statement - called Form
1099 - showing the amount of every taxable distribution you received in the
previous calendar year.
TAXES ON TRANSACTIONS. When you redeem shares, you will experience 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. You may be subject to tax.
Whenever you sell shares of a 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 that reports, among other things, your average
cost basis of the shares you sold. This will allow you or your tax preparer to
determine the tax consequences of each redemption. However, be sure to keep your
regular account statements; their information will be essential in verifying the
amount of your capital gains or losses.
To invest, you must be a U.S. resident with a Social Security or taxpayer
identification number. When you sign your account application, you must 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 this procedure, the IRS can require the Fund to
withhold 31% of your taxable distributions and redemptions.
40
<PAGE>
For more detail on the Artisan Funds, you may request the Statement of
Additional Information, which is incorporated herein by reference.
You can find more information about a Fund's investments in its annual and semi-
annual reports to shareholders. These documents discuss the market conditions
and investment strategies that significantly affected the Fund's performance
during its most recent fiscal period.
For a free copy of any of these documents, call 800.344.1770. Also call this
number if you have a question or would like to receive other information about
an Artisan Fund. You may also obtain copies of the reports to shareholders and
other information about the Artisan Funds on the Artisan Funds' website at
www.artisanfunds.com.
Information about the Funds, including the Statement of Additional Information,
is also available to you through the Securities and Exchange Commission. You can
review and copy Fund documents at the Commission's Public Reference Room, 450
5th St., N.W., Washington, D.C. 20549-6009. The telephone number there is
800.SEC.0330.
You may also request Fund documents by accessing the Commission's website at:
http://www.sec.gov.
And you may obtain copies for a fee by writing to: Securities and Exchange
Commission, Public Reference Section, 450 5th St., N.W., Washington, D.C. 20549-
6009.
811-8932
(LOGO) ARTISAN FUNDS
INVESTMENT MANAGEMENT PRACTICED WITH
INTELLIGENCE AND DISCIPLINE IS AN ART
For more information call 800.344.1770 or visit our website at
WWW.ARTISANFUNDS.COM
<PAGE>
(LOGO)
Prospectus
ARTISAN MID CAP FUND
(Institutional Shares)
July 1, 2000
This prospectus offers Artisan Mid Cap Fund Institutional Shares to
institutional investors including, but not limited to, employee benefit plans,
endowments, foundations, trusts and corporations able to meet the Fund's minimum
investment requirement of $2 million.
An investment in the Fund is 100% no-load, which means you pay no sales charges.
You also pay no 12b-1 fees. However, you bear your share of annual fund
operating expenses (including the investment management fee) which are deducted
from Fund assets.
ARTISAN FUNDS, INC.
Suite 1770
1000 North Water Street
Milwaukee, WI 53202-3197
Be sure to read this prospectus before you invest and please keep it on file for
future reference.
This prospectus presents essential facts about the Fund, including investment
strategies, management fees and services available to you as an investor.
If you have a question about any part of this prospectus, please call the number
below. An Artisan Funds representative will be happy to help you.
--------------
1-800-399-1770
--------------
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE
FUND'S SHARES OR DETERMINED WHETHER THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A CRIME.
<PAGE>
TABLE OF CONTENTS
Important Legal Information.......................Cover
Goal, Strategy & Philosophy...........................2
Risks You Should Consider.............................3
Total Return - Calendar Year..........................4
Average Annual Total Returns..........................5
Fees & Expenses.......................................5
Who is Eligible to Invest?............................6
The Fund's Financial Highlights.......................7
Organization, Management & Management Fee.............8
Investing with the Fund...............................8
Minimum Investments..............................8
How to Buy Shares.....................................9
How to Sell Shares...................................10
Shareholder & Account Policies.......................12
Statements & Reports............................12
Share Price.....................................12
Dividends, Capital Gains & Taxes................13
Distribution Options............................13
Taxes...........................................13
1
<PAGE>
GOAL, STRATEGY & PHILOSOPHY
--------------------------------------------------------------------------------
GOAL
Artisan Mid Cap Fund seeks maximum long-term capital growth. The Fund may change
this goal without the approval of shareholders.
--------------------------------------------------------------------------------
STRATEGY & PHILOSOPHY
The Fund invests at least 65% of its total assets in the common stocks of
medium-sized U.S. companies.
A medium-sized company is one whose total stock market value falls within the
range of companies in the S&P 400 MidCap Index. As of March 31, 2000, this
Index included companies with capitalizations between approximately $210 million
and $23.2 billion. Over time, the capitalization range of companies in the
Index will change. As it does, the size of the companies in which the Fund
invests may change.
- The Fund prefers to invest in companies with "franchise" characteristics.
These could be a proprietary technology, dominant market share or some
other form of sustainable competitive advantage.
- The Fund also favors companies with predictable streams of cash flow
through real growth in demand for their products or services. Such
companies are well-positioned to take advantage of opportunities in
their markets.
- If Artisan Partners, the adviser to the Fund, is impressed with a
company's competitive position and prospects for growth, it then defines
and researches key investment issues. It also estimates the company's
intrinsic value, and generally will buy the stock only if it sells below
that estimate.
- Under ordinary circumstances, the Fund is fully invested in common
stocks. At times, however, Artisan Partners may determine that market or
economic conditions warrant a temporary defensive position. During those
periods, the Fund's assets may not be invested in accordance with its
strategy and the Fund may not achieve its investment objective. In this
case, the Fund may hold up to 100% of its assets in cash, cash
equivalents, or short-term government or corporate obligations.
The Fund tries to lower the risks of investing in medium-sized companies through
broad diversification by industry and company, as well as continuous monitoring
of each holding.
The Fund may engage in active and frequent trading to achieve its principal
investment strategies. A higher rate of portfolio turnover results in increased
transaction expenses, the realization of capital gains or losses and may reduce
performance.
2
<PAGE>
Artisan Partners may decide to sell a stock when a company's valuation
approaches its growth rate, changing circumstances affect the original reasons
for a company's purchase, a company exhibits deteriorating fundamentals or more
attractive alternatives exist.
PRINCIPAL RISKS YOU SHOULD CONSIDER
The Fund invests primarily in common stocks. In the short-term, stock prices may
fluctuate widely in response to company, market or economic news. When you sell
your shares, they may be worth more or less than you paid for them. You can lose
money by investing in the Fund.
The Fund does not pursue income and is not a balanced investment plan. In
addition, there can be no assurance that it will achieve its investment goal.
The investment manager's ability to choose suitable investments for the Fund has
a significant impact on the Fund's ability to achieve its investment objective.
The percentage of the Fund's assets invested in various industries and sectors
will vary from time to time depending on the portfolio management team's
perception of investment opportunities. Investments in particular industries
or sectors may be more volatile than the overall stock market. For example,
technology, science and communications are rapidly changing fields, and stocks
of these companies may be subject to more abrupt or erratic market movements
than the stock market in general. Consequently, a higher percentage of holdings
in a particular industry or sector may have the potential for a greater impact
on the Fund.
Below are the principal investment risks of the Fund.
- Stocks of medium-sized companies tend to be more volatile than those of
large companies.
- Compared to large companies, medium-sized companies typically have
analyst coverage by fewer Wall Street firms. For this reason, they are
more likely to be trading at prices that reflect incomplete or
inaccurate information.
- During some periods, stocks of mid-sized companies, as a class, have
underperformed the stocks of small and large companies.
3
<PAGE>
INVESTMENT RETURNS
The bar chart and table below illustrate the risks of investing in the Fund. As
you can see, the bar chart shows the returns achieved year by year and the table
compares the Fund's average annual total returns for various periods, compared
to a market index. How the Fund has performed in the past does not necessarily
indicate how it will perform in the future.
TOTAL RETURN - CALENDAR YEAR<F1>
ARTISAN MID CAP FUND - INVESTOR SHARES
RETURN (%)
----------------------
1998 33.37%
1999 57.89%
<F1> Because Institutional Shares have not been offered for a full calendar
year, the information provided in the bar chart and table represents the
performance of Investor Shares, the Fund's other class of shares, which are
offered to individual investors by a separate prospectus. Institutional
Shares and Investor Shares would have substantially similar annual returns
because the shares are invested in the same portfolio of securities.
However, because the classes do not have the same expenses, the expense
ratio and the Total Return and Average Annual Total Return of Institutional
Shares will differ from the Investor Shares.
The Fund's return from January 1, 2000 through March 31, 2000 was 26.14%.
For the periods shown in the bar chart, the highest and lowest quarterly returns
for the Investor Shares were 37.66% and (10.54)% for the quarters ended December
31, 1999 and September 30, 1998, respectively.
4
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS
--------------------------------------------------------------------------------
FOR THE YEAR FROM 6/27/97
ENDED 12/31/99 THROUGH 12/31/99
--------------------------------------------------------------------------------
ARTISAN MID CAP FUND
(INVESTOR SHARES) 57.89% 48.39%
--------------------------------------------------------------------------------
S&P 400 MidCap Index<F1> 14.72% 20.38%
--------------------------------------------------------------------------------
Investor Shares inception date is 6/27/97. All returns reflect reinvested
dividends.
<F1> The S&P 400 MidCap Index is an unmanaged, market-weighted index of 400 mid-
cap companies.
The Fund's performance was achieved during a period of generally favorable
market and economic conditions, including for securities offered in initial
public offerings (IPOs), in which the Fund invests when attractive opportunities
are presented to it. The market and economic conditions prevailing in 1998 and
1999 are unlikely to continue and any positive impact on performance of IPO
investments will diminish as the Fund's assets grow.
FEES & EXPENSES OF THE FUND
Below are the fees and expenses that you may pay if you buy and hold
Institutional Shares of the Fund.
--------------------------------------------------------------------------------
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum sales charge (load) imposed on purchases None
Exchange fee None
Redemption fee None
5
<PAGE>
--------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
-------------------------------------------------------------
EXPENSE MID CAP FUND
(INSTITUTIONAL SHARES)
-------------------------------------------------------------
MANAGEMENT FEES 1.00%
-------------------------------------------------------------
DISTRIBUTION (12B-1) FEES None
-------------------------------------------------------------
OTHER EXPENSES 0.20<F1>
-------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING EXPENSES 1.20<F1>
-------------------------------------------------------------
<F1> In the absence of an operating history, the amount shown for "other
expenses" is the estimated amount that the Fund will incur.
EXAMPLE. This example is intended to help you compare the cost of investing in
Institutional Shares of the Fund with that of investing in other mutual funds.
The example assumes you invest $10,000 for the time periods indicated and then
redeem all of your shares at the end of those periods. The example also assumes
that you earn a 5% return each year, and that operating expenses remain
constant.
-------------------------------------------------------------
TIME PERIOD MID CAP FUND
(INSTITUTIONAL SHARES)
-------------------------------------------------------------
1 YEAR $122
-------------------------------------------------------------
3 YEARS $381
-------------------------------------------------------------
5 YEARS $660
-------------------------------------------------------------
10 YEARS $1,455
-------------------------------------------------------------
This example is for illustration only. It is not meant to suggest actual or
expected costs or returns, which may be more or less than the amounts shown.
WHO IS ELIGIBLE TO INVEST?
Institutional Shares are designed for institutional investors who are able to
meet the high minimum investment requirements, who want maximum long-term
capital growth rather than income, and who have the long-term investment outlook
needed for investing in the stocks of mid cap companies.
6
<PAGE>
TO REDUCE COSTS, INSTITUTIONAL SHARES ARE NOT AVAILABLE FOR SALE IN ALL STATES.
TO FIND OUT IF INSTITUTIONAL SHARES ARE AVAILABLE OR CAN BE MADE AVAILABLE IN
YOUR STATE, OR TO OBTAIN AN APPLICATION, CALL 1-800-399-1770. SEE "HOW TO BUY
SHARES."
THE FUND'S FINANCIAL HIGHLIGHTS
The following table is intended to help you understand the financial performance
of the Fund since it began operations as it relates to Investor Shares (not
Institutional Shares). Certain information reflects financial results for a
single Investor Share. Because Institutional Shares have not previously been
issued, similar information does not exist for them. Total return represents
the rate you would have earned (or lost) on an investment, assuming reinvestment
of all dividends and distributions. For periods up to and including the year
ended June 30, 1999, this information has been audited by PricewaterhouseCoopers
LLP, independent accountants, whose report is included in the annual report,
which is available on request.
For a share outstanding 6 Months Ended Year Year Year
throughout the period Ended Ended Ended Ended
12/31/99 6/30/99 6/30/98 6/30/97<F1>
--------- --------- --------- ---------
(unaudited)
Net asset value,
beginning of period $16.67 $13.69 $10.00 $10.00
Income from investment operations:
Net investment loss (0.05) (0.16)<F5> (0.08) --
Net realized and unrealized
gains on securities 5.90 4.41 4.56 --
-------- -------- -------- --------
TOTAL FROM INVESTMENT
OPERATIONS 5.85 4.25 4.48 --
-------- -------- -------- --------
Distributions paid to shareholders:
Net realized gains on
investment transactions (0.83) (1.27) (0.79) --
-------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $21.69 $16.67 $13.69 $10.00
======== ======== ======== ========
Total return 36.0%<F2> 35.8% 46.1% 0.0%<F2>
Ratios/supplemental data:
Net assets, end of
period (millions) $98.0 $43.3 $12.8 $1.8
Ratio of expenses to
average net assets 1.60%<F3> 2.00%<F4> 2.00%<F4> 0.00%<F3>
Ratio of net investment
income to average
net assets. (0.84)%<F3> (1.13)%<F4>(0.77)%<F4> 0.00%<F3>
Portfolio turnover rate 133.29%<F2> 202.84% 235.65% 0.00%<F2>
<F1> For the period from commencement of operations (June 27, 1997) through June
30, 1997.
<F2> Not annualized.
<F3> Annualized.
<F4> The ratios of expenses to average net assets and net investment loss to
average net assets exclude fund expenses paid by Artisan Partners. Absent
fund expenses paid by Artisan Partners, the ratios of expenses to average
net assets and net investment loss to average net assets would have been
2.12% and (1.25)% for the year ended June 30, 1999 and 3.64% and (2.41)%
for the year ended June 30, 1998, respectively.
<F5> Computed based on average shares outstanding.
7
<PAGE>
ORGANIZATION, MANAGEMENT & MANAGEMENT FEE
ORGANIZATION. The Fund is a series of Artisan Funds, Inc. The Fund offers two
classes of shares - Investor Shares and Institutional Shares. This prospectus
describes Institutional Shares. Investor Shares are offered to individual
investors through a separate prospectus.
MANAGEMENT. The Fund is managed by Artisan Partners Limited Partnership (Artisan
Partners), which selects the Fund's investments and handles its business affairs
under the direction of the board of directors. Artisan Partners was organized in
1994 and, as of March 31, 2000, manages approximately $9.5 billion for Artisan
Funds and institutional clients. Artisan Partners is a limited partnership
managed by its general partner, Artisan Investment Corporation. The address is:
Artisan Partners, 1000 North Water Street, Suite 1770, Milwaukee, Wisconsin
53202-3197.
ANDREW C. STEPHENS, Portfolio Manager, has been a Managing Director of Artisan
Partners and a Vice President of Artisan Funds since he joined Artisan Partners
in 1997. From 1993 to 1997, Mr. Stephens was Co-Manager of the Strong Asset
Allocation Fund. From 1994 to 1996, he served as a Senior Research Analyst for
the Strong Common Stock Fund and Strong Opportunity Fund.
Mr. Stephens holds a BS degree in Economics from the University of Wisconsin -
Madison.
MANAGEMENT FEE. The Fund pays a management fee to Artisan Partners for serving
as its investment adviser and providing administrative services. The fee is
determined as a percentage of average daily net assets. The Fund also pays
expenses related to its daily operations. Expenses paid out of the Fund's
assets are reflected in its share price or dividends. For services furnished
by Artisan Partners, the Fund has agreed to pay an annual fee of 1.00% of the
Fund's average daily net assets.
INVESTING WITH THE FUND
THE FUND IS 100% NO-LOAD, which means you pay no sales charges. You also pay no
12b-1 fees. However, you bear your share of annual fund operating expenses
(including the investment management fee) which are deducted from Fund assets.
--------------------------------------------------------------------------------
MINIMUM INVESTMENTS
To open an account......................$2,000,000
To add to an account......................$100,000
Minimum balance required................$2,000,000
8
<PAGE>
Each account must separately meet the minimum investment requirements applicable
to Institutional Shares. The Fund reserves the right to close your account if
the value is less than $2 million, unless the reduction in value is due solely
to market depreciation. Before closing an account below this level, the Fund
will notify you and allow you at least 30 days to bring the value of the account
up to the minimum.
HOW TO BUY SHARES
APPLICATIONS FOR INSTITUTIONAL SHARES ARE ONLY MADE AVAILABLE THROUGH ARTISAN
DISTRIBUTORS LLC BY CALLING 1-800-399-1770. Institutional Shares may be
purchased by check or wire. There are no sales commissions or underwriting
discounts.
--------------------------------------------------------------------------------
BY WIRE
You may purchase shares by instructing your bank to wire money to Artisan Funds'
custodian bank. Your bank may charge you a fee for sending the wire. IF YOU ARE
OPENING A NEW ACCOUNT BY WIRE TRANSFER, YOU MUST FIRST TELEPHONE ARTISAN
DISTRIBUTORS LLC AT 1-800-399-1770 TO REQUEST AN ACCOUNT NUMBER AND FURNISH YOUR
TAX IDENTIFICATION NUMBER. Artisan Funds will not be responsible for the
consequences of delays, including delays in the banking or Federal Reserve wire
systems.
Wire transfer instructions are:
State Street Bank and Trust Company
Attn: Mutual Funds
Boston, MA 02110
Routing #011000028
Credit to Artisan Mid Cap Institutional Shares 1333
Deposit DDA 99050882
--------------------------------------------------------------------------------
BY CHECK
To make an initial purchase of shares by check, complete and sign the "Account
Application" and send it to the Fund's transfer agent at one of the following
addresses with a check for the total purchase amount payable to "Artisan Funds":
REGULAR MAIL OVERNIGHT DELIVERY
------------ ------------------
Artisan Funds Artisan Funds
c/o Boston Financial Data Services c/o Boston Financial Data Services
P.O. Box 8412 66 Brooks Drive
Boston, MA 02266-8412 Braintree, MA 02184
All investment checks must be delivered to one of the above addresses. Neither
Artisan Funds nor Artisan Distributors LLC is authorized to accept shareholder
investment checks at their corporate offices.
9
<PAGE>
--------------------------------------------------------------------------------
PURCHASES IN KIND
You may, subject to the approval of Artisan Funds, purchase shares of the Fund
with securities that are eligible for purchase by the Fund (consistent with the
Fund's investment strategy, goal and philosophy) that have value that is readily
ascertainable in accordance with the Fund's valuation policies. Call Artisan
Funds at 1-800-399-1770 if you would like to purchase Fund shares with other
securities.
--------------------------------------------------------------------------------
SUBSEQUENT INVESTMENTS
You may make subsequent investments by wire transfer using the instructions
given above, or by submitting a check, along with either the stub from your Fund
account confirmation statement or a note indicating the amount of the purchase,
your account number, and the name in which your account is registered. ARTISAN
FUNDS WILL NOT ACCEPT CASH, DRAFTS, THIRD PARTY CHECKS, OR CHECKS DRAWN ON BANKS
OUTSIDE OF THE UNITED STATES. If your order to purchase Institutional Shares is
canceled because your check does not clear, you will be responsible for any
resulting loss incurred by the Fund.
--------------------------------------------------------------------------------
PURCHASE PRICE & EFFECTIVE DATE
Each purchase of Institutional Shares is made at the net asset value applicable
to Institutional Shares (see "Share Price") next determined after receipt by the
Fund's transfer agent of the check or wire transfer of funds in payment of the
purchase.
--------------------------------------------------------------------------------
GENERAL
Artisan Funds cannot accept a purchase order specifying a particular purchase
date or price per share. Each purchase order must be accepted by an authorized
officer of Artisan Funds or its transfer agent and is not binding until accepted
and entered on the books of the Fund. Once your purchase order has been
accepted, you may not cancel or revoke it; however, you may redeem the shares.
Artisan Funds reserves the right not to accept any purchase order that it
determines not to be in the best interest of the Fund or the Fund's
shareholders.
HOW TO SELL SHARES
You may redeem all or any part of your Institutional Shares upon your written
request delivered to Artisan Funds' transfer agent at one of the following
addresses:
REGULAR MAIL OVERNIGHT DELIVERY
------------ ------------------
Artisan Funds Artisan Funds
c/o Boston Financial Data Services c/o Boston Financial Data Services
P.O. Box 8412 66 Brooks Drive
Boston, MA 02266-8412 Braintree, MA 02184
10
<PAGE>
Your redemption request must:
- identify the Fund and give your account number;
- specify the number of shares or dollar amount to be redeemed;
- be accompanied by a corporate resolution or other authorization in the case
of a redemption by a corporation, trust, partnership or other entity, as
described below; and
- be signed by the shareholder in ink or by a duly authorized agent of the
shareholder.
--------------------------------------------------------------------------------
EVIDENCE OF AUTHORITY
Redemption requests by a corporation, trust, partnership or other entity must be
accompanied by evidence of authority of the person or persons signing the
redemption request to so act.
In the case of a corporation, the request must be signed in the name of the
corporation by an officer whose title must be stated, and must be accompanied by
a by-law provision or resolution of the board of directors, certified within 60
days, authorizing the officer to so act. A redemption request from a partnership
or a trust must be signed in the name of the partnership or trust by a general
partner or a trustee and include a signature guarantee. If the trustee is not
named in the account registration, a redemption request by a trust must also
include evidence of the trustee's appointment, such as a certified copy of the
relevant portions of the trust instrument. Under certain circumstances, before
the shares can be redeemed, additional documents may be required in order to
verify the authority of the person seeking to redeem.
--------------------------------------------------------------------------------
GENERAL REDEMPTION POLICIES
You may not cancel or revoke your redemption order once your instructions have
been received and accepted. Artisan Funds cannot accept a redemption request
that specifies a particular date or price for redemption or any special
conditions. PLEASE CALL 1-800-399-1770 IF YOU HAVE ANY QUESTIONS ABOUT
REQUIREMENTS FOR A REDEMPTION BEFORE SUBMITTING YOUR REQUEST. Artisan Funds
reserves the right to require a properly completed application before making
payment for shares redeemed.
The Fund intends to pay all redemptions in cash. During any 90-day period for
any one shareholder, a Fund is obligated to redeem shares solely in cash up to
the lesser of $250,000 or 1% of the Fund's net assets. Redemptions in excess of
these limits may be paid wholly or partly by an in-kind distribution of
securities.
The price at which your redemption order will be executed is the net asset value
next determined after proper redemption instructions are received by the Fund's
transfer agent. See "Share Price." Because the redemption price you receive
depends upon the net asset value per share of Institutional Shares at the time
of redemption, it may be more or less than the price you originally paid for the
shares and may result in a realized capital gain or loss.
11
<PAGE>
Artisan Funds will generally wire transfer the proceeds of your redemption to
the bank account designated in your purchase application. If you attempt to
redeem shares within 15 days after they have been purchased by check, Artisan
Funds may delay payment of the redemption proceeds to you until it can verify
that payment for the purchase of those shares has been (or will be) collected.
To reduce such delays, Artisan Funds recommends that your purchase be made by
federal funds wire through your bank.
Shares in any account you maintain with Artisan Funds may be redeemed to the
extent necessary to reimburse Artisan Funds for any loss it sustains that is
caused by you (such as losses from uncollected checks or any Fund liability
under the Internal Revenue Code provisions on backup withholding relating to
your account).
SHAREHOLDER & ACCOUNT POLICIES
--------------------------------------------------------------------------------
STATEMENTS & REPORTS
As a Fund investor, you will receive:
- confirmation statements - after every transaction in your account or change
in your account registration;
- quarterly account statements;
- annual and semi-annual reports with financial statements;
- year-end tax statements.
We suggest you keep each quarterly and year-end account statement with your
other important financial papers. You may need them for tax purposes.
If you need copies of statements, call 1-800-399-1770. Copies of this year's or
last year's statements are free of charge; for earlier years, there is a $10
processing fee.
--------------------------------------------------------------------------------
SHARE PRICE
The Fund is open for business every day the New York Stock Exchange ("NYSE") is
open. Institutional Shares will not be priced on days when the NYSE is closed.
The Fund buys and sells Institutional Shares each day at the net asset value per
Institutional Share.
The NET ASSET VALUE PER INSTITUTIONAL SHARE is the value of a single
Institutional Share. It is computed by totaling the Institutional Shares' pro
rata share of the value of the Fund's investments, cash and other assets,
subtracting the Institutional Shares' pro rata share of the value of the Fund's
liabilities and the liabilities specifically allocated to Institutional Shares,
then dividing the result by the number of Institutional Shares outstanding. The
net asset value is computed daily at the NYSE closing time - usually 3:00 p.m.
central time, but sometimes earlier.
12
<PAGE>
Fund securities and assets are valued chiefly by quotations from the primary
market in which they are traded. If quotations are not readily available, they
are valued by a method that the board of directors believes reflects a fair
value.
The Fund may hold foreign securities to a limited extent. Values of foreign
securities are translated from local currencies into U.S. dollars using current
exchange rates. To the extent the Fund holds foreign securities - traded
primarily on foreign exchanges - the price of Institutional Shares may change on
days when the Fund is not open for purchase or sale.
--------------------------------------------------------------------------------
DIVIDENDS, CAPITAL GAINS & TAXES
AS A SHAREHOLDER IN THE FUND, YOU ARE ENTITLED TO YOUR SHARE OF ITS NET INCOME
AND ANY GAINS REALIZED ON ITS INVESTMENTS. The Fund intends to distribute
substantially all of its net income and net realized capital gains to investors
at least annually.
--------------------------------------------------------------------------------
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to receive
your distributions. If you want to change your distribution option at a later
date, you may either submit a written request or call us at 1-800-399-1770.
The Fund offers three options:
- REINVESTMENT OPTION. Your dividends and capital gain distributions will be
reinvested in additional shares of the Fund. If you do not indicate a
choice on your application, we will automatically reinvest your
distributions.
- INCOME-ONLY OPTION. We will automatically reinvest your capital gain
distributions but send you a check for dividends.
- CASH OPTION. We will send you a check for all distributions.
When you reinvest, the reinvestment price is the net asset value per
Institutional Share at the close of business on the reinvestment date. The
mailing of distribution checks will usually begin on the payment date.
--------------------------------------------------------------------------------
TAXES
As you should with any investment, consider how the return on your investment in
the Fund will be taxed. If your investment is in a tax-deferred account - an
employee benefit plan account, for example - the following tax discussion does
not apply.
TAXES ON DISTRIBUTIONS. Distributions are subject to federal income tax, and may
be subject to state or local taxes. If you are a U.S. citizen residing outside
the United States, your distributions may also 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 are taxable as if you received
them on December 31.
13
<PAGE>
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. The character of a capital gain depends on the
length of time that the Fund held the asset it sold.
Given its objective and strategy, the Fund will chiefly produce capital gains
distributions, as opposed to current income. Every January, the Fund will send
you and the IRS a statement - called Form 1099 - showing the total amount of
taxable distributions you received in the previous calendar year.
TAXES ON TRANSACTIONS. When you redeem shares, you will experience 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. You may be subject to tax.
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 that reports, among other things, your average
cost basis of the shares you sold. This will allow you or your tax preparer to
determine the tax consequences of each redemption. However, be sure to keep your
regular account statements; their information will be essential in verifying the
amount of your capital gains or losses.
To invest, you must be a U.S. resident with a Social Security or taxpayer
identification number. When you sign your account application, you must 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 this procedure, the IRS can require the Fund to
withhold 31% of your taxable distributions and redemptions.
14
<PAGE>
For more detail on the Fund, you may request the Statement of Additional
Information, which is incorporated herein by reference.
You can find more information about the Fund's investments in its annual and
semi-annual reports to shareholders. These documents discuss the market
conditions and investment strategies that significantly affected the Fund's
performance in its most recent fiscal period.
For a free copy of any of these documents, call 1-800-399-1770. Also call this
number if you have a question or would like to receive other information about
the Fund.
Text-only versions of the Fund's documents can be viewed online or downloaded
from the EDGAR Database on the SEC's Internet web site at www.sec.gov. You may
also review and copy those documents by visiting the SEC's Public Reference Room
in Washington, D.C. Information on the operation of the Public Reference Room
may be obtained by calling the SEC at 202-942-8090. In addition, copies may be
obtained, after mailing the appropriate duplicating fee, by writing to the SEC's
Public Reference Section, 450 5th Street, N.W., Washington, D.C. 20549-0102 or
by e-mail request at [email protected].
811-8932
15
<PAGE>
(LOGO) ARTISAN FUNDS
INVESTMENT MANAGEMENT PRACTICED WITH
INTELLIGENCE AND DISCIPLINE IS AN ART.
ARTISAN FUNDS, INC.
ARTISAN SMALL CAP FUND
ARTISAN INTERNATIONAL FUND
ARTISAN MID CAP FUND
ARTISAN SMALL CAP VALUE FUND
1000 North Water Street, Suite 1770
Milwaukee, Wisconsin 53202
(414) 390-6100 (800) 344-1770
STATEMENT OF ADDITIONAL INFORMATION
October 29, 1999
Supplemented July 1, 2000
--------------------------------------------------------------------------
Artisan Small Cap Fund, Artisan International Fund, Artisan Mid Cap Fund
and Artisan Small Cap Value Fund (each, a "Fund," together, the "Funds") are
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 Funds dated October 29, 1999 and any supplement to the
prospectus. A copy of the prospectus can be obtained without charge by calling
(800) 344-1770, by writing to Artisan Funds, or by accessing the Artisan Funds
website at www.artisanfunds.com.
----------------
TABLE OF CONTENTS
Page
----
Information about the Funds and Artisan Partners..................B-2
Investment Objective and Policies.................................B-2
Investment Techniques and Risks...................................B-4
Investment Restrictions..........................................B-18
Performance Information..........................................B-21
Organization.....................................................B-26
Directors and Officers...........................................B-28
Principal Shareholders...........................................B-31
Investment Advisory Services.....................................B-32
Code of Ethics...................................................B-33
Distributor......................................................B-34
Portfolio Transactions...........................................B-34
Purchasing and Redeeming Shares..................................B-36
Additional Tax Information.......................................B-37
Custodian and Transfer Agent.....................................B-38
Independent Accountants..........................................B-38
Financial Statements.............................................B-39
Appendix - Description of Bond Ratings............................C-1
<PAGE>
INFORMATION ABOUT THE FUNDS AND ARTISAN PARTNERS
Each Fund is a series of Artisan Funds, Inc. ("Artisan Funds"). Artisan
Partners Limited Partnership ("Artisan Partners") provides investment advisory
services to the Funds.
Artisan Funds strives to offer distinctive, high-value-added investment
opportunities. Artisan Funds is not a "family" of indistinguishable products
devised by marketers in a financial services conglomerate. Rather, Artisan
Partners is a small partnership of investment professionals, focused on a
limited number of distinct investment strategies, each of which is offered as a
series of Artisan Funds. The portfolio manager of each Fund is a specialist in
his or her market, with an investment process created and refined through years
of experience - an artisan. At Artisan Funds, we believe that experienced,
active managers investing in inefficient markets can produce superior returns
over time. The Artisan Funds are intended for long-term investors who share
that belief.
The discussion below supplements the description in the prospectus of each
Fund's investment objectives, policies and restrictions.
INVESTMENT OBJECTIVE AND POLICIES
Artisan Small Cap Fund invests for maximum long-term capital growth
primarily in the common stocks of small companies whose outstanding shares have
an aggregate market value of less than $1.5 billion.
Artisan International Fund seeks to achieve its objective of long-term
capital growth by investing primarily in the stocks of foreign companies.
Artisan International Fund offers two classes of shares: Artisan International
Shares ("International Shares") and Artisan International Institutional Shares
("Institutional Shares"). As described more fully in the Institutional Shares
prospectus, Institutional Shares are offered to certain institutional investors
with a minimum initial investment of $2 million.
Artisan Mid Cap Fund seeks long-term capital growth by investing primarily
in the common stocks of medium-sized companies. Medium-sized companies are
those whose market capitalizations fall within the range of companies in the S&P
MidCap 400 Index (the "MidCap Index"). As of September 30, 1999, the MidCap
Index included companies with capitalizations between approximately $235 million
and $12.9 billion. The market capitalization range in which Artisan Mid Cap
Fund invests will change as the range of the companies included in the MidCap
Index changes.
Artisan Partners, investment adviser to the Artisan Mid Cap Fund, seeks
mid-cap companies that possess franchise characteristics with prospects for
growth and whose stock sells at compelling valuations. This focus may lead
it to companies with superior business potential that are temporarily out of
favor or misunderstood by the market. Artisan Partners attempts to identify
these companies when they are experiencing a change dynamic that could
potentially leverage their inherent strengths.
B-2
<PAGE>
This strategy rests on a few basic beliefs:
- An established franchise can protect a company from some of the effects
of competition. Over time, this advantage could lead to more stable
cash flow and, ultimately, to higher valuation. Examples of "franchise
characteristics" are proprietary technology, a defensible brand, a
dominant market share, or the position of a low-cost provider.
- A franchise company selling at a significant discount to its intrinsic
value offers superior long-term investment potential. Thus, the
assessment of "intrinsic value" - the price that Artisan Partners
believes a strategic buyer would pay to own the entire company - is
fundamental to Artisan Partners' process.
- A company with franchise characteristics and an attractive valuation is
often one experiencing a major change - for instance, new management, a
restructuring, a new product cycle, an acquisition or a divestiture.
Such a change could serve as a catalyst to improved performance, higher
earnings, and, often, powerful, long-term market response. Artisan
Partners actively seeks such opportunities, hoping to identify as early
as possible the potential for positive change.
- The mid-cap universe provides a fertile ground for identifying franchise
companies trading at attractive prices. Large-cap franchise companies,
because they are heavily followed and sponsored, tend to be priced
efficiently. Small-cap companies typically do not yet possess
meaningful franchise characteristics. By contrast, the mid-cap universe
- in which market caps range between approximately $210 million and
$23.2 billion as of March 31, 2000 - is less efficient than the
large-cap, is more mature than the small-cap, and is populated by many
established companies whose franchise characteristics are emerging or
are poised to create powerful competitive advantages.
Artisan Mid Cap Fund attempts to manage portfolio risk by focusing on
stocks that sell at significant discounts to their intrinsic value as determined
by Artisan Partners, and by diversifying its holdings to avoid concentration in
any one stock or industry sector.
Artisan Small Cap Value Fund seeks long-term capital growth by investing
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
$1.5 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
Artisan Partners' estimate of their enterprise value.
Because Artisan Small Cap Value 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:
B-3
<PAGE>
- The company operates in an industry category that is cyclical in nature
and is presently out of favor.
- The company has assets that 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 that 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, Artisan Small Cap Value Fund attempts
to manage portfolio risk by diversifying its holdings to avoid concentration in
any one stock or industry sector.
The Funds invest primarily in equity securities, including common and
preferred stocks, warrants or other similar rights, and convertible securities.
While Artisan International Fund invests mostly in the securities of foreign
issuers, each other Artisan Fund may from time to time have significant portions
of its portfolio invested in foreign securities. The Funds also may invest in
any other type of security, including debt securities.
The investment objective of each 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.
However, investors in a Fund will receive at least 30 days' prior written notice
of any change in a Fund's investment objective.
INVESTMENT TECHNIQUES AND RISKS
Foreign Securities
Each Fund, other than Artisan International Fund, may invest up to 25% of
its total assets in foreign securities (including American Depository Receipts
("ADRs") European Depositary Receipts ("EDRs"), Global Depositary Receipts
("GDRs"), or other securities representing underlying shares of foreign issuers)
, 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. Under normal market
conditions, Artisan International Fund invests at least 65% of its total assets
in foreign securities. ADRs are receipts typically issued by an American bank
or trust company evidencing ownership of the underlying securities. EDRs are
European receipts evidencing a similar arrangement. GDRs are receipts that may
trade in U.S. or non-U.S. markets. The Funds may invest in sponsored or
unsponsored ADRs, EDRs or GDRs. In the case of an unsponsored depositary
receipt, a 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 depositary receipt. No Fund
intends to invest more than 5% of its net assets in unsponsored depositary
receipts.
B-4
<PAGE>
With respect to portfolio securities that are issued by foreign issuers or
denominated in foreign currencies, a Fund's investment performance is affected
by the strength or weakness of the U.S. dollar against these currencies. For
example, if the dollar falls 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 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 Funds will try to invest in companies and governments of
countries having stable political environments, there is the possibility of
expropriation or confiscatory taxation, seizure or nationalization of foreign
bank deposits or other assets, establishment of exchange controls, the adoption
of foreign government restrictions, or other adverse political, social or
diplomatic developments that could affect investment in these nations.
European Currency Unification
Eleven of the fifteen member countries of the European Union adopted a
single European currency, the Euro, effective January 1, 1999. The countries
participating in the Economic and Monetary Union (EMU) are Austria, Belgium,
Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal
and Spain. The notable countries missing from the new unified currency are
Great Britain, Denmark, Sweden and Greece. A new European Central Bank (ECB)
was created to manage the monetary policy of the new unified region. On the
same day, the exchange rates were irrevocably fixed between the EMU member
countries. National currencies will continue to circulate until they are
replaced by Euro coins and bank notes by the middle of 2002. This change is
likely to significantly impact the European capital markets in which the Artisan
International Fund invests a portion of its assets. As the ECB and European
market participants search for a common understanding of policy targets and
instruments, interest rates and exchange rates could become more volatile and
may increase the Fund's share price volatility.
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Debt Securities
In pursuing its investment objective, a Fund may invest in debt securities
of corporate and governmental issuers. The risks inherent in debt securities
depend primarily on the term and quality of the obligations in the Fund's
portfolio as well as on market conditions. A decline in the prevailing levels
of interest rates generally increases the value of debt securities, while an
increase in rates usually reduces the value of those securities.
Investments in debt securities by the Funds 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. Each Fund may invest up to 35% of its net assets in debt
securities that are rated below investment grade (i.e., securities rated BBB or
lower by S&P or Ba or lower by Moody's, commonly called "junk bonds"). However,
no Fund currently intends to invest more than 5% of its net assets in debt
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 a 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
Each Fund intends to be substantially fully invested in equity securities
in ordinary circumstances, although a Fund may invest without limit in corporate
or government obligations (U.S. or non-U.S., in the case of Artisan
International Fund) or hold cash or cash equivalents if Artisan Partners
determines that a temporary defensive position is advisable. During those
periods, a Fund's assets may not be invested in accordance with its strategy and
the Fund may not achieve its investment objective.
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). The estimated price at which a convertible security would
be valued by the marketplace if it had no conversion feature is
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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, a 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 a 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 which 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 Funds may use various techniques to increase or decrease their exposure
to the effects of possible changes in security prices, currency exchange rates
or other factors that affect the value of their portfolios. 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 a Fund's portfolio. If Artisan Partners judges market
conditions incorrectly or employs a strategy that does not correlate well with a
particular 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 that Fund and may involve a small
investment of cash relative to the magnitude of the risk assumed. These
techniques are used by the Funds 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 at a price set at the time
of the contract. Forward contracts are usually entered into with banks and
broker-dealers, are not exchange traded, and are usually for less than one year,
but may be renewed.
Forward currency transactions may involve currencies of the different
countries in which a Fund may invest, and serve as hedges against possible
variations in the exchange rate between
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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 a Fund accruing in
connection with the purchase and sale of its portfolio securities or income
receivables. Portfolio hedging is the use of forward contracts with respect to
portfolio security positions denominated or quoted in a particular currency.
Portfolio hedging allows a 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. A 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 portfolio of a particular Fund.
The Funds may not engage in "speculative" currency exchange transactions.
At the maturity of a forward contract to deliver a particular currency, a
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 a Fund to purchase additional currency on the spot market
(and bear the expense of such purchase) if the market value of the security is
less than the amount of currency the Fund is obligated to deliver and if a
decision is made to sell the security and make delivery of the currency.
Conversely, it may be necessary to sell on the spot market some of the currency
received upon the sale of the portfolio security if its market value exceeds the
amount of currency the Fund is obligated to deliver.
If a Fund retains the portfolio security and engages in an offsetting
transaction, the Fund will incur a gain or a loss to the extent that there has
been movement in forward contract prices. If 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.
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Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency should rise. Moreover,
it may not be possible for a Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the currency
at a price above the devaluation level it anticipates. The cost to 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 Funds may purchase and write (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 stock market. The Funds may
purchase agreements, sometimes called cash puts, that may accompany the purchase
of a new issue of bonds from a dealer.
An option on a security (or index) is a contract that gives the purchaser
(holder) of the option, in return for a premium, the right to buy from (call) or
sell to (put) the seller (writer) of the option the security underlying the
option (or the cash value of the index) at a specified exercise price at any
time during the term of the option (normally not exceeding nine months). The
writer of an option on an individual security or on a foreign currency has the
obligation upon exercise of the option to deliver the underlying security or
foreign currency upon payment of the exercise price or to pay the exercise price
upon delivery of the underlying security or foreign currency. Upon exercise,
the writer of an option on an index is obligated to pay the difference between
the cash value of the index and the exercise price multiplied by the specified
multiplier for the index option. (An index is designed to reflect specified
facets of a particular financial or securities market, a specific group of
financial instruments or securities, or certain economic indicators.)
The 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 a Fund owns the security underlying the call or has an absolute
and immediate right to acquire that security without additional cash
consideration (or, if additional cash consideration is required, cash or cash
equivalents in such amount are held in a segregated account by its custodian)
upon conversion or exchange of other securities held in its portfolio.
If an option written by a Fund expires, the Fund realizes a capital gain
equal to the premium received at the time the option was written. If an option
purchased by a Fund expires, the Fund realizes a capital loss equal to the
premium paid.
Prior to the earlier of exercise or expiration, an option may be closed out
by an offsetting purchase or sale of an option of the same series (type,
exchange, underlying security or index, exercise price, and expiration). There
can be no assurance, however, that a closing purchase or sale transaction can be
effected when a Fund desires.
A Fund will realize a capital gain from a closing purchase transaction if
the cost of the closing option is less than the premium received from writing
the option, or, if it is more, the
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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 a 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 unexpected events.
There can be no assurance that a liquid market will exist when a Fund seeks
to close out an option position. If a Fund were unable to close out an option
that it had purchased on a security, it would have to exercise the option in
order to realize any profit or the option would expire and become worthless. If
a Fund were unable to close out a covered call option that it had written on a
security, it would not be able to sell the underlying security until the option
expired. As the writer of a covered call option on a security, a Fund foregoes,
during the option's life, the opportunity to profit from increases in the market
value of the security covering the call option above the sum of the premium and
the exercise price of the call.
If trading were suspended in an option purchased or written by a 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 Funds may use
interest rate futures contracts, index futures contracts, and foreign
currency futures contracts. An interest rate, index or foreign currency
futures contract provides for the future sale by one party and purchase by
another party of a specified quantity of a financial instrument or the cash
value of an index<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.
--------------------
<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
function of the value of certain specified securities, no physical
delivery of those securities is made.
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Treasury notes, Eurodollar certificates of deposit, and foreign
currencies). Other index and financial instrument futures contracts are
available and it is expected that additional futures contracts will be developed
and traded.
The Funds may purchase and write call and put futures options. Futures
options possess many of the same characteristics as options on securities,
indexes and foreign currencies (discussed above). A futures option gives the
holder the right, in return for the premium paid, to assume a long position
(call) or short position (put) in a futures contract at a specified exercise
price at any time during the period of the option. Upon exercise of a call
option, the holder acquires a long position in the futures contract and the
writer is assigned the opposite short position. In the case of a put option,
the opposite is true. A Fund might, for example, use futures contracts to hedge
against or gain exposure to fluctuations in the general level of stock prices,
anticipated changes in interest rates or currency fluctuations that might
adversely affect either the value of the Fund's securities or the price of the
securities that the Fund intends to purchase. Although other techniques could
be used to reduce or increase the Fund's exposure to stock price, interest rate
and currency fluctuations, the Fund may be able to achieve its exposure more
effectively and perhaps at a lower cost by using futures contracts and futures
options.
The Funds will only enter into futures contracts and futures options that
are standardized and traded on an exchange, board of trade, or similar entity,
or quoted on an automated quotation system.
The success of any futures transaction depends on 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, a Fund's return might have been better had the
transaction not been attempted; however, in the absence of the ability to use
futures contracts, 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 futures contract is made by a Fund, The Fund
is required to deposit with its custodian or broker 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 generally set
by the exchange on which the contract is traded, although the margin requirement
may be modified during the term of the contract and 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. Each Fund
expects to earn interest income on its initial margin deposits. A futures
contract held by a Fund is valued daily at the official settlement price of the
exchange on which it is traded. Each 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 a Fund does not represent a borrowing or loan by the Fund but is instead
settlement between the Fund and the broker of the amount one would owe the other
if the futures contract had expired at the close of the previous day. In
computing daily net asset value, each Fund will mark-to-market its open futures
positions.
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Each Fund is also required to deposit and maintain margin with respect to
put and call options on futures contracts written by it. Such margin deposits
will vary depending on the nature of the underlying futures contract (and the
related initial margin requirements), the current market value of the option,
and other futures positions held by that 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 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 a Fund's portfolio, and, in
the case of interest rate futures contracts, the interest rate levels,
maturities, and creditworthiness of the issues underlying the futures contract
may differ from the financial instruments held in a Fund's portfolio. A
decision as to whether, when and how to use futures contracts involves the
exercise of skill and judgment, and even a well-conceived transaction may be
unsuccessful to some degree because of market behavior or unexpected stock price
or interest rate trends.
Futures exchanges may limit the amount of fluctuation permitted in certain
futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous day's settlement price at the end of the
current trading session. Once the daily limit has been reached in a futures
contract subject to the limit, no more trades may be made on that day at a price
beyond that limit. The daily limit governs only price movements during a
particular trading day and therefore does not limit potential losses because the
limit may work to prevent the liquidation of unfavorable positions. For
example, futures prices have occasionally moved to the daily limit for several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of positions and subjecting some holders of futures contracts to
substantial losses. Stock index futures contracts are not normally subject to
such daily price change limitations.
There can be no assurance that a liquid market will exist at a time when a
Fund seeks to close out a futures or futures option position. The Fund would be
exposed to possible loss on the
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position during the interval of inability to close, and would continue to
be required to meet margin requirements until the position is closed. In
addition, many of the contracts discussed above are relatively new instruments
without a significant trading history. As a result, there can be no assurance
that an active secondary market will develop or continue to exist.
Limitations on Options and Futures. If other options, futures contracts,
or futures options of types other than those described herein are traded in the
future, a Fund also may use those investment vehicles, provided the board of
directors determines that their use is consistent with that Fund's investment
objective.
A 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.
When purchasing a futures contract or writing a put option on a futures
contract, a Fund must maintain with its custodian (or broker, if legally
permitted) assets (including any margin) equal to the market value of such
contract. When writing a call option on a futures contract, a Fund similarly
will maintain with its custodian 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 a Fund has written call options on specific securities in its
portfolio, the value of those securities will be deducted from the current
market value of the securities portfolio.
In order to comply with Commodity Futures Trading Commission Regulation 4.5
and thereby avoid being deemed a "commodity pool operator," each 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 each 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 a Fund exercises a call or put option
that it holds, the premium paid for the option is added to the cost basis of the
security purchased (call) or deducted from the proceeds of the security sold
(put). For cash settlement options and futures
--------------------------
<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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options exercised by a Fund, the difference between the cash received at
exercise and the premium paid is a capital gain or loss.
If a call or put option written by a Fund is exercised, the premium is
included in the proceeds of the sale of the underlying security (call) or
reduces the cost basis of the security purchased (put). For cash settlement
options and futures options written by a Fund, the difference between the cash
paid at exercise and the premium received is a capital gain or loss.
Entry into a closing purchase transaction will result in capital gain or
loss. If an option written by a Fund is in-the-money at the time it was written
and the security covering the option was held for more than the long-term
holding period prior to the writing of the option, any loss realized as a result
of a closing purchase transaction will be long-term. The holding period of the
securities covering an in-the-money option will not include the period of time
the option is outstanding.
If a 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 and the settlement price on the earlier of delivery notice date or
expiration date. If a Fund delivers securities under a futures contract, the
Fund also realizes a capital gain or loss on those securities.
For federal income tax purposes, a 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, futures options 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 a Fund may affect
the holding period of the hedged securities.
If a Fund were to enter into a short index future, short index futures
option or short index option position and the Fund's portfolio were deemed to
"mimic" the performance of the index underlying such contract, the option or
futures contract position and the Fund's stock positions
---------------------
<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 of the type that is ineligible to be traded
on a commodity futures exchange (e.g., an option contract on a
sub-index based on the price of nine hotel-casino stocks).
The definition of equity option excludes options on broad-based
stock indexes (such as the Standard & Poor's 500 index).
B-14
<PAGE>
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 or
"offsetting notional principal contracts" (as defined by the Act) with respect
to, or futures or "forward contracts" (as defined by the Act) to deliver, the
same or substantially identical property, or if they enter into such
transactions and then acquire the same or substantially identical property.
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 sales, offsetting notional principal
contracts, and futures or forward contracts to deliver the same or substantially
similar property.
In order for each Fund to continue 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 will be qualifying income for purposes of the 90%
requirement.
Each Fund intends to distribute to shareholders at least 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 a Fund.
Shareholders will be advised of the nature of such capital gain distributions.
Rule 144A Securities
The Funds may purchase securities that have been privately placed but that
are eligible for purchase and sale under Rule 144A under the 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 each Fund's restriction on investing no more than
10% of its net assets in illiquid securities. In making a determination of
whether a Rule 144A security is liquid or not, 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, a Fund's holdings of illiquid securities
would be reviewed to determine what, if any, steps are required to assure that
the Fund does not invest more than 10% of its assets in illiquid securities.
Investing in Rule 144A securities could
B-15
<PAGE>
have the effect of increasing the amount of a Fund's assets invested in
illiquid securities if qualified institutional buyers are unwilling to purchase
such securities.
Lending of Portfolio Securities
Subject to restriction (3) under "Investment Restrictions" in this
Statement of Additional Information, each Fund may lend its portfolio securities
to broker-dealers and banks. Any such loan must be continuously secured by
collateral in cash or cash 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. No Fund currently
intends to loan more than 5% of its net assets.
Repurchase Agreements
Repurchase agreements are transactions in which a 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, a Fund will enter into repurchase
agreements only with banks and dealers believed by Artisan Partners to present
minimal credit risks. 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.
A 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, each Fund intends to comply
with provisions under such Code that would allow it immediately to resell such
collateral.
B-16
<PAGE>
When-Issued and Delayed-Delivery Securities; Reverse Repurchase Agreements
Each Fund may purchase securities on a when-issued or delayed-delivery
basis. Although the payment and interest terms of these securities are
established at a 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. A 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.
No Fund currently intends to have commitments to purchase when-issued securities
in excess of 5% of its net assets.
A Fund may enter into reverse repurchase agreements with banks and
securities dealers. A reverse repurchase agreement is a repurchase agreement in
which a Fund is the seller of, rather than the investor in, securities and
agrees to repurchase them at an agreed-upon time and price. Use of a reverse
repurchase agreement may be preferable to a regular sale and later repurchase of
securities because it avoids certain market risks and transaction costs.
However, reverse repurchase agreements will be treated as borrowing and subject
to each Fund's fundamental limitation on borrowing.
At the time a 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
Each Fund may make short sales "against the box." In a short sale, a Fun
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 a Fund to obtain the current
market price of a security which it desires to sell but is unavailable for
settlement. No Fund currently intends 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 a Fund would
be subject to restriction (4) under "Investment Restrictions" in this Statement
of Additional Information.
B-17
<PAGE>
Portfolio Turnover
Although the Funds do 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 Funds 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 each 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. For the years ended
June 30, 1999 and 1998, each Fund's portfolio turnover rates were as follows:
Artisan Small Cap Fund, 155.38% and 134.67%; Artisan International Fund, 79.41%
and 109.42%; Artisan Mid Cap Fund, 202.84% and 235.65%;and Artisan Small Cap
Value Fund, 49.29% and 52.58% (for the period from commencement of operations on
September 29, 1997 through June 30, 1998). The future turnover rate may vary
greatly from year to year. A high rate of portfolio turnover in the Funds, if
it should occur, would result in increased transaction costs, which must be
borne by that 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 lesser of (i) 67% of each Fund's
shares present at a meeting if more than 50% of the shares outstanding are
present or (ii) more than 50% of each Fund's outstanding shares, under which a
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 a 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
B-18
<PAGE>
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 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
U.S. Government 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.
A 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 a Fund will receive written notification at least 30 days'
prior to any change in that Fund's investment objective.
Non-Fundamental Restrictions
The Funds also are subject to the following non-fundamental restrictions
and policies, which may be changed by the board of directors. Many of these
restrictions were formerly required by law or regulation of one or more states
in which shares of a Fund are offered for sale. It is expected that certain of
the following restrictions, with respect to Artisan Small Cap Fund and Artisan
International Fund, (including restrictions (a), (d) through (g), and (i)
through (k)) will be revised or eliminated, although no change in the Fund's
operations is expected to result.
A Fund may not:
(a) invest in any of the following: (i)interests in oil, gas, or other
mineral leases or exploration or development programs (except readily marketable
securities, including but not limited to master limited partnership interests,
that may represent indirect interests in oil, gas, or other mineral exploration
or development programs); (ii) puts, calls, straddles, spreads, or any
combination thereof if by reason thereof the value of the Fund's aggregate
investment in such securities exceed 5% of its total assets (except that the
Fund may enter into transactions in
<F4> A Fund will not purchase securities when total borrowings by the Fund
are greater than 5% of its net asset value.
B-19
<PAGE>
options, futures, and options on futures); and (iii) limited partnerships
in real estate unless they are readily marketable [Artisan Small Cap Fund and
Artisan International Fund only];
(b) invest in companies for the purpose of exercising control or
management;
(c) 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;
(d) purchase or hold securities of an issuer if 5% of the securities of
such issuer are owned by those officers, directors or partners of the Fund or of
its investment adviser, who each own beneficially more than 1/2 of 1% of the
securities of that issuer [Artisan Small Cap Fund and Artisan International Fund
only];
(e) purchase securities of issuers (other than issuers of Federal agency
obligations or securities issued or guaranteed by any foreign country or asset-
backed securities) that, including their predecessors or unconditional
guarantors, have been in operation for less than three years, if by reason of
such purchase the value of the Fund's investment in all such securities will
exceed 5% of its total assets (valued at time of purchase) [Artisan Small Cap
Fund and Artisan International Fund only];
(f) mortgage, pledge, or hypothecate its assets, except as may be
necessary in connection with permitted borrowings or in connection with options,
futures, and options on futures [Artisan Small Cap Fund and Artisan
International Fund only];
(g) invest more than 5% of its net assets (valued at time of purchase) in
warrants, nor more than 2% of its net assets in warrants that are not listed on
the New York or American stock exchange [Artisan Small Cap Fund and Artisan
International Fund only];
(h) invest more than 25% of its total assets (valued at time of purchase)
in securities of foreign issuers [Artisan Small Cap Fund, Artisan Mid Cap Fund
and Artisan Small Cap Value Fund only];
(i) buy or sell an option on a security, a futures contract, or an option
on a futures contract unless the option, the futures contract, or the option on
the futures contract is offered through the facilities of a recognized
securities association or listed on a recognized exchange or similar entity
[Artisan Small Cap Fund and Artisan International Fund only];
(j) purchase or put or call option if the aggregate premiums paid for all
put and call options exceed (i) 20% of its net assets [for Artisan Small Cap
Fund only] or (ii) 5% of its net assets [for Artisan International Fund only]
(less the amount by which any such positions are in-the-money), excluding put
and call options purchased as closing transactions;
B-20
<PAGE>
(k) invest more than 5% of its net assets in restricted securities, other
than securities eligible for resale pursuant to Rule 144A of the Securities Act
of 1933 [Artisan Small Cap Fund and Artisan International Fund only];
(l) purchase securities on margin (except for use of short-term credits
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
(m) 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.
(n) under normal market conditions, invest less than 65% of its total
assets in securities of issuers having aggregate common stock market
capitalizations within the range of the aggregate common stock market
capitalizations of issuers included in the S&P MidCap 400 Index, in each case
at the time of investment [Artisan Mid Cap Fund only]; or
(o) 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 $1.5 billion, in each case taken at the time of
investment, approval of the lesser of (i) 67% of each fund's shares present at a
meeting if more than 50% of the shares outstanding are present or (ii) more than
50% of each fund's outstanding shares [Artisan Small Cap Value Fund only].
PERFORMANCE INFORMATION
From time to time the Funds may quote total return figures. "Total Return"
for a period is the percentage change in value during the period of an
investment in shares of a fund, including the value of shares acquired through
reinvestment of all dividends and capital gains distributions. "Average Annual
Total Return" is the average annual compounded rate of change in value
represented by the Total Return for the period.
Average Annual Total Return is computed as follows:
n
ERV = P(1+T)
Where: P = a hypothetical intitial 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)
B-21
<PAGE>
Each Fund's Total Return and Average Annual Total Return for various
periods ended June 30, 1999 is shown below:
Artisan Small Cap Fund
----------------------
Average Annual
Total Return Total Return
-------------- ------------
1 year -17.01% -17.01%
Life of Fund<F1> 56.72% 11.11%
--------------------
<F1> from March 28, 1995 (commencement of operations)
Artisan International Fund
--------------------------
International Shares
--------------------
Average Annual
Total Return Total Return
-------------- ------------
1 year 17.38% 17.38%
Life of Fund<F1> 112.83% 24.01%
------------------
<F1> from December 28, 1995 (commencement of operations)
Institutional Shares
---------------------
Average Annual
Total Return Total Return
-------------- ------------
1 year 17.62% 17.62%
Life of Class<F1> 46.32% 20.96%
---------------------
<F1> from the date the class was first offered for sale (July 1, 1997)
Total Return and Average Annual and Total Return of Institutional Shares
are calculated in the same way as for International Shares. The performance of
Institutional Shares is different from the performance of International Shares
because the expenses allocated to the classes are different. Because the
expense ratio for Institutional Shares is expected to be lower, the Total Return
and Average Annual Total Return of Institutional Shares are expected to be
greater than for International Shares. If you were a shareholder of
International Shares prior to July 1, 1997, and your shares were transferred to
Institutional Shares on that date, the total return and average annual total
return on your investment for 1 year through June 30, 1999 would have been
17.62%, and the total return and average annual total return for the life of the
Fund (International Shares from inception on December 28, 1995 through June 30,
1997 and Institutional Shares from July 1, 1997 through June 30, 1999) would
have been 113.74% and 24.16%, respectively.
B-22
<PAGE>
Artisan Mid Cap Fund
--------------------
Average Annual
Total Return Total Return
-------------- ------------
1 year 35.82% 35.82%
Life of Fund<F1> 98.39% 40.59%
---------------------
<F1> from June 27, 1997 (commencement of operations)
Artisan Small Cap Value Fund
----------------------------
Average Annual
Total Return Total Return
-------------- ------------
One year -0.98% -0.98%
Life of Fund<F1> 12.58% 6.99%
----------------------
<F1> from September 29, 1997 (commencement of operations)
The Funds impose no sales charges and pay no distribution expenses. Income
taxes are not taken into consideration. Performance figures quoted by the Funds
are not necessarily indicative of future results. Each 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 a Fund's performance and in providing some basis for comparison with
other investment alternatives, it should not be used for comparison with other
investments using different reinvestment assumptions or time periods.
In advertising and sales literature, the performance of a 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
composition of these indexes, averages or accounts differs from those of the
Funds. Comparison of a 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 Artisan Funds generally believe
to be accurate. The Funds also may note their mention (including performance or
other comparative rankings) in newspapers, magazines, or other media from time
to time. However, Artisan Funds assumes no responsibility for the accuracy of
such data. Newspapers and magazines and other media which might mention the
Funds include, but are not limited to, the following:
B-23
<PAGE>
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 Chicago Pensions and Investments
Business Personal Investor
Consumer Reports Jane Bryant Quinn (syndicated
Consumer Digest 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 a 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.
Various newspapers and publications including those listed above may also
make mention of a Fund's portfolio manager. Portfolio managers and other
members of the Adviser's staff may make presentations at conferences or trade
shows, appear on television or radio programs, or conduct or participate in
telephone conference calls, and the Funds may announce those presentations,
appearances or calls to some or all shareholders, or to potential investors in
the Funds. Biographical and other information about a Fund's portfolio manager,
including information about awards received by that portfolio manager or
mentions of the manager in the media, may also be described or quoted in Fund
advertisements or sales literature. Mark L. Yockey, portfolio manager of
Artisan International Fund, was named "Morningstar International Fund Manager of
the Year for 1998" by Morningstar, Inc. ("Morningstar"). Morningstar presents
the award to a portfolio manager based on, according to Morningstar, "excellent
investment skill, the courage to differ from consensus and the commitment to
shareholders deemed necessary to deliver outstanding long-term performance."
B-24
<PAGE>
A Fund may compare its performance to the Consumer Price Index (All Urban),
a widely recognized measure of inflation.
The performance of a Fund may be compared to the following indexes or
averages:
Dow-Jones Industrial Average New York Stock Exchange Composite
Russell 2000 Index Index
Russell 2000 Growth Index American Stock Exchange Composite
Russell 2000 Value Index Index
Russell Mid-Cap Stock Index NASDAQ Composite
Russell Mid-Cap Value Index NASDAQ Industrials
Standard & Poor's 500 Stock Index (These indexes generally reflect
Standard & Poor's 400 Industrials the performance of stocks traded
Standard & Poor's 400 Index in the
Wilshire 5000 indicated markets.)
Wilshire 4500
Wilshire 4000 ---------------------------------
Wilshire Small-Cap Index Lipper International Fund Index
Wilshire Small-Cap Value Index Lipper International & Global
(These indexes are widely recognized Funds Average
indicators of general U.S. stock market Morgan Stanley Capital
results.) International Europe, Australasia
and Far East (EAFE) Index
Morningstar International Stock
Average
Financial Times-Actuaries World
Index (Ex-U.S.)
Morgan Stanley Capital
International World Index
(These indexes are widely
recognized indicators of the
international markets)
The performance of a 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 Cap Fund Index; Lipper
Small-Cap Core Fund Index, Lipper Small-Cap Value Fund Index, Lipper
International Fund Index; Lipper Mid Cap Fund Index; Lipper Mid-Cap Core Fund
Index, Lipper General Equity Funds Average; Lipper Equity Funds Average; Lipper
Small Company Growth Fund Index; 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 Lipper Small Cap Fund Index reflects the net asset value weighted total
return of the thirty largest small cap 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 Mid Cap Fund
Index reflects the net asset value weighted total return of the thirty largest
mid cap funds, and the Lipper International Fund Index reflects the net asset
value weighted total return of the thirty largest international equity funds.
B-25
<PAGE>
The Lipper 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 Funds
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 a Fund to a different category or develop
(and place that Fund into) a new category, the Fund may compare its performance
or ranking against other funds in the newly assigned category, as published by
the service. A Fund may also compare its performance or ranking against all
funds tracked by Lipper or another independent service.
A Fund may cite its rating, recognition or other mentioned by Morningstar or
any other entity. Morningstar's rating system is based on risk-adjusted total
return performance and is expressed in a star-rating format. The risk-adjusted
number is computed by subtracting a Fund's risk score (which is a function of
the Fund's monthly returns less the 3-month Treasury bill return) from the
Fund's load-adjusted total return score. This numerical score is then
translated into rating categories, with the top 10% labeled five star, the next
22.5% labeled four star, the next 35% labeled three star, the next 22.5% labeled
two star and the bottom 10% 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,
Artisan Funds 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 Funds also may use historical data compiled by Prudential
Securities, Inc., or by other similar sources believed by Artisan Funds 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).
ORGANIZATION
The Funds are series of Artisan Funds, Inc. ("Artisan Funds"), an open-end,
diversified management investment company which was incorporated under Wisconsin
law on January 5, 1995.
Each share of a Fund has one vote. All shares participate equally in
dividends and other distributions declared by the board of directors, and all
shares of a Fund have equal rights in the event of liquidation of that Fund.
Shares of the Funds have no preemptive, conversion or subscription rights.
B-26
<PAGE>
Artisan Funds is governed by a board of directors which is responsible for
protecting the interests of the shareholders of the Funds. The directors are
experienced executives and professionals who meet at regular intervals to
oversee the activities of the Funds, review contractual arrangements with
companies that provide services to the Funds and review performance. A majority
of directors are not otherwise affiliated with Artisan Funds 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). Artisan Funds 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.
Artisan Funds believes that not holding shareholder meetings except as otherwise
required reduces each Fund's expenses and enhances shareholder return.
The Funds may hold special meetings of shareholders to elect or remove
directors, change fundamental policies, approve a management contract, or for
other purposes. The Funds 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 any Fund that you own. Shareholders not
attending these meetings are encouraged to vote by proxy.
B-27
<PAGE>
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.
NAME AND DATE OF POSITIONS HELD PRINCIPAL OCCUPATIONS
BIRTH WITH REGISTRANT DURING PAST 5 YEARS
--------------- --------------- -------------------
Andrew A. Ziegler<F1> Director, Chairman of Managing director of Artisan
10/7/57 the Board and Chief Partners; prior to founding
Executive Officer Artisan Partners in
1994,president and chief
operating officer of
Strong/Corneliuson Capital
Management ("Strong") and
president of the Strong Funds
from 1990 to 1994.
Carlene Murphy Director and Managing director of Artisan
Ziegler<F1> 6/20/56 Vice President Partners; co-manager of Artisan
Small Cap Fund; president of
Artisan Funds (1995-1999); prior
to founding Artisan Partners in
1994, 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.
David A. Erne Director Partner of the law firm Reinhart,
5/6/43 Boerner, Van Deuren, Norris &
Rieselbach, S.C., Milwaukee, WI.
Thomas R. Hefty Director President of United Wisconsin
6/9/47 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.
B-28
<PAGE>
Howard B. Witt Director President and chief executive
5/17/40 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
Material Sciences Corporation,
(a technology based manufacturer
of continuously processed coated
and specialty engineered
materials and services) since
1997; and director of Franklin
Electric Co., Inc. (a
manufacturer of electronic
motors) since 1994.
Michael C. Roos President Managing director of Artisan
4/18/58 Partners; president of Artisan
Distributors; prior to joining
Artisan Partners in 1995, Vice
President, Fidelity Investments
(since 1994).
Lawrence A. Totsky Chief Financial Managing director of Artisan
5/6/59 Officer, Treasurer Partners; chief financial
and Secretary officer, Artisan Partners; prior
to joining Artisan Partners in
1998, senior vice president
(since 1994) and director of
mutual fund administration,
Strong Capital Management, Inc.,
prior thereto.
Mark L. Yockey Vice President Managing director of Artisan
6/5/56 Partners; portfolio manager of
Artisan International Fund;
prior to joining Artisan
Partners in 1995, portfolio
manager of the United
International Growth Fund and
vice president of Waddell & Reed
(investment management firm)
since January 1990.
Sandra Jean Voss- Vice President Equity trader for Artisan
Reinhardt Partners; prior to joining
3/6/64 Artisan Partners in 1995, equity
trader with Northwestern Mutual
since January 1989.
B-29
<PAGE>
Scott C. Satterwhite Vice President Managing director of Artisan
7/15/57 Partners and portfolio co-manager,
Artisan Small Cap Value Fund;
prior to joining Artisan Partners
in June 1997, senior vice
president and portfolio manager at
Wachovia Corporation. From 1993 to
1997, portfolio manager of
Biltmore Special Values Fund in
addition to being a personal trust
portfolio manager and manager of
the Georgia Personal Trust
Portfolio Group.
Andrew C. Stephens Vice President Managing director of Artisan
10/31/63 Partners, and portfolio manager,
Artisan Mid Cap Fund; prior to
joining Artisan Partners in 1997,
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.
Marina T. Carlson Vice President Managing director of Artisan
5/9/64 Partners, and portfolio co-
manager, Artisan Small Cap Fund;
prior to joining Artisan Partners
in 1999, manager of Strong Mid Cap
Disciplined Fund from its
inception in December 1998 through
March 1999 and co-manager of
Strong Opportunity Fund and Strong
Common Stock Fund from 1993
through December 1998.
James C. Kieffer Vice President Managing director of Artisan
12/2/64 Partners and portfolio co-manager,
Artisan Small Cap Value Fund, and
vice president of Artisan Funds
since 2000; prior to joining
Artisan Partners as a research
analyst in 1997, research analyst
for McColl Partners from 1996
to 1997; prior to McColl Partners,
research analyst for Wachovia
Investment Management since 1989.
Gregory K. Ramirez Assistan Secretary Controller of Artisan Partners;
7/14/70 and Assistant assistant treasurer and assistant
Treasurer secretary of Artisan Funds; prior
to joining Artisan Partners in
1997, audit manager of Price
Waterhouse LLP.
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 many 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.
B-30
<PAGE>
The following table sets forth compensation paid by Artisan Funds, Inc.
during the fiscal year ended June 30, 1999 to each of the directors of the Fund.
PENSION OR TOTAL
AGGREGATE RETIREMENT COMPENSATION
COMPENSATION BENEFITS ACCRUED FROM ARTISAN FUND AND
FROM ARTISAN AS PART OF FUND FUND COMPLEX(4)
NAME OF DIRECTOR FUNDS EXPENSES PAID TO DIRECTORS
---------------- ------------ --------------- ---------------------
Andrew A. Ziegler $ 0 $ 0 $ 0
Carlene Murphy Ziegler 0 0 0
David A. Erne 20,000 0 20,000
Thomas R. Hefty 20,000 0 20,000
Howard B. Witt 20,000 0 20,000
At September 30, 1999, the officers and directors of Artisan Funds as a
group owned 2.2% of the outstanding shares of Artisan Mid Cap Fund and less than
1% of the outstanding shares in the case of each other Fund.
PRINCIPAL SHAREHOLDERS
The only persons known by Artisan Funds to own of record or beneficially 5%
or more of the outstanding shares of any Fund (or class in the case of
International Fund) as of September 30, 1999 were:
PERCENTAGE OF
OUTSTANDING
NAME AND ADDRESS FUND SHARES HELD
---------------- ---- -----------
Charles Schwab & Co. Inc. <F1> Small Cap Fund 10.47%
101 Montgomery Street Mid Cap Fund 32.93%
San Francisco, CA 94104-4122 International Fund -
International Shares 55.69%
Small Cap Value Fund 24.82%
University of Iowa Foundation Small Cap Fund 10.41%
One West Park Road
PO Box 4550
Iowa City, IA 52244-4550
The Queens Health System Small Cap Fund 5.31%
1099 Alakea Street, Suite 1100
Honolulu, HI 96812-4512
The Childrens Museum of Small Cap Fund 8.07%
Indianapolis
PO Box 3030
Indianapolis, IN 46206-3000
National Financial Services International Fund -
Corp. <F1> International Shares 16.99%
One World Financial Center Mid Cap Fund 5.53%
200 Liberty Street Small Cap Value Fund 11.30%
New York, NY 10281-1003
B-31
<PAGE>
The Professional Golfers International Fund-
Association of America Institutional Shares 6.24%
PO Box 109601
Palm Beach, FL 33410-9601
The Burnett Foundation International Fund-
801 Cherry Street, Suite 1400 Institutional Shares 13.30%
Fort Worth, TX 76102-6814
US Trust, Trustee International Fund-
7-Eleven Inc. Employee Savings & Institutional Shares 6.90%
Profit Sharing Plan
515 South Flower Street, Suite
2700
Los Angeles, CA 90071-2216
Firstar, Trustee International Fund-
Wisconsin Electric Power Company Institutional Shares 10.58%
Master
Retirement Trust
777 East Wisconsin Avenue
Milwaukee, WI 53202
The Harold and Arlene Schnitzer Mid Cap Fund 7.12%
Care Foundation
4080 Southwest Macadan
Portland, OR 97201-6407
Wells Fargo Bank, Trustee Mid Cap Fund 6.33%
Stoel Rives LLP Retirement Trust
PO Box 9800
Calabasas, CA 91372-0800
American Express Trust Ret. Small Cap Value Fund 10.26%
Services Plans
FBO Best Buy
PO Box 534
Minneapolis, MN 55440-0534
Northern Trust Company Small Cap Value Fund 5.68%
FBO Marshfield Clinic ERP
PO Box 92955
Chicago, IL 60675-2955
-----------------------
<F1> Shares are held of record on behalf of customers, and not beneficially.
INVESTMENT ADVISORY SERVICES
Artisan Partners Limited Partnership ("Artisan Partners") provides
investment advisory services to each Fund pursuant to ' Investment Advisory
Agreements dated March 27, 1995, (Small Cap Fund); December 27, 1995
(International Fund); April 10, 1997 (Mid Cap Fund); July 31, 1997 (Small Cap
Value Fund) (the "Advisory Agreements"). 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 Pine Street, Suite 2950, San Francisco, California, and Five
Concourse Parkway NE, Suite 2120, Atlanta, Georgia 30328.
B-32
<PAGE>
In return for its services, each 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. In addition Artisan
Partners has undertaken to reimburse Artisan International Fund for any ordinary
operating expenses in excess of 2.50% of average net assets annually, and has
undertaken to reimburse each of Artisan Small Cap Fund, Artisan Mid Cap Fund and
Artisan Small Cap Value Fund for any ordinary operating expenses in excess of
2.00% of average net assets over each fiscal year.
The advisory fees paid by Artisan Small Cap Fund for the fiscal years ended
June 30, 1999, 1998, and 1997 were $1,980,620, $2,900,335, and $2,906,791. The
investment advisory fees paid by Artisan International Fund for the fiscal years
ended June 30, 1999, 1998 and 1997, were $6,718,770, $3,923,189 and $2,444,080.
For the fiscal years ended June 30, 1999 and 1998, Artisan Mid Cap Fund paid
investment advisory fees of $229,384 and $93,853 of which $29,152 and $93,853,
respectively, was waived or reimbursed by Artisan Partners. From its inception
on June 27, 1997 through June 30, 1997, Artisan Mid Cap Fund did not pay any
investment advisory fees. The investment advisory fees paid by Artisan Small
Cap Value Fund for the fiscal year ended June 30, 1999 and from its inception on
September 29, 1997 through June 30, 1998, were $511,680 and $252,397
respectively. Each Advisory Agreement provides that Artisan Partners shall not
be liable for any loss suffered by a 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.
Each Advisory Agreement may be continued from year to year only so long as
the continuance is approved annually (a) by the vote of a majority of the
directors of each 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. Each
Agreement will terminate automatically in the event of its assignment (as
defined in the 1940 Act).
CODE OF ETHICS
The 1940 Act and rules thereunder require that Artisan Funds, Artisan
Partners and Artisan Distributors LLC ("Distributors") establish standards
and procedures for the detection and prevention of certain conflicts of
interest, including activities by which persons having knowledge of the
investments and investment intentions of Artisan Funds might take advantage
of that knowledge for their own benefit. Artisan Funds, Artisan Partners and
Distributors have adopted a Code of Ethics to meet those concerns and legal
requirements. Although the Code does not prohibit employees who have knowledge
of the investments and investment intentions of Artisan Funds from engaging in
personal securities investing, it does regulate such personal securities
investing by these employees as a part of the effort by Artisan Funds,
Artisan Partners and Distributors to detect and prevent conflicts of interest.
B-33
<PAGE>
DISTRIBUTOR
Shares of the Funds are offered for sale by Distributors without any
sales commissions, 12b-1 fees, or other charges to the Funds or their
shareholders. Distributors is wholly-owned by Artisan Partners. All
distribution expenses relating to the Funds are paid by Artisan Partners,
including the payment or reimbursement of any expenses incurred by Distributors.
The Distribution Agreement will continue in effect through October 30, 2000 and
thereafter from year to year provided such continuance is approved annually (i)
by a majority of the directors or by a majority of the outstanding voting
securities of the Funds and (ii) by a majority of the directors who are not
parties to the Agreement or interested persons of any such party.
Artisan Funds has agreed to pay all expenses in connection with
registration of its shares with the Securities and Exchange Commission and any
auditing and filing fees required in compliance with various state securities
laws. Artisan Partners bears all sales and promotional expenses, including the
cost of prospectuses and other materials used for sales and promotional purposes
by Distributors. Distributors offers the Funds' shares only on a best efforts
basis. Distributors is located at 1000 North Water Street, Suite 1770,
Milwaukee, Wisconsin 53202.
PORTFOLIO TRANSACTIONS
Artisan Partners places the orders for the purchase and sale of each 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, a Fund may pay a brokerage commission in excess of
that which another broker or dealer may have charged for effecting the same
transaction. Evaluations of the reasonableness of brokerage commissions, based
on the foregoing factors, are made on an ongoing basis by 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-34
<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 a 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 Artisan Funds, 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 Artisan Funds), 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
Artisan Funds 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 Artisan Funds.
With respect to each Fund's purchases and sales of portfolio securities
transacted with a broker or dealer on 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 Artisan Funds. During fiscal years
1999, 1998 and 1997, Artisan Small Cap Fund paid brokerage commissions of
$1,811,405, $1,866,349 and $1,877,158,respectively, to brokers who furnished
research services to the Fund or Artisan Partners on purchases and sales
aggregating $666,090,745, $762,845,329 and $637,608,952, respectively. During
fiscal years 1999, 1998 and 1997, Artisan International Fund paid brokerage
commissions of $4,343,103, $2,893,523 and $2,960,678 to brokers who furnished
research services to the Fund or Artisan Partners on purchases and sales
aggregating $1,558,249,458, $885,882,850 and $824,170,635. During fiscal years
ended June 30, 1999, and 1998, Artisan Mid Cap Fund paid brokerage commissions
of $175,709 and $72,800 to brokers who furnished research services to the Fund
or Artisan Partners on purchases and sales aggregating $109,326,360 and
$50,307,734 (from its inception on June 27, 1997 through June 30, 1997, Artisan
Mid Cap Fund had no purchases or sales of its portfolio securities). For the
fiscal year ended June 30, 1999 and from its inception on September 29, 1997
through June 30, 1998, Artisan Small Cap Value Fund paid brokerage commissions
of $183,523 and $184,278 to brokers who furnished research services to the Fund
or Artisan Partners on purchases and sales aggregating $78,952,777 and
$70,354,053, respectively.
B-35
<PAGE>
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 each Fund may be purchased or redeemed through certain financial
services companies, some of which may charge a transaction fee. Each 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 its behalf. For purchase orders placed through an authorized agent, a
shareholder will pay a Fund's NAV per share (see "Net Asset Value," below) next
computed after the receipt by the authorized agent of such purchase order, plus
any applicable transaction charge imposed by the agent. For redemption orders
placed through an authorized agent, a shareholder will receive redemption
proceeds which 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 a Fund. However,
accounting and shareholder servicing services provided by such a company with
respect to Fund shares held by that company for its customers, the company may
charge a fee based on a percentage of the annual average value of those
accounts. A 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 a
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 January, the
third Monday in February, Good Friday, the last Monday in May, Independence Day,
Labor Day, Thanksgiving, and Christmas. If one of these holidays falls on a
Saturday or Sunday, the NYSE will be closed on the preceding Friday or the
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.
Each 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
B-36
<PAGE>
wholly or partly by a distribution in kind of readily marketable
securities. If redemptions are made in kind, the redeeming shareholders might
incur transaction costs in selling the securities received in the redemptions.
Each 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.
ADDITIONAL TAX INFORMATION
Artisan Funds intends for each Fund to continue 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. If Artisan Funds should fail to qualify
for pass-through tax treatment under Subchapter M, then it would be required to
pay taxes on any income and realized capital gains, reducing the amount of
income and realized capital gains that would otherwise be available for
distribution to shareholders of the Funds.
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 October,
November or December of 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 gains are taxable to you as long-term capital gains (currently taxed at
a maximum rate of 20% for individual taxpayers) regardless of the length of time
you have held your shares. Long-term gains are those derived from securities
held by a Fund for more than one year.
You will be advised annually as to the source of 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.
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.
A 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;
B-37
<PAGE>
- 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. Artisan Funds must promptly pay the IRS all
amounts withheld. Therefore, it usually is not possible for Artisan Funds to
reimburse you for amounts withheld. You may, however, claim the amount withheld
as a credit on your federal income tax return.
The Funds 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 a 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, a
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 laws, each 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 may be recognized to the extent of any gains
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.
U.S. citizens residing in a foreign country should consult their tax advisors as
to the tax consequences of ownership of Fund shares.
CUSTODIAN AND TRANSFER AGENT
State Street Bank & Trust Company ("State Street"), 66 Brooks Drive,
Braintree, MA 02184, 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 transfer agency, dividend paying agency and
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
PricewaterhouseCoopers LLP, 100 East Wisconsin Avenue, Milwaukee, Wisconsin
53202 serves as the Funds' independent accountants, providing services including
(i) an audit of the annual financial statements; (ii) assistance and
consultation in connection with Securities and
B-38
<PAGE>
Exchange Commission filings; and (iii) review of the annual income tax
returns filed on behalf of the Funds.
FINANCIAL STATEMENTS
The financial statements of Artisan Funds appearing in the prospectus and
this Statement of Additional Information have been audited by
PricewaterhouseCoopers LLP, independent auditors, as indicated in their reports
with respect thereto, and are included in reliance upon such reports given upon
the authority of such firm as experts in accounting and auditing.
B-39
<PAGE>
ARTISAN
SMALL CAP FUND
SCHEDULE OF INVESTMENTS - June 30, 1999
SHARES MARKET
HELD VALUE
====== =======
COMMON STOCKS - 98.7%
BASIC MATERIALS - 7.4%
CHEMICAL MANUFACTURING - 1.5%
MacDermid, Inc. - specialty chemical manufacturer 54,400 $2,529,600
CONTAINERS & PACKAGING - 2.6%
AptarGroup, Inc. - pumps, valves and closures
for consumer packaging 114,500 3,435,000
<F1> Gaylord Container Corporation - container
board manufacturer 146,300 1,161,256
----------
4,596,256
IRON & STEEL - 1.2%
<F1> Steel Dynamics, Inc. - specialty steel producer 139,800 2,162,531
MISCELLANEOUS FABRICATED PRODUCTS - 2.1%
Belden, Inc. - manufacturer of specialty
wire and cable 58,500 1,400,344
<F1> Park-Ohio Holdings Corporation - industrial
products distribution 127,500 2,159,531
----------
3,559,875
CAPITAL GOODS - 3.2%
MISCELLANEOUS CAPITAL GOODS - 3.2%
Hussmann International, Inc. - commercial
food service equipment 158,000 2,616,875
<F1> Ritchie Bros. Auctioneers, Inc. - used industrial
equipment auctions 47,800 1,822,375
<F1> Service Experts, Inc. - residential heating and
air conditioning service provider 48,400 1,061,775
----------
5,501,025
CONSUMER NON-CYCLICAL - 3.9%
BEVERAGES (ALCOHOLIC) - 1.3%
<F1> Beringer Wine Estates Holdings,
Inc. - wine producer 53,200 2,222,763
FOOD PROCESSING - 1.1%
<F1> Celestial Seasonings, Inc. - specialty teas
and herbal supplements 90,900 1,954,350
PERSONAL & HOUSEHOLD PRODUCTS - 1.5%
<F1> Playtex Products, Inc. - personal care products 171,900 2,675,194
ENERGY - 6.4%
OIL & GAS OPERATIONS - 2.6%
<F1> Houston Exploration Company - oil and
gas exploration 112,900 2,138,044
<F1> Newfield Exploration Company - oil and
gas exploration and production 85,900 2,442,781
----------
4,580,825
OIL WELL SERVICES & EQUIPMENT - 3.8%
<F1> Core Laboratories N.V. - oil field
analytical services 132,600 1,848,113
<F1> Marine Drilling Companies, Inc. - offshore
contract drilling 186,900 2,558,194
<F1> Precision Drilling Corporation - integrated
oilfield service contractor 111,600 2,127,375
----------
6,533,682
B-40
<PAGE>
SHARES MARKET
HELD VALUE
====== ======
FINANCIAL - 6.3%
INSURANCE (LIFE) - 2.7%
<F1> Penn Treaty American Corporation - long-term
care insurance 86,800 $2,088,625
<F1> StanCorp Financial Group, Inc. - group disability
and life insurance 86,000 2,580,000
----------
4,668,625
MISCELLANEOUS FINANCIAL SERVICES - 0.2%
<F1> HealthCare Financial Partners, Inc. -
specialty finance for healthcare providers 12,000 411,000
REGIONAL BANKS - 2.4%
Community First Bankshares, Inc. -
North Dakota based bank holding company 134,600 3,213,575
Riggs National Corporation -
Washington D. C. based bank holding company 48,500 997,281
----------
4,210,856
S&LS/SAVINGS BANKS - 1.0%
MAF Bancorp, Inc. - suburban Chicago based
savings and loan association 73,100 1,772,675
HEALTHCARE - 7.8%
BIOTECHNOLOGY & DRUGS - 5.3%
Dexter Corporation - specialty chemicals 57,600 2,350,800
<F1> King Pharmaceuticals, Inc. - branded
and generic prescription pharmaceutical products 86,800 2,245,950
<F1> Pharmaceutical Product Development, Inc. -
outsourced drug research 74,300 2,033,963
<F1> Techne Corporation - specialty manufacturer
of biological products 104,300 2,646,612
----------
9,277,325
HEALTHCARE FACILITIES - 2.5%
<F1> Alterra Healthcare Corporation - assisted living
facilities 125,400 1,724,250
<F1> Res-Care, Inc. - facilities for mentally
retarded and disabled persons 116,100 2,641,275
----------
4,365,525
REAL ESTATE INVESTMENT TRUSTS - 3.4%
Fortress Investment Corporation, 144A -
specialty real estate investments 107,625 1,816,172
HealthCare Financial Partners REIT, Inc.,
144A - healthcare related real estate investments 228,500 4,113,000
----------
5,929,172
SERVICES - 34.4%
BROADCASTING & CABLE TV - 2.7%
<F1> Emmis Communications Corporation - radio and
television broadcasting 43,500 2,147,813
<F1> Young Broadcasting, Inc. - television broadcasting 58,900 2,506,931
----------
4,654,744
BUSINESS SERVICES - 6.3%
<F1> Bell & Howell Company - imaging and information
services and systems 49,100 1,856,594
<F1> ChoicePoint, Inc. - risk management services to
the insurance industry 41,100 2,758,837
<F1> F.Y.I. Inc. - document management services 38,300 1,201,662
<F1> Getty Images, Inc. - digital photographic images 83,200 1,570,400
<F1> Heidrick & Struggles International, Inc. -
executive recruiters 37,700 716,300
Penton Media, Inc. - trade publications and
trade shows 120,900 2,931,825
----------
11,035,618
HOTELS & MOTELS - 1.3%
<F1> Sunterra Corporation - timeshare resorts 157,800 2,199,338
MOTION PICTURES - 1.0%
<F1> IMAX Corporation - theater projection and
sound systems 81,500 1,833,750
PERSONAL SERVICES - 2.3%
<F1> Carriage Services, Inc. - funeral homes
and cemeteries 92,700 1,738,125
Regis Corporation - hair salon operator 121,950 2,339,916
----------
4,078,041
SCHEDULE OF INVESTMENTS
ARTISAN SMALL CAP FUND
B-41
<PAGE>
SHARES MARKET
HELD VALUE
===== ======
SERVICES (CONTINUED)
RESTAURANTS - 4.5%
<F1> CEC Entertainment, Inc. - Chuck E.
Cheese restaurants 83,100 $3,510,975
Morrison Health Care, Inc. - food service to
healthcare institutions 111,600 2,790,000
<F1> NPC International, Inc. - Pizza Hut franchisee 95,700 1,471,387
----------
7,772,362
RETAIL (APPAREL) - 3.9%
<F1> Buckle, Inc. - teen fashion retailer 30,500 876,875
<F1> Gymboree Corporation - children's fashion retailer 168,600 1,770,300
<F1> Men's Wearhouse, Inc. - men's fashion retailer 80,000 2,040,000
<F1> Wet Seal, Inc. - teen fashion retailer 73,400 2,101,075
----------
6,788,250
RETAIL (GROCERY) - 3.2%
Richfood Holdings, Inc. - food distribution
and supermarkets 121,300 2,137,912
<F1> Wild Oats Markets, Inc. - natural
foods supermarkets 115,700 3,510,772
----------
5,648,684
RETAIL (HOME IMPROVEMENT) - 1.2%
<F1> Tractor Supply Company - farm supplies retailer 79,100 2,160,419
RETAIL (SPECIALTY) - 1.6%
<F1> ShopKo Stores, Inc. - discount department stores 77,880 2,823,150
SCHOOLS - 2.5%
<F1> Bright Horizons Family Solutions, Inc. -
corporate day-care centers 110,400 2,083,800
<F1> ITT Educational Services, Inc. - technical
colleges 89,400 2,329,987
----------
4,413,787
SECURITY SYSTEMS & SERVICES - 2.4%
<F1> Borg-Warner Security Corporation - physical
and electronic security services 81,000 1,645,312
<F1> ITI Technologies, Inc. - wireless home
security systems 109,100 2,468,388
----------
4,113,700
WASTE MANAGEMENT SERVICES - 1.5%
<F1> Tetra Tech, Inc. - environmental
consulting services 156,250 2,578,125
TECHNOLOGY - 20.9%
COMMUNICATIONS EQUIPMENT - 5.9%
<F1> Com21, Inc. - cable modems 76,400 1,303,575
<F1> Digital Microwave Corporation - wireless
components 126,500 1,612,875
<F1> DSP Communications, Inc. - wireless
communications chip sets 54,800 1,582,350
<F1> Excel Switching Corporation - telecommunications
switching platforms 71,030 2,126,461
<F1> PairGain Technologies, Inc. - high speed digital
subscriber line technology 150,400 1,729,600
<F1> TEKELEC - data network switching and
diagnostic systems 160,400 1,954,875
----------
10,309,736
COMPUTER PERIPHERALS - 1.2%
<F1> Apex PC Solutions, Inc. - manufacturer of
switching systems for client/server computing 99,000 2,029,500
COMPUTER SERVICES - 1.3%
<F1> Diamond Technology Partners, Inc. - technology
management consulting 100,200 2,241,975
ELECTRONIC INSTRUMENTS & CONTROLS - 4.7%
Applied Power, Inc. - contract manufacturer 87,300 2,384,381
<F1> Littelfuse, Inc. - circuit protection devices 111,800 2,152,150
Methode Electronics, Inc. - electrical
connector technology 56,400 1,290,150
<F1> Plexus Corporation - contract manufacturer 76,800 2,313,600
----------
8,140,281
SCHEDULE OF INVESTMENTS
ARTISAN SMALL CAP FUND
B-42
<PAGE>
SHARES MARKET
HELD VALUE
====== ======
TECHNOLOGY (CONTINUED)
SCIENTIFIC & TECHNICAL INSTRUMENTS - 2.4%
<F1> Electro Scientific Industries, Inc. - lasers
and components for semiconductor manufacturing 53,200 $2,222,762
<F1> Photronics, Inc. - photomasks for semiconductor
manufacturing 79,600 1,950,200
----------
4,172,962
SEMICONDUCTORS - 4.0%
<F1> Actel Corporation - field programmable
logic devices for semiconductor manufacturing 99,700 1,470,575
<F1> Burr-Brown Corporation - analog and mixed
signal circuits 36,100 1,322,163
<F1> Galileo Technology Limited - digital
semiconductor devices 46,800 2,120,625
<F1> SMART Modular Technologies, Inc. - memory
module assembly 124,400 2,161,450
----------
7,074,813
SOFTWARE & PROGRAMMING - 1.4%
<F1> AVT Corporation - software based
computer-telephony solutions 67,100 2,541,412
TRANSPORTATION - 3.8%
AIRLINE - 1.6%
<F1> Midwest Express Holdings, Inc. - regional airline 79,600 2,706,400
RAILROADS - 0.9%
<F1> MotivePower Industries, Inc. - manufacturer
and contract service for rail and power
related industries 85,300 1,514,075
TRUCKING - 1.3%
USFreightways Corporation - less than
truckload carrier 50,400 2,334,150
UTILITIES - 1.2%
NATURAL GAS UTILITIES - 1.2%
WICOR, Inc. - gas utility and pump manufacturer 76,000 2,123,250
TOTAL COMMON STOCKS (Cost $152,533,057) 172,239,801
WARRANTS - 0.0%
Healthcare Financial Partners REIT,
expires 4/28/01 (Cost $0) 91,400 -
Par Market
Amount Value
======= ======
SHORT TERM INVESTMENTS - 1.3%
Repurchase agreement with State Street Bank
and Trust Company, 4.0%, dated 6/30/99, due
7/1/99, maturity value $2,296,255, collateralized
by $2,347,438 market value U.S. Treasury Bond,
8.5%, due 2/15/20 (Cost $2,296,000) $2,296,000 2,296,000
----------
TOTAL INVESTMENTS - 100.0% (Cost $154,829,057) 174,535,801
OTHER ASSETS LESS LIABILITIES - 0.0%<F2> 20,074
----------
TOTAL NET ASSETS - 100.0%<F3> $174,555,875
============
<F1> Non-income producing securities
<F2> Represents less than 0.1% of total net assets
<F3> Percentages for the various classifications relate to total net assets
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
SCHEDULE OF INVESTMENTS
ARTISAN SMALL CAP FUND
B-43
<PAGE>
ARTISAN
INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS - June 30, 1999
SHARES MARKET
HELD VALUE
======= ======
COMMON AND PREFERRED STOCKS - 96.9%
AUSTRALIA - 2.3%
Colonial Limited - diversified financial services 2,330,382 $8,303,289
<F1> Cable & Wireless Optus Limited -
telecommunication services 600,000 1,360,441
<F1> LibertyOne Limited - internet content provider 15,500,000 8,811,796
St. George Bank Limited - commercial bank 1,100,000 7,635,127
-----------
26,110,653
AUSTRIA - 0.7%
Erste Bank Der Oesterreichischen Sparkassen AG -
commercial bank 130,000 7,409,442
BERMUDA - 2.6%
<F1> Global Telesystems Group, Inc.<F3> -
telecommunication services 360,000 29,160,000
BRAZIL - 3.5%
<F1> Celular CRT Participacoes SA -
telecommunication services 38,644,300 5,238,425
Cia de Saneamento Basico de Estado de
Sao Paulo - water and sewage utility 40,890,000 3,348,800
Cia Riograndense Telecomunicacoes -
Preferred - telecommunication services 29,922,700 7,106,747
Embraer-Empresa Brasileira Aeronautica SA -
aircraft manufacturer 1,941,000 3,234,086
Telecomunicacoes Brasileiras SA (ADR) -
Preferred - telecommunication services 135,000 12,175,313
Telesp Celular Participacoes SA (ADR) -
telecommunication services 170,000 4,547,500
<F1> Telesp Participacoes SA (ADR) -
telecommunication services 175,000 4,003,125
-----------
39,653,996
CANADA - 13.1%
<F1> AT&T Canada, Inc.<F3> - telecommunication services 938,000 60,090,628
BCE, Inc. - telecommunication services 435,000 21,196,095
<F1> Call-Net Enterprises, Inc. - Class B -
telecommunication services 1,764,200 11,142,316
<F1> Clearnet Communications, Inc. - Class A<F3> -
telecommunication services 825,000 11,498,438
Nortel Networks Corporation<F3> -
telecommunications equipment 278,000 24,133,875
Shaw Communications Inc. - Class B -
cable television 200,000 7,918,506
<F1> Telesystem International Wireless, Inc. -
telecommunication services 135,000 2,439,954
Toronto-Dominion Bank<F3> - commercial bank 200,000 9,066,214
-----------
147,486,026
DENMARK - 0.1%
NESA AS - electric utility 8,438 1,091,575
B-44
<PAGE>
SHARES MARKET
HELD VALUE
====== ======
FINLAND - 2.2%
Helsingin Puhelin Oyj - telecommunication
services 100,000 $4,741,911
HPY Holding - HTF Holding Oyj -
telecommunication services 145,071 3,140,476
Nokia Corporation (ADR) -
telecommunication equipment 100,000 9,156,250
Sonera Group Oyj - telecommunication services 340,000 7,430,369
-----------
24,469,006
FRANCE - 8.1%
Axa - multi-line insurance 80,000 9,755,967
Canal Plus - television broadcasting 39,000 10,939,280
Cap Gemini SA - information technology services 42,840 6,730,232
Dexia France - special purpose bank 60,000 8,028,262
Groupe Danone - food and beverage producer 58,200 14,998,871
Havas Advertising SA - advertising 60,000 12,920,677
Sopra SA - information technology services 83,555 4,306,635
Suez-Lyonnaise des Eaux - building and construction 70,000 12,620,700
Unilog SA - information technology services 21,380 10,863,308
-----------
91,163,932
GERMANY - 5.5%
<F1> 1&1 Aktiengesellschaft & Co. - advertising services 50,265 5,917,352
Altana AG - pharmaceuticals 50,000 2,814,221
Deutsche Bank AG - money center bank 261,111 15,921,189
Dresdner Bank AG - money center bank 242,000 9,454,752
KSB AG - Preferred - machinery and pump manufacturer 19,450 2,716,780
Mannesmann AG - machinery/general industry 118,000 17,601,356
Marschollek, Lautenschlaeger and Partner AG -
Preferred - financial services 4,200 2,000,262
Marseille-Kliniken AG - healthcare services 193,067 2,666,910
<F1> PrimaCom AG - cable television 65,000 2,948,232
-----------
62,041,054
IRELAND - 0.3%
Ryanair Holdings PLC (ADR) - airline 56,600 2,999,800
ITALY - 7.6%
Autogrill SPA - restaurants 1,558,000 16,044,586
Autostrade Concessioni e Construzioni
Autostrade SPA, Roma - transportation services 1,260,000 9,027,156
Banca Intesa SPA - commercial bank 1,463,636 7,030,959
BIPOP SPA - financial services 540,000 23,129,187
Class Editori SPA - publishing 475,000 3,794,818
Gucci Group NV<F3> - apparel manufacturer 81,000 5,670,000
Seat Pagine Gialle Saving Shares SPA -
publishing/advertising company 8,000,000 6,803,612
<F1> Seat Pagine Gialle SPA - publishing/advertising
company 10,480,790 14,315,466
-----------
85,815,784
JAPAN - 4.9%
Fancl Corporation - cosmetics retailer 18,000 3,273,539
NTT Mobile Communications Network, Inc. -
telecommunications services 1,225 16,445,400
Promise Co. Ltd. - consumer finance 165,000 9,752,418
Takefuji Corporation - consumer finance 117,000 12,099,446
Trans Cosmos, Inc. - outsourcing/information
technology services 180,000 13,094,156
-----------
54,664,959
SCHEDULE OF INVESTMENTS
ARTISAN INTERNATIONAL FUND
B-45
<PAGE>
SHARES MARKET
HELD VALUE
LUXEMBOURG - 0.2% ====== =======
Societe Europeenne des Satellites -
satellite operator 19,600 $2,838,755
MEXICO - 2.3%
<F1> Cifra SA de C.V. Series V - department stores 6,505,000 12,967,236
Grupo Financiero Inbursa SA de C.V. -
Class O - brokerage, insurance and
financial services 1,826,489 5,810,059
<F1> Seguros Comercial America - Class B -
multi-line insurance 927,500 3,491,279
Sigma Alimentos SA - Class B - food producer 1,270,077 3,097,420
-----------
25,365,994
NETHERLANDS - 6.0%
ASR Verzekeringsgroep NV - multi-line
insurance company 130,000 8,569,974
Athlon Groep NV - automobile leasing 310,425 7,520,040
Benckiser NV - Class B - home cleaning products 120,000 6,401,580
Cap Gemini NV - information technology services 125,000 8,530,286
Koninklijke KPN NV - telecommunications services 222,500 10,436,070
<F1> MIH Ltd.<F3>- cable television 241,000 6,386,500
<F1> United International Holdings, Inc. - Class A<F3> -
cable television 292,000 19,746,500
-----------
67,590,950
NEW ZEALAND - 0.4%
<F1> Contact Energy Limited - electric utility 2,725,000 4,414,820
NORWAY - 0.4%
P4 Radio Hele Norge ASA - radio stations 1,139,600 4,555,219
POLAND - 0.2%
Elektrim Spolka Akcyjna SA - electrical products 124,354 1,757,710
PORTUGAL - 0.3%
<F1> Companhia de Seguros Mundial Confianca SA -
multi-line insurance company 75,000 2,958,025
SINGAPORE - 0.8%
Development Bank of Singapore Limited -
money center bank 764,000 9,336,780
SPAIN - 2.7%
Argentaria, Caja Postal y Banco Hipotecario
de Espana SA - commercial bank 348,000 7,924,476
Banco Santander Central Hispano SA - money
center bank 1,060,000 11,036,283
Fomento de Construccciones y Contratas SA -
construction company 188,000 10,755,892
<F1> Telefonica Publicidad e Informacion SA -
advertising 11,000 219,416
-----------
29,936,067
SWEDEN - 3.6%
Celsius AB - Class B - aerospace and defense
product manufacturer 330,000 4,159,501
<F1> Icon Medialab International AB - information
technology services 80,000 2,902,580
Pharmacia & Upjohn, Inc.<F3>- pharmaceuticals 186,000 10,567,125
Sigma AB - Class B - information technology
services 137,050 1,065,532
Skandinaviska Enskilda Banken - money center bank 885,000 10,321,004
Telefonaktiebolaget LM Ericsson - Class B -
telecommunictions equipment 350,000 11,235,128
-----------
40,250,870
SCHEDULE OF INVESTMENTS
ARTISAN INTERNATIONAL FUND
B-46
<PAGE>
SHARES MARKET
HELD VALUE
SWITZERLAND - 7.7% ====== ======
<F1> ABB Limited - engineering services 119,954 $11,300,406
Julius Baer Holding AG - Class B - commercial bank 4,700 13,388,850
Nestle SA - diversified foods 7,550 13,598,836
Roche Holding AG - pharmaceutical company 1,875 19,267,250
UBS AG - money center bank 98,000 29,240,563
-----------
86,795,905
UNITED KINGDOM - 21.4%
<F1> Cable & Wireless Communications PLC -
cable television 1,120,000 10,768,942
Cable & Wireless PLC - telecommunication
services 800,000 10,188,882
<F1> Colt Telecom Group PLC - telecommunication
services 1,559,600 32,720,239
<F1> Easynet Group PLC - internet service provider 765,000 6,511,490
<F1> Energis PLC - telecommunication services 615,000 14,696,012
<F1> Future Network PLC - publisher 1,145,000 7,580,188
<F1> ITG Group PLC - telecommunication equipment 70,300 390,053
<F1> NTL Incorporated<F3> - cable television 200,500 17,280,594
Pearson PLC - publisher 300,000 6,095,360
Racal Electronics PLC - telecommunication
equipment 3,885,000 23,453,895
Reckitt & Colman PLC - household products 300,000 3,174,789
Saatchi & Saatchi PLC - advertising/media
services 2,750,000 9,302,241
Sainsbury (J) PLC - food retailer 1,325,000 8,354,127
Schroders PLC - international merchant
banking group 628,000 12,670,531
Securicor PLC - security and recruitment
services 3,612,907 31,805,714
<F1> Select Appointments Holdings PLC - employment
services 736,860 8,792,372
<F1> Telewest Communications PLC - cable television 5,235,422 23,457,264
United News & Media PLC - publisher 750,000 7,211,345
WPP Group PLC - advertising agency 700,000 5,958,226
-----------
240,412,264
TOTAL COMMON AND PREFERRED STOCKS (Cost $927,136,938) 1,088,279,586
PAR MARKET
AMOUNT VALUE
====== =======
SHORT TERM INVESTMENTS - 3.0%
Repurchase agreement with State Street Bank
and Trust Company, 4.0%, dated 6/30/99, due
7/1/99, maturity value $33,545,727,
collateralized by $34,219,154 market value
U.S. Treasury Bond, 8.500%, due 2/15/20
(Cost $33,542,000) $33,542,000 33,542,000
------------
TOTAL INVESTMENTS - 99.9% (Cost $960,678,938) 1,121,821,586
OTHER ASSETS LESS LIABILITIES - 0.1% 1,683,013
------------
TOTAL NET ASSETS - 100.0%<F2> $1,123,504,599
==============
<F1> Non-income producing security
<F2> Percentages for the various classifications relate to total net assets
<F3> Principally traded in the United States
(ADR) American Depository Receipt
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
SCHEDULE OF INVESTMENTS
ARTISAN INTERNATIONAL FUND
B-47
<PAGE>
ARTISAN
INTERNATIONAL FUND
PORTFOLIO DIVERSIFICATION - June 30, 1999
MARKET VALUE PERCENTAGE
------------- ----------
Consumer Cyclical $201,271,862 17.9%
Consumer Non-Cyclical 128,812,754 11.5%
Financial 244,334,337 21.8%
Industrial 65,779,998 5.9%
Technology 70,209,600 6.2%
Telecommunications
(Equipment and Services) 281,871,458 25.1%
Utilities 95,999,577 8.5%
------------- ------
TOTAL COMMON AND PREFERRED STOCKS 1,088,279,586 96.9%
Total short-term investments 33,542,000 3.0%
------------- ------
TOTAL INVESTMENTS 1,121,821,586 99.9%
OTHER ASSETS LESS LIABILITIES 1,683,013 0.1%
------------- ------
TOTAL NET ASSETS $1,123,504,599 100.0%
============== ======
SCHEDULE OF INVESTMENTS
ARTISAN INTERNATIONAL FUND
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
B-48
<PAGE>
ARTISAN
MID CAP FUND
SCHEDULE OF INVESTMENTS - June 30, 1999
SHARES MARKET
HELD VALUE
====== ======
COMMON STOCKS - 97.3%
BASIC MATERIALS - 6.5%
CHEMICAL MANUFACTURING - 1.3%
Sigma-Aldrich Corporation - specialty
chemical company 16,000 $551,000
CONTAINERS & PACKAGING - 2.7%
<F1> Owens-Illinois, Inc. - beverage packaging
company 18,000 588,375
<F1> Sealed-Air Corporation - specialty
packaging company 9,000 583,875
----------
1,172,250
MISCELLANEOUS FABRICATED PRODUCTS - 1.1%
<F1> SLI, Inc. - lighting products company 17,500 472,500
PAPER & PAPER PRODUCTS - 1.4%
Albany International Corporation - paper machine
clothing manufacturer 29,000 603,353
CAPITAL GOODS - 8.9%
MISCELLANEOUS CAPITAL GOODS - 8.9%
<F1> Mettler-Toledo International, Inc. - precision
weighing instruments 48,000 1,191,833
Millipore Corporation - commercial
filtration equipment 25,000 1,014,062
<F1> Zebra Technologies Corporation - thermal bar code
printer manufacturer 27,000 1,035,876
Symbol Technologies, Inc. - manufacturer and
marketer of scanning products 16,500 608,438
----------
3,850,209
CONGLOMERATES - 1.3%
Fortune Brands, Inc. - home and office supplies,
golf equipment, spirits 13,500 558,562
CONSUMER CYCLICAL - 5.1%
APPLIANCE & TOOL - 1.0%
Danaher Corporation - industrial tools and
process/environmental controls 7,500 434,698
AUTO & TRUCK PARTS - 4.1%
Federal-Mogul Corporation - auto
parts manufacturer 14,500 754,000
<F1> SPX Corporation - diversified industrial
electrical systems 12,000 1,002,000
----------
1,756,000
CONSUMER NON-CYCLICAL - 4.6%
FOOD PROCESSING - 2.5%
Universal Foods Corporation - diversified color
and flavor producer 52,000 1,100,145
OFFICE PRODUCTS - 2.1%
<F1> Mail-Well, Inc. - commercial printing and
mailing holding company 55,000 891,921
B-49
<PAGE>
SHARES MARKET
HELD VALUE
====== =======
ENERGY - 5.3%
OIL & GAS OPERATIONS - 2.4%
Devon Energy Corporation - natural gas and
exploration company 13,000 $465,020
Dynegy, Inc. - independent power producer
and energy marketer 27,500 560,717
----------
1,025,737
OIL WELL SERVICES & EQUIPMENT - 2.9%
Halliburton Company - diversified energy services 11,500 520,375
<F1> Weatherford International, Inc. - diversified
energy services 20,500 750,812
----------
1,271,187
FINANCIAL - 10.0%
INSURANCE (ACCIDENT & HEALTH) - 2.0%
<F1> Provident Companies, Inc. - disability insurance 22,000 880,000
INSURANCE (LIFE) - 0.8%
American Bankers Insurance Group, Inc. -
life insurance 6,500 353,844
INSURANCE (MISCELLANEOUS) - 1.7%
ITT Hartford Group, Inc. - life and
property insurance 12,500 729,276
INSURANCE (PROPERTY & CASUALTY) - 1.8%
Ace Limited, Inc. - property and casualty insurance 27,500 777,332
REGIONAL BANKS - 1.3%
FirstMerit Corporation - regional bank 20,000 561,250
S&LS/SAVINGS BANKS - 2.4%
Charter One Financial, Inc. - savings and loan 37,000 1,028,512
HEALTHCARE - 5.4%
BIOTECHNOLOGY & DRUGS - 2.5%
<F1> Centocor, Inc. - drugs for heart care 14,000 655,250
<F1> Covance, Inc. - contract research for
pharmaceutical industry 19,000 454,813
----------
1,110,063
MEDICAL EQUIPMENT & SUPPLIES - 2.9%
<F1> Sybron International Corporation - dental
supplies manufacturer 45,500 1,254,218
REAL ESTATE INVESTMENT TRUSTS - 2.2%
Apartment Investment & Management Company -
apartment owner and operator 18,000 769,500
HealthCare Financial Partners REIT, Inc., 144A -
healthcare related real estate investments 10,500 189,000
----------
958,500
SERVICES - 17.7%
ADVERTISING - 1.5%
<F1> Outdoor Systems, Inc. - billboard operator 18,000 657,000
BROADCASTING & CABLE TV - 4.7%
<F1> Century Communication Corporation - cable
systems operator 15,500 713,625
<F1> Liberty Media, Class A - cable television
programming 17,000 624,750
<F1> Media One Group, Inc. - cable systems operator 7,000 520,625
<F1> Univision Communications, Inc. - Spanish
television broadcaster 3,000 198,000
----------
2,057,000
SCHEDULE OF INVESTMENTS
ARTISAN MID CAP FUND
B-50
<PAGE>
SHARES MARKET
HELD VALUE
====== =======
SERVICES (CONTINUED)
BUSINESS SERVICES - 4.4%
<F1> A.C. Nielsen Corporation - consumer market
research 27,000 $815,721
<F1> Convergys Corporation - billing systems for
communications companies 44,000 847,000
<F1> Portal Software, Inc. - billing systems for
communications companies 5,000 231,063
----------
1,893,784
MOTION PICTURES - 1.9%
<F1> IMAX Corporation - developer of specialty movies
and theaters 37,000 833,975
PRINTING & PUBLISHING - 1.6%
<F1> Primedia, Inc. - niche magazines and trade
journals 40,000 677,455
RECREATIONAL ACTIVITIES - 1.9%
<F1> SFX Entertainment, Inc. - venue operator
and promotor 13,000 832,000
RETAIL (GROCERY) - 1.7%
Great Atlantic and Pacific Tea, Inc. -
grocery store chain 22,000 743,590
TECHNOLOGY - 17.5%
COMPUTER PERIPHERALS - 1.4%
<F1> National Instruments Corporation - industrial
automation software 15,000 605,575
COMPUTER SERVICES - 4.4%
<F1> NCR Corporation - systems applications 16,000 780,957
<F1> SunGard Data Systems, Inc. - recordkeeping
software and systems for investment management
companies 32,000 1,102,415
----------
1,883,372
ELECTRONIC INSTRUMENTS & CONTROLS - 6.3%
<F1> American Power Conversion Corporation -
uninterruptible power supplies 108,000 2,173,500
<F1> Sanmina Corporation - contract manufacturer for
electronics industry 7,500 569,063
----------
2,742,563
SOFTWARE & PROGRAMMING - 5.4%
<F1> Electronics For Imaging, Inc. - products for
digital color printing 16,500 847,687
<F1> InterVu, Inc. - network for streaming
video/audio delivery 15,000 574,688
<F1> Transaction Systems Architects, Inc. - develops,
markets, installs and supports software
for e-commerce 24,000 936,000
----------
2,358,375
TELECOMMUNICATIONS - 11.6%
COMMUNICATIONS SERVICES - 10.3%
<F1> Citizens Utilities Company - local wireline
telephone operator 20,000 226,538
<F1> Clearnet Communications, Inc. - digital wireless
telephone operator 66,000 919,875
<F1> Covad Communications Group, Inc. - digital
subscriber line provider 11,500 606,657
<F1> Nextlink Communications, Inc. - diversified
telecommunications 3,000 211,473
<F1> Omnipoint Corporation - digital wireless
telephone operator 35,000 1,012,812
<F1> Voicestream Wireless Corporation - digital
wireless telephone operator 18,500 526,094
<F1> Western Wireless Corporation - cellular
phone operator 15,500 418,500
<F1> Winstar Communications Company - fixed wireless
voice and data 11,000 536,125
----------
4,458,074
SCHEDULE OF INVESTMENTS
ARTISAN MID CAP FUND
B-51
<PAGE>
SHARES MARKET
HELD VALUE
====== =======
TELECOMMUNICATIONS (CONTINUED)
COMMUNICATIONS EQUIPMENT - 1.3%
<F1> PowerWave Technologies, Inc. - wireless base
station amplifiers 17,000 $547,375
TRANSPORTATION - 1.2%
MISCELLANEOUS TRANSPORTATION - 1.2%
CH Robinson Worldwide, Inc. - third party
logistics provider 14,500 532,875
TOTAL COMMON STOCKS (Cost $33,912,820) 42,163,570
WARRANTS - 0.0%
Healthcare Financial Partners REIT, expires 4/28/01
(Cost $0) 4,200 -
PAR MARKET
AMOUNT VALUE
====== ======
SHORT TERM INVESTMENTS - 8.4%
Repurchase agreement with State Street Bank
and Trust Company, 4.0%, dated 6/30/99,
due 7/1/99, maturity value $3,633,404,
collateralized by $3,708,824 market value
U.S. Treasury Bond, 8.500%, due 02/15/20,
(Cost $3,633,000) $3,633,000 3,633,000
----------
TOTAL INVESTMENTS - 105.7% (Cost $37,545,820) 45,796,570
OTHER ASSETS LESS LIABILITIES - (5.7)% (2,476,952)
----------
TOTAL NET ASSETS - 100.0%<F2> $43,319,618
===========
<F1> Non-income producing securities
<F2> Percentages for the various classifications relate to total net assets
SCHEDULE OF INVESTMENTS
ARTISAN MID CAP FUND
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
B-52
<PAGE>
ARTISAN
SMALL CAP VALUE FUND
Schedule of Investments - June 30, 1999
SHARES MARKET
HELD VALUE
COMMON STOCKS - 97.7% ====== ======
BASIC MATERIALS - 15.0%
CHEMICAL MANUFACTURING - 3.5%
<F1> American Pacific Corporation - specialty
chemicals for aerospace and defense 101,000 $852,188
<F1> CFC International, Inc. - specialty
chemical coatings 100,100 1,076,075
Terra Industries, Inc. - agricultural chemicals 197,800 791,200
----------
2,719,463
CONTAINERS & PACKAGING - 1.6%
Greif Brothers Corporation, Class A -
shipping containers and packaging manufacturer 48,900 1,246,950
FABRICATED PLASTIC & RUBBER - 0.8%
<F1> Gundle SLT/Environmental, Inc. - landfill
lining systems 137,900 586,075
IRON & STEEL - 3.7%
LTV Corporation - integrated steel manufacturer 137,300 918,194
Roanoke Electronic Steel Corporation - fabricated
steel products 59,400 1,032,075
Schnitzer Steel Industries, Inc., Class A - steel
scrap processor
and minimill operation 42,900 962,569
----------
2,912,838
METAL MINING - 1.6%
Cleveland Cliffs, Inc. - iron ore supplier 37,900 1,227,013
MISCELLANEOUS FABRICATED PRODUCTS - 3.8%
<F1> L.B. Foster Company, Class A - rail and
construction supplies manufacturer 127,200 747,300
<F1> Mueller Industries, Inc. - plumbing
products manufacturer 66,200 2,246,662
----------
2,993,962
CAPITAL GOODS - 14.6%
AEROSPACE & DEFENSE - 0.6%
<F1> Tristar Aerospace Company - aerospace
products distributor 56,000 462,000
CONSTRUCTION - FIXTURES & SUPPLIES - 1.8%
Insteel Industries, Inc. - steel wire products
manufacturer 159,800 1,438,200
CONSTRUCTION - RAW MATERIALS - 4.4%
<F1> Giant Cement Holding, Inc. - cement operations 74,300 1,699,612
Lone Star Industries, Inc. - cement operations 45,900 1,724,119
----------
3,423,731
B-53
<PAGE>
SHARES MARKET
HELD VALUE
====== ======
CAPITAL GOODS (CONTINUED)
CONSTRUCTION SERVICES - 2.4%
Chicago Bridge & Iron Company NV - engineering
and construction 1,500 $20,906
<F1> EMCOR Group, Inc. - mechanical and electrical
contractor 73,000 1,838,688
----------
1,859,594
MISCELLANEOUS CAPITAL GOODS - 5.4%
Gleason Corporation - gear manufacturing
equipment producer 118,600 1,993,963
Lincoln Electric Holdings, Inc. - welding products 5,100 104,550
Regal Beloit Corporation - electrical equipment
manufacturer 34,400 812,700
Smith Investment Company - multi-industry
holding company 15,600 780,000
Twin Disc, Inc. - heavy-duty power transmission
equipment manufacturer 25,500 511,594
----------
4,202,807
CONSUMER CYCLICAL - 10.4%
APPAREL/ACCESSORIES - 1.4%
Delta Woodside Industries, Inc. - apparel and
textiles manufacturer 45,900 275,400
Guilford Mills, Inc. - knit textile fabrics
producer 78,400 813,400
----------
1,088,800
AUTO & TRUCK PARTS - 2.7%
CLARCOR, Inc. - filtration products 62,400 1,197,300
Varlen Corporation - railroad equipment 21,900 886,950
----------
2,084,250
FOOTWEAR - 2.1%
Justin Industries, Inc. - western wear and building
products 28,300 394,431
<F1> R.G. Barry Corporation - specialized comfort
footwear manufacturer 150,200 1,239,150
----------
1,633,581
FURNITURE & FIXTURES - 1.1%
<F1> Winsloew Furniture, Inc. - casual furniture
manufacturer 25,000 840,625
JEWELRY & SILVERWARE - 1.5%
Jostens, Inc. - manufacturer of recognition products 54,300 1,143,694
RECREATIONAL PRODUCTS - 1.6%
Arctic Cat, Inc. - snowmobile and all-terrain
vehicle manufacturer 137,000 1,224,438
CONSUMER NON-CYCLICAL - 1.5%
TOBACCO - 1.5%
<F1> M&F Worldwide Corporation - flavorings producer 143,200 1,136,650
ENERGY - 5.5%
OIL & GAS OPERATIONS - 5.5%
Cabot Oil & Gas Corporation, Class A - natural
gas exploration/production 53,500 996,438
<F1> Forest Oil Corporation - oil and natural gas
exploration/production 68,017 854,464
Patina Oil & Gas Corporation - oil and natural
gas exploration/production 172,800 1,090,800
Santa Fe Snyder - oil and natural gas
exploration/production 151,800 1,157,475
<F1> Tom Brown, Inc. - oil and natural gas exploration 10,100 157,181
----------
4,256,358
SCHEDULE OF INVESTMENTS
ARTISAN SMALL CAP VALUE FUND
B-54
<PAGE>
SHARES MARKET
HELD VALUE
====== =======
FINANCIAL - 22.2%
CONSUMER FINANCIAL SERVICES - 2.2%
White Mountains Insurance Group, Inc. - insurance
and mortgage banking 12,200 $1,720,200
INSURANCE (LIFE) - 3.1%
Annuity and Life Re (Holdings) - life and
annuity reinsurance 72,700 1,631,206
Scottish Annuity & Life Holdings - life and
annuity reinsurance 70,400 756,800
----------
2,388,006
INSURANCE (MISCELLANEOUS) - 4.7%
Hilb, Rogal & Hamilton Company - insurance broker 95,000 2,125,625
<F1> Superior National Insurance Group - workers
compensation insurance 55,900 1,523,275
----------
3,648,900
INSURANCE (PROPERTY & CASUALTY) - 7.6%
<F1> Acceptance Insurance Companies - crop insurance 108,500 1,634,281
Capital Re Corporation - financial guaranty
reinsurance 47,600 764,575
Chicago Title Corporation - property title insurer 12,900 460,369
Merchants Group, Inc. - property and casualty
insurance 23,800 532,525
<F1> Risk Capital Holdings, Inc. - reinsurance products
and services 55,500 749,250
Stewart Information Services Corporation - property
title insurer 85,800 1,812,525
----------
5,953,525
MISCELLANEOUS FINANCIAL SERVICES - 2.5%
Capital Southwest Corporation - closed-end
venture capital investment company 15,800 1,264,000
<F1> Enstar Group, Inc. - financial services
holding company 41,200 643,750
----------
1,907,750
S&LS/SAVINGS BANKS - 2.1%
John Hancock Bank & Thrift Opportunity -
closed-end investment company 132,200 1,255,900
The Somerset Group, Inc. - investment services 20,900 418,000
----------
1,673,900
HEALTHCARE - 1.0%
BIOTECHNOLOGY & DRUGS - 1.0%
<F1> Quest Diagnostics, Inc. - diagnostic testing
services 29,700 813,037
REAL ESTATE INVESTMENT TRUSTS - 2.3%
Asset Investors Corporation - manufactured
housing communities 56,500 843,969
Fortress Investment Corporation, 144A - specialty
real estate investments 17,300 291,938
Healthcare Financial Partners REIT, 144A -
healthcare related real estate investments 36,000 648,000
----------
1,783,907
SERVICES - 13.6%
ADVERTISING - 4.1%
<F1> Advo, Inc. - direct mail marketing services 78,100 1,620,575
Grey Advertising, Inc. - advertising agency 4,700 1,565,100
----------
3,185,675
BROADCASTING & CABLE TV - 1.9%
<F1> On Command Corporation - pay-per-view movie services 84,600 1,491,075
SCHEDULE OF INVESTMENTS
ARTISAN SMALL CAP VALUE FUND
B-55
<PAGE>
SHARES MARKET
HELD VALUE
SERVICES (CONTINUED) ====== ======
BUSINESS SERVICES - 3.2%
<F1> Craig Corporation, Class A Preference - movie
theatre owner/operator 81,200 $573,475
Duff & Phelps Credit Rating Company - credit
rating agency 3,900 260,813
Midas, Inc. - automotive repair services 60,000 1,702,500
----------
2,536,788
HOTELS & MOTELS - 0.9%
<F1> Supertel Hospitality, Inc. - economy hotels
owner/operator 58,900 725,206
PRINTING & PUBLISHING - 0.0%<F3>
Courier Corporation - book manufacturer 1,300 29,900
RESTAURANTS - 1.2%
<F1> Host Marriott Services - food and beverage
concessions operator 105,300 855,562
<F1> Vicorp Restaurants, Inc. - casual dining
restaurant operator 1,100 19,112
----------
874,674
WASTE MANAGEMENT SERVICES - 2.3%
<F1> Harding Lawson Associates Group - environmental
and engineering consultants 105,600 897,600
Sevenson Environmental Services, Inc. - hazardous
waste remediation 76,000 883,500
----------
1,781,100
TECHNOLOGY - 7.8%
COMPUTER PERIPHERALS - 0.8%
Astro-Med Inc. - medical instrumentation/specialty
printers 96,800 665,500
ELECTRONIC INSTRUMENTS & CONTROLS - 2.8%
<F1> Genlyte Group, Inc. - commercial, industrial
and residential lighting 59,800 1,341,762
<F1> Powell Industries, Inc. - electrical equipment
manufacturer 89,700 829,725
----------
2,171,487
SCIENTIFIC & TECHNICAL INSTRUMENTS - 0.7%
Moore Products Company - measurement and
control instruments 24,000 550,500
SEMICONDUCTORS - 3.1%
<F1> Electroglas, Inc. - semiconductor wafer
probing equipment 39,900 798,000
<F1> FSI International, Inc. - semiconductor
equipment manufacturer 98,700 820,444
<F1> Silicon Valley Group, Inc. - semiconductor
equipment manufacturer 47,200 793,550
----------
2,411,994
SOFTWARE & PROGRAMMING - 0.4%
<F1>Intelligent Systems Corporation - software and
healthcare services 95,300 297,812
TRANSPORTATION - 2.1%
MISCELLANEOUS TRANSPORTATION - 2.1%
<F1> Aviall, Inc. - aviation parts distributor 86,030 1,618,439
SCHEDULE OF INVESTMENTS
ARTISAN SMALL CAP VALUE FUND
B-56
<PAGE>
SHARES MARKET
HELD VALUE
====== =======
UTILITIES - 1.7%
NATURAL GAS UTILITIES - 1.7%
UGI Corporation - propane and natural gas supplier 64,500 1,302,094
TOTAL COMMON STOCKS (Cost $73,684,541) 76,012,498
WARRANTS - 0.0%
Healthcare Financial Partners REIT, expires 4/28/01
(Cost $0) 14,400 $--
Par Market
Amount Value
======= ======
SHORT TERM INVESTMENTS - 3.1%
Repurchase agreement with State Street Bank and
Trust Company, 4.0%, dated 6/30/99, due 7/1/99,
maturity value $2,407,267, collateralized
by $2,455,585 market value U.S. Treasury Bond,
8.500% due 12/15/20 (Cost $2,407,000) $2,407,000 2,407,000
----------
TOTAL INVESTMENTS - 100.8% (Cost $76,091,541) 78,419,498
OTHER ASSETS LESS LIABILITIES - (0.8)% (619,476)
----------
TOTAL NET ASSETS - 100.0%<F2> $77,800,022
===========
<F1> Non-income producing securities
<F2> Percentages for the various classifications relate to total net assets.
<F3> Represents less than 0.1% of total net assets.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
SCHEDULE OF INVESTMENTS
ARTISAN SMALL CAP VALUE FUND
B-57
<PAGE>
ARTISAN FUNDS, INC.
Statements of Assets and Liabilities - June 30, 1999
<TABLE>
<CAPTION>
SMALL CAP INTERNATIONAL MID CAP SMALL CAP
FUND FUND FUND VALUE FUND
========= ============= ======= ==========
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities, at value $174,535,801 $1,121,821,586 $45,796,570 $78,419,498
Cash 160 613,654 760 443
Receivable from investments sold 4,044,925 32,824,911 689,161 301,071
Receivable from forward currency contracts - 25,384,553 - -
Receivable from fund shares sold 8,142 8,268,389 1,051,047 155,364
Interest receivable 255 3,727 404 268
Dividends receivable 88,354 2,121,737 9,057 60,131
Organizational costs 10,396 10,980 17,019 22,988
Receivable from Adviser - - 29,152 -
Other assets - 2,005 - 1,022
------------ --------------- ------------ ------------
TOTAL ASSETS 178,688,033 1,191,051,542 47,593,170 78,960,785
LIABILITIES:
Payable for investments purchased 3,923,672 40,996,522 4,113,713 1,031,041
Payable for forward currency contracts - 25,333,558 - -
Payable for fund shares redeemed 25,600 283,328 834 78
Payable for organizational costs 10,396 10,980 17,019 22,988
Payable for operating expenses 172,490 805,929 141,986 106,656
Other liabilities - 116,626 - -
------------ --------------- ------------ ------------
TOTAL LIABILITIES 4,132,158 67,546,943 4,273,552 1,160,763
------------ --------------- ------------ ------------
TOTAL NET ASSETS $174,555,875 $1,123,504,599 $43,319,618 $77,800,022
============ =============== =========== ===========
NET ASSETS CONSIST OF:
Fund shares issued and outstanding $195,135,595 $927,059,446 $33,834,096 $74,305,579
Net unrealized appreciation (depreciation)
on investments and foreign currency
related transactions 19,706,744 161,028,212 8,250,750 2,327,957
Accumulated undistributed net
investment income (loss) - 1,876,177 - -
Accumulated undistributed net realized
gains (losses) on investments and foreign
currency related transactions (40,286,464) 33,540,764 1,234,772 1,166,486
------------ --------------- ------------ ------------
$174,555,875 $1,123,504,599 $43,319,618 $77,800,022
============= =============== =========== ===========
SUPPLEMENTARY
INFORMATION:
Net assets $174,555,875 $43,319,618 $77,800,022
International Shares $943,941,134
Institutional Shares $179,563,465
Number of shares outstanding 15,740,076 2,598,115 7,345,039
International Shares 50,561,875
Institutional Shares 9,602,774
Net asset value, offering price
and redemption price per share $11.09 $16.67 $10.59
International Shares $18.67
Institutional Shares $18.70
Cost of securities held $154,829,057 $960,678,938 $37,545,820 $76,091,541
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
B-58
<PAGE>
ARTISAN FUNDS, INC.
Statements of Operations - For the Year Ended June 30, 1999
<TABLE>
<CAPTION>
SMALL CAP INTERNATIONAL MID CAP SMALL CAP
FUND FUND FUND VALUE FUND
========= ============= ======= ===========
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $490,934 $885,548 $82,956 $139,073
Dividends 897,185 12,395,675<F1> 114,629 481,8240
------------ --------------- ------------ ------------
TOTAL INVESTMENT INCOME 1,388,119 13,281,223 197,585 620,897
EXPENSES:
Advisory fees 1,980,620 6,718,770 229,384 511,680
Transfer agent fees 366,340 105,815 151,991
International Shares 1,208,884
Institutional Shares 21,460
Shareholder communications 108,994 14,293 37,380
International Shares 171,859
Institutional Shares 8,351
Custodian fees 77,618 577,023 27,304 21,516
Accounting fees 44,948 79,271 44,514 45,315
Professional fees 49,568 91,085 17,976 19,152
Registration fees 35,448 216,993 23,914 36,394
Directors' fees 15,000 15,000 15,000 15,000
Organizational costs 13,951 7,320 5,673 11,235
Other operating expenses 25,751 55,424 1,796 4,416
------------ --------------- ------------ ------------
TOTAL OPERATING EXPENSES BEFORE
AMOUNTS PAID BY THE ADVISER 2,718,238 9,171,440 485,669 854,079
LESS AMOUNTS PAID BY THE ADVISER - - (29,152) -
------------ --------------- ------------ ------------
NET EXPENSES 2,718,238 9,171,440 456,517 854,079
------------ --------------- ------------ ------------
NET INVESTMENT INCOME (LOSS) (1,330,119) 4,109,783 (258,932) (233,182)
NET REALIZED AND
UNREALIZED GAINS
(LOSSES) ON INVESTMENTS:
Net realized gain (loss) on:
Investments (40,422,189) 38,449,100 1,711,886 1,468,035
Foreign currency related transactions - (677,233) - -
Futures contracts 645,230 - - -
------------ --------------- ------------ ------------
(39,776,959) 37,771,867 1,711,886 1,468,035
Net increase (decrease) in unrealized
appreciation on:
Investments (15,181,024) 79,783,283 7,469,075 651,867
Foreign currency related transactions - (137,818) - -
------------ --------------- ------------ ------------
(15,181,024) 79,645,465 7,469,075 651,867
------------ --------------- ------------ ------------
NET GAIN (LOSS) ON INVESTMENTS (54,957,983) 117,417,332 9,180,961 2,119,902
------------ --------------- ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $(56,288,102) $121,527,115 $8,922,029 $1,886,720
============= ============= =========== ===========
<F1> Net of foreign taxes withheld of $1,526,314.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
B-59
<PAGE>
ARTISAN FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SMALL CAP FUND INTERNATIONAL FUND
============================ ============================
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
6/30/99 6/30/98 6/30/99 6/30/98
========== ========== ========== ============
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $(1,330,119) $(2,139,789) $4,109,783 $1,635,707
Net realized gain (loss) on:
Investments (40,422,189) 42,066,239 38,449,100 28,895,798
Foreign currency related transactions - - (677,233) (991,131)
Futures contracts 645,230 - - -
Net increase (decrease) in unrealized
appreciation on:
Investments (15,181,024) (907,556) 79,783,283 47,423,084
Foreign currency related transactions - - (137,818) 22,144
------------ ------------- ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS (56,288,102) 39,018,894 121,527,115 76,985,602
DISTRIBUTIONS PAID
TO SHAREHOLDERS:
Net investment income: - -
International Shares (944,186) (4,035,316)
Institutional Shares (257,100) (823,369)
Net realized gains on investment transactions: (17,843,098) (45,736,543)
International Shares (6,509,837) (23,067,732)
Institutional Shares (1,271,446) (4,236,936)
------------ ------------- ------------ ------------
TOTAL DISTRIBUTIONS PAID TO SHAREHOLDERS (17,843,098) (45,736,543) (8,982,569) (32,163,353)
FUND SHARE ACTIVITIES:
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM FUND SHARE ACTIVITIES (55,455,086) 43,039,922 513,780,438 3,177,296
------------ ------------- ------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (129,586,286) 36,322,273 626,324,984 47,999,545
Net assets, beginning of period 304,142,161 267,819,888 497,179,615 449,180,070
------------ ------------- ------------ ------------
NET ASSETS, END OF PERIOD $174,555,875 $304,142,161 $1,123,504,599 $497,179,615
============ ============ ============= ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
B-60
<PAGE>
ARTISAN FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS - Continued
<TABLE>
<CAPTION>
MID CAP FUND SMALL CAP VALUE FUND
=========================== =============================
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
6/30/99 6/30/98 6/30/99 6/30/98<F1>
========= ========== ========= ============
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $(258,932) $(72,646) $(233,182) $(127,378)
Net realized gain (loss) on investments 1,711,886 1,907,453 1,468,035 2,628,786
Net increase (decrease) in unrealized
appreciation on investments 7,469,075 781,675 651,867 1,676,090
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 8,922,029 2,616,482 1,886,720 4,177,498
DISTRIBUTIONS PAID
TO SHAREHOLDERS:
NET REALIZED GAINS ON INVESTMENT TRANSACTIONS (1,185,407) (586,078) (2,325,801) -
FUND SHARE ACTIVITIES:
NET INCREASE IN NET ASSETS
RESULTING FROM FUND SHARE ACTIVITIES 22,802,060 8,937,055 31,009,275 43,052,330
------------ ------------ ------------ ------------
TOTAL INCREASE IN NET ASSETS 30,538,682 10,967,459 30,570,194 47,229,828
Net assets, beginning of period 12,780,936 1,813,477 47,229,828 -
------------ ------------ ------------ ------------
NET ASSETS, END OF PERIOD $43,319,618 $12,780,936 $77,800,022 $47,229,828
============ ============ ============ ============
<F1> For the period from commencement of operations (September 29,1997) through
June 30,1998.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
B-61
<PAGE>
ARTISAN FUNDS, INC.
FINANCIAL HIGHLIGHTS - For a share outstanding throughout each period
-------------------------------------------------------------------------------
INTERNATIONAL FUND
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Period Ended
6/30/99 6/30/98 6/30/97 6/30/96
International International International International
For a share outstanding throughout each period Shares Shares Shares Shares<F1>
------- ------- ------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $16.25 $14.48 $12.08 $10.00
Income from investment operations:
Net investment income 0.08<F2> 0.06<F2> 0.07 0.04
Net realized and unrealized gains on securities
and foreign currency transactions 2.62 3.04<F2> 2.44 2.04
------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 2.70 3.10 2.51 2.08
------- ------- ------- -------
DISTRIBUTIONS PAID TO SHAREHOLDERS:
Net investment income (0.04) (0.20) (0.02) _
Net realized gains on investment transactions (0.24) (1.13) (0.09) _
------- ------- ------- -------
Total distributions paid to shareholders (0.28) (1.33) (0.11) _
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $18.67 $16.25 $14.48 $12.08
======= ======= ======= =======
Total return 17.4% 24.1% 20.9% 20.8%<F3>
Ratios/supplemental data:
Net assets, end of period (millions) $943.9<F5> $414.5<F5> $449.2 $71.5
Ratio of expenses to average net assets 1.38% 1.45% 1.61% 2.50%<F4>
Ratio of net investment income to average
net assets 0.59% 0.37% 1.07% 1.60%<F4>
Portfolio turnover rate 79.41% 109.42% 103.66% 57.00%<F3>
<F1> For the period from commencement of operations (December 28, 1995) through
June 30, 1996.
<F2> Computed based on average shares outstanding.
<F3> Not annualized.
<F4> Annualized.
<F5> Does not include assets represented by Institutional Shares, which were
first offered for sale on July 1, 1997.
B-62
<PAGE>
ARTISAN FUNDS, INC.
FINANCIAL HIGHLIGHTS - For a share outstanding throughout each period
-------------------------------------------------------------------------------
INTERNATIONAL FUND - INSTITUTIONAL SHARES
-------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year Ended Year Ended
6/30/99 6/30/98
International International
For a share outstanding throughout each period Shares Shares
------- -------
<S> <C> <C>
Net asset value, beginning of period $16.26 $14.48
Income from investment operations:
Net investment income 0.11<F1> 0.09<F1>
Net realized and unrealized gains on securities
and foreign currency transactions 2.62 3.04
------- -------
TOTAL FROM INVESTMENT OPERATIONS 2.73 3.13
------- -------
DISTRIBUTIONS PAID TO SHAREHOLDERS:
Net investment income (0.05) (0.22)
Net realized gains on investment transactions (0.24) (1.13)
------- -------
Total distributions paid to shareholders (0.29) (1.35)
------- -------
NET ASSET VALUE, END OF PERIOD $18.70 $16.26
======= =======
Total return 17.6% 24.4%
Ratios/supplemental data:
Net assets, end of period (millions) $179.6<F2> $82.6<F2>
Ratio of expenses to average net assets 1.17% 1.25%
Ratio of net investment income to average
net assets 0.68% 0.68%
Portfolio turnover rate 79.41% 109.42%
<F1> Computed based on average shares outstanding.
<F2> Does not include assets represented by International Shares, which are
offered to retail investors by a separate prospectus
B-63
<PAGE>
ARTISAN FUNDS, INC.
FINANCIAL HIGHLIGHTS - For a share outstanding throughout each period
</TABLE>
-------------------------------------------------------------------------------
MID CAP FUND
-------------------------------------------------------------------------------
Year Year Period
For a share outstanding Ended Ended Ended
throughout each period 6/30/99 6/30/98 6/30/97<F1>
-------- -------- -----------
Net asset value, beginning of period $13.69 $10.00 $10.00
Income from investment operations:
Net investment loss (0.16)<F5> (0.08) _
Net realized and unrealized
gains on securities 4.41 4.56 _
------- ------ ------
TOTAL FROM INVESTMENT OPERATIONS 4.25 4.48 _
------- ------ ------
DISTRIBUTIONS PAID TO SHAREHOLDERS:
Net realized gains on
investment transactions (1.27) (0.79) _
------- ------ ------
NET ASSET VALUE, END OF PERIOD $16.67 $13.69 $10.00
======= ======= =======
Total return 35.8% 46.1% 0.0%<F2>
Ratios/supplemental data:
Net assets, end of period
(millions) $43.3 $12.8 $1.8<F3>
Ratio of expenses to average
net assets 2.00%<F4> 2.00%<F4> 0.00%<F3>
Ratio of net investment loss
to average net assets (1.13)%<F4> (0.77)%<F4> 0.00%<F3>
Portfolio turnover rate 202.84% 235.65 0.00%<F2>
<F1> For the period from commencement of operations (June 27, 1997) through
June 30, 1997.
<F2> Not annualized.
<F3> Annualized.
<F4> The ratios of expenses to average net assets and net investment loss to
average net assets exclude fees paid by the Adviser. Absent fees paid by
the Adviser, the ratios of expenses to average net assets and net
investment loss to average net assets would have been 2.12% and (1.25)%
for the year ended June 30, 1999 and 3.64% and (2.41)% for the year ended
June 30, 1998, respectively.
<F5> Computed based on average shares outstanding
B-64
<PAGE>
ARTISAN FUNDS, INC.
FINANCIAL HIGHLIGHTS - For a share outstanding throughout each period
-------------------------------------------------------------------------------
SMALL CAP FUND
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Year Year Year Period
Ended Ended Ended Ended Ended
For a share outstanding throughout each period 6/30/99 6/30/98 6/30/97 6/30/96 6/30/95<F1>
-------- --------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $14.66 $15.11 $14.67 $11.52 $10.00
Income from investment operations:
Net investment loss (0.08) (0.10) (0.04) (0.07) (0.01)
Net realized and unrealized gain (loss) on
investments (2.53) 2.23 1.55 3.32 1.53
------- ------- ------- ------ ------
TOTAL FROM INVESTMENT OPERATIONS (2.61) 2.13 1.51 3.25 1.52
------- ------- ------- ------ ------
DISTRIBUTIONS PAID TO SHAREHOLDERS:
Net realized gains on investment transactions (0.96) (2.58) (1.07) (0.10) _
------- ------- ------- ------ ------
NET ASSET VALUE, END OF PERIOD $11.09 $14.66 $15.11 $14.67 $11.52
======= ======= ======= ====== ======
Total return (17.0)% 14.7% 11.3% 28.3% 15.2%<F2>
Ratios/supplemental data:
Net assets, end of period (millions) $174.6 $304.1 $267.8 $400.0 $99.3
Ratio of expenses to average net assets 1.37% 1.33% 1.41% 1.52% 2.00%<F3>
Ratio of net investment income to average
net assets (0.67)% (0.74)% (0.73)% (0.75)% (0.59)%<F3>
Portfolio turnover rate 155.38% 134.67% 87.18% 105.19% 9.28%<F2>
<F1> For the period from commencement of operations (March 28, 1995) through
June 30, 1995.
<F2> Not annualized.
<F3> Annualized.
</TABLE>
B-65
<PAGE>
ARTISAN FUNDS, INC.
FINANCIAL HIGHLIGHTS - For a share outstanding throughout each period
-------------------------------------------------------------------------------
SMALL CAP VALUE FUND
-------------------------------------------------------------------------------
Year Period
Ended Ended
June 30, June 30,
For a share outstanding throughout each period 1999 1998<F1>
------ --------
Net asset value, beginning of period $11.37 $10.00
Income from investment operations:
Net investment loss (0.03) (0.03)
Net realized and unrealized gains on securities (0.21)<F4> 1.40
------- ------
TOTAL FROM INVESTMENT OPERATIONS (0.24) 1.37
------- ------
DISTRIBUTIONS PAID TO SHAREHOLDERS:
Net realized gains on investment transactions (0.54) _
------- ------
NET ASSET VALUE, END OF PERIOD $10.59 $11.37
======= ======
Total return (1.0)% 13.7%<F2>
Ratios/supplemental data:
Net assets, end of period (millions) $77.8 $47.2
Ratio of expenses to average net assets 1.66% 1.93%<F3>
Ratio of net investment loss to average
net assets (0.45)% (0.50)%<F3>
Portfolio turnover rate 49.29% 52.58%<F2>
<F1> For the period from commencement of operations (September 29, 1997)
through June 30, 1998.
<F2> Not annualized.
<F3> Annualized.
<F4> The amount shown may not correlate with the aggregate gains and losses of
portfolio securities due to the timing of subscriptions and redemptions
of fund shares
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
B-66
<PAGE>
ARTISAN FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS - June 30, 1999
(1) ORGANIZATION:
Artisan Funds, Inc. ("Artisan Funds") was incorporated on January 5, 1995,
as a Wisconsin corporation and is registered under the Investment Company Act of
1940, as amended. Artisan Funds is a series comprised of four open-end,
diversified mutual funds (each a "Fund" and collectively the "Funds"): Artisan
Small Cap Fund ("Small Cap Fund"), Artisan International Fund ("International
Fund"), Artisan Mid Cap Fund ("Mid Cap Fund"), and Artisan Small Cap Value Fund
("Small Cap Value Fund"). Small Cap Fund, International Fund, Mid Cap Fund and
Small Cap Value Fund commenced operations on March 28, 1995, December 28, 1995,
June 27, 1997 and September 29, 1997, respectively.
Effective July 1, 1997, the International Fund began offering two classes
of capital shares, International Shares and International Institutional Shares
(Institutional Shares). Institutional Shares are sold to institutional investors
meeting certain minimum investment requirements. Each class of shares has equal
rights with respect to portfolio assets and voting privileges. Each class has
exclusive voting rights with respect to any matters involving only that class.
Income, non-class specific expenses, realized and unrealized gains and losses
are allocated daily to each class of shares based upon the relative net asset
value of outstanding shares. Expenses attributable to a particular class of
shares, such as transfer agency fees and shareholder communication expenses, are
allocated directly to that class. On July 1, 1997, 3,071,672 shares (with a net
asset value of $44,477,811) of International Shares were transferred to
Institutional Shares.
The Small Cap Fund, International Fund International Shares, International
Fund Institutional Shares, Mid Cap Fund and Small Cap Value Fund each have
5,000,000,000 shares authorized with a $0.01 par value.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the Funds.
(a) Security valuation - Each security is valued at the last sales price
reported by the principal securities exchange on which the issue is traded, or
if no sale is reported on the principal exchange, the last sale on a secondary
exchange. The last bid price reported is utilized if no sales have taken place.
Securities for which prices are not readily available, or which management
believes that the latest sales or bid price is not reflective of the fair value
of the security, are valued as determined in good faith under consistently
applied procedures established by and under the general supervision of the Board
of Directors. Short-term investments maturing within sixty days of their
purchase date are valued at
B-67
<PAGE>
ARTISAN FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS - Continued
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
amortized cost which approximates market. The Small Cap Fund, Mid Cap
Fund and Small Cap Value Fund each own certain securities which are valued at
their fair value as determined using procedures established by the Funds' Board
of Directors. Each Fund held fair valued securities in the amount of $5,929,172,
$189,000 and $939,938, respectively, representing 3.4%, 0.4% and 1.2%,
respectively, of the net assets of each of the Funds.
(b) Income taxes - No provision has been made for federal income taxes
since each Fund intends to 1) distribute to its shareholders substantially all
of its taxable income as well as realized gains from the sale of investment
securities and 2) comply with all provisions of the Internal Revenue Code
applicable to regulated investment companies.
(c) Portfolio transactions - Security and shareholder transactions are
recorded on trade date. Net realized gains and losses on securities are computed
on specific security lot identification.
(d) Foreign currency translation - Values of investments denominated in
foreign currencies are converted into U.S. dollars using the spot market rate of
exchange at the time of valuation. Purchases and sales of investments and
dividend and interest income are translated to U.S. dollars using the spot
market rate of exchange prevailing on the respective dates of such transactions.
The portion of security gains or losses resulting from changes in foreign
exchange rates is included with net realized and unrealized gain or loss from
investments, as appropriate, for both financial reporting and tax purposes.
The International Fund enters into forward currency contracts to hedge
the foreign currency exposure on open payables and receivables. The forward
currency contracts are recorded at market value and any related realized and
unrealized gains and losses are reported as foreign currency related
transactions for financial reporting purposes. For tax purposes, these foreign
exchange gains and losses are treated as ordinary income. The International Fund
could be exposed to loss if the counterparties fail to perform under these
contracts.
(e) Futures Contracts - Each Fund is authorized to enter into futures
contracts. A purchase or sale of a futures contract may result in losses in
excess of the amount invested and 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 can be no assurance that a liquid market
will exist at a time when the Fund seeks to close out a futures position and
there is a risk that the counterparty to the futures contract will not be able
to meet the terms of the contract. Futures contracts are valued based upon their
quoted daily settlement prices. Fluctuations in the value of these contracts are
recorded as unrealized appreciation (depreciation) until terminated, at which
time realized gains and losses are recognized.
B-68
<PAGE>
ARTISAN FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS - Continued
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
(f) Use of estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
(g) Other - Dividend income is recorded on the ex-dividend date, except
that certain dividends from private placements and foreign securities are
recorded as soon as the information becomes available to the Funds. Interest
income is reported on the accrual basis. Distributions to shareholders are
recorded on the ex-dividend date. Generally accepted accounting principles
require that permanent financial reporting and tax differences be reclassified
in the capital accounts.
(3) TRANSACTIONS WITH AFFILIATES:
Artisan Partners Limited Partnership (the -Adviser-), with which certain
officers and directors of the Funds are affiliated, provides investment advisory
and administrative services to the Funds. In exchange for these services, each
Fund pays a monthly management fee to the Adviser as follows:
Average Daily Net Assets Annual Rate
------------------------ -----------
Less than $500 million 1.000%
$500 million to $750 million 0.975%
$750 million to $1 billion 0.950%
Greater than $1 billion 0.925%
Each Fund also incurs other expenses for services such as maintaining
shareholder records and furnishing shareholder statements and reports. The
Adviser has undertaken to reimburse the Small Cap Fund, Mid Cap Fund and Small
Cap Value Fund for any ordinary operating expenses in excess of 2.00% of average
net assets annually, and the International Fund for ordinary operating expenses
in excess of 2.50% of average net assets annually.
Each director who is not an interested person of Artisan Funds, Inc. or
Artisan Partners Limited Partnership receives an annual retainer fee of $5,000
per Fund, plus reimbursement of expenses related to their duties as a director
of Artisan Funds, Inc.
(4) ORGANIZATIONAL COSTS AND PREPAID REGISTRATION EXPENSES:
Organizational costs are amortized over sixty months. These expenses were
paid by the Adviser and will be reimbursed by the Fund over the same time
period. Prepaid registration expenses are amortized over twelve months.
B-69
<PAGE>
ARTISAN FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS - Continued
(5) LINE OF CREDIT ARRANGEMENTS:
Artisan Funds, Inc. is party to a line of credit agreement with State
Street Bank and Trust Company, under which each Fund may borrow up to the lesser
of 10% of its net assets or $30 million. Artisan Funds, Inc. pays a commitment
fee of 0.10% on the unused portion of the line of credit. This fee is allocated
to each Fund based on relative net assets. Interest is charged on any borrowings
at the current Federal funds rate plus 0.50%. The use of the line of credit is
generally restricted to temporary borrowing for extraordinary or emergency
purposes. Maximum borrowings under the line of credit for the fiscal year ended
June 30, 1999 were as follows:
Fund Maximum Borrowings
---- ------------------
Small Cap Fund $-
International Fund 7,673,495
Mid Cap Fund -
Small Cap Value Fund 48,321
(6) INVESTMENT TRANSACTIONS:
The cost of securities purchased and the proceeds from the sale of
securities (excluding short-term securities) for the year ended June 30, 1999
were as follows:
Fund Security Purchases Security Sales
---- ------------------ --------------
Small Cap $298,849,368 $367,241,377
International 1,024,509,575 533,739,883
Mid Cap 65,195,028 44,131,332
Small Cap Value 54,667,037 24,285,740
B-70
<PAGE>
ARTISAN FUNDS, INC.
Notes to Financial Statements - Continued
(7) FUND SHARE ACTIVITIES:
Capital share transactions for the Funds were as follows:
<TABLE>
<CAPTION>
INTERNATIONAL FUND
==================================
INTERNATIONAL INSTITUTIONAL
FISCAL YEAR ENDED JUNE 30, 1999 SMALL CAP FUND SHARES SHARES
================================================= ============== ============= ======
<S> <C> <C> <C>
Proceeds from shares issued $41,079,632 $808,115,881 $108,430,376
Net asset value of shares issued in
reinvestment of distributions 17,337,992 7,211,053 1,448,132
Cost of shares redeemed (113,872,710) (376,463,582) (34,961,422)
-------------- ------------- -------------
NET INCREASE (DECREASE) FROM FUND SHARE ACTIVITIES $(55,455,086) $438,863,352 $74,917,086
============== ============= =============
SMALL CAP
FISCAL YEAR ENDED JUNE 30, 1999 MID CAP FUND VALUE FUND
================================================= ============ ==========
Proceeds from shares issued $31,529,435 $57,373,478
Net asset value of shares issued in
reinvestment of distributions 1,156,779 2,161,775
Cost of shares redeemed (9,884,154) (28,525,978)
------------ ------------
Net increase from fund share activities $22,802,060 $31,009,275
============ ============
INTERNATIONAL FUND
===================================
INTERNATIONAL INSTITUTIONAL
FISCAL YEAR ENDED JUNE 30, 1999 SMALL CAP FUND SHARES SHARES
================================================== ============== ============= ======
Shares sold 3,778,821 47,804,591 6,392,854
Shares issued from reinvestment of distributions 1,753,078 558,569 112,258
Shares redeemed (10,534,310) (23,304,036) (1,985,942)
------------- ------------ -----------
Net increase (decrease) in capital shares (5,002,411) 25,059,124 4,519,170
============= ============ ===========
SMALL CAP
FISCAL YEAR ENDED JUNE 30, 1999 MID CAP FUND VALUE FUND
================================================== ============ ==========
Shares sold 2,275,136 6,026,910
Shares issued from reinvestment of distributions 105,353 253,135
Shares redeemed (715,659) (3,088,372)
------------ -----------
Net increase from fund share activities 1,664,830 3,191,673
============ ===========
</TABLE>
B-71
<PAGE>
ARTISAN FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS - Continued
(7) FUND SHARE ACTIVITIES (continued):
<TABLE>
<CAPTION>
INTERNATIONAL FUND
====================================
INTERNATIONAL INSTITUTIONAL
FISCAL YEAR ENDED JUNE 30, 1998 SMALL CAP FUND SHARES SHARES
================================================== ============== ============= ======
<S> <C> <C> <C>
Net asset value of shares transferred $(44,477,811) $44,477,811
Proceeds from shares issued $68,878,543 235,471,219 27,045,257
Net asset value of shares issued in
reinvestment of distributions 44,157,727 25,959,795 4,802,555
Cost of shares redeemed (69,996,348) (287,349,997) (2,751,533)
------------ -------------- -----------
Net increase (decrease) from fund share activities $43,039,922 $(70,396,794) $73,574,090
============ ============= ===========
SMALL CAP
FISCAL YEAR ENDED JUNE 30, 1998 MID CAP FUND VALUE FUND
================================================== ============ ==========
Proceeds from shares issued $10,983,008 $54,638,155
Net asset value of shares issued in
reinvestment of distributions 539,701 -
Cost of shares redeemed (2,585,654) (11,585,825)
------------ ------------
Net increase from fund share activities $8,937,055 $43,052,330
============ ============
INTERNATIONAL FUND
====================================
INTERNATIONAL INSTITUTIONAL
FISCAL YEAR ENDED JUNE 30, 1998 SMALL CAP FUND SHARES SHARES
================================================== ============== ============= ======
Shares transferred (3,071,672) 3,071,672
Shares sold 4,616,498 15,876,987 1,835,634
Shares issued from reinvestment of distributions 3,125,105 2,075,110 383,897
Shares redeemed (4,721,885) (20,392,769) (207,599)
------------- ------------ ---------
Net increase (decrease) in capital shares 3,019,718 (5,512,344) 5,083,604
============= ============ =========
SMALL CAP
FISCAL YEAR ENDED JUNE 30, 1998 MID CAP FUND VALUE FUND
================================================= ============ ==========
Shares sold 912,840 5,232,019
Shares issued from reinvestment of distributions 45,932 -
Shares redeemed (206,835) (1,078,653)
---------- -----------
Net increase from fund share activities 751,937 4,153,366
========== ===========
</TABLE>
B-72
<PAGE>
ARTISAN FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS - Continued
(8) INFORMATION FOR FEDERAL INCOME TAX PURPOSES:
Aggregate Aggregate
Gross Gross Net
Unrealized Unrealized Unrealized
Cost of Appreciation Depreciation Appreciation
Fund Securities on Investments on Investments on Investments
---- ----------- ------------- -------------- --------------
Small Cap $155,941,617 $24,120,672 $(5,526,488) $18,594,184
International 965,796,983 210,387,841 (54,363,238) 156,024,603
Mid Cap 38,069,087 7,952,978 (225,495) 7,727,483
Small Cap Value 76,155,503 7,725,292 (5,461,297) 2,263,995
The difference between cost amounts for financial reporting and tax purposes is
due primarily to timing differences in recognizing certain gains and losses on
security transactions and for the International Fund, passive foreign investment
company (PFIC) value adjustments. Losses from foreign currency related
transactions for the International Fund of $487,619 and security transactions
for the Small Cap Fund and Small Cap Value Fund of $9,559,925 and $84,661,
respectively, from November 1, 1998 to June 30, 1999 are not recognized for
federal income tax purposes until fiscal 2000. Certain Funds utilized earnings
and profits distributed to shareholders on redemption of shares as part of the
dividends paid deduction.
The Small Cap Fund generated $29,613,980 in capital loss carryforwards during
the fiscal year ended June 30, 1999. These capital loss carryforwards are
available to offset future realized capital gains through June 30, 2007. Small
Cap Fund will resume capital gains distributions in the future to the extent
gains are realized in excess of the available carryforwards.
(9) OTHER TAX INFORMATION (UNAUDITED):
For the year ended June 30, 1999, ordinary income distributions paid by Small
Cap Fund, Mid Cap Fund and Small Cap Value Fund, of 5%, 2% and 9%, respectively,
are eligible for the dividend received deduction available to corporate
shareholders.
In early 1999, shareholders received information regarding distributions paid to
them during the fiscal year ended June 30, 1999. Each Fund hereby designates the
following amounts as long term capital gain distributions.
Long-Term Capital Gains
------------------------
Small Cap Fund $9,324,956
International Fund 7,920,878
Mid Cap Fund 9,526
Small Cap Value Fund 34,376
B-73
<PAGE>
PRICE WATERHOUSE COOPERS (LOGO)
--------------------------------------------------------------------------------
PRICE WATERHOUSE COOPERS LLP
100 East Wisconsin Avenue
Suite 1500
Milwaukee WI 53202
Telephone (414) 212 1600
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Artisan Funds, Inc.
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Artisan Small Cap Fund, Artisan
International Fund, Artisan Mid Cap Fund and Artisan Small Cap Value Fund
(constituting Artisan Funds, Inc., hereafter referred to as the "Funds") at June
30, 1999, the results of each of their operations, the changes in each of their
net assets and the financial highlights for each of the periods indicated, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Funds' management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at June 30, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
/s/Price Waterhouse Coopers
July 26, 1999
B-74
<PAGE>
APPENDIX
---------
DESCRIPTION OF BOND RATINGS
A rating of a rating service represents the service's opinion as to the credit
quality of the security being rated. However, the ratings are general and are
not absolute standards of quality or guarantees as to the creditworthiness of an
issuer. Consequently, the Fund's investment adviser believes that the quality of
debt securities in which the Fund invests should be continuously reviewed and
that individual analysts give different weightings to the various factors
involved in credit analysis. A rating is not a recommendation to purchase, sell
or hold a security, because it does not take into account market value or
suitability for a particular investor. When a security has received a rating
from more than one service, each rating should be evaluated independently.
Ratings are based on current information furnished by the issuer or obtained by
the ratings services from other sources which they consider reliable. Ratings
may be changed, suspended or withdrawn as a result of changes in or
unavailability of such information, or for other reasons.
The following is a description of the characteristics of rating used by Moody's
Investors Service, Inc. ("Moody's") and Standard & Poor's Corporation ("S&P").
RATINGS BY MOODY'S
Aaa--Bonds rated Aaa are judged to be the best quality. They carry the smallest
degree of investment risk and are generally referred to as "gilt-edge." Interest
payments are protected by a large or by an exceptionally stable margin and
principal is secure. Although the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such bonds.
Aa--Bonds rated Aa are judged to be high quality by all standards. Together
with the Aaa group they comprise what are generally known as high grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as in Aaa bonds or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the long
term risk appear somewhat larger than in Aaa bonds.
A--Bonds rated A possess many favorable investment attributes and are to be
considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa--Bonds rated Baa are considered as medium grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
A-1
<PAGE>
Ba--Bonds rated Ba are judged to have speculative elements; their future cannot
be considered as well assured. Often the protection of interest and principal
payments may be very moderate and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position characterizes bonds in
this class.
B--Bonds rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Caa--Bonds rated Caa are of poor standing. Such bonds may be in default or
there may be present elements of danger with respect to principal or interest.
Ca--Bonds rated Ca represent obligations which are speculative in a high degree.
Such bonds are often in default or have other marked shortcomings.
S&P RATINGS
AAA--Bonds rated AAA have the highest rating. Capacity to pay principal and
interest is extremely strong.
AA--Bonds rated AA have a very strong capacity to pay principal and interest and
differ from AAA bonds only in small degree.
A--Bonds rated A have a strong capacity to pay principal and interest, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this capacity
than for bonds in higher rated categories.
BB--B--CCC--CC--Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation among such bonds and CC the highest
degree of speculation. Although such bonds will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
A-2
<PAGE>
ARTISAN FUNDS, INC.
ARTISAN MID CAP FUND
INSTITUTIONAL SHARES
1000 North Water Street, Suite 1770
Milwaukee, Wisconsin 53202
(414) 390-6100 (800) 399-1770
STATEMENT OF ADDITIONAL INFORMATION
July 1, 2000
--------------------------------------------------------------------------------
Artisan Mid Cap Fund Institutional Shares (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 July 1, 2000 and any supplement to that prospectus. A copy of
the prospectus can be obtained without charge by calling (800) 399-1770, or by
writing to Artisan Funds.
The Artisan Funds, Inc. Annual Report to shareholders for the fiscal year
ended June 30, 1999 contains financial statements, notes thereto, supplementary
information entitled "Financial Highlights," and a report of independent
accountants, all of which (but no other part of the Annual Report) are
incorporated herein by reference.
The Artisan Funds, Inc. Semi-Annual Report to shareholders for the fiscal
year ended December 31, 1999 contains financial statements, notes thereto,
supplementary information entitled "Financial Highlights," all of which (but no
other part of the Semi-Annual Report) are incorporated herein by reference.
TABLE OF CONTENTS
Page
----
Information about the Fund and Artisan Partners....................B-2
Investment Objective and Policies..................................B-2
Investment Techniques and Risks....................................B-3
Investment Restrictions...........................................B-17
Performance Information...........................................B-19
Organization......................................................B-23
Directors and Officers............................................B-24
Principal Shareholders............................................B-27
Investment Advisory Services......................................B-28
Code of Ethics....................................................B-29
Distributor.......................................................B-29
Portfolio Transactions............................................B-29
Purchasing and Redeeming Shares...................................B-31
Additional Tax Information........................................B-31
Custodian and Transfer Agent......................................B-33
Independent Accountants...........................................B-33
Financial Statements..............................................B-33
Appendix - Description of Bond Ratings......................Appendix-1
<PAGE>
INFORMATION ABOUT THE FUND AND ARTISAN PARTNERS
The Fund is a series of Artisan Funds, Inc. ("Artisan Funds"). Artisan
Partners Limited Partnership ("Artisan Partners") provides investment advisory
services to the Fund.
Artisan Funds strives to offer distinctive, high-value-added investment
opportunities. Artisan Funds is not a "family" of indistinguishable products
devised by marketers in a financial services conglomerate. Rather, Artisan
Partners is a small partnership of investment professionals, focused on a
limited number of distinct investment strategies, each of which is offered as a
series of Artisan Funds. The portfolio manager of the Fund is a specialist in
his or her market, with an investment process created and refined through years
of experience - an artisan. At Artisan Funds, we believe that experienced,
active managers investing in inefficient markets can produce superior returns
over time. The Artisan Funds are intended for long-term investors who share
that belief.
The discussion below supplements the description in the prospectus of the
Fund's investment objectives, policies and restrictions.
INVESTMENT OBJECTIVE AND POLICIES
The Fund seeks long-term capital growth by investing primarily in the
common stocks of medium-sized companies. Medium-sized companies are those whose
market capitalizations fall within the range of companies in the S&P MidCap 400
Index (the "MidCap Index"). As of March 31, 2000, the MidCap Index included
companies with capitalizations between approximately $210 million and $23.2
billion. The market capitalization range in which the Fund invests will change
as the range of the companies included in the MidCap Index changes. The Fund
offers two classes of shares: Artisan Mid Cap Investor Shares ("Mid Cap
Investor Shares") and Artisan Mid Cap Institutional Shares ("Mid Cap
Institutional Shares"). As described more fully in the Mid Cap Institutional
Shares prospectus, Mid Cap Institutional Shares are offered to certain
institutional investors with a minimum initial investment of $2 million.
Artisan Partners, investment adviser to the Fund, seeks mid-cap companies
that possess franchise characteristics with prospects for growth and whose stock
sells at compelling valuations. This focus may lead it to companies with
superior business potential that are temporarily out of favor or misunderstood
by the market. Artisan Partners attempts to identify these companies
when they are experiencing a change in dynamics that could potentially leverage
their inherent strengths.
This strategy rests on a few basic beliefs:
- An established franchise can protect a company from some of the effects
of competition. Over time, this advantage could lead to more stable
cash flow and, ultimately, to higher valuation. Examples of "franchise
characteristics" are proprietary technology, a defensible brand, a
dominant market share, or the position of a low-cost provider.
B-2
<PAGE>
- A franchise company selling at a significant discount to its intrinsic
value offers superior long-term investment potential. Thus, the
assessment of "intrinsic value" - the price that Artisan Partners
believes a strategic buyer would pay to own the entire company - is
fundamental to Artisan Partners' process.
- A company with franchise characteristics and an attractive valuation is
often one experiencing a major change - for instance, new management, a
restructuring, a new product cycle, an acquisition or a divestiture.
Such a change could serve as a catalyst to improved performance, higher
earnings, and, often, powerful, long-term market response. Artisan
Partners actively seeks such opportunities, hoping to identify as early
as possible the potential for positive change.
- The mid-cap universe provides a fertile ground for identifying franchise
companies trading at attractive prices. Large-cap franchise companies,
because they are heavily followed and sponsored, tend to be priced
efficiently. Small-cap companies typically do not yet possess
meaningful franchise characteristics. By contrast, the mid-
cap universe - in which market caps range between approximately $210
million and $23.2 billion as of March 31, 2000 - is less efficient than
the large-cap, is more mature than the small-cap, and is populated by
many established companies whose franchise characteristics are emerging
or are poised to create powerful competitive advantages.
The Fund attempts to manage portfolio risk by focusing on stocks that sell
at significant discounts to their intrinsic value as determined by Artisan
Partners, and 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, and convertible securities.
The Fund may from time to time have significant portions of its portfolio
invested in foreign securities. The Fund also may invest in any other type of
security, including debt securities.
The Fund's investment objective 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. However, investors
in the Fund will receive at least 30 days' prior written notice of any change in
the Fund's investment objective.
INVESTMENT TECHNIQUES AND RISKS
Foreign Securities
The Fund may invest up to 25% of its total assets in foreign securities
(including American Depository Receipts ("ADRs") European Depositary Receipts
("EDRs"), Global Depositary Receipts ("GDRs"), or other securities representing
underlying shares of foreign issuers) , 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. EDRs are
European receipts evidencing a
B-3
<PAGE>
similar arrangement. GDRs are receipts that may trade in U.S. or
non-U.S. markets. The Fund may invest in sponsored or unsponsored ADRs, EDRs or
GDRs. In the case of an unsponsored depositary receipt, 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 depositary receipt. The Fund does not intend to invest more
than 5% of its net assets in unsponsored depositary receipts.
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 of uniform settlement periods and trading practices; less
liquidity and frequently greater price volatility in foreign markets than in the
United States; possible imposition of foreign taxes; possible investment in
securities of companies in developing as well as developed countries; and
sometimes less advantageous legal, operational, and financial protections
applicable to foreign sub-custodial arrangements.
Although the Fund will try to invest in companies and governments of
countries having stable political environments, there is the possibility of
expropriation or confiscatory taxation, seizure or nationalization of foreign
bank deposits or other assets, establishment of exchange controls, the adoption
of foreign government restrictions, or other adverse political, social or
diplomatic developments that could affect investment in these nations.
Debt Securities
In pursuing its investment objective, the Fund may invest in debt
securities of corporate and governmental issuers. The risks inherent in debt
securities depend primarily on the term and quality of the obligations in the
Fund's portfolio as well as on market conditions. A decline in the prevailing
levels of interest rates generally increases the value of debt securities, while
an increase in rates usually reduces the value of those securities.
B-4
<PAGE>
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. The Fund may invest up to 35% of its net assets in debt
securities that are rated below investment grade (i.e., securities rated BBB or
lower by S&P or Ba or lower by Moody's, commonly called "junk bonds"). However,
the Fund currently does not intend to invest more than 5% of its net assets in
debt 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. During those
periods, the Fund's assets may not be invested in accordance with its strategy
and the Fund may not achieve its investment objective.
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). The estimated price at which a convertible security would
be valued by the marketplace if it had no conversion feature 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.
B-5
<PAGE>
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 which 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 may use various techniques to increase or decrease its exposure to
the effects of possible changes in security prices, currency exchange rates or
other factors that affect the value of its portfolio. These techniques include
buying and selling options, futures contracts, or options on futures contracts,
or entering into currency exchange contracts.
These techniques are used by Artisan Partners to adjust the risk and return
characteristics of the Fund's portfolio. If Artisan Partners judges market
conditions incorrectly or employs a strategy that does not correlate well with
the Fund's investments, or if the counterparty to the transaction does not
perform as promised, the transaction could result in a loss. Use of these
techniques may increase the volatility of the Fund and may involve a small
investment of cash relative to the magnitude of the risk assumed. These
techniques are used by the Fund for hedging, risk management or portfolio
management purposes and not for speculation.
Currency Exchange Transactions. Currency exchange transactions may be
conducted either on a spot (i.e., cash) basis at the spot rate for purchasing or
selling currency prevailing in the foreign exchange market or through forward
currency exchange contracts ("forward contracts"). Forward contracts are
contractual agreements to purchase or sell a specified currency at a
specified future date (or within a specified time period) and at a price set at
the time of the contract. Forward contracts are usually entered into with banks
and broker-dealers, are not exchange traded, and are usually for less than one
year, but may be renewed.
Forward currency transactions may involve currencies of the different
countries in which the 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 or income receivables. 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
B-6
<PAGE>
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's portfolio. 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 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
B-7
<PAGE>
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 write (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 stock 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.)
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.
B-8
<PAGE>
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 unexpected 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 was unable to close out an
option that it had purchased on a security, it would have to exercise the option
in order to realize any profit or the option would expire and become
worthless. If the Fund were unable to close out a covered call option that it
had written on a security, it would not be able to sell the underlying security
until the option expired. As the writer of a covered call option on a security,
the Fund foregoes, during the option's life, the opportunity to profit from
increases in the market value of the security covering the call option above the
sum of the premium and the exercise price of the call.
If trading were suspended in an option purchased or written by the Fund,
the Fund would not be able to close out the option. If restrictions on exercise
were imposed, the Fund might be unable to exercise an option it had 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.
----------------
<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
function of the value of certain specified securities, no physical delivery
of those securities is made.
B-9
<PAGE>
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.
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 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 generally set
by the exchange on which the contract is traded, although the margin requirement
may be modified during the term of the contract and 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.
B-10
<PAGE>
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 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.
B-11
<PAGE>
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.
When purchasing a futures contract or writing a put option on a futures
contract, the Fund must maintain with its custodian (or broker, if legally
permitted) assets (including any margin) equal to the market value of such
contract. When writing a call option on a futures contract, the Fund similarly
will maintain with its custodian assets (including any margin) equal to the
amount by which such option is in-the-money until the option expires or is
closed out by the Fund.
The Fund may not maintain open short positions in futures contracts, call
options written on futures contracts or call options written on indexes if, in
the aggregate, the market value of all such open positions exceeds the current
value of the securities in its portfolio, plus or minus unrealized gains and
losses on the open positions, adjusted for the historical relative volatility of
the relationship between the portfolio and the positions. For this purpose, to
the extent the Fund has written call options on specific securities in its
portfolio, the value of those securities will be deducted from the current
market value of the securities portfolio.
In order to comply with Commodity Futures Trading Commission Regulation 4.5
and thereby avoid being deemed a "commodity pool operator," the Fund will use
commodity futures or commodity options contracts solely for bona fide hedging
purposes within the meaning and intent of Regulation 1.3(z), or, with respect
to positions in commodity futures and commodity options contracts that do not
come within the meaning and intent of Regulation 1.3(z), the aggregate initial
margin and premiums required to establish such positions will not exceed 5% of
the fair market value of the assets of the Fund, after taking into account
unrealized profits and unrealized losses on any such contracts it has entered
into (in the case of an option that is in-the-money at the time of purchase, the
in-the-money amount (as defined in Section 190.01(x) of the Commission
Regulations) may be excluded in computing such 5%).
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
is a capital gain or loss.
----------------
<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 option.
B-12
<PAGE>
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 and the premium received is a capital gain or loss.
Entry into a closing purchase transaction will result in capital gain
or loss. If an option written by the Fund is in-the-money at the time it was
written and the security covering the option was held for more than the long-
term holding period prior to the writing of the option, any loss realized as a
result of a closing purchase transaction will be long-term. The holding period
of the securities covering an in-the-money option will not include the period of
time the option is outstanding.
If the Fund writes an equity call option<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 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, futures options 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.
----------------
<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 of the type that is ineligible to be traded on a commodity
futures exchange (e.g., an option contract on a sub-index based on the
price of nine hotel-casino stocks). The definition of equity option
excludes options on broad-based stock indexes (such as the Standard &
Poor's 500 index).
B-13
<PAGE>
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 or
"offsetting notional principal contracts" (as defined by the Act) with respect
to, or futures or "forward contracts" (as defined by the Act) to deliver, the
same or substantially identical property, or if they enter into such
transactions and then acquire the same or substantially identical property.
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 sales, offsetting notional principal
contracts, and futures or forward contracts to deliver the same or substantially
similar property.
In order for the Fund to continue 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 will be qualifying income for purposes of the 90%
requirement.
The Fund intends to distribute to shareholders at least 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.
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 on investing no more than
10% of its net assets in illiquid securities. In making a determination of
whether a Rule 144A security is liquid or not, Artisan Partners will consider
the trading markets for the specific security, taking into account the
unregistered nature of a Rule 144A security. In addition, Artisan Partners
could consider the (1) frequency of trades and quotes, (2) number of dealers and
potential purchasers, (3) dealer undertakings to make a market, and (4) nature
of the security and of marketplace trades (e.g., the time needed to dispose of
the security, the method of soliciting offers, and the mechanics of transfer).
The liquidity of Rule 144A securities would be monitored and, if as a result of
changed conditions, Artisan Partners determined that a Rule 144A security is no
longer liquid, the Fund's holdings of illiquid securities would be reviewed to
determine what, if any, steps are required to assure that the Fund does not
invest more than 10% of its assets in illiquid securities. Investing in Rule
144A securities could have the effect of increasing the amount of the Fund's
assets invested in illiquid securities if qualified institutional buyers are
unwilling to purchase such securities.
B-14
<PAGE>
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
currently does not 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 minimal credit risks. 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 to comply
with provisions under such Code that would allow it immediately to resell such
collateral.
B-15
<PAGE>
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 a 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 currently does not 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 Fund's 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 currently does not 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. For the years ended
June 30, 1999 and 1998, the Fund's portfolio turnover rates were as follows:
202.84% and 235.65%. 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 costs, 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 lesser of (i) 67% of the Fund's
shares present at a meeting if more than 50% of the shares outstanding are
present or (ii) more than 50% of the Fund's outstanding shares, 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);
B-17
<PAGE>
(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 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 U.S. Government 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 is also subject to the following non-fundamental restrictions and
policies, which may be changed by the board of directors. Many of these
restrictions were formerly required by law or regulation of one or more states
in which shares of the Fund are offered for sale.
The Fund may not:
(a) invest in any of the following: (i) interests in oil, gas, or other
mineral leases or exploration or development programs (except readily marketable
securities, including but not limited to master limited partnership interests,
that may represent indirect interests in oil, gas, or other mineral exploration
or development programs); and (ii) puts, calls, straddles, spreads, or any
combination thereof if by reason thereof the value of the Fund's aggregate
investment in such securities exceed 5% of its total assets (except that the
Fund may enter into transactions in options, futures, and options on futures);
(b) invest in companies for the purpose of exercising control or
management;
----------------
<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>
(c) 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;
(d) invest more than 25% of its total assets (valued at time of purchase)
in securities of foreign issuers
(e) 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
(f) 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; or
(g) under normal market conditions, invest less than 65% of its total
assets in securities of issuers having aggregate common stock market
capitalizations within the range of the aggregate common stock market
capitalizations of issuers included in the S&P MidCap 400 Index, in each case 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 repre-
sented by the Total Return for the period.
Average Annual Total Return is computed as follows:
n
ERV = P(l+T)
Where: P = a hypothetical initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
investment made at the beginning of the period, at the end
of the period (or fractional portion thereof)
B-19
<PAGE>
The Fund's Total Return and Average Annual Total Return for various periods
ended December 31, 1999 is shown below:
Artisan Mid Cap Fund
--------------------
Mid Cap Investor Shares
-----------------------
Average Annual
Total Return Total Return
------------ --------------
1 year 57.89% 57.89%
Life of Fund<F5> 169.84% 48.39%
-------------------
<F5> from June 27, 1997 (commencement of operations)
Total Return and Average Annual Total Return of Mid Cap Investor Shares
are calculated in the same way as for Mid Cap Institutional Shares. The
performance of Mid Cap Institutional Shares is expected to be different from
the performance of Mid Cap Investor Shares because the expenses allocated to
the classes are different. Because the expense ratio for Mid Cap
Institutional Shares is expected to be lower, the Total Return and Average
Annual Total Return of Mid Cap Institutional Shares are expected to be
greater than for Mid Cap Investor Shares.
The Fund imposes no sales charges and pays no distribution expenses.
Income taxes are not taken into consideration. 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. The Fund may invest in initial public offerings (IPOs). IPOs and
other investment techniques may have a magnified performance impact on a fund
with a small asset base. The Fund may not experience similar performance as its
assets grow.
In advertising and sales literature, the Fund's performance 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 composition of
these indexes, averages or accounts differs from those 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 Artisan Funds generally believe
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, Artisan Funds 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:
B-20
<PAGE>
Atlanta Constitution Mutual Fund Letter
Barron's Mutual Fund News Service
Boston Herald Mutual Fund Values Morningstar
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 Chicago Pensions and Investments
Business Personal Investor
Consumer Reports Jane Bryant Quinn (syndicated
Consumer Digest 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.
Various newspapers and publications including those listed above may also
make mention of the Fund's portfolio manager. Portfolio managers and other
members of the Adviser's staff may make presentations at conferences or trade
shows, appear on television or radio programs, or conduct or participate in
telephone conference calls, and the Fund may announce those presentations,
appearances or calls to some or all shareholders, or to potential investors in
the Fund. Biographical and other information about the Fund's portfolio
manager, including information about awards received by that portfolio manager
or mentions of the manager in the media, may also be described or quoted in Fund
advertisements or sales literature.
The Fund may compare its performance to the Consumer Price Index (All
Urban), a widely recognized measure of inflation.
B-21
<PAGE>
The Fund's performance may be compared to the following indexes or
averages:
Dow-Jones Industrial Average New York Stock Exchange
Russell 2000 Index Composite Index
Russell 2000 Growth Index American Stock Exchange
Russell 2000 Value Index Composite Index
Russell Mid-Cap Stock Index NASDAQ Composite
Russell Mid-Cap Value Index NASDAQ Industrials
Standard & Poor's 500 Stock Index (These indexes generally
Standard & Poor's 400 Industrials reflect the performance of
Standard & Poor's 400 MidCap Index stocks traded in the
Wilshire 5000 indicated markets.)
Wilshire 4500
Wilshire 4000
(These indexes are widely recognized
indicators of general U.S. stock market
results.)
The Fund's performance 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 Mid Cap Fund Index; Lipper
Mid-Cap Core Fund Index, Lipper General Equity Funds Average; Lipper Equity
Funds Average; Morningstar Growth 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 Lipper Mid Cap Fund Index reflects the net asset value weighted total
return of the thirty largest mid cap funds as calculated and published by
Lipper, Inc. ("Lipper"), an independent service that monitors the performance of
more than 1,000 funds.
The Lipper and Morningstar averages are unweighted averages of total return
performance of mutual funds as classified, calculated and published by these
independent services that monitor the performance of mutual funds. The Fund
also may use comparative performance as computed in a ranking by Lipper or
category averages and rankings provided by another independent service. Should
Lipper or another service reclassify the Fund to a different category or develop
(and place the Fund into) a new category, the Fund may compare its performance
or ranking against other funds in the newly assigned category, as published by
the service. The Fund may also 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
or any other entity. Morningstar's rating system is based on risk-adjusted
total return performance and is expressed in a star-rating format. The risk-
adjusted number is computed by subtracting the Fund's risk score (which is a
function of the Fund's monthly returns less the 3-month Treasury bill return)
from the Fund's load-adjusted total return score. This numerical score is then
translated into rating categories, with the top 10% labeled five star, the next
22.5% labeled four
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<PAGE>
star, the next 35% labeled three star, the next 22.5% labeled two star and the
bottom 10% 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,
Artisan Funds 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 Artisan Funds 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).
ORGANIZATION
The Fund is a series of Artisan Funds, Inc. ("Artisan Funds"), an open-end,
diversified management investment company which was incorporated under Wisconsin
law on January 5, 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 Artisan Funds 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). Artisan Funds 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.
Artisan Funds believes that not holding shareholder meetings except as otherwise
required reduces the Fund's expenses and enhances shareholder return.
B-23
<PAGE>
The Fund may hold special meetings of shareholders 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.
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.
NAME AND DATE OF POSITIONS HELD PRINCIPAL OCCUPATIONS DURING
BIRTH WITH REGISTRANT PAST 5 YEARS
--------------------- --------------- -------------------------------
Andrew A. Ziegler* Director, Chairman Managing Director of Artisan
10/7/57 of the Board and Partners; prior to founding
Chief Executive Artisan Partners in 1994,
Officer President and Chief Operating
Officer of Strong/Corneliuson
Capital Management ("Strong")
and President of the Strong
Funds from 1990 to 1994.
Carlene Murphy Director and Vice Managing Director of Artisan
Ziegler<F6> President Partners; Co-Manager of Artisan
6/20/56 Small Cap Fund; President of
Artisan Funds (1995-1999);
prior to founding Artisan
Partners in 1994, 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.
David A. Erne Director Partner of the law firm
5/6/43 Reinhart, Boerner, Van Deuren,
Norris & Rieselbach, S.C.,
Milwaukee, WI, and Director of
Capital Commerce
Banccorporation - Milwaukee
Western Bank since 1994.
Thomas R. Hefty Director President of United Wisconsin
6/9/47 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.
B-24
<PAGE>
NAME AND DATE OF POSITIONS HELD PRINCIPAL OCCUPATIONS DURING
BIRTH WITH REGISTRANT PAST 5 YEARS
--------------------- --------------- -------------------------------
Howard B. Witt Director President and Chief Executive
5/17/40 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 Material Sciences
Corporation, (a technology
based manufacturer of
continuously processed coated
and specialty engineered
materials and services) since
1997; and Director of Franklin
Electric Co., Inc. (a
manufacturer of electronic
motors) since 1994.
Michael C. Roos President Managing Director of Artisan
4/18/58 Partners; President of Artisan
Distributors; prior to joining
Artisan Partners in 1995, Vice
President, Fidelity Investments
(since 1994).
Lawrence A. Totsky Chief Financial Managing Director of Artisan
5/6/59 Officer, Treasurer Partners; Chief Financial
and Secretary Officer, Artisan Partners;
prior to joining Artisan
Partners in 1998, Senior Vice
President (since 1994) and
Director of Mutual Fund
Administration, Strong Capital
Management, Inc., prior
thereto.
Mark L. Yockey Vice President Managing Director of Artisan
6/5/56 Partners; Portfolio Manager of
Artisan International Fund;
prior to joining Artisan
Partners in 1995, Portfolio
Manager of the United
International Growth Fund and
Vice President of Waddell &
Reed (investment management
firm) since January 1990.
Sandra Jean Voss- Vice President Senior Equity Trader for
Reinhardt Artisan Partners; prior to
joining Artisan Partners in
1995, Equity Trader with
Northwestern Mutual Life
Insurance Company since January
1989.
B-25
<PAGE>
NAME AND DATE OF POSITIONS HELD PRINCIPAL OCCUPATIONS DURING
BIRTH WITH REGISTRANT PAST 5 YEARS
--------------------- --------------- -------------------------------
Scott C. Satterwhite Vice President Managing Director of Artisan
7/15/57 Partners, and Portfolio
Co-Manager, Artisan Small Cap
Value Fund; prior to joining
Artisan Partners in June 1997,
Senior Vice President and
Portfolio Manager at Wachovia
Corporation. From 1993 to 1997,
portfolio manager of Biltmore
Special Values Fund in addition
to being a personal trust
portfolio manager and manager of
the Georgia Personal Trust
Portfolio Group.
Andrew C. Stephens Vice President Managing Director of Artisan
10/31/63 Partners, and Portfolio
Manager, Artisan Mid Cap Fund;
prior to joining Artisan
Partners in 1997, 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.
Marina T. Carlson Vice President Managing Director of Artisan
5/9/64 Partners, and Co-Portfolio
Manager, Artisan Small Cap
Fund; prior to joining Artisan
Partners in 1999, Manager of
Strong Mid Cap Disciplined Fund
from its inception in December
1998 through March 1999 and Co-
Manager of Strong Opportunity
Fund and Strong Common Stock
Fund from 1993 through December
1998.
James C. Kieffer Vice President Managing Director of Artisan
12/2/64 Partners and portfolio co-
manager, Artisan Small Cap
Value Fund and Vice President of
Artisan Funds since 2000; prior
to joining Artisan Partners in
1997, Research Analyst for McColl
Partners from 1996 to 1997; prior
to McColl Partners, Research
Analyst for Wachovia Investment
Management since 1989.
Gregory K. Ramirez Assistant Secretary Controller of Artisan Partners;
7/14/70 and Assistant Assistant Treasurer and
Treasurer Assistant Secretary of Artisan
Funds; prior to joining Artisan
Partners in 1997, Audit Manager
of Price Waterhouse LLP.
B-26
<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 many of the powers of the Board
of Directors.
The compensation paid to directors and officers of Artisan Funds for their
services as such consists of an annual retainer fee in the amount of $27,000.
In addition, directors receive $1,000 for any meeting held on a day other than
which a meeting of the full board of directors is held and $500 for any meeting
held by telephone. Compensation is paid only to directors who are not
interested persons of Artisan Funds or Artisan Partners and is allocated among
the series of the Artisan Funds. The Artisan Mid Cap Fund pays $6,000 of the
annual retainer, $222 of each meeting fee, and $111 of each telephone meeting
fee. Artisan Funds has no retirement or pension plans.
The following table sets forth compensation paid by Artisan Funds, Inc.
during the fiscal year ended June 30, 1999 to each of the directors of the Fund.
PENSION OR TOTAL
AGGREGATE RETIREMENT COMPENSATION
COMPENSATION BENEFITS ACCRUED FROM ARTISAN FUND AND
FROM ARTISAN AS PART OF FUND FUND COMPLEX(4)
NAME OF DIRECTOR FUNDS EXPENSES PAID TO DIRECTORS
---------------- --------------- --------------- --------------------
Andrew A. Ziegler $ 0 $ 0 $ 0
Carlene Murphy
Ziegler 0 0 0
David A. Erne 20,000 0 20,000
Thomas R. Hefty 20,000 0 20,000
Howard B. Witt 20,000 0 20,000
At March 31, 2000, the officers and directors of Artisan Funds as a group
owned less than 1% of the outstanding shares of Artisan Mid Cap Fund.
PRINCIPAL SHAREHOLDERS
No person was known by Artisan Funds to own of record or beneficially 5% or
more of the outstanding shares of the Artisan Mid Cap Institutional Shares at
April 28, 2000. The only persons known by Artisan Funds to own of record or
beneficially 5% or more of the outstanding shares of the Artisan Mid Cap
Investor Shares as of March 31, 2000 were:
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<PAGE>
NAME AND ADDRESS OUTSTANDING SHARES HELD
---------------- -----------------------
Charles Schwab & Co. Inc. <F1> 29.96%
101 Montgomery Street
San Francisco, CA 94104-4122
National Financial Services Corp. <F1> 8.94%
One World Financial Center
200 Liberty Street
New York, NY 10281-1003
Wells Fargo Bank, Trustee 6.00%
Stoel Rives LLP Retirement Trust
PO Box 9800
Calabasas, CA 91372-0800
<F1> Shares are held of record on behalf of customers, and not beneficially.
INVESTMENT ADVISORY SERVICES
Artisan Partners Limited Partnership ("Artisan Partners") provides
investment advisory services to the Fund pursuant to Investment Advisory
Agreements dated April 10, 1997. 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 Pine Street, Suite 2950, San Francisco, California, and Five
Concourse Parkway NE, 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.
The Artisan Mid Cap Fund paid investment advisory fees of $229,384 and
$93,853 in 1999 and 1998, respectively, of which $29,152 and $93,853,
respectively, was waived or reimbursed by Artisan Partners. From its inception
on June 27, 1997 through June 30, 1997, Artisan Mid Cap Fund did not pay any
investment advisory fees. The Advisory Agreement provides that Artisan Partners
shall not be liable for any loss suffered by the Fund or its shareholders as a
consequence of any act of omission in connection with investment advisory or
portfolio services under the agreement, except by reason of willful misfeasance,
bad faith or gross negligence on the part of Artisan Partners in the performance
of its duties or from reckless disregard by Artisan Partners of its obligations
and duties under the Advisory Agreement.
The Advisory Agreement may be continued from year to year only so long as
the continuance is approved annually (a) by the vote of a majority of the
directors of the Fund who are not "interested persons" of the Fund or Artisan
Partners cast in person at a meeting called for the purpose of voting on such
approval, and (b) by the board of directors or by the vote of a
B-28
<PAGE>
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).
CODE OF ETHICS
The 1940 Act and rules thereunder require that Artisan Funds, Artisan
Partners and Artisan Distributors LLC ("Distributors") establish standards and
procedures for the detection and prevention of certain conflicts of interest,
including activities by which persons having knowledge of the investments and
investment intentions of Artisan Funds might take advantage of that knowledge
for their own benefit. Artisan Funds, Artisan Partners and Distributors have
adopted a Code of Ethics to meet those concerns and legal requirements.
Although the Code does not prohibit employees who have knowledge of the
investments and investment intentions of Artisan Funds from engaging in personal
securities investing, it does regulate such personal securities investing by
these employees as a part of the effort by Artisan Funds, Artisan Partners and
Distributors to detect and prevent conflicts of interest.
DISTRIBUTOR
Shares of the Fund are offered for sale by Distributors without any sales
commissions, 12b-1 fees, or other charges to the Fund or its shareholders.
Distributors is wholly-owned by Artisan Partners. All distribution expenses
relating to the Fund are paid by Artisan Partners, including the payment or
reimbursement of any expenses incurred by Distributors. The Distribution
Agreement will continue in effect through October 30, 2000 and thereafter from
year to year provided such continuance is approved annually (i) by a majority of
the directors or by a majority of the outstanding voting securities of the Fund
and (ii) by a majority of the directors who are not parties to the Agreement or
interested persons of any such party.
Artisan Funds has agreed to pay all expenses in connection with
registration of its shares with the Securities and Exchange Commission and any
auditing and filing fees required in compliance with various state securities
laws. Artisan Partners bears all sales and promotional expenses, including the
cost of prospectuses and other materials used for sales and promotional purposes
by Distributors. Distributors offers the Fund's shares only on a best efforts
basis. Distributors is located at 1000 North Water Street, Suite 1770,
Milwaukee, Wisconsin 53202.
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
B-29
<PAGE>
any broker or dealer. Recognizing the value of these factors, the Fund may pay
a brokerage commission in excess of that which another broker or dealer may have
charged for effecting the same transaction. Evaluations of the reasonableness
of brokerage commissions, based on the foregoing factors, are made on an ongoing
basis by Artisan Partners' staff while effecting portfolio transactions. The
general level of brokerage commissions paid is reviewed by Artisan Partners, and
reports are made annually to the board of directors.
With respect to issues of securities involving brokerage commissions, when
more than one broker or dealer is believed to be capable of providing the best
combination of price and execution with respect to a particular portfolio
transaction for the Fund, Artisan Partners often selects a broker or dealer that
has furnished it with research products or services such as research reports,
subscriptions to financial publications and research compilations, compilations
of securities prices, earnings, dividends, and similar data, and computer data
bases, quotation equipment and services, research-oriented computer software and
services, and services of economic and other consultants. Selection of brokers
or dealers is not made pursuant to an agreement or understanding with any of the
brokers or dealers; however, Artisan Partners uses internal allocation
procedures to identify those brokers or dealers who provide it with research
products or services and the amount of research products or services they
provide, and endeavors to direct sufficient commissions generated by its
clients' accounts in the aggregate, including Artisan Funds, 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 Artisan Funds), 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
Artisan Funds 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 Artisan Funds.
With respect to the Fund's purchases and sales of portfolio securities
transacted with a broker or dealer on 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 Artisan Funds. During fiscal years
1999, 1998 and 1997, Artisan Mid Cap Fund paid brokerage commissions of $175,709
and $72,800 to brokers who furnished research services to the Fund or Artisan
Partners on purchases and sales aggregating $109,326,360 and $50,307,734 (from
its inception on June 27, 1997 through June 30, 1997, Artisan Mid Cap Fund had
no purchases or sales of its portfolio securities).
B-30
<PAGE>
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.
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 the Fund's transfer agent. 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 January, the third Monday in February, Good
Friday, the last Monday in May, Independence Day, Labor Day, Thanksgiving, and
Christmas. If one of these holidays falls on a Saturday or Sunday, the NYSE
will be closed on the preceding Friday or the 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.
Although the Fund intends to pay all redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.
Because the Fund has elected to be governed by Rule 18f-1 under the
Investment Company Act of 1940, the Fund is obligated to pay share redemptions
to any one shareholder in cash only up to the lesser of $250,000 or one percent
of the Fund's net assets represented by such share class during any 90-day
period. Redemptions in excess of such limit may be paid wholly or partly by a
distribution in kind of readily marketable securities. If redemptions are 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.
ADDITIONAL TAX INFORMATION
Artisan Funds intends for the Fund to continue 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. If Artisan Funds should fail to qualify
for pass-through tax treatment under Subchapter M, then it would be required to
pay taxes on any income and realized capital gains, reducing the amount
B-31
<PAGE>
of income and realized capital gains that would otherwise be available for
distribution to the Fund's 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 October,
November or December of 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 gains. Distributions of net long-term
capital gains are taxable to you as long-term capital gains (currently taxed at
a maximum rate of 20% for individual taxpayers) regardless of the length of time
you have held your shares. Long-term gains are those derived from securities
held by the Fund for more than one year.
You will be advised annually as to the source of 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.
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 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. Artisan Funds must promptly pay the IRS all
amounts withheld. Therefore, it usually is not possible for Artisan Funds to
reimburse you for amounts withheld. You may, however, claim the amount withheld
as a credit on your federal income tax return.
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.
B-32
<PAGE>
In accordance with tax laws, 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 may be recognized to the extent of any gains
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.
U.S. citizens residing in a foreign country should consult their tax advisors as
to the tax consequences of ownership of Fund shares.
CUSTODIAN AND TRANSFER AGENT
State Street Bank & Trust Company ("State Street"), 66 Brooks Drive,
Braintree, MA 02184, 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 transfer agency, dividend paying agency and 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
PricewaterhouseCoopers LLP, 100 East Wisconsin Avenue, Milwaukee, Wisconsin
53202 serves as the Fund's independent accountants, providing services including
(i) an 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.
FINANCIAL STATEMENTS
The financial statements of Artisan Funds appearing in the prospectus and
this Statement of Additional Information for periods prior to and including the
year ended June 30, 1999 have been audited by PricewaterhouseCoopers LLP,
independent accountants, as indicated in their reports with respect thereto, and
are included in reliance upon such reports given upon the authority of such firm
as experts in accounting and auditing. The unaudited interim financial
statements as of December 31, 1999, reflect all adjustments which are, in the
opinion of management, necessary to present a fair statement of the results for
the six months ended December 31, 1999.
The Artisan Funds, Inc. Annual Report to shareholders for the fiscal year
ended June 30, 1999 contains financial statements, notes thereto, supplementary
information entitled "Financial Highlights," and a report of independent
accountants, all of which (but no other part of the Annual Report) are
incorporated herein by reference.
B-33
<PAGE>
The Artisan Funds, Inc. Semi-Annual Report to shareholders for the fiscal
year ended December 31, 1999 contains financial statements, notes thereto,
supplementary information entitled "Financial Highlights," all of which
(but no other part of the Semi-Annual Report) are incorporated herein by
reference.
APPENDIX
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DESCRIPTION OF BOND RATINGS
A rating of a rating service represents the service's opinion as to the credit
quality of the security being rated. However, the ratings are general and are
not absolute standards of quality or guarantees as to the creditworthiness of an
issuer. Consequently, the Fund's investment adviser believes that the quality of
debt securities in which the Fund invests should be continuously reviewed and
that individual analysts give different weightings to the various factors
involved in credit analysis. A rating is not a recommendation to purchase, sell
or hold a security, because it does not take into account market value or
suitability for a particular investor. When a security has received a rating
from more than one service, each rating should be evaluated independently.
Ratings are based on current information furnished by the issuer or obtained by
the ratings services from other sources which they consider reliable. Ratings
may be changed, suspended or withdrawn as a result of changes in or
unavailability of such information, or for other reasons.
The following is a description of the characteristics of rating used by Moody's
Investors Service, Inc. ("Moody's") and Standard & Poor's Corporation ("S&P").
RATINGS BY MOODY'S
Aaa--Bonds rated Aaa are judged to be the best quality. They carry the smallest
degree of investment risk and are generally referred to as "gilt-edge." Interest
payments are protected by a large or by an exceptionally stable margin and
principal is secure. Although the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such bonds.
Aa--Bonds rated Aa are judged to be high quality by all standards. Together
with the Aaa group they comprise what are generally known as high grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as in Aaa bonds or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the long
term risk appear somewhat larger than in Aaa bonds.
A--Bonds rated A possess many favorable investment attributes and are to be
considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa--Bonds rated Baa are considered as medium grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Appendix-1
<PAGE>
Ba--Bonds rated Ba are judged to have speculative elements; their future cannot
be considered as well assured. Often the protection of interest and principal
payments may be very moderate and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position characterizes bonds in
this class.
B--Bonds rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other
terms of the contract over any long period of time may be small.
Caa--Bonds rated Caa are of poor standing. Such bonds may be in default or
there may be present elements of danger with respect to principal or interest.
Ca--Bonds rated Ca represent obligations which are speculative in a high degree.
Such bonds are often in default or have other marked shortcomings.
S&P RATINGS
AAA--Bonds rated AAA have the highest rating. Capacity to pay principal and
interest is extremely strong.
AA--Bonds rated AA have a very strong capacity to pay principal and interest and
differ from AAA bonds only in small degree.
A--Bonds rated A have a strong capacity to pay principal and interest, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this capacity
than for bonds in higher rated categories.
BB--B--CCC--CC--Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation among such bonds and CC the highest
degree of speculation. Although such bonds will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions.
