ANNUAL
REPORT
(logo)
Artisan Funds
SMALL CAP FUND MID CAP FUND
INTERNATIONAL FUND SMALL CAP VALUE FUND
ARTISAN FUNDS
JUNE 30, 1998
<PAGE>
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Dear Fellow Shareholders,
Thank you for investing with Artisan Funds. We're pleased to send you this
Annual Report for the Funds' 1998 fiscal year.
Unlike previous annual reports, this one covers all four of our Funds. This
consolidation reflects our ongoing efforts to reduce costs, improve efficiency
and simplify the investing process for you. In this spirit, we are also
developing a consolidated prospectus.
It's no secret that the past year was a difficult time for equities - especially
in the last six months, when Asia's financial crisis, a slowing U.S. economy and
earnings disappointments contributed to market volatility and declines.
However, as you'll see from the Funds' returns, our portfolio managers performed
admirably. Their experience, discipline and focus made the difference. As we've
stated from the start, "We believe that experienced, active managers employing
high-value-added strategies can provide superior returns over time."
If you have a question about any of the Funds discussed in this report or would
like another prospectus, please call us at 1-800-344-1770. An Artisan Funds
representative will be happy to help you.
Again, thank you for investing with Artisan Funds. In the coming year, we'll do
our best to earn your continued confidence.
Sincerely,
/s/ Andrew A. Ziegler
Andrew A. Ziegler
Chairman
<PAGE>
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ARTISAN
FUNDS
Table of Contents
LETTERS TO SHAREHOLDERS
Small Cap Fund 2
International Fund 8
Mid Cap Fund 14
Small Cap Value Fund 20
SCHEDULES OF INVESTMENTS
Small Cap Fund 26
International Fund 30
Mid Cap Fund 36
Small Cap Value Fund 39
STATEMENTS OF
ASSETS AND LIABILITIES 43
STATEMENTS OF OPERATIONS 44
STATEMENTS OF
CHANGES IN NET ASSETS 45
FINANCIAL HIGHLIGHTS 47
NOTES TO
FINANCIAL STATEMENTS 50
INDEPENDENT
ACCOUNTANT'S REPORT 57
(logo)
ARTISAN FUNDS
ARTISAN FUNDS
C/O BOSTON FINANCIAL DATA SERVICES
P.O. BOX 8412
BOSTON, MA 02266-8412
(800) 344-1770
This report and the financial statements contained herein are provided for the
general information of the shareholders of Artisan Funds. This report is not
authorized for distribution to prospective investors unless preceded or
accompanied by an effective prospectus. For more information on any Fund,
including fees and expenses, please call (800) 344-1770 for a free prospectus.
Read it carefully before you invest or send money.
<PAGE>
ARTISAN
SMALL CAP FUND
Letter to Shareholders - August 20, 1998
THE FUND'S PERFORMANCE
For its fiscal year ended June 30, 1998, Artisan Small Cap Fund rose 14.7%. By
comparison, the Fund's benchmark index, the Russell 2000 Index, gained 16.5%,
the Russell 2000 Growth Index rose 13.2% and the Lipper Small Cap Fund Index
gained 15.5%. Since its inception on March 28, 1995, Artisan Small Cap Fund has
appreciated 88.8% versus 84.1% for the Russell 2000, 64.0% for the Russell 2000
Growth and 74.0% for the Lipper Small Cap Fund Index.
COMPARATIVE QUARTERLY PERFORMANCE
- ------------------------------
ARTISAN SMALL CAP FUND
AVERAGE ANNUAL TOTAL RETURNS:
One Year: 14.7%
Since Inception: 21.5%
- ------------------------------
Artisan Small Cap Russell 2000 Lipper Small Cap
Fund Index Fund Index
---------- ---------- ----------
3/28/95 $10,000.00 $10,000.00 $10,000.00
6/30/95 11,520.00 10,962.00 10,896.00
9/30/95 12,650.00 12,044.00 12,258.00
12/31/95 13,283.00 12,305.00 12,427.00
3/31/96 14,059.02 12,933.00 13,128.00
6/30/96 14,784.64 13,580.00 14,170.00
9/30/96 14,159.80 13,626.00 14,349.00
12/31/96 14,857.94 14,335.00 14,212.00
3/31/97 14,149.90 13,594.00 12,874.00
6/30/97 16,459.20 15,797.00 15,063.00
9/30/97 18,626.89 18,149.00 17,359.00
12/31/97 18,226.31 17,541.00 16,347.00
3/31/98 19,565.91 19,305.00 18,099.00
6/30/98 18,883.22 18,405.00 17,400.00
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
QUARTERLY 1995 1996 1997 1998
PERFORMANCE -------------------------- ----------------------------------- -------------------------------- -----------------
6/30/95 9/30/95 12/31/95 3/31/96 6/30/96 9/30/96 12/31/96 3/31/97 6/30/97 9/30/97 12/31/97 3/31/98 6/30/98
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ARTISAN
SMALL
CAP
FUND 15.2% 9.8% 5.0% 5.8% 5.2% -4.2% 4.9% -4.8% 16.3% 13.2% -2.2% 7.3% -3.5%
- ------------------------------------------------------------------------------------------------------------------------------------
Russell
2000
Index 9.6% 9.9% 2.2% 5.1% 5.0% 0.3% 5.2% -5.2% 16.2% 14.9% -3.3% 10.1% -4.7%
-----------------------------------------------------------------------------------------------------------------------------------
Lipper
Small Cap
Fund Index 9.0% 12.5% 1.4% 5.6% 7.9% 1.3% -1.0% -9.4% 17.0% 15.2% -5.8% 10.7% -3.9%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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 and the Lipper Small Cap Fund 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. The Russell 2000 Growth Index is an index of
common stocks with dividends reinvested, which measures the performance of those
Russell 2000 companies with higher price-to-book ratios and higher forecasted
growth values. The Lipper Small Cap Fund Index reflects the net asset value
weighted return of the 30 largest small-cap mutual funds. 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.
<PAGE>
This year, once again, small-caps took a back seat to large-caps, as the S&P 500
gained a stunning 30.1%. However, while last year's large-cap dominance was
fueled by earnings growth, this year's reflected investor preference for the
liquidity and greater perceived safety of large companies. This strong element
of caution was precipitated last fall by the economic and market turmoil that
engulfed Asia. Despite a weak and short-lived first quarter rally in Asian
markets, the region's economies continued to deteriorate through June 30.
OUR INVESTMENT APPROACH
Before detailing the Fund's performance this past year, it might be helpful to
review the characteristics we look for in a stock.
- - ABOVE-AVERAGE GROWTH. We favor companies with sustainable earnings-growth
rates of at least 15%.
- - ADEQUATE LIQUIDITY. It's essential for us to be able to buy or sell a stock
without unduly affecting its price. We look for stocks that trade at least
20,000 shares a day.
- - HIGH QUALITY MANAGEMENT. In small companies, management often holds the key
to ultimate success or failure. We look for management teams with the
vision, focus, drive and ability to take their companies to higher levels
of success. Before we invest in a company, we typically meet with its
management team in person to discuss the company's goals, strategies,
competitive position and control systems.
- - STRONG BUSINESS MODEL. We always ask ourselves, "Is this a good business?"
In other words, does this company have a defensible position in its market?
Does it have franchise potential, i.e. a dominant brand, leading technology
or other strength that would allow for a sustainable competitive advantage?
- - STRONG AND IMPROVING FUNDAMENTALS. We look at a company's historic revenue
and earnings growth, its profitability, and the potential for those trends
to continue or accelerate. We also consider financial strength, as measured
by its balance sheet leverage and coverage ratios.
- - POSITIVE TAILWIND. To realize the value inherent in its stock, a company
typically needs a catalyst. This might be an internal factor like a new or
revived product line, a new management team, or a critical acquisition. Or
the catalyst might be external - an emerging demographic trend, for
example, or a cyclical turnaround in an industry.
- - REASONABLE VALUATION. Through our research process, we determine the
"intrinsic value" of a business...the price a strategic buyer would pay to
own the entire company. We purchase a stock only when it sells at a
substantial discount to its intrinsic value. This is why our strategy is
often characterized as "growth at a reasonable price" or a "growth/value
blend."
LETTER TO SHAREHOLDERS
ARTISAN SMALL CAP FUND
<PAGE>
The question is, why would a stock have the positive characteristics that we
like, yet be selling for much less than it's really worth? The answer is simply
that there's usually a "catch." The stock may be underfollowed by Wall Street
analysts, misunderstood because the business is complex, or unrecognized by
investors because the investment thesis isn't yet obvious. Our research enables
us to uncover compelling growth opportunities that may be subtle, obscure or in
their early stages.
SINCE SMALL CAP INVESTING CAN BE VOLATILE, WE PURSUE A NUMBER OF STRATEGIES
DESIGNED TO REDUCE RISK. One, of course, is our focus on reasonable valuations.
In addition, we avoid industry concentration, limit each investment to no more
than 3% of assets, and continuously monitor and reappraise each of our holdings.
Artisan Small Cap Fund is designed as a long-term core investment that seeks to
out-perform its benchmark, the Russell 2000 Index, over a full market cycle. The
Fund stays fully invested in US small-cap stocks. We believe it is most
appropriate as part of a long-term diversified portfolio.
TWELVE MONTH REVIEW
For the twelve months ended June 30, 1998, Artisan Small Cap Fund gained 14.7%
versus a return of 16.5% by its benchmark index, the Russell 2000. In the first
half of 1998, the Fund trailed its index, 3.6% vs. 4.9%. Similarly, in the
second half of 1997, the Fund's 10.7% return was slightly under its index's
11.0% gain. It's revealing, though, to look at the quarterly returns, including
those of the Russell 2000 Growth Index.
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ARTISAN SMALL CAP RUSSELL 2000 RUSSELL 2000 GROWTH
- -------------------------------------------------------------------------------
Q3 '97 13.2% 14.9% 16.9%
Q4 '97 -2.2% -3.3% -8.2%
Q1 '98 7.3% 10.1% 11.9%
Q2 '98 -3.5% -4.7% -5.7%
- -------------------------------------------------------------------------------
RETURN 14.7% 16.5% 13.2%
- -------------------------------------------------------------------------------
Our goal is to keep up in strong markets and hold onto our gains in down
markets. Last year, as shown above, our success was more the latter...downside
retention. As you can see, the Fund outperformed the small-cap market in the two
negative quarters, but underperformed in the two positive quarters. This
performance reflects, at least in part, our attention to valuation and
cautious posture; these conservative aspects of our strategy steered us away
from the speculative sectors that led the market during the two up quarters.
While we had some strong performers, as shown below, we had none of the internet
stocks or similar home run stories that captured investor attention with little
more than an exciting business plan. Instead, we pursued the strategy that has
served us well over time: buying well-managed, profitable, growing companies at
valuations that don't reflect the full potential of the business. This approach
has produced above-average returns with less risk than many of our small-cap
growth peers. Some of our stocks did quite well, while others were
disappointing.
LETTER TO SHAREHOLDERS
ARTISAN SMALL CAP FUND
<PAGE>
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TOP 5 GAINERS<F1> TOP 5 LOSERS<F1>
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SECURITY % SECURITY %
- -----------------------------------------------------------------------------
HealthCare Financial Partners 128% Miller Industries -49%
International Comfort Products 80% Graham-Field Health Products -44%
Columbia Banking System 70% Nutraceutical International -44%
Gulf South Medical Supply 63% CFM Technologies -43%
OshKosh B'Gosh 57% CompDent -35%
- -----------------------------------------------------------------------------
<F1> These are the holdings that made the largest dollar difference in the
portfolio. While some minor holdings experienced greater percentage changes
in price, the change in their dollar value, did not, on an individual
basis, have as meaningful an effect on the Fund's net assets.
HealthCare Financial Partners and OshKosh B'Gosh reported better-than-expected
earnings. International Comfort Products and Columbia Banking System saw their
multiples expand as they gained recognition. Gulf South was a takeover. Among
our losers, Miller Industries and Graham-Field failed to deliver on rapid growth
projections, the result of inadequate control systems. Nutraceutical, a newly
public company, missed its earnings and showed questionable management controls.
CFM was hurt by a decline in capital spending for technology and CompDent's
near-term earnings were depressed by a change in strategy by management.
We bought a number of new names, mostly service-related companies in a variety
of industries. We believe the economy's service sector is well positioned for
growth. In healthcare, we purchased Alternative Living Services, Sunrise
Assisted Living and Healthcare Recoveries. In the information technology
outsourcing sector, we bought Data Processing Resources Corporation and
Intelligroup. Our research in the restaurants/hotels sector led us to Rio Hotel
& Casino, Vistana, Micros Systems and Hospitality Worldwide Services.
For a variety of reasons, we sold quite a number of holdings during the year.
Some met our price objective or exceeded our market cap limit: Whole Foods
Market, Express Scripts and Action Performance Companies are examples. We
benefited from takeovers, too - all in the second half of '97: DH Technology,
Gulf South Medical Supply, Telemundo Group and CapMac Holdings were among them.
We felt that certain holdings - Hvide Marine, Ultratech Stepper, Belden and
Western Gas Resources, to name a few - had too much dependence on commodity
prices or other cyclical factors. We also shed a few names that missed our
earnings, including Wall Data, Nutraceutical International and Graham-Field
Health Products.
PORTFOLIO CHARACTERISTICS
As of June 30, 1998, the Fund's net assets were $304.1 million and it was 97.4%
invested in stocks, which we consider fully invested. The Fund held 73 stocks
with a median market capitalization of $333 million. The median annual growth
rate of these companies was 28%, and they were selling at 17.6X our estimated
1998 earnings. In other words, we owned these stocks at a significant discount
to the growth rate of the underlying companies. Moreover, the median price of
our stocks was just 79% of their intrinsic value, based on our 1998 estimate.
Yet, despite these attractive valuation characteristics, our stocks were largely
under-researched and undiscovered - typically followed by four or fewer
analysts.
LETTER TO SHAREHOLDERS
ARTISAN SMALL CAP FUND
<PAGE>
-------------------------------------------
TOP TEN HOLDINGS
-------------------------------------------
COMPANY NAME %
-------------------------------------------
Borg-Warner Security 2.5
-------------------------------------------
Park-Ohio Holdings 2.4
-------------------------------------------
ITI Technologies 2.4
-------------------------------------------
CEC Entertainment<F1> 2.4
-------------------------------------------
HealthCare Financial Partners 2.3
-------------------------------------------
Penn Treaty American 2.3
-------------------------------------------
OshKosh B'Gosh 2.3
-------------------------------------------
General Cable 2.2
-------------------------------------------
ATL Ultrasound 2.2
-------------------------------------------
Tokheim Corporation 2.0
-------------------------------------------
TOTAL 23.0%
-------------------------------------------
<F1> Formerly ShowBiz Pizza Time
As you can see in the table below, the Fund's holdings, as of June 30, remained
broadly diversified by economic sector. We consider it important to have
exposure to all market sectors, and our research typically enables us to do so.
We believe this approach helps to reduce volatility, yet places emphasis on
picking stocks, which is where we add the most value. During the past six
months, we increased the Fund's participation in business services, healthcare
services, REITs/property and retailing/apparel, while we lowered the exposure to
financials, energy, transportation related and paper/packaging companies.
<TABLE>
<CAPTION>
INDUSTRY DIVERSIFICATION (%)
- ----------------------------------------------------------------------------------------------------------------
WEIGHTING WEIGHTING
- ----------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
6/30 12/31 6/30 12/31
INDUSTRY 1998 1997 INDUSTRY 1998 1997
- ----------------------------------------------------------------------------------------------------------------
Banks/Savings & Loans 3.4 4.7 Medical Devices/Supplies 5.1 5.6
- ----------------------------------------------------------------------------------------------------------------
Basic Industry 1.0 2.1 Other Financial 5.7 5.1
- ----------------------------------------------------------------------------------------------------------------
Biotech/Pharmaceuticals 2.6 0.6 Paper and Packaging 1.3 6.9
- ----------------------------------------------------------------------------------------------------------------
Business Services 7.2 3.4 REITs/Property 3.7 0.0
- ----------------------------------------------------------------------------------------------------------------
Capital Spending 9.6 9.9 Restaurants/Hotels 7.1 8.1
- ----------------------------------------------------------------------------------------------------------------
Consumer Cyclicals 5.8 4.8 Retailing/Apparel 7.2 3.5
- ----------------------------------------------------------------------------------------------------------------
Consumer Services 2.4 1.5 Tech - Computer & Equipment 3.1 2.7
- ----------------------------------------------------------------------------------------------------------------
Consumer Staples 3.4 5.1 Tech - Electronics 7.3 7.2
- ----------------------------------------------------------------------------------------------------------------
Energy 4.4 8.6 Tech - Software/Telecommunications 4.2 3.7
- ----------------------------------------------------------------------------------------------------------------
Healthcare Services 4.6 1.6 Transportation Related 2.6 7.5
- ----------------------------------------------------------------------------------------------------------------
Insurance 2.3 3.4 Utilities 3.4 1.5
- ----------------------------------------------------------------------------------------------------------------
Other assets less liabilities 2.6 2.5
- ----------------------------------------------------------------------------------------------------------------
TOTAL 100.0%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
LETTER TO SHAREHOLDERS
ARTISAN SMALL CAP FUND
<PAGE>
OUTLOOK AND STRATEGY
Just as we were a year ago, we're still concerned, still cautious. Factors such
as extremely high valuations, the sustainability of productivity gains and
profit growth, and ramifications from Asia's economic turmoil remain concerns.
So we see no reason to alter the conservative strategy we've followed.
Now that we've painted the sky gray, let's add a ray of sunshine. A small-cap
resurgence may be on the horizon. It's no secret that large-caps have
outperformed small-caps for several years. As a result, small-cap valuations
relative to large-caps are extraordinarily favorable. In fact, relative
valuations are so low by historical standards that a small-cap rally seems - at
last - a real possibility.
The table below illustrates this point. Based on research by Prudential
Securities,<F1> it shows that nearly every measure of relative valuation is
below its 1990 recession low - an especially difficult time for small-cap
stocks.
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RELATIVE VALUATIONS OF SMALL-CAPS TO LARGE-CAPS
- -------------------------------------------------------------------------------
6/98 1983 PEAK 1990 TROUGH AVERAGE
- -------------------------------------------------------------------------------
P/E Trailing 0.95 1.39 1.04 1.22
- -------------------------------------------------------------------------------
P/E Forecast 0.87 1.17 0.91 1.05
- -------------------------------------------------------------------------------
Price/Book 0.62 1.13 0.70 0.88
- -------------------------------------------------------------------------------
Price/Sales 0.75 1.10 0.65 0.87
- -------------------------------------------------------------------------------
P/E to Growth 0.62 1.00 0.67 0.79
- -------------------------------------------------------------------------------
A valuation study by The Leuthold Group,<F2> highly regarded specialists in
investment research, is similarly revealing. In breaking down the 3000 largest
U.S. equities by decile, it shows that the 300 largest companies currently have
a P/E of 22.5X vs. a P/E of 16.5X for the 300 smallest. This 25% discount,
according to the study, is as wide as the gap has ever gotten. For those of us
who like to "think small," that's big news. With a little luck, it will soon
translate into headlines.
As always, we thank you for your confidence. We will do our best in the coming
year to identify superior investments for you.
Sincerely,
/s/ Carlene Murphy Ziegler /s/ Millie Adams Hurwitz
Carlene Murphy Ziegler Millie Adams Hurwitz
Portfolio Manager Portfolio Manager
<F1> Prudential Securities Incorporated, "Investor Weekly", June 10, 1998.
<F2> The Leuthold Group, "Perception for the Professional", June 1998.
LETTER TO SHAREHOLDERS
ARTISAN SMALL CAP FUND
<PAGE>
ARTISAN
INTERNATIONAL FUND
Letter to Shareholders - August 20, 1998
THE FUND'S PERFORMANCE
Artisan International Fund gained 24.1% for its fiscal year ended June 30, 1998,
outpacing its benchmarks, the Morgan Stanley EAFE Index and Lipper International
Fund Index, which gained 6.1% and 9.0%, respectively. For the six months ended
June 30, 1998, the Fund gained 30.4%, well ahead of its benchmarks. In the ten
quarters since its inception, the Fund has gained 81.3%, versus gains of 25.1%
and 42.5% for the EAFE and Lipper indexes. We are understandably delighted with
this record of consistent outperformance.
COMPARATIVE QUARTERLY PERFORMANCE
- -----------------------------
ARTISAN INTERNATIONAL FUND
AVERAGE ANNUAL TOTAL RETURNS:
One Year: 24.1%
Since Inception: 26.8%
- -----------------------------
Artisan International EAFE Lipper International
Fund Index Fund Index
---------- ---------- ----------
12/28/95 $10,000.00 $10,000.00 $10,000.00
3/31/96 10,910.00 10,288.95 10,467.28
6/30/96 12,080.00 10,451.74 10,894.57
9/30/96 12,220.00 10,438.63 10,902.89
12/31/96 13,437.23 10,604.70 11,471.87
3/31/97 14,153.48 10,438.60 11,756.05
6/30/97 14,607.44 11,793.25 13,071.82
9/30/97 14,839.46 11,710.22 13,322.30
12/31/97 13,902.49 10,793.24 12,303.30
3/31/98 16,714.22 12,380.92 14,128.57
6/30/98 18,131.25 12,512.37 14,248.54
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
QUARTERLY 1996 1997 1998
PERFORMANCE ----------------------------------- ------------------------------------ ----------------
3/31/96 6/30/96 9/30/96 12/31/96 3/31/97 6/30/97 9/30/97 12/31/97 3/31/98 6/30/98
- --------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ARTISAN
INTERNATIONAL
FUND 9.1% 10.7% 1.2% 10.0% 5.3% 3.2% 1.6% -6.3% 20.2% 8.5%
- --------------------------------------------------------------------------------------------------------
EAFE
Index 2.9% 1.6% -0.1% 1.6% -1.6% 13.0% -0.7% -7.8% 14.7% 1.1%
-------------------------------------------------------------------------------------------------------
Lipper
International
Fund Index 4.4% 4.1% 0.1% 5.2% 2.5% 11.2% 1.9% -7.6% 14.8% 0.8%
- --------------------------------------------------------------------------------------------------------
</TABLE>
This graph compares the results of $10,000 invested in Artisan International
Fund on December 28, 1995 (the date the Fund began operations), with Morgan
Stanley's Europe, Australasia and Far East (EAFE) Index and Lipper International
Fund 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.
<PAGE>
OUR INVESTMENT APPROACH
As is our custom, we would like to review our investment approach before
discussing details of the Fund's recent performance. Because there are a number
of approaches to international investing, we believe investors should understand
how a fund achieves its returns.
The Artisan International Fund invests in a broadly diversified portfolio of
international growth stocks, concentrating on industries and countries that have
accelerating growth prospects and companies that can capitalize on that growth.
The Fund's style can be characterized as "top-down and bottom-up," meaning that
country selection and stock selection are both fundamental to our process.
However, country exposures are typically a residual of stock selection.
OUR APPROACH HAS FOUR BASIC ELEMENTS
COUNTRY AND INDUSTRY FOCUS. We first search for countries and industries that
are providing a good environment for growth. This includes economies where
development is accelerating, as well as those becoming more competitive or
benefiting from economic stimulus. These countries and industries are where we
focus our search for stocks. Although the Fund holds some stocks from emerging
countries, these holdings are very modest - a minor aspect of our overall
strategy. Importantly, we do not consider the index weighting of countries as
part of our process. We will not, for example, maintain a large position in
Japan simply because it represents a large portion of the EAFE Index. This
approach differentiates the Fund from many of its peers.
BROAD THEMES. Management often identifies one or more broad themes that
influence both its country allocation and stock selection.
STOCK SELECTION. Having identified countries, industries and themes that provide
environments for growth, we look for companies best able to capitalize on this
potential. Our portfolio management team travels widely, meeting with company
managements and conducting fundamental research. We look for well-managed
companies in good financial condition, with strong market shares and a
reputation for competence and integrity. To be considered by us, stocks must
sell at attractive prices relative to their local markets. We avoid stocks that
are trading at unsustainable or unusually high valuations. Because of this focus
on valuation analysis, our stock selection style has been characterized as
"growth at a price." Our final country weightings are a residual of our stock
selection - the number of good investments we find in a particular area
determines our exposure to that area.
RISK REDUCTION. International markets can be volatile; so the management of risk
is a major consideration in any decision. Broad diversification - across many
regions, countries, industries and companies - is a fundamental aspect of risk
management. Although diversification cannot eliminate risk, it can cushion the
impact of a decline in one or more parts of the portfolio. As further elements
of risk reduction, we monitor the size of individual positions, trading
liquidity and exposure to individual countries and emerging markets.
LETTER TO SHAREHOLDERS
ARTISAN INTERNATIONAL FUND
<PAGE>
As we've done before, we urge you to view this Fund as a long-term investment.
Because foreign markets can be volatile, 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 suggest you use this
Fund as part of a diversified portfolio, and only if you can accept the
possibility of short-term loss.
TWELVE MONTH REVIEW
We are very pleased with the Fund's performance during the past twelve months.
We believe the Fund's regional allocations - increasingly overweight in Europe
and increasingly underweight in Asia/Pacific - contributed to its significant
outperformance of the EAFE. As of July 1, 1997, Fund assets were 62.0% in Europe
and 25.2% in Asia/Pacific. By June 30, 1998, these proportions had changed to
81.5% in Europe and 3.2% in Asia/Pacific.
As we have mentioned before, we believe that Europe's long-term investment
potential is truly exceptional; a confluence of major trends - including
deregulation and privatization, consolidation and restructuring, a nascent
concern for shareholder value, an emerging equity culture, and the advent of a
common currency - is creating unprecedented investment opportunities.
Conversely, we intend to keep our distance from Asia until we see significant
and consistent improvement in the region. So far, it still seems mired in the
economic malaise and market turmoil that started last fall. Japan, in
particular, must come to grips with its onerous structural problems before it
can assume its role as the region's engine for resurgence.
- -------------------------------------------------------------------------------
REGION/COUNTRY ALLOCATION
- -------------------------------------------------------------------------------
REGION/COUNTRY WEIGHTING REGION/COUNTRY WEIGHTING
- -------------------------------------------------------------------------------
United Kingdom 14.6% Japan 1.6%
Netherlands 10.9% Hong Kong 0.7%
Italy 9.3% Singapore 0.5%
Germany 8.1% Thailand 0.2%
Switzerland 7.4% Philippines 0.1%
France 7.1% Australia 0.1%
Sweden 5.6% Indonesia 0.0%<F1>
--------
Denmark 4.9% ASIA/PACIFIC TRIAL 3.2%
Finland 3.9%
Spain 3.5% Brazil 4.0%
Portugal 2.3% Mexico 2.5%
-----
Austria 1.7% LATIN AMERICA TOTAL 6.5%
Norway 1.3%
Poland 0.7% Canada 4.0%
Czech Republic 0.2% Bermuda 1.9%
------ -----
EUROPE TOTAL 81.5% NORTH AMERICA TOTAL 5.9%
-----------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES 2.9%
-----------------------------------------------------------------------------
TOTAL 100.0%
-----------------------------------------------------------------------------
<F1> Less than 0.1% of assets
LETTER TO SHAREHOLDERS
ARTISAN INTERNATIONAL FUND
<PAGE>
In concert with regional exposure, stock selection contributed to performance.
On June 30, the 107 stocks in our portfolio represented investments in 26
different countries. To us, broad diversification by country and region is
important. It enhances return opportunity and helps to protect the Fund from
volatility in a particular market. Like other international managers, we prefer
to stress some countries and limit or avoid exposure to others. But we don't
make large, concentrated bets. For us, the more sensible strategy is the
combination of broad diversification by country and a focus on astute stock
picking.
- -------------------------------------------------------------------------------
TOP 5 GAINERS<F1> TOP 5 LOSERS<F1>
- -------------------------------------------------------------------------------
SECURITY % SECURITY %
- -------------------------------------------------------------------------------
COLT Telecom Group PLC 309% Wing Hang Bank -68%
Cap Gemini NV 128% Peregrine Investment Holdings -63%
Energis PLC 96% Cia de Saneamento Basico -52%
Credito Italiano SPA 88% Guangzhou Investment -38%
Credit Suisse Group 40% Grupo Financiero Inbursa -30%
- -------------------------------------------------------------------------------
<F1> These are the holdings that made the largest dollar difference in the
portfolio. While some minor holdings experienced greater percentage changes
in price, the change in their dollar value, did not, on an individual
basis, have as meaningful an effect on the Fund's net assets.
MetroNet Communications is another big gainer, and a holding that illustrates
our selection process. This Canadian company provides voice and data telecom
services to high-volume corporate and government users. Since the start of 1998,
when Canada deregulated its highly lucrative $20 billion telecom market,
MetroNet has become Bell Canada's largest competitor. Through its lean operation
- - just 570 employees - and advanced technology, MetroNet offers service that's
more sophisticated and more efficient at a much lower cost. Its custom-tailored
networks - including bundled voice and data - service 222 office buildings in
five major cities. The company has very little competition, and its recent
acquisition of Rogers Communications enhanced its leadership position. It also
accelerated - by two or three years - MetroNet's build-out plan for fiber-optic
cable. Though it generates sales of over $700 million, MetroNet has yet to turn
a profit. But we're confident that this well-managed company will continue its
explosive growth and well reward its investors over time.
PORTFOLIO CHARACTERISTICS
As of June 30, 1998, total net assets in the Fund were $497.2 million. The
median market cap of the Fund's holdings was $1.4 billion, and its weighted
average market cap was $15.7 billion. The portfolio had a weighted average
growth rate of 29% and, based on 1998 estimates, a weighted average price-to-
earnings ratio of 21.2X. We believe this to be an excellent growth rate at a
relatively modest P/E ratio and an indication of our attention to valuation. On
June 30, we were 97.1% invested in equities, which we consider to be fully
invested. We did not hedge currency exposure on portfolio holdings in the
preceding twelve months.
Our industry holdings remain broadly diversified. One area of emphasis is the
telecommunications sector. Deregulation and privatization - in Europe and
elsewhere - are creating exceptional
LETTER TO SHAREHOLDERS
ARTISAN INTERNATIONAL FUND
<PAGE>
- ------------------------------------------------------------------------
TOP TEN HOLDINGS
- ------------------------------------------------------------------------
COMPANY NAME COUNTRY %
- ------------------------------------------------------------------------
Colt Telecom Group PLC United Kingdom 3.9
- ------------------------------------------------------------------------
MetroNet Communications Canada 3.4
- ------------------------------------------------------------------------
Union Bank of Switzerland Switzerland 3.0
- ------------------------------------------------------------------------
Nokia Corporation Finland 2.2
- ------------------------------------------------------------------------
Novartis AG Switzerland 2.2
- ------------------------------------------------------------------------
Cap Gemini NV Netherlands 2.0
- ------------------------------------------------------------------------
Energis PLC United Kingdom 2.0
- ------------------------------------------------------------------------
Vest-Wood A/S Denmark 1.9
- ------------------------------------------------------------------------
Global Telesystems Group Bermuda 1.9
- ------------------------------------------------------------------------
Credit Suisse Group Switzerland 1.8
- ------------------------------------------------------------------------
TOTAL 24.3%
- ------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION (%)
- -------------------------------------------------------------------------------
6/30 6/30
INDUSTRY 1998 INDUSTRY 1998
- -------------------------------------------------------------------------------
Automotive 3.0 Mining/Metals 0.8
- -------------------------------------------------------------------------------
Broadcast/Publishing 2.7 Money Center Banks 10.3
- -------------------------------------------------------------------------------
Business & Public Services 4.9 Multi-Industry 3.1
- -------------------------------------------------------------------------------
Cable Television 0.9 Office Furnishings 1.1
- -------------------------------------------------------------------------------
Capital Spending 1.1 Retailing 1.4
- -------------------------------------------------------------------------------
Cellular Telecommunications 3.4 Software 4.0
- -------------------------------------------------------------------------------
Commercial Banks 12.5 Special Finance 3.5
- -------------------------------------------------------------------------------
Computer Services 5.0 Technology 0.3
- -------------------------------------------------------------------------------
Construction/Housing 2.5 Telecommunication Equipment 4.1
- -------------------------------------------------------------------------------
Consumer Cyclicals 2.0 Telecommunication Service 12.6
- -------------------------------------------------------------------------------
Consumer Staples/Service 1.4 Telephone and Integrated Services 2.7
- -------------------------------------------------------------------------------
Engineering 3.7 Transportation/Distribution 1.6
- -------------------------------------------------------------------------------
Financial Services 0.9 Utilities 0.8
- -------------------------------------------------------------------------------
Food/Restaurants 2.2
- -------------------------------------------------------------------------------
Health Care Services 4.6 Other assets less liabilities 2.9
- -------------------------------------------------------------------------------
TOTAL 100.0%
- -------------------------------------------------------------------------------
investment opportunities. We continue to favor Europe's financial services
sectors, which we see being in the early stages of consolidation. And we also
hold a number of firms that are meeting Europe's growing need for temporary
employees. No single stock, even among our top ten holdings, represents more
than 3.9% of assets; and we intend to continue diversifying broadly by country,
sector and company.
LETTER TO SHAREHOLDERS
ARTISAN INTERNATIONAL FUND
<PAGE>
OUTLOOK AND STRATEGY
Looking ahead to the next twelve months, we expect to maintain our recent
elements of strategy. We intend, for example, to maintain our significant
commitment to Europe. As we mentioned earlier, the economic trends we see
converging in this region point to truly compelling opportunities both now and
for years to come.
The investment environment in Asia is a different story. We regard the region's
political, economic and market conditions as simply too unstable to warrant more
than our current token exposure. While we still regard the region's long-term
potential as staggering, the region's dominant governments - Japan, India and
China - must prove the wisdom of their policies and strength of their
currencies.
We also have high long-term hopes for Latin America. For now, however, we are
satisfied with our relatively modest commitments to Mexico and Brazil. Though
both economies have shown internal improvement in recent years, they are
nonetheless subject to both political uncertainty and dependence on exports to
Asia for much of their growth.
Regardless of the countries or companies in which we invest, we fully intend to
maintain our single focus: to find high-quality, well-managed growth companies
and invest in their stocks at prices we consider to be attractive.
Thank you for your support of the Artisan International Fund. We will continue
doing our very best to justify your confidence.
Sincerely,
/s/ Mark L. Yockey
Mark L. Yockey
Portfolio Manager
Effective July 1, 1997, the Fund began offering an institutional class of shares
for institutional investors meeting certain minimum investment requirements. A
report on the institutional class is available under separate cover.
LETTER TO SHAREHOLDERS
ARTISAN INTERNATIONAL FUND
<PAGE>
ARTISAN
MID CAP FUND
Letter to Shareholders - August 20, 1998
THE FUND'S PERFORMANCE
For its fiscal year ended June 30, 1998, Artisan Mid Cap Fund returned 46.1%. By
comparison, the Fund's benchmark index, the S&P 400 Mid-Cap Index, rose 25.6%,
and its peer group, represented by the Lipper Mid Cap Index, gained 22.0%.
We're delighted to note that for the year ended June 30, 1998, Artisan Mid Cap
Fund ranked #4 for total return among the 284 mid-cap funds tracked by Lipper
Analytical Services. Put another way, the Fund outperformed 98% of its peers
during its first year of operation.
COMPARATIVE QUARTERLY PERFORMANCE
- -----------------------------
ARTISAN MID CAP FUND
AVERAGE ANNUAL TOTAL RETURNS:
One Year: 46.1%
Since Inception: 45.5%
- -----------------------------
Lipper
ARTISAN S&P 400 MID CAP Fund
MID CAP FUND Index Index
------------- ---------- -------------
6/27/97 $10,000.00 $10,000.00 $10,000.00
9/30/97 $12,550.00 $11,535.00 $11,455.00
12/31/97 $12,814.41 $11,595.00 $10,913.00
3/31/98 $14,713.64 $12,834.00 $12,294.00
6/30/98 $14,606.94 $12,524.00 $12,244.00
- -------------------------------------------------------------
QUARTERLY 1997 1998
------------------- -----------------
PERFORMANCE 9/30/97 12/31/97 3/31/98 6/30/98
- -------------------------------------------------------------
ARTISAN MID CAP FUND 25.5% 2.1% 14.8% -0.7%
- -------------------------------------------------------------
S&P 400 Index 15.7% 0.5% 10.7% -2.4%
- -------------------------------------------------------------
Lipper Mid Cap Index 14.1% -4.8% 12.7% -0.4%
- -------------------------------------------------------------
This graph compares the results of $10,000 invested in the Artisan Mid Cap Fund
on June 27, 1997 (the date the Fund began operations) with the S&P 400 Index and
the Lipper Mid Cap Fund Index. The S&P 400 Index is an unmanaged, market-
weighted index of 400 mid-cap companies. The Lipper Mid Cap Fund Index reflects
the net asset value weighted return of the 30 largest mid-cap mutual funds. 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.
<PAGE>
Given the challenging environment for equities during the year, we believe these
results reflect our particular focus and discipline: We invest in companies with
"franchise characteristics," a potential catalyst for growth, and a stock price
that represents a substantial discount to our assessment of intrinsic value.
OUR INVESTMENT APPROACH
Because we assume the stock market is inherently efficient, we employ a strategy
that we believe can reveal compelling opportunities. Our strategy consists of
three elements...
- We concentrate on companies with franchise characteristics. An established
franchise can bring a company a major competitive advantage and protect it
from some of the effects of competition. Over time, this feature can lead
to more stable cash flows and, ultimately, to higher valuations. Examples
of "franchise characteristics" are proprietary technology, a leading brand,
a dominant market share, or the position of low-cost producer.
- A franchise company selling at a significant discount to its intrinsic
value offers superior long-term investment potential. Thus, our assessment
of "intrinsic value" - the price a knowledgeable or strategic buyer would
pay to own a company's cash flows - is fundamental to our process. It
guides our buying and selling decisions - we attempt to buy only at a large
discount and sell when the price approaches intrinsic value - and helps to
lower overall portfolio risk.
- A company with franchise characteristics and an attractive valuation is
often one experiencing a major change - new management, for instance, or a
restructuring, new product cycle, acquisition or divestiture. Such a change
can serve as a catalyst to improved performance, higher earnings and,
often, powerful, long-term market response. We hope to identify as early as
possible the potential for possible change, particularly if it overrides or
runs counter to consensus opinion.
We believe the mid-cap universe - where market caps currently range from $600
million to $6 billion - provides the most fertile ground for identifying
franchise companies trading at attractive prices. Large-cap franchise companies,
which are heavily followed and sponsored, tend to be priced more efficiently.
And small-cap companies typically do not yet possess meaningful franchise
characteristics. By contrast, the mid-cap universe - less efficient than the
large-cap and more mature than the small-cap - is populated by many established
companies whose franchise characteristics are emerging or are poised to create
powerful competitive advantages.
Artisan Mid Cap Fund is designed as a long-term core investment for a
diversified portfolio. The Fund seeks to outperform its index, the S&P 400
Mid-Cap, over a full market cycle. To this end, it stays fully invested in
U.S. mid-cap stocks.
LETTER TO SHAREHOLDERS
ARTISAN MID CAP FUND
<PAGE>
TWELVE MONTH REVIEW
The third quarter of 1997 was good for the Fund. We were in the right place at
the right time. It was a season of robust earnings, and the market paid richly
for them. Holdings like @HOME, J.D. Edwards and Equity Office Products
contributed to the Fund's quarterly return of 25.5%.
Sensing the market's concern, however, we went on the road in September to
assess the economic problems unfolding in Asia. Throughout the fall, we spoke
with management in numerous companies - some were current holdings, others we
were considering - and continued our fact-finding into the fourth quarter. Asia
represented a major source of growth in the world economy, and we wanted to
determine if this role would be diminished in the future. By the end of the
first quarter, we'd concluded that Asia's problems were broader and deeper than
generally assumed, and that major structural changes - including leadership and
capital reallocation - were clearly necessary. Along the way, this thesis caused
us to sell some of our commodity technology holdings, which we viewed as
especially vulnerable...VLSI Technology, International Rectifier and Kent
Electronics. Also, as oil prices fell in response to lower demand from Asia,
we sold energy stocks such as Tidewater, Sonat and Oryx Energy.
Similarly, our point of view on Asia caused us to back away from certain
companies we were watching. At the same time, market overreaction presented what
we regarded as exceptional opportunities. In technology, for example, we were
able to purchase Sanmina and Aspen Technology - both of which eventually
contributed greatly to performance - as well as American Power Conversion, for
which we still have great hopes.
Along with Asia, our investment decisions were also affected by several industry
trends. One was the trend toward a digital world...the emergence of the internet
and the merging of voice and data communications. We see the telecom industry at
the beginning of a capital spending cycle, building the capacity and capability
to deliver digital information and media. This led us to significant positions
in cable companies - Century Communications and Rogers Communications;
infrastructure plays - Sanmina and American Power Conversion; and a content
provider for cable - Liberty Media.
Another trend where we found opportunity was outsourcing. Embraced by virtually
every industry for functions ranging from manufacturing and training to research
and information technology, outsourcing is now seen as a tool for competitive
advantage. This concept led us to a number of outsourcing providers: Sanmina,
which we mentioned earlier in manufacturing; Covance, in drug research; Fiserv,
National Data and Sungard Data Systems in information technology.
The trend to consolidation also led us to exciting investments...Fiserv, Mail-
Well, Quorum Health and Fortune Brands. Each company is focused on a specific
niche market in its industry and is rapidly acquiring smaller players to gain
advantages of scale. Behind the scenes, an interesting scenario is playing out.
Many of the companies that have been acquired belonged to retiring entrepreneurs
who chose as their exit strategy to sell to an industry consolidator. During the
year, some stocks did very well; others were disappointing.
LETTER TO SHAREHOLDERS
ARTISAN MID CAP FUND
<PAGE>
- ----------------------------------------------------------------------
TOP 5 GAINERS<F1> TOP 5 LOSERS<F1>
- ----------------------------------------------------------------------
SECURITY % SECURITY %
- ----------------------------------------------------------------------
@HOME 119% Cabletron Systems -33%
Century Communications 54% International Rectifier -29%
Centennial Cellular 52% Teradyne -24%
Outdoor Systems 39% Steel Dynamics -23%
Liberty Media - Class A 36% Nabors Industries -21%
- ----------------------------------------------------------------------
<F1> These are the holdings that made the largest dollar difference in the
portfolio. While some minor holdings experienced greater percentage
changes in price, the change in their dollar value, did not, on an
individual basis, have as meaningful an effect on the Fund's net assets.
As an example of a successful stock that reflects our investment methodology,
consider Outdoor Systems, listed above. Its franchise is clear-cut: not only is
this company America's largest owner of billboards, it also dominates most of
its local markets. As catalysts to growth, we see two significant factors: the
continued acquisition and profitable integration of additional billboard
properties; and the ability as a national player to offer both national
contracts and attractive synergies with radio stations, thus pushing up rates
for what has historically been a cheap medium. The company's valuation was
compelling as well.
PORTFOLIO CHARACTERISTICS
We ended the year with 56 holdings spread across most major sectors of the
economy. Our top ten holdings represented 29.4% of net assets. Our median market
cap was $1.5 billion - still near the low end of our capitalization range.
Based on our 1998 estimates, the portfolio's median P/E of 14.9X was somewhat
below its median growth rate of 16%. And our median price/intrinsic value was
81%.
--------------------------------------------------
TOP TEN HOLDINGS
--------------------------------------------------
COMPANY NAME %
--------------------------------------------------
Fortune Brands 3.3
--------------------------------------------------
Apartment Investment and Management 3.2
--------------------------------------------------
Centennial Cellular 3.2
--------------------------------------------------
American Power Conversion 3.2
--------------------------------------------------
Mettler-Toledo International 3.1
--------------------------------------------------
Century Communications 2.9
--------------------------------------------------
Covance 2.9
--------------------------------------------------
Thermo Electron 2.7
--------------------------------------------------
LNR Property 2.6
--------------------------------------------------
Dial Corp. 2.3
--------------------------------------------------
TOTAL 29.4%
--------------------------------------------------
You may recall that we started 1998 with 65 holdings in the portfolio. The
reason we ended with 56 reflects a decision to focus on companies in which we
have the highest confidence. As earnings projections become more difficult, we
prefer to invest only in companies whose earnings have strong underlying trends.
This strategy of selectivity and consolidation does not lessen diversification
or increase risk. Rather, it enables us to follow our current holdings even more
closely, and to gain more intimate knowledge of investments we're considering.
LETTER TO SHAREHOLDERS
ARTISAN MID CAP FUND
<PAGE>
As you know, attention to valuation is fundamental to our strategy. So it's
probably not surprising - given the market's passion for large-caps during the
year - that our research led us to opportunities at the smaller end of our cap
range. While we're pleased with these holdings, and confident in their quality,
we realize that we may be early in recognizing their value.
- ----------------------------------------
MARKET CAP DIVERSIFICATION
- ----------------------------------------
MARKET CAP FUND S&P 400
(IN $ BILLIONS) (%) (%)
- ----------------------------------------
0.0 to 0.5 4.8 0.5
- ----------------------------------------
0.5 to 1.0 28.1 5.9
- ----------------------------------------
1.0 to 2.0 23.3 17.3
- ----------------------------------------
2.0 to 3.0 22.1 22.3
- ----------------------------------------
3.0 to 4.0 4.6 17.0
- ----------------------------------------
4.0 to 5.0 1.8 12.8
- ----------------------------------------
5.0 to 6.0 4.8 6.0
- ----------------------------------------
6.0 to 7.0 5.6 4.6
- ----------------------------------------
7.0 to 8.0 0.0 3.9
- ----------------------------------------
Over 8.0 4.9 9.7
- ----------------------------------------
TOTAL 100.0% 100.0%
- ----------------------------------------
- -------------------------------------------
INDUSTRY DIVERSIFICATION (%)
- -------------------------------------------
WEIGHTING
- -------------------------------------------
6/30
INDUSTRY 1998
- -------------------------------------------
Business Services 7.5
- -------------------------------------------
Communications 16.0
- -------------------------------------------
Conglomerate 6.0
- -------------------------------------------
Consumer Discretionary & Services 9.3
- -------------------------------------------
Consumer Staples 5.3
- -------------------------------------------
Energy 2.2
- -------------------------------------------
Financial Services 4.7
- -------------------------------------------
Healthcare 6.5
- -------------------------------------------
Materials & Processing 11.0
- -------------------------------------------
REITs/Property 10.7
- -------------------------------------------
Technology 15.0
- -------------------------------------------
Transportation Related 0.0
- -------------------------------------------
Utilities 0.0
- -------------------------------------------
Other assets less liabilities 5.8
- -------------------------------------------
TOTAL 100.0%
- -------------------------------------------
As of June 30, the Fund remained broadly diversified by economic sector. We
regard it as strategically sound to participate in virtually every major segment
of the economy. Doing so helps to reduce investment risk and to emphasize the
area where we add the most value...picking stocks.
Over the past twelve months, we lightened up on energy and financial service
stocks, while increasing the percentage of assets in communications and
technology.
In energy, we sold off Sonat, Tidewater, Noble Drilling, Oryx Energy and
Ultramar Diamond Shamrock. We concluded that this sector's earnings cycle had
turned negative, and was likely to remain so for awhile. Another decision was to
eliminate all of our regional bank stocks in December and January. These were:
First Commerce of Little Rock, Pacific Century Financial, First American of
Tennessee and First Security Corporation. These stocks reflected their
industry's takeover fever, and our valuation work led us to conclude that their
risk/reward tradeoff was no longer attractive.
LETTER TO SHAREHOLDERS
ARTISAN MID CAP FUND
<PAGE>
We continued riding the wave of the communications trend, adding cable
companies, broadcasters and content providers, including Rogers Communications,
Clearnet Communications, Century Broadcasting, Sinclair Broadcast Group, SFX
Entertainment and Liberty Media. Asia's problems and cyclical trends combined to
open some exceptional opportunities in technology. We enhanced our exposure to
this sector by adding American Power Conversion, Teradyne, Seagate Technology
and Berg Electronics.
LOOKING FORWARD
Given the rapidity of change in today's global landscape, we choose not to
indulge in forecasting or subscribe to the prevailing consensus opinion. Rather,
we prefer to build an investment process that enables us to accommodate change
and to benefit from extreme swings in consensus opinion.
A year ago, for example, the consensus deemed that Asia's growth would continue
in the high single digits and the region would continue its disproportionate
contribution to world economic growth. Now, many of the region's countries have
negative growth, decimated currencies and uncertain futures. This turmoil has
had a major ripple effect. In the U.S. alone, many companies - industrial,
energy and high-tech - have seen their earnings estimates reduced by 50% or
more.
What's the consensus today? Globally, that Asia will go from bad to worse.
Domestically, that our economy will slow, sending interest rates lower.
For our part, we're hedging our bet. Rather than building an investment strategy
on "group think" or greater fool theories, we'll continue following what we
regard as an all-weather investment process. To refine our thinking, we'll
question every assumption; to lower risk while enhancing return potential, we'll
diversify broadly; and to maintain our conviction in uncertain markets, we'll
buy only those stocks we understand. In addition, we'll look for opportunities
on the cusp of major change. Change, after all, continues in a given direction
until a catalyzing event appears to redirect it. We'll look for the catalyst
that can change a vicious cycle to a virtuous circle, and - thinking defensively
- - vice versa. Moreover, because it's our obligation to keep your money at work,
we'll pursue this strategy within the context of remaining fully invested.
Once again, thank you for your confidence. In the coming year, we'll do our best
to earn superior returns on your investment.
Sincerely,
/s/ Andrew C. Stephens
Andrew C. Stephens
Portfolio Manager
LETTER TO SHAREHOLDERS
ARTISAN MID CAP FUND
<PAGE>
ARTISAN
SMALL CAP VALUE FUND
Letter to Shareholders - August 20, 1998
THE FUND'S PERFORMANCE
Artisan Small Cap Value Fund began operations on September 29, 1997. For its
fiscal year ended June 30, 1998, the Fund returned 13.7%, outpacing both its
benchmark index, the Russell 2000 Value, which gained 6.7%, and its peer group,
as represented by the Lipper Small Cap Index, which rose 0.7%. During this nine-
month period, the Fund's gain also exceeds the 2.0% return of the Russell 2000
Index, which is representative of the broader small-cap market.
COMPARATIVE QUARTERLY PERFORMANCE
- ----------------------------
ARTISAN SMALL CAP VALUE FUND
TOTAL RETURN:
Since Inception: 13.7%
- ----------------------------
ARTISAN RUSSELL LIPPER RUSSELL
SMALL CAP 2000 SMALL CAP 2000
VALUE FUND VALUE INDEX FUND INDEX INDEX
---------- ----------- ---------- -------
9/29/97 $10,000 $10,000 $10,000 $10,000
12/31/97 $10,310 $10,220 $ 9,461 $ 9,722
3/31/98 $11,220 $11,073 $10,475 $10,700
6/30/98 $11,370 $10,673 $10,071 $10,201
- -------------------------------------------------------------
QUARTERLY 1997 1998
--------- -----------------
PERFORMANCE 12/31/97 3/31/98 6/30/98
- -------------------------------------------------------------
ARTISAN SMALL CAP VALUE FUND 3.2% 8.8% 1.3%
- -------------------------------------------------------------
Russell 2000 Value Index 1.7% 8.4% -3.6%
- -------------------------------------------------------------
Russell 2000 Index -3.3% 10.1% -4.7%
- -------------------------------------------------------------
Lipper Small Cap Fund Index -5.8% 10.7% -3.9%
- -------------------------------------------------------------
This graph compares the results of $10,000 invested in the Artisan Small Cap
Value Fund on September 29, 1997 (the date the Fund began operations) with the
Russell 2000 Index, the Russell 2000 Value Index and the Lipper Small Cap Fund
Index. The Russell 2000 Index is an unmanaged index of small companies, formed
by taking the largest 3,000 companies and eliminating the largest 1,000. The
Russell 2000 Value Index is an unmanaged index of small companies that 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 mutual funds. 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.
<PAGE>
We find these results especially satisfying, considering the challenging
environment in which the Fund was launched. Last September, equity valuations
were extremely high, and investors were showing an unequivocal preference for
growth stocks, particularly large-cap growth. And we'd barely left port when
Asia's economies and markets went into a tailspin. We believe our returns
reflect our focus on value and downside protection, our broad diversification
and our relatively limited exposure to industries affected by fallout from
Asia.
OUR INVESTMENT APPROACH
Artisan Small Cap Value Fund invests in small companies that it considers
undervalued, concentrating on companies in solid financial condition with
favorable economics. The Fund's investment style can be characterized as
"bottom-up," meaning its focus in stock selection is on individual companies,
rather than on trends in the economy or securities markets. Overall, there are
two concepts that frame our decision-making:
- WE PURCHASE A STOCK ONLY AT WHAT WE CONSIDER A BARGAIN PRICE...a price
that, because of market forces, differs significantly from what we
determine is the true value of the business. We find deeply discounted
companies in several categories, and many of our investments have
elements of each.
- Turnarounds, both industry and company-specific. Poor results lead to
disappointment, uncertainty and fear, which can lead to mis-priced
securities and opportunity for patient investors.
- Undiscovered or unsponsored stocks. Even in today's market, we are
able to find over-looked bargains where nothing is going wrong.
- Companies with hidden assets. Undervalued real estate, fully
depreciated assets and unrecognized business lines are examples.
- Companies in the process of major change. Stock prices for such
companies often inaccurately reflect their new and improved situation
until it shows up in their results. Early investments on conservative
assumptions can produce excellent results.
- WE DO NOT BELIEVE THAT BARGAIN PURCHASES BY THEMSELVES CREATE A SUFFICIENT
MARGIN OF SAFETY, so we look for two other attributes to provide an extra
cushion:
- Financial strength. We emphasize unleveraged companies - those with
little or no debt - that are cash flow neutral or positive.
- Favorable economics. By this we mean generating acceptable returns on
capital and producing free cash over the business cycle. Companies and
industries with these characteristics are less likely to experience
eroding values over the long-term.
This discipline often leads us to companies with little, if any, analyst
coverage. Thus, we conduct our own research on companies' fundamentals.
LETTER TO SHAREHOLDERS
ARTISAN SMALL CAP VALUE FUND
<PAGE>
Finally, we are patient. It's important to us to have a sense of why shares are
undervalued, and what it would take to cause a revaluation. But we don't believe
the revaluation process must be in motion before we invest. We believe it's
sufficient to buy financially strong businesses with good economics at a
discount to underlying value. A portfolio of stocks like this is set up for good
things to happen.
Despite our inherently cautious approach to investing in small-cap stocks, the
Fund may experience significant short-term fluctuation. We thus urge you to
consider this Fund only as a long-term holding, and to use it as part
of a diversified portfolio.
NINE-MONTH REVIEW (SINCE INCEPTION)
As the Fund began operations in late September 1997, stock prices were at all-
time highs and valuation levels were, in our view, extremely aggressive.
Nonetheless, we were able to assemble a portfolio that we believed held the
potential for worthwhile gain without undue risk of capital loss. It wasn't
easy. The market was pretty well picked over. There were no cheap sectors, no
cyclically out-of-favor opportunities, and earnings driven stocks were simply
too rich for our blood.
So, in the beginning, we concentrated on potential turnarounds and companies
with undervalued assets. Our purchases included Dart Group, Smith Investment
Company, Greif Brothers and American Pacific. These investments held up well -
and in fact made us some money - during 1998's first quarter, a treacherous
period marked by fears related to Asia's deepening woes. In December, we took
advantage of the beaten down energy sector to add Patina Oil & Gas, Snyder Oil
and Atwood Oceanics. Also capitalizing on weakness in technology, we added
Silicon Valley Group.
In view of earnings disappointments, and the further challenge to earnings
presented by fallout from Asia, we couldn't understand January's surge in stock
prices following December's steep decline. We were watching additional stocks in
the decimated energy and technology sectors. But the swiftness and strength of
January's rally swept those bargains away; the stocks that had fallen the
farthest rallied the strongest.
The second quarter of 1998 was a different story. As the quarter evolved, it
became clear that Asia's problems were far from over, and that they were having
undeniable effects on our own economy. The technology and energy sectors
weakened, and we started moving into some emerging bargains. New names included
Schnitzer Steel, Terra Industries, FSI International and Inco Ltd. We do not
expect these investments to reward us quickly. Although we consider them
bargains, they have little visibility of earnings and may take several years to
reach our price objectives. In any case, the second quarter was a good one for
us. We squeezed out a small gain in the face of another swoon in the small-cap
market, as concern over earnings took its toll. All in all, some of our stocks
did very well, while others were disappointing.
LETTER TO SHAREHOLDERS
ARTISAN SMALL CAP VALUE FUND
<PAGE>
- ---------------------------------------------------------------------------
TOP 5 GAINERS<F1> TOP 5 LOSERS<F1>
- ---------------------------------------------------------------------------
SECURITY % SECURITY %
- ---------------------------------------------------------------------------
Mueller Industries 65% Inco Ltd. Class VBN -41%
Stewart Information Services 55% Intelligent Systems Corp. -38%
Superior National Insurance 54% Asset Investors Corporation -19%
Devon Group 48% Dexter Corporation -18%
R.G. Barry Corporation 27% Hilb, Rogal & Hamilton -11%
- ---------------------------------------------------------------------------
<F1> These are the holdings that made the largest dollar difference in the
portfolio. While some minor holdings experienced greater percentage
changes in price, the change in their dollar value, did not, on an
individual basis, have as meaningful an effect on the Fund's net assets.
Sometimes you never know how quickly a stock will appreciate, or why. For
example, take Stewart Information Services, a title insurance company whose
stock we purchased in February at an average cost of about $31. Because
Stewart's reserves were very high relative to its payouts, we calculated that
its economic value greatly exceeded its book value. In addition, the title
insurance industry was starting to consolidate. In May, Stewart reported huge
earnings gains for the previous quarter. So did its industry in general.
Suddenly, Wall Street took notice of the value we had seen and drove up the
stocks of many title insurers, including Stewart. In May, Stewart reached the
low end of our price objective, and we started selling our position. We
continued selling through mid-June, with an average selling price of about $48.
Among our winners during the year were a number of holdings that became
takeovers. These were: Showboat, White River Corporation, Devon Group, Dart
Group and Fluke. Seeking takeover candidates is not part of our strategy. But
strategic buyers - the people behind take-overs - often look for the same
characteristics in a company that we do, and try to buy the company when its
stock is at a deep discount relative to the intrinsic value of the business. Put
another way, we think like strategic buyers when we invest.
--------------------------------------------------
TOP TEN HOLDINGS
--------------------------------------------------
COMPANY NAME %
--------------------------------------------------
Hilb, Rogal & Hamilton Co. 2.6
--------------------------------------------------
R.G. Barry Corporation 2.5
--------------------------------------------------
Superior National Insurance Group 2.5
--------------------------------------------------
M&F Worldwide Corporation 2.3
--------------------------------------------------
Gleason Corporation 2.2
--------------------------------------------------
Host Marriott Services, Inc. 2.2
--------------------------------------------------
Esco Electronics, Corporation 2.1
--------------------------------------------------
CFC International, Inc. 2.1
--------------------------------------------------
Smith Investment Company 1.9
--------------------------------------------------
Jostens, Inc. 1.9
--------------------------------------------------
TOTAL 22.3%
--------------------------------------------------
LETTER TO SHAREHOLDERS
ARTISAN SMALL CAP VALUE FUND
<PAGE>
We also sold other positions that reached our price objectives. The major
sales included Citizens National, Snyder Oil, Oglebay-Norton, Chart
Industries and Cleveland Cliffs.
As a matter of policy, the Fund makes only a modest commitment to any individual
holding and - as shown in the table below - invests its assets broadly across
the nation's economy. These aspects of diversification help reduce the Fund's
overall risk, while increasing the importance of stock-picking, where we add the
most value to the process.
The relative industry weightings below reflect our general sense of caution
toward the market. We are weighted toward basic industry, insurance and capital
spending, with little or no exposure to banks, biotech and other industries that
we regard as overvalued or believe will experience continued volatility.
- --------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION (%)
- --------------------------------------------------------------------------------
WEIGHTING WEIGHTING
- --------------------------------------------------------------------------------
6/30 12/31 6/30 12/31
INDUSTRY 1998 1997 INDUSTRY 1998 1997
- --------------------------------------------------------------------------------
Banks/Savings & Loans 0.0 0.0 Healthcare Services 0.0 0.0
- --------------------------------------------------------------------------------
Basic Industry 19.0 18.1 Insurance 13.3 16.1
- --------------------------------------------------------------------------------
Biotech/Pharmaceutical 0.0 0.0 Medical Devices/Supplies 1.2 0.0
- --------------------------------------------------------------------------------
Business Services 8.1 13.2 Other Financial 3.7 10.9
- --------------------------------------------------------------------------------
Capital Spending 14.1 9.9 Paper and Packaging 1.6 1.4
- --------------------------------------------------------------------------------
Computer Related 2.2 1.6 REITs/Property 5.5 0.0
- --------------------------------------------------------------------------------
Consumer Cyclicals 1.6 0.0 Restaurants/Hotels 4.8 5.6
- --------------------------------------------------------------------------------
Consumer Services 2.9 3.6 Retailing/Apparel 2.5 2.4
- --------------------------------------------------------------------------------
Consumer Staples 6.8 4.8 Software/Telecommunications 0.6 1.9
- --------------------------------------------------------------------------------
Electronics 0.0 0.0 Transportation Related 1.0 2.2
- --------------------------------------------------------------------------------
Energy 3.4 1.9 Utilities 0.0 0.0
- --------------------------------------------------------------------------------
Other assets less liabilities 7.7 6.4
- --------------------------------------------------------------------------------
TOTAL 100.0%
- --------------------------------------------------------------------------------
PORTFOLIO CHARACTERISTICS
On June 30, 1998, the Fund's net assets were $47.2 million. The portfolio held
73 stocks spread across 17 economic sectors, and its top ten holdings
represented about 22% of assets. The median market cap was $185 million. And
based on our 1998 estimates, our median P/E was 14.8X and our price-to-book
value was 1.3X. Yet despite these compelling valuation characteristics, our
stocks are largely under-researched and undiscovered-typically followed by only
two analysts.
LETTER TO SHAREHOLDERS
ARTISAN SMALL CAP VALUE FUND
<PAGE>
OUTLOOK AND STRATEGY
In the coming year, the investment environment may well prove to be less
friendly, as the earnings question moves to front and center. After all, stocks
are valued as though high levels of profitability are sustainable forever. And
then there's Asia. Its diminished currencies and depressed economies raise the
prospects of fewer exports for some U.S. companies and more price competition
for others. Reported earnings, earnings expectations and stock prices for
companies in the path of these forces have fallen dramatically.
In this environment, we see continuing opportunity, and we believe our
conservative approach to valuation will serve us well. We will persist in our
search for stocks suffering from neglect, misunderstanding or impatience, and
for companies that can fuel their growth through internal dynamics, as opposed
to reliance on the growth of the overall economy. If our earnings concerns prove
to be ill-founded, our bargain purchases might emerge from their obscurity more
quickly and be accorded higher valuations by the marketplace.
Once again, thank you for your investment in Artisan Small Cap Value Fund. We'll
do our best to reward your confidence in us.
Sincerely,
/s/ Scott C. Satterwhite
Scott C. Satterwhite
Portfolio Manager
LETTER TO SHAREHOLDERS
ARTISAN SMALL CAP VALUE FUND
<PAGE>
ARTISAN
SMALL CAP FUND
Schedule of Investments - June 30, 1998
Shares Market
Held Value
COMMON STOCKS - 97.4% ----------- ----------
BANKS/SAVINGS & LOANS - 3.4%
Bay View Capital Corporation -
San Francisco, CA based community bank 138,300 $ 4,391,025
<F1> Columbia Banking System, Inc. -
Tacoma, WA based community bank 22,707 451,302
<F1> Silicon Valley Bancshares -
bank holding company serving
the high-technology industry 153,000 5,445,844
-----------
10,288,171
BASIC INDUSTRY - 1.0%
<F1> Southern Energy Homes, Inc. - manufactured homes 325,450 3,193,478
BIOTECHNOLOGY/
PHARMACEUTICALS - 2.6%
<F1> NCS HealthCare, Inc. -
institutional pharmaceutical services 99,700 2,841,450
<F1> Techne Corporation -
specialty manufacturer of biological products 269,300 5,133,531
-----------
7,974,981
BUSINESS SERVICES - 7.2%
<F1> Borg-Warner Security Corporation - physical and
electronic security services 340,200 7,697,025
<F1> Carey International, Inc. -
chauffeured vehicle services 133,900 3,749,200
<F1> Data Processing Resources Corporation -
technology staffing services 134,300 4,171,694
<F1> Intelligroup, Inc. - software
implementation services 317,700 5,639,175
<F1> THINK New Ideas, Inc. - interactive
marketing services 21,100 551,238
-----------
21,808,332
CAPITAL SPENDING - 9.6%
<F1> CTB International Corporation -
agricultural equipment manufacturer 168,300 2,282,569
<F1> Cuno, Inc. - filtration products 148,700 3,215,638
<F1> DeCrane Aircraft Holdings, Inc. -
avionics components 212,300 3,688,712
<F1> Holophane Corporation - highly-engineered
lighting fixtures 120,550 3,074,025
<F1> Park-Ohio Holdings Corporation - industrial
products distribution 389,500 7,205,750
<F1> Tokheim Corporation - petroleum dispensing systems 299,100 6,131,550
<F1> TriStar Aerospace Company -
aerospace parts distributor 236,600 3,667,300
-----------
29,265,544
<PAGE>
Shares Market
Held Value
----------- -----------
CONSUMER CYCLICALS - 5.8%
Crown Crafts, Inc. - bedding and home accessories 229,900 $ 3,534,712
Culp, Inc. - fabrics for home furnishings 146,600 1,896,638
Interface, Inc. - carpets and fabrics for
commercial interiors 214,300 4,326,181
<F1> International Comfort Products Corporation -
heating and air conditioning systems 302,800 3,671,450
<F1> Pameco Corporation - heating and
air conditioning distributor 207,300 4,146,000
-----------
17,574,981
CONSUMER SERVICES - 2.4%
<F1> ITI Technologies, Inc. - wireless home
security systems 254,200 7,197,037
CONSUMER STAPLES - 3.4%
K2, Inc. - recreational and industrial products 196,400 3,461,550
Northland Cranberries, Inc. - cranberry grower and
juice producer 290,900 4,490,769
Worthington Foods, Inc. - meat alternative products 108,800 2,278,000
-----------
10,230,319
ENERGY - 4.4%
<F1> Callon Petroleum Company - oil and gas exploration 175,000 2,504,688
<F1> Houston Exploration Company - oil and gas exploration 192,600 4,417,762
<F1> Tom Brown, Inc. - oil and gas exploration 199,600 3,754,975
<F1> UTI Energy Corporation - drilling rig operator 214,700 2,764,263
-----------
13,441,688
HEALTHCARE SERVICES - 4.6%
<F1> Alternative Living Services, Inc. -
assisted living facilities 199,200 5,378,400
<F1> Healthcare Recoveries, Inc. - outsourced medical
expense collection 252,100 4,978,975
<F1> Sunrise Assisted Living, Inc. -
assisted living facilities 108,200 3,719,375
-----------
14,076,750
INSURANCE - 2.3%
<F1> Penn Treaty American Corporation -
long-term care insurance 222,600 7,011,900
MEDICAL DEVICES/SUPPLIES - 5.1%
<F1> ATL Ultrasound, Inc. - diagnostic medical
ultrasound systems 144,900 6,611,062
<F1> Maxxim Medical, Inc. - disposable medical products
and procedure trays 166,300 4,822,700
<F1> Prime Medical Services, Inc. - provider of
lithotripsy services 437,300 4,099,687
-----------
15,533,449
OTHER FINANCIAL - 5.7%
<F1> CB Richard Ellis Services, Inc. -
commercial real estate services 128,900 4,310,094
<F1> Franchise Mortgage Acceptance Company -
specialty finance for franchisees 234,500 6,111,656
<F1> HealthCare Financial Partners, Inc. -
specialty finance for healthcare providers 115,100 7,057,069
-----------
17,478,819
PAPER AND PACKAGING - 1.3%
AptarGroup, Inc. - pumps, valves and
closures for consumer packaging 61,500 3,824,531
SCHEDULE OF INVESTMENTS
ARTISAN SMALL CAP FUND
<PAGE>
Shares Market
Held Value
----------- -----------
REAL ESTATE
INVESTMENT TRUSTS/PROPERTY - 3.7%
Fortress Investment Corporation, 144A -
specialty real estate investments 162,100 $ 3,242,000
Great Lakes REIT, Inc. - Midwest-based office
property investments 171,800 2,995,763
HealthCare Financial Partners REIT, 144A -
healthcare related real estate investments 50,100 5,010,000
-----------
11,247,763
RESTAURANTS/HOTELS - 7.1%
<F1> CEC Entertainment, Inc. - Chuck E. Cheese restaurants 177,900 7,171,594
<F1> Hospitality Worldwide Services, Inc. -
hotel renovation and maintenance services 372,000 3,348,000
Morrison Health Care, Inc. - food service to
healthcare institutions 162,900 3,095,100
<F1> Rio Hotel & Casino, Inc. - Las Vegas, NV based
gaming resort owner and operator 267,500 5,049,062
<F1> Vistana, Inc. - timeshare resort operator 166,300 3,055,763
-----------
21,719,519
RETAILING/APPAREL - 7.2%
<F1> The Dress Barn, Inc. - women's clothing retailer 241,700 6,012,287
<F1> Hastings Entertainment, Inc. - multimedia
retail stores 134,600 1,480,600
OshKosh B'Gosh, Inc. - children's
clothing manufacturer 155,200 6,906,400
<F1> Tractor Supply Company - farm supplies retailer 119,500 2,972,563
<F1> Trans World Entertainment Corporation -
recorded music retailer 107,500 4,635,937
-----------
22,007,787
TECHNOLOGY -
COMPUTER & EQUIPMENT - 3.1%
<F1> ATMI, Inc. - materials for
semiconductor manufacturing 143,300 2,149,500
<F1> Photronics, Inc. - photomasks for
semiconductor manufacturing 91,100 2,009,894
<F1> PRI Automation, Inc. - semiconductor
automation systems 76,500 1,305,281
<F1> Telxon Corporation - wireless information systems 121,000 3,917,375
-----------
9,382,050
TECHNOLOGY - ELECTRONICS - 7.3%
<F1> Aavid Thermal Technologies, Inc. - electronic heat
management products 147,600 4,317,300
General Cable Corporation - electrical wire and
cable products 233,150 6,732,206
<F1> Littelfuse, Inc. - circuit protection devices 183,100 4,623,275
<F1> PCD, Inc. - electronic connectors 206,200 3,531,175
<F1> Sipex Corporation - analog circuits and
electroluminescence devices 140,500 3,020,750
-----------
22,224,706
TECHNOLOGY -
SOFTWARE/TELECOMMUNICATIONS - 4.2%
<F1> Glenayre Technologies, Inc. -
paging infrastructure equipment 245,600 2,640,200
<F1> Micros Systems, Inc. - point-of-sales systems
for hospitality providers 124,800 4,130,100
<F1> SPSS, Inc. - statistical software 255,300 5,935,725
-----------
12,706,025
TRANSPORTATION RELATED - 2.6%
<F1> Aftermarket Technology Corporation -
after-market auto body parts 211,300 3,961,875
<F1> US Xpress Enterprises, Inc. - time-definite
truckload services 235,700 3,947,975
-----------
7,909,850
SCHEDULE OF INVESTMENTS
ARTISAN SMALL CAP FUND
<PAGE>
Shares Market
Held Value
----------- -----------
UTILITIES - 3.4%
<F1> General Communication, Inc. -
Alaskan telecommunications provider 474,200 $ 2,874,838
<F1> MGC Communications, Inc. - competitive local
exchange carrier 111,100 1,694,275
<F1> US LEC Corporation - competitive local
exchange carrier 96,000 2,004,000
WICOR, Inc. - gas utility and pump manufacturer 157,300 3,637,562
-----------
10,210,675
TOTAL COMMON STOCKS (Cost $261,420,587) $296,308,355
Par Market
Amount Value
----------- -----------
SHORT TERM INVESTMENTS - 5.3%
Repurchase agreement with State Street Bank and
Trust Company, 5.0%, dated 6/30/98, due
7/1/98, maturity value $15,974,218,
collateralized by $16,294,774 market value
U.S. Treasury Note, 6.625%, due 7/31/01
(Cost $15,972,000) $ 15,972,000 $15,972,000
-----------
TOTAL INVESTMENTS - 102.7% (Cost $277,392,587) 312,280,355
OTHER ASSETS LESS LIABILITIES - (2.7)% (8,138,194)
-----------
TOTAL NET ASSETS - 100.0% (<F2>) $304,142,161
===========
<F1> Non-income producing securities
<F2> Percentages for the various classifications relate to total net assets
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
SCHEDULE OF INVESTMENTS
ARTISAN SMALL CAP FUND
<PAGE>
ARTISAN
INTERNATIONAL FUND
Schedule of Investments - June 30, 1998
Shares Market
Held Value
----------- -----------
COMMON AND PREFERRED STOCKS - 97.1%
AUSTRIA - 1.7%
Erste Bank Der Oesterreichischen Sparkassen AG -
commercial bank 70,000 $ 4,248,276
<F1> Scala Business Solutions -
resource planning software 218,520 3,272,418
<F1> Scala Business Solutions Warrants (3/31/1999) -
resource planning software 91,050 424,201
<F1> Scala Business Solutions Warrants (3/31/2001) -
resource planning software 91,050 379,988
-----------
8,324,883
AUSTRALIA - 0.1%
<F1> AMP Limited - life and health insurance 50,000 586,608
BERMUDA - 1.9%
<F1> Global Telesystems Group, Inc. <F3> -
telephone and integrated services 195,000 9,506,250
BRAZIL - 4.0%
Cia de Saneamento Basico de Estado
de Sao Paulo - water and sewage utility 19,590,000 2,354,425
Cia Riograndense Telecom - Preferred -
telecommunications 7,931,300 8,647,589
<F1> Embraer-Empresa Brasileira de Aeronautica SA -
Preferred - aerospace and defense 110,100,000 1,951,537
Fertilizantes Fosfatados SA - Preferred -
phosphatic mining and fertilizer 1,010,600,000 3,801,055
Telecomunicacoes Brasileiras SA (ADR) -
telecommunications 30,000 3,275,625
-----------
20,030,231
CANADA - 4.0%
<F1> The T. Eaton Company Ltd. - retail 100,000 1,019,333
<F1> MetroNet Communications Corporation -
Class B <F3> - telecommunications 590,300 16,675,975
Northern Telecom Ltd. <F3> -
telecommunication equipment 40,000 2,270,000
-----------
19,965,308
CZECH REPUBLIC - 0.2%
<F1> Ceske Radiokomunikace, 144a (GDR) -
telecommunication services 52,600 1,126,955
<PAGE>
Shares Market
Held Value
----------- -----------
DENMARK - 4.9%
EDB Gruppen A/S - Class B - computer services 143,000 $ 6,607,414
NESA A/S - electrical utility 8,438 1,535,410
<F1> Olicom <F3> - computer network equipment 20,000 537,500
Sydbank A/S - commercial bank 108,300 6,038,125
Vest-Wood A/S - furniture manufacturer 98,500 9,606,958
-----------
24,325,407
FINLAND - 3.9%
Helsingin Puhelin Oyj - telecommunication services 42,500 1,977,267
Nokia Corporation (ADR) -
telecommunications equipment 150,000 10,884,375
Orion-Yhtyma Oy - Class B - pharmaceuticals 65,000 2,004,178
TT Tieto Oy - computer data services 56,700 4,313,754
-----------
19,179,574
FRANCE - 7.1%
Banque Nationale de Paris - money center bank 80,807 6,602,818
Credit Commercial de France - commercial bank 100,000 8,419,207
<F1> ILOG SA (ADR) - computer software 50,000 756,250
<F1> Omnicom SA - telecommunication services 14,000 1,634,881
Societe Generale - money center bank 30,000 6,237,491
Strafor-Facom SA - office furnishings 10,000 977,554
Suez-Lyonnaise des Eaux - building and construction 33,000 5,431,133
Thomson CSF - electronics manufacturer 90,000 3,423,921
Unilog SA - computer services 5,000 1,754,140
-----------
35,237,395
GERMANY - 8.1%
Altana AG - pharmaceuticals 45,000 3,437,162
Bayerische Hypotheken-und Wechsel-Bank AG -
commercial bank 120,000 7,612,077
Deutsche Bank AG - commercial banking 100,000 8,461,560
Dresdner Bank AG - money center bank 65,000 3,514,098
ESG RE Ltd. <F3> - life/health insurance 110,000 2,378,750
KSB AG-Vorzug - Preferred - machinery and
pump manufacturer 22,450 5,601,763
Mannesmann AG - machinery/general industry 53,000 5,451,496
<F1> Marseille-Kliniken AG - healthcare services 190,567 2,757,935
Marschollek, Lautenschlaeger und Partner AG -
Preferred - financial services 2,200 1,073,498
<F1> Wuensche AG - retail 1,500 137,154
-----------
40,425,493
HONG KONG - 0.7%
China Foods Holdings Ltd. - food processing 3,590,000 949,858
Wing Hang Bank Ltd. - commercial bank 1,821,000 2,432,544
-----------
3,382,402
INDONESIA - 0.0%
Sona Topas Tourism - duty free retailing 2,030,000 20,785
SCHEDULE OF INVESTMENTS
ARTISAN INTERNATIONAL FUND
<PAGE>
Shares Market
Held Value
----------- -----------
ITALY - 9.3%
<F1> Banca di Roma - money center bank 4,375,000 $ 8,847,263
Credito Italiano SPA - commercial bank 1,250,000 6,546,363
IFI Istituto Finanziario - Preferred -
financial holding company 260,000 5,436,330
Istituto Bancario San Paolo di Torino -
commercial bank 315,000 4,547,488
<F1> Olivetti SPA - office furnishings 3,100,000 4,614,887
<F1> Seat Saving Shares SPA -
publishing/advertising company 2,000,000 945,547
<F1> Seat SPA - publishing/advertising company 6,900,000 4,660,194
Tecnost SPA - computer/integrated systems 400,000 1,193,190
Telecom Italia Savings Shares SPA -
cellular phone services 400,000 1,937,245
Telecom Italia SPA - cellular phone services 1,050,000 7,732,799
-----------
46,461,306
JAPAN - 1.6%
Toyota Motor Corporation - automobile manufacturer 300,000 7,789,108
MEXICO - 2.5%
<F1> Empresas (ICA) Sociadad Controladora S.A.
de C.V. (ADR) - commercial construction 234,300 2,211,206
Grupo Financiero Inbursa S.A. de C.V. - Class B -
brokerage, insurance and financial services 1,826,489 4,675,226
<F1> Seguros Comercial America - Class B - insurance 877,500 3,027,378
Sigma BCP - Class B - food producer 1,149,077 2,621,566
-----------
12,535,376
NETHERLANDS - 10.9%
Amsterdam Option Traders NV - financial services 33,000 3,358,849
Athlon Groep NV - automobile leasing 41,475 7,037,131
<F1> Bennf - Benckiser - Class B - home cleaning products 110,000 6,769,647
Brunel International NV - temporary
employment services 160,784 6,683,679
Cap Gemini NV - computer software 120,000 9,917,599
Content Beheer NV - temporary employment services 105,000 3,589,964
KLM Royal Dutch Air Lines NV - airline 196,234 7,973,892
Unique International NV - temporary
employment services 253,571 8,607,255
-----------
53,938,016
NORWAY - 1.3%
<F1> Computer Advances Group ASA - hardware and software 150,000 782,830
EDB-Elektronisk Databehandling ASA -
computer services 160,000 615,826
Radio P4 - radio stations 1,139,600 5,203,993
-----------
6,602,649
PHILIPPINES - 0.1%
<F1> Bankard, Inc. - credit card provider 19,419,000 679,898
POLAND - 0.7%
Elektrim Spolka Akcyjna SA - electrical products 300,000 3,656,438
SCHEDULE OF INVESTMENTS
ARTISAN INTERNATIONAL FUND
<PAGE>
Shares Market
Held Value
----------- -----------
PORTUGAL - 2.3%
Portugal Telecom SA - telephone and
integrated services 75,600 $ 4,009,339
Telecel-Comunicacaoes Pessoais SA, 144A -
cellular phone service 40,660 7,224,528
-----------
11,233,867
SINGAPORE - 0.5%
Development Bank of Singapore Ltd. -
money center bank 400,000 2,219,585
SPAIN - 3.5%
Argentaria SA - commercial bank 388,000 8,703,749
Banco Central Hispanoamericano SA - commercial bank 100,000 3,143,137
<F1> Baron de Ley SA - winery 26,500 879,589
Grupo Acciona SA - building and construction 20,500 4,876,687
-----------
17,603,162
SWEDEN - 5.6%
Celsius AB - Class B - aerospace and
defense product manufacturer 161,000 3,754,513
<F1> Guide Konsult AB - Class B, 144A -
computer/information technology 106,400 2,134,403
Modul 1 Data AB - computer services 95,200 2,888,465
Pharmacia & Upjohn, Inc. <F3> - pharmaceuticals 80,000 3,690,000
Resco AB - Class B - computer services 38,600 1,388,942
Semcon AB - consulting services 309,200 3,043,154
Sigma AB - Class B - computer services 111,300 3,349,047
Telefonaktiebolaget LM Ericsson - Class B (ADR) -
telecommunications equipment 144,000 4,122,000
Telefonaktiebolaget LM Ericsson -Class B -
telecommunications equipment 114,000 3,330,241
-----------
27,700,765
SWITZERLAND - 7.4%
Credit Suisse Group - money center bank 40,500 9,026,448
Julius Baer Holding AG - commercial bank 700 2,193,423
Novartis AG - pharmaceuticals 6,500 10,834,049
Union Bank of Switzerland AG - money center bank 40,000 14,897,972
-----------
36,951,892
THAILAND - 0.2%
The Pizza Company PLC - fast food
restaurant franchise 334,300 950,616
<F1> Srithai Superware PLC - consumer plastic products 972,200 126,708
-----------
1,077,324
SCHEDULE OF INVESTMENTS
ARTISAN INTERNATIONAL FUND
<PAGE>
Shares Market
Held Value
----------- -----------
UNITED KINGDOM - 14.6%
<F1> Colt Telecom Group PLC -
telecommunication services 474,900 $19,268,454
<F1> Energis PLC - telecommunication services 650,000 9,904,276
<F1> Freepages Group PLC - telephone classified
information services 4,000,000 2,471,156
General Electric Company PLC -
diversified manufacturer 800,000 6,899,200
LucasVarity PLC - auto parts manufacturer 1,850,000 7,351,689
Next PLC - retail 650,000 5,589,321
Royal & Sun Alliance Insurance Group PLC -
multi-line insurance 200,000 2,068,758
Select Appointments Holdings PLC -
employment services 400,000 5,656,944
<F1> TeleWest Communications PLC - cable television 1,850,000 4,324,523
Triad Group PLC - consulting services 300,000 3,280,960
Whitbread PLC - restaurants and brewing 345,000 5,587,651
-----------
72,402,932
TOTAL COMMON AND PREFERRED STOCKS (Cost $401,576,181) $482,963,609
Par Market
Amount Value
----------- -----------
SHORT TERM INVESTMENTS - 2.2%
Repurchase agreement with State Street Bank
and Trust Company, 5.0%, dated 6/30/98,
due 7/1/98, maturity value $10,778,497,
collateralized by $10,993,428 market value
U.S. Treasury Note, 6.625%, due 7/31/01
(Cost $10,777,000) $10,777,000 $10,777,000
-----------
TOTAL INVESTMENTS - 99.3% (Cost $412,353,181) 493,740,609
OTHER ASSETS LESS LIABILITIES - 0.7% 3,439,006
-----------
TOTAL NET ASSETS - 100.0% (<F2>) $497,179,615
===========
<F1> Non-income producing securities
<F2> Percentages for the various classifications relate to total net assets
<F3> Principally traded in the United States
ADR - American Depository Receipt
GDR - Global Despository Receipt
SCHEDULE OF INVESTMENTS
ARTISAN INTERNATIONAL FUND
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
ARTISAN
INTERNATIONAL FUND
Portfolio Diversification - June 30, 1998
Market
Value Percentage
------------ -----------
Automotive $ 15,140,797 3.0%
Broadcast/Publishing 13,280,890 2.7
Business & Public Services 24,537,842 4.9
Cable Television 4,324,523 0.9
Capital Spending 5,601,763 1.1
Cellular Telecommunications 16,894,572 3.4
Commercial Banks 62,345,949 12.5
Computer Services 25,062,351 5.0
Construction/Housing 12,519,026 2.5
Consumer Cyclicals 9,733,666 2.0
Consumer Staples/Service 6,769,647 1.4
Engineering 18,237,905 3.7
Financial Services 4,432,347 0.9
Food/Restaurants 10,989,280 2.2
Health Care Services 22,723,324 4.6
Mining/Metals 3,801,055 0.8
Money Center Banks 51,345,675 10.3
Multi-Industry 15,281,702 3.1
Office Furnishings 5,592,441 1.1
Retailing 6,766,593 1.4
Software 19,847,040 4.0
Special Finance 17,507,577 3.5
Technology 1,730,690 0.3
Telecommunication Equipment 20,606,616 4.1
Telecommunication Service 62,511,022 12.6
Telephone and Integrated Services 13,515,589 2.7
Transportation/Distribution 7,973,892 1.6
Utilities 3,889,835 0.8
----------- -----------
Total common and preferred stocks 482,963,609 97.1
Total short-term investments 10,777,000 2.2
----------- -----------
Total investments 493,740,609 99.3
Other assets less liabilities 3,439,006 0.7
----------- -----------
TOTAL NET ASSETS $497,179,615 100.0%
=========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
ARTISAN
MID CAP FUND
Schedule of Investments - June 30, 1998
Shares Market
Held Value
----------- -----------
COMMON STOCKS - 94.2%
BUSINESS SERVICES - 7.5%
<F1> Fiserv, Inc. - administrative processing for
financial institutions 4,500 $ 191,109
National Data Corporation - financial and
healthcare transaction processing 6,500 284,375
<F1> Outdoor Systems, Inc. - billboard operator 7,000 196,000
<F1> Sungard Data Systems, Inc. - recordkeeping software
for investment management 5,000 191,875
<F1> Sykes Enterprises, Inc. - technical
product support services 5,000 100,625
-----------
963,984
COMMUNICATIONS - 16.0%
<F1> Centennial Cellular Corporation - Class A -
cellular phone operator 11,000 410,438
<F1> Century Communications Corporation -
cable and cellular phone operator 20,000 375,000
<F1> Clearnet Communications, Inc. -
Canadian wireless phone operator 19,000 209,000
<F1> Glenayre Technologies, Inc. -
paging infrastructure equipment 17,900 192,425
<F1> Loral Space & Communications Company -
satellite manufacturer and operator 5,200 146,900
<F1> Media One Group - cable television operator 4,000 175,750
<F1> Rogers Communications, Inc. -
Canadian cable and cellular phone operator 27,000 243,000
Sinclair Broadcasting Group -
radio and television stations 10,000 287,500
US West Communications, Inc. - telephone operator 1 34
-----------
2,040,047
CONGLOMERATE - 6.0%
Fortune Brands, Inc. - home and office supplies,
golf equipment, spirits 11,000 422,813
<F1> Thermo Electron Corporation -
develops and commercializes technology 10,000 341,875
-----------
764,688
CONSUMER DISCRETIONARY & SERVICES - 9.3%
<F1> IMAX Corporation - developer of specialty
movies and theaters 12,000 273,750
Jostens, Inc. - manufacturer of recognition products 7,500 179,062
<F1> Liberty Media Class A - cable television programming 5,500 213,469
Polaroid Corporation - photographic and imaging
equipment/supplies 3,800 135,137
<F1> SFX Entertainment, Inc. - consolidator of live
entertainment venues 4,000 183,500
Shaw Industries, Inc. - carpet manufacturer
and retailer 11,500 202,687
-----------
1,187,605
<PAGE>
Shares Market
Held Value
----------- -----------
CONSUMER STAPLES - 5.3%
Dial Corporation - soap and candle manufacturer 11,500 $ 298,281
<F1> Fred Meyer, Inc. - western U.S. grocery stores 4,000 170,000
Whitman Corporation - soft drink/beverage
bottler and distributor 9,000 206,438
-----------
674,719
ENERGY - 2.2%
<F1> EVI, Inc. - premium drill pipe manufacturer 4,000 148,500
<F1> Nabors Industries Inc. - contract land
drilling services 7,000 138,687
-----------
287,187
FINANCIAL SERVICES - 4.7%
Horace Mann Educators Corporation -
life and property insurance 4,500 155,250
ITT Hartford Group, Inc. -
life and property insurance 1,700 194,438
Sirrom Capital Corporation - small business lender 9,500 247,000
-----------
596,688
HEALTHCARE - 6.5%
<F1> Biochem Pharmaceutical, Inc. -
AIDS and Hepatitis drug manufacturer 7,500 198,750
<F1> Clinichem Development, Inc. -
drug research and development 188 1,078
<F1> Covance, Inc. - contract research for
pharmaceutical industry 16,400 369,000
<F1> Quorum Health Group, Inc. - suburban hospital
holding company 10,000 265,000
-----------
833,828
MATERIALS & PROCESSING - 11.0%
Hussmann International, Inc. - manufacturer of
commercial refrigeration equipment 11,000 204,188
<F1> Knoll, Inc. - high-end office furniture systems 8,500 250,750
<F1> Mail-Well, Inc. - commercial printing and
mailing holding company 7,000 151,812
<F1> Mettler-Toledo International, Inc. - precision
weighing instruments 19,500 391,219
Millipore Corporation - commercial water
filtration equipment 4,000 109,000
Safety-Kleen Corporation - hazardous waste
collection and disposal 50,000 181,250
<F1> Steel Dynamics, Inc. - steel producer 8,500 117,938
-----------
1,406,157
REAL ESTATE
INVESTMENT TRUSTS/PROPERTY - 10.7%
Apartment Investment & Management Company -
apartment complex management 10,500 414,750
Equity Office Products - office building
owner and operator 9,000 255,375
Fortress Investment Corporation, 144A -
specialty real estate investments 6,900 138,000
HealthCare Financial Partners REIT, 144A -
healthcare related real estate investments 2,300 230,000
LNR Property Corporation - real estate
acquisition and development 13,000 333,125
-----------
1,371,250
SCHEDULE OF INVESTMENTS
ARTISAN MID CAP FUND
<PAGE>
Shares Market
Held Value
----------- -----------
TECHNOLOGY - 15.0%
<F1> American Power Conversion Corporation -
un-interruptible power supplies 13,500 $ 405,000
<F1> Aspen Technology, Inc. - software for
process manufacturing 2,500 126,250
<F1> Berg Electronics Corporation -
electronic connector manufacturer 6,000 117,375
<F1> Broadcom Corporation - semiconductor manufacturer 3,000 220,875
Cognex Corporation - supplier of
machine vision equipment 5,500 101,750
<F1> Electronics For Imaging, Inc. -
products for digital color printing 12,000 253,500
<F1> Micron Technology, Inc. - semiconductor manufacturer 3,000 74,438
<F1> Sanmina Corporation - contract manufacturer
of backplane assemblies 6,500 281,937
<F1> Seagate Technology, Inc. - disk drive manufacturer 10,000 238,125
<F1> Teradyne, Inc. - semi-conductor test
equipment manufacturer 3,500 93,625
-----------
1,912,875
TOTAL COMMON STOCKS (Cost $11,257,353) $12,039,028
Par Market
Amount Value
----------- -----------
SHORT TERM INVESTMENTS-7.3%
Repurchase agreement with State Street Bank
and Trust Company, 5.0%,dated 6/30/98, due
7/1/98, maturity value $938,130, collateralized
by $961,000 market value U.S. Treasury Note,
5.625%, due 12/31/99
(Cost $938,000) $ 938,000 $ 938,000
-----------
TOTAL INVESTMENTS - 101.5% (Cost $12,195,353) 12,977,028
OTHER ASSETS LESS LIABILITIES - (1.5)% (196,092)
TOTAL NET ASSETS - 100.0% (<F2>) -----------
$12,780,936
===========
<F1> Non-income producing securities
<F2> Percentages for the various classifications relate to total net assets
ADR - American Depository Receipt
SCHEDULE OF INVESTMENTS
ARTISAN MID CAP FUND
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
ARTISAN
SMALL CAP VALUE FUND
Schedule of Investments - June 30, 1998
COMMON AND PREFERRED STOCKS - 92.3%
Shares Market
Held Value
----------- -----------
BASIC INDUSTRY - 19.0%
<F1> American Pacific Corporation - specialty
chemicals for aerospace and defense 86,000 $ 849,250
<F1> CFC International, Inc. - specialty
chemical coatings 91,100 979,325
Dexter Corporation - specialty
industrial materials manufacturer 27,600 878,025
<F1> Emcor Group, Inc. - mechanical and
electrical contractors 29,800 569,925
<F1> L.B. Foster Company - rail and
construction supplies manufacturer 120,300 624,056
<F1> Giant Cement Holdings, Inc. - cement operations 25,000 715,625
<F1> Gundle Slt Environmental, Inc. -
landfill lining systems 125,000 562,500
Inco Ltd., Class VBN Shares - nickel mining 55,000 395,313
Insteel Industries, Inc. - steel
wire products manufacturer 119,300 753,081
Lone Star Industries, Inc. - cement operations 3,000 231,187
Monarch Cement Company - cement operations 8,500 216,750
<F1> Perini Corporation - general contractors/construction 6,000 51,375
Schnitzer Steel Industries, Inc. - steel scrap
processor and minimill operation 30,900 730,013
Sevenson Environmental Service -
hazardous waste remediation 62,000 519,250
<F1> Steel of West Virginia, Inc. - steel minimill operator 70,100 674,713
Terra Industries, Inc. - agribusiness 26,900 242,100
-----------
8,992,488
BUSINESS SERVICES - 8.1%
<F1> Anacomp, Inc. - systems for storage, retrieval
and archiving of data 8,900 210,262
Angelica Corporation - textile rental and
laundry services 29,200 613,200
<F1> Audits & Surveys Worldwide, Inc. - marketing research 90,300 259,612
Cordiant Communications Group (ADR) -
advertising/media services 70,000 857,500
Grey Advertising, Inc. - advertising agency 1,700 673,200
<F1> Pinkertons, Inc. - security services 42,000 871,500
Saatchi & Saatchi PLC (ADR) -
advertising/media services 24,000 330,000
-----------
3,815,274
<PAGE>
Shares Market
Held Value
----------- -----------
CAPITAL SPENDING - 14.1%
<F1> DeCrane Aircraft Holdings, Inc. - avionics
components manufacturer 20,000 $ 347,500
<F1> Esco Electronics Corporation -
defense systems contractor 52,300 993,700
Gleason Corporation - gear manufacturing
equipment producer 37,600 1,057,500
Lawson Products, Inc. - industrial parts
manufacturer and distributor 25,000 643,750
<F1> Mueller Industries, Inc. - plumbing
products manufacturer 16,400 608,850
<F1> Powell Industries, Inc. - electrical
equipment manufacturer 60,000 750,000
Smith Investment Company - multi-industry
holding company 13,300 911,050
Twin Disc, Inc. - heavy-duty power
transmission equipment manufacturer 22,500 680,625
<F1> Wolverine Tube, Inc. - copper tubing manufacturer 17,000 646,000
-----------
6,638,975
COMPUTER RELATED - 2.2%
Astro-Med, Inc. - medical instrumentation/
specialty printers 89,800 684,725
<F1> FSI International, Inc. - semiconductor
equipment manufacturer 10,500 101,719
<F1> Silicon Valley Group, Inc. - semiconductor
equipment manufacturer 10,000 160,625
<F1> Standard Microsystems Corporation -
input/output integrated circuits producer 10,000 88,125
-----------
1,035,194
CONSUMER CYCLICALS - 1.6%
Boston Acoustics, Inc. - speaker manufacturer 20,000 735,000
CONSUMER SERVICES - 2.9%
<F1> Craig Corporation, Class A Preference - movie
theatres owner/operator 56,600 633,212
<F1> On Command Corporation - pay-per-view movie services 53,600 743,700
-----------
1,376,912
CONSUMER STAPLES - 6.8%
Jostens, Inc. - manufacturer of recognition products 38,000 907,250
<F1> M & F Worldwide Corporation - flavorings producer 110,300 1,096,106
Midwest Grain Products, Inc. - wheat
gluten and wheat by-products processor 52,400 759,800
Pepsi Cola - Puerto Rico Bottling Company -
soft drink/beverage bottler/distributor 62,600 469,500
-----------
3,232,656
ENERGY - 3.4%
Castle Energy Corporation - natural gas
exploration/production 12,000 234,000
<F1> Forest Oil Corporation - oil and gas
exploration/production 40,000 572,500
Patina Oil & Gas Corporation - oil and
gas exploration/production 100,000 700,000
<F1> Saxon Petroleum, Inc. - oil and gas
exploration/production 475,500 122,789
-----------
1,629,289
SCHEDULE OF INVESTMENTS
ARTISAN SMALL CAP VALUE FUND
<PAGE>
Shares Market
Held Value
----------- -----------
INSURANCE - 13.3%
Annuity and Life Re Holdings - life
and annuity reinsurance 25,600 $ 566,400
Argonaut Group, Inc. - workers compensation insurance 18,600 588,225
Capital Re Corporation - financial
guaranty reinsurance 5,000 358,125
Fund American Enterprises Holdings, Inc. -
mortgage banking/property and casualty insurance 4,500 666,000
Hilb, Rogal & Hamilton Company - insurance brokers 78,100 1,220,312
Merchants Group, Inc. - property and
casualty insurance 16,400 387,450
<F1> Risk Capital Holdings, Inc. - reinsurance
products and services 35,000 872,813
Stewart Information Services Corporation -
title insurance 10,000 485,625
<F1> Superior National Insurance Group, Inc. -
workers compensation insurance 49,300 1,158,550
-----------
6,303,500
MEDICAL DEVICES/SUPPLIES - 1.2%
<F1> Quest Diagnostics, Inc. - diagnostic testing services 25,200 551,250
OTHER FINANCIAL - 3.7%
Capital Southwest Corporation - closed-end venture
capital investment company 8,700 852,600
<F1> Enstar Group, Inc. - financial services
holding company 29,200 419,750
Somerset Group, Inc. - investment services 20,900 454,575
-----------
1,726,925
PAPER AND PACKAGING - 1.6%
Greif Brothers Corporation - shipping containers
and packaging manufacturer 20,000 747,500
-----------
REAL ESTATE
INVESTMENT TRUSTS/PROPERTY - 5.5%
Asset Investors Corporation - manufactured
housing communities 45,000 717,187
Fortress Investment Corporation, 144A - specialty
real estate investments 25,900 518,000
HealthCare Financial Partners REIT, 144A -
healthcare related real estate investments 7,600 760,000
<F1> Lexford Residential Trust - multi-family
residence owner/operator 31,400 600,525
-----------
2,595,712
RESTAURANTS/HOTELS - 4.8%
<F1> Boardwalk Casino, Inc. - casino operator 36,000 175,500
<F1> Host Marriott Services Corporation - food and
beverage concessions operator 70,000 1,019,375
<F1> Spaghetti Warehouse, Inc. - Italian restaurant chain 83,900 671,200
<F1> Supertel Hospitality, Inc. - economy
hotels owner/operator 32,000 400,000
-----------
2,266,075
RETAILING - 2.5%
<F1> R. G. Barry Corporation - footwear manufacturer 70,400 1,161,600
SOFTWARE/TELECOMMUNICATIONS - 0.6%
<F1> Intelligent Systems Corporation -
software and healthcare services 94,100 294,063
SCHEDULE OF INVESTMENTS
ARTISAN SMALL CAP VALUE FUND
<PAGE>
Shares Market
Held Value
----------- -----------
TRANSPORTATION RELATED - 1.0%
<F1> Ansaldo Signal - railroad switches and
signals manufacturer 69,200 $ 294,100
<F1> Avalon Holdings Corporation - hazardous
waste transportation 25,000 165,625
-----------
459,725
TOTAL COMMON AND PREFERRED STOCKS (Cost $41,886,048) $43,562,138
Par Market
Amount Value
----------- -----------
SHORT TERM INVESTMENTS - 7.4%
Repurchase agreement with State Street Bank
and Trust Company, 5.0%, dated 6/30/98, due
7/1/98, maturity value $3,516,488, collateralized
by $3,590,553 market value U.S. Treasury Note,
6.625%, due 7/31/01
(Cost $3,516,000) $ 3,516,000 $ 3,516,000
-----------
TOTAL INVESTMENTS - 99.7% (Cost $45,402,048) 47,078,138
OTHER ASSETS LESS LIABILITIES - 0.3% 151,690
-----------
TOTAL NET ASSETS - 100.0% (<F2>) $47,229,828
===========
<F1> Non-income producing securities
<F2> Percentages for the various classifications relate to total net assets
ADR - American Depository Receipt
SCHEDULE OF INVESTMENTS
ARTISAN SMALL CAP VALUE FUND
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
ARTISAN FUNDS, INC.
Statements of Assets and Liabilities - June 30, 1998
<TABLE>
<CAPTION>
SMALL CAP INTERNATIONAL MID CAP SMALL CAP
FUND FUND FUND VALUE FUND
------------- ------------- ------------ ------------
ASSETS: <C> <C> <C> <C>
Investments in securities, at value $312,280,355 $493,740,609 $12,977,028 $47,078,138
Cash 777 937,887 5,120 603
Receivable from investments sold 588,246 12,030,107 335,915 717,889
Receivable from forward currency contracts - 8,971,239 - -
Receivable from fund shares sold 57,418 4,881,388 50 75,546
Interest receivable 2,218 1,497 130 488
Dividends receivable 75,281 1,630,862 6,389 41,019
Organizational costs 24,347 18,300 22,692 34,223
Receivable from Adviser - - 155,534 -
------------- ------------- ------------ ------------
TOTAL ASSETS 313,028,642 522,211,889 13,502,858 47,947,906
LIABILITIES:
Payable for investments purchased 8,388,297 15,411,415 489,798 560,176
Payable for forward currency contracts - 8,971,680 - -
Payable for fund shares redeemed 245,843 187,678 25,434 18,735
Payable for organizational costs 24,347 18,300 22,692 34,223
Payable for operating expenses 227,994 356,029 183,998 103,919
Other liabilities - 87,172 - 1,025
------------- ------------- ------------ ------------
TOTAL LIABILITIES 8,886,481 25,032,274 721,922 718,078
------------- ------------- ------------ ------------
TOTAL NET ASSETS $304,142,161 $497,179,615 $12,780,936 $47,229,828
============= ============= ============ ============
NET ASSETS CONSIST OF:
Fund shares issued and outstanding $248,569,027 $405,388,668 $10,727,864 $43,033,921
Net unrealized appreciation on investments
and foreign currency related transactions 34,887,768 81,382,747 781,675 1,676,090
Accumulated undistributed net investment income - 309,643 - -
Accumulated undistributed net realized gains on
investments and foreign currency related transactions 20,685,366 10,098,557 1,271,397 2,519,817
------------- ------------- ------------ ------------
$304,142,161 $497,179,615 $12,780,936 $47,229,828
============= ============= ============ ============
SUPPLEMENTARY
INFORMATION:
Net assets $304,142,161 $12,780,936 $47,229,828
International Shares $414,535,770
Institutional Shares $82,643,845
Number of shares outstanding 20,742,487 933,285 4,153,366
International Shares 25,502,751
Institutional Shares 5,083,604
Net asset value, offering price and
redemption price per share $14.66 $13.69 $11.37
International Shares $16.25
Institutional Shares $16.26
Cost of securities held $ 277,392,587 $ 412,353,181 $ 12,195,353 $ 45,402,048
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
ARTISAN FUNDS, INC.
Statements of Operations - For the Year or Period Ended June 30, 1998
<TABLE>
<CAPTION>
SMALL CAP INTERNATIONAL MID CAP SMALL CAP
FUND FUND FUND VALUE FUND <F1>
------------- ------------- ------------ ------------
INVESTMENT INCOME: <C> <C> <C> <C>
Interest $ 668,064 $ 392,119 $ 38,536 $ 130,204
Dividends 1,057,997 6,832,557<F2> 76,523 232,533
------------- ------------- ------------ ------------
TOTAL INVESTMENT INCOME 1,726,061 7,224,676 115,059 362,737
EXPENSES:
Advisory fees 2,900,335 3,923,189 93,853 252,397
Transfer agent fees 577,185 75,844 103,956
International Shares 755,802
Institutional Shares 15,317
Shareholder communications 98,455 22,745 25,886
International Shares 119,710
Institutional Shares 7,195
Custodian fees 84,447 456,772 19,857 14,320
Accounting fees 43,858 74,259 31,815 23,890
Professional fees 65,287 98,011 34,522 24,756
Registration fees 40,621 76,297 26,458 25,185
Directors' fees 15,000 15,000 15,000 -
Organizational costs 14,220 7,320 22,668 17,799
Other operating expenses 26,442 40,097 477 1,926
------------- ------------- ------------ ------------
TOTAL OPERATING EXPENSES BEFORE
AMOUNTS PAID BY THE ADVISER 3,865,850 5,588,969 343,239 490,115
LESS AMOUNTS PAID BY THE ADVISER - - (155,534) -
------------- ------------- ------------ ------------
NET EXPENSES 3,865,850 5,588,969 187,705 490,115
------------- ------------- ------------ ------------
NET INVESTMENT INCOME (LOSS) (2,139,789) 1,635,707 (72,646) (127,378)
Net REALIZED AND
UNREALIZED GAINS
(LOSSES) ON INVESTMENTS:
Net realized gain (loss) on:
Investments 42,066,239 28,895,798 1,907,453 2,628,786
Foreign currency related transactions - (991,131) - -
------------- ------------- ------------ ------------
42,066,239 27,904,667 1,907,453 2,628,786
Net increase (decrease) in unrealized
appreciation on:
Investments (907,556) 47,423,084 781,675 1,676,090
Foreign currency related transactions - 22,144 - -
------------- ------------- ------------ ------------
(907,556) 47,445,228 781,675 1,676,090
------------- ------------- ------------ ------------
NET GAIN ON INVESTMENTS 41,158,683 75,349,895 2,689,128 4,304,876
------------- ------------- ------------ ------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 39,018,894 $ 76,985,602 $ 2,616,482 $ 4,177,498
============= ============= ============ ============
</TABLE>
<F1> For the period from commencement of operations (September 29, 1997) through
June 30, 1998.
<F2> Net of foreign taxes withheld of $765,444.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
ARTISAN FUNDS, INC.
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Small Cap Fund International Fund
------------------------------- ------------------------------
Year Year Year Year
Ended Ended Ended Ended
6/30/98 6/30/97 6/30/98 6/30/97
-------------- -------------- ------------- -------------
OPERATIONS: <C> <C> <C> <C>
Net investment income (loss) $ (2,139,789) $ (2,124,352) $ 1,635,707 $ 2,615,087
Net realized gain (loss) on:
Investments 42,066,239 28,932,063 28,895,798 11,001,981
Foreign currency related transactions - - (991,131) (419,819)
Net increase (decrease) in unrealized appreciation on:
Investments (907,556) (6,867,786) 47,423,084 30,260,301
Foreign currency related transactions - - 22,144 (31,194)
-------------- -------------- ------------- -------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 39,018,894 19,939,925 76,985,602 43,426,356
DISTRIBUTIONS PAID
TO SHAREHOLDERS:
Net investment income: - -
International Shares (4,035,316) (237,011)
Institutional Shares (823,369)
Net realized gains on investment transactions: (45,736,543) (21,951,585)
International Shares (23,067,732) (1,238,614)
Institutional Shares (4,236,936)
-------------- -------------- ------------- -------------
TOTAL DISTRIBUTIONS PAID TO SHAREHOLDERS (45,736,543) (21,951,585) (32,163,353) (1,475,625)
FUND SHARE ACTIVITIES:
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM FUND SHARE ACTIVITIES 43,039,922 (130,169,041) 3,177,296 335,717,641
-------------- -------------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 36,322,273 (132,180,701) 47,999,545 377,668,372
Net assets, beginning of year 267,819,888 400,000,589 449,180,070 71,511,698
-------------- -------------- ------------- -------------
NET ASSETS, END OF YEAR $304,142,161 $267,819,888 $497,179,615 $449,180,070
============== ============== ============= =============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
ARTISAN FUNDS, INC.
Statements of Changes in Net Assets - Continued
<TABLE>
<CAPTION>
MID CAP FUND SMALL CAP VALUE FUND
------------------------------ -----------------------
YEAR PERIOD PERIOD
ENDED ENDED ENDED
6/30/98 6/30/97<F1> 6/30/98<F2>
------------ ----------- -----------
OPERATIONS: <C> <C> <C>
Net investment loss $ (72,646) $ - $ (127,378)
Net realized gain on investments 1,907,453 - 2,628,786
Net increase in unrealized
appreciation on investments 781,675 - 1,676,090
----------- ---------- -----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 2,616,482 - 4,177,498
DISTRIBUTIONS PAID
TO SHAREHOLDERS:
NET REALIZED GAINS ON
INVESTMENT TRANSACTIONS (586,078) - -
FUND SHARE ACTIVITIES:
NET INCREASE IN NET ASSETS RESULTING FROM
FUND SHARE ACTIVITIES 8,937,055 1,813,477 43,052,330
----------- ---------- -----------
TOTAL INCREASE IN NET ASSETS 10,967,459 1,813,477 47,229,828
Net assets, beginning of period 1,813,477 - -
----------- ---------- -----------
NET ASSETS, END OF PERIOD $12,780,936 $1,813,477 $47,229,828
=========== ========== ===========
</TABLE>
<F1> For the period from commencement of operations (June 27, 1997) through June
30, 1997.
<F2> For the period from commencement of operations (September 29, 1997) through
June 30, 1998.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
ARTISAN FUNDS, INC.
Financial Highlights
<TABLE>
<CAPTION>
SMALL CAP FUND
--------------------------------------------------------
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
For a share outstanding throughout each period 6/30/98 6/30/97 6/30/96 6/30/95<F1>
-------- -------- -------- -----------
<C> <C> <C> <C>
Net asset value, beginning of period $ 15.11 $ 14.67 $ 11.52 $ 10.00
Income from investment operations:
Net investment loss (0.10) (0.04) (0.07) (0.01)
Net realized and unrealized
gains on securities 2.23 1.55 3.32 1.53
-------- -------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS 2.13 1.51 3.25 1.52
Distributions paid to shareholders:
Net realized gains on
investment transactions (2.58) (1.07) (0.10) -
-------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 14.66 $ 15.11 $ 14.67 $ 11.52
======== ======== ======== ========
Total return 14.7% 11.3% 28.3% 15.2%<F2>
Ratios/Supplemental data:
Net assets, end of
period (millions) $304.1 $267.8 $400.0 $99.3
Ratio of expenses to
average net assets 1.33% 1.41% 1.52% 2.00%<F3>
Ratio of net
investment income to
average net assets (0.74%) (0.73%) (0.75%) (0.59%)<F3>
Portfolio turnover rate 134.67% 87.18% 105.19% 9.28%<F2>
</TABLE>
<F1> For the period from commencement of operations (March 28, 1995) through
June 30, 1995.
<F2> Not annualized.
<F3> Annualized.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
ARTISAN FUNDS, INC.
Financial Highlights - Continued
<TABLE>
<CAPTION>
INTERNATIONAL FUND
-----------------------------------------------------------
YEAR YEAR PERIOD
ENDED ENDED ENDED
6/30/98 6/30/97 6/30/96<F1>
---------------------------- ------------- -------------
INTERNATIONAL INSTITUTIONAL INTERNATIONAL INTERNATIONAL
For a share outstanding throughout each period SHARES SHARES SHARES SHARES
------------- ------------- ------------- -------------
<C> <C> <C> <C>
Net asset value, beginning of period $ 14.48 $ 14.48 $ 12.08 $ 10.00
Income from investment operations:
Net investment income 0.06<F2> 0.09<F2> 0.07 0.04
Net realized and unrealized
gains on securities and foreign
currency transactions 3.04 3.04 2.44 2.04
-------- -------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS 3.10 3.13 2.51 2.08
-------- -------- -------- --------
Distributions paid to shareholders:
Net investment income (0.20) (0.22) (0.02) -
Net realized gain on
investment transactions (1.13) (1.13) (0.09) -
-------- -------- -------- --------
TOTAL DISTRIBUTIONS PAID
TO SHAREHOLDERS (1.33) (1.35) (0.11) -
-------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 16.25 $ 16.26 $ 14.48 $ 12.08
======== ======== ======== ========
Total return 24.1% 24.4% 20.9% 20.8%<F3>
Ratios/Supplemental data:
Net assets, end of
period (millions) $414.5 $82.6 $449.2 $71.5
Ratio of expenses to
average net assets 1.45% 1.25% 1.61% 2.50%<F4>
Ratio of net
investment income to
average net assets 0.37% 0.68% 1.07% 1.60%<F4>
Portfolio turnover rate 109.42% 109.42% 103.66% 57.00%<F3>
</TABLE>
<F1> For the period from commencement of operations (December 28, 1995) through
June 30, 1996.
<F2> Computed based on average shares outstanding.
<F3> Not annualized.
<F4> Annualized.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
ARTISAN FUNDS, INC.
Financial Highlights - Continued
<TABLE>
<CAPTION>
MID CAP FUND SMALL CAP VALUE FUND
------------------------------ -----------------------
YEAR PERIOD PERIOD
ENDED ENDED ENDED
6/30/98 6/30/97<F1> 6/30/98<F2>
----------- ----------- -----------
<C> <C> <C>
Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00
Income from investment operations:
Net investment loss (0.08) - (0.03)
Net realized and unrealized gains
on securities 4.56 - 1.40
------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 4.48 - 1.37
------- ------- -------
Distributions paid to shareholders:
Net realized gains on
investment transactions (0.79) - -
------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 13.69 $ 10.00 $ 11.37
======= ======= =======
Total return 46.1% 0.0%<F3> 13.7%<F3>
Ratios/Supplemental data:
Net assets, end of
period (millions) $12.8 $1.8 $47.2
Ratio of expenses to
average net assets 2.00%<F5> 0.00%<F4> 1.93%<F4>
Ratio of net investment loss
to average net assets (0.77%)<F5> 0.00%<F4> (0.50%)<F4>
Portfolio turnover rate 235.65% 0.00%<F3> 52.58%<F3>
</TABLE>
<F1> For the period from commencement of operations (June 27, 1997) through
June 30, 1997.
<F2> For the period from commencement of operations (September 29, 1997) through
June 30, 1998.
<F3> Not annualized.
<F4> Annualized.
<F5> The ratios of expenses to average net assets and net investment loss to
average net assets include fees paid by the Adviser. Absent fees paid by
the Adviser, the ratios of expenses to average net assets and net
investment loss to average net assets would have been 3.64% and (2.41%),
respectively.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
ARTISAN FUNDS, INC.
Notes to Financial Statements - June 30, 1998
(1)ORGANIZATION:
Artisan Funds, Inc. ("Artisan Funds" ) was incorporated on January 5, 1995,
as a Wisconsin corporation and is registered under the Investment Company
Act of 1940, as amended. Artisan Funds is comprised of four open-end,
diversified mutual funds (each a "Fund" and collectively the "Funds").
Artisan Small Cap Fund ("Small Cap Fund"), Artisan International Fund
("International Fund"), Artisan Mid Cap Fund ("Mid Cap Fund"), and Artisan
Small Cap Value Fund ("Small Cap Value Fund") commenced operations on March
28, 1995, December 28, 1995, June 27, 1997 and September 29, 1997,
respectively.
Effective July 1, 1997, the International Fund began offering two classes of
capital shares, International Shares and International Institutional Shares
("Institutional Shares"). Institutional Shares are sold to institutional
investors meeting certain minimum investment requirements. Each class of
shares has equal rights with respect to portfolio assets and voting
privileges. Each class has exclusive voting rights with respect to any
matters involving only that class. Income, non-class specific expenses, and
realized and unrealized gains and losses are allocated daily to each class
of shares based upon the relative net asset value of outstanding shares.
Expenses attributable to a particular class of shares, such as transfer
agency fees and shareholder communication expenses, are allocated directly
to that class. On July 1, 1997, 3,071,672 International Shares (with a net
asset value of $44,477,811) were transferred to Institutional Shares.
The Small Cap Fund, International Fund International Shares, International
Fund Institutional Shares, Mid Cap Fund and Small Cap Value Fund each have
5,000,000,000 shares authorized with a $0.01 par value.
(2)SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the Funds.
(a) Security valuation - Each security is valued at the last sales price
reported by the principal securities exchange on which the issue is
traded, or if no sale is reported on the principal exchange, the last
sale on a secondary exchange. The last bid price reported is utilized if
no sales have taken place. Securities for which prices are not readily
available, or for which management believes that the last sale or bid
price is not reflective of the fair value of the security, are valued at
a 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.
<PAGE>
ARTISAN FUNDS, INC.
Notes to Financial Statements - Continued
(b) Income taxes - No provision has been made for federal income taxes since
each Fund intends to 1) distribute to its shareholders substantially all
of its taxable income as well as realized gains from the sale of
investment securities and 2) comply with all provisions of the Internal
Revenue Code applicable to regulated investment companies.
(c) Portfolio transactions - Security and shareholder transactions are
recorded on trade date. Net realized gains and losses on securities are
computed on specific security lot identification.
(d) Foreign currency translation - Values of investments denominated in
foreign currencies are converted into U.S. dollars using the spot market
rate of exchange at the time of valuation. Purchases and sales of
investments and dividend and interest income are translated to U.S.
dollars using the spot market rate of exchange prevailing on the
respective dates of such transactions. The portion of security gains or
losses resulting from changes in foreign exchange rates is included with
net realized and unrealized gain or loss from investments, as
appropriate, for both financial reporting and tax purposes.
The International Fund enters into forward currency contracts to hedge
the foreign currency exposure on open payables and receivables. The
forward currency contracts are recorded at market value and any related
realized and unrealized gains and losses are reported as foreign
currency related transactions for financial reporting purposes. For tax
purposes, these foreign exchange gains and losses are treated as
ordinary income. The International Fund could be exposed to loss if the
counterparties fail to perform under these contracts.
(e) Use of estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts and
disclosures in the financial statements. Actual results could differ
from those estimates.
(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 Funds. Interest income is reported
on the accrual basis. Distributions to shareholders are recorded on the
ex-dividend date. Generally accepted accounting principles require that
certain differences between financial reporting and tax amounts be
reclassified to capital stock.
<PAGE>
ARTISAN FUNDS, INC.
Notes to Financial Statements - Continued
(3)TRANSACTIONS WITH AFFILIATES:
Artisan Partners Limited Partnership (the "Adviser"), with which certain
officers and directors of the Funds are affiliated, provides investment
advisory and administrative services to the Funds. In exchange for these
services, each Fund pays a monthly management fee to the Adviser as follows:
Average Daily Net Assets Annual Rate
------------------------ -----------
Less than $500 million 1.000%
$500 million to $750 million 0.975%
$750 million to $1 billion 0.950%
Greater than $1 billion 0.925%
Each Fund also incurs other expenses for services such as maintaining
shareholder records and furnishing shareholder statements and reports. The
Advisor has undertaken to reimburse the Small Cap Fund, Mid Cap Fund and
Small Cap Value Fund for any ordinary operating expenses in excess of 2.00%
of average net assets annually, and International Fund for ordinary
operating expenses in excess of 2.50% of average net assets annually.
Each director who is not an interested person of Artisan Funds, Inc. or
Artisan Partners Limited Partnership receives an annual retainer fee of
$5,000 per Fund, plus reimbursement of expenses related to his duties as a
director of Artisan Funds, Inc. The Small Cap Value Fund does not begin to
pay directors' fees until fiscal year 1999.
A company in which a Fund directly or indirectly owns, controls, or holds
power to vote 5% or more of the outstanding voting securities is defined by
the Investment Company Act of 1940 as an affiliated person of the Fund. The
International Fund holds two securities which are defined by the Investment
Company Act as affiliated persons of the Fund. A summary of transactions in
the securities of each such affiliated person and dividend income received
on those securities for the fiscal year ended June 30, 1998 follows:
Purchases Sales Realized Dividend
------------------- --------------
Affiliate Shares Cost Shares Cost Gains Income
--------- ------ ---- ------ ---- ----- -------
Bankard, Inc. 2,975,000 $298,422 - - - -
Radio P4 - - - - - $130,829
<PAGE>
ARTISAN FUNDS, INC.
Notes to Financial Statements - Continued
(4)ORGANIZATIONAL COSTS AND PREPAID REGISTRATION EXPENSES:
Organizational costs are amortized over sixty months. These expenses were
paid by the Adviser and will be reimbursed by the Funds 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. Prepaid registration expenses are
amortized over twelve months.
(5)LINE OF CREDIT ARRANGEMENTS:
Artisan Funds, Inc. is party to a line of credit agreement with State Street
Bank and Trust Company, under which each Fund may borrow up to a maximum of
$30 million, but not more than 10% of its net assets. Artisan Funds, Inc.
pays an annual commitment fee of 0.10% on the unused portion of the line of
credit. This fee is allocated to each series of Artisan Funds, Inc. based on
relative net assets. Interest is charged on any borrowings at the current
Federal funds rate plus 0.50%. The use of the line of credit is generally
restricted to temporary borrowing for extraordinary or emergency purposes.
Interest charges and maximum borrowing amounts for the fiscal year ended
June 30, 1998 follows:
Interest Maximum
Fund Charges Borrowings
---- -------- -----------
Small Cap $ 181 $ 664,274
International 14,468 9,690,453
Mid Cap 8 45,420
Small Cap Value - -
(6)INVESTMENT TRANSACTIONS:
The cost of securities purchased and the proceeds from the sale of
securities (excluding short-term securities) for the fiscal year ended June
30, 1998 were as follows:
Fund Security Purchases Security Sales
---- ------------------ --------------
Small Cap $ 377,917,617 $ 384,927,712
International 426,137,759 459,745,091
Mid Cap 29,829,713 20,478,021
Small Cap Value 54,813,813 15,540,240
<PAGE>
ARTISAN FUNDS, INC.
Notes to Financial Statements - Continued
(7)FUND SHARE ACTIVITIES:
Capital share transactions for the Funds were as follows:
International
Fund
-----------------------------
International Institutional
Fiscal year ended June 30, 1998 Small Cap Fund Shares Shares
- ---------------------------------- -------------- -------------- --------------
Net asset value of
shares transferred $ (44,477,811) $ 44,477,811
Proceeds from
shares issued $ 68,878,543 235,471,219 27,045,257
Net asset value
of shares issued in
reinvestment of
distributions 44,157,727 25,959,795 4,802,555
Cost of shares redeemed (69,996,348) (287,349,997) (2,751,533)
------------- -------------- ------------
Net increase (decrease)
from fund share
activities $ 43,039,922 $ (70,396,794) $ 73,574,090
============= ============== ============
Small Cap
Mid Cap Fund Value Fund
-------------- --------------
Proceeds from shares issued $ 10,983,008 $ 54,638,155
Net asset value of shares issued in
reinvestment of distributions 539,701 -
Cost of shares redeemed (2,585,654) (11,585,825)
------------ ------------
Net increase from fund
share activities $ 8,937,055 $ 43,052,330
============ ============
International
Fund
----------------------------
International Institutional
Transactions in shares of the Fund Small Cap Fund Shares Shares
- ---------------------------------- --------------- ------------- --------------
Shares transferred (3,071,672) 3,071,672
Shares sold 4,616,498 15,876,987 1,835,634
Shares issued from reinvestment
of distributions 3,125,105 2,075,110 383,897
Shares redeemed (4,721,885) (20,392,769) (207,599)
-------------- -------------- --------------
Net increase (decrease)
in capital shares 3,019,718 (5,512,344) 5,083,604
============== ============== ==============
Small Cap
Mid Cap Fund Value Fund
-------------- --------------
Shares sold 912,840 5,232,019
Shares issued from reinvestment
of distributions 45,932 -
Shares redeemed (206,835) (1,078,653)
-------------- --------------
Net increase in capital shares 751,937 4,153,366
============== ==============
<PAGE>
ARTISAN Funds, INC.
Notes to Financial Statements - Continued
(7)FUND SHARE ACTIVITIES (continued):
International
Fund
-------------
International
Fiscal year ended June 30, 1997 Small Cap Fund Shares Mid Cap Fund
- ---------------------------------- -------------- ------------- --------------
Proceeds from shares issued $ 58,361,524 $ 447,478,870 $ 1,813,477
Net asset value of shares
issued in reinvestment of
distributions 21,200,167 1,414,826 -
Cost of shares redeemed (209,730,732) (113,176,055) -
-------------- -------------- --------------
Net increase (decrease) from
fund share activities $ (130,169,041) $ 335,717,641 $ 1,813,477
============== ============== ==============
Transactions in shares of the Fund
- ----------------------------------
Shares sold 4,247,380 33,329,489 181,348
Shares issued from reinvestment
of distributions 1,600,012 108,735 -
Shares redeemed (15,384,496) (8,344,932) -
----------------------------- --------------
Net increase (decrease) in
capital shares (9,537,104) 25,093,292 181,348
============== ============== ==============
(8)INFORMATION FOR FEDERAL INCOME TAX PURPOSES:
Aggregate Aggregate
Gross Gross Net
Unrealized Unrealized Unrealized
Cost of Appreciation Depreciation Appreciation
Fund Securities on Investments on Investments on Investments
---- ----------- -------------- -------------- --------------
Small Cap $277,902,525 $ 49,785,264 $15,407,434 $ 34,377,830
International 412,408,875 117,411,127 36,079,393 81,331,734
Mid Cap 12,232,984 1,301,142 557,098 744,044
Small Cap Value 45,420,398 3,714,386 2,056,646 1,657,740
The difference between cost amounts for financial reporting and tax purposes
is due primarily to timing differences in recognizing certain gains and
losses on security transactions and for the International Fund, passive
foreign investment company (PFIC) value adjustments. Losses from foreign
currency related transactions for the International Fund from November 1,
1997 to June 30, 1998 of $887,524 are not recognized for federal income tax
purposes until fiscal 1999.
<PAGE>
ARTISAN FUNDS, INC.
Notes to Financial Statements - Continued
(9)OTHER TAX INFORMATION (UNAUDITED):
For the year ended June 30, 1998, ordinary income distributions paid by
Small Cap Fund and Mid Cap Fund, of 5% and 2%, respectively, are eligible
for the dividend received deduction available to corporate shareholders.
In early 1998, shareholders received information regarding distributions
paid to them during the fiscal year ended June 30, 1998. Each Fund hereby
designates the following amounts as long-term capital gain distributions.
Small Cap Fund International Fund
--------------- -------------------
Capital Gains Taxed at 20% $ 13,002,121 $756,661
Capital Gains Taxed at 28% 19,309,312 4,295,676
------------- ------------
Total Long-Term Capital Gains $ 32,311,433 $ 5,052,337
============= ============
- -------------------------------------------------------------------------------
NOTES ON PORTFOLIO STATISTICS
The letters to shareholders included in this annual report include statistical
information about the portfolios of each of the Artisan Funds. That information
is as of June 30, 1998; it varies with changes in a Fund's portfolio
investments.
- -------------------------------------------------------------------------------
<PAGE>
(logo)
PRICEWATERHOUSECOOPERS
- -------------------------------------------------------------------------------
PRICEWATERHOUSECOOPERS
100 East Wisconsin Avenue
Suite 1500
Milwaukee WI 53202
Telephone (414) 276 9500
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Artisan Funds, Inc.
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Artisan Small Cap Fund, Artisan
International Fund, Artisan Mid Cap Fund and Artisan Small Cap Value Fund
(constituting Artisan Funds, Inc., hereafter referred to as the "Funds") at June
30, 1998, the results of each of their operations, the changes in each of their
net assets and the financial highlights for each of the periods indicated, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Funds' management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at June 30, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
July 31, 1998
(LOGO)
ARTISAN FUNDS
P.O. BOX 8412
BOSTON, MA 02266-8412
(800) 344-1770
-----------------
Bulk Rate
U.S. Postage
PAID
Milwaukee, WI
Permit No. 2855
-----------------
<PAGE>
ANNUAL REPORT
(logo)
ARTISAN FUNDS
INTERNATIONAL FUND INSTITUTIONAL SHARES
ARTISAN FUNDS
JUNE 30, 1998
<PAGE>
ARTISAN
INTERNATIONAL FUND
Letter to Shareholders - August 20, 1998
Effective July 1, 1997, the Artisan International Fund began offering two
classes of capital shares: International Shares and Institutional Shares.
Additional information regarding each class of shares is available in the Fund's
prospectus. Performance data herein relates to the International Shares prior
to July 1, 1997, and to the Institutional Shares subsequent to July 1, 1997.
THE FUND'S PERFORMANCE
Artisan International Fund gained 24.4% for its fiscal year ended June 30, 1998,
outpacing its benchmarks, the Morgan Stanley EAFE Index and Lipper International
Fund Index, which gained 6.1% and 9.0%, respectively. For the six months ended
June 30, 1998, the Fund gained 30.6%, well ahead of its benchmarks. In the ten
quarters since its inception, the Fund has gained 81.7%, versus gains of 25.1%
and 42.5% for the EAFE and Lipper indexes. We are understandably delighted with
this record of consistent outperformance.
COMPARATIVE QUARTERLY PERFORMANCE
- -----------------------------
ARTISAN INTERNATIONAL FUND
AVERAGE ANNUAL TOTAL RETURNS:
One Year: 24.4%
Since Inception: 26.9%
- -----------------------------
Artisan International EAFE Lipper International
Fund Index Fund Index
---------- ---------- ----------
12/28/95 $10,000.00 $10,000.00 $10,000.00
3/31/96 10,910.00 10,288.95 10,467.28
6/30/96 12,080.00 10,451.74 10,894.57
9/30/96 12,220.00 10,438.63 10,902.89
12/31/96 13,437.23 10,604.70 11,471.87
3/31/97 14,153.48 10,438.60 11,756.05
6/30/97 14,607.44 11,793.25 13,071.82
9/30/97 14,849.55 11,710.22 13,322.30
12/31/97 13,913.31 10,793.24 12,303.30
3/31/98 16,729.50 12,380.92 14,128.57
6/30/98 18,171.12 12,512.37 14,248.54
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
QUARTERLY 1996 1997 1998
PERFORMANCE ----------------------------------- ------------------------------------ ----------------
3/31/96 6/30/96 9/30/96 12/31/96 3/31/97 6/30/97 9/30/97 12/31/97 3/31/98 6/30/98
- --------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ARTISAN
INTERNATIONAL
FUND 9.1% 10.7% 1.2% 10.0% 5.3% 3.2% 1.7% -6.3% 20.2% 8.6%
- --------------------------------------------------------------------------------------------------------
EAFE
Index 2.9% 1.6% -0.1% 1.6% -1.6% 13.0% -0.7% -7.8% 14.7% 1.1%
-------------------------------------------------------------------------------------------------------
Lipper
International
Fund Index 4.4% 4.1% 0.1% 5.2% 2.5% 11.2% 1.9% -7.6% 14.8% 0.8%
- --------------------------------------------------------------------------------------------------------
</TABLE>
Effective July 1, 1997, the Artisan International Fund began offering two
classes of capital shares, International Shares and International Institutional
Shares. Each class bears different expenses. Please see the Fund's prospectus
for additional information regarding each class of shares. This graph compares
the results of $10,000 invested in International Shares on December 28, 1995
(the date the Fund began operations) to June 30, 1997, and in the Institutional
Shares from July 1, 1997, to June 30, 1998, with Morgan Stanley's Europe,
Australasia and Far East (EAFE) Index and Lipper International Fund 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.
<PAGE>
OUR INVESTMENT APPROACH
As is our custom, we would like to review our investment approach before
discussing details of the Fund's recent performance. Because there are a number
of approaches to international investing, we believe investors should understand
how a fund achieves its returns.
The Artisan International Fund invests in a broadly diversified portfolio of
international growth stocks, concentrating on industries and countries that have
accelerating growth prospects and companies that can capitalize on that growth.
The Fund's style can be characterized as "top-down and bottom-up," meaning that
country selection and stock selection are both fundamental to our process.
However, country exposures are typically a residual of stock selection.
OUR APPROACH HAS FOUR BASIC ELEMENTS
COUNTRY AND INDUSTRY FOCUS. We first search for countries and industries that
are providing a good environment for growth. This includes economies where
development is accelerating, as well as those becoming more competitive or
benefiting from economic stimulus. These countries and industries are where we
focus our search for stocks. Although the Fund holds some stocks from emerging
countries, these holdings are very modest - a minor aspect of our overall
strategy. Importantly, we do not consider the index weighting of countries as
part of our process. We will not, for example, maintain a large position in
Japan simply because it represents a large portion of the EAFE Index.
This approach differentiates the Fund from many of its peers.
BROAD THEMES. Management often identifies one or more broad themes that
influence both its country allocation and stock selection.
STOCK SELECTION. Having identified countries, industries and themes that provide
environments for growth, we look for companies best able to capitalize on this
potential. Our portfolio management team travels widely, meeting with company
managements and conducting fundamental research. We look for well-managed
companies in good financial condition, with strong market shares and a
reputation for competence and integrity. To be considered by us, stocks must
sell at attractive prices relative to their local markets. We avoid stocks that
are trading at unsustainable or unusually high valuations. Because of this focus
on valuation analysis, our stock selection style has been characterized as
"growth at a price." Our final country weightings are a residual of our stock
selection - the number of good investments we find in a particular area
determines our exposure to that area.
RISK REDUCTION. International markets can be volatile; so the management of risk
is a major consideration in any decision. Broad diversification - across many
regions, countries, industries and companies - is a fundamental aspect of risk
management. Although diversification cannot eliminate risk, it can cushion the
impact of a decline in one or more parts of the portfolio. As further elements
of risk reduction, we monitor the size of individual positions, trading
liquidity and exposure to individual countries and emerging markets.
LETTER TO SHAREHOLDERS
ARTISAN INTERNATIONAL FUND
<PAGE>
As we've done before, we urge you to view this Fund as a long-term investment.
Because foreign markets can be volatile, 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 suggest you use this
Fund as part of a diversified portfolio, and only if you can accept the
possibility of short-term loss.
TWELVE MONTH REVIEW
We are very pleased with the Fund's performance during the past twelve months.
We believe the Fund's regional allocations - increasingly overweight in Europe
and increasingly underweight in Asia/Pacific - contributed to its significant
outperformance of the EAFE. As of July 1, 1997, Fund assets were 62.0% in Europe
and 25.2% in Asia/Pacific. By June 30, 1998, these proportions had changed to
81.5% in Europe and 3.2% in Asia/Pacific.
As we have mentioned before, we believe that Europe's long-term investment
potential is truly exceptional; a confluence of major trends - including
deregulation and privatization, consolidation and restructuring, a nascent
concern for shareholder value, an emerging equity culture, and the advent of a
common currency - is creating unprecedented investment opportunities.
Conversely, we intend to keep our distance from Asia until we see significant
and consistent improvement in the region. So far, it still seems mired in the
economic malaise and market turmoil that started last fall. Japan, in
particular, must come to grips with its onerous structural problems before it
can assume its role as the region's engine for resurgence.
- -------------------------------------------------------------------------------
REGION/COUNTRY ALLOCATION
- -------------------------------------------------------------------------------
REGION/COUNTRY WEIGHTING REGION/COUNTRY WEIGHTING
- -------------------------------------------------------------------------------
United Kingdom 14.6% Japan 1.6%
Netherlands 10.9% Hong Kong 0.7%
Italy 9.3% Singapore 0.5%
Germany 8.1% Thailand 0.2%
Switzerland 7.4% Philippines 0.1%
France 7.1% Australia 0.1%
Sweden 5.6% Indonesia 0.0%<F1>
--------
Denmark 4.9% ASIA/PACIFIC TRIAL 3.2%
Finland 3.9%
Spain 3.5% Brazil 4.0%
Portugal 2.3% Mexico 2.5%
-----
Austria 1.7% LATIN AMERICA TOTAL 6.5%
Norway 1.3%
Poland 0.7% Canada 4.0%
Czech Republic 0.2% Bermuda 1.9%
------ -----
EUROPE TOTAL 81.5% NORTH AMERICA TOTAL 5.9%
-----------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES 2.9%
-----------------------------------------------------------------------------
TOTAL 100.0%
-----------------------------------------------------------------------------
<F1> Less than 0.1% of assets
LETTER TO SHAREHOLDERS
ARTISAN INTERNATIONAL FUND
<PAGE>
In concert with regional exposure, stock selection contributed to performance.
On June 30, the 107 stocks in our portfolio represented investments in 26
different countries. To us, broad diversification by country and region is
important. It enhances return opportunity and helps to protect the Fund from
volatility in a particular market. Like other international managers, we prefer
to stress some countries and limit or avoid exposure to others. But we don't
make large, concentrated bets. For us, the more sensible strategy is the
combination of broad diversification by country and a focus on astute stock
picking.
- -------------------------------------------------------------------------------
TOP 5 GAINERS<F1> TOP 5 LOSERS<F1>
- -------------------------------------------------------------------------------
SECURITY % SECURITY %
- -------------------------------------------------------------------------------
COLT Telecom Group PLC 309% Wing Hang Bank -68%
Cap Gemini NV 128% Peregrine Investment Holdings -63%
Energis PLC 96% Cia de Saneamento Basico -52%
Credito Italiano SPA 88% Guangzhou Investment -38%
Credit Suisse Group 40% Grupo Financiero Inbursa -30%
- -------------------------------------------------------------------------------
<F1> These are the holdings that made the largest dollar difference in the
portfolio. While some minor holdings experienced greater percentage changes
in price, the change in their dollar value, did not, on an individual
basis, have as meaningful an effect on the Fund's net assets.
MetroNet Communications is another big gainer, and a holding that illustrates
our selection process. This Canadian company provides voice and data telecom
services to high-volume corporate and government users. Since the start of 1998,
when Canada deregulated its highly lucrative $20 billion telecom market,
MetroNet has become Bell Canada's largest competitor. Through its lean operation
- - just 570 employees - and advanced technology, MetroNet offers service that's
more sophisticated and more efficient at a much lower cost. Its custom-tailored
networks - including bundled voice and data - service 222 office buildings in
five major cities. The company has very little competition, and its recent
acquisition of Rogers Communications enhanced its leadership position. It also
accelerated - by two or three years - MetroNet's build-out plan for fiber-optic
cable. Though it generates sales of over $700 million, MetroNet has yet to turn
a profit. But we're confident that this well-managed company will continue its
explosive growth and well reward its investors over time.
PORTFOLIO CHARACTERISTICS
As of June 30, 1998, total net assets in the Fund were $497.2 million. The
median market cap of the Fund's holdings was $1.4 billion, and its weighted
average market cap was $15.7 billion. The portfolio had a weighted average
growth rate of 29% and, based on 1998 estimates, a weighted average price-to-
earnings ratio of 21.2X. We believe this to be an excellent growth rate at a
relatively modest P/E ratio and an indication of our attention to valuation. On
June 30, we were 97.1% invested in equities, which we consider to be fully
invested. We did not hedge currency exposure on portfolio holdings in the
preceding twelve months.
Our industry holdings remain broadly diversified. One area of emphasis is the
telecommunications sector. Deregulation and privatization - in Europe and
elsewhere - are creating exceptional
LETTER TO SHAREHOLDERS
ARTISAN INTERNATIONAL FUND
<PAGE>
- ------------------------------------------------------------------------
TOP TEN HOLDINGS
- ------------------------------------------------------------------------
COMPANY NAME COUNTRY %
- ------------------------------------------------------------------------
Colt Telecom Group PLC United Kingdom 3.9
- ------------------------------------------------------------------------
MetroNet Communications Canada 3.4
- ------------------------------------------------------------------------
Union Bank of Switzerland Switzerland 3.0
- ------------------------------------------------------------------------
Nokia Corporation Finland 2.2
- ------------------------------------------------------------------------
Novartis AG Switzerland 2.2
- ------------------------------------------------------------------------
Cap Gemini NV Netherlands 2.0
- ------------------------------------------------------------------------
Energis PLC United Kingdom 2.0
- ------------------------------------------------------------------------
Vest-Wood A/S Denmark 1.9
- ------------------------------------------------------------------------
Global Telesystems Group Bermuda 1.9
- ------------------------------------------------------------------------
Credit Suisse Group Switzerland 1.8
- ------------------------------------------------------------------------
TOTAL 24.3%
- ------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION (%)
- -------------------------------------------------------------------------------
6/30 6/30
INDUSTRY 1998 INDUSTRY 1998
- -------------------------------------------------------------------------------
Automotive 3.0 Mining/Metals 0.8
- -------------------------------------------------------------------------------
Broadcast/Publishing 2.7 Money Center Banks 10.3
- -------------------------------------------------------------------------------
Business & Public Services 4.9 Multi-Industry 3.1
- -------------------------------------------------------------------------------
Cable Television 0.9 Office Furnishings 1.1
- -------------------------------------------------------------------------------
Capital Spending 1.1 Retailing 1.4
- -------------------------------------------------------------------------------
Cellular Telecommunications 3.4 Software 4.0
- -------------------------------------------------------------------------------
Commercial Banks 12.5 Special Finance 3.5
- -------------------------------------------------------------------------------
Computer Services 5.0 Technology 0.3
- -------------------------------------------------------------------------------
Construction/Housing 2.5 Telecommunication Equipment 4.1
- -------------------------------------------------------------------------------
Consumer Cyclicals 2.0 Telecommunication Service 12.6
- -------------------------------------------------------------------------------
Consumer Staples/Service 1.4 Telephone and Integrated Services 2.7
- -------------------------------------------------------------------------------
Engineering 3.7 Transportation/Distribution 1.6
- -------------------------------------------------------------------------------
Financial Services 0.9 Utilities 0.8
- -------------------------------------------------------------------------------
Food/Restaurants 2.2
- -------------------------------------------------------------------------------
Health Care Services 4.6 Other assets less liabilities 2.9
- -------------------------------------------------------------------------------
TOTAL 100.0%
- -------------------------------------------------------------------------------
investment opportunities. We continue to favor Europe's financial services
sectors, which we see being in the early stages of consolidation. And we also
hold a number of firms that are meeting Europe's growing need for temporary
employees. No single stock, even among our top ten holdings, represents more
than 3.9% of assets; and we intend to continue diversifying broadly by country,
sector and company.
LETTER TO SHAREHOLDERS
ARTISAN INTERNATIONAL FUND
<PAGE>
OUTLOOK AND STRATEGY
Looking ahead to the next twelve months, we expect to maintain our recent
elements of strategy. We intend, for example, to maintain our significant
commitment to Europe. As we mentioned earlier, the economic trends we see
converging in this region point to truly compelling opportunities both now and
for years to come.
The investment environment in Asia is a different story. We regard the region's
political, economic and market conditions as simply too unstable to warrant more
than our current token exposure. While we still regard the region's long-term
potential as staggering, the region's dominant governments - Japan, India and
China - must prove the wisdom of their policies and strength of their
currencies.
We also have high long-term hopes for Latin America. For now, however, we are
satisfied with our relatively modest commitments to Mexico and Brazil. Though
both economies have shown internal improvement in recent years, they are
nonetheless subject to both political uncertainty and dependence on exports to
Asia for much of their growth.
Regardless of the countries or companies in which we invest, we fully intend to
maintain our single focus: to find high-quality, well-managed growth companies
and invest in their stocks at prices we consider to be attractive.
Thank you for your support of the Artisan International Fund. We will continue
doing our very best to justify your confidence.
Sincerely,
/s/ Mark L. Yockey
Mark L. Yockey
Portfolio Manager
Effective July 1, 1997, the Fund began offering Institutional Shares for
institutional investors meeting certain minimum investment requirements. A
report on the International Shares is available under separate cover.
LETTER TO SHAREHOLDERS
ARTISAN INTERNATIONAL FUND
<PAGE>
ARTISAN
INTERNATIONAL FUND
Schedule of Investments - June 30, 1998
Shares Market
Held Value
----------- -----------
COMMON AND PREFERRED STOCKS - 97.1%
AUSTRIA - 1.7%
Erste Bank Der Oesterreichischen Sparkassen AG -
commercial bank 70,000 $ 4,248,276
<F1> Scala Business Solutions -
resource planning software 218,520 3,272,418
<F1> Scala Business Solutions Warrants (3/31/1999) -
resource planning software 91,050 424,201
<F1> Scala Business Solutions Warrants (3/31/2001) -
resource planning software 91,050 379,988
-----------
8,324,883
AUSTRALIA - 0.1%
<F1> AMP Limited - life and health insurance 50,000 586,608
BERMUDA - 1.9%
<F1> Global Telesystems Group, Inc. <F3> -
telephone and integrated services 195,000 9,506,250
BRAZIL - 4.0%
Cia de Saneamento Basico de Estado
de Sao Paulo - water and sewage utility 19,590,000 2,354,425
Cia Riograndense Telecom - Preferred -
telecommunications 7,931,300 8,647,589
<F1> Embraer-Empresa Brasileira de Aeronautica SA -
Preferred - aerospace and defense 110,100,000 1,951,537
Fertilizantes Fosfatados SA - Preferred -
phosphatic mining and fertilizer 1,010,600,000 3,801,055
Telecomunicacoes Brasileiras SA (ADR) -
telecommunications 30,000 3,275,625
-----------
20,030,231
CANADA - 4.0%
<F1> The T. Eaton Company Ltd. - retail 100,000 1,019,333
<F1> MetroNet Communications Corporation -
Class B <F3> - telecommunications 590,300 16,675,975
Northern Telecom Ltd. <F3> -
telecommunication equipment 40,000 2,270,000
-----------
19,965,308
CZECH REPUBLIC - 0.2%
<F1> Ceske Radiokomunikace, 144a (GDR) -
telecommunication services 52,600 1,126,955
<PAGE>
Shares Market
Held Value
----------- -----------
DENMARK - 4.9%
EDB Gruppen A/S - Class B - computer services 143,000 $ 6,607,414
NESA A/S - electrical utility 8,438 1,535,410
<F1> Olicom <F3> - computer network equipment 20,000 537,500
Sydbank A/S - commercial bank 108,300 6,038,125
Vest-Wood A/S - furniture manufacturer 98,500 9,606,958
-----------
24,325,407
FINLAND - 3.9%
Helsingin Puhelin Oyj - telecommunication services 42,500 1,977,267
Nokia Corporation (ADR) -
telecommunications equipment 150,000 10,884,375
Orion-Yhtyma Oy - Class B - pharmaceuticals 65,000 2,004,178
TT Tieto Oy - computer data services 56,700 4,313,754
-----------
19,179,574
FRANCE - 7.1%
Banque Nationale de Paris - money center bank 80,807 6,602,818
Credit Commercial de France - commercial bank 100,000 8,419,207
<F1> ILOG SA (ADR) - computer software 50,000 756,250
<F1> Omnicom SA - telecommunication services 14,000 1,634,881
Societe Generale - money center bank 30,000 6,237,491
Strafor-Facom SA - office furnishings 10,000 977,554
Suez-Lyonnaise des Eaux - building and construction 33,000 5,431,133
Thomson CSF - electronics manufacturer 90,000 3,423,921
Unilog SA - computer services 5,000 1,754,140
-----------
35,237,395
GERMANY - 8.1%
Altana AG - pharmaceuticals 45,000 3,437,162
Bayerische Hypotheken-und Wechsel-Bank AG -
commercial bank 120,000 7,612,077
Deutsche Bank AG - commercial banking 100,000 8,461,560
Dresdner Bank AG - money center bank 65,000 3,514,098
ESG RE Ltd. <F3> - life/health insurance 110,000 2,378,750
KSB AG-Vorzug - Preferred - machinery and
pump manufacturer 22,450 5,601,763
Mannesmann AG - machinery/general industry 53,000 5,451,496
<F1> Marseille-Kliniken AG - healthcare services 190,567 2,757,935
Marschollek, Lautenschlaeger und Partner AG -
Preferred - financial services 2,200 1,073,498
<F1> Wuensche AG - retail 1,500 137,154
-----------
40,425,493
HONG KONG - 0.7%
China Foods Holdings Ltd. - food processing 3,590,000 949,858
Wing Hang Bank Ltd. - commercial bank 1,821,000 2,432,544
-----------
3,382,402
INDONESIA - 0.0%
Sona Topas Tourism - duty free retailing 2,030,000 20,785
SCHEDULE OF INVESTMENTS
ARTISAN INTERNATIONAL FUND
<PAGE>
Shares Market
Held Value
----------- -----------
ITALY - 9.3%
<F1> Banca di Roma - money center bank 4,375,000 $ 8,847,263
Credito Italiano SPA - commercial bank 1,250,000 6,546,363
IFI Istituto Finanziario - Preferred -
financial holding company 260,000 5,436,330
Istituto Bancario San Paolo di Torino -
commercial bank 315,000 4,547,488
<F1> Olivetti SPA - office furnishings 3,100,000 4,614,887
<F1> Seat Saving Shares SPA -
publishing/advertising company 2,000,000 945,547
<F1> Seat SPA - publishing/advertising company 6,900,000 4,660,194
Tecnost SPA - computer/integrated systems 400,000 1,193,190
Telecom Italia Savings Shares SPA -
cellular phone services 400,000 1,937,245
Telecom Italia SPA - cellular phone services 1,050,000 7,732,799
-----------
46,461,306
JAPAN - 1.6%
Toyota Motor Corporation - automobile manufacturer 300,000 7,789,108
MEXICO - 2.5%
<F1> Empresas (ICA) Sociadad Controladora S.A.
de C.V. (ADR) - commercial construction 234,300 2,211,206
Grupo Financiero Inbursa S.A. de C.V. - Class B -
brokerage, insurance and financial services 1,826,489 4,675,226
<F1> Seguros Comercial America - Class B - insurance 877,500 3,027,378
Sigma BCP - Class B - food producer 1,149,077 2,621,566
-----------
12,535,376
NETHERLANDS - 10.9%
Amsterdam Option Traders NV - financial services 33,000 3,358,849
Athlon Groep NV - automobile leasing 41,475 7,037,131
<F1> Bennf - Benckiser - Class B - home cleaning products 110,000 6,769,647
Brunel International NV - temporary
employment services 160,784 6,683,679
Cap Gemini NV - computer software 120,000 9,917,599
Content Beheer NV - temporary employment services 105,000 3,589,964
KLM Royal Dutch Air Lines NV - airline 196,234 7,973,892
Unique International NV - temporary
employment services 253,571 8,607,255
-----------
53,938,016
NORWAY - 1.3%
<F1> Computer Advances Group ASA - hardware and software 150,000 782,830
EDB-Elektronisk Databehandling ASA -
computer services 160,000 615,826
Radio P4 - radio stations 1,139,600 5,203,993
-----------
6,602,649
PHILIPPINES - 0.1%
<F1> Bankard, Inc. - credit card provider 19,419,000 679,898
POLAND - 0.7%
Elektrim Spolka Akcyjna SA - electrical products 300,000 3,656,438
SCHEDULE OF INVESTMENTS
ARTISAN INTERNATIONAL FUND
<PAGE>
Shares Market
Held Value
----------- -----------
PORTUGAL - 2.3%
Portugal Telecom SA - telephone and
integrated services 75,600 $ 4,009,339
Telecel-Comunicacaoes Pessoais SA, 144A -
cellular phone service 40,660 7,224,528
-----------
11,233,867
SINGAPORE - 0.5%
Development Bank of Singapore Ltd. -
money center bank 400,000 2,219,585
SPAIN - 3.5%
Argentaria SA - commercial bank 388,000 8,703,749
Banco Central Hispanoamericano SA - commercial bank 100,000 3,143,137
<F1> Baron de Ley SA - winery 26,500 879,589
Grupo Acciona SA - building and construction 20,500 4,876,687
-----------
17,603,162
SWEDEN - 5.6%
Celsius AB - Class B - aerospace and
defense product manufacturer 161,000 3,754,513
<F1> Guide Konsult AB - Class B, 144A -
computer/information technology 106,400 2,134,403
Modul 1 Data AB - computer services 95,200 2,888,465
Pharmacia & Upjohn, Inc. <F3> - pharmaceuticals 80,000 3,690,000
Resco AB - Class B - computer services 38,600 1,388,942
Semcon AB - consulting services 309,200 3,043,154
Sigma AB - Class B - computer services 111,300 3,349,047
Telefonaktiebolaget LM Ericsson - Class B (ADR) -
telecommunications equipment 144,000 4,122,000
Telefonaktiebolaget LM Ericsson -Class B -
telecommunications equipment 114,000 3,330,241
-----------
27,700,765
SWITZERLAND - 7.4%
Credit Suisse Group - money center bank 40,500 9,026,448
Julius Baer Holding AG - commercial bank 700 2,193,423
Novartis AG - pharmaceuticals 6,500 10,834,049
Union Bank of Switzerland AG - money center bank 40,000 14,897,972
-----------
36,951,892
THAILAND - 0.2%
The Pizza Company PLC - fast food
restaurant franchise 334,300 950,616
<F1> Srithai Superware PLC - consumer plastic products 972,200 126,708
-----------
1,077,324
SCHEDULE OF INVESTMENTS
ARTISAN INTERNATIONAL FUND
<PAGE>
Shares Market
Held Value
----------- -----------
UNITED KINGDOM - 14.6%
<F1> Colt Telecom Group PLC -
telecommunication services 474,900 $19,268,454
<F1> Energis PLC - telecommunication services 650,000 9,904,276
<F1> Freepages Group PLC - telephone classified
information services 4,000,000 2,471,156
General Electric Company PLC -
diversified manufacturer 800,000 6,899,200
LucasVarity PLC - auto parts manufacturer 1,850,000 7,351,689
Next PLC - retail 650,000 5,589,321
Royal & Sun Alliance Insurance Group PLC -
multi-line insurance 200,000 2,068,758
Select Appointments Holdings PLC -
employment services 400,000 5,656,944
<F1> TeleWest Communications PLC - cable television 1,850,000 4,324,523
Triad Group PLC - consulting services 300,000 3,280,960
Whitbread PLC - restaurants and brewing 345,000 5,587,651
-----------
72,402,932
TOTAL COMMON AND PREFERRED STOCKS (Cost $401,576,181) $482,963,609
Par Market
Amount Value
----------- -----------
SHORT TERM INVESTMENTS - 2.2%
Repurchase agreement with State Street Bank
and Trust Company, 5.0%, dated 6/30/98,
due 7/1/98, maturity value $10,778,497,
collateralized by $10,993,428 market value
U.S. Treasury Note, 6.625%, due 7/31/01
(Cost $10,777,000) $10,777,000 $10,777,000
-----------
TOTAL INVESTMENTS - 99.3% (Cost $412,353,181) 493,740,609
OTHER ASSETS LESS LIABILITIES - 0.7% 3,439,006
-----------
TOTAL NET ASSETS - 100.0% (<F2>) $497,179,615
===========
<F1> Non-income producing securities
<F2> Percentages for the various classifications relate to total net assets
<F3> Principally traded in the United States
ADR - American Depository Receipt
GDR - Global Despository Receipt
SCHEDULE OF INVESTMENTS
ARTISAN INTERNATIONAL FUND
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
ARTISAN
INTERNATIONAL FUND
Portfolio Diversification - June 30, 1998
Market
Value Percentage
------------ -----------
Automotive $ 15,140,797 3.0%
Broadcast/Publishing 13,280,890 2.7
Business & Public Services 24,537,842 4.9
Cable Television 4,324,523 0.9
Capital Spending 5,601,763 1.1
Cellular Telecommunications 16,894,572 3.4
Commercial Banks 62,345,949 12.5
Computer Services 25,062,351 5.0
Construction/Housing 12,519,026 2.5
Consumer Cyclicals 9,733,666 2.0
Consumer Staples/Service 6,769,647 1.4
Engineering 18,237,905 3.7
Financial Services 4,432,347 0.9
Food/Restaurants 10,989,280 2.2
Health Care Services 22,723,324 4.6
Mining/Metals 3,801,055 0.8
Money Center Banks 51,345,675 10.3
Multi-Industry 15,281,702 3.1
Office Furnishings 5,592,441 1.1
Retailing 6,766,593 1.4
Software 19,847,040 4.0
Special Finance 17,507,577 3.5
Technology 1,730,690 0.3
Telecommunication Equipment 20,606,616 4.1
Telecommunication Service 62,511,022 12.6
Telephone and Integrated Services 13,515,589 2.7
Transportation/Distribution 7,973,892 1.6
Utilities 3,889,835 0.8
----------- -----------
Total common and preferred stocks 482,963,609 97.1
Total short-term investments 10,777,000 2.2
----------- -----------
Total investments 493,740,609 99.3
Other assets less liabilities 3,439,006 0.7
----------- -----------
TOTAL NET ASSETS $497,179,615 100.0%
=========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
ARTISAN INTERNATIONAL FUND
(A Series of Artisan Funds, Inc.)
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
ASSETS:
Investments in securities, at value (cost $412,353,181) $493,740,609
Cash 937,887
Receivable from investments sold 12,030,107
Receivable from forward currency contracts 8,971,239
Receivable from fund shares sold 4,881,388
Interest receivable 1,497
Dividends receivable 1,630,862
Organizational costs 18,300
-------------
Total assets 522,211,889
LIABILITIES:
Payable for investments purchased 15,411,415
Payable for forward currency contracts 8,971,680
Payable for fund shares redeemed 187,678
Payable for organizational costs 18,300
Payable for operating expenses 356,029
Other liabilities 87,172
-------------
Total liabilities 25,032,274
-------------
Total net assets $497,179,615
=============
NET ASSETS CONSIST OF THE FOLLOWING:
Fund shares issued and outstanding $405,388,668
Net unrealized appreciation on investments
and foreign currency related transactions 81,382,747
Accumulated undistributed net investment income 309,643
Accumulated undistributed net realized gains on
investments and foreign currency related
transactions 10,098,557
-------------
$497,179,615
=============
INTERNATIONAL SHARES:
Net Assets $414,535,770
Shares authorized ($0.01 par value) 5,000,000,000
Shares issued and outstanding 25,502,751
Net asset value, offering and
redemption price per share $16.25
======
INSTITUTIONAL SHARES:
Net Assets $82,643,845
Shares authorized ($0.01 par value) 5,000,000,000
Shares issued and outstanding 5,083,604
Net asset value, offering and
redemption price per share $16,26
======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
ARTISAN INTERNATIONAL FUND
(A Series of Artisan Funds, Inc.)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1998
INVESTMENT INCOME:
Interest $ 392,119
Dividends (net of foreign taxes withheld
of $765,444) 6,832,557
-------------
Total investment income 7,224,676
EXPENSES:
Advisory fees 3,923,189
Transfer agent fees:
International Shares 755,802
Institutional Shares 15,317
Shareholder communications:
International Shares 119,710
Institutional Shares 7,195
Custodian fees 456,772
Accounting fees 74,259
Professional fees 98,011
Registration fees 76,297
Directors' fees 15,000
Organizational costs 7,320
Other operating expenses 40,097
-------------
Total operating expenses 5,588,969
-------------
Net investment income 1,635,707
REALIZED AND
UNREALIZED GAINS
(LOSSES) ON INVESTMENTS - NET:
Net realized gain (loss) on:
Investments 28,895,798
Foreign currency related transactions (991,131)
-------------
27,904,667
Net increase in unrealized
appreciation on:
Investments 47,423,084
Foreign currency related transactions 22,144
-------------
47,445,228
-------------
Net gain on investments 75,349,895
-------------
Net Increase in net assets resulting
from operations $ 76,985,602
=============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
ARTISAN INTERNATIONAL FUND
(A Series of Artisan Funds, Inc.)
STATEMENT OF CHANGES IN NET ASSETS
Year Year
Ended Ended
June 30, 1998 June 30, 1997
-------------- --------------
OPERATIONS: <C> <C>
Net investment income $ 1,635,707 $ 2,615,087
Net realized gain (loss) on:
Investments 28,895,798 11,001,981
Foreign currency related transactions (991,131) (419,819)
Net increase in unrealized appreciation
(depreciation) on:
Investments 47,423,084 30,260,301
Foreign currency related transactions 22,144 (31,194)
-------------- --------------
Net increase in net assets resulting from operations 76,985,602 43,426,356
DISTRIBUTIONS PAID TO SHAREHOLDERS:
Net investment income:
International Shares (4,035,316) (237,011)
Institutional Shares (823,369)
Net realized gains on investment transactions:
International Shares (23,067,732) (1,238,614)
Institutional Shares (4,236,936)
-------------- --------------
Total distributions paid to shareholders (32,163,353) (1,475,625)
FUND SHARE ACTIVITIES:
Net increase in net assets resulting from fund
share activities 3,177,296 335,717,641
------------- -------------
Total increase in net assets 47,999,545 377,668,372
Net assets, beginning of year 449,180,070 71,511,698
------------- -------------
Net assets, end of period $497,179,615 $449,180,070
============= =============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
ARTISAN INTERNATIONAL FUND
(A Series of Artisan Funds, Inc.)
FINANCIAL HIGHLIGHTS
Year Ended Year Ended Period Ended
June 30, 1998 June 30, 1997 June 30, 1996
International Institutional International International
For a share outstanding throughout each period Shares Shares Shares Shares<F1>
------------- ------------- ------------- -------------
<C> <C> <C> <C>
Net asset value, beginning of period $ 14.48 $ 14.48 $ 12.08 $ 10.00
Income from investment operations:
Net investment income 0.06<F2> 0.09<F2> 0.07 0.04
Net realized and unrealized
gains on securities and foreign
currency transactions 3.04 3.04 2.44 2.04
-------- -------- -------- --------
Total from investment operations 3.10 3.13 2.51 2.08
-------- -------- -------- --------
Distributions paid to shareholders:
Net investment income (0.20) (0.22) (0.02) -
Net realized gains on
investment transactions (1.13) (1.13) (0.09) -
-------- -------- -------- --------
Total distributions paid
to shareholders (1.33) (1.35) (0.11) -
-------- -------- -------- --------
Net asset value, end of period $ 16.25 $ 16.26 $ 14.48 $ 12.08
======== ======== ======== ========
Total return 24.12% 24.40% 20.92% 20.8%<F3>
Ratios/Supplemental data:
Net assets, end of
period (millions) $414.5 $82.6 $449.2 $71.5
Ratio of expenses to
average net assets 1.45% 1.25% 1.61% 2.50%<F4>
Ratio of net
investment income to
average net assets 0.37% 0.68% 1.07% 1.60%<F4>
Portfolio turnover rate 109.42% 109.42% 103.66% 57.00%<F3>
</TABLE>
<F1> For the period from commencement of operations (December 28, 1995) through
June 30, 1996.
<F2> Computed based on average shares outstanding.
<F3> Not annualized.
<F4> Annualized.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
ARTISAN INTERNATIONAL FUND
(A SERIES OF ARTISAN FUNDS, INC.)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
(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.
Effective July 1, 1997, the Fund began offering two classes of capital
shares, International Shares and International Institutional Shares
("Institutional Shares"). Institutional Shares are sold to institutional
investors meeting certain minimum investment requirements. Each class of
shares has equal rights with respect to portfolio assets and voting
privileges. Each class has exclusive voting rights with respect to any
matters involving only that class. Income, non-class specific expenses and
realized and unrealized gains and losses are allocated daily to each class
of shares based upon the relative net asset value of outstanding shares.
Expenses attributable to a particular class of shares, such as transfer
agency fees and shareholder communication expenses, are allocated directly
to that class. On July 1, 1997, 3,071,672 International Shares (with a net
asset value of $44,477,811) were transferred to Institutional Shares.
(2) Summary of significant accounting policies:
The following is a summary of significant accounting policies of the Fund.
(a) Security valuation - Each security is valued at the last sales price
reported by the principal securities exchange on which the issue is
traded, or if no sale is reported on the principal exchange, the last
sale on a secondary exchange. The last bid price reported is utilized
if no sales have taken place. Securities for which prices are not
readily available, or for which management believes that the last sale
or bid price is not reflective of the fair value of the security, are
valued at a 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 to its shareholders
substantially all of its taxable income as well as realized gains from
the sale of investment securities and 2) comply with all provisions of
the Internal Revenue Code applicable to regulated investment
companies.
(c) Portfolio transactions - Security and shareholder transactions are
recorded on trade date. Net realized gains and losses on common stocks
are computed on specific security lot identification.
(d) Foreign currency translation - Values of investments denominated in
foreign currencies are converted into U.S. dollars using the spot
market rate of exchange at the time of valuation. Purchases and sales
of investments and dividend and interest income are translated to U.S.
dollars using the spot market rate of exchange prevailing on the
respective dates of such transactions. The portion of security gains
or losses resulting from changes in foreign exchange rates is included
with net realized and unrealized gain or loss from investments, as
appropriate, for both financial reporting and tax purposes.
<PAGE>
ARTISAN INTERNATIONAL FUND
(A SERIES OF ARTISAN FUNDS, INC.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
The Fund enters into forward currency contracts to hedge the foreign
currency exposure on open payables and receivables. The forward
currency contracts are recorded at market value and any related
realized and unrealized gains and losses are reported as foreign
currency related transactions for financial reporting purposes. For
tax purposes, these foreign exchange gains and losses are treated as
ordinary income. The Fund could be exposed to loss if the
counterparties fail to perform under these contracts.
(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 and disclosures in the financial statements. Actual results
could 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. Generally accepted accounting
principles require that certain differences between financial
reporting and tax amounts be reclassified to capital stock.
(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 Assets Annual Rate
------------------------ -----------
Less than $500 million 1.000%
$500 million to $750 million 0.975%
$750 million to $1 billion 0.950%
Greater than $1 billion 0.925%
The Fund also incurs other expenses for services such as maintaining
shareholder records and furnishing shareholder statements and reports.
Each director who is not an interested person of Artisan Funds, Inc.
or Artisan Partners Limited Partnership receives an annual retainer
fee of $5,000, plus reimbursement of expenses related to his duties as
a director of the Fund.
A company in which the Fund directly or indirectly owns, controls, or
holds power to vote 5% or more of the outstanding voting securities is
defined by the Investment Company Act of 1940 as an affiliated person
of the Fund. A summary of transactions in the securities of each such
affiliated person and dividend income received on those securities for
the fiscal year ended June 30, 1998 follows:
Purchases Sales Realized Dividend
--------- -----
Affiliate Shares Cost Shares Cost Gain Income
---------- ------ ---- ------ ---- ---- ------
Bankard, Inc. 2,975,000 $298,422 - - - -
Radio P4 - - - - - $130,829
<PAGE>
ARTISAN INTERNATIONAL FUND
(A SERIES OF ARTISAN FUNDS, INC.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(4) Organizational costs and prepaid registration expenses:
Organizational costs are amortized over sixty months. These expenses were
paid by the Adviser and will be reimbursed by the Fund over the same time
period. 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 with State
Street Bank and Trust Company, under which the Fund may borrow up to a
maximum of $30 million, but not more than 10% of its net assets. Artisan
Funds, Inc. pays an annual commitment fee of 0.10% on the unused portion of
the line of credit. This fee is allocated to each series of Artisan Funds,
Inc., including the Fund, based on relative net assets. Interest is
charged on any borrowings at the current Federal funds rate plus 0.50%.
The use of the line of credit is generally restricted to temporary
borrowing for extraordinary or emergency purposes.
During the period ended June 30, 1998 the Fund incurred interest charges of
$14,468 on maximum borrowings of $9,690,453 related to the line of credit.
(6) Investment transactions:
For the year ended June 30, 1998, the cost of purchases and the proceeds
from the sales of investment securities (excluding short-term securities)
were $426,137,759 and $459,745,091, respectively.
(7) Fund share activities:
Capital share transactions for the Fund were as follows:
Year ended Year ended
June 30, 1998 June 30, 1997
International Institutional International
------------ ------------ ------------
Shares Shares Shares
------ ------ ------
Net asset value of
shares transferred $ (44,477,811) $ 44,477,811
Proceeds from shares
issued 235,471,219 27,045,257 $447,478,870
Net asset value of shares
issued in reinvestment
of distributions 25,959,795 4,802,555 1,414,826
Cost of shares redeemed (287,349,997) (2,751,533) (113,176,055)
------------ ------------ -------------
Net increase (decrease)
from fund
Share activities $ (70,396,794) $ 73,574,090 $335,717,641
============ ============ ============
<PAGE>
ARTISAN INTERNATIONAL FUND
(A SERIES OF ARTISAN FUNDS, INC.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Year ended Year ended
June 30, 1998 June 30, 1997
International Institutional International
------------ ------------ ------------
Shares Shares Shares
------ ------ ------
Shares transferred (3,071,672) 3,071,672
Shares sold 15,876,987 1,835,634 33,329,489
Shares issued from
reinvestment of distributions 2,075,110 383,897 108,735
Shares redeemed (20,392,769) (207,599) (8,344,932)
------------ ------------ -------------
Net increase (decrease)
in capital shares (5,512,344) 5,083,604 25,093,292
============ ============ ============
(8) Information for Federal income tax purposes:
Aggregate gross unrealized appreciation (depreciation) on investments as of
June 30, 1998, based on investment cost of $412,408,875 for federal tax
purposes, is as follows:
Aggregate gross unrealized
appreciation on investments $ 117,411,127
Aggregate gross unrealized
depreciation on investments (36,079,393)
--------------
Net unrealized depreciation $ 81,331,734
==============
The difference between cost amounts for financial reporting and tax
purposes is due primarily to timing differences in recognizing certain
gains and losses on security transactions and passive foreign investment
company (PFIC) value adjustments. Losses from foreign currency related
transactions from November 1, 1997 to June 30, 1998 of $887,524 are not
recognized for federal income tax purposes until fiscal 1999.
(9) Other tax information (unaudited):
In early 1998, shareholders received information regarding distributions
paid to them during the fiscal year ended June 30, 1998. The Fund hereby
designates the following amounts as long-term capital gain distributions.
Capital Gains Taxed at 20% $ 756,661
Capital Gains Taxed at 28% 4,295,676
-----------
Total Long Term Capital Gains $ 5,052,337
===========
- --------------------------------------------------------------------------------
Notes on Portfolio Statistics
The letter to shareholders included in this annual report includes statistical
information about the Fund. That information is as of June 30, 1998; it varies
with changes in the Fund's portfolio investments.
- --------------------------------------------------------------------------------
<PAGE>
(logo)
PRICEWATERHOUSECOOPERS
- -------------------------------------------------------------------------------
PRICEWATERHOUSECOOPERS
100 East Wisconsin Avenue
Suite 1500
Milwaukee WI 53202
Telephone (414) 276 9500
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Artisan Funds, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Artisan International Fund (one of
the portfolios constituting Artisan Funds, Inc., hereafter referred to as the
"Fund") at June 30, 1998, the results of its operations, the changes in its net
assets and the financial highlights for the periods indicated, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at June 30, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
July 31, 1998
