SEMI-ANNUAL
REPORT
(LOGO)
ARTISAN INTERNATIONAL FUND - INSTITUTIONAL SHARES
DECEMBER 31, 1998
<PAGE>
ARTISAN
INTERNATIONAL
FUND
INSTITUTIONAL SHARES
Table of Contents
LETTER TO SHAREHOLDERS..........2
SCHEDULE OF INVESTMENTS.........8
STATEMENT OF
ASSETS AND LIABILITIES.........13
STATEMENT OF OPERATIONS........14
STATEMENTS OF
CHANGES IN NET ASSETS..........15
FINANCIAL HIGHLIGHTS...........16
NOTES TO
FINANCIAL STATEMENTS...........17
ARTISAN FUNDS
P.O. BOX 8412
BOSTON, MA 02266-8412
(800) 399-1770
This report and the financial statements contained herein are provided for the
general information of the shareholders of the Artisan International Fund. This
report is not authorized for distribution to prospective investors unless
preceded or accompanied by an effective prospectus. For more information on the
Fund, including fees and expenses, please call (800) 399-1770 for a free
prospectus. Read it carefully before you invest or send money.
<PAGE>
ARTISAN
INTERNATIONAL FUND
INSTITUTIONAL SHARES
Letter to Shareholders - February 25, 1999
THE FUND'S PERFORMANCE
Artisan International Fund gained 1.5% 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 32.5% versus 20.0% and 12.7%, respectively. And since
its inception on December 31, 1995, the Fund has gained 84.4%, 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 - INSTITUTIONAL SHARES
AVERAGE ANNUAL TOTAL RETURNS:
One Year: 32.18%
Since Inception: 22.37%
- --------------------------------------------------
ARTISAN LIPPER
INTERNATIONAL EAFE 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 14,850 11,710 13,322
12/31/97 13,913 10,793 12,303
3/31/98 16,730 12,381 14,129
6/30/98 18,171 12,512 14,249
9/30/98 14,744 10,734 12,000
12/31/98 18,436 12,952 13,861
<TABLE>
<CAPTION>
INTERNATIONAL SHARES INSTITUTIONAL SHARES
-------------------------------------------------- ---------------------------------------------------
QUARTERLY 1996 1997 1998
PERFORMANCE ---------------------------------- --------------------------------- ----------------------------------
3/31/96 6/30/96 9/30/96 12/31/96 3/31/97 6/30/97 9/30/97 12/31/97 3/31/98 6/30/98 9/30/98 12/31/98
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ARTISAN
INTERNATIONAL FUND
INSTITUTIONAL SHARES 9.1% 10.7% 1.2% 10.0% 5.3% 3.2% 1.7% -6.3% 20.2% 8.6% -18.9% 25.0%
- -----------------------------------------------------------------------------------------------------------------------------------
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>
Effective July 1, 1997 the Artisan International Fund began offering two classes
of capital shares, International Shares and Institutional Shares. Quarterly
performance relates to the International Shares prior to July 1, 1997 and to the
Institutional Shares subsequent to July 1, 1997. Each class bears different
expenses. Please see the Fund's Institutional Shares prospectus dated October
30, 1998 for additional information. Except as otherwise noted, all performance
information for Artisan International is for the Institutional Shares.
The graph above compares the results of $10,000 invested in Artisan
International Fund International Shares on December 28, 1995 (the date the Fund
began operations) to June 30, 1997, and in the Institutional Shares from July 1,
1997 to December 31, 1998, with Morgan Stanley's Europe, Australasia and Far
East (EAFE) Index and Lipper International Fund index. EAFE's performance 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>
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.
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.
<PAGE>
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 especially resilient. Relative to EAFE, we
continued to be heavily overweight Europe and heavily underweight in
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%
- --------------------------------------------------------------------------------
TOTAL 100.0%
- --------------------------------------------------------------------------------
<F1> Less than 0.1% of total net assets
<F2> As a percentage of net assets as of December 31, 1998.
<PAGE>
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.
- --------------------------------------------------------------------------------
TOP5 GAINERS<F1> TOP5 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.
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 investment banking;
and, with a recent market cap of almost $70 billion, one of Europe's largest
banks.
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.
<PAGE>
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.
- --------------------------------------------------------------------------------
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.
<PAGE>
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 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
<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
<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
<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.
<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.
<PAGE>
ARTISAN INTERNATIONAL FUND
(A Series of Artisan Funds, Inc.)
Statement of Assets and Liabilities
December 31, 1998 (Unaudited)
ASSETS:
Investments in securities, at value (cost $561,355,679)....... $ 654,217,016
Cash ......................................................... 863
Receivable from investments sold.............................. 7,381,761
Receivable from forward currency contracts.................... 44,895,672
Receivable from fund shares sold.............................. 5,762,918
Interest receivable........................................... 6,744
Dividends receivable.......................................... 960,651
Organizational costs.......................................... 14,640
-------------
TOTAL ASSETS.................................................. 713,240,265
LIABILITIES:
Payable for investments purchased............................. 51,916,084
Payable for forward currency contracts........................ 44,985,628
Payable for fund shares redeemed.............................. 283,632
Payable for organizational costs.............................. 14,640
Payable for operating expenses................................ 341,931
Other liabilities............................................. 98,658
-------------
TOTAL LIABILITIES............................................. 97,640,573
-------------
TOTAL NET ASSETS.............................................. $ 615,599,692
=============
NET ASSETS CONSIST OF:
Fund shares issued and outstanding............................ $ 523,845,201
Net unrealized appreciation (depreciation) on investments
and foreign currency related transactions .................. 92,815,738
Accumulated undistributed net investment income (loss)........ (2,033,917)
Accumulated undistributed net realized gains (losses)
on investments and foreign currency related transactions ... 972,670
-------------
$ 615,599,692
=============
INTERNATIONAL SHARES:
Net assets:................................................... $ 507,659,389
Number of shares outstanding:................................. 31,489,123
Net asset value, offering price and redemption price per share: $16.12
INSTITUTIONAL SHARES:
Net assets:................................................... $ 107,940,303
Number of shares outstanding: .............................. 6,692,656
Net asset value, offering price and redemption price per share: $16.13
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
ARTISAN INTERNATIONAL FUND
(A Series of Artisan Funds, Inc.)
Statement of Operations
For the Six Months Ended December 31, 1998 (Unaudited)
INVESTMENT INCOME:
Interest...................................................... $ 408,517
Dividends..................................................... 1,924,850<F1>
--------------
TOTAL INVESTMENT INCOME....................................... 2,333,367
EXPENSES:
Advisory fees................................................. 2,502,989
Transfer agent fees:
International Shares ....................................... 429,715
Institutional Shares ....................................... 10,413
Shareholder communications:
International Shares ....................................... 81,203
Institutional Shares ....................................... 5,423
Custodian fees ............................................. 236,871
Accounting fees............................................... 37,991
Professional fees............................................. 44,623
Registration fees............................................. 86,834
Directors' fees............................................... 7,500
Organizational costs.......................................... 3,660
Other operating expenses...................................... 28,419
--------------
TOTAL OPERATING EXPENSES...................................... 3,475,641
--------------
NET INVESTMENT INCOME (LOSS).................................. (1,142,274)
NET REALIZED AND UNREALIZED GAINS (LOSSES)
ON INVESTMENTS:
Net realized gain (loss) on:
Investments ................................................ (1,190,304)
Foreign currency related transactions ...................... (154,300)
--------------
(1,344,604)
Net increase (decrease) in unrealized appreciation on:
Investments ................................................ 11,445,631
Foreign currency related transactions ...................... (12,640)
--------------
11,432,991
--------------
NET GAIN (LOSS) ON INVESTMENTS................................ 10,088,387
--------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $8,946,113
==============
<F1> Net of foreign taxes withheld of $328,425.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
ARTISAN INTERNATIONAL FUND
(A Series of Artisan Funds, Inc.)
Statements of Changes in Net Assets
SIX MONTHS YEAR
ENDED ENDED
12/31/98<F1> 6/30/98
===========================
OPERATIONS:
Net investment income (loss)................... $ (1,142,274) $ 1,635,707
Net realized gain (loss) on:
Investments ................................. (1,190,304) 28,895,798
Foreign currency related transactions ....... (154,300) (991,131)
Net increase (decrease) in unrealized
appreciation on:
Investments ................................. 11,445,631 47,423,084
Foreign currency related transactions ....... (12,640) 22,144
---------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS .................. 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:
International Shares ........................ (6,509,837) (23,067,732)
Institutional Shares ........................ (1,271,446) (4,236,936)
---------------------------
TOTAL DISTRIBUTIONS PAID TO SHAREHOLDERS....... (8,982,569) (32,163,353)
FUND SHARE ACTIVITIES:
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM FUND SHARE ACTIVITIES ........ 118,456,533 3,177,296
---------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS........ 118,420,077 47,999,545
Net assets, beginning of period................ 497,179,615 449,180,070
---------------------------
NET ASSETS, END OF PERIOD...................... $ 615,599,692 $ 497,179,615
===========================
<F1> Unaudited.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
ARTISAN INTERNATIONAL FUND
(A Series of Artisan Funds, Inc.)
Financial Highlights
For a share outstanding throughout each period
<TABLE>
<CAPTION>
PERIOD PERIOD YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
12/31/98<F1> 12/31/98<F1> 6/30/98 6/30/98 6/30/97 6/30/96<F5>
INTERNATIONAL INSTITUTIONAL INTERNATIONAL INSTITUTIONAL INTERNATIONAL INTERNATIONAL
SHARES SHARES SHARES SHARES SHARES SHARES
=========================================================================================
<C> <C> <C> <C> <C> <C>
Net Asset Value
Beginning of Period $ 16.25 $ 16.26 $ 14.48 $ 14.48 $ 12.08 $ 10.00
Net Investment
Income (Loss) (0.04)<F2> (0.03)<F2> 0.06<F2> 0.09<F2> 0.07 0.04
Net Realized and
Unrealized Gain (Loss)
on Investments 0.19 0.19 3.04 3.04 2.44 2.04
-----------------------------------------------------------------------------------------
Total Income
(Loss) from Investment
Operations 0.15 0.16 3.10 3.13 2.51 2.08
-----------------------------------------------------------------------------------------
Dividends from Net
Investment Income (0.04) (0.05) (0.20) (0.22) (0.02) -
Distributions from
Net Realized Gains (0.24) (0.24) (1.13) (1.13) (0.09) -
-----------------------------------------------------------------------------------------
Total Distributions (0.28) (0.29) (1.33) (1.35) (0.11) -
-----------------------------------------------------------------------------------------
Net Asset Value
End of Period $ 16.12 $ 16.13 $ 16.25 $ 16.26 $ 14.48 $ 12.08
=========================================================================================
Total Return 1.4%<F3> 1.5%<F3> 24.1% 24.4% 20.9% 20.8%<F3>
Net Assets End of
Period (millions) $ 507.7 $107.9 $ 414.5 $ 82.6 $ 449.2 $ 71.5
Ratio of Expenses to
Average Net Assets 1.42%<F4> 1.23%<F4> 1.45% 1.25% 1.61% 2.50%<F4>
Ratio of Net Investment
Income (Loss) to Average
Net Assets (0.49%)<F4> (0.30%)<F4> 0.37% 0.68% 1.07% 1.60%<F4>
Portfolio Turnover Rate 40.38%<F3> 40.38%<F3> 109.42% 109.42% 103.66% 57.00%<F3>
</TABLE>
<F1> Unaudited.
<F2> Computed based on average shares outstanding.
<F3> Not annualized.
<F4> Annualized.
<F5> For the period from commencement of operations (December 28, 1995) through
June 30, 1996.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
ARTISAN INTERNATIONAL FUND
(A Series of Artisan Funds, Inc.)
Notes to Financial Statements
December 31, 1998 (Unaudited)
(1) ORGANIZATION:
The Artisan International Fund ("the Fund") is a series of Artisan Funds,
Inc. ("Artisan Funds") which was incorporated on January 5, 1995, as a
Wisconsin corporation and is registered under the Investment Company Act of
1940, as amended. The Fund is an open-end diversified investment company.
The Fund commenced operations on December 28, 1995.
Effective July 1, 1997, the 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 International Fund International Shares and International Fund
Institutional Shares 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 Fund.
(a) Security valuation - Each security is valued at the last sales price
reported by the principal securities exchange on which the issue is
traded, or if no sale is reported on the principal exchange, the last
sale on a secondary exchange. The last bid price reported is utilized
if no sales have taken place. Securities for which prices are not
readily available, or for which management believes that the last sale
or bid price is not reflective of the fair value of the security, are
valued at a fair value as determined in good faith under consistently
applied procedures established by and under the general supervision of
the Board of Directors. Short-term investments maturing within sixty
days of their purchase date are valued at amortized cost which
approximates market.
<PAGE>
ARTISAN INTERNATIONAL FUND
(A Series of Artisan Funds, Inc.)
Notes to Financial Statements
(Continued)
(b) Income taxes - No provision has been made for federal income taxes
since the Fund intends to 1) distribute to its shareholders
substantially all of its taxable income as well as realized gains from
the sale of investment securities and 2) comply with all provisions of
the Internal Revenue Code applicable to regulated investment
companies.
(c) Portfolio transactions - Security and shareholder transactions are
recorded on trade date. Net realized gains and losses on 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 Fund enters into forward currency contracts to hedge the foreign
currency exposure on open payables and receivables. The forward
currency contracts are recorded at market value and any related
realized and unrealized gains and losses are reported as foreign
currency related transactions for financial reporting purposes. For
tax purposes, these foreign exchange gains and losses are treated as
ordinary income. The Fund could be exposed to loss if the
counterparties fail to perform under these contracts.
(e) Use of estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results
could differ from those estimates.
(f) Other - Dividend income is recorded on the ex-dividend date, except
that certain dividends from private placements and foreign securities
are recorded as soon as the information becomes available to the Fund
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.
<PAGE>
ARTISAN INTERNATIONAL FUND
(A Series of Artisan Funds, Inc.)
Notes to Financial Statements
(Continued)
(3) TRANSACTIONS WITH AFFILIATES:
Artisan Partners Limited Partnership (the "Adviser"), with which certain
officers and directors of the Fund are affiliated, provides investment
advisory and administrative services to the Fund. In exchange for these
services, the Fund pays a monthly management fee to the Adviser as follows:
Average Daily Net Assets Annual Rate
------------------------ ------------
Less than $500 million 1.000%
$500 million to $750 million 0.975%
$750 million to $1 billion 0.950%
Greater than $1 billion 0.925%
The Fund also incurs other expenses for services such as maintaining
shareholder records and furnishing shareholder statements and reports.
Each director who is not an interested person of Artisan Funds 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
Fund 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 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 Fund over the same time
period. The proceeds of any redemption of the initial shares by the
original shareholder will be reduced by a pro-rata portion of any
unamortized expenses at the time of redemption.
<PAGE>
ARTISAN INTERNATIONAL FUND
(A Series of Artisan Funds, Inc.)
Notes to Financial Statements
(Continued)
(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:
Security Purchases Security Sales
------------------ ---------------
$293,093,535 $199,174,916
<PAGE>
ARTISAN INTERNATIONAL FUND
(A Series of Artisan Funds, Inc.)
Notes to Financial Statements
(Continued)
(7) FUND SHARE ACTIVITIES:
Capital share transactions for the Fund were as follows:
INTERNATIONAL FUND
-----------------------------
INTERNATIONAL INSTITUTIONAL
SIX MONTHS ENDED DECEMBER 31, 1998 SHARES SHARES
- --------------------------------------------------------------------------------
Proceeds from shares issued $ 265,575,121 $24,302,379
Net asset value of shares issued in
reinvestment of distributions 7,210,693 1,448,132
Cost of shares redeemed (175,397,339) (4,682,453)
----------------------------
NET INCREASE (DECREASE) FROM FUND SHARE ACTIVITIES $ 97,388,475 $ 21,068,058
============================
TRANSACTIONS IN SHARES OF THE FUND
- -----------------------------------------------
Shares sold 17,380,736 1,805,019
Shares issued from reinvestment of distributions 558,547 112,258
Shares redeemed (11,952,911) (308,225)
----------------------------
NET INCREASE (DECREASE) IN CAPITAL SHARES 5,986,372 1,609,052
============================
FISCAL YEAR ENDED JUNE 30, 1998
- -----------------------------------------------
Net asset value of shares transferred $(44,477,811) $ 44,477,811
Proceeds from shares issued 235,471,219 27,045,257
Net asset value of shares issued in
reinvestment of distributions 25,959,795 4,802,555
Cost of shares redeemed (287,349,997) (2,751,533)
----------------------------
NET INCREASE (DECREASE) FROM FUND SHARE ACTIVITIES $(70,396,794) $ 73,574,090
============================
TRANSACTIONS IN SHARES OF THE FUND
- -----------------------------------------------
Shares transferred (3,071,672) 3,071,672
Shares sold 15,876,987 1,835,634
Shares issued from reinvestment of distributions 2,075,110 383,897
Shares redeemed (20,392,769) (207,599)
----------------------------
NET INCREASE (DECREASE) IN CAPITAL SHARES (5,512,344) 5,083,604
===========================
<PAGE>
ARTISAN INTERNATIONAL FUND
(A Series of Artisan Funds, Inc.)
Notes to Financial Statements
(Continued)
(8) INFORMATION FOR FEDERAL INCOME TAX PURPOSES:
Federal Tax Basis Cost of Securities........................$ 561,355,679
Aggregate Gross Unrealized Appreciation on Investments...... 133,776,975
Aggregate Gross Unrealized Depreciation on Investments...... 40,915,638
Net Unrealized Appreciation (Depreciation) on Investments... $ 92,861,337
The difference between cost amounts for financial reporting and tax
purposes is due primarily to timing differences in recognizing certain
gains and losses on security transactions and passive foreign investment
company (PFIC) value adjustments. Losses from foreign currency related
transactions from November 1, 1997 to June 30, 1998 of $887,524 are
recognized for federal income tax purposes in fiscal 1999.
- --------------------------------------------------------------------------------
NOTES ON PORTFOLIO STATISTICS
The letter to shareholders included in this annual report includes statistical
information about the portfolio of the Artisan International Fund. That
information is as of December 31, 1998 and varies with changes in the Fund's
portfolio investments.
- --------------------------------------------------------------------------------
