February 28, 1997
Securities and Exchange Commission
450 Fifth Street, N. W.
Washington, D.C. 20549
Ladies and Gentleman:
On behalf of the Artisan Funds, Inc. we are enclosing for electronic filing, in
accordance with Rule 30b2-1 under the Investment Company Act of 1940 as amended,
the 1996 semi-annual report to shareholders for Artisan Small Cap Fund and
Artisan International Fund.
Very truly yours,
/s/ John Blaser
John Blaser
(LOGO)
ARTISAN FUNDS
ARTISAN SMALL CAP FUND
SEMI-ANNUAL REPORT
DECEMBER 31, 1996
INVESTMENT MANAGEMENT PRACTICED WITH
INTELLIGENCE AND DISCIPLINE IS AN ART.
(LOGO)
February 10, 1997
Dear Fellow Shareholder,
We're pleased to provide you with this semi-annual report for the Artisan Small
Cap Fund. The primary focus of this report is the six-month period ended
December 31, 1996. However, we will also touch briefly on calendar 1996, and our
outlook going into 1997.
The Artisan Small Cap Fund rose 0.5% for the six months ended December 31, 1996,
and gained 11.9% for calendar 1996. This compares with returns of 5.6% and 16.5%
for the Fund's benchmark, the Russell 2000 index, for those respective periods.
Since its inception on March 28, 1995, the Fund has appreciated 48.6% versus a
return of 43.4% for the Russell 2000 index.
During the first half of 1996, the environment for small-cap stocks was quite
favorable. Interest rates and inflation remained low, and corporate earnings
posted strong gains in the early part of the year. Thus, despite high valuation
levels, small-cap stocks posted strong gains. The small-cap sector experienced a
significant correction in July and August, however, and generally underperformed
U.S. large-cap stocks during the second half of 1996. We believe such periods
are a normal part of small-cap investing. As we look at the small-cap market
today we believe many stocks are now attractively valued relative to the overall
market.
COMPARATIVE QUARTERLY PERFORMANCE
3/28/95 6/30/95 9/30/95 12/31/95 3/31/96 6/30/96 9/30/96 12/31/96
------- ------- -------- ------- ------- ------- ---------------
ARTISAN
SMALL
CAP FUND $10,000 $11,520 $12,650 $13,283 $14,059 $14,785 $14,160 $14,857
Russell
2000 $10,000 $10,962 $12,045 $12,306 $12,934 $13,581 $13,627 $14,336
AVERAGE ANNUAL TOTAL RETURNS:
ONE YEAR: 11.9%
SINCE INCEPTION: 25.1%
6/30/95 9/30/95 12/31/95 3/31/96 6/30/96 9/30/96 12/31/96
------- ------- -------- -------- ------- ------- --------
Small Cap 15.2% 9.8% 5.0% 5.8% 5.2% -4.2% 4.9%
Russell 2000 9.6% 9.9% 2.2% 5.1% 5.0% 0.3% 5.2%
This graph compares the results of $10,000 invested in the Artisan Small Cap
Fund on March 28, 1995 (the date the Fund began operations) with the Russell
2000 stock index. The Russell 2000 is an unmanaged index of small companies,
formed by taking the largest 3,000 companies and eliminating the largest 1,000.
All returns include reinvested dividends. Past performance does not guarantee
future results. The investment return and principal value of an investment in
the Fund will fluctuate so that Fund shares, when redeemed, may be worth more or
less than their original cost. The Fund had an average annual return of 25.1%,
from inception on March 28, 1995 through December 31, 1996.
Semi-Annual Report 1
LETTER TO SHAREHOLDERS (continued)
OUR INVESTMENT APPROACH
As is our custom, we would like to preface our review of the Fund's investment
performance with an overview of our investment approach and goals. IN A
NUTSHELL, WE INVEST IN UNDERFOLLOWED, SMALL-CAP GROWTH COMPANIES WHOSE STOCK
PRICES DO NOT FULLY REFLECT THEIR INTRINSIC VALUE.
The Fund focuses on small-cap stocks that are not widely followed and evaluated
by Wall Street. Often, these stocks are inefficiently priced and investors are
paid a premium for taking the risk of having incomplete information. By doing
our own fundamental research, we aim to reduce the information risk while
earning premium returns. Finding these stocks requires a lot of hard work, but
there are several areas that are frequently successful sources of ideas:
TRANSACTIONS. Often, there are small "jewels" within larger conglomerates
which are great investments when they are free to operate on their own.
Littelfuse, a superbly managed growth company which was spun-out of a large
bankrupt defense conglomerate, is an example of this type of investment.
INDUSTRY CONTACTS. Some of our best ideas come from company managements,
suppliers and competitors. We always ask managements about their toughest
competitors and most reliable suppliers. For example, Silicon Valley
Bancshares is the bank of choice of our West Coast technology companies.
Likewise, our drug industry contacts brought IBAH, a contract research
provider, to our attention.
REGIONAL BROKERAGE FIRMS. Far away from the giant New York brokerage firms,
these smaller firms only cover companies in their own backyards. Often, they
are the first to recognize new investment opportunities. We have developed a
large network of contacts at these brokerage firms. Expeditors, a global
freight forwarder based in Seattle, was suggested by a small Portland-based
brokerage firm, and we get our best information on Midwest Express from a
local firm in Milwaukee.
Once we find these underfollowed companies, we perform a detailed analysis of
the industry fundamentals, financial statements and, importantly, the quality of
management. We believe that the quality of management in small companies is
often the key to ultimate success or failure. We usually meet with management in
person to discuss the company's goals, strategies, competitive position, and
control systems.
A very important part of our research process is the determination of the
"intrinsic value" of the business. By intrinsic value, we mean the price a
strategic buyer would pay to own the entire company. We will only purchase a
stock when it sells at a substantial discount to our estimate of its intrinsic
value, and we sell stocks when they approach their intrinsic value. This
discipline reduces the down-side risk of the investment. Our goal is to find
well-run, growing companies with stock prices that do not yet reflect all the
good things that we see in them.
We recognize that small-cap investing can be volatile. Thus, we use a number of
strategies designed to reduce risk. In addition to our focus on stocks that sell
at discounts to intrinsic value, we limit the size of individual positions to no
more than 3% of assets, avoid industry concentration, pay careful attention to
liquidity, and continuously monitor and reappraise all of our holdings on an
ongoing basis.
Semi-Annual Report 2
LETTER TO SHAREHOLDERS (continued)
The Artisan Small Cap Fund is designed as a long-term core investment which
seeks to out perform its benchmark, the Russell 2000 index, over a full market
cycle. It stays fully invested in U.S. small-cap stocks. We believe it is most
appropriately used as part of a long-term diversified portfolio.
SIX MONTH REVIEW
In the second half of 1996, the Fund underperformed the Russell 2000 index in
the third quarter and rebounded in the fourth quarter. In the third quarter, the
market experienced a sharp correction in July and early August followed by a
bounce back in late August and September. The correction was quite
indiscriminate, affecting the broad universe of small-cap stocks. The bounce
back, however, was much narrower, and focused on a relatively small group of
"brand-name" high P/E stocks that are favored by more aggressive investors.
Because the Fund focuses its attention on underfollowed stocks, its holdings did
not snap back as dramatically.
The Fund had a solid fourth quarter in a particularly difficult period for
small-caps. It was helped by some excellent performers including all of its
energy holdings and Syratech, a sterling silver company, which was acquired at a
premium price by a private investor group. The Fund's top gainers and losers for
the six month period are set forth below.
TOP 5 GAINERS TOP 5 LOSERS
----------------------------- ---------------------------------
Keane 72.2% Housecall Medical -67.3%
Nuevo Energy 61.2% CP Clare -61.1%
Seitel 46.1% Daka International -59.0%
Expeditors 48.4% Marisa Christina -58.8%
Syratech 40.0% ITI Technology -54.2%
In addition to Syratech, our best gainers included Keane, a computer service
consultant, which benefited from investors' growing enthusiasm for outsourcing
in the information technology area; Nuevo, one of our energy holdings;
Expeditors, which was rewarded for an accelerating growth rate; and Seitel,
another energy related stock.
Our losers were all stocks which reported disappointing earnings during the
period. Given the volatility in small-caps during the second half of 1996,
investors severely punished the stocks of companies which didn't meet
expectations. We expect this type of reaction to continue with companies that
underperform, and we have enhanced our attention to sustainability of earnings
as we go into 1997.
Semi-Annual Report 3
LETTER TO SHAREHOLDERS (continued)
PORTFOLIO CHARACTERISTICS
The Fund's net assets as of December 31, 1996 were $296.1 million. The Fund
remains closed to new investors. This allows its management team to continue to
focus on the kind of small-cap, out-of-the-way companies we favor.
The Fund owned 68 stocks with a median market capitalization of $361 million. On
average, these stocks are growing 22% per year, selling at 15 times 1997
earnings estimates and valued at 72% of our estimate of their intrinsic value.
Typically, each stock is followed by only four Wall Street analysts, despite
attractive growth and valuation characteristics. The Fund is 98.5% invested in
stocks, which we consider to be fully invested.
TOP TEN HOLDINGS
---------------------------------------
COMPANY NAME %
K2 2.4%
Silicon Valley Bank 2.3%
Belden 2.3%
Int'l Family Entertainment 2.3%
Vital Signs 2.2%
Capital Re 2.2%
CommNet Cellular 2.2%
Libbey 2.2%
IBAH 2.1%
DH Technology 2.0%
---------------------------------------
TOTAL 22.2%
The Fund's sector weightings remain broadly diversified. We believe that
attractive investment candidates can be found in almost every industry, and we
strive to have some level of participation in almost every sector. We believe
this reduces the potential volatility of the Fund while putting more emphasis in
stock-picking -- the area where we add the most value.
Over the past six months, we increased our exposure to energy and financial
services; and decreased our exposure to consumer cyclicals, capital spending and
healthcare services as we have concentrated on companies that we believe will
show steady, consistent earnings rather than companies whose earnings are
economically sensitive or less predictable.
Semi-Annual Report 4
LETTER TO SHAREHOLDERS (continued)
INDUSTRY DIVERSIFICATION (%)<F1>
Weighting Weighting
------------- -------------
12/31 6/30 12/31 6/30
SECTOR 1996 1996 SECTOR 1996 1996
- ------------------ ---- ---- --------------------- ---- ----
Consumer Staples 12.0 11.5 Healthcare Services 0.0 3.6
Consumer Cyclicals 1.6 4.6 Medical Devices 8.5 6.7
Consumer Services 10.0 10.1 Basic Industry 2.4 3.2
Retailing 3.8 6.1 Business Services 8.5 6.9
Restaurants 3.9 4.2 Capital Spending 5.2 7.7
Energy 10.5 9.4 Transportation 1.6 1.5
Banks/S&Ls 3.6 2.3 Computer Related 3.0 3.1
Insurance 8.6 4.4 Electronics 9.4 8.9
Special Financial 0.2 0.6 Software/Telecommunications 2.7 3.0
Biotech/Pharmaceutical 2.9 2.2 Utilities 1.6 0.0
TOTAL 100.0%
<F1> Percentages for the various classifications relate to total investments in
common stocks.
OUTLOOK AND STRATEGY
While we don't base our investment decisions on market timing or short-term
trends, we do watch the economy and interest rates, and try to assess how their
directions are likely to affect the stock market.
Looking into 1997, we believe the growth of the economy will continue to slow,
but that we will avoid a recession. Interest rates should be stable to slightly
lower, and inflation will remain subdued. In contrast to the past two years, we
believe corporate profit growth will increase only in line with economic growth,
as the large productivity gains of recent years will be less dramatic going
forward. We also believe the dollar will continue to strengthen against most
foreign currencies. These trends should produce a relatively benign stock
market, but one in which the better secular growth of small companies may shine
through.
In this environment, we will focus on companies with the potential to post good
earnings gains even in a slowing economy. One of the beauties of small companies
is that their growth is tied more to the internal dynamics of their own
businesses than to what is happening to the economy in general. Companies like
K2, which is gaining market share rapidly in a mature market by introducing
exciting new technologies such as parabolic skis, are less likely to be buffeted
by the general economy than are the big multinationals. Furthermore, given our
view that earnings growth will be less robust, we are concentrating on companies
that have a history of consistent earnings growth.
We continue to be concerned about the valuation levels of the U.S. market. By
traditional measures such as dividend yield and price-to-book value, we regard
the market as fully valued even in a low interest rate, low inflation
environment. As always, we will focus our research efforts on stocks that are
selling at a discount to our estimate of the value of the business -- not just
on stocks that look "cheap" when compared to an expensive market. Long
experience has proven that this attention to valuation should help cushion the
Fund during market downturns while providing healthy upside potential when times
are good.
Semi-Annual Report 6
LETTER TO SHAREHOLDERS (continued)
As always, we appreciate your confidence and support. Thank you for your
interest in the Artisan Small Cap Fund.
Sincerely,
/s/ Carlene Murphy Ziegler /s/ Millie Adams Hurwitz
Carlene Murphy Ziegler Millie Adams Hurwitz
Portfolio Manager Portfolio Manager
Semi-Annual Report 7
ARTISAN SMALL CAP FUND
(A Series of Artisan Funds, Inc.)
Schedule of Investments
December 31, 1996
(Unaudited)
Shares Quoted
Held Market Value
----- ------------
COMMON STOCKS - 98.5%
BANKS/SAVINGS AND LOANS - 3.5%
216,800 <F2>Columbia Banking System, Inc. - Tacoma, WA based
community bank ................................... $3,523,000
214,200 <F2>Silicon Valley Bancshares - bank holding company
serving the high technology industry ............. 6,907,950
-----------
10,430,950
BASIC INDUSTRY - 2.4%
171,900 Oregon Metallurgical Corporation - titanium
producer ....................................... 5,543,775
81,500 <F2>Steel Dynamics, Inc. - steel mini-mill............ 1,558,688
-----------
7,102,463
BIOTECHNOLOGY/PHARMACEUTICAL - 2.8%
902,300 <F2>IBAH, Inc. - pharmaceutical research services..... 6,090,525
136,400 <F2>Neurex Corporation - development stage drug
company ........................................ 2,318,800
-----------
8,409,325
BUSINESS SERVICES - 8.4%
228,600 <F2>Bell & Howell Holdings Company - systems and
services for information access and
dissemination .................................. 5,429,250
232,400 <F2>CommNet Cellular - rural cellular phone systems
in the Rockies ................................. 6,478,150
209,400 <F2>Donnelley Enterprise Solutions Incorporated -
information management services ................ 5,130,300
203,500 Expeditors International of Washington, Inc. -
freight forwarder .............................. 4,680,500
99,200 <F2>Keane, Inc. - computer programming services....... 3,149,600
-----------
24,867,800
CAPITAL SPENDING - 5.2%
184,700 Hardinge Inc. - machine tool manufacturer......... 4,917,638
266,950 <F2>Holophane Corporation - highly-engineered
lighting fixtures .............................. 5,072,050
214,100 W.H. Brady Co. - specialty adhesives and
graphics ....................................... 5,272,212
-----------
15,261,900
COMPUTER RELATED - 2.9%
240,500 <F2>DH Technology Incorporated - specialty printers... 5,772,000
68,400 <F2>Daisytek International Corporation - wholesale
distributor of computer accessories ............ 2,804,400
-----------
8,576,400
Semi-Annual Report 7
SCHEDULE OF INVESTMENTS (continued)
Quoted
Held Market Value
----- ------------
CONSUMER CYCLICALS - 1.6%
402,350 <F2>Southern Energy Homes, Inc. - manufactured homes.. 4,627,025
CONSUMER SERVICES - 8.3%
288,500 <F2>ITI Technologies, Inc. - wireless home security
systems ........................................ 4,363,562
433,025 <F2>International Family Entertainment, Inc. -
family-oriented entertainment programming ...... 6,711,888
259,600 <F2>Seattle Filmworks, Inc. - mail-order film
processor ...................................... 5,289,350
258,900 <F2>Servico, Inc. - hotel management.................. 4,174,763
142,500 <F2>Telemundo Group, Inc. - television broadcaster of
Spanish language programming ................... 4,132,500
-----------
24,672,063
CONSUMER STAPLES - 11.8%
264,700 <F2>Amscan Holdings, Inc. - manufacturer and
distributor of party supplies .................. 3,176,400
156,200 AptarGroup, Inc. - pumps, valves and closures for
consumer packaging ............................. 5,506,050
267,000 <F2>GT Bicycles, Inc. - high-end bicycles............. 3,437,625
261,800 K2 Inc.- recreational and industrial products..... 7,199,500
228,100 Libbey Inc. - consumer and commercial glassware... 6,358,287
170,800 Matthews International Corporation - memorial
plaques ........................................ 4,825,100
137,500 <F2>Syratech Corporation - silver flatware and
giftware ....................................... 4,331,250
-----------
34,834,212
ELECTRONICS - 9.2%
181,950 Belden Inc. - electrical wire and cable products.. 6,732,150
259,070 <F2>CP Clare Corporation- electronic relay switches
for telecomm/datacomm markets .................. 2,590,700
185,500 Dallas Semiconductor Corporation - electronic
components and subsystems ...................... 4,266,500
99,900 <F2>Littelfuse, Inc. - circuit protection devices..... 4,845,150
218,050 Methode Electronics, Inc. - electronic
interconnect devices ........................... 4,415,513
41,700 <F2>SIPEX Corporation - high-performance analog
IC's ........................................... 1,344,825
133,400 <F2>Ultratech Stepper, Inc. - semiconductor
capital equipment .............................. 3,168,250
-----------
27,363,088
ENERGY SERVICES - 6.3%
115,500 Camco International Inc. - oilfield service
equipment ...................................... 5,327,437
296,200 <F2>Oceaneering International, Inc. - underwater
vehicles for offshore drilling ................. 4,702,175
94,300 Production Operators Corp - gas compression
services ....................................... 4,384,950
105,100 <F2>Seitel, Inc.- seismic data and geophysical
service provider ............................... 4,204,000
-----------
18,618,562
Semi-Annual Report 8
SCHEDULE OF INVESTMENTS (continued)
Quoted
Held Market Value
----- ------------
EXPLORATION/PRODUCTION - 2.9%
310,600 Lomak Petroleum, Inc. - oil and gas exploration... 5,319,025
63,950 <F2>Nuevo Energy Company - oil and gas exploration.... 3,325,400
-----------
8,644,425
INSURANCE - 6.7%
176,900 <F2>Amerin Corporation - private mortgage insurance... 4,555,175
140,000 Capital Re Corporation - financial guaranty
reinsurance ..................................... 6,527,500
132,100 CapMAC Holdings Inc. - financial guaranty
insurance ....................................... 4,375,813
169,900 <F2>Penn Treaty American Corporation - long-term
care insurance .................................. 4,417,400
-----------
19,875,888
MEDICAL DEVICES/SUPPLIES - 8.4%
165,400 <F2>Advanced Technology Labs, Inc. - diagnositic
medical ultrasound systems ..................... 5,127,400
469,400 Kinetic Concepts, Inc. - specialty hospital beds.. 5,750,150
125,300 <F2>Patterson Dental Company - dental supply
distributor .................................... 3,539,725
216,100 <F2>Respironics, Inc. - breathing-related medical
devices ........................................ 3,754,737
251,800 Vital Signs, Inc. - anesthesia and respiratory
medical products ............................... 6,546,800
-----------
24,718,812
SPECIAL FINANCIAL - 0.2%
44,900 <F2>Healthcare Financial - specialty finance for
healthcare service providers ................... 572,475
RESTAURANTS - 3.8%
121,200 <F2>JP Foodservice - wholesale food distributor....... 3,378,450
271,300 <F2>Morrison Health Care, Inc. - food service to
health care institutions ....................... 4,001,675
211,600 <F2>Showbiz Pizza Time, Inc. - Chuck E. Cheese
restaurants .................................... 3,835,250
-----------
11,215,375
RETAILING - 3.8%
763,400 <F2>Bernard Chaus, Inc. - women's apparel
manufacturer ................................... 1,240,525
25,000 <F2>Marisa Christina, Incorporated - women's apparel
manufacturer ................................... 206,250
43,200 <F2>Proffitt's, Inc. - regional department stores
in the southeast ............................... 1,593,000
136,000 <F2>Stage Stores, Inc - department store retailer..... 2,482,000
295,300 <F2>Zale Corporation - jewelry retailer............... 5,647,612
-----------
11,169,387
Semi-Annual Report 9
SCHEDULE OF INVESTMENTS (continued)
Quoted
Held Market Value
----- ------------
SOFTWARE/TELECOMMUNICATIONS - 2.7%
376,300 <F2>Data Broadcasting Corporation - wireless
distributor of financial and business
information .................................... 2,634,100
246,600 <F2>Ross Systems, Inc. - computer software
business solutions ............................. 2,373,525
110,700 <F2>SPSS Inc. - statistical software for PCs.......... 3,085,762
-----------
8,093,387
UTILITIES - 1.5%
130,900 WICOR - gas utility and pump manufacturer......... 4,696,038
TRANSPORTATION RELATED - 1.6%
129,600 <F2>Midwest Express Holdings, Inc. - regional airline
based in Milwaukee, WI ......................... 4,665,600
FOREIGN SECURITIES - 4.5%
BERMUDA - 1.8%
INSURANCE
164,800 RenaissanceRe Holdings Ltd. (USD/NYSE) - property
catastrophe reinsurance ........................ 5,438,400
CANADA - 2.6%
CONSUMER SERVICES - 1.5%
361,700 <F2>Livent Inc.(USD/NYSE) - producer of theatrical
productions .................................... 4,385,613
EXPLORATION/PRODUCTION - 1.1%
230,400 <F2>Denbury Resources Inc. (USD/NASDAQ) - oil and
gas exploration ................................ 3,369,600
-----------
Total foreign securities 13,193,613
-----------
Total common stocks (Cost $262,841,201) $291,608,788
Semi-Annual Report 10
Schedule of Investments (continued)
Par
Amount Market Value
- ------- -------------
SHORT TERM INVESTMENTS - 2.2%
$6,447,000 Investment in repurchase agreement with
State Street Bank and Trust Company
(U.S. Treasury obligations) in a joint
trading pool at 4.82% dated 12/31/96 due
1/2/97 (Cost $6,447,000) .......................$ 6,447,000
-----------
Total investments-100.7% (Cost $269,288,201) ..... 298,055,788
-----------
Other assets less liabilities-(0.7)%.............. (1,962,460)
-----------
Total net assets-100.0% <F3>...................... $296,093,328
============
<F2> Non-income producing securities
<F3> Percentages for the various classifications relate to total net
assets
The accompanying notes are an integral part of the financial statements.
Semi-Annual Report 11
ARTISAN SMALL CAP FUND
(A Series of Artisan Funds, Inc.)
Statement of Assets and Liabilities
December 31, 1996
(Unaudited)
ASSETS:
Investments in securities, at value (cost $269,288,201) ....... $298,055,788
Cash .......................................................... 873
Receivable from investments sold .............................. 1,218,060
Receivable from fund shares sold .............................. 62,843
Dividends and interest receivable ............................. 53,500
Organizational costs .......................................... 45,215
------------
Total assets................................................ 299,436,279
LIABILITIES:
Payable for investments purchased ............................. 2,926,479
Payable for organizational costs .............................. 45,215
Payable for operating expenses ................................ 371,257
------------
Total liabilities ............................................. 3,342,951
------------
Total net assets .............................................. $296,093,328
============
NET ASSETS CONSIST OF THE FOLLOWING:
Fund shares issued and outstanding ............................ $258,779,572
Net unrealized appreciation on investments .................... 28,767,587
Accumulated undistributed net realized gains on investments ... 9,906,177
Accumulated undistributed net investment loss ................ (1,360,008)
------------
$296,093,328
============
NET ASSET VALUE PER SHARE
Net asset value, offering price and redemption price per share
($.01 par value, 5,000,000,000 shares authorized,
[$ 296,093,328/ 21,701,177 shares outstanding]).............. $13.64
======
The accompanying notes are an integral part of the financial statements.
Semi-Annual Report 12
ARTISAN SMALL CAP FUND
(A Series of Artisan Funds, Inc.)
Statement of Operations
For the Six Months Ended December 31, 1996
(Unaudited)
INVESTMENT INCOME:
Interest ......................................................$ 383,290
Dividends ..................................................... 774,858
------------
Total investment income ....................................... 1,158,148
EXPENSES:
Advisory fees ................................................. 1,606,650
Transfer agent fees ........................................... 478,641
Registration fees ............................................. 158,567
Shareholder communications .................................... 79,443
Custodian fees ................................................ 77,250
Professional fees ............................................. 50,590
Accounting fees ............................................... 30,293
Directors' fees ............................................... 15,000
Organizational costs .......................................... 9,545
Other operating expenses ...................................... 12,177
------------
Total expenses.............................................. 2,518,156
------------
Net investment loss......................................... (1,360,008)
REALIZED AND UNREALIZED GAINS
ON INVESTMENTS - NET:
Net realized gain on investments .............................. 9,454,374
Net decrease in unrealized appreciation on investments ........ (13,895,523)
------------
Net decrease in investments................................. (4,441,149)
------------
Net decrease in net assets resulting from operations........$ (5,801,157)
=============
The accompanying notes are an integral part of the financial statements.
Semi-Annual Report 13
ARTISAN SMALL CAP FUND
(A Series of Artisan Funds, Inc.)
Statement of Changes in Net Assets
(Unaudited)
Six Months Ended Year Ended
December 31, June 30,
1996 1996
--------------- ------------
OPERATIONS:
Net investment loss ......................... $ (1,360,008) $(2,029,400)
Net realized gain on investments ............ 9,454,374 27,026,370
Net increase (decrease) in unrealized
appreciation on investments............... (13,895,523) 36,295,167
------------ ------------
Net increase (decrease) in net assets
from operations ........................ (5,801,157) 61,292,137
DISTRIBUTIONS PAID TO SHAREHOLDERS:
Distributions from net realized gains on
investment transactions ($1.0712 and
$0.103 per share, respectively)........... (21,952,864) (2,110,073)
FUND SHARE ACTIVITIES:
Proceeds from shares issued (2,573,249
and 25,268,039 shares respectively)....... 35,509,462 327,727,662
Net asset value of shares issued in
reinvestment of distributions from net
realized gains (1,600,164 and 155,258
shares respectively)...................... 21,202,178 2,046,303
Cost of shares redeemed (9,732,109 and
6,778,168 shares respectively) .......... (132,864,880) (88,224,291)
------------ ------------
Net increase (decrease) in net assets from
fund share activities..................... (76,153,240) 241,549,674
------------ ------------
Total increase (decrease) ................... (103,907,261) 300,731,738
Net assets at the beginning of the period ... 400,000,589 99,268,851
------------ ------------
Net assets at the end of the period ......... $296,093,328 $400,000,589
============ ============
The accompanying notes are an integral part of the financial statements.
Semi-Annual Report 14
ARTISAN SMALL CAP FUND
(A Series of Artisan Funds, Inc.)
Financial Highlights
For a Share Outstanding throughout the Period
(Unaudited)
Six Months Year Period
Ended Ended Ended
December 31, June 30, June 30,
1996 1996 1995<F6>
------ ------ ------
Net asset value, beginning of period......... $14.67 $11.52 $10.00
Income from investment operations:
Net investment loss ....................... (0.08) (0.07) (0.01)
Net realized and unrealized gains
(losses) on securities.................. 0.12 3.32 1.53
------ ------ ------
Total from investment operations........ 0.04 3.25 1.52
Distributions:
Net realized capital gains ................ (1.07) (0.10)
------ ------ ------
Net asset value, end of period............... $13.64 $14.67 $11.52
====== ====== ======
Total Return................................. 0.5%<F5> 28.3% 15.2%<F5>
Ratios/supplemental data:
Net assets, end of period (millions)....... $296.1 $400.0 $99.30%<F4>
Ratio of expenses to average net assets.... 1.56%<F4> 1.52% 2.00%<F4>
Ratio of net investment income to
average net assets....................... (0.84)%<F4> (0.75)% (0.59)%<F4>
Portfolio turnover rate.................... 39.77%<F5> 105.19% 9.28%<F5>
Average commission rate.................... $0.0632<F5>
<F4> Annualized
<F5> Not annualized
<F6> For the period from commencement of operations (March 28, 1995)
through June 30, 1995
The accompanying notes are an integral part of the financial statements.
Semi-Annual Report 15
ARTISAN SMALL CAP FUND
(A Series of Artisan Funds, Inc.)
Notes to Financial Statements
December 31, 1996
(Unaudited)
(1)Organization
The Artisan Small Cap Fund (the "Fund") is a series of Artisan Funds, Inc.
which was incorporated on January 5, 1995 as a Wisconsin corporation and is
registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company. The Fund commenced
operations on March 28, 1995.
(2)Summary of significant accounting policies:
(a) Security valuation - Each security is valued at the latest sales price
reported by the principal security exchange on which the issue is
traded, or if no sale is reported, the latest sales price reported from
previous trading activities. Securities for which prices are not readily
available or which management believes that the last sales price is not
reflective of the fair value of the security are valued at fair value 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 amortized cost which approximates market.
(b) Income taxes - No provision has been made for federal income taxes since
the Fund intends to 1) distribute substantially all of its taxable
income as well as realized gains from the sale of investment securities
to its shareholders 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 no later than the first business day after the trade date. Net
realized gains and losses on common stocks are computed on the specific
identification basis.
(d) Use of estimates - The preparation of the financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets
and liabilities at the date of the financial statements and the reported
amounts of revenue and expense during the reporting period. Actual
results may differ from those estimates.
(e) Other - Dividend income and distributions to shareholders are recorded
on the ex-dividend date. Interest income is reported on the accrual
basis.
(3)Transactions with affiliates:
Artisan Partners Limited Partnership (the "Adviser"), with which certain
officers and directors of the Fund are affiliated, provides investment
advisory and administrative services to the Fund. In exchange for these
services, the Fund pays a monthly management fee to the Adviser as follows:
Semi-Annual Report 16
ARTISAN SMALL CAP FUND
(A Series of Artisan Funds, Inc.)
Notes to Financial Statements
December 31, 1996
(Unaudited)
Average Daily Net Asset Value 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%
The 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 Fund for any ordinary operating
expenses in excess of 2.00% of average daily net assets annually.
(4)Organization costs:
Organization costs are amortized over sixty months. These expenses were paid
by the Adviser which will be reimbursed by the Fund over the same time
period. The proceeds of any redemption of the initial shares by the original
shareholders will be reduced by a pro-rata portion of any unamortized
expenses at the time of redemption.
(5)Line of credit arrangements:
Artisan Funds, Inc. is party to a line of credit agreement under which the
Fund may borrow 10% of net assets up to a maximum of $20 million. The use of
the line of credit is generally restricted to temporary borrowing for
extraordinary or emergency purposes. The Fund made no borrowing under the
line of credit during the six months ended December 31, 1996.
(6)Investment transactions:
For the six months ended December 31, 1996, the cost of purchases and the
proceeds from the sales of investment securities (excluding short-term
securities) were $123,622,851 and $213,265,805, respectively.
(7)Income tax information:
Aggregate gross unrealized appreciation (depreciation) on investments as of
December 31, 1996, based on investment cost of $269,997,410 for federal tax
purposes, is as follows:
Aggregate gross unrealized appreciation on investments $37,352,329
Aggregate gross unrealized depreciation on investments (9,293,951)
-----------
Net unrealized appreciation $28,058,378
===========
Semi-Annual Report 17
C/O BOSTON FINANCIAL DATA SERVICES
P.O. BOX 8412
BOSTON MA 02266-8412
1 800 344 1770
- -------------------------------------------------------------------------------
(LOGO)
ARTISAN FUNDS
ARTISAN INTERNATIONAL FUND
SEMI-ANNUAL REPORT
DECEMBER 31, 1996
INVESTMENT MANAGEMENT PRACTICED WITH
INTELLIGENCE AND DISCIPLINE IS AN ART.
(logo)
February 10, 1997
Dear Fellow Shareholder,
Thank you for your investment in the Artisan International Fund. We are pleased
to send you this semi-annual report detailing the second half of 1996 and our
outlook for 1997.
RANKED NUMBER ONE FOR 1996
The Artisan International Fund gained 11.2% in the last six months of 1996,
outdistancing its benchmarks, the Morgan Stanley EAFE index and the Lipper
International Fund index, which gained 1.5% and 5.3%, respectively. For the
calendar year 1996, the Fund gained 34.4%, again outperforming its indexes, and
all of its peers _ the Fund's total return earned it the number one ranking out
of 331 diversified international funds for 1996 by Lipper Analytical Services,
Inc.
COMPARATIVE QUARTERLY PERFORMANCE
12/28/95 3/31/96 6/30/96 9/30/96 12/31/96
--------- --------- --------- --------- ---------
ARTISAN
INTERNATIONAL
FUND $10,000 $10,910 $12,077 $12,222 $13,437
Lipper
International
Equity $10,000 $10,440 $10,868 $10,879 $11,445
EAFE $10,000 $10,290 $10,455 $10,444 $10,611
3/31/96 6/30/96 9/30/96 12/31/96
--------- --------- --------- ---------
INTERNATIONAL FUND 9.1% 10.7% 1.2% 10.0%
Lipper Index 4.4% 4.1% 0.1% 5.2%
EAFE 2.9% 1.6% -0.1% 1.6%
This graph compares the results of $10,000 invested in the Artisan International
Fund on December 28, 1995 (the date the Fund began operations) with Morgan
Stanley Capital International's Europe, Australia and Far East (EAFE) index.
EAFE is an unmanaged index of companies throughout the world in proportion to
world stock market capitalization, excluding the U.S. and Canada. The Lipper
International Fund index reflects the net asset value weighted return of the 30
largest international equity funds. All returns include net reinvested
dividends. Past performance does not guarantee future results. The investment
return and principal value of an investment in the Fund will fluctuate so that
Fund shares, when redeemed, may be worth more or less than their original cost.
The Fund had an average annual total return of 33.8% from inception on December
28, 1995, through December 31, 1996.
Semi-Annual Report 1
LETTER TO SHAREHOLDERS (CONTINUED)
OUR INVESTMENT APPROACH
As is our custom, we would like to briefly review our investment approach before
discussing the Fund's recent performance in detail. There are a variety of
distinct approaches to international investing, and we believe it is very
important for investors understand how a fund achieves its returns.
THE ARTISAN INTERNATIONAL FUND INVESTS IN A BROADLY-DIVERSIFIED PORTFOLIO OF
INTERNATIONAL GROWTH STOCKS, CONCENTRATING ON DEVELOPED COUNTRIES THAT HAVE
ACCELERATING GROWTH PROSPECTS. It will have some emerging market holdings, but
these will be relatively modest and are not the central focus of the Fund's
investment strategy.
The Fund's style is often characterized as "top-down and bottom-up," meaning
that country selection and stock selection are both important parts of the
investment process. Our approach has four basic elements:
COUNTRY ALLOCATION. Our first step involves searching for countries and
regions of the world that will provide a good environment for growth. For
example, we look for countries where economic development is accelerating
(in our present portfolio, our investments in the Philippines and Indonesia
would fall into this category), or where economies are becoming more
competitive or benefiting from economic stimulus (for example, the
Scandinavian countries). Importantly, we do not make reference to the index
weighting of various countries as part of our investment process. So, for
example, we will not maintain a large position in Japan SIMPLY BECAUSE it
constitutes a large portion of the EAFE index. This differentiates the Fund
from many of its peers.
BROAD THEMES. The Fund will frequently reflect one or more broad themes
which influence or combine both country allocation and stock selection. For
example, the Fund was positioned for all of 1996 to benefit from lower
interest rates in Europe, with significant positions in interest-sensitive
stocks across the region.
STOCK SELECTION. Having identified favorable areas of the world for growth
and broad investment themes, we then look for companies that can capitalize
on that growth and whose stocks are selling at attractive prices relative to
their local markets. Our portfolio management team travels widely, meeting
with company managements and spending time on fundamental research. We
emphasize companies in good financial condition with strong market shares
that are well-managed with a reputation for competence and integrity. Stocks
that are trading at unsustainable or unusually high valuations are strictly
avoided. Our emphasis on valuation analysis often leads the Fund's security
selection style to be characterized as "growth-at-a-price".
PORTFOLIO MANAGEMENT. Stock picking isn't the whole story, however.
Recognizing that international markets can be volatile, our team makes a
concerted effort to manage risk. To this end, the portfolio is broadly-
diversified among different stocks, industries and regions of the world.
While this diversification cannot eliminate market risk, it should cushion
the impact of a decline in any one country or region on the overall
portfolio. We also monitor the size of individual positions, trading
liquidity, emerging market exposure and country exposure as part of the
portfolio management process.
Semi-Annual Report 2
LETTER TO SHAREHOLDERS (CONTINUED)
FINALLY, WE BELIEVE THAT THE FUND SHOULD BE VIEWED AS A LONG-TERM INVESTMENT BY
SHAREHOLDERS. FOREIGN MARKETS CAN BE QUITE VOLATILE; THEREFORE, THE FUND MAY
EXPERIENCE WIDE PERFORMANCE SWINGS ON A SHORT-TERM BASIS. WHILE WE MANAGE THE
FUND TO DAMPEN THIS VOLATILITY, WE CANNOT ELIMINATE IT. ACCORDINGLY, WE
ENCOURAGE OUR SHAREHOLDERS TO USE THE FUND AS PART OF A DIVERSIFIED INVESTMENT
PORTFOLIO, AND, OF COURSE, ONLY IF ONE IS ABLE TO ACCEPT THE POSSIBILITY OF
SHORT-TERM CAPITAL LOSSES.
SECOND HALF AND 1996 REVIEW
The Fund had solid performance in the second half of 1996, capping a terrific
year. For the calendar year, the Fund outperformed its benchmarks in each of the
four quarters, and finished the year ranked number one in its peer group. This
success came against a backdrop of varied international markets. Some, such as
Japan, Korea and Thailand, had very bad years and significant negative returns
for dollar investors. Others, such as the Scandinavian countries, Hong Kong and
Mexico, provided outstanding returns.
The Fund prospered both from good country weightings and adept stock picking.
For all of the year, it was "underweighted" in Japan and finished with only a 7%
position in the country (this compares to an index weighting of approximately
32%). This was an important factor. Because Japan is such a significant portion
of the EAFE index, it is heavily weighted by many international portfolio
managers. In 1996, however, the Japanese market continued its recent trend of
poor performance, with a loss of 13.1% for dollar investors.
REGION/COUNTRY ALLOCATION <F7>
REGION/COUNTRY WEIGHTING REGION/COUNTRY WEIGHTING
--------------------------------- ----------------------------------
Sweden 11.2% Hong Kong 10.5%
United Kingdom 10.9% Japan 7.0%
Norway 9.5% Indonesia 4.8%
France 8.3% Thailand 2.8%
Denmark 5.1% Philippines 2.3%
Germany 4.3% Korea 1.6%
Portugal 3.9% Malasia 0.8%
Finland 3.2% ------
Spain 2.6% Asia/Pacific Total 29.8%
Netherlands 1.1%
Ireland 0.8% Mexico 5.6%
------ Brazil 0.6%
Europe Total 60.9% ------
United States Total 1.3% Latin America Total 6.2%
Cash Total 1.8%
<F7> Percentages for the various classifications relate to net assets
Semi-Annual Report 3
LETTER TO SHAREHOLDERS (CONTINUED)
Conversely, the Fund benefited from its relatively large positions in Mexico,
the Scandinavian countries and several non-Japan Pacific region markets. Hong
Kong was particularly strong in the fourth quarter, as many investors came to
the conclusion that the "hand-over" of political control from Britain to China
would not adversely affect its financial markets.
Stock selection was also very important throughout 1996. In fact, the Fund's top
twenty gaining stocks came from twelve different countries located in many
regions of the world. In our view, performance contribution from companies in a
variety of countries is reassuring, because it means that the Fund is not
dependent on large, concentrated country bets for performance. While all
international managers have to determine which countries to emphasize or avoid,
we prefer to stay broadly-diversified among geographic regions, and let our
stock picking carry much of the load. As of December 31, 1996, the Fund owned
stocks in 21 different countries. We believe this broad diversification
partially insulates the Fund from volatility in any individual market. The
Fund's top gainers and losers for the six month period are set forth below.
TOP 10 GAINERS TOP 10 LOSERS
- ------------------------------------ --------------------------------------
SECURITY COUNTRY % SECURITY COUNTRY %
- ------------------------------------ --------------------------------------
Sondagsavisen Denmark 66.9% Calcutta Electric India -46.0%
TT Tieto Finland 66.7% FiloFax U.K. -43.1%
Guangzhou
Investment Hong Kong 64.4% Tigaraksa Indonesia -39.4%
Dassault
Systemes France 49.9% Ethical Holdings U.K. -32.5%
Ark Norway 43.7% Tag Heuer Switzerland -29.1%
Cheung Kong Hong Kong 43.4% Hornbach Germany -27.8%
Infrastructure Baumarkt
Dongfang Electric Hong Kong 35.2% Autobacs Seven Japan -25.3%
Falck Denmark 33.5% Sanyo Pax Japan -24.5%
Modern Photo Tong Yang
Film Co. Indonesia 31.1% Confectionery Korea -24.2%
HSBC Holdings Hong Kong 31.0% IMS Data Sweden -23.2%
Sondagsavisen, one of our top gainers for the year, is a good example of the
kind of stock we like to buy for the Fund. This is a Danish company that
publishes a weekly "free paper". It uses advanced technology to economically
target small local areas for specific advertisers. For example, a local car
dealer can advertise in only the area around his dealership at a lower cost. As
a result of its popularity with budget-conscious advertisers, Sondagsavisen's ad
content is growing substantially, as is its circulation. The firm's next step is
to expand into other Scandinavian countries. Our portfolio management team met
with Sondagsavisen's management in Denmark early in 1996 and was very impressed.
The Fund was able to purchase the stock at a very attractive valuation, and it
made a significant contribution to the Fund's 1996 performance.
Semi-Annual Report 4
LETTER TO SHAREHOLDERS (CONTINUED)
PORTFOLIO CHARACTERISTICS
Total assets in the Fund at December 31, 1996 were $191.6 million. The median
market cap of the Fund's holdings was $523 million and its weighted average
market cap was $4.1 billion. The Fund had a weighted average growth rate of
21.4% and a weighted average price-to-earnings ratio of 15.1X. We believe this
is an excellent growth rate at a relatively modest P/E ratio and that it
demonstrates our continued attention to valuation. We were 98.6% invested in
equities at year-end, which we consider to be fully-invested. We did not hedge
currency during 1996, although the Fund may hedge occasionally for defensive
purposes.
INDUSTRY DIVERSIFICATION (%)<F8>
WEIGHTING WEIGHTING
12/31 6/30 12/31 6/30
SECTOR 1996 1996 SECTOR 1996 1996
----------------------------------- ---------------------------------
Banking 18.9 15.0 Health Care 10.8 10.5
Broadcast/Publishing 7.9 6.8 Multi-Industry 7.2 9.1
Business Services 3.8 5.4 Special Financial 4.4 6.5
Capital Spending 0.5 0.0 Retailing 11.1 12.8
Construction/Housing 9.0 5.8 Software 4.0 5.4
Consumer Cyclicals 2.8 2.7 Telecommunications/
Technology 8.4 8.3
Consumer Services 2.8 2.0 Transportation/
Distribution 1.2 2.8
Food/Restaurants 4.2 5.8 Utilities 3.0 1.1
TOTAL 100.0%
<F8> Percentages for the various classifications relate to total investments in
common and preferred stocks
Our industry weightings remain broadly diversified. We continue to have an
emphasis in the banking sector because we expect global inflation to be
relatively tame and interest rates to remain at low levels for some time,
particularly in Europe. Retailing continues to be important to the Fund because
it is where we find growth at reasonable prices in a variety of countries. Some
of our Japan exposure is in retailers, which stand to benefit from the
government's stimulation of the local economy. In addition, the Fund has a
growing emphasis on companies that provide outsourced labor and corporate
services to firms seeking to reduce costs. Our top ten holdings also reflect our
commitment to diversification _ no single stock is more than 3.1% of the
portfolio.
Semi-Annual Report 5
LETTER TO SHAREHOLDERS (CONTINUED)
TOP TEN HOLDINGS
COMPANY NAME COUNTRY %
------------------------------------------------------
Astra A Sweden 3.1
Schibsted Norway 2.4
SE-Banken Sweden 2.1
Whitbread United Kingdom 2.1
Damart France 2.1
Generale des Eaux France 2.0
Sonae Investments Portugal 2.0
Guangzhou Investment Hong Kong 2.0
Storehouse United Kingdom 1.9
Portugal Telecom Portugal 1.9
TOTAL 21.6%
OUTLOOK AND STRATEGY
Looking into 1997, the Fund's strategy will not change dramatically. We continue
to be optimistic about the overseas markets in an environment of low global
interest rates and (relative to the U.S.) attractive equity valuations. As
always, the Fund will remain broadly diversified and its management team will
concentrate most of its efforts on researching and visiting individual
companies.
We remain cautious about Japan _ and expect to have only modest exposure there
and to avoid its financial sector entirely. We like Europe currently, where
interest rates are very low by historical standards and inflation remains
subdued. In particular, we are finding very attractive opportunities among
restructuring situations. In Asia, we will continue to invest on a company-by-
company basis, but are finding attractive valuations in the Philippines,
Thailand, and Indonesia. We think the "hand-over" of Hong Kong will be positive
for its financial markets, and we expect to maintain the Fund's positions there.
As always our emphasis will be on finding high-quality, well-managed, growth
stocks and on being careful about what we pay for them.
Thank you again for your investment in the Artisan International Fund and your
continued support. We are excited about the prospects for the international
markets in the years ahead and will work hard to reward your confidence in us.
Sincerely,
/s/ Mark L. Yockey
Mark L. Yockey
Portfolio Manager
Semi-Annual Report 6
ARTISAN INTERNATIONAL FUND
(A SERIES OF ARTISAN FUNDS, INC.)
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996
(UNAUDITED)
Quoted
Shares Industry Market
Held Classification Value
- --------- -------------- -----
COMMON AND PREFERRED
STOCKS - 98.6%
BRAZIL - 0.6%
10,050,000 <F9> Telemig PNB - Telecommunication services .. (14) $1,242,830
DENMARK - 5.2%
7,000 <F9> Falck - Home security systems .............. (6) 2,091,397
10,000 InWear Group AS** - Apparel manufacturer
and retailer ............................ (12) 436,274
6,588 NESA AS - Electrical utility .............. (16) 1,845,284
40,000 <F9> Neurosearch** - Pharmaceuticals ............ (9) 1,783,187
39,550 <F9> Scanbox Danmark - Music and video
producer ................................. (7) 1,879,880
8,820 <F9> Sondagsavisen - Newspaper publisher ........ (2) 1,871,562
-----------
9,907,584
FINLAND - 3.3%
80,000 Aamulehti II - Newspaper publisher ......... (2) 2,434,783
30,000 <F9> TT Tieto Oy - Computer data services ...... (13) 2,519,348
140,000 Talentum Oy - Information technology
publisher ................................ (2) 1,278,261
-----------
6,232,392
FRANCE - 8.3%
30,000 CLF-Dexia France - Banking ................. (1) 2,613,472
32,000 Compagnie Generale des Eaux - Water
and waste utility ....................... (16) 3,965,693
4,776 Damart SA - Thermal apparel manufacturer .. (12) 3,820,064
12,000 Roussel Uclaf - Pharmaceuticals ............ (9) 3,531,657
18,000 <F9> Union Financiere de France
Banque SA - Investment
management services ..................... (11) 1,942,758
-----------
15,873,644
GERMANY - 4.4%
70,000 Deutsche Pfandbrief Bank AG -
Banking services ......................... (1) 3,160,190
15,000 Escada AG - Men's and women's
apparel retailer ........................ (12) 2,466,207
126,667 <F9> Marseille-Kliniken AG - Health care
services ................................. (9) 2,741,104
-----------
8,367,501
Semi-Annual Report 7
SCHEDULE OF INVESTMENTS (CONTINUED)
Quoted
Shares Industry Market
Held Classification Value
------ -------------- -----
HONG KONG - 10.6%
300,000 Cheung Kong (Holdings) Ltd. -
Real estate development .................. (5) 2,666,624
1,200,000 <F9> Cheung Kong Infrastructure Holdings - Public
infrastructure construction .............. (5) 3,180,555
2,500,000 <F9> Dongfang Electrical Machinery Company Ltd. -
Electrical generators .................... (4) 872,713
8,000,000 Guangzhou Investment - Manufacturing
conglomerate ............................ (10) 3,827,009
390,000 Guoco Group Ltd. - Banking and
financial services ....................... (1) 2,183,334
110,915 HSBC Holdings - Banking and financial
services ................................. (1) 2,373,319
2,562,000 JCG Holdings - Banking services ............ (1) 2,500,886
600,000 Wing Hang Bank Ltd. - Banking services ..... (1) 2,722,865
-----------
20,327,305
INDONESIA - 4.8%
921,500 Bank Nisp - Banking services ............... (1) 1,043,612
1,600,000 Mayora Indah - Diversified food producer ... (8) 745,131
250,000 Modern Photo Film Company - Photographic
equipment and supplies .................. (12) 793,819
1,050,000 Semen Cibinong - Cement producer ........... (5) 2,956,181
3,005,000 Sona Topas - Duty free retailing .......... (12) 1,272,227
1,128,833 Steady Safe - Urban transportation
services ................................ (15) 1,445,690
674,700 Tigaraksa Satria** - Consumer
products distributor .................... (15) 942,638
-----------
9,199,298
IRELAND - 0.8%
176,724 Bank of Ireland - Banking and
financial services ....................... (1) 1,611,210
JAPAN - 7.0%
25,000 Autobacs Seven - Auto parts retailer ...... (12) 1,767,982
150,000 Banyu Pharmaceutical Co. Ltd. -
Pharmaceuticals .......................... (9) 2,098,264
55,000 Circle K Japan - Convenience stores ....... (12) 2,374,579
12,500 Japan Maintenance - Building maintenance ... (3) 188,887
50,000 Promise - Consumer lending ................ (11) 2,460,927
100,000 Sankyo Co. Ltd. - Pharmaceuticals .......... (9) 2,832,225
200 Sanyo Pax - Consumer products and
food packaging ........................... (8) 3,471
60,000 Xebio - Sporting goods and casual
menswear retailer ....................... (12) 1,787,410
-----------
13,513,745
KOREA - 1.6%
59,300 Hana Bank<F10> - Banking services .......... (1) 896,913
115,000 <F9> Keumkang Development - Retail
stores and hotel operator ................ (7) 1,891,716
12,550 Tong Yang Confectionery - Snack
food producer ............................ (8) 276,249
-----------
3,064,878
Semi-Annual Report 8
SCHEDULE OF INVESTMENTS (CONTINUED)
Quoted
Shares Industry Market
Held Classification Value
------ -------------- ------
MEXICO - 5.7%
250,000 Grupo Carso A1 - Multi-industry
conglomerate ............................ (10) 1,324,314
250,000 <F9> Empresas (ICA) Sociadad Controladora S.A.
de C.V. - Commercial construction ........ (5) 3,656,250
700,000 Grupo Financiero Banamex Accival -
Banking services ......................... (1) 1,477,896
653,489 Grupo Financiero Inbursa S.A. de C.V. -
Banking services ......................... (1) 2,233,086
100,000 Sigma BCP - Food producer .................. (8) 893,039
4,295,000 <F9> Seguros Comercial America - Insurance ..... (11) 1,282,171
-----------
10,866,756
MALAYSIA - 0.8%
500,000 Berjaya Leisure Berhad - Gaming
activities ............................... (7) 756,286
150,000 MNI Holdings BHD - Mining and metal
products ................................. (5) 778,064
-----------
1,534,350
NETHERLANDS - 1.2%
110,000 <F9> Boskalis Westminster N.V. - Environmental
construction services .................... (5) 2,229,945
NORWAY - 9.5%
400,000 Ark ASA - Computer equipment retailer ..... (14) 2,793,686
80,000 Blom ASA - Geographical surveying .......... (3) 2,228,741
360,000 Fokus Bank - Regional bank ................. (1) 2,452,857
67,500 Merkantildata - Information
technology provider ..................... (14) 1,225,730
400,000 Radio P4 - Radio stations .................. (2) 3,600,751
255,000 Schibsted AS - Newspaper publisher ......... (2) 4,650,324
40,000 <F9> Tandberg Data AS - Computer
peripheral equipment .....................(14) 1,235,430
-----------
18,187,519
PHILIPPINES - 2.3%
7,306,000 <F9> Bankard, Inc. - Credit card provider ...... (11) 2,611,270
24,000,000 Engineering Equipment, Inc. -
Industrial construction .................. (5) 1,587,833
1,181,000 RFM Corporation - Food products ............ (8) 202,072
-----------
4,401,175
PORTUGAL - 4.0%
128,600 Portugal Telecom SA - Telecommunication
services ................................ (14) 3,665,992
125,000 Sonae Investimentos - SGPS -
Multi-industry conglomerate ............. (10) 3,958,401
-----------
7,624,393
Semi-Annual Report 9
SCHEDULE OF INVESTMENTS (CONTINUED)
Quoted
Shares Industry Market
Held Classification Value
------ -------------- ------
SPAIN - 2.5%
125,000 Banco Central Hispanoamericano, S.A. -
Banking services ......................... (1) 3,211,053
16,600 Corporacion Financiera Alba, S.A. -
Multi-industry conglomerate ............. (10) 1,677,581
-----------
4,888,634
SWEDEN - 11.3%
120,000 Astra A - Pharmaceuticals .................. (9) 5,929,706
100,300 Caran AB Class B - Aerospace software ..... (13) 1,058,901
12,575 Caran AB New Shares - Aerospace software .. (13) 134,602
72,500 <F9> Enator AB- Software design ................ (13) 1,855,049
11,500 <F9> Enator AB New Shares - Software design .... (13) 290,034
100,000 Esselte AB - Manufacturer of office
products ................................. (3) 2,214,109
190,200 Intelligent Micro Systems Data AB -
Computer systems and consulting
services ................................ (14) 1,338,671
63,000 <F9> ADB-Gruppen Mandator - Information
technology consulting ................... (14) 609,686
100,000 Nordbanken AB - Banking services ........... (1) 3,027,904
12,500 <F9> Scala International AB - Business
application software .................... (13) 1,136,380
400,000 <F9> Skandinaviska Enskilda Banken -
Commercial and investment banking
services ................................. (1) 4,105,632
-----------
21,700,674
THAILAND - 2.8%
120,000 <F9> BEC World Public Company Limited -
Television broadcasting .................. (2) 1,151,057
300,000 The Pizza PLC - Fast food restaurant
franchise ................................ (8) 1,754,660
500,000 Srithai Superware PLC - Consumer
plastic products ......................... (6) 2,417,531
-----------
5,323,248
UNITED KINGDOM - 10.6%
300,000 <F9> Colt Telecom Group Plc - Telecommunication
services ................................ (14) 1,516,190
850,000 The Corporate Services Group PLC -
Employment services ...................... (3) 2,511,992
30,000 <F9> Dr. Solomon's Group Plc - Anti-virus
software ................................ (13) 513,750
255,000 <F9> Ethical Holdings plc - Pharmaceuticals ..... (9) 1,482,188
50,000 Granada Group plc - Television
broadcasting and theme parks ............. (7) 739,250
70,000 D.F.S. Furniture Company plc - Home
furniture manufacturer and retailer ...... (6) 719,548
850,000 Storehouse PLC - Apparel and
housewares retailer ..................... (12) 3,764,348
612,500 Tomkins PLC - Multi-industry
conglomerate ............................ (10) 2,833,219
525,000 Vodafone Group Plc - Mobile
telecommunication services ...............(14) 2,221,604
300,000 Whitbread PLC - Restaurants and brewing .... (8) 4,044,886
-----------
20,346,975
Semi-Annual Report 10
SCHEDULE OF INVESTMENTS (CONTINUED)
Par Industry Market
Amount Classification Value
-------- -------------- -------
UNITED STATES - 1.3%
112,490 <F9> PETsMART, Inc. - Pets and pet
supply retailer ......................... (12) 2,460,719
-----------
Total common and preferred stocks
(Cost $173,263,861) ............................... $188,904,775
SHORT TERM INVESTMENTS - 4.0%
$7,691,000 Investment in repurchase agreement with State
Street Bank and Trust Company (U.S. Treasury
obligations) in a joint trading pool at 4.82%
dated 12/31/96 due 1/2/97 ...................... $ 7,691,000
-----------
Total investments-102.6% (Cost $180,954,861) ... $196,595,775
Other assets less liabilities-(2.6%) ........... (5,027,739)
-----------
Total net assets-100.0% <F11> .................. $191,568,036
============
<F9> Non-income producing securities
<F10> Restricted security
<F11> Percentages for the various classifications relate to total net assets
Semi-Annual Report 11
ARTISAN INTERNATIONAL FUND
(A SERIES OF ARTISAN FUNDS, INC.)
PORTFOLIO DIVERSIFICATION
DECEMBER 31, 1996
(UNAUDITED)
Percent of
Industrial Market Total Net
Classification Value Assets
--------------- ------- ---------
Banking (1) $ 35,614,229 18.6%
Broadcast/Publishing (2) 14,986,738 7.8
Business & Public Services (3) 7,143,729 3.7
Capital Spending (4) 872,713 0.5
Construction/Housing (5) 17,055,452 8.9
Consumer Cyclicals (6) 5,228,476 2.7
Consumer Services (7) 5,267,132 2.8
Food/Restaurants (8) 7,919,508 4.1
Health Care Services (9) 20,398,331 10.7
Multi-Industry (10) 13,620,524 7.1
Special Financial (11) 8,297,126 4.3
Retailing (12) 20,943,629 10.9
Software (13) 7,508,064 3.9
Telecommunication/Technology (14) 15,849,819 8.3
Transportation/Distribution (15) 2,388,328 1.3
Utilities (16) 5,810,977 3.0
------------ ------
Total common and preferred stocks 188,904,775 98.6
Total short term investments 7,691,000 4.0
------------ ------
Total investments 196,595,775 102.6
Other assets less liabilities (5,027,739) (2.6)
------------ ------
Net assets $191,568,036 100.0%
============ ======
The accompanying notes to financial statements are
an integral part of this schedule.
Semi-Annual Report 12
ARTISAN INTERNATIONAL FUND
(A SERIES OF ARTISAN FUNDS, INC.)
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
(UNAUDITED)
ASSETS:
Investments in securities, at value (cost $180,954,861).... $196,595,775
Foreign currency (cost $2,193,788)......................... 2,215,495
Cash....................................................... 977
Receivable for investments sold............................ 1,123,905
Receivable from foreign currency sold...................... 7,926,639
Receivable from fund shares sold........................... 852,494
Dividends, interest and reclaim receivable................. 231,707
Organizational costs....................................... 29,280
------------
Total assets............................................ 208,976,272
LIABILITIES:
Payable for investments purchased.......................... 9,340,335
Payable for foreign currency purchased..................... 7,871,512
Payable for withholding tax liability...................... 20,315
Payable for organizational costs........................... 29,280
Payable for operating expenses............................. 146,794
------------
Total liabilities....................................... 17,408,236
------------
Total net assets........................................ $191,568,036
============
NET ASSETS CONSIST OF THE FOLLOWING:
Fund shares issued and outstanding......................... $171,475,930
Net unrealized appreciation on investments
and foreign currency transactions...................... 15,634,621
Accumulated undistributed net investment loss............. (285,310)
Accumulated undistributed net realized gain in sales
of investments and foreign currency transactions........ 4,742,795
------------
$191,568,036
============
NET ASSET VALUE PER SHARE
Net asset value, offering price and redemption price
per share ($0.01 par value, 5,000,000,000 shares
authorized, [$191,568,036/14,381,894 shares
outstanding])........................................... $13.32
=======
The accompanying notes to financial statements are
an integral part of this statement.
Semi-Annual Report 13
ARTISAN INTERNATIONAL FUND
(A SERIES OF ARTISAN FUNDS, INC.)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1996
(UNAUDITED)
NVESTMENT INCOME:
Interest................................................... $ 147,174
Dividends (net of foreign taxes withheld of $117,489)...... 779,489
------------
Total investment income.................................. 926,663
EXPENSES:
Advisory fees.............................................. 659,652
Transfer agent fees........................................ 170,097
Custodian fees............................................. 159,086
Registration fees.......................................... 111,355
Professional fees.......................................... 34,896
Accounting fees............................................ 27,212
Shareholder communications................................. 21,906
Directors' fees............................................ 15,000
Organizational costs....................................... 3,660
Insurance.................................................. 1,259
Other operating expenses................................... 7,850
------------
Total expenses........................................... 1,211,973
------------
Net investment income.................................... (285,310)
REALIZED AND UNREALIZED GAINS
ON INVESTMENTS - NET:
Net realized gain (loss) on:
Investments.............................................. 5,040,320
Foreign currency related transactions.................... (87,116)
------------
4,953,204
Net increase in unrealized appreciation of:
Investments.............................................. 11,920,538
Foreign currency related transactions.................... 5,674
------------
11,926,212
------------
Net gain on investments.................................. 16,879,416
------------
Net increase in net assets resulting from operations..... $16,594,106
============
The accompanying notes to financial statements are
an integral part of this statement.
Semi-Annual Report 14
ARTISAN INTERNATIONAL FUND
(A SERIES OF ARTISAN FUNDS, INC.)
STATEMENT OF CHANGES IN NET ASSETS
(UNAUDITED)
Six months ended Period ended
December 31, June 30,
1996 1996<F12>
---- ----------
OPERATIONS:
Net investment income.................... $ (285,310) $ 217,111
Net realized gain on investments......... 5,040,320 1,087,925
Net realized loss on foreign currency
transactions........................... (87,116) (40,001)
Net increase in unrealized appreciation
(depreciation) on:
Investments............................ 11,920,538 3,720,376
Foreign currency related transactions.. 5,674 (11,966)
------------ ------------
Net increase in net assets from
operations........................... 16,594,106 4,973,445
DISTRIBUTIONS PAID TO SHAREHOLDERS:
Distributions from net realized gains on
investment transactions
($0.1145 per share).................... (1,475,445)
FUND SHARE ACTIVITIES:
Proceeds from shares issued (9,805,190 and
6,080,442 shares respectively).......... 121,588,888 68,360,994
Net asset value of shares issued in
reinvestment of distributions
from net realized gains (108,517 shares) 1,411,808
Cost of shares redeemed (1,453,616 and
158,639 shares respectively)........... (18,063,019) (1,822,741)
------------- -------------
Net increase in net assets from fund
share activities....................... 104,937,677 66,538,253
Net assets at the beginning of
the period............................. 71,511,698
------------- -------------
Net assets at the end of
the period............................. $191,568,036 $71,511,698
============= =============
<F12> For the period from commencement of operations (December 28, 1995) through
June 30, 1996
The accompanying notes to financial statements are
an integral part of this statement.
Semi-Annual Report 15
ARTISAN INTERNATIONAL FUND
(A SERIES OF ARTISAN FUNDS, INC.)
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
(UNAUDITED)
Six months ended Period ended
December 31, 1996 June 30, 1996<F15>
----------------- ----------------
Net asset value, beginning of
the period................................ $ 12.08 $10.00
Income from investment operations:
Net investment income..................... (0.04) 0.04
Net realized and unrealized gains on
securities and foreign currency held.... 1.39 2.04
------- -------
Total from investment operations........ 1.35 2.08
Distributions: Net realized
capital gains............................. (0.11)
------- -------
Net asset value, end of period.............. $ 13.32 $12.08
======= =======
Total return............................ 11.2%<F14> 20.8%<F14>
======= =======
Ratios/supplemental data:
Net assets, end of period (millions)...... $191.6 $71.5
Ratio of expenses to average net assets... 1.83%<F13> 2.50%<F13>
Ratio of net investment income to
average net assets...................... (0.4)%<F13> 1.6%<F13>
Portfolio turnover rate................... 55.9%<F14> 57.0%<F14>
Average commission rate................... $0.0129<F14>
<F13> Annualized
<F14> Not annualized
<F15> For the period from commencement of operations (December 28, 1995)
through June 30, 1996
The accompanying notes to financial statements are
an integral part of this statement.
Semi-Annual Report 16
ARTISAN INTERNATIONAL FUND
(A SERIES OF ARTISAN FUNDS, INC.)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(UNAUDITED)
(1) Organization:
The Artisan International Fund (the "Fund") is a series of Artisan Funds,
Inc. which was incorporated on January 5, 1995, as a Wisconsin corporation
and is registered under the Investment Company Act of 1940, as amended, as
a diversified, open-end management investment company. The Fund commenced
operations on December 28, 1995.
(2) Summary of significant accounting policies:
(a) Security valuation - Each security is valued at the latest sales price
reported by the principal security exchange on which the issue is
traded, or if no sale is reported, the latest sales price reported
from previous trading activities. Securities for which prices are not
readily available or which management believes that the last sales
price is not reflective of the fair value of the security are valued
at fair value 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 amortized cost which approximates
market.
(b) Income taxes - No provision has been made for federal income taxes
since the Fund intends to 1) distribute substantially all of its
taxable income as well as realized gains from the sale of investment
securities to its shareholders 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 no later than the first business day after the trade date.
Net realized gains and losses on common stocks are computed on the
specific identification basis.
(d) Foreign currency translation - Values of investments, other assets and
liabilities 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 gain or loss resulting from changes in foreign
exchange rates is included with net realized and unrealized gain or
loss from investments, as appropriate.
(e) Use of estimates - The preparation of the financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenue and expense during the reporting period.
Actual results may differ from those estimates.
(f) Other - Dividend income is recorded on the ex-dividend date, except
that certain dividends from foreign securities are recorded as soon as
the information becomes available to the Fund. Interest income is
reported on the accrual basis. Distributions to shareholders are
recorded on the ex-dividend date.
Semi-Annual Report 17
ARTISAN INTERNATIONAL FUND
(A SERIES OF ARTISAN FUNDS, INC.)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(UNAUDITED)
(3) Transactions with affiliates:
Artisan Partners Limited Partnership (the "Adviser"), with which certain
officers and directors of the Fund are affiliated, provides investment
advisory and administrative services to the Fund. In exchange for these
services, the Fund pays a monthly management fee to the Adviser as follows:
Average Daily Net Asset Value 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%
The 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 Fund for any ordinary operating
expenses in excess of 2.50% of average daily net assets annually.
(4) Organization costs:
Organization costs are amortized over sixty months. These expenses were
paid by the Adviser which will be reimbursed by the Fund over the same time
period. The proceeds of any redemption of the initial shares by the
original shareholder will be reduced by a pro-rata portion of any
unamortized expenses at the time of redemption.
(5) Line of credit arrangements:
Artisan Funds, Inc. is party to a line of credit agreement under which the
Fund may borrow 10% of net assets up to a maximum of $20 million. The use
of the line of credit is generally restricted to temporary borrowing for
extraordinary or emergency purposes. The Fund made no borrowing under the
line of credit during the six month period ended December 31, 1996.
(6) Investment transactions:
For the six months ended December 31, 1996, the cost of purchases and the
proceeds from the sales investment securities (excluding short-term
securities) was $172,477,442 and $71,668,217, respectively.
(7) Income tax information:
Aggregate gross unrealized appreciation (depreciation) on investments as of
December 31, 1996, based on investment cost of $181,025,528 for federal tax
purposes, is as follows:
Aggregate gross unrealized appreciation on investments $20,700,814
Aggregate gross unrealized depreciation on investments (5,130,567)
------------
Net unrealized appreciation $15,570,247
------------
Semi-Annual Report 18
(LOGO)
ARTISAN FUNDS
C/O BOSTON FINANCIAL DATA SERVICES
P.O. BOX 8412
BOSTON MA 02266-8412
1 800 344 1770
