----------------------
ARTISAN SMALL CAP FUND
----------------------
QUARTERLY UPDATE OCTOBER 1998
Thank you for investing in the Artisan Small Cap Fund. We are pleased to present
this update for the year's third quarter.
In a quarter that took an especially heavy toll on small-cap stocks, the Artisan
Small Cap Fund declined 26.0%. Its benchmark index, the Russell 2000, fell
20.1%, and its peer group, the Lipper Small-Cap Fund Index lost 21.4%.<F1>
Though market declines are disappointing, this long-overdue correction has
created opportunities that we believe will enhance the Fund's long-term
potential for growth. You'll find specifics enclosed.
Thank you for your confidence.
(logo)
ARTISAN FUNDS
<PAGE>
----------------------
THIRD QUARTER OVERVIEW
----------------------
It was a difficult quarter. From mid-July to the end of August, the markets
declined sharply, with small-caps suffering the most. Though the markets
rebounded in September, the largest gains in small-caps were produced by the
largest names. Our stocks lagged the Russell 2000 Index because of selling
pressure on some of our less liquid holdings. Our financial companies were weak,
as were some of our smaller, less seasoned holdings. In addition, some of the
rebound's leaders were biotech and Internet stocks, which do not fit
neatly into our disciplined investment style.
On the brighter side, this quarter's market turmoil provided the opportunity to
enhance the portfolio with companies that historically have been richly valued,
but which recently - and irrationally - fell to prices that we found attractive.
Four of these purchases - all high-quality companies with above-average growth
rates - are profiled.
---------------------------
AVERAGE ANNUAL RETURNS<F1>
---------------------------
3/28/95 (INCEPTION) TO 9/30/98
ARTISAN SMALL RUSSELL LIPPER SMALL
CAP FUND 2000 INDEX CAP FUND INDEX
------------ ------------ ----------------
10.0% 11.6% 9.3%
<PAGE>
1
INVESTMENT PROFILE
-------------------
ALTERNATIVE LIVING SERVICES
AND SUNRISE ASSISTED LIVING
Driving the explosive growth of the assisted living industry are powerful
demographic trends and the need to provide better, more cost-effective living
environments for the elderly. Among people over 65, some 6-7 million need
assistance with daily living - a number projected to grow by over 50% in twenty
years. But even today, the supply of professionally managed facilities is
inadequate - serving only about 300,000 people in the U.S. We believe a select
group of companies will emerge as industry leaders to meet this need. We've
invested in two that we regard as likely to fill that role.
ALTERNATIVE LIVING SERVICES (ALS) is the largest provider in the industry, with
290 residences in 31 states, and another 150 in development. ALS focuses on the
needs of the frail elderly, with a particular specialty in Alzheimer's care
residences. It currently serves 13,000 residents - a number set to grow to
19,000 by the end of 1999.
SUNRISE ASSISTED LIVING, the second largest provider, specializes in high-end
facilities, chiefly in the country's
TOP 10 HOLDINGS<F3>
--------------------
- ---------------------------------------------------------------------
COMPANY %
- ---------------------------------------------------------------------
PENN TREATY AMERICAN...Long-term care insurance 2.5%
ALTERNATIVE LIVING SERVICES...Assisted living facilities 2.5%
DATA PROCESSING RESOURCES CORPORATION...Technology
staffing services 2.4%
ITI TECHNOLOGIES...Wireless home security systems 2.4%
OSHKOSH B'GOSH...Children's clothing manufacturer 2.3%
HEALTHCARE FINANCIAL PARTNERS REIT...Healthcare related
real estate investments (144A) 2.3%
WICOR...Gas utility and pump manufacturer 2.3%
SUPERIOR SERVICES...Solid waste disposal services 2.2%
WILD OATS MARKETS...Natural food supermarkets 2.2%
BORG-WARNER SECURITY...Physical and electronic security services 2.2%
- ----------------------------------------------------------------------
TOTAL 23.3%
======================================================================
<PAGE>
INVESTMENT PROFILE (continued)
------------------------------
ALTERNATIVE LIVING SERVICES
AND SUNRISE ASSISTED LIVING
top 20 metropolitan areas. Many consider Sunrise the industry's benchmark of
quality. It owns and operates 58 Victorian-styled facilities serving 5,900
residents, with another 25 facilities in development.
Though both companies can grow by 30% for several years, the recent correction
drove down their stocks to 15X projected 1999 earnings.<F2>
2
INVESTMENT PROFILE
--------------------
DATA PROCESSING RESOURCES CORPORATION
As information technologies (IT) and their applications have become more
complex, businesses increasingly have come to rely on outside experts. But in
recent years, the number of experts available has failed to keep pace with the
demand. Thus, companies providing IT professionals now enjoy attractive growth
potential.
DATA PROCESSING RESOURCES CORPORATION (DPRC) provides temporary workers who
design, implement and maintain solutions for information systems. Screened very
carefully, DPRC's consultants command high billing rates, resulting in above-
industry profitability. Through internal growth and acquisition, DPRC has over
2000 consultants on assignment chiefly at Fortune 500 companies throughout the
country. Though we anticipate annual growth at over 30%, the recent market
decline enabled us to buy this stock at 16X our 1999 earnings estimate.<F2>
<PAGE>
3
INVESTMENT PROFILE
---------------------
PACIFIC SUNWEAR OF CALIFORNIA
PACIFIC SUNWEAR OF CALIFORNIA is a leading retailer of casual clothes for young
people ages 12 to 22. This company has shown a remarkable ability to deliver
consistent results in this fashion-driven sector. By selectively mixing name
brands with its private label brands, it has grown to over 300 stores in 40
states, with potential for up to 600 stores. Management just completed a
successful test of a prototype store called "d.e.m.o." - which targets a more
mainstream teen, influenced by urban fashion - and will roll out this concept in
1999. We're confident that Pacific Sunwear can maintain its 30% earnings growth
for at least the next 3-5 years. At quarter-end, it traded at 15X our 1999
estimate.<F2>
DIVERSIFICATION BY INDUSTRY<F4>
--------------------------------
- --------------------------------------------------------------------------------
INDUSTRY % INDUSTRY %
- --------------------------------------------------------------------------------
CONSUMER STAPLES 5.0 HEALTHCARE SERVICES 7.4
CONSUMER CYCLICALS/ 4.9 MEDICAL DEVICES/ 1.9
BUILDING RELATED SUPPLIES
CONSUMER SERVICES 2.5 BUSINESS SERVICES 12.5
RETAILING/APPAREL 13.7 CAPITAL SPENDING 5.4
RESTAURANTS/HOTELS 7.1 PAPER/PACKAGING 2.1
ENERGY 2.8 TRANSPORTATION 0.0
RELATED
BANKS/S&Ls 1.2
COMPUTER RELATED 4.6
INSURANCE 2.6
ELECTRONICS 7.7
OTHER FINANCIAL 4.2
SOFTWARE/ 5.3
BIOTECH/ 2.1 TELECOMMUNICATIONS
PHARMACEUTICAL
UTILITIES 3.1
REITs/PROPERTY 3.9
- --------------------------------------------------------------------------------
TOTAL 100.0%
================================================================================
<PAGE>
OUR VIEW OF THE MARKET
----------------------
LOOKING FORWARD
Though global uncertainties may cause additional volatility, we're cautiously
optimistic that further easing by the Federal Reserve will leave the economy
relatively unscathed on the domestic front. And, as we've noted before, we have
very few companies with meaningful international exposure. We're a bit concerned
about the consumer, but believe that our holdings are not, for the most part,
dependent on the so-called wealth effect. Companies will still have to upgrade
their technology, teens will continue buying clothes and our aging population
will continue to need appropriate living facilities.
In addition, small-caps continue to be very cheap relative to their large-cap
brethren. Investors took note of this in September, causing small-caps to
outperform smartly on a number of days. For our part, we'll persist in our
search for high-quality companies that have become relative bargains.
PLEASE NOTE
DISTRIBUTIONS
- - On September 30, Artisan Small Cap Fund paid a distribution of $0.9603 to
shareholders of record as of September 29. The Fund's share price on
September 30 was reduced by the amount of the distribution.
- - For most non-retirement accounts, this distribution will be taxable, whether
you re-
continued on following panel
<PAGE>
OUR VIEW OF THE MARKET (continued)
-----------------------------------
invest it or receive it in a check. However,because of pending legislation,
we're unable to let you know at the moment what portions will be taxed at
20% versus 28% rates. We will let you know precisely with your year-end
tax information.
- - This distribution reflects undistributed capital gains for the Fund's fiscal
year ended June 30, 1998. During that period, the domestic equity market was
very strong. The market decline since then does not alter this payment in any
way, though it may affect subsequent distributions.
REPORTS
Don't be surprised to see a change in your next quarterly report, and to receive
it somewhat later than usual. We believe you'll find the revision in form and
content to be helpful. The later mailing reflects an operational change at
Artisan.
As always, if you have a question, please call us at 1-800-344-1770.
FUND STATISTICS <F5>
--------------------
NUMBER OF HOLDINGS 66
MEDIAN MARKET CAP $331 million
MEDIAN GROWTH RATE 29%
MEDIAN P/E 1998E 16.5X
1999E 13.0X
MEDIAN PRICE/INTRINSIC VALUE 1998E 68%
1999E 53%
EQUITY DIVIDEND YIELD 0.4%
<PAGE>
FOOTNOTES
---------
<F1> THE ARTISAN SMALL CAP FUND HAD AN AVERAGE ANNUAL TOTAL RETURN OF -
25.0% FOR THE YEAR ENDED SEPTEMBER 30, 1998, AND 10.0% FOR THE PERIOD
FROM INCEPTION ON MARCH 28, 1995 THROUGH SEPTEMBER 30, 1998. PER
FORMANCE DATA CONTAINED HEREIN REPRESENT PAST PERFORMANCE AND DO NOT
GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES IN THE FUND, WHEN REDEEMED, MAY
BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE RUSSELL 2000 IS AN
UNMANAGED, UNWEIGHTED INDEX OF COMMON STOCKS OF 2000 SMALL COMPANIES
WITH DIVIDENDS REINVESTED. THE LIPPER SMALL CAP FUND INDEX REFLECTS
THE NET ASSET VALUE WEIGHTED RETURN OF THE 30 LARGEST SMALL-CAP FUNDS.
<F2> PORTFOLIO PROFILES ARE FOR ILLUSTRATION ONLY AND ARE NOT INTENDED AS
RECOMMENDATIONS OF INDIVIDUAL STOCKS. THE PROFILES PRESENT INFORMATION
ABOUT THE COMPANIES BELIEVED TO BE ACCURATE, AND THE VIEWS OF THE
PORTFOLIO MANAGERS, AS OF OCTOBER 1, 1998. THAT INFORMATION AND THOSE
VIEWS MAY CHANGE AND THE FUND DISCLAIMS ANY OBLIGATION TO ADVISE
SHAREHOLDERS OF ANY SUCH CHANGES.
<F3> AS A PERCENTAGE OF TOTAL NET ASSETS AS OF SEPTEMBER 30, 1998.
<F4> AS A PERCENTAGE OF PORTFOLIO EQUITIES AS OF SEPTEMBER 30, 1998.
<F5> FUND STATISTICS ARE AS OF SEPTEMBER 30, 1998.
(logo)
ARTISAN FUNDS
C/O BOSTON FINANCIAL DATA SERVICES
P.O. BOX 8412
BOSTON, MA 02266-8412
1 800 344 1770
<PAGE>
----------------------------
ARTISAN SMALL CAP VALUE FUND
----------------------------
QUARTERLY UPDATE OCTOBER 1998
Thank you for investing in Artisan Small Cap Value Fund. We are pleased to
present this update for the third quarter of 1998.
During this complex period for small-cap stocks, the Fund declined 20.2%. Its
benchmark indexes - the Russell 2000 and Russell 2000 Value - lost 20.1% and
17.9%, respectively. In the twelve months since inception, the Fund has returned
- -9.2% versus -18.5% and -12.3% for its respective indexes.<F1>
This report presents our view of the quarter's events, as well as insight into
recent investments and our outlook for the markets in the quarter ahead.
(logo)
ARTISAN FUNDS
<PAGE>
THIRD QUARTER OVERVIEW
----------------------
For U.S. equity markets, this was a volatile quarter. After peaking in mid-July,
the averages plummeted through the end of August and spent September in a fitful
rally. Relative to the small-cap market, the Fund outperformed in the down
phases and lagged in the up phases. This pattern reflects our value discipline
and has been the trend since inception.
The markets' concern was earnings-worries that worsening global problems could
further encroach on U.S. corporate earnings, more broadly eroding underlying
equity values.
Amidst the turmoil, we managed to find attractive opportunities. Profiles of
three of them follow. Though their industries are hardly glamorous - plumbing,
insurance and cement - we believe they will prove their merit as investments
over time.
----------------------
INVESTMENT RETURNS<F1>
----------------------
9/29/97 (INCEPTION) TO 9/30/98
ARTISAN SMALL RUSSELL 2000 LIPPER SMALL
CAP VALUE FUND VALUE INDEX CAP FUND INDEX
------------ ------------ ----------------
-9.2% -12.3% -20.8%
<PAGE>
1
INVESTMENT PROFILE
-------------------
MUELLER INDUSTRIES
MUELLER INDUSTRIES manufactures and distributes plumbing supplies. Spun-off from
a bankrupt steel company, Mueller was bought, then transformed, by its
management team, which infused capital, upgraded technology, boosted
productivity and expanded margins.
Management continues applying this successful formula. Recently, it added a
product line that enables the company to re-melt its own scrap. And it upgraded
Mueller's main factory - the country's largest copper fabricating plant - to
maximize this facility's advantage of scale. Intending to transfer its business
methodology to Europe, Mueller recently purchased - at bargain prices - two
similar, smaller firms in England and France.<F2>
TOP 10 HOLDINGS<F3>
--------------------
- ----------------------------------------------------------------------
COMPANY %
- ----------------------------------------------------------------------
HILB, ROGAL & HAMILTON...Insurance broker 4.0%
M&F WORLDWIDE...Flavoring producer 3.0%
R.G. BARRY...Manufacturer of specialized comfort footwear 2.7%
CFC INTERNATIONAL...Specialty chemical coatings 2.5%
ANNUITY AND LIFE RE HOLDINGS...Life and annuity reinsurance 2.4%
CAPITAL SOUTHWEST...Closed-end venture capital
investment company 2.3%
RISK CAPITAL HOLDINGS...Reinsurance products and services 2.2%
GLEASON CORPORATION...Gear manufacturing equipment producer 2.2%
SUPERIOR NATIONAL INSURANCE...Worker's compensation
insurance in Arizona and California 2.1%
SMITH INVESTMENT COMPANY...Multi-industry holding company 2.0%
- ----------------------------------------------------------------------
TOTAL 25.4%
======================================================================
<PAGE>
2
INVESTMENT PROFILE
-------------------
ANNUITY AND LIFE RE HOLDINGS
Several factors favor the growth of ANNUITY AND LIFE RE HOLDINGS. One is its
Bermuda location. The island has no taxes and relatively relaxed capital
requirements. Thus, with a lower expense structure, the company can under-price
its competition and gain market share.
A couple of trends are also creating opportunity. As mutual life insurers
convert to stock companies, they typically reinsure a portion of their business.
And a number of marginal life insurers are looking to reduce their exposure.
Another plus for this new company - public since April - is its management,
which set up and ran a successful property and casualty insurer in Bermuda. And
the company is well capitalized, with Prudential, Ace and Exel (three large
insurance companies) as strategic investors.
Annuity and Life seems well positioned to garner sizeable contracts and
to generate a high return on equity (ROE).<F2>
3
INVESTMENT PROFILE
-------------------
LONE STAR CEMENT
Following its near-demise in the late 80s and early 90s, the cement industry
emerged into a time of rising prosperity.
Construction has been strong and appears likely to stay so - especially in light
of low interest rates and the recently passed highway construction bill. In
<PAGE>
INVESTMENT PROFILE (CONTINUED)
-------------------------------
LONE STAR CEMENT
addition, demand exceeds supply, as no capacity was added during the downturn.
And trade restrictions have discouraged foreign competition. Thus, manufacturers
have been enjoying pricing power; year after year, they've been able to raise
their prices and increase their earnings.
In this industry, we favor LONE STAR CEMENT. It's a huge cash cow and debt free.
Plus, it is using its strong balance sheet to finance an aggressive share
repurchase program. We bought the stock at a discount to its peers. And the
industry is consolidating, with Lone Star a possible takeover.<F2>
DIVERSIFICATION BY INDUSTRY<F4>
--------------------------------
- ------------------------------------------------------------------------------
INDUSTRY % INDUSTRY %
- ------------------------------------------------------------------------------
CONSUMER STAPLES 6.8 MEDICAL DEVICES 1.2
CONSUMER CYCLICALS 1.0 BASIC INDUSTRY 23.9
CONSUMER SERVICES 2.8 BUSINESS SERVICES 7.5
RETAILING 2.8 CAPITAL SPENDING 14.4
RESTAURANTS/HOTELS 4.3 PAPER/PACKAGING 1.3
ENERGY 3.9 TRANSPORTATION 0.0
BANKS/S&LS 0.0 COMPUTER RELATED 3.9
INSURANCE 15.0 ELECTRONICS 0.0
OTHER FINANCIAL 4.6 SOFTWARE/ 0.5
TELECOMMUNICATIONS
BIOTECH/ 0.0
PHARMACEUTICAL UTILITIES 0.0
REITS/PROPERTY 6.1 HEALTHCARE SERVICES 0.0
- -------------------------------------------------------------------------------
TOTAL 100.0%
===============================================================================
<PAGE>
OUR VIEW OF THE MARKET
----------------------
LOOKING FORWARD
Caution will be the watchword through year-end, at least. Weakness in earnings
is likely to spread beyond the cyclical/commodity industries already affected.
And equities - especially large-caps - are still high by historical standards.
So we may be faced with more volatility.
But we're not about to sound the retreat. Instead, we see abundant opportunity
to enhance the portfolio with high-quality companies that the market has driven
down from "overvalued" to "bargain" status. This approach enables us to
complement our holdings of turnarounds, asset plays and smaller market caps.
As always, we're proceeding selectively. One example: We recently purchased
Briggs and Stratton, the largest maker of air-cooled gasoline engines. A year
ago, on the day we launched the Fund, this stable, financially strong company
was priced at 24X earnings. A few weeks ago, our initial purchase was
at 12X earnings.
PLEASE NOTE
- -----------
DISTRIBUTIONS
- - On September 30, Artisan Small Cap Value Fund paid a distribution of
$0.5387 to shareholders of record as of September 29. The Fund's share
price on September 30 was reduced by the amount of the distribution.
continued on following panel
<PAGE>
OUR VIEW OF THE MARKET (continued)
-----------------------------------
- - For most non-retirement accounts, this distribution will be taxable,
whether you reinvest it or receive it in a check. However, because of
pending legislation, we're unable to let you know at the moment what
portions will be taxed at 20% versus 28% rates. We will let you know
precisely with your year-end tax information.
- - This distribution reflects undistributed capital gains for the Fund's fiscal
year ended June 30, 1998. During that period, the domestic equity market was
very strong. The market decline since then does not alter this payment in
any way, though it may affect subsequent distributions.
REPORTS
Don't be surprised to see a change in your next quarterly report, and to receive
it somewhat later than usual. We believe you'll find the revision in form and
content to be helpful. The later mailing reflects an operational change at
Artisan.
As always, if you have a question, please call us at 1-800-344-1770.
FUND STATISTICS<F5>
-------------------
NUMBER OF HOLDINGS 65
MEDIAN MARKET CAP $167 MILLION
WEIGHTED AVG. MARKET CAP $266 MILLION
MEDIAN PRICE/BOOK VALUE 1.0X
MEDIAN P/E 1998E 11.5X
EQUITY DIVIDEND YIELD 1.2%
<PAGE>
FOOTNOTES
---------
<F1> THE ARTISAN SMALL CAP VALUE FUND HAD AN AVERAGE ANNUAL TOTAL RETURN OF
-9.1% FOR THE YEAR ENDED SEPTEMBER 30, 1998, AND -9.2% FOR THE PERIOD
FROM INCEPTION ON SEPTEMBER 29,1997 THROUGH SEPTEMBER 30, 1998.
PERFORMANCE DATA CONTAINED HEREIN REPRESENT PAST PERFORMANCE AND DO
NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE
WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES IN THE FUND, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE
RUSSELL 2000 IS AN UNMANAGED, UNWEIGHTED INDEX OF COMMON STOCKS OF
2000 SMALL COMPANIES WITH DIVIDENDS REINVESTED. THE RUSSELL 2000 VALUE
INDEX MEASURES THE PERFORMANCE OF THOSE RUSSELL 2000 COMPANIES WITH
LOWER PRICE-TO-BOOK RATIOS AND LOWER FORECASTED GROWTH VALUES. THE
LIPPER SMALL CAP FUND INDEX REFLECTS THE NET ASSET VALUE WEIGHTED
RETURN OF THE 30 LARGEST SMALL-CAP FUNDS.
<F2> PORTFOLIO PROFILES ARE FOR ILLUSTRATION ONLY AND ARE NOT INTENDED AS
RECOMMENDATIONS OF INDIVIDUAL STOCKS. THE PROFILES PRESENT INFORMATION
ABOUT THE COMPANIES BELIEVED TO BE ACCURATE, AND THE VIEWS OF THE
PORTFOLIO MANAGERS, AS OF OCTOBER 1, 1998. THAT INFORMATION AND THOSE
VIEWS MAY CHANGE AND THE FUND DISCLAIMS ANY OBLIGATION TO ADVISE
SHAREHOLDERS OF ANY SUCH CHANGES.
<F3> AS A PERCENTAGE OF TOTAL NET ASSETS AS OF SEPTEMBER 30, 1998.
<F4> AS A PERCENTAGE OF PORTFOLIO EQUITIES AS OF SEPTEMBER 30, 1998.
<F5> FUND STATISTICS ARE AS OF SEPTEMBER 30, 1998.
(logo)
ARTISAN FUNDS
C/O BOSTON FINANCIAL DATA SERVICES
P.O. BOX 8412
BOSTON, MA 02266-8412
1 800 344 1770
<PAGE>
--------------------
ARTISAN MID CAP FUND
--------------------
QUARTERLY UPDATE OCTOBER 1998
Thank you for investing in the Artisan Mid Cap Fund. We are pleased to provide
you with this update for the third quarter of 1998.
Artisan Mid Cap Fund completed the quarter with a loss of 10.5%, ahead of both
its benchmark indexes, the S&P 400 and Lipper Mid-Cap Fund Index, which declined
14.8% and 17.9%, respectively.<F1>
In the fifteen months since inception, the Fund's return of 30.7% also outpaced
both indexes, which gained 6.8% and 0.5%, respectively.<F1>
Inside you'll find a review of this complex quarter, as well as a look at some
recent investments, and our outlook for the economy and equity markets.
(logo)
ARTISAN FUNDS
<PAGE>
THIRD QUARTER OVERVIEW
-----------------------
As investors groped for consensus opinion, the equity markets were roiled by
volatility during the quarter. Eventually it became clear that Asia's forest
fire had blown into other emerging markets - threatening Latin America and
further jeopardizing the earning power of U.S. corporations.
Though we'd noted that it was getting tough for corporate America to achieve its
profit objectives, we have to admit surprise at the slowdown's rapidity and
breadth. No doubt, the effects of a slowing were exacerbated by the overreaction
of a financial system that has grown so leveraged it can't easily accommodate
stress.
During the quarter, our focus remained intact: to invest in franchise companies,
priced below intrinsic value, experiencing a trend that we believe is bigger
than consensus. Within this context, the market decline provided an opportunity
to purchase some stocks - SPX and Starbucks, for example - that had previously
been too richly valued for our approach.
-------------------
INVESTMENT RETURNS<F1>
--------------------
6/27/97 (INCEPTION) TO 9/30/98
ARTISAN MID S&P 400 LIPPER MID CAP
CAP FUND INDEX FUND INDEX
------------ ------------ ----------------
30.7% 6.8% 0.5%
<PAGE>
1
INVESTMENT PROFILE
-------------------
C.H. ROBINSON
Increasingly, large companies are choosing to outsource certain non-strategic
functions. One of these is logistics - the myriad elements, from planning to
unloading, entailed in transporting products. C.H. ROBINSON is the largest third
party logistics provider in North America.
Unlike many competitors, C.H. Robinson doesn't own trucks, railroads or barges;
and it doesn't employ their operators. Instead, it serves as an intermediary.
Through an enormous database, it leverages its relationships with both client
companies and transportation providers, from which it buys space and time. In
effect, it collects a fee for bringing buyers and sellers together, thus making
the marketplace more efficient.
Driven in part by the outsourcing theme mentioned above, C.H. Robinson is
growing at a steady 15%.
TOP 10 HOLDINGS<F3>
-------------------
- ----------------------------------------------------------------------
COMPANY %
- ----------------------------------------------------------------------
AMERICAN POWER CONVERSION...Un-interruptible power supplies 3.6%
CENTENNIAL CELLULAR...Wireless telephone system operator 3.5%
APARTMENT INVESTMENT & MANAGEMENT...Apartment complex
management 3.5%
ELECTRONICS FOR IMAGING...Products for digital color printing 3.1%
FRED MEYER...Western U.S. grocery stores 2.9%
IMAX...Developer of specialty movies and theaters 2.9%
SUNGARD DATA SYSTEMS...Recordkeeping software for
investment management 2.8%
METTLER-TOLEDO...Leader in precision weighing instruments 2.6%
SAFETY-KLEEN...Hazardous waste collection and disposal 2.6%
LIBERTY MEDIA...Cable television programmer 2.4%
- ----------------------------------------------------------------------
TOTAL 29.9%
======================================================================
<PAGE>
INVESTMENT PROFILE (continued)
------------------------------
C.H. ROBINSON
And because it's not asset-based, the company avoids much of its industry's
cyclicality. Yet despite these positives, the stock dropped with its industry
peers last quarter. We bought at an average price of $19, with a target price of
$30 within 12-18 months.<F2>
2
INVESTMENT PROFILE
-------------------
GARTNER GROUP
GARTNER GROUP is the dominant worldwide provider of research services on the
information technology (IT) marketplace. It offers over 100 monthly
publications, targeted chiefly to Fortune 1000 MIS directors. Each publication,
available only by subscription, addresses a specialized niche such as
networking, laptops or "Year 2000" issues.
As companies increasingly recognize their internal information technology
research limitations, they see this type of information - and its expenditure -
as imperative.
For Gartner's target client, research typically accounts for 1% of corporate IT
expenditures, and ranges from $40,000 to $400,000 annually. This is a small
price for a company to pay to ensure that its information systems remain
efficient and competitive. Gartner has enjoyed subscription renewals of 85-90%
and a growth rate of over 25%. It will seek additional growth chiefly through
acquisitions and longer-term subscriptions.
<PAGE>
INVESTMENT PROFILE (continued)
------------------------------
GARTNER GROUP
This financially sound company has no debt and a substantial cash balance. Yet
we were able to purchase its stock at a 35% discount to our assessment of its
intrisic value.<F2>
DIVERSIFICATION BY INDUSTRY<F4>
--------------------------------
- ------------------------------------------------------------------------------
INDUSTRY % INDUSTRY %
- ------------------------------------------------------------------------------
TECHNOLOGY 20.3 MATERIALS & PROCESSING 12.6
HEALTHCARE 9.1 TRANSPORTATION 2.6
CONSUMER DISCRETIONARY FINANCIAL SERVICES 6.2
& SERVICES 11.5
COMMUNICATIONS 11.9
CONSUMER STAPLES 7.0 UTILITIES 0.0
ENERGY 1.9 BUSINESS SERVICES 9.5
CONGLOMERATE 1.8 REITS/PROPERTY 5.6
- -------------------------------------------------------------------------------
TOTAL 100.0%
===============================================================================
MARKET CAP DISTRIBUTION<F4>
---------------------------
------------------------------------------------------------
MARKET CAP MID CAP FUND S&P 400
(IN $ BILLIONS) (%) (%)
------------------------------------------------------------
$0.0 to 0.5 3.6 1.9
0.5 to 1.0 28.1 8.1
1.0 to 2.0 25.3 23.2
2.0 to 3.0 8.0 20.7
3.0 to 4.0 12.7 21.0
4.0 to 5.0 1.9 8.4
5.0 to 6.0 4.4 5.4
6.0 to 7.0 7.0 1.6
7.0 to 8.0 1.0 1.9
8.0+ 8.0 7.8
------------------------------------------------------------
TOTAL 100.0% 100.0%
============================================================
<PAGE>
OUR VIEW OF THE MARKET
----------------------
LOOKING FORWARD
We believe the markets are past the point of peak volatility. In our opinion,
stocks are likely to trade sideways for awhile, as investors wait for clearer
economic signals.
Nonetheless, some turbulence is very likely. And while we can't avoid market
movements, we can work to minimize their effects as we build the Fund's
portfolio. In these very tricky times, that means heightened selectivity. We
intend to continue shedding less attractive stocks in favor of high quality
companies that the market decline has brought within our reach. As always, we
will apply our major investment criteria: franchise companies...priced below
intrinsic value...riding an under-appreciated trend. Thus far, this approach has
enabled us to outperform. Over time, we believe it will continue to serve
our investors well.
PLEASE NOTE
- -----------
DISTRIBUTIONS
- - On September 30, Artisan Mid Cap Fund paid a distribution of $1.2673 to
shareholders of record as of September 29. The Fund's share price on
September 30 was reduced by the amount of the distribution.
- - For most non-retirement accounts, this distribution will be taxable,
whether you reinvest it or receive it in a check. However, because
<PAGE>
continued on following panel
OUR VIEW OF THE MARKET (continued)
-----------------------------------
of pending legislation, we're unable to let you know at the moment what
portions will be taxed at 20% versus 28% rates. We will let you know
precisely with your year-end tax information.
- - This distribution reflects undistributed capital gains for the Fund's
fiscal year ended June 30, 1998. During that period, the domestic equity
market was very strong. The market decline since then does not alter this
payment in any way, though it may affect subsequent distributions.
REPORTS
Don't be surprised to see a change in your next quarterly report, and to receive
it somewhat later than usual. We believe you'll find the revision in form and
content to be helpful. The later mailing reflects an operational change at
Artisan.
As always, if you have a question, please call us at 1-800-344-1770.
FUND STATISTICS<F5>
-------------------
NUMBER OF HOLDINGS 52
MEDIAN MARKET CAP $1.9 BILLION
MEDIAN GROWTH RATE 1998E 18%
1999E 16%
WEIGHTED AVERAGE P/E 1998E 13.4X
1999E 13.8X
MEDIAN PRICE/INTRINSIC VALUE 1998E 71%
1999E 58%
<PAGE>
FOOTNOTES
<F1> THE ARTISAN MID CAP FUND HAD AN AVERAGE ANNUAL TOTAL RETURN OF 4.1%
FOR THE YEAR ENDED SEPTEMBER 30, 1998, AND 23.6% FOR THE PERIOD FROM
INCEPTION ON JUNE 27, 1997, THROUGH SEPTEMBER 30, 1998. PERFORMANCE
DATA CONTAINED HEREIN REPRESENT PAST PERFORMANCE AND DO NOT GUARANTEE
FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE
SO THAT AN INVESTOR'S SHARES IN THE FUND, WHEN REDEEMED, MAY BE WORTH
MORE OR LESS THAN THEIR ORIGINAL COST. THE S&P 400 IS AN UNMANAGED,
MARKET-WEIGHTED INDEX, WITH DIVIDENDS REINVESTED, OF 400 MID-CAP
COMPANIES. THE LIPPER MID CAP FUND INDEX REFLECTS THE NET ASSET VALUE
WEIGHTED RETURN OF THE 30 LARGEST MID-CAP FUNDS. DURING THE YEAR ENDED
SEPTEMBER 30, 1998, ARTISAN MID CAP FUND WAS REIMBURSED FOR EXPENSES
IN EXCESS OF CERTAIN LIMITS, WHICH MAY HAVE HAD A MATERIAL EFFECT ON
THE FUND'S TOTAL RETURN.
<F2> PORTFOLIO PROFILES ARE FOR ILLUSTRATION ONLY AND ARE NOT INTENDED AS
RECOMMENDATIONS OF INDIVIDUAL STOCKS. THE PROFILES PRESENT INFORMATION
ABOUT THE COMPANIES BELIEVED TO BE ACCURATE, AND THE VIEWS OF THE
PORTFOLIO MANAGERS, AS OF OCTOBER 1, 1998. THAT INFORMATION AND THOSE
VIEWS MAY CHANGE AND THE FUND DISCLAIMS ANY OBLIGATION TO ADVISE
SHAREHOLDERS OF ANY SUCH CHANGES.
<F3> AS A PERCENTAGE OF TOTAL NET ASSETS AS OF SEPTEMBER 30, 1998.
<F4> AS A PERCENTAGE OF PORTFOLIO EQUITIES AS OF SEPTEMBER 30, 1998.
<F5> FUND STATISTICS ARE AS OF SEPTEMBER 30, 1998.
(logo)
ARTISAN FUNDS
C/O BOSTON FINANCIAL DATA SERVICES
P.O. BOX 8412
BOSTON, MA 02266-8412
1 800 344 1770
<PAGE>
--------------------------
ARTISAN INTERNATIONAL FUND
--------------------------
QUARTERLY UPDATE OCTOBER 1998
Thank you for investing in the Artisan International Fund. We are pleased to
provide this update for the third quarter of 1998.
During the quarter, the Artisan International Fund declined 18.8%, while its
benchmark index, the Morgan Stanley EAFE Index, lost 14.2%. Year-to-date,
through September 30, the Fund has gained 5.9% versus a loss of 0.6% for EAFE.
In the eleven quarters since inception, the Fund has returned 47.2% versus
EAFE's gain of 7.3%.<F1>
Inside we address this complex quarter for international markets. We also
discuss some recent purchases, as well as our continued commitment to European
equities.
Thank you for your confidence.
(logo)
ARTISAN FUNDS
<PAGE>
THIRD QUARTER OVERVIEW
----------------------
The third quarter saw volatility and overall declines in international markets.
Asia's markets responded to its continuing malaise, the increasing effects of
which roiled Latin American stocks.
More important to the Fund are the markets of Europe, where we've committed over
80% of our assets. While Europe's economies generally remain healthy, its
markets fell nonetheless, particularly in August. They retreated in reaction to
Russia's meltdown - with Russian debt held by German banks an immediate concern
and the political implications a longer-term worry. Europe also reflected U.S.
market conditions.
To capitalize on the downturn, we replaced some of our less favored holdings
with quality companies whose stocks had been driven down to attractive levels.
We believe this move will enhance the Fund's long-term growth potential.
-----------------------
INVESTMENT RETURNS<F1>
-----------------------
12/28/95 (INCEPTION) TO 9/30/98
ARTISAN EAFE LIPPER INTERNATIONAL
INTERNATIONAL INDEX FUND INDEX
------------ ------------ ----------------
47.2% 7.3% 20.0%
1
INVESTMENT PROFILE
--------------------
CAP GEMINI NV (NETHERLANDS)
We find computer services in Europe a very attractive sector. Demand far
outstrips supply, as information technology emerges as a competitive imperative;
and the Year 2000 (Y2K) problem, advent of the euro and development of the
Internet are likely to drive growth for years.
In this sector, CAP GEMINI stands out as a high quality company. It offers
robust growth, presence in one of the world's fastest developing information
technology markets (Netherlands), operates in many economic sectors and
dominates its home turf.
Cap Gemini's 6,500 employees provide services from programming and contract
consulting to software design and systems engineering. Its stock has proven
to be one of our finest holdings.<F2>
TOP 10 HOLDINGS<F3>
-------------------
- ----------------------------------------------------------------------
COMPANY %
- ----------------------------------------------------------------------
COLT TELECOM GROUP PLC...U.K. telephone service provider
for European corporations 3.4%
METRONET...Canadian telephone service provider 3.0%
NOKIA...International telecommunications company in Finland 2.8%
UNION BANK OF SWITZERLAND...Global bank in Switzerland 2.7%
CREDIT COMMERCIAL DE FRANCE...Commercial bank in France 2.5%
NOVARTIS AG...Pharmaceutical firm (world's largest)
in Switzerland 2.5%
TELECOM ITALIA SPA...Telephone and integrated services in Italy 2.5%
OLIVETTI SPA...Italian provider of telecom services 2.4%
SUEZ-LYONNAISE DES EAUX...Building and construction
company in France 2.0%
BANCA DI ROMA...Money center bank in Italy 2.0%
- ----------------------------------------------------------------------
TOTAL 25.8%
======================================================================
<PAGE>
2
INVESTMENT PROFILE
-------------------
OLIVETTI (ITALY)
In 1996, after a financially disastrous foray into computers, OLIVETTI decided
to restructure. The company sold all of its computer-related assets, put its
other technology ventures on the block and transformed itself into a provider of
telecommunications services.
Today, some 90% of Olivetti's value is in wireless and wireline services. And
this highly focused company stands to become a key beneficiary of Italy's
imminent liberalization of its telecommunications industry.
Germany's Mannesmann - also a Fund holding - has accumulated a 49% stake in
Olivetti's telecom interests. Mannesmann is Europe's largest new-entrant telecom
operator, with number two market share in Germany and France. We believe this
alliance should enhance Olivetti's ability to grow, even as it sheds its
remaining non-core assets.2
3
INVESTMENT PROFILE
-------------------
ARGENTARIA (SPAIN)
Madrid-based ARGENTARIA is a major restructuring story in European banking. The
March merger of its three commercial banking units promises to serve as
a catalyst for improved earnings growth, higher earnings quality, greater focus
and enhanced profitability.
As part of the process, this strategic change should: reinforce the retail
franchise - currently 1,743 branches in Spain and Latin America, with
<PAGE>
INVESTMENT PROFILE (continued)
------------------------------
ARGENTARIA (SPAIN)
a client base of nearly five million; exploit the synergies between the mortgage
and retail businesses; centralize and streamline back-office operations; and
enhance management capabilities and effectiveness.
As we've mentioned a number of times before, there's a strong trend to
consolidation in Europe's financial services industry. It's one reason we find
the sector attractive. As the trend continues, we believe a potential acquirer
may well find this transformed Spanish bank a compelling takeover.<F2>
REGION/COUNTRY ALLOCATION<F4>
-----------------------------
- ------------------------------------------------------------------------------
EUROPE 85.0% ASIA/PACIFIC 2.6%
- ------------------------------------------------------------------------------
UNITED KINGDOM 16.2 JAPAN 1.6
ITALY 11.6 SINGAPORE 0.5
GERMANY 10.8 HONG KONG 0.2
NETHERLANDS 9.5 THAILAND 0.2
FRANCE 8.1 PHILIPPINES 0.1
SWEDEN 6.6
---------------------------------
SWITZERLAND 6.5 LATIN AMERICA 4.2%
---------------------------------
DENMARK 5.1 BRAZIL 2.2
FINLAND 4.1 MEXICO 2.0
SPAIN 2.5
---------------------------------
NORWAY 1.2 NORTH AMERICA 6.2%
---------------------------------
AUSTRIA 1.1 CANADA 3.8
POLAND 1.1 BERMUDA 2.4
CZECH REPUBLIC 0.5
---------------------------------
IRELAND 0.1 CASH 2.0%
---------------------------------
<PAGE>
OUR VIEW OF THE MARKET
-----------------------
LOOKING AT EUROPE
Our enthusiasm for Europe remains undiminished. We believe the attributes that
have made Europe's markets among the world's most attractive in recent years are
still intact.
The evolution of a single, continental market should bring continuing benefits
such as gains from increased scope and scale of operations. Restructuring of
industry - with its many positive effects - will also continue, as will
deregulation and the liberalization of labor markets and industry.
There's a rising commitment to focusing business decisions on returns on assets
or capital. The imminent advent of monetary union should enhance the flow of
trade. And we expect continued high levels of corporate activity - including
mergers, acquisitions, spin-offs and share buybacks - all aimed at producing
higher returns for investors.
PLEASE NOTE
- -----------
DISTRIBUTIONS
- - On September 30, Artisan International Fund paid a distribution of $0.2798
to shareholders of record as of September 29. The Fund's share price on
September 30 was reduced by the amount of the distribution.
- - For most non-retirement accounts, this distribution will be taxable,
whether you
continued on following panel
OUR VIEW OF THE MARKET (continued)
reinvest it or receive it in a check. However, because of pending
legislation, we're unable to let you know at the moment what portions will
be taxed at 20% versus 28% rates. We will let you know precisely with your
year-end tax information.
- - This distribution reflects undistributed earnings for the Fund's fiscal
year ended June 30, 1998. The distribution is a result of net gains
realized from the sale of securities and net income. The market decline
since June 30 does not alter this payment in any way, though it may affect
subsequent distributions.
REPORTS
Don't be surprised to see a change in your next quarterly report, and to receive
it somewhat later than usual. We believe you'll find the revision in form and
content to be helpful. The later mailing reflects an operational change at
Artisan.
As always, if you have a question, please call us at 1-800-344-1770.
FUND STATISTICS<F5>
--------------------
NUMBER OF HOLDINGS 90
WEIGHTED AVERAGE MARKET CAP $12.6 BILLION
WEIGHTED AVERAGE GROWTH RATE 27%
WEIGHTED AVERAGE P/E 1998E 16.6X
1999E 16.5X
<PAGE>
FOOTNOTES
---------
<F1> THE ARTISAN INTERNATIONAL FUND HAD AN AVERAGE ANNUAL TOTAL RETURN OF -
0.8% FOR THE YEAR ENDED SEPTEMBER 30, 1998, AND 15.0% FOR THE
PERIOD FROM INCEPTION ON DECEMBER 28, 1995 THROUGH SEPTEMBER 30, 1998.
PERFORMANCE DATA CONTAINED HEREIN REPRESENT PAST PERFORMANCE AND DO
NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE
WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES IN THE FUND, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE
MORGAN STANLEY EAFE INDEX IS UNMANAGED AND INCLUDES NET REINVESTED
DIVIDENDS FOR COMPANIES THROUGHOUT THE WORLD, EXCLUDING THE U.S. AND
CANADA, IN PROPORTION TO WORLD STOCK MARKET CAPITALIZATION. THE LIPPER
INTERNATIONAL FUND INDEX REFLECTS THE NET ASSET VALUE WEIGHTED RETURN
OF THE THIRTY LARGEST INTERNATIONAL FUNDS. INTERNATIONAL INVESTMENTS
INVOLVE SPECIAL RISK CONSIDERATIONS, WHICH ARE DISCUSSED IN THE
PROSPECTUS.
<F2> PORTFOLIO PROFILES ARE FOR ILLUSTRATION ONLY AND ARE NOT INTENDED AS
RECOMMENDATIONS OF INDIVIDUAL STOCKS. THE PROFILES PRESENT INFORMATION
ABOUT THE COMPANIES BELIEVED TO BE ACCURATE, AND THE VIEWS OF THE
PORTFOLIO MANAGER, AS OF OCTOBER 1, 1998. THAT INFORMATION AND THOSE
VIEWS MAY CHANGE AND THE FUND DISCLAIMS ANY OBLIGATION TO ADVISE
SHAREHOLDERS OF ANY SUCH CHANGES.
<F3> AS A PERCENTAGE OF TOTAL NET ASSETS AS OF SEPTEMBER 30, 1998.
<F4> AS A PERCENTAGE OF PORTFOLIO ASSETS AS OF SEPTEMBER 30, 1998.
<F5> FUND STATISTICS ARE AS OF SEPTEMBER 30, 1998.
(logo)
ARTISAN FUNDS
C/O BOSTON FINANCIAL DATA SERVICES
P.O. BOX 8412
BOSTON, MA 02266-8412
1 800 344 1770
