SEMI-ANNUAL
REPORT
Small Cap Fund (LOGO) Mid Cap Fund
International Fund Small Cap Value Fund
ARTISAN FUNDS
DECEMBER 31, 1998
<PAGE>
- --------------------------------------------------------------------------------
Dear Fellow Shareholders,
Thank you for investing with Artisan Funds. We're pleased to send you this semi-
annual report, covering the Funds' activities from July 1 - December 31, 1998.
It was a challenging six months. For much of the 3rd quarter, equities
plummeted, spooked by a slew of worries, including Asia, Russia, Long Term
Capital Management and corporate earnings. For much of the 4th quarter, equities
surged, sparked by multiple interest rate cuts by the Federal Reserve.
Our seasoned, focused portfolio managers proved themselves resourceful, seizing
opportunities created from market overreaction. In fact, Andy Stephens, our Mid
Cap Fund manager, and Mark Yockey, who heads the International Fund, produced
returns that helped achieve outstanding results for the year.
Speaking of achievements, kudos to Mark Yockey, named Morningstar International
Fund Manager of the Year for 1998. In addition, Mark and his team led Artisan
International Fund to a 5-star (*****) rating by Morningstar.<F1>
If you have questions about this report, or need additional information on our
Funds, 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. We value your confidence in
us.
Sincerely,
/s/ Andrew A. Ziegler
Andrew A. Ziegler
Chairman
<F1> Morningstar proprietary ratings reflect historical risk-adjusted
performance as of 12/31/98. The ratings are subject to change every month.
Morningstar ratings are calculated from the fund's 3-, 5-, and 10-year
average annual returns (if applicable) in excess of 90-day T-bill returns
with appropriate fee adjustments, and a risk factor that reflects fund
performance below 90-day T-bill returns. The top 10% of the funds in an
investment class receives 5 stars. A high rating reflects either above-
average returns or below-average risk, or both.
Past performance does not guarantee future results.
- --------------------------------------------------------------------------------
<PAGE>
ARTISAN
FUNDS
Table of Contents
LETTERS TO SHAREHOLDERS
Small Cap Fund...............2
International Fund...........8
Mid Cap Fund................15
Small Cap Value Fund........21
SCHEDULES OF INVESTMENTS
Small Cap Fund..............27
International Fund..........31
Mid Cap Fund................36
Small Cap Value Fund........40
STATEMENTS OF
ASSETS AND LIABILITIES.........44
STATEMENTS OF OPERATIONS.......45
STATEMENTS OF
CHANGES IN NET ASSETS..........46
FINANCIAL HIGHLIGHTS...........48
NOTES TO
FINANCIAL STATEMENTS...........50
ARTISAN FUNDS
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 - February 22, 1999
THE FUND'S PERFORMANCE
For the six months ended December 31, 1998, Artisan Small Cap Fund declined
16.5%. The Fund's benchmark index, the Russell 2000 Index, lost 7.1%, and its
peer group, the Lipper Small Cap Fund Index, declined 6.9%. By contrast, the S&P
500 Index gained 9.3%, reflecting investors' continued preference for the
liquidity and perceived safety of larger companies.
COMPARATIVE QUARTERLY PERFORMANCE
- -----------------------------
ARTISAN SMALL CAP FUND
AVERAGE ANNUAL TOTAL RETURNS:
One Year: -13.47%
Since Inception: 12.85%
- -----------------------------
Artisan Small Russell 2000 Lipper Small
Cap Fund Index Cap Fund Index
-------- --------- ----------
3/28/95 $10,000 $10,000 $10,000
6/30/95 11,520 10,962 10,896
9/30/95 12,650 12,044 12,258
12/31/95 13,283 12,305 12,427
3/31/96 14,059 12,933 13,128
6/30/96 14,785 13,580 14,170
9/30/96 14,160 13,626 14,349
12/31/96 14,858 14,335 14,212
3/31/97 14,150 13,594 12,874
6/30/97 16,459 15,797 15,063
9/30/97 18,627 18,149 17,359
12/31/97 18,226 17,541 16,347
3/31/98 19,566 19,305 18,099
6/30/98 18,883 18,405 17,400
9/30/98 13,976 14,697 13,677
12/31/98 15,771 17,094 16,207
<TABLE>
<CAPTION>
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1995 1996
QUARTERLY ------------------------------------------------------------------------------
PERFORMANCE 6/30/95 9/30/95 12/31/95 3/31/96 6/30/96 9/30/96 12/31/96
- ---------------------------------------------------------------------------------------------------------------
<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%
- ---------------------------------------------------------------------------------------------------------------
Russell 2000 Index 9.6% 9.9% 2.2% 5.1% 5.0% 0.3% 5.2%
- ---------------------------------------------------------------------------------------------------------------
Lipper Small Cap
Fund Index 9.0% 12.5% 1.4% 5.6% 7.9% 1.3% -1.0%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
1997 1998
QUARTERLY ------------------------------------------------------------------------------
PERFORMANCE 3/31/97 6/30/97 9/30/97 12/31/97 3/31/98 6/30/98 9/30/98 12/31/98
- ---------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
ARTISAN
SMALL CAP FUND -4.8% 16.3% 13.2% -2.2% 7.3% -3.5% -26.0% 12.8%
- ---------------------------------------------------------------------------------------------------------------
Russell 2000 Index -5.2% 16.2% 14.9% -3.3% 10.1% -4.7% -20.1% 16.3%
- ---------------------------------------------------------------------------------------------------------------
Lipper Small Cap
Fund Index -9.4%% 17.0% 15.2% -5.8% 10.7% -3.9% -21.4% 18.5%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
The graph above 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 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 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. The S&P 500, an unmanaged index of common stocks
with dividends reinvested, is a market-weighted average of 500 large companies.
All returns include reinvested dividends. Past performance does not guarantee
future results. The investment return and principal value of an investment in
the Fund will fluctuate so that Fund shares, when redeemed, may be worth more or
less than their original cost. The Fund's portfolio may differ significantly
from the securities of the two indexes.
<PAGE>
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 companies whose stocks
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 we think a strategic buyer
would pay to own the entire company. We purchase a stock 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."
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.
LETTER TO SHAREHOLDERS
ARTISAN SMALL CAP FUND
<PAGE>
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, generally 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
outperform its benchmark, the Russell 2000 Index, over a full market cycle. The
Fund stays fully invested in U.S. small-cap stocks. We believe it is most
appropriate as part of a long-term diversified portfolio.
SIX MONTH REVIEW
The past six months were challenging. After falling through the floor in this
period's first half, the equity markets reversed course to go through the roof
in the second. But the largest, most liquid companies did best overall. They
declined less and rebounded more than small-caps in general. (And, of course,
Internet stocks continued their journey to a galaxy far away.)
Our underperformance was a function of three primary factors:
- OUR BIAS TOWARD SMALLER MARKET CAPS. The market clearly favored larger,
more liquid companies in 1998. This was true in declines as well as
rallies. In the July-August market decline the smaller the market cap, the
worse the stock fared. We have always focused on true small-cap stocks. At
December 31, 1998, our weighted average market cap was $507 million, versus
a weighted average market cap of about $880 million for the Russell 2000.
Our bias toward smaller capitalization stocks clearly kept us from
participating in the second half of 1998's rally.
- OUR CAUTIOUS APPROACH TO TECHNOLOGY. From July to December, our weighting
in technology averaged 12-15%, versus a weighting of about 18% for the
Russell 2000. Further-more, our tech holdings tend to be lesser known,
secondary players such as Littelfuse and PCD. We believe our underweight
posture in technology also held us down in the rally.
- OUR STRETCH TO FIND UNDERFOLLOWED STOCKS. We've always searched for growing
companies whose stock prices don't yet reflect all the good things we see
in the business. This approach enables us to participate both in the
company's growth and an upward revaluation. In the recent market
environment, however, this approach had a drawback: our search for
attractive valuations ultimately resulted in a number of companies that
failed to meet our earnings expectations.
Obviously, we don't want to suffer a repeat of this underperformance. So, as
you'll see below, we've made some adjustments. But we surely won't change our
core investment philosophy. You won't, for example, see us buying $5 billion
companies or momentum-driven tech stocks that we can't rationally value. Our
adjustments included...
LETTER TO SHAREHOLDERS
ARTISAN SMALL CAP FUND
<PAGE>
- SELLING SELECTED HOLDINGS. As the market dropped, we sold a number of
holdings that we felt were too small, cyclical, illiquid or leveraged for
the current market environment. Among these were: CTB International, a
manufacturer of feeding and water systems for livestock; Southern Energy
Homes, a maker of manufactured homes; and TriStar Aerospace, a distributor
of aerospace parts. As a result, our median market cap rose
over $100 million by year-end to $474 million.
- AUGMENTING SELECTED HOLDINGS. Much of the selling in July and August seemed
indiscriminate. It appeared that many of our companies were taking a
beating simply because they were small and less liquid, with no regard for
their business fundamentals. We decided to make the most of this unusual
opportunity by adding to those positions in which we had the highest
conviction, thus raising their prominence in the portfolio. Some of these
were: AptarGroup, a maker of pumps, valves and closures for personal care
products; HealthCare Financial Partners, which provides working capital to
healthcare service providers; and ITI Technologies, a leading manufacturer
of wireless home security systems.
- LOOKING FOR PREDICTABILITY. In the fourth quarter, as the markets staged
their powerful recovery, we sharpened our focus on one element of our
strategy: looking for consistent, above-average earnings growth and the
highest quality management. While we're certainly not about to abandon our
valuation discipline, companies that can accomplish this deserve a higher
valuation. The predictability of growth is a criterion toward which we hope
to tilt the portfolio. It's a method of ensuring that we're buying first-
tier companies. Given today's investment realities - which includes slowing
corporate profit growth - this seems a sensible course for us to pursue.
Some recent purchases reflecting the above approaches are: Celestial Seasonings,
a leading marketer of specialty teas and herbal supplements; Expeditors
International, a freight forwarder; Papa John's International, a leading
delivery-only pizza chain; PAREXEL International and Pharmaceutical Product
Development, both of which do outsourced research for large pharmaceutical
companies; Res-Care, a leading provider of residential and support services to
people with disabilities and troubled youths; Tetra Tech, a consulting firm
specializing in water treatment; and Wild Oats Markets, one of the country's
largest chains of natural foods supermarkets.
Our portfolio had some excellent performers, as well as its share of
disappointments. All of our top gainers were bought during the past six months.
Jefferies Group is a brokerage firm with a niche in large block trading.
Fingerhut Companies had been hurt because it services people with poor credit;
it rebounded strongly in part because of its new business - providing
fulfillment services for Internet marketers. Applied Micro Circuits is a rapidly
growing technology company that became attractively priced during the
correction. The Talbots and Wild Oats Markets are both growing retailers with
predictable, above-average growth prospects.
LETTER TO SHAREHOLDERS
ARTISAN SMALL CAP FUND
<PAGE>
- --------------------------------------------------------------------------------
TOP 5 GAINERS<F1> TOP 5 LOSERS<F1>
- --------------------------------------------------------------------------------
Security % Security %
- --------------------------------------------------------------------------------
Jefferies Group, Inc. 76.2% Franchise Mortgage -64.4%
Acceptance Company
Fingerhut Companies, Inc. 70.2% Tokheim Corporation -59.1%
Applied Micro
Circuits Corporation 55.4% Northland Cranberries, Inc. -43.5%
The Talbots, Inc. 32.1% The Dress Barn, Inc. -34.2%
Wild Oats Markets, Inc. 24.8% HealthCare Financial Partners, Inc. -24.9%
- --------------------------------------------------------------------------------
<F1> For the six months ended December 31, 1998, 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.
With the exception of Tokheim, which announced a very dilutive acquisition, our
other biggest losers were punished not because of business problems, but simply
for the crime of being small. Each has a market cap of under $400 million.
PORTFOLIO CHARACTERISTICS
On December 31, 1998, the Fund held 68 stocks diversified across virtually all
major sectors of the economy. Our Top Ten Holdings represented 23% of net
assets, and our median market capitalization was $474 million. Based on 1999
estimates, our holdings had a median projected annual growth rate of 27%, well
above their median P/E of 18X. 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 71% of their intrinsic value.
- ----------------------------------------------------
TOP TEN HOLDINGS<F2>
- ----------------------------------------------------
Company Name %
- ----------------------------------------------------
HealthCare Financial Partners, Inc. 2.6
- ----------------------------------------------------
Wild Oats Markets, Inc. 2.5
- ----------------------------------------------------
Fingerhut Companies, Inc. 2.4
- ----------------------------------------------------
Techne Corporation 2.3
- ----------------------------------------------------
CEC Entertainment, Inc. 2.3
- ----------------------------------------------------
Penn Treaty American Corporation 2.3
- ----------------------------------------------------
Healthcare Recoveries, Inc. 2.2
- ----------------------------------------------------
AptarGroup, Inc. 2.2
- ----------------------------------------------------
ITI Technologies, Inc. 2.1
- ----------------------------------------------------
The Talbots, Inc. 2.1
- ----------------------------------------------------
TOTAL 23.0%
- ----------------------------------------------------
<F2> As a percentage of net assets as of December 31, 1998.
- ----------------------------------------------------
SECTOR DIVERSIFICATION (%) <F2>
- ----------------------------------------------------
Sector 12/31/1998
- ----------------------------------------------------
Basic Materials 6.6
- ----------------------------------------------------
Capital Goods 2.0
- ----------------------------------------------------
Consumer Cyclical 1.5
- ----------------------------------------------------
Consumer Non-Cyclical 2.7
- ----------------------------------------------------
Energy 3.6
- ----------------------------------------------------
Financial 9.5
- ----------------------------------------------------
Healthcare 12.9
- ----------------------------------------------------
Real Estate Investment Trusts 2.9
- ----------------------------------------------------
Services
Business Services 10.3
Consumer Services 21.7
- ----------------------------------------------------
Technology 14.9
- ----------------------------------------------------
Transportation 1.8
- ----------------------------------------------------
Utilities 1.6
- ----------------------------------------------------
Other assets less liabilities 8.0
- ----------------------------------------------------
TOTAL 100.0%
- ----------------------------------------------------
LETTER TO SHAREHOLDERS
ARTISAN SMALL CAP FUND
<PAGE>
We believe these valuations _ which reflect the actions we took in recent months
- - help to make the Fund an attractive investment right now.
As you can see in the Sector Diversification table, the Fund's holdings, as of
December 31, 1998, remained broadly diversified by economic sector. We attempt
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 seek to add the most value. Our largest
commitments are in services (both business and consumer), technology and
healthcare.
OUTLOOK AND STRATEGY
The current environment makes us cautiously optimistic. Corporate earnings are
continuing to slow, while equity valuations - especially for large-caps - remain
very high by historical standards.
On the plus side, however, commodity prices remain low, inflation is subdued and
interest rates have been falling. We expect these factors may enable the market
to hold its own, at the least, and to possibly avoid a repeat of the third and
fourth quarters' extreme volatility.
We believe the portfolio is very well positioned for this environment. And to
help ensure both its resilience and vigor, we will continue to focus a portion
of assets in two promising directions: companies with consistent, above-average,
highly visible earnings gains; and reasonable opportunities to participate more
fully in technology. To gain these elements of quality and return potential,
it's likely we'll have to be more generous with our valuation discipline. But
this complementary approach seems sensible for us today.
Will small-caps have a better year in 1999? They're certainly overdue. Relative
to large-caps, their valuations are now very favorable; and as earnings growth
slows at big companies, investors may awaken to the superior earnings growth
potential of small-caps.
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
LETTER TO SHAREHOLDERS
ARTISAN SMALL CAP FUND
<PAGE>
ARTISAN
INTERNATIONAL FUND
Letter to Shareholders - February 22, 1999
THE FUND'S PERFORMANCE
Artisan International Fund gained 1.4% for the six months ended December 31,
1998. By comparison, the Fund's benchmark index, the Morgan Stanley EAFE Index
(EAFE) rose 3.5%; and its peer group, the Lipper International Fund Index,
returned -2.7%. For the year ended December 31, 1998, the Fund outpaced its
indexes, with a gain of 32.2% versus 20.0% and 12.7%, respectively. And since
its inception on December 31, 1995, the Fund has gained 83.8%, versus gains of
29.5%<F1> and 38.6% for the EAFE and Lipper indexes, respectively. We are
understandably pleased with our outperformance since the Fund was launched.
<F1> EAFE's performance is based upon a starting date of December 31, 1995.
Comparative Quarterly Performance
- -----------------------------
ARTISAN INTERNATIONAL FUND
AVERAGE ANNUAL TOTAL RETURNS:
One Year: 32.18%
Since Inception: 22.37%
- -----------------------------
Artisan EAFE Lipper International
International Fund Index Fund Index
-------- --------- ----------
12/28/95 $10,000 $10,000 $10,000
3/31/96 10,910 10,289 10,467
6/30/96 12,080 10,452 10,895
9/30/96 12,220 10,439 10,903
12/31/96 13,437 10,605 11,472
3/31/97 14,153 10,439 11,756
6/30/97 14,607 11,793 13,072
9/30/97 14,839 11,710 13,322
12/31/97 13,902 10,793 12,303
3/31/98 16,714 12,381 14,129
6/30/98 18,131 12,512 14,249
9/30/98 14,717 10,734 12,000
12/31/98 18,376 12,952 13,861
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1996 1997 1998
QUARTERLY ------------------------------------------------------------------------------------------------------------------------
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 9/30/98 12/31/98
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <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% -18.8% 24.9%
- ------------------------------------------------------------------------------------------------------------------------------------
EAFE Index 2.9% 1.6% -0.1% 1.6% -1.6% 13.0% -0.7% -7.8% 14.7% 1.1% -14.2% 20.7%
- ------------------------------------------------------------------------------------------------------------------------------------
Lipper
International
Fund Index 4.4% 4.1% 0.1% 5.2% 2.5% 11.2% 1.9% -7.6% 14.8% 0.8% -15.8% 15.5%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The graph above 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's perform ance is based upon a starting date of
December 31, 1995. EAFE is an unmanaged index of companies throughout the world
in proportion to world stock market capitalization, excluding the U.S. and
Canada. The Lipper International Fund Index reflects the net asset value
weighted return of the 30 largest international equity funds.
All returns include net reinvested dividends. Past performance does not
guarantee future results. The investment return and principal value of an
investment in the Fund will fluctuate so that Fund shares, when redeemed, may be
worth more or less than their original cost. The Fund's portfolio may differ
significantly from the securities of the two indexes.
<PAGE>
- -------------------------------------------------------------------------------
ON TOP OF THE WORLD
--------------------
Artisan International Fund recently received several forms of prestigious
industry recognition. We are delighted to share these reflections of excellence
with you.
TOP RATING
5 Stars
Artisan International Fund has achieved the highest rating awarded by
Morningstar for the overall and 3-year periods ended December 31, 1998, among
862 international equity funds based upon historical risk-adjusted performance.
TOP MANAGER
Mark Yockey, portfolio manager of Artisan International Fund, is Morningstar
International Fund Manager of the Year for 1998.
According to Morningstar, this award "recognizes portfolio managers who
demonstrate excellent investment skill, the courage to differ from consensus and
the commitment to shareholders necessary to deliver outstanding long-term
performance."
TOP 1% PERFORMANCE
Based on total return for the 1-year and 3-year periods ended December 31, 1998,
Artisan International Fund ranked #3 and #2, respectively, among the 527 and 316
international funds tracked by Lipper, Inc.
Morningstar proprietary ratings reflect historical risk-adjusted performance as
of 12/31/98. The ratings are subject to change every month. Morningstar ratings
are calculated from the fund's 3-, 5-, and 10-year average annual returns (if
applicable) in excess of 90-day T-bill returns with appropriate fee adjustments,
and a risk factor that reflects fund performance below 90-day T-bill returns.
The top 10% of the funds in an investment class receives 5 stars. A high rating
reflects either above-average returns or below-average risk, or both.
Past performance does not guarantee future results.
- -------------------------------------------------------------------------------
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 a few selected themes, i.e.,
sectors and industries that have accelerating growth prospects and companies
that can capitalize on that growth. The Fund's style can be characterized as
"bottom-up," meaning that country exposures are typically a residual of stock
selection.
LETTER TO SHAREHOLDERS
ARTISAN INTERNATIONAL FUND
<PAGE>
OUR APPROACH HAS FOUR BASIC ELEMENTS
COUNTRY AND INDUSTRY FOCUS. We first search for sectors 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 modest - a minor aspect of our overall strategy.
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 identifies a limited number of specific sector/industry
themes as a focus for its stock selection.
STOCK SELECTION. Having identified 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 management 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. While our emphasis is on growth, stocks must trade at reasonable
valuations. We avoid stocks that are trading at unsustainable or unusually high
valuations. 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.
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 loss.
SIX MONTH REVIEW
The July to September period was turbulent for international equities. Asia's
markets were still in the doldrums when Russia devalued the ruble in mid-August,
precipitating major declines in many of our bank and telecom holdings. Confident
that this too would pass, we persisted in our fundamental strategy. We felt
vindicated in October, when foreign markets - much in line with U.S. markets -
rebounded dramatically, then continued to make impressive gains throughout the
rest of the year.
In this extreme environment, our sector allocation proved sound. Our telecom,
financial services and pharmaceutical holdings - in sectors where we have our
largest commitments - proved
LETTER TO SHAREHOLDERS
ARTISAN INTERNATIONAL FUND
<PAGE>
especially resilient. Relative to EAFE, we continued to be heavily overweight
Europe and heavily underweight Asia/Pacific.
For reasons we've discussed before and will reiterate later, we regard Europe's
long-term investment potential as superb. But European markets - despite their
advances - failed to match the exceptional gains in many Asian markets.
Nonetheless, we do not regret the decision to minimize our exposure to Asia. A
mid-Fall trip throughout the region confirmed our reluctance. While the worst
seemed to be over - with the exception of Japan - and some of the export
countries were on the mend, the extent of economic damage had been so severe,
that we were simply unable to find companies that met our investment criteria.
Our December 31, 1998, holdings comprised 95 stocks in 22 countries. While we
place great importance on our country exposure and weighting, we do not make
large, concentrated bets. For us, the more sensible strategy is the combination
of broad diversification by country and sector, and a focus on astute stock
picking. We believe this strategy may enhance return potential while protecting
the Fund from volatility in a given market.
- --------------------------------------------------------------------------------
REGION/COUNTRY ALLOCATION - 12/31/98<F2>
- --------------------------------------------------------------------------------
REGION/COUNTRY WEIGHTING REGION/COUNTRY WEIGHTING
- --------------------------------------------------------------------------------
United Kingdom 19.6% Australia 3.3%
Italy 11.3% Japan 0.1%
France 9.6% Singapore 0.1%
Switzerland 9.4% Thailand 0.0%<F1>
Germany 9.2% ---------
Netherlands 5.6% ASIA/PACIFIC TOTAL 3.5%
Finland 4.6%
Sweden 3.1% Brazil 2.4%
Spain 2.9% Mexico 1.5%
Poland 0.8% ---------
Austria 0.8% LATIN AMERICA TOTAL 3.9%
Norway 0.6%
Czech Republic 0.4% Canada 6.8%
Denmark 0.2% Bermuda 4.1%
--------- ---------
EUROPE TOTAL 78.1% NORTH AMERICA TOTAL 10.9%
OTHER ASSETS LESS LIABILITIES 3.6%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<F1> Less than 0.1% of total net assets
<F2> As a percentage of net assets as of December 31, 1998.
As to stock selection, our winners greatly outnumbered our losers, and nearly
one-third posted gains exceeding 15% during the period. Following is our table
of largest winners and losers, as well as a recent investment and the thought
process behind it.
One of our most exciting new holdings is UBS AG (UBS), created by the 1998
merger of Union Bank of Switzerland and Swissbank Corporation. This merger
created one of the world's largest money management firms, with over $1.1
trillion in assets; a world leader in private banking and
LETTER TO SHAREHOLDERS
ARTISAN INTERNATIONAL FUND
<PAGE>
investment banking; and, with a recent market cap of almost $70 billion,
one of Europe's largest banks.
- --------------------------------------------------------------------------------
TOP 5 GAINERS<F1> TOP 5 LOSERS<F1>
- --------------------------------------------------------------------------------
SECURITY % SECURITY %
- --------------------------------------------------------------------------------
Olivetti SPA 107.4% Cia Riograndense
Nokia Corporation (ADR) 66.0% Telecom - Preferred -56.0%
Energis PLC 47.9% Brunel International NV -53.3%
Colt Telecom Group PLC 40.8% Content Beheer NV -46.3%
MetroNet Communications 21.5% KLM Royal Dutch Airlines NV -24.2%
Corporation - Class B Deutsche Bank AG -23.0%
- --------------------------------------------------------------------------------
<F1> For the six months ended December 31, 1998, 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.
We expect that merger-related efficiencies will immediately enhance earnings, of
which 65% flow from the stable bases of asset management and private banking.
Also, last Fall's losses from exposure to derivatives and Long Term Capital
Management prompted management - which we view as excellent - to reduce the
bank's risk-related assets.
This better use of the balance sheet, combined with high and rising anticipated
returns, point to sharply increasing levels of excess capital, resulting in
better opportunities for capital generation and deployment. While management has
indicated a possible share buyback in '99, we also expect them to harness UBS's
financial strength to expand its global presence through acquisitions. As of
December 31, 1998, UBS was the Fund's third largest holding.
PORTFOLIO CHARACTERISTICS
As of December 31, 1998, total net assets in the Fund were $615.6 million. The
median market cap of the Fund's holdings was $2.5 billion, and its weighted
average market cap was $20.6 billion. Our weighted average growth rate, 17%,
slipped below our weighted average P/E ratio of 18X. The reasons: we added
several large-cap stocks with lower growth estimates than the smaller-cap names
they replaced; and the upward movement of many of our holdings lifted P/E
ratios. We continue our practice of purchasing stocks that we believe are most
attractive, regardless of market cap. On December 31, 1998, we were 96.4%
invested in equities, which we consider to be fully invested. We continue to
follow our practice of not hedging the Fund's currency exposure.
Our sector holdings remain broadly diversified. Telecommunications, however,
remains an area of emphasis. Deregulation, privatization, technological advances
and the growing acceptance of the Internet - in Europe and elsewhere - continue
to create exceptional investment opportunities in this sector. And we still
favor Europe's banking and insurance sectors, which we see as in the early
stages of consolidation. We also hold a number of Europe's leading
pharmaceutical firms, and companies that are meeting Europe's growing need for
temporary employees. Yet no single stock represents more than 4.8% of assets;
and we intend to continue diversifying broadly by country, sector and company.
LETTER TO SHAREHOLDERS
ARTISAN INTERNATIONAL FUND
<PAGE>
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS<F2>
- --------------------------------------------------------------------------------
COMPANY NAME COUNTRY %
- --------------------------------------------------------------------------------
MetroNet Communications Corporation Canada 4.8
- Class B
- --------------------------------------------------------------------------------
Colt Telecom Group PLC United Kingdom 3.7
- --------------------------------------------------------------------------------
UBS AG Switzerland 2.9
- --------------------------------------------------------------------------------
Nokia Corporation ADR Finland 2.9
- --------------------------------------------------------------------------------
Global Telesystems Group, Inc. Bermuda 2.9
- --------------------------------------------------------------------------------
Olivetti SPA Italy 2.8
- --------------------------------------------------------------------------------
Novartis AG Switzerland 2.7
- --------------------------------------------------------------------------------
Roche Holding AG Switzerland 2.6
- --------------------------------------------------------------------------------
Credit Commercial de France France 2.5
- --------------------------------------------------------------------------------
TeleWest Communications PLC United Kingdom 2.2
- --------------------------------------------------------------------------------
TOTAL 30.0%
- --------------------------------------------------------------------------------
- -----------------------------------------------------
SECTOR DIVERSIFICATION (%)<F2>
- -----------------------------------------------------
SECTOR 12/31/1998
- -----------------------------------------------------
Basic Materials 0.4
- -----------------------------------------------------
Consumer Cyclical 13.2
- -----------------------------------------------------
Consumer Non-Cyclical 14.4
- -----------------------------------------------------
Energy 0.1
- -----------------------------------------------------
Financial
Banks 20.9
Diversified Financial Services 1.2
Insurance 3.2
- -----------------------------------------------------
Industrial 7.8
- -----------------------------------------------------
Technology
Aerospace/Defense 1.4
Computers 2.0
Semiconductors 0.3
Software 1.8
Telecommunications Services 17.2
Telecommunications Equipment 6.3
- -----------------------------------------------------
Utilities 6.2
- -----------------------------------------------------
Other assets less liabilities 3.6
- -----------------------------------------------------
TOTAL 100.0%
- -----------------------------------------------------
<F2> As a percentage of net assets as of December 31, 1998.
OUTLOOK AND STRATEGY
Looking ahead to the next six months, we expect to maintain our recent elements
of strategy. We intend, for example, to continue our significant commitment to
Europe. As we wrote in last year's annual report, "...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
LETTER TO SHAREHOLDERS
ARTISAN INTERNATIONAL FUND
<PAGE>
advent of a common currency - is creating unprecedented investment
opportunities." And now that the common currency, the Euro, has arrived, we
expect it will accelerate and magnify these trends.
We look at Asia differently. Despite glimmers of life in certain economies, the
investment environment remains largely unattractive to us. Throughout the
region, we continue to see political uncertainty, economic instability and the
potential for more market turmoil. Will China stand behind its currency? Will
Japan deal effectively with its deepening recession and the huge structural
problems that lie behind it? Given the region's enormous potential, we'll be
watching closely.
The same goes for Latin America. As things stand, we're not likely to add to our
modest holdings in Mexico and Brazil. Brazil's currency devaluation, market
plunge and flight of foreign capital do not auger well for the near-term
investment environment. In Mexico, too, the sluggish economy, political
uncertainty and market drop combine to make us wary. Again, despite this
region's potential, we need a higher comfort level to invest.
Canada and Bermuda - where we ended the year at over 10% of assets - certainly
offer us that comfort level. Our holdings there are chiefly in
telecommunications.
Wherever we invest, we intend to maintain our focus: to find high-quality
companies that can profit from emerging trends in stable economies, and to
purchase their stocks at attractive valuations.
Thank you for your support of 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 - February 22, 1999
THE FUND'S PERFORMANCE
For the six months ended December 31, 1998 Artisan Mid Cap Fund returned 17.0%.
By comparison, the Fund's benchmark index, the S&P 400 MidCap Index, rose 9.6%;
and its peer group, represented by the Lipper Mid Cap Fund Index, gained 1.5%.
We're delighted to note that for the six quarters ended December 31, 1998,
Artisan Mid Cap Fund ranked number #3 for total return among the 281 mid-cap
funds tracked by Lipper, Inc. For the 1-year period ended December 31, 1998, the
Fund ranked #22 for total return in Lipper's mid-cap universe of 327 funds.
COMPARATIVE QUARTERLY PERFORMANCE
- -----------------------------
ARTISAN MID CAP FUND
AVERAGE ANNUAL TOTAL RETURNS:
One Year: 33.37%
Since Inception: 42.44%
- -----------------------------
Artisan Lipper International S&P 400
Mid Cap Fund Fund Index MidCap Index
-------- --------- ----------
6/27/97 $10,000 $10,000 $10,000
9/30/97 12,550 11,455 11,573
12/31/97 12,814 10,913 11,669
3/31/98 14,714 12,294 12,954
6/30/98 14,607 12,244 12,677
9/30/98 13,068 10,047 10,843
12/31/98 17,090 12,432 13,899
- -----------------------------------------------------------------------------
1997 1998
QUARTERLY -----------------------------------------------------------
PERFORMANCE 9/30/97 12/31/97 3/31/98 6/30/98 9/30/98 12/31/98
- -----------------------------------------------------------------------------
Artisan
Mid Cap Fund 25.5% 2.1% 14.8% -0.7% -10.5% 30.8%
- -----------------------------------------------------------------------------
S&P 400
MidCap Index 16.1% 0.8% 11.0% -2.1% -14.5% 28.2%
- -----------------------------------------------------------------------------
Lipper Mid Cap
Fund Index 14.1% -4.7% 12.7% -0.4% -17.9% 23.7%
- -----------------------------------------------------------------------------
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 MidCap
Index and the Lipper Mid Cap Fund index. The S&P 400 MidCap 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. The Fund's portfolio may differ significantly
from the securities of the two indexes.
<PAGE>
Considering the market's extreme behavior in the last two quarters of 1998, we
attribute the Fund's results to our particular focus and discipline. We invest
in companies with "franchise characteristics," experiencing a trend that's
larger than consensus, and priced at 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 TREND. The trend can be internal - a
restructuring or new product cycle, for example; or external - a cyclical
turnaround, for instance, or the widespread adoption of a new product or
service. Such a trend - especially in its emerging stages - can serve as a
catalyst to improved performance, higher earnings and, often, powerful,
long-term market response. We hope to identify trends as early as possible,
and ideally when they run counter to consensus opinion.
We believe the mid-cap universe 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
MidCap Index, 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>
SIX MONTH REVIEW
In the third quarter of 1998, the equity markets experienced a precipitous
decline. In the fourth quarter, they rebounded just as dramatically. To tend our
portfolio under such conditions, we needed to be both vigilant and
opportunistic; thus, we weeded and trimmed back when necessary, planted and
harvested when possible.
In July and August, as the markets declined, we sold a number of holdings that
seemed too weak for current conditions. Millipore, Polaroid and Cognex each
faced a continuing drag on business because of Asia. Loral Space &
Communications, though a great franchise, made some questionable earnings
projections for new services. Stage Stores was hurt by the weather and the
economic consequences on its agrarian customer base in the South.
We used the proceeds to capitalize on an exceptional opportunity provided by the
third quarter's indiscriminate carnage: to upgrade the portfolio with high
quality companies, but whose stocks had previously sold at valuations we
considered too high. Here are a few of the gems we added. As you can see, they
represent a broad spectrum of the economy...
- AUTODESK is a leading player in CAD/CAM software systems.
- C.H. ROBINSON is one of the country's largest third-party provider of
logistics services. Logistics - the elements entailed in transporting
products - is a function that many large companies are now outsourcing.
- STERIS, which we'd owned before, is a major provider of sterilization
equipment and supplies for hospitals and surgery centers.
- UNIVISION is a major player in Spanish language broadcasting.
October's sudden market rise enabled us to take healthy profits in a number of
stocks. In fact, we sold two stocks just weeks after having bought them. These
were: AptarGroup, a maker of pumps, valves and closures; and Financial Security
Assurance Holdings, an insurer of municipal bonds. Minerals Technologies reached
our price objective, as did Steel Dynamics, so we sold both.
November was similar. We sold Starbucks and Ciena, both October purchases, when
each reached our assessment of private market value. We also sold partial
positions in a number of stocks. Some were among our largest holdings -
companies in which we had, and still have, the strongest conviction.
Nonetheless, it again seemed prudent to take some profits as these stocks began
to approach our price objectives.
In December, too, the market continued its ascent; our valuation discipline
impelled us to take some profits and reduce portfolio risk. We eliminated our
positions in Micron Technology, Stryker Corporation, SFX Entertainment and
Rogers Communications. We also pruned our
LETTER TO SHAREHOLDERS
ARTISAN MID CAP FUND
<PAGE>
positions in Autodesk, Wang Labs, Electronics for Imaging and Sykes
Enterprises, as they approached our estimates of intrinsic value.
We were able to use the cash we raised to buy some stocks we considered
undervalued: Sun International Hotels, Owens-Illinois and a return to
fundamentally improving Millipore. We regard each as an excellent franchise
whose stock price, when we bought it, reflected consensus misperception.
Some stocks did very well; others were disappointing.
- --------------------------------------------------------------------------------
TOP 5 GAINERS<F1> TOP 5 LOSERS<F1>
- --------------------------------------------------------------------------------
SECURITY % SECURITY %
- --------------------------------------------------------------------------------
Berg Electronics
Corporation 68.2% Stage Stores, Inc. -53.8%
Electronics for
Imaging, Inc. 50.7% Sirrom Capital Corporation -43.0%
Autodesk, Inc. 36.7% Safety-Kleen Corporation -37.9%
American Power Conversion
Corporation 26.1% LNR Property Corporation -35.1%
Century Communications
Corporation 26.1% Mail-Well, Inc. -23.7%
- --------------------------------------------------------------------------------
<F1> For the six months ended December 31, 1998, 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.
One recent purchase that we consider especially exciting is Western Wireless.
Established as a rural cellular wireless system in the Pacific Northwest, this
excellent franchise is leveraging the demand for nationwide cellular "roaming"
capability across disparate systems. Western Wireless is helping to meet this
demand through alliances with large, national carriers like AT&T and Sprint.
Typically these carriers own systems in urban areas but prefer to lease rural
systems from existing providers. So Western Wireless is earning considerable
additional revenue by allowing these players to market for them.
Most rural providers have been bought out by private investors. Western Wireless
is one of the few remaining independents, and it has only one competitor in its
region. Western Wireless's management recently announced its intention to split
the company's rural cellular assets from its PCS (personal communication
services) assets. We believe this move will allow the company to highlight the
true value of its rural operation.
Despite these attributes, Western Wireless was trading at approximately 55% of
our assessment of intrinsic value when we started buying it.
PORTFOLIO CHARACTERISTICS
On December 31, 1998, we had 56 holdings spread across most major sectors of the
economy. Our Top Ten Holdings represented 29.3% of net assets, and our median
market cap was $2.2 billion - still trending to the low end of our
capitalization range. Based on our 1999 estimates, the portfolio's projected
weighted average P/E of 15X was in line with its weighted average growth rate of
14%. And our median price/intrinsic value was 80%.
LETTER TO SHAREHOLDERS
ARTISAN MID CAP FUND
<PAGE>
Attention to valuation is fundamental to our strategy. Because the market
continued to favor large-cap stocks during this period, we continued to find the
most compelling values at the smaller end of our cap range. We believe this
strategy, and some patience, will reward us over time.
- -------------------------------------------------------------
TOP TEN HOLDINGS<F2>
- -------------------------------------------------------------
COMPANY NAME %
- -------------------------------------------------------------
SunGard Data Systems, Inc. 3.4
- -------------------------------------------------------------
Universal Foods Corporation 3.2
- -------------------------------------------------------------
Autodesk, Inc. 3.1
- -------------------------------------------------------------
Apartment Investment & Management Company 3.0
- -------------------------------------------------------------
Equity Office Properties Trust 3.0
- -------------------------------------------------------------
Centennial Cellular Corporation 2.8
- -------------------------------------------------------------
Sybron International Corporation 2.8
- -------------------------------------------------------------
Western Wireless Corporation 2.7
- -------------------------------------------------------------
Covance, Inc. 2.7
- -------------------------------------------------------------
American Power Conversion 2.6
- -------------------------------------------------------------
TOTAL 29.3%
- -------------------------------------------------------------
- -------------------------------------------------------------
MARKET CAP DIVERSIFICATION
- -------------------------------------------------------------
Market Cap Fund<F2> S&P 400
(in $ billions) (%) (%)
- -------------------------------------------------------------
0.0 to 0.5 2.3 1.1
- -------------------------------------------------------------
0.5 to 1.0 8.4 5.2
- -------------------------------------------------------------
1.0 to 2.0 32.5 20.0
- -------------------------------------------------------------
2.0 to 3.0 20.3 18.3
- -------------------------------------------------------------
3.0 to 4.0 4.8 14.1
- -------------------------------------------------------------
4.0 to 5.0 12.3 14.0
- -------------------------------------------------------------
5.0 to 6.0 5.0 6.3
- -------------------------------------------------------------
6.0 to 7.0 4.8 5.3
- -------------------------------------------------------------
7.0 to 8.0 2.2 2.3
- -------------------------------------------------------------
Over 8.0 7.4 13.4
- -------------------------------------------------------------
TOTAL 100.0% 100.0%
- -------------------------------------------------------------
<F2> As a percentage of net assets as of December 31, 1998.
- --------------------------------------------------------
SECTOR DIVERSIFICATION (%)<F2>
- --------------------------------------------------------
SECTOR 12/31/1998
- --------------------------------------------------------
Basic Materials 4.0
- --------------------------------------------------------
Capital Goods 4.6
- --------------------------------------------------------
Consumer Cyclical 6.3
- --------------------------------------------------------
Consumer Non-Cyclical 8.9
- --------------------------------------------------------
Energy 2.0
- --------------------------------------------------------
Financial 8.1
- --------------------------------------------------------
Healthcare 9.3
- --------------------------------------------------------
Real Estate Investment Trusts 6.7
- --------------------------------------------------------
Services 10.4
- --------------------------------------------------------
Technology 22.3
- --------------------------------------------------------
Telecommunications 10.9
- --------------------------------------------------------
Transportation 1.6
- --------------------------------------------------------
Other assets less liabilities 4.9
- --------------------------------------------------------
TOTAL 100.0%
- --------------------------------------------------------
As of December 31, 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 seek to add the most value...picking stocks.
LETTER TO SHAREHOLDERS
ARTISAN MID CAP FUND
<PAGE>
Over the past six months, our sector allocations changed only modestly. As you
can see, our largest commitments are in technology, telecommunications, services
and healthcare. Each of these is a flourishing segment of the economy.
LOOKING FORWARD
In the coming months, we intend to learn more about the growing phenomenon of
cyberspace. Its application has become pervasive. From wireless phones and e-
mail to electronic commerce on the Internet, there is clearly a sea of change
occurring.
Until now, we believed it too early to consider this trend, because companies
had not yet developed into franchises as we define them. Though the time has
come to look for them, we intend - given our valuation criteria - to be prudent.
In fact, much of our work may well go into the research file, since many such
companies defy traditional methods of valuation. But their stocks are
characterized by very high volatility; so the effort we put in now may pay off
down the road as compelling buying opportunities.
This longer-term view of research is typical of us. Wherever our research takes
us, much of our effort is geared toward building a database of companies. We
monitor each one until, hopefully, it comprises all three elements of our
strategy: a franchise company...priced below our assessment of intrinsic
value...experiencing a major trend that's bigger than consensus.
Thank you for your confidence in Artisan Mid Cap Fund. In the coming months, we
will 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 - February 22, 1999
THE FUND'S PERFORMANCE
For the six months ended December 31, 1998, Artisan Small Cap Value Fund
returned -14.5%. By comparison, the Fund's benchmark index, the Russell 2000
Value Index, returned -10.4%, and its peer group, represented by the Lipper
Small Cap Fund Index, returned -6.9%.
After a good first half for the Fund and for value stocks in general, the second
half of 1998 was characterized by the markets favoring large-caps over small-
caps, growth stocks over value, and Internet stocks over just about everything
else.
COMPARATIVE QUARTERLY PERFORMANCE
- -----------------------------
ARTISAN SMALL CAP VALUE FUND
AVERAGE ANNUAL TOTAL RETURNS:
One Year: -5.76%
Since Inception: -2.26%
- -----------------------------
Artisan Small Cap Russell 2000 Lipper Small Russell 2000
Value Fund Index Cap Fund Index Value Index
-------- --------- ---------- ----------
6/27/97 $10,000 $10,000 $10,000 $10,000
12/31/97 10,310 9,722 9,461 10,220
3/31/98 11,220 10,700 10,475 11,073
6/30/98 11,370 10,201 10,071 10,673
9/30/98 9,079 8,146 7,916 8,765
12/31/98 9,717 9,474 9,380 9,560
- -------------------------------------------------------------------------------
1997 1998
QUARTERLY ---------------------------------------------------------------
PERFORMANCE 12/31/97 3/31/98 6/30/98 9/30/98 12/31/98
- -------------------------------------------------------------------------------
Artisan Small Cap Value Fund 3.2% 8.8% 1.3% -20.2% 7.0%
Russell 2000 Value Index 1.7% 8.4% -3.6% -17.9% 9.1%
Russell 2000 Index -3.3% 10.1% -4.7% -20.1% 16.3%
Lipper Small Cap Fund Index -5.8% 10.7% -3.9% -21.4% 18.5%
- -------------------------------------------------------------------------------
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. The Fund's portfolio may differ significantly
from the securities of the two indexes.
<PAGE>
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 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 incorrectly
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.
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 may be set up for
good things to happen.
LETTER TO SHAREHOLDERS
ARTISAN SMALL CAP VALUE FUND
<PAGE>
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.
SIX MONTH REVIEW
Last year's second half was a turbulent environment for equities. After falling
like a rock in the third quarter, stocks rose like a rocket in the fourth. While
this period of extreme overreaction wasn't without frustration, it presented us
with a spectrum of investment opportunities. We did our best to make the most of
them as they emerged.
Below are some of the stocks we purchased, and why. We trust these examples will
help to illustrate the breadth of our approach, as well as the shades of meaning
within our definition of "value."
BEATEN DOWN CYCLICALS. Commodity-related sectors - oil, steel and
semiconductors, for example - took it on the chin last Fall. We purchased
Electroglas, a semiconductor equipment manufacturer. Though this sector's near-
term prospects are poor, its long-term fundamentals are favorable. And
Electroglas appears to be a survivor. It has proven itself profitable over a
full business cycle, and is very sound financially.
OPPORTUNISTIC UPGRADES. We were able to upgrade the portfolio with high quality
companies that had always been too highly valued for us. But investors beat them
down to valuations we found compelling, for reasons we considered temporary and
overreactive. One example is Briggs and Stratton, a major manufacturer of air-
cooled gasoline engines. Our initial purchase was at 12X earnings. A year
before, when we launched the Fund, this stable, financially strong company was
priced at 25X earnings.
REPURCHASES OF OLD FRIENDS...stocks we'd sold when they reached our price
objectives. As the energy sector declined, so did Snyder Oil. But we knew it
well and still liked it. With its vast reserves, strong finances and seasoned
management, Snyder seems well positioned to prosper when oil and gas prices
eventually rebound.
MICROCAPS. This market segment had it especially rough, as investors flocked to
the greater perceived safety and liquidity of larger companies. One purchase was
Moore Products Corporation, which makes process automation and control systems,
chiefly for the chemical, paper and power industries. A small player in its
niche, Moore is recognized for the quality of its products. The company has no
long-term debt and strong cash flow.
REPOSITIONING CURRENT HOLDINGS. When some of our favorite holdings fell in
price, we added to these positions so they represented a greater percentage of
net assets. For example, we added to Mueller Industries (plumbing supplies),
R.G. Barry (footwear), Pinkerton's (security), and EMCOR (electromechanical
contracting and facilities maintenance.) Before the market dropped, we believed
that each had been too aggressively valued to justify more prominence.
LETTER TO SHAREHOLDERS
ARTISAN SMALL CAP VALUE FUND
<PAGE>
- ----------------------------------------------------------------------------
TOP 5 GAINERS<F1> TOP 5 LOSERS<F1>
- ----------------------------------------------------------------------------
SECURITY % SECURITY %
- ----------------------------------------------------------------------------
DeCrane Aircraft
Holdings, Inc. 32.4% Patina Oil &Gas Corporation -47.6%
Hilb, Rogal & Hamilton
Company 28.7% Esco Electronics Corporation -47.2%
L.B. Foster Company 27.7% Forest Oil Corporation -31.8%
Annuity and Life Re
(Holdings) Ltd. 26.7% Gleason Corporation -27.6%
Pinkerton's, Inc. 9.9% R.G. Barry Corporation -23.6%
- ----------------------------------------------------------------------------
<F1> For the six months ended December 31, 1998, 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.
- -----------------------------------------------------------
TOP TEN HOLDINGS<F2>
- -----------------------------------------------------------
COMPANY NAME %
- -----------------------------------------------------------
Superior National Insurance Group, Inc. 3.6
- -----------------------------------------------------------
Hilb, Rogal & Hamilton Corporation 3.0
- -----------------------------------------------------------
Pinkerton's, Inc. 2.7
- -----------------------------------------------------------
R.G. Barry Corporation 2.6
- -----------------------------------------------------------
M&F Worldwide Corporation 2.5
- -----------------------------------------------------------
Giant Cement Holding, Inc. 2.5
- -----------------------------------------------------------
EMCOR Group, Inc. 2.4
- -----------------------------------------------------------
Capital Southwest Corporation 2.3
- -----------------------------------------------------------
Annuity and Life Re (Holdings) Ltd. 2.3
- -----------------------------------------------------------
Gleason Corporation 2.3
- -----------------------------------------------------------
TOTAL 26.2%
- -----------------------------------------------------------
<F2> As a percentage of net assets as of December 31, 1998.
To help finance these purchases, we sold off a number of holdings that we
considered less desirable. Among them: Angelica Corporation, Boston Acoustics,
Pepsi-Cola Puerto Rico Bottling Company, Anacomp, Lawson Products, Dexter
Corporation, Perini Corporation, Ansaldo Signal and INCO Ltd. As a result of
these actions, the Fund appears to be well positioned for this market, and - as
you'll see in "Portfolio Characteristics" - represents what we believe is a
truly attractive value.
As a matter of policy, the Fund makes only a modest commitment to any individual
holding and - as shown in the following table - invests its assets broadly
across the nation's economy. These aspects of diversification are intended to
help reduce the Fund's overall risk, while increasing the importance of stock-
picking, where we seek to add the most value to the process.
The relative sector weightings below reflect our continued sense of caution
toward the market. We are weighted toward basic materials, capital goods,
services and the insurance industry within the financial sector. We have little
or no exposure to healthcare, transportation and other sectors where we have
found few compelling values.
LETTER TO SHAREHOLDERS
ARTISAN SMALL CAP VALUE FUND
<PAGE>
- -------------------------------------------------------------
SECTOR DIVERSIFICATION (%)<F2>
- -------------------------------------------------------------
SECTOR 12/31/1998
- -------------------------------------------------------------
Basic Materials 12.4
- -------------------------------------------------------------
Capital Goods 13.5
- -------------------------------------------------------------
Consumer Cyclical 6.1
- -------------------------------------------------------------
Consumer Non-Cyclical 2.5
- -------------------------------------------------------------
Energy 6.0
- -------------------------------------------------------------
Financial 21.8
- -------------------------------------------------------------
Healthcare 1.0
- -------------------------------------------------------------
Real Estate Investment Trusts 2.9
- -------------------------------------------------------------
Services 16.2
- -------------------------------------------------------------
Technology 9.7
- -------------------------------------------------------------
Transportation 1.4
- -------------------------------------------------------------
Other assets less liabilities 6.5
- -------------------------------------------------------------
TOTAL 100.0%
- -------------------------------------------------------------
<F2> As a percentage of net assets as of December 31, 1998.
PORTFOLIO CHARACTERISTICS
On December 31, 1998, the Fund's net assets were $54.0 million. The portfolio
held 68 stocks spread across most economic sectors, and its Top Ten Holdings
represented about 26% of assets. The median market cap was $230 million. And
based on our 1999 estimates, our median projected P/E was 10X and our price-to-
book value was 1.2X. Yet despite these compelling valuation characteristics, our
stocks are largely under-researched and undiscovered...typically followed by
only three analysts.
OUTLOOK AND STRATEGY
Looking ahead, we have to admit to mixed emotions. It's easy to be upbeat about
market conditions like low inflation and interest rates. Falling energy and
commodity costs should boost profitability, as should the modest spending plans
- - for selling and general administrative expenses - proposed by increasing
numbers of U.S. corporations.
On the flip side, we are concerned about a number of factors: corporate
earnings, analyst and investor expectations, and equity valuations. In the long
run, corporate earnings drive stock prices. And earnings are falling short. One
reason is intense competition from emerging markets. And domestically, margins
are eroding from rising costs that can not be passed through...costs for labor,
healthcare and technology.
Yet analysts continue defying this reality with lofty earnings expectations,
which in turn stimulate higher valuations and unrealistic investor expectations.
It is possible this pattern will lead to a market correction, which could be
aggravated by a slowdown in spending by consumers.
Yet whatever happens, we will look for bargains, adapting our search to
prevailing market conditions, as we have done before. If there is a sharp
downturn, perhaps caused by broad earnings
LETTER TO SHAREHOLDERS
ARTISAN SMALL CAP VALUE FUND
<PAGE>
disappointments, we will attempt to upgrade with battered high quality
companies that are typically too highly valued for us. Otherwise, we will
continue to focus our efforts in two directions: commodity-related areas -
energy, steel and agricultural equipment, for example - where there is already
considerable pressure on earnings; and the area we typically emphasize...
companies with undervalued assets or earnings streams, overlooked because of
short-term problems or lack of analyst coverage.
Once again, thank you for your investment in Artisan Small Cap Value Fund. We
will do our best to earn your continued confidence in the months ahead.
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 - December 31, 1998 (Unaudited)
SHARES MARKET
HELD VALUE
-------- --------
COMMON STOCKS - 92.0%
BASIC MATERIALS - 6.6%
CHEMICAL MANUFACTURING - 0.7%
MacDermid, Inc. - specialty chemical manufacturer 37,900 $1,482,838
CONTAINERS & PACKAGING - 2.2%
AptarGroup, Inc. - pumps, valves and closures
for consumer packaging 155,400 4,360,913
MISCELLANEOUS FABRICATED PRODUCTS - 3.7%
General Cable Corporation - electrical wire
and cable products 190,050 3,896,025
<F1>Park-Ohio Holdings Corporation -
industrial products distribution 238,100 3,601,262
-----------
7,497,287
CAPITAL GOODS - 2.0%
MISCELLANEOUS CAPITAL GOODS - 2.0%
<F1> International Comfort Products
Corporation - heating and air
conditioning systems 236,000 1,888,000
<F1> Service Experts, Inc. - residential heating
and air conditioning service provider 71,600 2,094,300
-----------
3,982,300
CONSUMER CYCLICAL - 1.5%
APPAREL/ACCESSORIES - 1.5%
OshKosh B'Gosh, Inc. - children's
clothing manufacturer 151,800 3,064,462
CONSUMER NON-CYCLICAL - 2.7%
FOOD PROCESSING - 2.7%
<F1> Celestial Seasonings, Inc. - specialty teas
and herbal supplements 52,700 1,465,719
Worthington Foods, Inc. - meat alternative
products 208,000 3,952,000
-----------
5,417,719
ENERGY - 3.6%
OIL & GAS OPERATIONS - 2.1%
<F1> Houston Exploration Company - oil and gas
exploration and production 111,100 2,208,113
<F1> Newfield Exploration Company - oil and gas
exploration and production 97,700 2,039,487
-----------
4,247,600
OIL WELL SERVICES & EQUIPMENT - 1.5%
<F1> Core Laboratories N.V. - oil field
analytical services 88,600 1,694,475
<F1> Dril-Quip, Inc. - oil rig equipment
supplier 68,400 1,214,100
-----------
2,908,575
<PAGE>
SHARES MARKET
HELD VALUE
-------- --------
FINANCIAL - 9.5%
INSURANCE (LIFE) - 2.3%
<F1> Penn Treaty American Corporation -
long-term care insurance 168,900 $4,549,744
INSURANCE (MISCELLANEOUS) - 2.2%
<F1> Healthcare Recoveries, Inc. - outsourced
medical expense collection 260,700 4,431,900
INVESTMENT SERVICES - 1.2%
Jefferies Group, Inc. - investment banking
services 49,200 2,441,550
MISCELLANEOUS FINANCIAL SERVICES - 2.6%
<F1> HealthCare Financial Partners, Inc. -
specialty finance for healthcare providers 133,400 5,319,325
REGIONAL BANKS - 1.2%
Community First Bankshares, Inc. - North Dakota
based bank holding company 112,400 2,367,425
HEALTHCARE - 12.9%
BIOTECHNOLOGY & DRUGS - 4.8%
<F1> PAREXEL International Corporation -
outsourced drug research 102,700 2,567,500
<F1> Pharmaceutical Product Development, Inc. -
outsourced drug research 85,000 2,555,313
<F1> Techne Corporation - specialty manufacturer
of biological products 217,700 4,598,912
-----------
9,721,725
HEALTHCARE FACILITIES - 6.6%
<F1> Alternative Living Services, Inc. -
assisted living facilities 110,500 3,784,625
<F1> Prime Medical Services, Inc. - provider of
lithotripsy services 280,200 2,048,962
<F1> Province Healthcare Company - rural
hospital owner 16,000 574,000
<F1> Res-Care, Inc. - facilities for mentally
retarded and disabled persons 162,000 3,999,375
<F1> Sunrise Assisted Living, Inc. - assisted
living facilities 54,500 2,827,188
-----------
13,234,150
MEDICAL EQUIPMENT & SUPPLIES - 1.5%
<F1> Wesley Jessen Visioncare, Inc. - contact lens
manufacturer 104,700 2,905,425
REAL ESTATE INVESTMENT TRUSTS - 2.9%
Fortress Investment Corporation, 144A - specialty
real estate investments 107,625 1,816,172
HealthCare Financial Partners REIT, Inc., 144A -
healthcare related real estate investments 45,700 4,113,000
-----------
5,929,172
SERVICES - 32.0%
BUSINESS SERVICES - 3.4%
<F1> Boron, LePore & Associates, Inc. - marketing
services to the drug industry 4,900 169,050
<F1> ChoicePoint, Inc. - risk management services
to the insurance industry 30,700 1,980,150
<F1> Hagler Bailly, Inc. - utility industry
consulting services 131,300 2,626,000
<F1> NCO Group, Inc. - accounts receivable
collection services 35,000 1,575,000
<F1> The Profit Recovery Group International,
Inc. - audit recovery services 14,000 524,125
-----------
6,874,325
HOTELS & MOTELS - 1.6%
<F1> Vistana, Inc. - timeshare resort operator 224,400 3,141,600
SCHEDULE OF INVESTMENTS
ARTISAN SMALL CAP FUND
<PAGE>
SHARES MARKET
HELD VALUE
-------- --------
SERVICES (CONTINUED)
PERSONAL SERVICES - 1.5%
Regis Corporation - hair salon operator 78,500 $3,140,000
RESTAURANTS - 5.3%
<F1> CEC Entertainment, Inc. - Chuck E. Cheese
restaurants 165,200 4,584,300
Morrison Health Care, Inc. - food service to
healthcare institutions 134,600 2,565,812
<F1> Papa John's International, Inc. -
delivery-only pizza restaurants 79,300 3,499,113
-----------
10,649,225
RETAIL (APPAREL) - 4.0%
<F1> The Dress Barn, Inc. - women's clothing
retailer 253,000 3,842,438
The Talbots, Inc. - women's clothing retailer 133,200 4,179,150
-----------
8,021,588
RETAIL (CATALOG & MAIL ORDER) - 2.4%
Fingerhut Companies, Inc. - specialty catalog
retailer 306,900 4,737,769
RETAIL (GROCERY) - 4.1%
<F1> Whole Foods Market, Inc. - natural foods
supermarkets 64,100 3,100,838
<F1> Wild Oats Markets, Inc. - natural foods
supermarkets 161,600 5,090,400
-----------
8,191,238
RETAIL (HOME IMPROVEMENT) - 1.9%
<F1> Tractor Supply Company - farm supplies retailer 159,800 3,835,200
RETAIL (SPECIALTY) - 0.9%
<F1> Hastings Entertainment, Inc. - multimedia
retail stores 125,100 1,751,400
SECURITY SYSTEMS & SERVICES - 3.9%
<F1> Borg-Warner Security Corporation -
security services 194,000 3,637,500
<F1> ITI Technologies, Inc. - wireless home
security systems 138,100 4,281,100
-----------
7,918,600
WASTE MANAGEMENT SERVICES - 3.0%
<F1> Superior Services, Inc. - solid waste services 142,000 2,848,875
<F1> Tetra Tech, Inc. - environmental
consulting services 119,400 3,231,262
-----------
6,080,137
TECHNOLOGY - 14.9%
COMPUTER NETWORKS - 0.3%
<F1> RadiSys Corporation - embedded computer systems 23,300 699,000
COMPUTER SERVICES - 3.8%
<F1> Data Processing Resources Corporation -
technology staffing services 126,200 3,691,350
<F1> Intelligroup, Inc. - software implementation
services 217,800 3,893,175
-----------
7,584,525
ELECTRONIC INSTRUMENTS & CONTROLS - 2.3%
<F1> Benchmark Electronics, Inc. - contract
electronics manufacturer 32,900 1,204,962
<F1> Littelfuse, Inc. - circuit protection devices 114,400 2,202,200
<F1> PCD, Inc. - electronic connectors 86,200 1,120,600
-----------
4,527,762
SCHEDULE OF INVESTMENTS
ARTISAN SMALL CAP FUND
<PAGE>
SHARES MARKET
HELD VALUE
-------- --------
TECHNOLOGY (CONTINUED)
SEMICONDUCTORS - 2.9%
<F1> Photronics, Inc. - photomasks for
semiconductor manufacturing 36,700 $ 879,653
<F1> PRI Automation, Inc. - semiconductor
automation systems 38,100 990,600
<F1> Sipex Corporation - analog circuits and
electroluminescence devices 33,800 1,187,225
<F1> SMART Modular Technologies, Inc. - memory
module assembly 97,700 2,711,175
-----------
5,768,653
SOFTWARE & PROGRAMMING - 5.6%
Analysts International Corporation - technology
staffing and software services 111,300 2,142,525
<F1> Cotelligent, Inc. - technology staffing and
software services 158,200 3,371,637
<F1> INSpire Insurance Solutions, Inc. -
automated insurance claims management 131,800 2,421,825
<F1> Kronos, Inc. - time and attendance software 33,000 1,462,313
<F1> SPSS, Inc. - statistical software 101,900 1,923,362
-----------
11,321,662
TRANSPORTATION - 1.8%
MISCELLANEOUS TRANSPORTATION - 1.8%
<F1> Carey International, Inc. - chauffeured
vehicle services 113,200 1,981,000
Expeditors International of Washington, Inc. -
freight forwarding services 40,300 1,692,600
-----------
3,673,600
UTILITIES - 1.6%
NATURAL GAS UTILITIES - 1.6%
WICOR, Inc. - gas utility and pump manufacturer 143,700 3,134,456
TOTAL COMMON STOCKS (Cost $157,790,041) 184,912,850
PAR MARKET
AMOUNT VALUE
-------- --------
SHORT TERM INVESTMENTS - 6.8%
Repurchase agreement with State Street Bank
and Trust Company, 4.0%, dated 12/31/98, due
1/4/99, maturity value $13,747,107, collateralized
by $14,015,919 market value U.S. Treasury Bond,
8.875%, due 2/15/19 (Cost $13,741,000) $13,741,000 $13,741,000
-----------
TOTAL INVESTMENTS - 98.8% (Cost $171,531,041) 198,653,850
OTHER ASSETS LESS LIABILITIES - 1.2% 2,408,035
-----------
TOTAL NET ASSETS - 100.0%<F2> $201,061,885
============
<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 - December 31, 1998 (Unaudited)
SHARES MARKET
HELD VALUE
-------- --------
COMMON AND PREFERRED STOCKS - 96.4%
AUSTRIA - 0.8%
Erste Bank Der Oesterreichischen Sparkassen AG -
commercial bank 93,000 $4,977,398
AUSTRALIA - 3.3%
APN News & Media Limited - publisher and printer
of regional newspapers 200,000 288,008
Australia & New Zealand Banking Group Limited -
commercial bank 900,000 5,890,067
Colonial Limited - diversified financial services 1,000,000 3,425,455
<F1> LibertyOne Limited - Internet content provider 1,450,000 3,420,859
St. George Bank Limited - commercial bank 1,200,000 7,573,993
-----------
20,598,382
BERMUDA - 4.1%
<F1> Global Crossing Ltd.<F3> - telecommunication
services 170,000 7,671,250
<F1> Global Telesystems Group, Inc.<F3> -
telecommunication services 320,000 17,840,000
-----------
25,511,250
BRAZIL - 2.4%
Cia de Saneamento Basico de Estado de Sao Paulo -
water and sewage utility 30,390,000 2,301,320
Cia Riograndense Telecom - Preferred -
telecommunication services 13,051,500 4,698,670
Embraer-Empresa Brasileira de Aeronautica SA -
Preferred - aerospace and defense 132,100,000 1,639,907
Fertilizantes Fosfatados SA - Preferred -
phosphatic mining and fertilizer 1,010,600,000 2,592,783
Telecomunicacoes Brasileiras SA (ADR) -
Preferred - telecommunications 50,000 3,634,375
-----------
14,867,055
CANADA - 6.8%
<F1> MetroNet Communications Corporation -
Class B <F3> - telecommunication services 873,000 29,245,500
Northern Telecom Ltd. <F3> - telecommunications
equipment 250,000 12,531,250
<F1> The T. Eaton Company Ltd. - retail 100,000 336,932
-----------
42,113,682
CZECH REPUBLIC - 0.4%
<F1> Ceske Radiokomunikace, 144A (GDR) -
telecommunication services 52,600 1,696,350
<F1> Ceske Radiokomunikace, Regulation S (GDR) -
telecommunication services 25,000 806,250
-----------
2,502,600
<PAGE>
SHARES MARKET
HELD VALUE
-------- --------
DENMARK - 0.2%
NESA A/S - electrical utility 8,438 $ 961,229
FINLAND - 4.6%
<F1> Fortum Corporation, 144A - energy related
service company 100,000 588,351
Helsingin Puhelin Oyj - telecommunication services 70,000 4,159,639
Nokia Corporation (ADR) - Class A -
telecommunications equipment 150,000 18,065,625
<F1> Sonera Group Oyj - telecommunication services 215,000 3,794,862
<F1> Telephone Cooperative HPY - Membership
Certificates - telecommunication services 500 1,804,275
-----------
28,412,752
FRANCE - 9.6%
Axa - multi-line insurance 70,000 10,141,298
Credit Commercial de France - commercial bank 165,000 15,316,580
Dexia France - special purpose bank 23,000 3,541,943
Etablissements Economiques du Casino Guichard-
Perrachon SA - Preferred - hypermarket/supermarket
retailer 65,000 4,173,672
<F1> Omnicom SA - telecommunication services 24,567 2,715,508
Sopra SA - computer services 12,731 4,508,564
Suez-Lyonnaise des Eaux - building and construction 60,000 12,319,800
Thomson CSF - electronics manufacturer 90,000 3,863,352
Unilog SA - computer services 6,000 2,597,031
-----------
59,177,748
GERMANY - 9.2%
Altana AG - pharmaceuticals 50,000 3,900,156
Bayerische Hypo-Und Vereins Bank AG - commercial bank 50,650 3,966,054
Bayerische Motoren Werke AG - automobile manufacturer 8,400 6,516,981
Deutsche Bank AG - money center bank 200,000 11,766,471
Dresdner Bank AG - money center bank 260,000 10,920,437
KSB AG - Preferred - machinery and pump manufacturer 22,450 3,812,162
Mannesmann AG - machinery/general industry 90,000 10,314,412
Marschollek, Lautenschlaeger und Partner AG -
Preferred - insurance broker 3,200 1,824,073
Marseille-Kliniken AG - healthcare services 190,567 3,430,343
-----------
56,451,089
ITALY - 11.3%
<F1> Banca di Roma - money center bank 4,455,000 7,544,226
Banca Popolare di Lodi - commercial bank 150,000 1,687,381
Banca Popolare di Milano - cooperative bank 400,000 3,628,776
Istituto Bancario San Paolo di Torino - money
center bank 600,000 10,596,026
Olivetti SPA - telecommunication services 4,995,000 17,370,498
Seat Pagine Gialle Saving Shares SPA -
publishing/advertising company 4,000,000 3,072,364
<F1> Seat Pagine Gialle SPA - publishing/advertising
company 8,350,000 7,878,073
Telecom Italia Savings Shares SPA -
telecommunication services 800,000 5,031,903
Telecom Italia SPA - telecommunication services 1,500,000 12,791,436
-----------
69,600,683
JAPAN - 0.1%
Fancl Corporation - cosmetics retailer 7,000 600,000
SCHEDULE OF INVESTMENTS
ARTISAN INTERNATIONAL FUND
<PAGE>
SHARES MARKET
HELD VALUE
-------- --------
MEXICO - 1.5%
Grupo Financiero Inbursa S.A. de C.V. - Class B -
brokerage, insurance
and financial services 1,826,489 $ 3,834,760
<F1> Seguros Comercial America - Class B - multi-line
insurance 927,500 3,136,293
Sigma Alimentos S.A. - Class B - food producer 1,170,077 2,031,425
-----------
9,002,478
NETHERLANDS - 5.6%
ASR Verzekeringsgroep NV - multi-line insurance 42,000 3,800,500
Athlon Groep NV - automobile leasing 250,425 7,451,300
Benckiser NV - Class B - home cleaning products 100,000 6,547,081
Cap Gemini NV - computer services 110,000 7,670,198
Content Beheer NV - temporary employment services 196,900 3,364,289
Unique International NV - temporary employment
services 251,971 5,767,154
-----------
34,600,522
NORWAY - 0.6%
<F1> Electric Farm ASA - Internet software 56,980 0
P4 Radio Hele Norge ASA - radio stations 1,139,600 3,749,424
-----------
3,749,424
POLAND - 0.8%
Elektrim Spolka Akcyjna SA - electrical products 460,000 4,980,057
SINGAPORE - 0.1%
Fraser & Neave Limited - beverage seller
and manufacturer 100,000 291,944
SPAIN - 2.9%
Argentaria, Caja Postal y Banco Hipotecario de
Espana SA - commercial bank 338,000 8,740,149
Catalana Occidente SA - multi-line insurance 28,281 736,277
Fomento de Construcciones y Contratas SA -
construction company 110,000 8,165,635
-----------
17,642,061
SWEDEN - 3.1%
Celsius AB - Class B - aerospace and defense
product manufacturer 240,000 3,249,311
<F1> Guide Konsult AB - Class B - computer services 60,000 1,063,411
Pharmacia & Upjohn, Inc. <F3> - pharmaceuticals 100,000 5,662,500
Semcon AB - consulting services 180,700 1,490,116
Sigma AB - Class B - computer services 500,000 4,153,948
Telefonaktiebolaget LM Ericsson - Class B -
telecommunications equipment 134,000 3,183,094
-----------
18,802,380
SWITZERLAND - 9.4%
Julius Baer Holding AG - Class B - commercial bank 2,000 6,646,284
Novartis AG - pharmaceuticals 8,500 16,706,705
Roche Holding AG - pharmaceutical company 1,325 16,165,829
UBS AG - money center bank 59,000 18,124,772
-----------
57,643,590
THAILAND - 0.0%<F4>
The Pizza Public Company Limited - fast food
restaurant franchise 52,100 157,662
UNITED KINGDOM - 19.6%
<F1> ARM Holdings PLC - microprocessor technology 100,000 2,159,827
<F1> Cable & Wireless Communications PLC -
telecommunication services 820,000 7,479,316
<F1> Colt Telecom Group PLC - telecommunication
services 1,559,600 23,048,084
<F1> Energis PLC - telecommunication services 575,000 12,801,130
SCHEDULE OF INVESTMENTS
ARTISAN INTERNATIONAL FUND
<PAGE>
SHARES MARKET
HELD VALUE
-------- --------
UNITED KINGDOM (Continued)
<F1> Freepages Group PLC - telecommunication
services 3,900,000 $ 1,263,499
General Electric Company PLC - diversified
manufacturer 900,000 8,149,194
LucasVarity PLC - auto parts manufacturer 1,714,391 5,725,081
Next PLC - general retail 950,000 7,781,193
Pearson PLC - publisher 200,000 3,976,940
Racal Electronic PLC - telecommunication services 900,000 5,203,522
Schroders PLC - international merchant banking group 428,000 7,814,787
Securicor PLC - security and recruitment services 1,005,907 8,406,234
Select Appointments Holdings PLC - employment
services 736,860 7,590,184
<F1> TeleWest Communications PLC - cable television 4,750,422 13,653,813
Triad Group PLC - computer services 320,000 2,791,161
WPP Group PLC - advertising agency 500,000 3,032,065
-----------
120,876,030
TOTAL COMMON AND PREFERRED STOCKS (Cost $500,658,679) 593,520,016
PAR MARKET
AMOUNT VALUE
-------- --------
SHORT TERM INVESTMENTS - 9.9%
Repurchase agreement with State Street Bank and
Trust Company, 4.0%, dated 12/31/98, due 1/4/99,
maturity value $60,723,976, collateralized
by $61,911,521 market value U.S. Treasury
Bond, 8.875%, due 2/15/19 (Cost $60,697,000) $60,697,000 $60,697,000
-----------
TOTAL INVESTMENTS - 106.3% (Cost $561,355,679) 654,217,016
OTHER ASSETS LESS LIABILITIES - (6.3)% (38,617,324)
------------
TOTAL NET ASSETS - 100.0%<F2> $615,599,692
============
<F1> Non-income producing securities
<F2> Percentages for the various classifications relate to total net assets
<F3> Principally traded in the United States
<F4> Represents less than 0.1% of assets
ADR - American Depository Receipt
GDR - Global Depository Receipt
Regulation S - Security not registered with the
Securities and Exchange Commission and not subject to United States
security laws
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
SCHEDULE OF INVESTMENTS
ARTISAN INTERNATIONAL FUND
<PAGE>
ARTISAN
INTERNATIONAL FUND
Portfolio Diversification - December 31, 1998 (Unaudited)
Market
Value Percentage
-------- --------
Basic Materials $ 2,592,783 0.4%
Consumer Cyclical 80,990,332 13.2
Consumer Non-Cyclical 88,918,795 14.4
Energy 588,351 0.1
Financial
Banks 128,735,343 20.9
Diversified Financial Services 7,260,215 1.2
Insurance 19,638,442 3.2
Industrial 47,741,261 7.8
Technology
Aerospace/Defense 8,752,570 1.4
Computers 12,322,954 2.0
Semiconductors 2,159,827 0.3
Software 11,091,057 1.8
Telecommunications Services 105,629,579 17.2
Telecommunications Equipment 38,983,491 6.3
Utilities 38,115,016 6.2
------------- --------
TOTAL COMMON AND PREFERRED STOCKS 593,520,016 96.4
Total short-term investments 60,697,000 9.9
------------- --------
TOTAL INVESTMENTS 654,217,016 106.3
OTHER ASSETS LESS LIABILITIES (38,617,324) (6.3)
------------- --------
TOTAL NET ASSETS $ 615,599,692 100.0%
============= ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
SCHEDULE OF INVESTMENTS
ARTISAN INTERNATIONAL FUND
<PAGE>
ARTISAN
MID CAP FUND
Schedule of Investments - December 31, 1998 (Unaudited)
SHARES MARKET
HELD VALUE
-------- --------
COMMON STOCKS - 95.1%
BASIC MATERIALS - 4.0%
CHEMICAL MANUFACTURING - 1.4%
Sigma-Aldrich Corporation - specialty
chemical company 11,500 $ 337,813
CONTAINERS AND PACKAGING - 2.6%
<F1> Owens-Illinois, Inc. - beverage packaging
company 10,500 321,562
<F1> Sealed Air Corporation - protective
packaging company 6,500 331,906
-----------
653,468
CAPITAL GOODS - 4.6%
MISCELLANEOUS CAPITAL GOODS - 4.6%
Hussmann International, Inc. - commercial
refrigerated products producer 15,000 290,625
<F1> Mettler-Toledo International, Inc. -
precision weighting instruments 11,500 322,719
Millipore Corporation - commercial water
filtration equipment 6,500 184,843
<F1> Zebra Technologies Corporation - thermal
bar code printer manufacturer 12,000 345,000
-----------
1,143,187
CONSUMER CYCLICAL - 6.3%
APPLIANCE AND TOOL - 1.2%
Danaher Corporation - industrial tools and
process/environmental controls 5,500 298,719
AUTO AND TRUCK PARTS - 1.5%
<F1> SPX Corporation - diversified industrial
electrical systems 5,500 368,500
FURNITURE AND FIXTURES - 1.4%
<F1> Knoll, Inc. - high-end office furniture systems 11,500 340,688
RECREATIONAL PRODUCTS - 1.0%
Callaway Golf Company - golf club manufacturer 25,500 261,375
TEXTILES - NON APPAREL - 1.2%
Shaw Industries, Inc. - carpet manufacturer
and retailer 12,000 291,000
CONSUMER NON-CYCLICAL - 8.9%
BEVERAGES (NON-ALCOHOLIC) - 1.3%
Whitman Corporation - soft drink/beverage
bottler and distributor 13,000 329,875
<PAGE>
SHARES MARKET
HELD VALUE
-------- --------
CONSUMER NON-CYCLICAL (CONTINUED)
FOOD PROCESSING - 3.2%
Universal Foods Corporation - diversified color
and flavor producer 28,500 $781,969
OFFICE SUPPLIES - 1.5%
<F1> Mail-Well, Inc. - commercial printing and
mailing holding company 31,500 360,281
PERSONAL AND HOUSEHOLD PRODUCTS - 2.9%
Dial Corporation - soap and candle manufacturer 12,000 346,500
Fortune Brands, Inc. - home and office supplies,
golf equipment, spirits 12,000 379,500
-----------
726,000
ENERGY - 2.0%
OIL WELL SERVICES AND EQUIPMENT - 2.0%
Halliburton Company - diversified energy services 7,500 222,188
<F1> Weatherford International, Inc. - diversified
energy services 13,500 261,562
-----------
483,750
FINANCIAL - 8.1%
Insurance (Accident and Health) - 3.9%
Provident Companies, Inc. - disability
insurance provider 13,500 560,250
<F1> Trigon Healthcare, Inc. - healthcare
insurance provider 11,000 410,438
-----------
970,688
INSURANCE (LIFE) - 1.1%
American Bankers Insurance Group, Inc. - life
insurance provider 5,500 266,062
INSURANCE (MISCELLANEOUS) - 1.5%
ITT Hartford Group, Inc. - life and property
insurance 7,000 384,125
S&LS/SAVINGS BANKS - 1.6%
Charter One Financial, Inc. - savings and loans 14,000 388,500
HEALTHCARE - 9.3%
BIOTECHNOLOGY AND DRUGS - 4.5%
Biochem Pharmaceutical, Inc. - AIDS and Hepatitis
drug manufacturer 15,500 443,688
<F1> Covance, Inc. - contract research for
pharmaceutical industry 23,000 669,875
-----------
1,113,563
Medical Equipment and Supplies - 4.8%
<F1> Steris Corporation - diversified medical
equipment provider 17,000 483,438
<F1> Sybron International Corporation - dental
supplies manufacturer 25,500 693,281
-----------
1,176,719
REAL ESTATE INVESTMENT TRUSTS - 6.7%
Apartment Investment & Management Company -
apartment complex management 20,000 743,750
Equity Office Properties Trust - office building
owner and operator 30,500 732,000
HealthCare Financial Partners REIT, Inc., 144A -
healthcare related real estate investments 2,100 189,000
-----------
1,664,750
SERVICES - 10.4%
ADVERTISING - 1.5%
<F1> Outdoor Systems, Inc. - billboard operator 12,000 360,000
SCHEDULE OF INVESTMENTS
ARTISAN MID CAP FUND
<PAGE>
SHARES MARKET
HELD VALUE
-------- --------
SERVICES (CONTINUED)
BROADCASTING AND CABLE TV - 3.7%
<F1> Infinity Broadcasting Corporation -
network broadcaster 2,000 $ 54,750
<F1> Liberty Media, Class A - cable television
programming 12,500 575,781
<F1> Univision Communications, Inc. - Spanish cable
television broadcasting 8,000 289,500
-----------
920,031
BUSINESS SERVICES - 1.6%
<F1> Sykes Enterprises, Inc. - technical product
support services 13,000 396,500
CASINOS AND GAMBLING - 1.5%
<F1> Sun International Hotels Limited - resort
hotel operator 8,000 363,500
MOTION PICTURES - 2.1%
<F1> IMAX Corporation - developer of specialty
movies and theaters 16,500 521,813
TECHNOLOGY - 22.3%
COMPUTER SERVICES - 8.2%
<F1> DST Systems, Inc. - mutual fund shareholder
services provider 5,500 313,844
<F1> Fiserv, Inc. - administrative processing for
financial institutions 7,500 385,781
<F1> Gartner Group, Inc. - information technology
consulting 23,500 499,375
<F1> SunGard Data Systems, Inc. - recordkeeping
software and systems for investment management 21,000 833,438
-----------
2,032,438
COMPUTER STORAGE DEVICES - 0.9%
<F1> Seagate Technology, Inc. - disk drive
manufacturer 7,500 226,875
ELECTRONIC INSTRUMENTS AND CONTROLS - 3.8%
<F1> American Power Conversion Corporation -
uninterruptible power supplies 13,500 653,906
<F1> KEMET Corporation - passive electrical
components manufacturer 24,700 277,875
-----------
931,781
SEMICONDUCTORS - 1.0%
<F1> Maxim Integrated Products, Inc. - analog
semiconductor manufacturer 5,500 240,281
SOFTWARE AND PROGRAMMING - 8.4%
Autodesk, Inc. - CAD/CAM software provider 18,000 768,375
<F1> Cadence Design Systems, Inc. - electronic
design automation provider 13,500 401,625
<F1> Electronics For Imaging, Inc. - products for
digital color printing 9,500 381,781
<F1> Wang Laboratories, Inc. - network service
provider 19,000 527,250
-----------
2,079,031
TELECOMMUNICATIONS - 10.9%
<F1> Centennial Cellular Corporation, Class A -
cellular phone operator 17,000 697,000
<F1> Century Communications Corporation - cable and
cellular phone operator 16,500 523,359
<F1> Clearnet Communications, Inc. - Canadian
cable and cellular phone operator 30,500 247,813
<F1> Media One Group - cable television operator 11,500 540,500
<F1> Western Wireless Corporation - cellular
phone operator 30,500 671,000
-----------
2,679,672
TRANSPORTATION - 1.6%
MISCELLANEOUS TRANSPORTATION - 1.6%
C. H. Robinson Worldwide, Inc. - third party
logistics provider 15,000 389,063
TOTAL COMMON STOCKS (Cost $19,296,835) $23,482,017
SCHEDULE OF INVESTMENTS
ARTISAN MID CAP FUND
<PAGE>
PAR MARKET
AMOUNT VALUE
-------- --------
SHORT TERM INVESTMENTS - 4.9%
Repurchase agreement with State Street Bank and
Trust Company, 4.0%, dated 12/31/98, due 1/4/99,
maturity value $1,219,542, collateralized by
$1,243,758 market value U.S. Treasury Bond,
8.875%, due 2/15/19 (Cost $1,219,000) $ 1,219,000 $1,219,000
-----------
TOTAL INVESTMENTS - 100.0% (Cost $20,515,835) 24,701,017
OTHER ASSETS LESS LIABILITIES - 0.0%<F3> 2,847
-----------
TOTAL NET ASSETS - 100.0%<F2> $24,703,864
===========
<F1> Non-income producing securities
<F2> Percentages for the various classifications relate to total net assets
<F3> Represents less than 0.1% of total net assets
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
SCHEDULE OF INVESTMENTS
ARTISAN MID CAP FUND
<PAGE>
ARTISAN
SMALL CAP VALUE FUND
Schedule of Investments - December 31, 1998 (Unaudited)
SHARES MARKET
HELD VALUE
-------- --------
COMMON AND PREFERRED STOCKS - 93.5%
BASIC MATERIALS - 12.4%
CHEMICAL MANUFACTURING - 3.9%
<F1> American Pacific Corporation - specialty
chemicals for aerospace and defense 98,000 $ 771,750
<F1> CFC International, Inc. - specialty
chemical coatings 100,100 800,800
Terra Industries, Inc. - agricultural chemicals 84,000 519,750
-----------
2,092,300
CONTAINERS & PACKAGING - 1.0%
Greif Brothers Corporation, Class A - shipping
containers and packaging manufacturer 19,200 560,400
FABRICATED PLASTIC & RUBBER - 1.0%
<F1> Gundle SLT/Environmental, Inc. - landfill
lining systems 137,900 551,600
IRON & STEEL - 2.2%
LTV Corporation - integrated steel manufacturer 95,200 553,350
Schnitzer Steel Industries, Inc., Class A -
steel scrap processor and mini-mill operation 42,900 616,688
-----------
1,170,038
MISCELLANEOUS FABRICATED PRODUCTS - 4.3%
<F1> L.B. Foster Company, Class A - rail and
construction supplies manufacturer 120,300 796,988
<F1> Mueller Industries, Inc. - plumbing
products manufacturer 54,400 1,105,000
<F1> Wolverine Tube, Inc. - copper
tubing manufacturer 20,000 420,000
-----------
2,321,988
CAPITAL GOODS - 13.5%
CONSTRUCTION - RAW MATERIALS - 4.5%
<F1> Giant Cement Holding, Inc. - cement
operations 53,500 1,324,125
Lone Star Industries, Inc. - cement operations 30,000 1,104,375
-----------
2,428,500
CONSTRUCTION - SUPPLIES & FIXTURES - 1.2%
Insteel Industries, Inc. - steel wire products
manufacturer 128,300 625,463
CONSTRUCTION & AGRICULTURAL MACHINERY - 1.1%
Lindsay Manufacturing Company - irrigation equipment 39,100 579,169
CONSTRUCTIONS SERVICES - 2.4%
EMCOR Group, Inc. - mechanical and electrical
contractor 80,800 1,302,900
<PAGE>
SHARES MARKET
HELD VALUE
-------- --------
CAPITAL GOODS (Continued)
MISCELLANEOUS CAPITAL GOODS - 4.3%
Gleason Corporation - gear manufacturing
equipment producer 67,600 $1,225,250
Smith Investment Company - multi-industry
holding company 13,300 597,669
Twin Disc, Inc. - heavy-duty power transmission
equipment manufacturer 25,500 525,938
-----------
2,348,857
CONSUMER CYCLICAL - 6.1%
AUTO & TRUCK PARTS - 2.0%
CLARCOR, Inc. - filtration products 20,000 400,000
Varlen Corporation - railroad equipment 29,850 688,416
-----------
1,088,416
FOOTWEAR - 2.6%
<F1> R.G. Barry Corporation - specialized comfort
footwear manufacturer 126,400 1,390,400
JEWELRY & SILVERWARE - 1.5%
Jostens, Inc. - manufacturer of recognition products 30,000 785,625
CONSUMER NON-CYCLICAL- 2.5%
TOBACCO - 2.5%
<F1> M&F Worldwide Corporation - flavorings producer 135,300 1,361,456
ENERGY - 6.0%
OIL & GAS OPERATIONS - 4.0%
<F1> Forest Oil Corporation - oil and gas
exploration/production 84,117 714,995
Patina Oil & Gas Corporation - oil and gas
exploration/production 172,800 507,600
Snyder Oil Corporation - oil and gas
exploration/production 70,000 931,875
-----------
2,154,470
OIL WELL SERVICES & EQUIPMENT - 2.0%
<F1> Atwood Oceanics, Inc. - contract supplier of
drilling equipment 32,000 544,000
<F1> UTI Energy Corporation - contract drilling
and pumping pressure services 75,900 550,275
-----------
1,094,275
FINANCIAL - 21.8%
CONSUMER FINANCIAL SERVICES - 1.4%
Fund American Enterprises Holdings, Inc. -
mortgage banking/property and casualty insurance 5,500 770,344
INSURANCE (LIFE) - 2.3%
Annuity and Life Re (Holdings), Ltd. - life and
annuity reinsurance 46,600 1,252,375
INSURANCE (OTHER) - 6.7%
Hilb, Rogal & Hamilton Company - insurance broker 82,100 1,631,737
<F1> Superior National Insurance Group, Inc. -
workers compensation insurance 97,600 1,958,100
-----------
3,589,837
INSURANCE (PROPERTY & CASUALTY) - 7.4%
<F1> Acceptance Insurance Companies, Inc. -
crop insurance 50,600 1,024,650
W.R. Berkley Corporation - regional provider of
property and casualty insurance 15,000 510,938
Capital Re Corporation - financial guaranty
reinsurance 40,400 810,525
Merchants Group, Inc. - property and casualty
insurance 22,400 459,200
<F1> Risk Capital Holdings, Inc. - reinsurance
products and services 54,500 1,185,375
-----------
3,990,688
SCHEDULE OF INVESTMENTS
ARTISAN SMALL CAP VALUE FUND
<PAGE>
SHARES MARKET
HELD VALUE
-------- --------
FINANCIAL (Continued)
MISCELLANEOUS FINANCIAL SERVICES - 3.4%
Capital Southwest Corporation - closed end
venture capital investment company 14,600 $1,262,900
<F1> Enstar Group, Inc. - financial services
holding company 41,200 540,750
-----------
1,803,650
S&LS/SAVINGS BANKS - 0.6%
The Somerset Group, Inc. - investment services 20,900 342,237
HEALTHCARE - 1.0%
BIOTECHNOLOGY & DRUGS - 1.0%
<F1> Quest Diagnostics, Inc. - diagnostic
testing services 29,700 529,031
REAL ESTATE INVESTMENT TRUSTS - 2.9%
Asset Investors Corporation - manufactured
housing communities 49,500 618,750
Fortress Investment Corporation, 144A - specialty
real estate investments 17,300 291,938
HealthCare Financial Partners REIT, Inc.,
144A - healthcare related real estate
investments 7,200 648,000
-----------
1,558,688
SERVICES - 16.2%
ADVERTISING - 3.7%
Cordiant Communications Group (ADR) -
advertising/media services 80,000 830,000
Grey Advertising, Inc. - advertising agency 2,200 800,800
Saatchi & Saatchi PLC (ADR) - advertising/media
services 31,000 372,000
-----------
2,002,800
BROADCASTING & CABLE TV - 1.4%
<F1> On Command Corporation - pay-per-view
movie services 84,600 766,687
BUSINESS SERVICES - 1.0%
<F1> Craig Corporation, Class A Preference - movie
theatres owner/operator 68,600 540,225
HOTELS & MOTELS - 0.9%
<F1> Supertel Hospitality, Inc. - economy hotels
owner/operator 54,500 497,312
PERSONAL SERVICES - 0.9%
Angelica Corporation - textile rental and
laundry services 24,700 460,037
REAL ESTATE OPERATIONS - 0.1%
Getty Realty Corporation - service station lessor 4,900 71,662
RESTAURANTS - 2.2%
<F1> Host Marriott Services Corporation - food
and beverage concessions operator 112,000 1,162,000
RETAIL (APPAREL) - 1.3%
<F1> Footstar, Inc. - casual and athletic footwear
retailer 26,900 672,500
SECURITY SYSTEMS & SERVICES - 2.7%
<F1> Pinkerton's, Inc. - corporate security services 69,500 1,481,218
WASTE MANAGEMENT SERVICES - 2.0%
<F1> Harding Lawson Associates Group, Inc. -
environmental and engineering consultants 79,100 484,487
Sevenson Environmental Services, Inc. -
hazardous waste remediation 76,000 608,000
-----------
1,092,487
SCHEDULE OF INVESTMENTS
ARTISAN SMALL CAP VALUE FUND
<PAGE>
SHARES MARKET
HELD VALUE
-------- --------
TECHNOLOGY - 9.7%
COMPUTER PERIPHERALS - 1.0%
Astro-Med Inc. - medical instrumentation/
specialty printers 96,800 $ 526,350
ELECTRONIC INSTRUMENTS & CONTROLS - 2.8%
<F1> Genlyte Group, Inc. - commercial, industrial
and residential lighting 40,100 751,875
<F1> Powell Industries, Inc. - electrical
equipment manufacturer 76,900 769,000
-----------
1,520,875
SCIENTIFIC & TECHNICAL INSTRUMENTS - 2.2%
Chart Industries, Inc. - industrial process
equipment 78,100 595,513
<F1> Moore Products Company - measurement and
control instruments 24,000 588,000
-----------
1,183,513
SEMICONDUCTORS - 3.4%
<F1> Electroglas, Inc. - semiconductor wafer
probing equipment 31,500 370,125
<F1> FSI International, Inc. - semiconductor
equipment manufacturer 58,000 601,750
<F1> Silicon Valley Group, Inc. - semiconductor
equipment manufacturer 45,000 573,750
<F1> Sparton Corporation - contract manufacturer of
electronic products 55,000 326,562
-----------
1,872,187
SOFTWARE & PROGRAMMING - 0.3%
<F1> Intelligent Systems Corporation - software
and healthcare services 94,100 158,794
TRANSPORTATION - 1.4%
MISCELLANEOUS TRANSPORTATION - 1.4%
<F1> Aviall, Inc. - aviation parts distributor 63,000 740,250
TOTAL COMMON AND PREFERRED STOCKS (Cost $54,842,276) 50,441,604
PAR MARKET
AMOUNT VALUE
-------- --------
SHORT TERM INVESTMENTS - 9.6%
Repurchase agreement with State Street bank and
Trust Company, 4.0%, dated 12/31/98, due 1/4/99,
maturity value $5,196,308, collateralized by
$5,302,338 market value U.S. Treasury Bond,
8.875% due 2/15/19 (Cost $5,194,000) $ 5,194,000$ 5,194,000
-----------
TOTAL INVESTMENTS - 103.1% (Cost $60,036,276) 55,635,604
OTHER ASSETS LESS LIABILITIES - (3.1)% (1,658,783)
-----------
TOTAL NET ASSETS - 100.0%<F2> $ 53,976,821
============
<F1> Non-income producing securities
<F2> Percentages for the various classifications relate to total net assets
ADR - American Depository Receipt
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
SCHEDULE OF INVESTMENTS
ARTISAN SMALL CAP VALUE FUND
<PAGE>
ARTISAN FUNDS, INC.
Statements of Assets and Liabilities - December 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
Small Cap International Mid Cap Small Cap
Fund Fund Fund Value Fund
==========================================================================
<C> <C> <C> <C>
ASSETS:
Investments in securities, at value $ 198,653,850 $ 654,217,016 $ 24,701,017 $ 55,635,604
Cash 847 863 815 411
Receivable from investments sold 5,609,327 7,381,761 - -
Receivable from forward currency contracts - 44,895,672 - -
Receivable from fund shares sold 190,356 5,762,918 188,041 424,319
Interest receivable 1,527 6,744 135 577
Dividends receivable 4,463 960,651 15,580 21,908
Organizational costs 17,314 14,640 19,854 26,522
Receivable from Adviser - - 47,597 -
--------------------------------------------------------------------------
TOTAL ASSETS 204,477,684 713,240,265 24,973,039 56,109,341
LIABILITIES:
Payable for investments purchased 2,491,737 51,916,084 95,063 1,803,941
Payable for forward currency contracts - 44,985,628 - -
Payable for fund shares redeemed 745,522 283,632 35,569 233,902
Payable for organizational costs 17,314 14,640 19,854 26,522
Payable for operating expenses 161,226 341,931 118,689 68,155
Other liabilities - 98,658 - -
--------------------------------------------------------------------------
TOTAL LIABILITIES 3,415,799 97,640,573 269,175 2,132,520
--------------------------------------------------------------------------
TOTAL NET ASSETS $ 201,061,885 $ 615,599,692 $ 24,703,864 $ 53,976,821
==========================================================================
NET ASSETS CONSIST OF:
Fund shares issued and outstanding $ 216,534,231 $ 523,845,201 $ 20,473,518 $ 59,294,714
Net unrealized appreciation (depreciation)
on investments and foreign currency
related transactions 27,122,809 92,815,738 4,185,182 (4,400,672)
Accumulated undistributed net
investment income (loss) (759,295) (2,033,917) (52,604) (84,346)
Accumulated undistributed net realized
gains (losses) on investments and foreign
currency related transactions (41,835,860) 972,670 97,768 (832,875)
--------------------------------------------------------------------------
$ 201,061,885 $ 615,599,692 $ 24,703,864 $ 53,976,821
==========================================================================
SUPPLEMENTARY INFORMATION:
Net assets: $ 201,061,885 $ 24,703,864 $ 53,976,821
International Shares $ 507,659,389
Institutional Shares $ 107,940,303
Number of shares outstanding: 18,013,892 1,720,285 5,903,012
International Shares 31,489,123
Institutional Shares 6,692,656
Net asset value, offering price and
redemption price per share: $11.16 $14.36 $9.14
International Shares $16.12
Institutional Shares $16.13
Cost of securities held $ 171,531,041 $ 561,355,679 $ 20,515,835 $ 60,036,276
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
ARTISAN FUNDS, INC.
Statements of Operations - For the Six Months Ended December 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Small Cap International Mid Cap Small Cap
Fund Fund Fund Value Fund
===========================================================================
<C> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 356,132 $ 408,517 $ 35,654 $ 85,254
Dividends 417,988 1,924,850<F1> 58,409 225,486
---------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 774,120 2,333,367 94,063 310,740
EXPENSES:
Advisory fees 1,125,499 2,502,989 73,319 230,193
Transfer agent fees: 219,916 47,459 66,490
International Shares 429,715
Institutional Shares 10,413
Shareholder communications: 48,344 8,797 17,268
International Shares 81,203
Institutional Shares 5,423
Custodian fees 42,110 236,871 13,856 10,320
Accounting fees 23,734 37,991 22,206 20,411
Professional fees 22,550 44,623 5,352 6,183
Registration fees 17,111 86,834 12,064 26,055
Directors' fees 7,500 7,500 7,500 7,500
Organizational costs 7,033 3,660 2,837 7,701
Other operating expenses 19,618 28,419 874 2,965
---------------------------------------------------------------------------
TOTAL OPERATING EXPENSES BEFORE
AMOUNTS PAID BY THE ADVISER 1,533,415 3,475,641 194,264 395,086
LESS AMOUNTS PAID BY THE ADVISER - - (47,597) -
---------------------------------------------------------------------------
NET EXPENSES 1,533,415 3,475,641 146,667 395,086
---------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (759,295) (1,142,274) (52,604) (84,346)
NET REALIZED AND
UNREALIZED GAINS
(LOSSES) ON INVESTMENTS:
Net realized gain (loss) on:
Investments (45,323,354) (1,190,304) 11,778 (1,027,112)
Foreign currency related transactions - (154,300) - -
Futures contracts 645,230 - - -
--------------------------------------------------------------------------
(44,678,124) (1,344,604) 11,778 (1,027,112)
Net increase (decrease) in unrealized
appreciation on:
Investments (7,764,959) 11,445,631 3,403,507 (6,076,762)
Foreign currency related transactions - (12,640) - -
--------------------------------------------------------------------------
(7,764,959) 11,432,991 3,403,507 (6,076,762)
--------------------------------------------------------------------------
NET GAIN (LOSS) ON INVESTMENTS (52,443,083) 10,088,387 3,415,285 (7,103,874)
--------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $(53,202,378) $8,946,113 $3,362,681 $(7,188,220)
==========================================================================
</TABLE>
<F1> Net of foreign taxes withheld of $328,425.
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
===========================================================================
Six Months Year Six Months Year
Ended Ended Ended Ended
12/31/98<F1> 6/30/98 12/31/98<F1> 6/30/98
===========================================================================
<C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ (759,295) $ (2,139,789) $ (1,142,274) $ 1,635,707
Net realized gain (loss) on:
Investments (45,323,354) 42,066,239 (1,190,304) 28,895,798
Foreign currency related transactions - - (154,300) (991,131)
Futures contracts 645,230 - - -
Net increase (decrease) in unrealized
appreciation on:
Investments (7,764,959) (907,556) 11,445,631 47,423,084
Foreign currency related transactions - - (12,640) 22,144
---------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS (53,202,378) 39,018,894 8,946,113 76,985,602
DISTRIBUTIONS PAID
TO SHAREHOLDERS:
Net investment income: - -
International Shares (944,186) (4,035,316)
Institutional Shares (257,100) (823,369)
Net realized gains on investment transactions: (17,843,102) (45,736,543)
International Shares (6,509,837) (23,067,732)
Institutional Shares (1,271,446) (4,236,936)
---------------------------------------------------------------------------
TOTAL DISTRIBUTIONS PAID TO SHAREHOLDERS (17,843,102) (45,736,543) (8,982,569) (32,163,353)
FUND SHARE ACTIVITIES:
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM FUND SHARE ACTIVITIES (32,034,796) 43,039,922 118,456,533 3,177,296
---------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (103,080,276) 36,322,273 118,420,077 47,999,545
Net assets, beginning of period 304,142,161 267,819,888 497,179,615 449,180,070
---------------------------------------------------------------------------
NET ASSETS, END OF PERIOD $ 201,061,885 $ 304,142,161 $ 615,599,692 $ 497,179,615
===========================================================================
</TABLE>
<F1> Unaudited.
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
========================================================================
SIX MONTHS YEAR SIX MONTHS PERIOD
ENDED ENDED ENDED ENDED
12/31/98<F1> 6/30/98 12/31/98<F1> 6/30/98<F2>
========================================================================
<C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ (52,604) $ (72,646) $ (84,346) $ (127,378)
Net realized gain (loss) on investments 11,778 1,907,453 (1,027,112) 2,628,786
Net increase (decrease) in unrealized
appreciation on investments 3,403,507 781,675 (6,076,762) 1,676,090
------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 3,362,681 2,616,482 (7,188,220) 4,177,498
DISTRIBUTIONS PAID
TO SHAREHOLDERS:
NET REALIZED GAINS ON INVESTMENT TRANSACTIONS (1,185,407) (586,078) (2,325,580) -
FUND SHARE ACTIVITIES:
NET INCREASE IN NET ASSETS RESULTING
FROM FUND SHARE ACTIVITIES 9,745,654 8,937,055 16,260,793 43,052,330
------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 11,922,928 10,967,459 6,746,993 47,229,828
Net assets, beginning of period 12,780,936 1,813,477 47,229,828 -
------------------------------------------------------------------------
NET ASSETS, END OF PERIOD $ 24,703,864 $ 12,780,936 $ 53,976,821 $ 47,229,828
========================================================================
</TABLE>
<F1> Unaudited.
<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 - For a share outstanding throughout each period
<TABLE>
<CAPTION>
NET ASSET NET NET REALIZED TOTAL INCOME DIVIDENDS
YEAR OR VALUE INVESTMENT AND UNREALIZED (LOSS) FROM FROM NET
PERIOD BEGINNING INCOME GAIN (LOSS) ON INVESTMENT INVESTMENT
ENDED OF PERIOD (LOSS) INVESTMENTS OPERATIONS INCOME
----------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
ARTISAN SMALL CAP FUND
12/31/98<F1> $ 14.66 $ (0.04) $ (2.50) $ (2.54) -
6/30/98 15.11 (0.10) 2.23 2.13 -
6/30/97 14.67 (0.04) 1.55 1.51 -
6/30/96 11.52 (0.07) 3.32 3.25 -
6/30/95<F4> 10.00 (0.01) 1.53 1.52 -
ARTISAN INTERNATIONAL FUND
INTERNATIONAL 12/31/98<F1> $ 16.25 $(0.04)<F5> $ 0.19 $ 0.15 $ (0.04)
SHARES 6/30/98 14.48 0.06<F5> 3.04 3.10 (0.20)
6/30/97 12.08 0.07 2.44 2.51 (0.02)
6/30/96<F6> 10.00 0.04 2.04 2.08 -
INSTITUTIONAL 12/31/98<F1> $ 16.26 $(0.03)<F5> $ 0.19 $ 0.16 $(0.05)
SHARES 6/30/98 14.48 0.09<F5> 3.04 3.13 (0.22)
ARTISAN MID CAP FUND
12/31/98<F1> $ 13.69 $ (0.03) $ 1.97 $ 1.94 -
6/30/98 10.00 (0.08) 4.56 4.48 -
6/30/97<F8> 10.00 - - - -
ARTISAN SMALL CAP VALUE FUND
12/31/98<F1> $ 11.37 $ (0.01) $ (1.68) $ (1.69) -
6/30/98<F9> 10.00 (0.03) 1.40 1.37 -
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
RATIO OF NET
DISTRIBUTIONS NET ASSET NET ASSETS RATIO OF INVESTMENT
YEAR OR FROM NET VALUE END OF EXPENSES INCOME (LOSS) PORTFOLIO
PERIOD REALIZED TOTAL END TOTAL PERIOD TO AVERAGE TO AVERAGE TURNOVER
ENDED GAINS DISTRIBUTIONS OF PERIOD RETURN (MILLIONS) NET ASSETS NET ASSETS RATE<F3>
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
ARTISAN SMALL CAP FUND
12/31/98<F1> $(0.96) $ (0.96) $ 11.16 (16.5%)<F2> $ 201.1 1.37%<F3> (0.68%)<F3> 60.69%<F2>
6/30/98 (2.58) (2.58) 14.66 14.7 304.1 1.33 (0.74) 134.67
6/30/97 (1.07) (1.07) 15.11 11.3 267.8 1.41 (0.73) 87.18
6/30/96 (0.10) (0.10) 14.67 28.3 400.0 1.52 (0.75) 105.19
6/30/95<F4> - - 11.52 15.2<F2> 99.3 2.00<F3> (0.59)<F3> 9.28<F2>
ARTISAN INTERNATIONAL FUND
INTERNATIONAL SHARES
12/31/98<F1> $ (0.24) $ (0.28) $ 16.12 1.4%<F2> $ 507.7 1.42%<F3> (0.49%)<F3> 40.38%<F2>
6/30/98 (1.13) (1.33) 16.25 24.1 414.5 1.45 0.37 109.42
6/30/97 (0.09) (0.11) 14.48 20.9 449.2 1.61 1.07 103.66
6/30/96<F6> - - 12.08 20.8<F2> 71.5 2.50<F3> 1.60<F3> 57.00<F2>
INSTITUTIONAL SHARES
12/31/98<F1> $ (0.24) $ (0.29) $ 16.13 1.5%<F2> $107.9 1.23%<F3> (0.30%)<F3> 40.38%<F2>
6/30/98 (1.13) (1.35) 16.26 24.4 82.6 1.25 0.68 109.42
ARTISAN MID CAP FUND
12/31/98<F1> $ (1.27) $ (1.27) $ 14.36 17.0%<F2> $ 24.7 2.00%<F3><F7> (0.71%)<F3><F7> 115.41%<F2>
6/30/98 (0.79) (0.79) 13.69 46.1 12.8 2.00<F7> (0.77)<F7> 235.65
6/30/97<F8> - - 10.00 0.0<F2> 1.8 0.00<F3> 0.00<F3> 0.00<F2>
ARTISAN SMALL CAP VALUE FUND
12/31/98<F1> $ (0.54) $ (0.54) $ 9.14 (14.5%)<F2> $ 54.0 1.71%<F3> (0.37%)<F3> 28.05%<F2>
6/30/98<F9> - - 11.37 13.7<F2> 47.2 1.93<F3> (0.50) <F3> 52.58<F2>
</TABLE>
<F1> Unaudited.
<F2> Not annualized.
<F3> Annualized.
<F4> For the period from commencement of operations (March 28, 1995) through
June 30, 1995.
<F5> Computed based on average shares outstanding.
<F6> For the period from commencement of operations (December 28, 1995) through
June 30, 1996.
<F7> The ratios of expenses to average net assets and net investment loss to
average net assets exclude fees paid by the Adviser. Absent fees paid by
the Adviser, the ratios of expenses to average net assets and net
investment loss to average net assets would have been 2.63% and (1.34%) on
an annualized basis for the six months ended December 31, 1998 and 3.64%
and (2.41%) for the year ended June 30, 1998, respectively.
<F8> For the period from commencement of operations (June 27, 1997) through June
30, 1997.
<F9> 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.
Notes to Financial Statements - December 31, 1998 (Unaudited)
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 an open-end diversified
investment company comprised of four series (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, International Fund began offering a second class of
capital shares, International Institutional Shares ("Institutional
Shares"). Institutional Shares are sold to institutional investors meeting
certain minimum investment requirements. International Fund's shares
outstanding at July 1, 1997 were designated "International Shares."
International Shares are sold to all potential investors. 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) Futures Contracts - Each Fund is authorized to enter into futures
contracts. There are several risks associated with the use of futures
contracts. A purchase or sale of a futures contract may result in
losses in excess of the amount invested and there can be no guarantee
that there will be a correlation between price movements in the
futures contract and in the portfolio exposure sought. In addition,
there can be no assurance that a liquid market will exist at a time
when the Fund seeks to close out a futures position and there is a
risk that the counterparty to the futures contract will not be able
to meet the terms of the contract. Futures contracts are valued based
upon their quoted daily settlement prices. Fluctuations in the value
of these contracts are recorded as unrealized appreciation
(depreciation) until terminated, at which time realized gains and
losses are recognized.
<PAGE>
ARTISAN FUNDS, INC.
Notes to Financial Statements - Continued
(f) Use of estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results
could differ from those estimates.
(g) Other - Dividend income is recorded on the ex-dividend date, except
that certain dividends from private placements and foreign securities
are recorded as soon as the information becomes available to the Funds
if such information is obtained subsequent to the ex-dividend date.
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 Funds are affiliated, provides investment
advisory and administrative services to the Funds. In exchange for these
services, each Fund pays a monthly management fee to the Adviser as
follows:
Average Daily Net Assets Annual Rate
----------------------------- -----------
Less than $500 million 1.000%
$500 million to $750 million 0.975%
$750 million to $1 billion 0.950%
Greater than $1 billion 0.925%
Each Fund also incurs other expenses for services such as maintaining
shareholder records and furnishing shareholder statements and reports. The
Adviser has undertaken to reimburse the Small Cap Fund, Mid Cap Fund and
Small Cap Value Fund for any ordinary operating expenses in excess of 2.00%
of average net assets annually, and 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 or the
Adviser receives an annual retainer fee of $5,000 per Fund, plus
reimbursement of expenses related to his duties as a director of Artisan
Funds.
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
<PAGE>
ARTISAN FUNDS, INC.
Notes to Financial Statements - Continued
holds one security, P4 Radio Hele Norge ASA(P4 Radio), which is defined by
the Investment Company Act as an affiliated person of the Fund. The
International Fund did not execute any transactions or realize any income
from P4 Radio during the six months ended December 31, 1998.
(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 is party to a line of credit agreement with State Street Bank
and Trust Company, under which each Fund may borrow up to the lesser of 10%
of its net assets or $30 million. Artisan Funds pays an annual commitment
fee of 0.10% on the unused portion of the line of credit. This fee is
allocated to each Fund based on relative net assets. Interest is charged on
any borrowings at the current Federal funds rate plus 0.50%. The use of the
line of credit is generally restricted to temporary borrowing for
extraordinary or emergency purposes. There were no borrowings under the
line of credit during the six months ended December 31, 1998.
(6) INVESTMENT TRANSACTIONS:
The cost of securities purchased and the proceeds from the sale of
securities (excluding short-term securities) for the six months ended
December 31, 1998 were as follows:
Fund Security Purchases Security Sales
---- ------------------ ---------------
Small Cap $ 129,286,955 $ 187,589,601
International 293,093,535 199,174,916
Mid Cap 24,112,260 16,090,923
Small Cap Value 25,613,858 12,011,332
<PAGE>
ARTISAN FUNDS, INC.
Notes to Financial Statements - Continued
(7) Fund share activities:
Capital share transactions for the Funds were as follows:
<TABLE>
<CAPTION>
International Fund
----------------------------------
International Institutional
Six months ended December 31, 1998 Small Cap Fund Shares Shares
- ------------------------------------------------------------------------------------------------------------------------
<C> <C> <C>
Proceeds from shares issued $ 23,803,504 $ 265,575,121 $ 24,302,379
Net asset value of shares issued in
reinvestment of distributions 17,337,997 7,210,693 1,448,132
Cost of shares redeemed (73,176,297) (175,397,339) (4,682,453)
---------------------------------------------------------
NET INCREASE (DECREASE) FROM FUND SHARE ACTIVITIES $ (32,034,796) $ 97,388,475 $ 21,068,058
=========================================================
Small Cap
Mid Cap Fund Value Fund
- --------------------------------------------------------------------------------------------------
Proceeds from shares issued $ 11,928,629 $ 27,831,341
Net asset value of shares issued in
reinvestment of distributions 1,156,779 2,161,553
Cost of shares redeemed (3,339,754) (13,732,101)
--------------------------------
NET INCREASE (DECREASE) FROM FUND SHARE ACTIVITIES $ 9,745,654 $ 16,260,793
================================
International Fund
----------------------------------
International Institutional
Transactions in shares of the Fund Small Cap Fund Shares Shares
- ------------------------------------------------------------------------------------------------------------------------
Shares sold 2,070,750 17,380,736 1,805,019
Shares issued from reinvestment of distributions 1,753,078 558,547 112,258
Shares redeemed (6,552,423) (11,952,911) (308,225)
-------------------------------------------------------
NET INCREASE (DECREASE) IN CAPITAL SHARES (2,728,595) 5,986,372 1,609,052
=======================================================
Small Cap
Mid Cap Fund Value Fund
- --------------------------------------------------------------------------------------------------
Shares sold 948,205 2,952,350
Shares issued from reinvestment of distributions 105,353 253,109
Shares redeemed (266,558) (1,455,813)
---------------------------------
NET INCREASE (DECREASE) IN CAPITAL SHARES 787,000 1,749,646
=================================
</TABLE>
<PAGE>
ARTISAN FUNDS, INC.
Notes to Financial Statements - Continued
(7) Fund share activities (continued):
<TABLE>
<CAPTION>
International Fund
---------------------------------
International Institutional
Fiscal year ended June 30, 1998 Small Cap Fund Shares Shares
- -----------------------------------------------------------------------------------------------------------------------
<C> <C> <C>
Net asset value of shares transferred $ (44,477,811) $ 44,477,811
Proceeds from shares issued $ 68,878,543 235,471,219 27,045,257
Net asset value of shares issued in
reinvestment of distributions 44,157,727 25,959,795 4,802,555
Cost of shares redeemed (69,996,348) (287,349,997) (2,751,533)
--------------------------------------------------------
NET INCREASE (DECREASE) FROM FUND SHARE ACTIVITIES $ 43,039,922 $ (70,396,794) $ 73,574,090
========================================================
Small Cap
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 (DECREASE) 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 (DECREASE) IN CAPITAL SHARES 751,937 4,153,366
=================================
</TABLE>
<PAGE>
ARTISAN FUNDS, INC.
Notes to Financial Statements - Continued
(8) Information for Federal income tax purposes:
Aggregate Aggregate Net
Federal Gross Gross Unrealized
Tax Basis Unrealized Unrealized Appreciation
Cost of Appreciation Depreciation (Depreciation)
Fund Securities on Investments on Investments on Investments
- ---- ------------- ------------- ------------- -------------
Small Cap $171,531,041 $ 32,590,750 $ 5,467,941 $27,122,809
International 561,355,679 133,776,975 40,915,638 92,861,337
Mid Cap 20,525,028 4,437,804 261,815 4,175,989
Small Cap Value 60,048,585 2,436,204 6,849,185 (4,412,981)
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 recognized for federal income tax
purposes in fiscal 1999.
- --------------------------------------------------------------------------------
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 December 31, 1998; it varies with changes in a Fund's portfolio
investments.
- --------------------------------------------------------------------------------
<PAGE>
(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
----------------
