- --------------------------------------------------------------------------------
ARTISAN SMALL CAP FUND
- --------------------------------------------------------------------------------
QUARTERLY UPDATE JANUARY 2000
Artisan Small Cap Fund outpaced its benchmark index, the Russell 2000, during
the fourth quarter, marking the second consecutive quarter it has outperformed
its index.
The Fund advanced 21.0% for the fourth quarter, surpassing the Russell 2000 that
ended the quarter with a gain of 18.4%. For the year ended December 31, 1999,
the Fund rose 19.18%, while the Russell 2000 gained 21.26%.<F1>
Inside you'll find a discussion of the quarter's events, profiles of a few
selected holdings and our near-term outlook for the economy and the markets.
(LOGO)
ARTISAN FUNDS
<PAGE>
FOURTH QUARTER OVERVIEW
------------------------
Divergence ruled the market during the fourth quarter. Technology issues and
tech-heavy indexes soared, while the broader market posted more modest gains, if
any.
The Fund's portfolio reflected this divergence. Our technology holdings did
superbly, but our broad diversification limited our gains compared to the more
aggressive small-cap averages. Even given our valuation discipline, we have ways
to participate in the Internet. Our holdings include manufacturers of Internet
components, software developers and technical service providers assisting
customers in e-commerce applications, and firms trying to enhance their growth
by employing Internet strategies.
Given technology's increasing importance, we have chosen to profile holdings
with exposure to the Internet. Each is redefining its business through new
technology initiatives.
--------------------------------
AVERAGE ANNUAL TOTAL RETURNS<F1>
--------------------------------
FOR THE PERIODS ENDED 12/31/99
SINCE INCEPTION
ONE-YEAR (3/28/95)
-------- ---------------
ARTISAN SMALL CAP FUND 19.18% 14.15%
RUSSELL 2000 INDEX 21.26% 16.52%
LIPPER SMALL-CAP CORE FUND INDEX 20.17% 16.24%
<PAGE>
1
INVESTMENT PROFILE
------------------
BELL & HOWELL
Long the king of movie cameras and projectors, BELL & HOWELL has morphed into a
leading information management company. Its array of businesses may appear
somewhat disparate, but a consistent strategy ties them together. To obtain a
market-leading position, Bell & Howell focuses on well-defined niche markets
with high barriers to entry.
With ProQuest, it has the largest existing online database of regional
newspapers, a competitive advantage in its quest to penetrate local libraries
and schools.
Also intriguing is the Bell & Howell joint venture with Infonautics. Designed
for the K-12 schools, this separate e-company (as yet unnamed) will combine
ProQuest information with Infonautics' Electronic Library. Bell & Howell expects
to spin off this company, seeking to realize added value for shareholders.<F2>
TOP 10 HOLDINGS<F3>
--------------------
- --------------------------------------------------------------------------------
COMPANY %
- --------------------------------------------------------------------------------
HEALTHCARE FINANCIAL PARTNERS REIT...Healthcare related real estate
investments (144A) 2.2%
PENTON MEDIA ...Trade shows and publications 1.9%
APEX...Personal computer server administration systems 1.9%
NCO GROUP...Accounts receivable management services 1.8%
NEWFIELD EXPLORATION COMPANY...Natural gas exploration and production 1.7%
MEDICIS PHARMACEUTICAL CORP...Dermatology pharmaceutical company 1.7%
CLEARNET COMMUNICATIONS...Cellular telecommunications provider 1.7%
DAISYTEK INTERNATIONAL CORP...Computer supplies distributor 1.6%
GALILEO TECHNOLOGY LTD...Producer of communications semiconductor chips 1.6%
TEKELEC...Data network switching and diagnostic systems 1.6%
- --------------------------------------------------------------------------------
TOTAL 17.7%
===============================================================================
<PAGE>
2
INVESTMENT PROFILE
------------------
DAISYTEK INTERNATIONAL CORPORATION
DAISYTEK INTERNATIONAL CORPORATION is a leading wholesale distributor of
consumable, non-paper, microcomputer and office automation supplies. The company
recently entered the professional video and audiotape market, which primarily
serves the film entertainment industry in the U.S.
However, our interest in Daisytek is focused on its 80% ownership of
PFSweb,which aims to be a major player in e-commerce fulfillment. Daisytek
established the firm in 1996 as Priority Fulfillment Services to provide
outsourcing services in the company's core competencies of outbound
telemarketing, order fulfillment, logistics, customer service and receivables
management.
PFSweb now provides transaction management services for electronic and
traditional commerce, offering retailers and e-tailers order management,
customer support, billing services and distribution to approximately 30 clients,
including American Eagle Outfitters, Hewlett-Packard, IBM and Nokia.
Daisytek plans to eventually spin off the balance of PFSweb's shares. We believe
Daisytek's stake in PFSweb is currently worth more than the entire valuation of
Daisytek, which means we're essentially getting the core business for free.<F2>
<PAGE>
3
INVESTMENT PROFILE
------------------
PENTON MEDIA
Founded in 1892, PENTON MEDIA is one of the oldest and best-known brands in the
business-to-business media arena. It's America's sixth-largest business
publisher and seventh-largest trade show producer. Although its publications
dominate their markets, management recognizes the opportunities available via
the Internet.
Penton maintains over 40 websites and with the acquisition of Mecklermedia,
extended its Internet stake by adding 32 Internet trade shows and a share in the
internet.com network of websites. The Internet magazines and trade shows provide
competitive advantages over pure online competitors. Utilizing its existing
editorial infrastructure, Penton is developing vertical industry portals
tailored for industry professionals by providing daily news, archived content,
vendor directories and community boards.<F2>
DIVERSIFICATION BY SECTOR<F4>
-----------------------------
- ----------------------------------------
SECTOR %
- ----------------------------------------
BASIC MATERIALS 4.9
CAPITAL GOODS 2.8
CONGLOMERATES 0.0
CONSUMER CYCLICAL 0.0
CONSUMER NON-CYCLICAL 5.6
ENERGY 7.6
FINANCIAL 6.6
HEALTHCARE 8.6
REITS 3.2
SERVICES 26.4
BUSINESS SERVICES 11.0
CONSUMER SERVICES 15.4
TECHNOLOGY 21.8
TELECOMMUNICATIONS 9.7
TRANSPORTATION 1.4
UTILITIES 1.4
- ----------------------------------------
TOTAL 100.0%
========================================
<PAGE>
OUR VIEW ON SMALL-CAPS
----------------------
LOOKING FORWARD
Technology, recent market activity would seem to say, is the only place to
invest these days. We maintain a more balanced view.
Undoubtedly the U.S. is a world leader in technological innovation and
technology is expected to be a major force spurring global economic growth in
coming years. But to us the equity markets are underestimating the value of many
firms outside the technology sphere.
We intend to continue participating in technology's investment potential, yet be
mindful of valuations. We plan to offer broad exposure to small growing
companies that we believe could benefit from the "new economy."
Within technology, one area we like is information technology service companies.
We believe this discounted sector has life after Y2K. As more businesses look to
enter the Internet, they'll need these firms' expertise.
Also intriguing is E-health. We believe the Internet and technology are
essentially changing healthcare. We like: Caremark Rx, a leading mail-order
pharmacy; InfoCure, a developer of automation software for doctors' offices; and
Eclypsis, whose software streamlines clinical processes in hospitals.
<PAGE>
SPECIAL NOTE
------------
1999 DISTRIBUTIONS. Artisan Funds paid their distributions on November 11, 1999,
to shareholders of record on November 10, 1999. However, Artisan Small Cap Fund
did not pay a distribution 1999.
ARTISAN FUNDS WEBSITE AVAILABLE. Visit the Artisan Funds website at
www.artisanfunds.com. It provides you with 24-hours a day, 7-days a week access
to:
- Current & Historical Share Prices
- Fund Performance Information
- Portfolio Data & Statistics
- Combined Prospectus
- Annual & Quarterly Reports
- Applications & Forms
- And More!
FUND STATISTICS<F5>
-------------------
NUMBER OF HOLDINGS 82
MEDIAN MARKET CAP $764 million
MEDIAN GROWTH RATE 2000E 24%
MEDIAN P/E 2000E 15.9X
MEDIAN PRICE/INTRINSIC VALUE 2000E 65%
EQUITY DIVIDEND YIELD 0.3%
<PAGE>
NOTES
-----
<F1> PERFORMANCE DATA IS HISTORICAL AND DOES NOT GUARANTEE FUTURE RESULTS. AN
INVESTMENT IN A MUTUAL FUND THAT CONCENTRATES ITS PORTFOLIO IN THE STOCKS
OF SMALLER COMPANIES MAY PRESENT ADDITIONAL RISKS INCLUDING A SHORTER
HISTORY OF OPERATIONS, HIGHER VOLATILITY AND LESS LIQUIDITY, ALL OF WHICH
ARE DISCUSSED IN THE PROSPECTUS. PLEASE READ IT CAREFULLY BEFORE YOU INVEST
OR SEND MONEY. Investment return and principal value will fluctuate so that
an investor's shares in the Fund, when redeemed, may be worth more or less
than their original cost. The Russell 2000 Index is an unmanaged, market-
weighted index, with dividends reinvested, of 2000 small companies. DURING
THE QUARTER, LIPPER INC. RECLASSIFIED THE FUND TO ITS NEW SMALL-CAP CORE
FUND CATEGORY. INDEX PERFORMANCE COMPARISONS REFLECT THIS CHANGE. The
Lipper Small-Cap Core Fund Index reflects the net asset weighted return of
the 30 largest small-cap core funds, with dividends reinvested. The returns
of the indices do not include the payment of sales commissions or other
expenses incurred in the purchase of the securities included in the index.
<F2> Portfolio profiles are for illustration only and are not intended as
recommendations of individual stocks. The profiles present information
about the companies believed to be accurate, and the views of the portfolio
managers, as of 1/1/00. That information and those views may change and the
Fund disclaims any obligation to advise shareholders of any such changes.
On 12/31/99, Bell & Howell, Caremark Rx, InfoCure, Eclypsis and Infonautics
represented 1.4%, 0.9%, 1.5%, 0.5% and 0.0% of the Fund's total net assets,
respectively.
<F3> As a percentage of total net assets as of 12/31/99.
<F4> As a percentage of total portfolio equities as of 12/31/99.
<F5> Fund statistics are as of 12/31/99.
Artisan Funds offered through Artisan Distributors LLC, 1000 North Water
Street, Milwaukee, WI 53202, member NASD.
Date of first use: January 7, 2000.
------------
800.344.1770
------------
www.artisanfunds.com
A9058-1
- --------------------------------------------------------------------------------
ARTISAN INTERNATIONAL FUND
- --------------------------------------------------------------------------------
QUARTERLY UPDATE JANUARY 2000
In 1999, Artisan International Fund saved its best for last. The Fund soared
during the fourth quarter, gaining 49.1%, its highest quarterly return since
inception, and the highest quarterly return in Mark Yockey's international
investing career. In doing so, the Fund outpaced its benchmark, the EAFE Index,
which advanced 17.0% for the period.
The Fund's performance for the year was impressive as well. For the 12 months
ended December 31, 1999, Artisan International Fund rose 81.29% versus EAFE's
increase of 26.96% for the year.<F1>
Inside you'll find a review of the quarter's activity, profiles of several
holdings and our view of the climate for European restructuring given Vodafone's
hostile offer for Mannesmann AG.
(LOGO)
ARTISAN FUNDS
<PAGE>
FOURTH QUARTER OVERVIEW
-----------------------
European stock markets rose on a wave of optimism about the economic outlook and
continued enthusiasm for communication and technology shares. Leading indices
hit new record peaks in several markets as investors appeared impressed by the
European Commission's forecast of increased economic growth, as well as
declining fears about the Y2K computer bug.
The quarter wasn't without its share of newsworthy events. The Euro approached
parity with the dollar. Wireless communications shares surged as investors paid
more attention to the potential for revenue and profit growth exhibited by
Japan's NTT DoCoMo's success with its i-mode service, which allows users to
access the Internet through a cellular phone. And, Mannesmann's rejection of
Vodafone's offer potentially sets the stage for the world's largest hostile
takeover battle.
--------------------------------
AVERAGE ANNUAL TOTAL RETURNS<F1>
--------------------------------
FOR THE PERIODS ENDED 12/31/99
SINCE INCEPTION
ONE-YEAR (12/28/95)
-------- ---------------
INTERNATIONAL FUND 81.29% 34.96%
EAFE INDEX 26.96% 13.19%
LIPPER INT'L FUND INDEX 37.83% 17.50%
<PAGE>
1
INVESTMENT PROFILE
------------------
KONINKLIJKE KPN NV (KPN)
(NETHERLANDS)
With its controlling purchase of E-Plus, Germany's third largest cellular
operator, KPN has become a strategic asset in the realignment of the European
communications industry. We believe the E-Plus deal is just the start of KPN's
new mobile strategy. Initially, the deal doubles KPN's mobile presence, and
offers significant growth opportunities - Germany is Europe's largest under-
penetrated mobile market. Finally, its new partnership with Bell South (also a
result of the deal) gives KPN significant negotiating power to acquire
additional mobile franchises.
Other encouraging developments for KPN include an improvement in the Dutch
regulatory environment and a late, but strategically correct, decision to roll
out bandwidth in order to support high-speed Internet services.<F2>
-------------------
TOP 10 HOLDINGS<F3>
-------------------
- --------------------------------------------------------------------------------
COMPANY %
- --------------------------------------------------------------------------------
AT&T CANADA...Canadian communications service provider for corporations 3.1%
TRANS COSMOS, INC...Japanese outsourcing/information technology
service provider 2.9%
MANNESMANN AG...German communications service provider 2.9%
BCE INC...Canadian full-service communications provider 2.7%
NORTEL NETWORKS CORP...Canadian provider of communications systems 2.4%
GLOBAL TELESYSTEMS GROUP...Communications service provider
incorporated in Bermuda 2.3%
COLT TELECOM GROUP PLC...U.K. communications service provider
for corporations 2.3%
UNITEDGLOBALCOM...Dutch provider of multichannel television and
related communications services 2.2%
TELECOM ITALIA MOBILE ...Italian cellular communications provider 2.1%
BIPOP SPA...Italian bank 2.0%
- --------------------------------------------------------------------------------
TOTAL 24.9%
================================================================================
<PAGE>
2
INVESTMENT PROFILE
------------------
DBS GROUP HOLDINGS (DBS)
(SINGAPORE)
DBS (Development Bank of Singapore) has a combined asset base of about $65
billion, which makes it larger than any other Asian-domiciled bank by a wide
margin. And, with the largest capital base of any bank in Asia, DBS is committed
to proactively managing this capital, freeing it up from businesses where the
returns are poor and putting it toward businesses with superior returns.
Led by a highly regarded management team, DBS is becoming a leaner, more focused
organization placing greater emphasis on risk management, international banking
and consumer banking. Its acquisition of POSB highlights this commitment to
leveraging its huge capital base to improve returns. POSB strengthens its
already dominant consumer banking franchise by providing DBS with a new low-cost
funding platform, an effective distribution and delivery network and a
recognizable brand name.<F2>
3
INVESTMENT PROFILE
------------------
GUCCI GROUP NV
(ITALY)
GUCCI is synonymous with luxury goods. We like its long-term growth potential
given its unique brand name, global growth potential and restructured and
refocused operations. Gucci's strategy for the future includes maximizing the
brand potential of the Gucci name and acquiring other luxury brands.
Internal growth initiatives include new store openings and expansions as well as
new product offerings in
<PAGE>
INVESTMENT PROFILE (CONTINUED)
------------------------------
GUCCI GROUP NV
jewelry distribution and print and luggage collections. From an acquisition
standpoint, we view Gucci's recent purchase of Sanofi Beaute of France, owner of
Yves Saint Laurent (YSL), as a positive development. The YSL brand has
considerable potential, and we believe that management's strategic success in
turning around the Gucci brand can be successfully applied to YSL. With further
acquisition possibilities in the highly fragmented and consolidating luxury
goods sector, we believe that Gucci could become one of the world's leading, and
most profitable, multibrand luxury goods companies.<F2>
REGION/COUNTRY ALLOCATION<F3>
-----------------------------
- ----------------------------------------
EUROPE 51.8%
- ----------------------------------------
UNITED KINGDOM 10.6
ITALY 10.0
NETHERLANDS 7.9
FRANCE 5.6
GERMANY 5.6
FINLAND 4.3
SWEDEN 3.4
SWITZERLAND 2.6
SPAIN 1.1
IRELAND 0.3
NORWAY 0.2
AUSTRIA 0.1
PORTUGAL 0.1
DENMARK<F5> 0.0
- ----------------------------------------
ASIA/PACIFIC 22.8%
- ----------------------------------------
JAPAN 15.5
AUSTRALIA 2.4
HONG KONG 2.3
SINGAPORE 2.1
KOREA 0.3
NEW ZEALAND 0.2
- ----------------------------------------
LATIN AMERICA 4.8%
- ----------------------------------------
BRAZIL 3.6
MEXICO 1.2
- ----------------------------------------
NORTH AMERICA 16.1%
- ----------------------------------------
CANADA 13.8
BERMUDA 2.3
- ----------------------------------------
CASH 4.5%
- ----------------------------------------
<F5> Less than 0.1%
<PAGE>
OUR VIEW OF THE MARKET
----------------------
LOOKING FORWARD
Restructuring has been and continues to be a key portfolio theme. Throughout
1999, our projection for increased European merger activity was validated. A
prime example is the recent hostile takeover attempt of Mannesmann AG, a German
telecommunications service provider and one of the Fund's top holdings, by
Vodafone AirTouch, a British mobile telecommunications firm.
Whether this attempt is successful or not - and Mannesman is fighting it - may
profoundly alter the business landscape in Europe. While hostile takeover
attempts are common in corporate America, they are a new, and not entirely
welcome, development in Europe. However, even by U.S. standards, the size of
this offer is unprecedented because it's the largest takeover proposal in
history.
We conclude from this bid and other activity we see that Europe's already
vigorous M&A activity will accelerate and gain in scale. We believe that if
hostile takeover attempts become more common in Europe, shareholder activism
(currently in its beginning stages) will flourish and cross-border acquisitions
will increase. From our perspective, these would be very positive changes,
likely to promote Europe's growth and enhance its global competitiveness.
<PAGE>
SPECIAL NOTE
------------
1999 DISTRIBUTIONS. Artisan International Fund paid a total distribution of
$0.5629 per share on November 11, 1999, to shareholders of record on November
10, 1999. The distribution included $0.2751 of short-term capital gains, $0.2643
of long-term capital gains and $0.0235 ordinary income. Reinvestment NAV was
$22.16. No other distributions were paid in 1999.
ARTISAN FUNDS WEBSITE AVAILABLE. Visit the Artisan Funds website at
www.artisanfunds.com. It provides you with 24-hours a day, 7-days a week access
to:
- Current & Historical Share Prices
- Fund Performance Information
- Portfolio Data & Statistics
- Combined Prospectus
- Annual & Quarterly Reports
- Applications & Forms
- And More!
FUND STATISTICS<F4>
-------------------
NUMBER OF HOLDINGS 115
WEIGHTED AVERAGE MARKET CAP $40.4 billion
WEIGHTED AVERAGE
GROWTH RATE 2000E 23.9%
WEIGHTED AVERAGE P/E 2000E 32.0X
<PAGE>
NOTES
-----
<F1> PERFORMANCE IS HISTORICAL AND DOES NOT GUARANTEE FUTURE RESULTS.
INTERNATIONAL INVESTMENTS INVOLVE SPECIAL RISKS, INCLUDING CURRENCY
FLUCTUATION, SOMETIMES LOWER LIQUIDITY, ECONOMIC AND POLITICAL RISKS,
DIFFERENT ACCOUNTING METHODS AND HIGHER TRANSACTION COSTS, WHICH ARE
DISCUSSED IN THE PROSPECTUS. PLEASE READ IT CAREFULLY BEFORE YOU INVEST OR
SEND MONEY. Investment return and principal value will fluctuate so that an
investor's shares in the Fund, when redeemed, may be worth more or less
than their original cost. The Morgan Stanley Capital International EAFE
Index (EAFE) is unmanaged and includes net reinvested dividends for
companies throughout the world, excluding the U.S. and Canada, in
proportion to world stock market capitalization. EAFE's average annual
return since inception of the Fund is based upon a starting date of
December 31, 1995. The Lipper International Fund Index reflects the net
asset weighted return of the 30 largest international funds. The returns of
the indices do not include the payment of sales commissions or other
expenses incurred in the purchase of the securities included in the index.
<F2> Portfolio profiles are for illustration only and are not intended as
recommendations of individual stocks. The profiles present information
about the companies believed to be accurate, and the views of the portfolio
manager, as of 1/1/00. That information and those views may change and the
Fund disclaims any obligation to advise shareholders of any such changes.
As of 12/31/99, Vodafone AirTouch, NTT DoCoMo, KPN, DBS Group Holdings and
Gucci Group represented 0.0%, 1.9%, 2.0%, 1.3% and 1.2% of the Fund's total
net assets, respectively.
<F3> As a percentage of total net assets as of 12/31/99.
<F4> Fund statistics are as of 12/31/99.
Artisan Funds offered through Artisan Distributors LLC, 1000 North Water
Street, Milwaukee, WI 53202, member NASD.
Date of first use: January 7, 2000.
------------
800.344.1770
------------
www.artisanfunds.com
A9058-3
- --------------------------------------------------------------------------------
ARTISAN MID CAP FUND
- --------------------------------------------------------------------------------
QUARTERLY UPDATE JANUARY 2000
Artisan Mid Cap Fund enjoyed success in the fourth quarter and, despite
continuing volatility in the market, outperformed its benchmark, the S&P 400
MidCap Index.
The Fund advanced 37.7% in the fourth quarter, impressive we believe when
compared to the gain of 17.19% by the S&P 400 MidCap Index for the period. For
the year ended December 31, 1999, the Fund posted equally convincing results,
closing the year up 57.89% while the index rose 14.72%.<F1>
Inside you'll find a review of the quarter's events, profiles of several
investments and our investment outlook for the quarter ahead. Thank you for your
continued confidence.
(LOGO)
ARTISAN FUNDS
<PAGE>
FOURTH QUARTER OVERVIEW
-----------------------
To us, the overriding influence on the market as it entered the fourth quarter
was an uncertainty with the direction of interest rates. For the most part, we
believe this nervousness about the Federal Reserve's actions fueled the
quarter's volatility.
However, as the quarter progressed, the market regained confidence when it saw
few signs of inflation and it ably absorbed November's Federal Reserve rate
increase. Confidence restored, the market rallied, or should we say, the
technology sector rallied.
Almost every superlative has been applied to the recent performance of
technology issues. Evolution, revolution "new economy" or whatever this
technology driven mania is labeled, we've been digging for promising technology-
related companies and benefited as the sector's performance accelerated.
AVERAGE ANNUAL TOTAL RETURNS<F1>
--------------------------------
FOR THE PERIODS ENDED 12/31/99
SINCE INCEPTION
ONE-YEAR (6/27/97)
-------- ---------------
MID CAP FUND 57.89% 48.39%
S&P 400 MIDCAP INDEX 14.72% 20.38%
LIPPER MID-CAP CORE FUND INDEX 28.19% 18.93%
<PAGE>
FOURTH QUARTER OVERVIEW (continued)
-----------------------------------
While we recognize technology's importance and its potential for long-term
capital growth, we remain mindful of maintaining our investing strategy. We are
committed to maintaining a diversified portfolio as we pursue our investment
goal.
1
INVESTMENT PROFILE
------------------
INTERNET.COM CORPORATION
We've discussed how we search for Internet investment opportunities that meet
our valuation style. INTERNET.COM meets the criteria. It's a premier content-
driven business-to-business company in the Internet information segment, using
its network of 78 websites, 70 e-mail newsletters,
TOP 10 HOLDINGS<F3>
-------------------
- --------------------------------------------------------------------------------
COMPANY %
- --------------------------------------------------------------------------------
DYNEGY...Independent power producer and energy marketer 3.5%
POLYCOM...Manufacturer of audio/video conferencing equipment 3.1%
OMNIPOINT CORPORATION...Manufactures digital communication products
and services 2.8%
POWERWAVE TECHNOLOGIES...Supplier of power amplifiers for wireless
infrastructure 2.7%
METTLER-TOLEDO...Leader in precision weighing instruments 2.7%
KINDER MORGAN...Natural gas energy service company 2.6%
ELECTRONICS FOR IMAGING...Component supplier for digital
printing/copying equipment 2.6%
COVAD COMMUNICATIONS GROUP...Digital subscriber line provider 2.6%
MILLIPORE CORPORATION...Manufactures products for analysis and
purification of fluids 2.2%
ADELPHIA COMMUNICATIONS...Cable service provider 2.1%
- --------------------------------------------------------------------------------
TOTAL 26.9%
================================================================================
<PAGE>
INVESTMENT PROFILE (continued)
------------------------------
INTERNET.COM CORPORATION
101 online discussion forums and 73 moderated e-mail discussion lists to connect
Internet decision makers with technology companies.
The company has a top brand name and unique focus on the Internet, leaving it
with only indirect competitors. Its unique position is appealing to advertisers
who want to target this specific segment, and benefits from the "network
effect," accomplished when a website can be self-sustaining and build traffic by
itself.
internet.com has what we consider a successful model that moves beyond
traditional advertising or subscription models and appeals to a valuable
customer base. Its target market continues to expand rapidly as more and more
businesses are using the Internet.<F2>
<PAGE>
2
INVESTMENT PROFILE
------------------
RADIO ONE, INC.
RADIO ONE is the largest U.S. network of its kind, specializing in rap, R&B,
hip-hop and other urban music styles. The fast-growing company operates more
than two dozen radio stations serving primarily African-American listeners in
top urban markets. Radio One is also teaming up with Black Entertainment
Television to create African-American talk and music channels on XM Satellite
Radio's upcoming network.
The company boasts strong management that has more than 20 years of operating
experience, an attractive demographic target and acquisition capacity. Given
this
<PAGE>
INVESTMENT PROFILE (continued)
------------------------------
RADIO ONE, INC.
potential for dramatic growth, Radio One intends to build a presence in the Top
50 urban markets through acquisitions and changes in program formats.
As the company broadens its presence, it expects to enhance profitability by
gaining clout with advertisers and music labels. It also envisions Internet
opportunities.<F2>
DIVERSIFICATION BY SECTOR<F4>
-----------------------------
- ----------------------------------------
SECTOR %
- ----------------------------------------
BASIC MATERIALS 7.7
CAPITAL GOODS 12.2
CONGLOMERATES 0.0
CONSUMER CYCLICAL 2.7
CONSUMER NON-CYCLICAL 1.1
ENERGY 7.9
FINANCIAL 4.2
HEALTHCARE 1.8
REITS/PROPERTY 0.2
SERVICES 15.2
TECHNOLOGY 32.5
TELECOMMUNICATIONS 10.3
TRANSPORTATION 0.0
UTILITIES 4.2
- ----------------------------------------
TOTAL 100.0%
========================================
MARKET CAP DISTRIBUTION<F4>
---------------------------
MARKET CAP MID CAP FUND S&P 400
(IN $ BILLIONS) (%) (%)
-------------- ------------ -------
$0.0 to 0.5 0.2 1.0
0.5 to 1.0 12.4 7.2
1.0 to 2.0 26.3 19.3
2.0 to 3.0 13.7 22.2
3.0 to 4.0 17.2 11.6
4.0 to 5.0 10.6 7.5
5.0 to 6.0 5.6 10.0
6.0 to 7.0 5.2 3.5
7.0 to 8.0 4.4 1.7
8.0+ 4.4 16.0
- ------------------------------------------------------
TOTAL 100.0% 100.0%
======================================================
<PAGE>
OUR VIEW OF THE MARKET
----------------------
LOOKING FORWARD
This year we've experienced market volatility, interest rate hikes, continuing
concerns about future Federal Reserve actions and an undying fascination with
nearly all companies related to technology while other profitable firms have
been ignored.
Our challenge is to build a portfolio that is designed both to harness growth
opportunities and weather volatility. Providing you with consistent returns over
time means we may not always appear as aggressive as other mid-cap offerings. We
consider it prudent to manage the fund for long-term gains and not short-term
rewards.
Currently we are pursuing several topics. For openers, we're assessing the
multitude of opportunities spawned by the revolution in the voice-video-data
network. Many entrants are jostling for position in this arena, but we believe
few will achieve the strength of a franchise company. We intend to be objective
and deliberate in finding the potential winners.
Another intriguing theme is "energy convergence," the deregulation and
consolidation of electric and natural gas companies. We purchased several at
prices we consider excellent values as uncharacteristic weather depressed the
stocks.
Also, our radar is directed to recovering economies elsewhere in the world. We
see some early-stage opportunities among U.S. companies positioned to take
advantage of these opportunities.
<PAGE>
SPECIAL NOTE
------------
1999 DISTRIBUTIONS. Artisan Mid Cap Fund paid a total distribution of $0.8256
per share on November 11, 1999, to shareholders of record on November 10, 1999.
The distribution included $0.7991 of short-term capital gains, $0.0265 of long-
term capital gains and $0.00 of ordinary income. Reinvestment NAV was $18.22. No
other distributions were paid in 1999.
ARTISAN FUNDS WEBSITE AVAILABLE. Visit the Artisan Funds website at
www.artisanfunds.com. It provides you with 24-hours a day, 7-days a week access
to:
- Current & Historical Share Prices
- Fund Performance Information
- Portfolio Data & Statistics
- Combined Prospectus
- Annual & Quarterly Reports
- Applications & Forms
- And More!
FUND STATISTICS<F5>
-------------------
NUMBER OF HOLDINGS 66
MEDIAN MARKET CAP $2.7 billion
WEIGHTED AVG. GROWTH RATE 2000E 20.3%
WEIGHTED AVERAGE P/E 2000E 17.4X
MEDIAN PRICE/INTRINSIC VALUE 2000E 75%
<PAGE>
NOTES
-----
<F1> PERFORMANCE DATA IS HISTORICAL AND DOES NOT GUARANTEE FUTURE RESULTS.
PLEASE READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
Investment return and principal value will fluctuate so that an investor's
shares in the Fund, when redeemed, may be worth more or less than their
original cost. The S&P 400 MidCap Index is an unmanaged, market-weighted
index, with dividends reinvested, of 400 mid-cap companies. DURING THE
QUARTER, LIPPER INC. RECLASSIFIED THE FUND TO ITS NEW MID-CAP CORE FUND
CATEGORY. INDEX PERFORMANCE COMPARISONS REFLECT THIS CHANGE.The Lipper Mid-
Cap Core Fund Index reflects the net asset weighted return of the 30
largest mid-cap core funds, with dividends reinvested. From its inception
through 6/30/99, Artisan Mid Cap Fund was reimbursed for expenses in excess
of 2.00% of its average net assets, which may have had a material effect on
the Fund's total return. The returns of the indices do not include the
payment of sales commissions or other expenses incurred in the purchase of
the securities included in the index.
<F2> Portfolio profiles are for illustration only and are not intended as
recommendations of individual stocks. The profiles present information
about the companies believed to be accurate, and the views of the portfolio
manager, as of 1/1/00. That information and those views may change and the
Fund disclaims any obligation to advise shareholders of any such changes.
As of 12/31/99, internet.com Corporation and Radio One, Inc. represented
0.9% and 1.1% of the Fund's total net assets, respectively.
<F3> As a percentage of total net assets as of 12/31/99.
<F4> As a percentage of total portfolio equities as of12/31/99.
<F5> Fund statistics are as of 12/31/99.
Artisan Funds offered through Artisan Distributors LLC, 1000 North Water
Street, Milwaukee, WI 53202, member NASD.
Date of first use: January 7, 2000.
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800.344.1770
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www.artisanfunds.com
A9058-2
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ARTISAN SMALL CAP VALUE FUND
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QUARTERLY UPDATE JANUARY 2000
We are pleased with the fourth quarter performance of Artisan Small Cap Value
Fund. It soundly outperformed its benchmark, the Russell 2000 Value Index,
during a period of volatility in the small-cap market. The Fund gained 3.9% in
the fourth quarter, while the Russell 2000 Value Index gained 1.5%.
The Fund's 1999 performance was also solid, gaining 15.42%, while its index was
down 1.49% for the same 12 months.<F1>
Inside, we discuss the Fund's quarterly performance, several holdings in the
portfolio and our outlook for investing as we begin the New Year.
(LOGO)
ARTISAN FUNDS
<PAGE>
FOURTH QUARTER OVERVIEW
-----------------------
The Fund's positive quarterly return was welcome following the small-cap market
volatility that continued from the end of the third quarter into October.
Although our quarterly return was positive, the market continued a pattern
generally unfavorable to small-cap value investors. Typically, our universe
consists of companies looked on as undervalued. Recent examples were found in
cyclical, financial and energy holdings. However, in the fourth quarter, as in
most of 1999, investors generally favored technology companies, a sector with
few opportunities for our style.
During the quarter, as is common when a style such as small-cap value is out of
favor, we added higher quality companies available at what we considered
moderate prices. These stocks were slumping for several reasons, including
rising interest rates, the continued liquidation of small-cap value strategies
and, in certain industries, a combination of earnings disappointment and fear.
--------------------------------
AVERAGE ANNUAL TOTAL RETURNS<F1>
--------------------------------
FOR THE PERIODS ENDED 12/31/99
SINCE INCEPTION
ONE-YEAR (9/29/97)
-------- ---------------
SMALL CAP VALUE FUND 15.42% 5.21%
RUSSELL 2000 VALUE INDEX -1.49% -2.62%
LIPPER SMALL-CAP VALUE FUND INDEX 1.32% -3.16%
<PAGE>
1
INVESTMENT PROFILE
-------------------
JOHN NUVEEN COMPANY
JOHN NUVEEN COMPANY provides customized individual accounts, mutual funds,
exchange-traded funds and defined portfolios to financial advisers for their
high net worth clients. It sells its closed- and open-end funds through its own
sales network, external brokerages and financial service providers. Nuveen added
equity funds when it acquired Rittenhouse Financial Services.
We like the company's balance sheet and seasoned management. Its strong
franchise in municipal bond investments will benefit, in our opinion, from long-
term demand for those products. And, its closed-end funds, which do not issue
redeemable securities and do not need to liquidate securities to meet investor
demands for cash, provide a stream of recurring income.<F2>
TOP 10 HOLDINGS<F3>
-------------------
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COMPANY %
- --------------------------------------------------------------------------------
GLEASON CORPORATION...Gear manufacturing equipment producer 2.9%
GENLYTE GROUP INCORPORATED...Commercial, industrial and
residential lighting 2.7%
JOSTENS, INC...Leader in school memorabilia 2.5%
MUELLER INDUSTRIES...Manufacturer/distributor of plumbing supplies 2.4%
GREY ADVERTISING...Advertising agency 2.2%
HILB, ROGAL & HAMILTON...Insurance broker 2.1%
ADVO, INC...Direct mail marketing services 2.0%
CLEVELAND CLIFFS...Iron ore supplier 1.9%
EMCOR GROUP...Mechanical and electrical contractor 1.9%
ANNUITY AND LIFE RE (HOLDINGS) LTD...Life and annuity reinsurance 1.9%
- --------------------------------------------------------------------------------
TOTAL 22.5%
================================================================================
<PAGE>
2
INVESTMENT PROFILE
------------------
MODINE MANUFACTURING
MODINE MANUFACTURING is a worldwide leader in the production of heat exchangers
for vehicle and building heating, ventilating and air-conditioning needs.
Products include radiators, charge-air coolers, vehicle air conditioning parts
and oil coolers sold to original equipment manufacturers (OEMs) and others.
We consider Modine a great company capable of providing solid returns on capital
over business cycles. However, the company's earnings have been flat because of
increased capital spending and the continued slump in its agricultural and
construction equipment markets. We believe the completion of an assembly plant
in March 2000 could lead to increased outsourcing orders. Also, the company
anticipates significant growth in the future in part from its entry in a new
product category, exhaust-gas-recirculation (EGR) coolers, a technology Modine
believes could generate $50 million annually in new business partnerships for
the company.<F2>
3
INVESTMENT PROFILE
------------------
BORG-WARNER AUTOMOTIVE (BWA)
BORG-WARNER AUTOMOTIVE (BWA) is a leading maker of powertrain products for the
world's major automakers. Its powertrain products include four-wheel-drive and
all-wheel-drive transfer cases primarily for light trucks and sport utility
vehicles (SUVs), as well as automatic transmission and timing chain systems.
<PAGE>
INVESTMENT PROFILE (continued)
-------------------------------
BORG-WARNER AUTOMOTIVE (BWA)
In our opinion, Borg-Warner Automotive has historically enjoyed good returns on
invested capital. However, BWA's stock declined recently for the same reasons
the stocks of other automotive suppliers slumped, namely interest rate concerns,
lower future auto sales expectations and the sector's generally declining return
on invested capital.
We believe Borg-Warner's management has responded appropriately. They focused on
industry segments that offer above average growth rates such as overhead cam and
turbocharged engines. They positioned themselves by buying German and U.S.
turbocharger manufacturers and a manufacturer of belt-driven engine cooling
systems primarily for light trucks and SUVs. And, they sold their manual
transmission business as competitors moved into the market and profit margins
came under pressure.<F2>
DIVERSIFICATION BY SECTOR<F4>
-----------------------------
- ----------------------------------------
SECTOR %
- ----------------------------------------
BASIC MATERIALS 18.7
CAPITAL GOODS 15.8
CONGLOMERATES 0.0
CONSUMER CYCLICAL 15.3
CONSUMER NON-CYCLICAL 1.7
ENERGY 5.8
FINANCIAL 19.2
HEALTHCARE 0.4
REITS 1.4
SERVICES 9.7
TECHNOLOGY 9.7
TRANSPORTATION 1.1
UTILITIES 1.2
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TOTAL 100.0%
========================================
<PAGE>
OUR VIEW OF THE MARKET
----------------------
LOOKING FORWARD
In our view, the positive earnings environment we experienced in the fourth
quarter is continuing. Underlying economic trends continue to be positive for
stocks despite rising long-term interest rates and the prospect of another rate
hike by the Federal Reserve. Inflation remains low, productivity is rising,
consumer spending is strong and Americans continue to invest.
We may continue to see relatively few stocks dominate the market. If so,
strategic or financial buyers could be a source of activity in the small-cap
value universe, especially if individuals and institutions aren't buying what we
regard as great stocks at great prices.
Although we do not make investments only for their takeover potential, our
investment criteria are similar to those used by strategic and financial buyers.
We commented earlier that low prices among quality companies would heighten
takeover activity. In 2000 we expect continued takeover activity if our style
remains out of favor.
SPECIAL NOTE ON FUND CLOSING
Artisan Small Cap Value Fund intends to close to new investors when it reaches
about $250 million in total assets. This is a change from the intended closing
level of $400 million previously announced. For more information please refer to
the Artisan Funds prospectus dated October 29, 1999.
<PAGE>
SPECIAL NOTE
-------------
1999 DISTRIBUTIONS. Artisan Small Cap Value Fund paid a total distribution of
$0.3757 per share on November 11, 1999, to shareholders of record on November
10, 1999. The distribution included $0.3439 of short-term capital gains, $0.0047
of long-term capital gains and $0.0271 of ordinary income. Reinvestment NAV was
$9.81. No other distributions were paid in 1999.
ARTISAN FUNDS WEBSITE AVAILABLE. Visit the Artisan Funds website at
www.artisanfunds.com. It provides you with 24-hours a day, 7-days a week access
to:
- Current & Historical Share Prices
- Fund Performance Information
- Portfolio Data & Statistics
- Combined Prospectus
- Annual & Quarterly Reports
- Applications & Forms
- And More!
FUND STATISTICS<F5>
-------------------
NUMBER OF HOLDINGS 93
MEDIAN MARKET CAP $317 million
WEIGHTED AVG. MARKET CAP $498 million
MEDIAN PRICE/BOOK VALUE 1.3X
MEDIAN P/E 2000E 10.3X
EQUITY DIVIDEND YIELD 1.4%
<PAGE>
NOTES
-----
<F1> PERFORMANCE DATA CONTAINED HEREIN REPRESENT PAST PERFORMANCE AND DO NOT
GUARANTEE FUTURE RESULTS. AN INVESTMENT IN A MUTUAL FUND THAT CONCENTRATES
ITS PORTFOLIO IN VALUE STOCKS AND THE STOCKS OF SMALLER COMPANIES MAY
PRESENT ADDITIONAL RISKS INCLUDING A SHORTER HISTORY OF OPERATIONS, HIGHER
VOLATILITY AND LESS LIQUIDITY, ALL OF WHICH ARE DISCUSSED IN THE
PROSPECTUS. PLEASE READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
Investment return and principal value will fluctuate so that an investor's
shares in the Fund, when redeemed, may be worth more or less than their
original cost. The Russell 2000 Index is an unmanaged, market-weighted
index, with dividends reinvested, of 2000 small companies. The Russell 2000
Value Index measures the performance of those Russell 2000 companies with
lower price-to-book ratios and lower forecasted growth values. DURING THE
QUARTER, LIPPER INC. RECLASSIFIED THE FUND TO ITS NEW SMALL-CAP VALUE FUND
CATEGORY. INDEX PERFORMANCE COMPARISONS REFLECT THIS CHANGE. The Lipper
Small-Cap Value Fund Index reflects the net asset weighted return of the 30
largest small-cap value funds, with dividends reinvested. The returns of
the indices do not include the payment of sales commissions or other
expenses incurred in the purchase of the securities included in the index.
<F2> Portfolio profiles are for illustration only and are not intended as
recommendations of individual stocks. The profiles present information
about the companies believed to be accurate, and the views of the portfolio
manager, as of 1/1/00. That information and those views may change and the
Fund disclaims any obligation to advise shareholders of any such changes.
As of 12/31/99, John Nuveen, Modine Manufacturing and Borg-Warner
Automotive represented 1.2%, 1.8%, and 1.4% of the Fund's total net assets,
respectively.
<F3> As a percentage of total net assets as of 12/31/99.
<F4> As a percentage of total portfolio equities as of 12/31/99.
<F5> Fund statistics are as of 12/31/99.
Artisan Funds offered through Artisan Distributors LLC, 1000 North Water
Street, Milwaukee, WI 53202, member NASD.
Date of first use: January 7, 2000.
------------
800.344.1770
------------
www.artisanfunds.com
A9058-4
