UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-08932
Artisan Funds, Inc.
(Exact name of registrant as specified in charter)
875 East Wisconsin Avenue, Suite 800
Milwaukee, WI 53202
(Address of principal executive offices) (Zip Code)
Janet D. Olsen Cameron S. Avery
Artisan Funds, Inc. Bell, Boyd & Lloyd LLC
875 East Wisconsin Avenue, #800 Three First National Plaza, #3100
Milwaukee, Wisconsin 53202 Chicago, IL 60602
(Name and address of agents for service)
Registrant's telephone number, including area code: (414) 390-6100
Date of fiscal year end: 09/30/04
Date of reporting period: 03/31/04
ITEM 1. REPORTS TO SHAREHOLDERS.
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[LOGO]
ARTISAN
-----------------------------
SEMI-ANNUAL
REPORT
MARCH 31, 2004
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ARTISAN INTERNATIONAL FUND
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ARTISAN INTERNATIONAL
SMALL CAP FUND
--------------
ARTISAN INTERNATIONAL
VALUE FUND
--------------
ARTISAN MID CAP FUND
--------------
ARTISAN MID CAP
VALUE FUND
--------------
ARTISAN SMALL CAP FUND
--------------
ARTISAN SMALL CAP
VALUE FUND
-----------------------------
ARTISAN FUNDS, INC.
INVESTOR SHARES
- --------------------------------------------------------------------------------
ARTISAN FUNDS
P.O. BOX 8412
BOSTON, MA 02266-8412
This report and the unaudited financial statements contained herein are provided
for the general information of the shareholders of Artisan Funds. This report is
not authorized for distribution to prospective investors unless preceded or
accompanied by an effective prospectus. For more complete information on any
Fund, including fees and expenses, please call 800.344.1770 or visit our website
at WWW.ARTISANFUNDS.COM for a free prospectus. Read it carefully before you
invest or send money.
Company discussions are for illustration only and are not intended as
recommendations of individual stocks. The discussions present information about
the companies believed to be accurate, and the views of the portfolio
manager(s), as of March 31, 2004. That information and those views may change
and the Funds disclaim any obligation to advise shareholders of any such
changes. Artisan International Fund and Artisan Mid Cap Fund offer institutional
classes of shares for institutional investors meeting certain minimum investment
requirements. A report on each institutional class is available under separate
cover.
Artisan Funds offered through Artisan Distributors LLC, member NASD.
- -----------------------------------------------------------TABLE OF CONTENTS----
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02 MANAGEMENT'S DISCUSSION
OF FUND PERFORMANCE
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02 Artisan International Fund
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06 Artisan International Small Cap Fund
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10 Artisan International Value Fund
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14 Artisan Mid Cap Fund
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18 Artisan Mid Cap Value Fund
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22 Artisan Small Cap Fund
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26 Artisan Small Cap Value Fund
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30 SCHEDULES OF INVESTMENTS
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30 Artisan International Fund
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32 Artisan International Small Cap Fund
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34 Artisan International Value Fund
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36 Artisan Mid Cap Fund
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39 Artisan Mid Cap Value Fund
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41 Artisan Small Cap Fund
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43 Artisan Small Cap Value Fund
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46 STATEMENTS OF
ASSETS & LIABILITIES
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- --------------------------------------------
48 STATEMENTS OF OPERATIONS
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52 STATEMENTS OF
CHANGES IN NET ASSETS
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56 FINANCIAL HIGHLIGHTS
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- --------------------------------------------
60 NOTES TO FINANCIAL STATEMENTS
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70 PROXY VOTING POLICIES
AND PROCEDURES
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- --------------------------------------------
70 NOTES ON
MANAGEMENT'S DISCUSSION
OF FUND PERFORMANCE
- --------------------------------------------
- ------------------------------------------------AVERAGE ANNUAL TOTAL RETURNS----
SINCE
1-YEAR 3-YEAR 5-YEAR INCEPTION
------ ------ ------ ---------
Artisan International Fund
(inception 12/28/95) 59.53% 2.36% 6.38% 13.20%
- --------------------------------------------------------------------------------
Artisan International Small Cap Fund
(inception 12/21/01) 81.44 NA NA 27.43
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Artisan International Value Fund
(inception 9/23/02) 77.03 NA NA 47.70
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Artisan Mid Cap Fund (inception 6/27/97) 43.05 4.75 15.27 20.33
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Artisan Mid Cap Value Fund
(inception 3/28/01) 49.81 14.49 NA 14.71
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Artisan Small Cap Fund (inception 3/28/95) 57.86 8.68 10.39 9.57
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Artisan Small Cap Value Fund
(inception 9/29/97) 51.81 16.33 18.56 12.67
- --------------------------------------------------------------------------------
As of 3/31/04.
THE PERFORMANCE QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT GUARANTEE
FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN A
FUND WILL FLUCTUATE, SO THAT AN INVESTOR'S SHARES IN THE FUND, WHEN REDEEMED,
MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE
LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. FOR MONTH-END PERFORMANCE
INFORMATION, VISIT WWW.ARTISANFUNDS.COM OR CALL 800.344.1770. THE PERFORMANCE
INFORMATION SHOWN FOR ARTISAN INTERNATIONAL FUND, ARTISAN INTERNATIONAL SMALL
CAP FUND AND ARTISAN INTERNATIONAL VALUE FUND DOES NOT REFLECT THE DEDUCTION OF
A 2% REDEMPTION FEE ON SHARES HELD BY AN INVESTOR FOR 90 DAYS OR LESS AND, IF
REFLECTED, THE FEE WOULD REDUCE THE PERFORMANCE QUOTED. THE REDEMPTION FEE FOR
ARTISAN INTERNATIONAL FUND WAS EFFECTIVE MAY 1, 2004. THE PERFORMANCE OF ARTISAN
INTERNATIONAL VALUE FUND AND ARTISAN MID CAP VALUE FUND REFLECTS ARTISAN
PARTNERS' UNDERTAKING TO LIMIT EACH FUND'S EXPENSES, WHICH MAY BE TERMINATED AT
ANY TIME, HAS BEEN IN EFFECT SINCE EACH FUND'S INCEPTION, AND HAS HAD A MATERIAL
IMPACT ON EACH FUND'S PERFORMANCE, WHICH WOULD HAVE BEEN LOWER IN ITS ABSENCE.
ARTISAN INTERNATIONAL, INTERNATIONAL SMALL CAP & INTERNATIONAL VALUE FUNDS:
International investments involve special risks, including currency fluctuation,
lower liquidity, different accounting methods and economic and political systems
and higher transaction costs. These risks typically are greater in emerging
markets. ARTISAN INTERNATIONAL and INTERNATIONAL SMALL CAP FUNDS invest in
growth stocks, which may underperform other asset types during a given period.
ARTISAN INTERNATIONAL SMALL CAP FUND invests in the stocks of smaller companies,
which may be more volatile and less liquid than those of large companies, have
underperformed the stocks of larger companies during some periods and may have a
shorter history of operations than larger companies. ARTISAN INTERNATIONAL VALUE
FUND invests in value stocks, which may underperform other asset types during a
given period. In addition, the Fund may invest a significant portion of its
assets in small and medium-sized companies, which may be more volatile and less
liquid than those of large companies, have underperformed the stocks of larger
companies during some periods and may have a shorter history of operations than
larger companies.
ARTISAN MID CAP & MID CAP VALUE FUNDS: Stocks of medium-sized companies tend to
be more volatile than those of large companies, and have underperformed the
stocks of small and large companies during some periods. ARTISAN MID CAP FUND
invests primarily in growth stocks, which may underperform other asset types
during a given period. ARTISAN MID CAP VALUE FUND invests primarily in value
stocks, which may underperform other asset types during a given period.
ARTISAN SMALL CAP & SMALL CAP VALUE FUNDS: Stocks of smaller companies may be
more volatile and less liquid than those of large companies, have underperformed
the stocks of larger companies during some periods and may have a shorter
history of operations than larger companies. ARTISAN SMALL CAP FUND invests
primarily in growth stocks, which may underperform other asset types during a
given period. ARTISAN SMALL CAP VALUE FUND invests primarily in value stocks,
which may underperform other asset types during a given period.
800.344.1770 o WWW.ARTISANFUNDS.COM
ARTISAN
INTERNATIONAL
FUND
- ----HIGHLIGHTS------------------------------------------------------------------
o During the six months ended March 31, 2004, Artisan International Fund
outperformed the MSCI EAFE/R Index.
o Our stock selections in the technology sector and media industry were the
primary reasons for our outperformance.
o The Swiss equity market trailed the broader average and our overweight
position, compared to the MSCI EAFE/R Index, detracted from our relative
returns.
- ----INVESTMENT APPROACH---------------------------------------------------------
We use a bottom-up investment process to construct a portfolio of international
growth companies of all market capitalizations. The investment team conducts its
own fundamental analysis with particular emphasis on:
1) Well-managed companies focused on increasing shareholder value;
2) Sustainable growth prospects;
3) Reasonable valuations;
4) Dominant or increasing market shares or direct exposure to an identified
theme.
- ----PERFORMANCE REVIEW----------------------------------------------------------
The halfway point of our fiscal year marked the end of a strong twelve months
for stocks. The Fund returned almost 60% and outpaced its benchmark, the MSCI
EAFE/R Index, and peers, as measured by the Lipper International Funds Index.
FUND STATISTICS
Net Assets.................................. $10.2 Bil.
Number of Holdings................................. 109
Weighted Avg. Market Cap.................... $26.8 Bil.
Weighted Avg. Growth Rate (3-5 yr)............... 10.8%
Weighted Harmonic Avg. P/E (2004E)............... 17.2X
Source: Factset/Artisan Partners. All statistics are as of 3/31/04.
GROWTH OF AN ASSUMED $10,000 INVESTMENT (12/28/95 to 3/31/04)
[CHART APPEARS HERE]
ARTISAN INTERNATIONAL FUND ($27,846)
MSCI EAFE/R Index ($13,477)
Lipper International Funds Index ($16,172)
Lipper
ARTISAN MSCI International
INTERNATIONAL EAFE/R Funds
FUND Index Index
------ ------- -------
12/28/95 (inception) 10,000 10,000 10,000
10,000 10,000 10,025
10,910 10,289 10,467
12,080 10,452 10,895
12,220 10,439 10,903
12/96 13,437 10,605 11,472
14,153 10,439 11,756
14,607 11,793 13,072
14,839 11,710 13,322
12/97 13,902 10,793 12,303
16,714 12,381 14,129
18,131 12,512 14,249
14,717 10,734 12,000
12/98 18,376 12,952 13,861
20,439 13,132 14,039
21,283 13,465 14,818
22,343 14,056 15,318
12/99 33,314 16,444 19,105
39,182 16,427 19,223
35,254 15,776 18,320
31,338 14,503 16,976
12/00 29,787 14,114 16,293
25,965 12,176 14,168
26,564 12,015 14,251
22,823 10,365 12,120
12/01 25,064 11,088 13,144
25,282 11,144 13,467
24,777 10,908 13,212
19,480 8,755 10,621
12/02 20,327 9,320 11,326
17,455 8,555 10,329
21,482 10,203 12,366
22,732 11,032 13,342
26,612 12,917 15,403
3/04 27,846 13,477 16,172
AVERAGE ANNUAL TOTAL RETURNS (as of 3/31/04)
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SINCE
FUND / INDEX 1-YEAR 5-YEAR INCEPTION
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Artisan International Fund 59.53% 6.38% 13.20%
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MSCI EAFE/R Index 57.54 0.52 3.68
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Lipper International Funds Index 56.57 2.87 5.99
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THE PERFORMANCE QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT GUARANTEE
FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN
THE FUND WILL FLUCTUATE, SO THAT AN INVESTOR'S SHARES IN THE FUND, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. FOR MONTH-
END PERFORMANCE INFORMATION, VISIT WWW.ARTISANFUNDS.COM OR CALL 800.344.1770.
INTERNATIONAL FUND'S PERFORMANCE INFORMATION SHOWN DOES NOT REFLECT THE
DEDUCTION OF A 2% REDEMPTION FEE ON SHARES HELD BY AN INVESTOR FOR 90 DAYS OR
LESS AND, IF REFLECTED, THE FEE WOULD REDUCE THE PERFORMANCE QUOTED. THE
REDEMPTION FEE WAS EFFECTIVE MAY 1, 2004. See page 70 for a description of each
index.
02
- -----
TWO
- --------------------------------------------------ARTISAN INTERNATIONAL FUND----
INVESTING ENVIRONMENT AND PERFORMANCE DISCUSSION
During the six months ended March 31, 2004, international equity markets
continued to add to the gains that began roughly twelve months prior to the
period end. Returns were supported by low interest rates around the globe, tax
cuts in the U.S. and advancing earnings. Virtually every area of the market
advanced, but the leaders were small-caps, many emerging markets and value-
oriented stocks. The U.S. dollar weakened against a range of currencies, which
enhanced absolute returns for domestic investors with securities denominated in
those currencies. Late in the period, the Madrid terrorist attacks, uncertainty
after the elections in Taiwan and continued tension in the Middle East caused
some pause in the markets, but the reaction was not strong enough to erase the
strength of the returns.
We benefited from the strength of our stock selection during the period. Leading
contributors were our media selections, technology stocks and financials
holdings. We were hurt by our exposure to certain consumer industries and our
chemicals stocks. On a country basis, we added value to returns due to our
investments in certain emerging markets and Japan, while our investments in
Switzerland were a drag on results as the Swiss market did not perform as well
as the broader average.
SECTOR REVIEW
The consumer sectors together remain our largest weighting relative to the MSCI
EAFE/R Index, although we did trim our exposure. The media industry was a strong
contributor to performance. However, relative to the benchmark, the returns of
our clothing retailers, food retailers, food products and beverage companies
detracted from those gains. The market favored other industries and a few of our
larger positions were weak.
In the media industry, leading performers in the Fund were JCDecaux S.A.,
Promotora de Informaciones S.A. (Prisa) and ITV PLC. JCDecaux, the French
outdoor advertising company, improved profitability by lowering spending and its
success in doing so was affirmed by speculation of a possible merger of its
outdoor operations with Viacom of the U.S. Prisa, a Spanish media company,
benefited from solid sales growth and expanded profitability due to
restructuring and cost cutting. British media company ITV was formed from the
combination of the former Granada PLC and Carlton Communications PLC companies
and began trading under the ITV name in February. We held both stocks prior to
the merger and our combined position after the merger made ITV a Top 10 Holding.
Food retailer Tesco PLC, food products company Nestle S.A., and clothing
retailer Marks & Spencer Group PLC underperformed relative to the benchmark.
Tesco reported strong sales growth, but that was overshadowed by the unexpected
announcement of an additional share issuance. Nestle reported solid sales growth
and earnings, but it suffered from higher expectations. Marks & Spencer's share
price weakened due to slower sales and certain supply chain issues.
Our investments in a few select industry-leading technology companies allowed us
to add value in that area. The best individual performer was Telefonaktiebolaget
LM Ericsson (Ericsson), a Swedish manufacturer of wireless communications
equipment. Over the past two years, Ericsson has undergone a significant
restructuring program and pushed through cost cutting goals ahead of
expectations. This led to a strong increase in profitability. Samsung
Electronics Co., Ltd. also posted a strong gain as overall handset shipment
growth was robust and Europe emerged as one of the fastest growing areas for
exports. Finally, Dutch semiconductor equipment manufacturer ASML Holding N.V.
benefited from strong orders and improved profits.
Our financial stocks made a meaningful contribution to the Fund's return. One of
the leaders was Japanese consumer finance company Promise Co. Ltd. It benefited
from lower costs after a reduction in write-offs due to a decline in personal
bankruptcies. In addition, the company announced a notable increase in the
number of new customer loan accounts and sold its credit card business to focus
more on the core loan business. A number of the Japanese banks we owned recorded
meaningful gains. Two of the best performers were UFJ
[PHOTO]
MARK L. YOCKEY
Portfolio Manager
800.344.1770 o WWW.ARTISANFUNDS.COM
03
------
THREE
- ----ARTISAN INTERNATIONAL FUND--------------------------------------------------
Holdings, Inc. and The Bank of Yokohama Ltd. UFJ acquired a credit card company,
which was an additional step in its efforts to focus on the retail business.
Bank of Yokohama advanced as it cut costs and improved profit growth. Finally,
German insurer Allianz AG, our largest holding, performed roughly in line with
the financial sector return, but continued to improve the performance of many of
its business units. The company further reduced its cross-shareholdings in other
German financial companies and sold its stake in Beiersdorf, maker of Nivea
products.
SECTOR DIVERSIFICATION
SECTOR 9/30/03 3/31/04 SECTOR 9/30/03 3/31/04
- --------------------------------------------------------------------------------
Consumer Discretionary 24.9% 24.2% Information Technology 1.9% 6.7%
- --------------------------------------------------------------------------------
Consumer Staples 16.5 11.9 Materials 7.4 4.9
- --------------------------------------------------------------------------------
Energy 4.7 7.4 Telecommunication Services 7.9 9.0
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Financials 24.2 27.3 Utilities 0.3 0.4
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Healthcare 6.9 3.0 Other assets less liabilities 1.9 1.1
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Industrials 3.4 4.1 TOTAL 100.0%100.0%
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As a percentage of total net assets as of 9/30/03 and 3/31/04, respectively.
Although oil and gas prices trended higher during the period, energy stocks in
general trailed the market. We favored emerging market and smaller energy
companies and our selections outpaced the sector return. The two best performers
in the area were Russian oil company LUKOIL and Chinese oil refiner China
Petroleum & Chemical Corporation (Sinopec). LUKOIL announced earnings in
January, which indicated that profitability levels remained healthy due to solid
production growth and cost reductions. Growth in China and its increased demand
for commodities helped Sinopec.
In the chemicals industry, we were hurt by the performance of CIBA Specialty
Chemicals AG and Rhodia S.A. CIBA recently announced the acquisition of a paper
chemicals company that we thought aligned well with its own paper chemicals
division. However, investors seemed to believe the price paid for the assets was
excessive. Rhodia was pressured by financing and liquidity issues and, as of
March 31, 2004, we started to move out of our position. Imperial Chemical
Industries PLC offset some of the negative effect by disposing of its food
ingredients unit in an ongoing restructuring effort.
COUNTRY & CURRENCY REVIEW
Our country allocations, all of which were driven by our security selection,
contributed marginally to performance. Our overweight exposure to the
underperforming Swiss market was an area of negative performance relative to
the MSCI EAFE/R Index. However, many emerging markets outperformed the major
markets and our exposure to those areas and the strength of gains in our
Japanese holdings helped drive a strong relative result. Our security selection
also contributed to our gains in excess of the MSCI EAFE/R Index.
Fund returns benefited from our exposure to currencies that appreciated relative
to the U.S. dollar. When local currencies were converted back to U.S. dollars,
at the depreciated level, the translation effect enhanced absolute returns. This
effect was muted late in the period as the U.S. dollar appreciated marginally
versus a group of currencies.
TOP 5 COUNTRY ALLOCATIONS
United Kingdom............. 18.3%
Japan...................... 17.8
Germany.................... 12.9
Switzerland................ 12.1
Spain....................... 5.4
As a percentage of total net assets as of 3/31/04.
04
- -----
FOUR
- --------------------------------------------------ARTISAN INTERNATIONAL FUND----
FUND CHANGES
Within our sector and industry allocations, we reduced our consumer and
healthcare exposure during the six months ended March 31, 2004. We used the
proceeds to increase our allocations to energy, technology and financials. On a
country level, we increased our Japanese exposure and reduced European exposure.
The Far East has seen some of the world's highest growth rates. For the first
time in years, it seemed to us that Japan might be on a sustainable path to an
economic recovery, fueled in large part by the continued growth of the Chinese
economy. Europe was behind the curve, with low, albeit improving, economic
growth that was partly dampened by the strong euro and the Madrid terrorist
attacks. Our weight in emerging markets was left basically unchanged, although
we reduced our Mexican exposure. We sold a number of holdings when they reached
our assessment of their full valuations, and others when we lost confidence in
their investment prospects. We replaced them with potentially more promising
stocks within our themes at what we consider to be more attractive valuations.
In the consumer areas, we sold Carrefour S.A., Next PLC and Wolters Kluwer N.V.
and we pared our positions in other stocks. The relative performance of the
consumer staples group served to reduce our weighting further. Among our
healthcare holdings, we closed out our position in French pharmaceutical company
Sanofi-Synthelabo S.A. because we did not believe that its attempt at a hostile
takeover of its larger, slower growth competitor, Aventis, was a good use of
capital. We sold Novartis AG because of the potential for slowing earnings
growth and reduced profitability.
TOP 10 HOLDINGS
COMPANY NAME COUNTRY %
- --------------------------------------------------------------------------------
Allianz AG Germany 3.1%
- --------------------------------------------------------------------------------
UBS AG Switzerland 2.9
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ITV PLC United Kingdom 2.8
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Muenchener Rueckversicherungs-Gesellschaft AG Germany 2.6
- --------------------------------------------------------------------------------
Nestle S.A., Class B Switzerland 2.6
- --------------------------------------------------------------------------------
Fortis Netherlands 2.5
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Honda Motor Co. Ltd. Japan 2.5
- --------------------------------------------------------------------------------
Compass Group PLC United Kingdom 2.4
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Tesco PLC United Kingdom 2.3
- --------------------------------------------------------------------------------
Nikko Cordial Corp. Japan 2.3
- --------------------------------------------------------------------------------
TOTAL 26.0%
- --------------------------------------------------------------------------------
As a percentage of total net assets as of 3/31/04. Top 10 Holdings are
determined by security, not issuer. Securities of the same issuer are not
aggregated.
The purchases of Italian oil services company Saipem S.p.A., Italian oil and gas
exploration company ENI S.p.A. and small positions in Total S.A. and BP PLC
increased our energy exposure. Samsung Electronics was the largest purchase in
the technology sector. Our increase in Japan was a primary reason for the
increase in our financials weight. Although we believed there was remaining risk
in the Japanese financial industry, the overall improvement of the economic
situation and the recovering stock market led us to initiate some positions in
banks and consumer finance companies. The stocks added included: UFJ, Nomura
Holdings, Inc., Bank of Yokohama, Sumitomo Mitsui Financial Group, Inc., Credit
Saison Co. Ltd. and ORIX Corp. We invested slowly in Japan because deflation was
still prevalent and Japan was continuing to deal with increasingly challenging
demographics.
REGION ALLOCATION
Europe..................... 67.2%
Asia/Pacific............... 24.6
Latin America............... 4.2
North America............... 2.8
Middle East................. 0.1
As a percentage of total net assets as of 3/31/04.
800.344.1770 o WWW.ARTISANFUNDS.COM
05
-----
FIVE
ARTISAN
INTERNATIONAL
SMALL CAP FUND
- ----HIGHLIGHTS------------------------------------------------------------------
o During the six months ended March 31, 2004, Artisan International Small Cap
Fund trailed the MSCI EAFE/R Small Cap Index, but recorded a strong absolute
return and outperformed the MSCI EAFE/R Index.
o Our financial and telecommunication stocks were strong contributors to
performance, but the per-formance of our consumer related stocks relative to
the MSCI EAFE/R Small Cap Index offset the success.
- ----INVESTMENT APPROACH---------------------------------------------------------
We use a bottom-up investment process to construct a portfolio of smaller
international growth companies. The investment team conducts its own fundamental
analysis with particular emphasis on:
1) Well-managed companies focused on increasing shareholder value;
2) Sustainable growth prospects;
3) Reasonable valuations;
4) Strong or increasing market shares or direct exposure to an identified
theme.
- ----PERFORMANCE REVIEW----------------------------------------------------------
Artisan International Small Cap Fund has outperformed the MSCI EAFE/R Small Cap
Index since inception, which has been a favorable period for small stocks.
FUND STATISTICS
Net Assets.............................. $587 Mil.
Number of Holdings............................. 82
Median Market Cap....................... $1.2 Bil.
Weighted Avg. Market Cap................ $2.0 Bil.
Weighted Avg. Growth Rate (3-5 yr).......... 16.7%
Weighted Harmonic Avg. P/E (2004E).......... 17.1X
Source: Factset/Artisan Partners. All statistics are as of 3/31/04.
GROWTH OF AN ASSUMED $10,000 INVESTMENT (12/21/01 to 3/31/04)
[CHART APPEARS HERE]
ARTISAN INTERNATIONAL SMALL CAP FUND ($17,353)
MSCI EAFE/R Small Cap Index ($17,089)
MSCI EAFE/R Index ($12,453)
Lipper International Small-Cap Funds Index ($16,014)
ARTISAN MSCI
INTERNATIONAL EAFE/R Lipper
SMALL Small MSCI International
CAP Cap EAFE/R Small-Cap
FUND Index Index Funds Index
------ ------- ------- ----------
12/21/01 (inception) 10,000 10,000 10,000 10,000
10,080 10,218 10,245 10,219
3/02 10,490 10,806 10,298 10,645
6/02 10,500 11,254 10,079 10,925
9/02 9,090 9,449 8,090 9,131
12/02 9,945 9,420 8,612 9,407
3/03 9,564 9,149 7,905 8,999
6/03 12,130 11,441 9,428 11,137
9/03 13,885 13,325 10,194 12,713
12/03 16,210 15,198 11,936 14,590
3/04 17,353 17,089 12,453 16,014
AVERAGE ANNUAL TOTAL RETURNS (as of 3/31/04)
- -------------------------------------------------------------------------------
SINCE
FUND / INDEX 1-YEAR INCEPTION
- -------------------------------------------------------------------------------
Artisan International Small Cap Fund 81.44% 27.43%
- -------------------------------------------------------------------------------
MSCI EAFE/R Small Cap Index 86.79 26.57
- -------------------------------------------------------------------------------
MSCI EAFE/R Index 57.54 10.13
- -------------------------------------------------------------------------------
Lipper International Small-Cap Funds Index 77.97 23.01
- -------------------------------------------------------------------------------
THE PERFORMANCE QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT GUARANTEE
FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN
THE FUND WILL FLUCTUATE, SO THAT AN INVESTOR'S SHARES IN THE FUND, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. FOR MONTH-
END PERFORMANCE INFORMATION, VISIT WWW.ARTISANFUNDS.COM OR CALL 800.344.1770.
INTERNATIONAL SMALL CAP FUND'S PERFORMANCE INFORMATION SHOWN DOES NOT REFLECT
THE DEDUCTION OF A 2% REDEMPTION FEE ON SHARES HELD BY AN INVESTOR FOR 90 DAYS
OR LESS AND, IF REFLECTED, THE FEE WOULD REDUCE THE PERFORMANCE QUOTED. See page
70 for a description of each index.
06
- -----
SIX
- ----------------------------------------ARTISAN INTERNATIONAL SMALL CAP FUND----
INVESTING ENVIRONMENT AND PERFORMANCE DISCUSSION
Throughout the six months ended March 31, 2004, international equity markets
continued to advance. Flexible monetary conditions around the world have
promoted economic growth, which has contributed to a recovery in riskier assets
such as small-cap stocks (one of the best performing asset classes during the
period). The U.S. dollar weakened against a range of currencies, which enhanced
absolute returns for domestic investors with securities denominated in those
currencies. Late in the period, the Madrid terrorist attacks, uncertainty after
the elections in Taiwan and continued tension in the Middle East caused some
hesitation in the markets, but reaction was not strong enough to erase the
strength of the returns.
We benefited from the market's preference for small stocks and recorded a strong
absolute return. The strongest areas of the Fund were the financials,
telecommunications and healthcare sectors. However, we trailed the MSCI EAFE/R
Small Cap Index due to the underperformance of our consumer holdings and because
we had few investments in some markets in which the currencies were particularly
strong relative to the dollar.
SECTOR REVIEW
In the financials sector we had a number of stocks that performed well. Our
largest holding, Banco Latinoamericano de Exportaciones, S.A. (BLADEX), was one
of the leading gainers, advancing over 50%. It improved its asset quality,
increased profitability and re-introduced a dividend policy. BLADEX pulled back
somewhat late in the period as higher expenses and lower fees and trading income
softened earnings results. German bank Depfa Bank PLC also rose strongly during
the period as its largest shareholder, DEPFA Holding, sold its stake in the
company, which investors believed could improve liquidity long-term. We sold our
position into the strength. AMMB Holdings Berhad, Malaysia's fifth largest bank,
also posted a strong return. It benefited from improvement in the domestic
economy and restructuring plans.
Two new purchases, Hypo Real Estate Holding AG (HRE) and Creed Corporation,
contributed to Fund returns. We acquired a position in HRE after it was spun off
from HVB Group. The first post-spinoff profit report reflected pre-tax profits
greater than forecasted. The company also made strides in restructuring its
German business and announced that it plans to grow internationally. Creed is a
Japanese real estate advisory services firm. It provides property valuation,
risk analysis, cash flow analysis and asset management services. Importantly for
Creed, investing in the property market in Japan gradually has gained popularity
among domestic investors.
Wireless providers AO VimpelCom of Russia and Telesp Celular Participacoes S.A.
of Brazil were our two best performing stocks in the strong telecommunications
sector. VimpelCom's share price advanced over 70% and Telesp Celular's share
price almost doubled. VimpelCom reported strong subscriber growth in Russia and
received shareholder approval for a merger with its subsidiary. Telesp Celular
sales were solid as market growth accelerated and the Brazilian economy seemed
to be on a path to stronger growth. Canadian wireless company Microcell
Telecommunications, Inc. was another strong contributor, and we closed out our
position.
Among our healthcare holdings, dental implant manufacturer Straumann AG was the
leading contributor to performance. The dental implant market has expanded at an
accelerating rate, and Straumann gained market share in the fast growing U.S.
market. Another strong performer was U.K. diagnostics and life sciences company
Amersham PLC. It received a takeover offer from General Electric Co. at a
premium to the outstanding share price at the time of the announcement. We sold
our position subsequent to the news. Stada Arzneimittel AG, a German
pharmaceutical company, offset some of the gains due to the uncertainty
surrounding the potential negative impact on pricing from German healthcare
reform. We thought its product pipeline and acquisition strategy provided solid
growth potential, so we used the weakness to increase our position in its stock.
[PHOTO]
MARK L. YOCKEY
Portfolio Manager
800.344.1770 o WWW.ARTISANFUNDS.COM
07
------
SEVEN
- ----ARTISAN INTERNATIONAL SMALL CAP FUND----------------------------------------
SECTOR DIVERSIFICATION
SECTOR 9/30/03 3/31/04 SECTOR 9/30/03 3/31/04
- --------------------------------------------------------------------------------
Consumer Discretionary 29.4% 26.4% Information Technology 1.5% 2.4%
- --------------------------------------------------------------------------------
Consumer Staples 21.1 15.8 Materials 3.1 5.1
- --------------------------------------------------------------------------------
Energy 1.5 5.7 Telecommunication Services 7.8 7.3
- --------------------------------------------------------------------------------
Financials 13.0 18.7 Utilities 0.0 1.8
- --------------------------------------------------------------------------------
Healthcare 11.2 7.0 Other assets less liabilities 3.2 0.9
- --------------------------------------------------------------------------------
Industrials 8.2 8.9 TOTAL 100.0%100.0%
- --------------------------------------------------------------------------------
As a percentage of total net assets as of 9/30/03 and 3/31/04, respectively.
In the consumer areas, we had a number of strong performers such as Sogecable
S.A., Spanish pay television; JCDecaux S.A., French outdoor advertising; and
Lianhua Supermarket Holdings Limited, Chinese supermarkets. JCDecaux improved
profitability by lowering spending and its success in doing so was affirmed by
speculation of a possible merger of its outdoor operations with Viacom Inc. of
the U.S. Sogecable, a former Top 10 Holding, and Lianhua were sold into the
share price gains. However, those successes were outweighed by the poor
performance of certain beverage, food product and household product stocks,
which underperformed the market. One of the weakest performers was Russian juice
and dairy producer Wimm-Bill-Dann Foods OJSC. It fell due to a slump in juice
sales and concern about political stability after executives of one of Russia's
largest companies came under investigation. We used the weakness to add to our
position.
Luxury boat maker Rodriguez Group was another negative performer. It fell after
reporting lower than expected sales for the year due in part to a delay in the
delivery of two boats. We sold our position in favor of what we believed to be
better alternatives. CanWest Global Communications Corporation, the largest
conventional television broadcaster and newspaper publisher in Canada, was one
of our weaker media stocks. Its share price fell as its TV sales results dropped
due to a weak ad market caused in part by a relatively new programming lineup.
The energy sector was the best performing sector in our benchmark as the average
price for oil and gas moved higher during the period. In the sector, our only
investment at the beginning of the fiscal year was Canadian service company
Precision Drilling Corporation. However, we added three new names to the
portfolio: Norwegian oil service firms TGS Nopec Geophysical Company ASA and
Smedvig ASA, and U.K. energy services company John Wood Group PLC. We bought
those securities because exploration spending had started to show improvements.
Nevertheless, our preference for service companies in favor of producers hurt
returns.
COUNTRY & CURRENCY REVIEW
Our country allocations, which were driven by our security selection, hurt
performance. The stocks we owned in certain emerging markets added to returns,
but our relatively small investment in a strong Japanese market in favor of
stocks in countries such as Switzerland negated the positives. Our exposure to
Japan relative to the MSCI EAFE/R Small Cap Index is the largest underweight
position in the Fund. For the first time in years, it seemed to us that Japan
might be on a sustainable path to an economic recovery, but deflation was still
prevalent and we remained concerned long-term about Japan's increasingly
challenging demographics. Consequently, we added names in the area cautiously.
TOP 5 COUNTRY ALLOCATIONS
Switzerland................ 16.4%
Japan....................... 7.9
United Kingdom.............. 7.4
France...................... 7.0
Russia...................... 4.7
As a percentage of total net assets as of 3/31/04.
08
- -----
EIGHT
- ----------------------------------------ARTISAN INTERNATIONAL SMALL CAP FUND----
Fund returns benefited from our exposure to currencies that appreciated relative
to the U.S. dollar. When local currencies were converted back to U.S. dollars,
at the depreciated level, the translation effect enhanced absolute returns. This
effect was muted late in the period as the U.S. dollar appreciated marginally
versus a group of currencies. In addition, we were not as exposed to some of the
currencies that appreciated the most, which hurt returns compared to our
benchmark.
FUND CHANGES
The sector allocations that changed the most since September 30, 2003 as a
consequence of our stock selection were the consumer areas (reduced) and the
energy and financials sectors (increased). Security sales in the consumer
sectors, in addition to those previously discussed, included Italian luxury
goods company Bulgari S.p.A., U.K. media company Trinity Mirror PLC, Japanese
retailer Don Quijote Company, Ltd. and Dutch and Italian beverage companies
Koninklijke Grolsch N.V. and Davide Campari-Milano S.p.A., respectively.
TOP 10 HOLDINGS
COMPANY NAME COUNTRY %
- --------------------------------------------------------------------------------
Banco Latinoamericano de Exportaciones,
S.A., E Shares Panama 4.6%
- --------------------------------------------------------------------------------
AO VimpelCom (ADR) Russia 3.3
- --------------------------------------------------------------------------------
Fraser & Neave Limited Singapore 2.9
- --------------------------------------------------------------------------------
Straumann AG Switzerland 2.9
- --------------------------------------------------------------------------------
SIG Holding AG Switzerland 2.7
- --------------------------------------------------------------------------------
Sulzer AG Switzerland 2.6
- --------------------------------------------------------------------------------
Hypo Real Estate Holding AG Germany 2.5
- --------------------------------------------------------------------------------
Gruppo Editoriale L'Espresso S.p.A. Italy 2.3
- --------------------------------------------------------------------------------
Clarins S.A. France 2.2
- --------------------------------------------------------------------------------
Komeri Company, Ltd. Japan 2.2
- --------------------------------------------------------------------------------
TOTAL 28.2%
- --------------------------------------------------------------------------------
As a percentage of total net assets as of 3/31/04. Top 10 Holdings are
determined by security, not issuer. Securities of the same issuer are not
aggregated.
The extension of our investment themes resulted in increased exposure to Japan
and various emerging market countries in the Pacific region. In Japan, in
addition to the purchase of Creed, we added motion picture company Toho Company,
Ltd. and food products firm Yakult Honsha Company Ltd. Elsewhere in the region
we initiated positions in: Kangwon Land, Inc., a Korean casino-resort company;
China Resources Power Holdings Company Limited, a Chinese utility; Satyam
Infoway Limited, an Indian internet software firm; and Hanil Cement Company,
Ltd., a Korean construction materials company. One sale in the region was South
Korean shipbuilder Samsung Heavy Industries Company, Inc. It benefited from an
upturn in orders as global shipbuilding demand rose due to an expansion in
global trade, particularly to and from China, and we sold on the resulting
strength.
REGION ALLOCATION
Europe..................... 60.7%
Asia/Pacific............... 27.0
Latin America............... 7.5
North America............... 3.9
As a percentage of total net assets as of 3/31/04.
800.344.1770 o WWW.ARTISANFUNDS.COM
09
-----
NINE
ARTISAN
INTERNATIONAL
VALUE FUND
- ----HIGHLIGHTS------------------------------------------------------------------
o During the six months ended March 31, 2004, Artisan International Value Fund
outperformed the MSCI EAFE/R and MSCI EAFE/R Value Indices and its peer
group, as measured by the Lipper International Funds Index.
o The primary driver behind the Fund's strong performance was good stock
selection.
- ----INVESTMENT APPROACH---------------------------------------------------------
We use a bottom-up investment process to construct a portfolio of undervalued
non-U.S. companies. Our focus is on selecting individual companies, not
countries or industries. We conduct our own in-depth fundamental research with
the goal of investing in companies at a significant discount to the team's
estimates of their economic value. Attention is also given to a company's
historic returns on capital, its financial strength and management. Assessing
the tradeoffs among these factors is at the heart of our investment process.
- ----PERFORMANCE REVIEW----------------------------------------------------------
Since inception, Artisan International Value Fund has outperformed the MSCI
EAFE/R and MSCI EAFE/R Value Indices in five of six calendar quarters.
FUND STATISTICS
Net Assets............................ $108.4 Mil.
Number of Holdings............................. 44
Median Market Cap....................... $2.1 Bil.
Weighted Avg. Market Cap............... $10.2 Bil.
Median P/B Value............................. 2.0X
Weighted Harmonic Avg. P/E (2004E).......... 13.2X
Source: Factset/Artisan Partners. All statistics are as of 3/31/04.
GROWTH OF AN ASSUMED $10,000 INVESTMENT (9/23/02 to 3/31/04)
[CHART APPEARS HERE]
ARTISAN INTERNATIONAL VALUE FUND ($18,075)
MCSI EAFE/R Value Index ($16,175)
MCSI EAFE/R Index ($15,440)
Lipper International Funds Index ($15,183)
ARTISAN MSCI Lipper
INTERNATIONAL EAFE/R MSCI International
VALUE Value EAFE/R Funds
FUND Index Index Index
------ ------- ------- --------
9/23/02 (inception) 10,000 10,000 10,000 10,000
10,070 10,473 10,570 10,488
10,570 11,116 11,049 10,985
12/02 10,600 10,632 10,678 10,633
10,510 10,269 10,232 10,244
10,280 10,019 9,997 9,940
3/03 10,210 9,736 9,801 9,697
11,450 10,797 10,761 10,657
12,480 11,543 11,413 11,342
6/03 13,010 11,899 11,689 11,610
13,280 12,318 11,972 11,935
13,710 12,685 12,261 12,279
9/03 14,320 13,040 12,639 12,526
15,130 13,913 13,427 13,273
15,511 14,207 13,726 13,539
12/03 16,598 15,448 14,798 14,461
17,419 15,586 15,007 14,771
18,024 16,009 15,354 15,109
3/04 18,075 16,175 15,440 15,183
AVERAGE ANNUAL TOTAL RETURNS (as of 3/31/04)
- --------------------------------------------------------------------------------
SINCE
FUND / INDEX 1-YEAR INCEPTION
- --------------------------------------------------------------------------------
Artisan International Value Fund 77.03% 47.70%
- --------------------------------------------------------------------------------
MSCI EAFE/R Value Index 66.15 37.28
- --------------------------------------------------------------------------------
MSCI EAFE/R Index 57.54 33.13
- --------------------------------------------------------------------------------
Lipper International Funds Index 56.57 31.67
- --------------------------------------------------------------------------------
THE PERFORMANCE QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT GUARANTEE
FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN
THE FUND WILL FLUCTUATE, SO THAT AN INVESTOR'S SHARES IN THE FUND, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. THE FUND'S
PERFORMANCE INFORMATION SHOWN DOES NOT REFLECT THE DEDUCTION OF A 2% REDEMPTION
FEE ON SHARES HELD BY AN INVESTOR FOR 90 DAYS OR LESS AND, IF REFLECTED, THE FEE
WOULD REDUCE THE PERFORMANCE QUOTED. THE FUND'S PERFORMANCE ALSO REFLECTS
ARTISAN PARTNERS' UNDERTAKING TO LIMIT THE FUND'S EXPENSES, WHICH MAY BE
TERMINATED AT ANY TIME, HAS BEEN IN EFFECT SINCE THE FUND'S INCEPTION, AND HAS
HAD A MATERIAL IMPACT ON THE FUND'S PERFORMANCE, WHICH WOULD HAVE BEEN LOWER IN
ITS ABSENCE. FOR MONTH-END PERFORMANCE INFORMATION, VISIT WWW.ARTISANFUNDS.COM
OR CALL 800.344.1770. See page 70 for a description of each index.
10
- -----
TEN
- --------------------------------------------ARTISAN INTERNATIONAL VALUE FUND----
INVESTING ENVIRONMENT AND PERFORMANCE DISCUSSION
International markets continued their ascent during the period from March 2003
lows, with investors still showing relatively little discrimination among asset
classes. Developed markets, emerging markets, large-cap stocks, small-cap
stocks, commodities, technology and consumer stocks all showed meaningful
increases. The period was characterized by accelerating evidence of a
synchronized global economic recovery, supported largely by stimulative fiscal
and monetary policies in the United States.
During the first six months of the fiscal year, Artisan International Value Fund
was up 26.22%. Since inception, the Fund has achieved an average annual total
return of 47.70%.
The following companies had a significant positive impact on the portfolio
during the semi-annual period:
o Ichiyoshi Securities Co., Ltd. is a Japanese brokerage firm that
benefited from the recent bull market in Japan. Its share price
increased by 82%. Its shares moved during the most recent quarter from a
discount to book value to a premium to book value mainly due to a
significant increase in profits.
o Aventis S.A.'s shares increased by 48% largely due to a hostile
takeover bid from fellow French pharmaceutical company Sanofi-Synthelabo
S.A.
o The share price of Hunter Douglas N.V. rose by 44%. Hunter Douglas is
the world's leading manufacturer of custom window treatments. Brisk
growth in U.S. consumption led to an increase in sales growth at
Hunter's U.S. division.
Several other companies experienced improving fundamentals, which had a positive
impact on their share price. Grupo Aeroportuario del Sureste S.A. de C.V.
operates a number of airports in Mexico, the largest of which is in Cancun. The
Cancun airport has shown significant increases in air passenger traffic over the
last twelve months. Increased passenger traffic had the impact of increasing the
company's revenues and brought more traffic into its retail concessions.
Management at Vivendi Universal S.A. announced the merger of its largest media
assets, including Universal Studios, with GE's NBC unit. The merger, along with
other disposals, significantly lowered the amount of debt on Vivendi's balance
sheet and reduced overall financial risk. Carpetright PLC, the U.K.'s largest
carpet retailer, continued to impress us as perhaps one of the best managed
companies in the portfolio. Over the last year, under the leadership of Chairman
and CEO Lord Harris, its U.K. based retail stores posted positive same store
sales and conditions at the company's newly acquired European operations
improved. Finally, Brit Insurance Holdings PLC posted positive underwriting
results and indications of a significant dividend payout ratio boosted the share
price.
A few stocks had a negative impact on the portfolio. Shares of Caltagirone
Editore S.p.A., an Italian based newspaper publisher, declined 3.7% though we
could find no specific fundamental reason. The share price of Wolters Kluwer
N.V. increased since our purchase, but it was not enough to offset the impact of
a decline in the euro. Finally, an investment in Unilever PLC's preferred shares
proved disappointing. At the time of investment, we had anticipated the shares
being converted to cash and indeed the shares had rallied from our purchase
price very near to our estimate of the cash conversion price. Instead,
management decided to convert the preferred shares into common stock, which
resulted in a small capital loss.
FUND CHANGES
During the period, we acquired positions in eight companies: MFI Furniture
Group PLC, Guoco Group Ltd., Lotte Confectionery Co., Ltd., Olympus Corporation,
Rinker Group, Ltd., Wolters Kluwer N.V., Zehnder Group AG, and Samchully Co.,
Ltd. A brief discussion of each of these companies is provided below.
MFI Furniture Group PLC is the owner of the U.K.'s largest retailer of kitchen
and bedroom furniture, with a market share in excess of 30%. While this business
is fairly mature, we expected an aggressive refurbishment program to increase
both sales and margins. MFI also owns Howdens Joinery (a new concept
[PHOTO]
N. DAVID SAMRA
Portfolio Manager
800.344.1770 o WWW.ARTISANFUNDS.COM
11
--------
ELEVEN
- ----ARTISAN INTERNATIONAL VALUE FUND--------------------------------------------
launched in the mid-1990s), which manufactures and sells kitchens and bathrooms
exclusively to building contractors. Howdens has been a tremendous success story
to date. We like the track record of John Hancock, MFI's CEO, who has led the
business during a period of significant investment.
SECTOR DIVERSIFICATION
SECTOR 9/30/03 3/31/04 SECTOR 9/30/03 3/31/04
- --------------------------------------------------------------------------------
Consumer Discretionary 18.9% 18.7% Information Technology 0.0% 0.0%
- --------------------------------------------------------------------------------
Consumer Staples 16.3 22.8 Materials 4.6 8.2
- --------------------------------------------------------------------------------
Energy 2.1 0.6 Telecommunication Services 7.4 4.8
- --------------------------------------------------------------------------------
Financials 25.1 20.6 Utilities 0.0 1.2
- --------------------------------------------------------------------------------
Healthcare 7.6 5.8 Other assets less liabilities 5.9 8.5
- --------------------------------------------------------------------------------
Industrials 12.1 8.8 TOTAL 100.0%100.0%
- --------------------------------------------------------------------------------
As a percentage of total net assets as of 9/30/03 and 3/31/04, respectively.
Guoco Group, Ltd. is a Hong Kong-listed holding company controlled by Quek Leng
Chan, a Malaysian lawyer-turned-billionaire with financial interests throughout
Asia. Quek formed Guoco in the 1980s with an emphasis on financial service
businesses. In 2001, Guoco sold its successful investment in Hong Kong-based Dao
Heng Bank to DBS Group (Singapore's largest bank). Since that time Guoco has
used the proceeds to buy back 25% of its own shares and has been patiently
analyzing potential acquisitions in the region. Consequently, we in effect
bought a large pile of cash and securities at what we considered to be a
significant discount, managed by people with a track record of building value
and with investment criteria similar to our own.
After a recent visit to Korea we made an investment in Lotte Confectionery Co.,
Ltd., a leading national producer of gum, cookies, chocolate and ice cream. The
quality of the business, as evidenced by its strong market position and high
profit margins, made it a compelling investment given what we estimated was a
very low price.
Olympus Corporation is perhaps best known for its cameras, but the company
generates most of its profits from the manufacture of endoscopes (medical
devices based on optical technology). As of its 2003 annual report, Olympus had
an 80% market share in flexible endoscopes and our research indicated that
barriers to entry for the business were high. Though not fast growing, Olympus
reported solid profitability on these products. We think this is a terrific
business and one that we estimated to be worth more than the market
capitalization of the whole company at the time of purchase. Thrown in for
"free" is the world's third largest digital camera manufacturer, about 100
billion yen of sales in other optical related businesses, and about 30 billion
yen in net cash and securities.
Rinker Group, Ltd. is an Australian-based building materials company that sells
aggregates, concrete, cement, and cement pipe. In addition to its businesses in
Australia, Rinker has strong market positions in growing areas of the U.S.
including Florida, Arizona, and Nevada. Though not as cheap as our other cement
holding (Cementir S.p.A. Cementerie del Tirreno), we were impressed with CEO
David Clarke and his team. Moreover, the company had a strong balance sheet, and
we liked the secular growth profile of its markets.
TOP 5 COUNTRY ALLOCATIONS
United Kingdom............. 21.3%
Netherlands................ 13.5
Switzerland................ 12.3
Japan...................... 10.2
Italy....................... 6.2
As a percentage of total net assets as of 3/31/04.
12
- -------
TWELVE
- --------------------------------------------ARTISAN INTERNATIONAL VALUE FUND----
Wolters Kluwer N.V. is a Dutch-based professional publishing company. Its
professional publishing business generates recurring revenue, is highly
profitable and produces meaningful cash flows. Unfortunately for Wolters Kluwer,
management of the company historically failed to profitably reinvest the cash
flow back in the business. As a result, the company stopped growing and
profitability declined as the company tried to invest in improving its content.
Wolters recently promoted a new CEO from in-house who is attempting to turn the
business around. Although we were encouraged by the initial strategy that was
put in place, when we purchased the stock, we relied more on the value of the
underlying content, which we believed could fetch a higher price in a private
market transaction.
Zehnder Group AG is a Swiss-based radiator manufacturer, which in our view had a
niche-oriented, high profitability business that was not properly reflected in
its valuation. We thought the shares were trading at an attractive price and had
a decent dividend yield, and the company had a good balance sheet.
Samchully Co., Ltd. is a Korean operator of a natural gas utility. Typically we
find regulated utilities to be poor investments. However, Samchully had several
attractive qualities. First, we thought the company could continue to grow over
the next few years as it completed the build-out of its franchise area. Second,
the company had valuable assets that exceeded its modest debt outstanding. Most
importantly, after adjusting for the excess assets, Samchully was trading at a
very attractive value.
TOP 10 HOLDINGS
COMPANY NAME COUNTRY %
- --------------------------------------------------------------------------------
Euronext N.V. Netherlands 5.8%
- --------------------------------------------------------------------------------
Unilever PLC (ADR) United Kingdom 5.2
- --------------------------------------------------------------------------------
Givaudan S.A. Switzerland 5.1
- --------------------------------------------------------------------------------
Cementir S.p.A. Cementerie del Tirreno Italy 5.1
- --------------------------------------------------------------------------------
Diageo PLC United Kingdom 4.6
- --------------------------------------------------------------------------------
Wolters Kluwer N.V. Netherlands 4.1
- --------------------------------------------------------------------------------
MFI Furniture Group PLC United Kingdom 3.8
- --------------------------------------------------------------------------------
Guoco Group, Ltd. Hong Kong 3.7
- --------------------------------------------------------------------------------
Meitec Corporation Japan 3.4
- --------------------------------------------------------------------------------
Telecom Corporation of New Zealand, Ltd. New Zealand 3.4
- --------------------------------------------------------------------------------
TOTAL 44.2%
- --------------------------------------------------------------------------------
As a percentage of total net assets as of 3/31/04. Top 10 Holdings are
determined by security, not issuer. Securities of the same issuer are not
aggregated.
We funded the above purchases with new subscriptions and the proceeds of five
sales. We sold TSX Group Inc., Tokyo Broadcasting System, Inc. and Somerfield
PLC when their prices reached our assessment of intrinsic value. Shares in
Radiometer A/S were tendered to Danaher as a result of the takeover offer made
in December. We sold Lloyds TSB Group PLC in favor of more attractive
alternatives.
REGION ALLOCATION
Europe..................... 62.6%
Asia/Pacific............... 27.1
North America............... 0.9
Latin America............... 0.9
As a percentage of total net assets as of 3/31/04.
800.344.1770 o WWW.ARTISANFUNDS.COM
13
----------
THIRTEEN
ARTISAN
MID CAP FUND
- ----HIGHLIGHTS------------------------------------------------------------------
o During the six months ended March 31, 2004, Artisan Mid Cap Fund trailed the
Russell Midcap/R and Russell Midcap/R Growth Indices.
o The technology and healthcare sectors were two of the leading contributors to
Fund performance compared to both indices.
o Our stocks in the producer durables sector underperformed both benchmarks.
- ----INVESTMENT APPROACH---------------------------------------------------------
We use a bottom-up investment process to identify well-managed mid-sized
companies whose growth and profit potential are not yet fully recognized by
investors. Specifically, we spend most of our time answering three questions
about a company before we will invest in it:
1) Does the company exhibit franchise characteristics?
2) Is the company positioned for long-term growth and at an early stage in its
profit cycle?
3) Is the stock of the company trading at a reasonable discount to our
estimate of its private market value?
- ----PERFORMANCE REVIEW----------------------------------------------------------
Artisan Mid Cap Fund has outperformed both benchmark indices on a 5-year and
since inception basis.
FUND STATISTICS
Net Assets.............................. $4.7 Bil.
Number of Holdings............................ 102
Median Market Cap....................... $5.8 Bil.
Weighted Avg. Market Cap................ $8.5 Bil.
Weighted Avg. Growth Rate (3-5 yr).......... 17.2%
Weighted Harmonic Avg. P/E (2004E).......... 22.8X
Source: Factset/Artisan Partners. All statistics are as of 3/31/04.
GROWTH OF AN ASSUMED $10,000 INVESTMENT (6/27/97 to 3/31/04)
[CHART APPEARS HERE]
ARTISAN MID CAP FUND ($34,930)
Russell Midcap/R Growth Index ($15,121)
Russell Midcap/R Index ($18,741)
Lipper Mid-Cap Core Funds Index ($18,414)
Russell Lipper
ARTISAN Midcap/R Russell Mid-Cap
MID CAP Growth Midcap/R Core
FUND Index Index Funds Index
------ ------- ------- ----------
6/27/97 (inception) 10,000 10,000 10,000 10,000
10,000 9,994 9,969 10,072
12,550 11,393 11,293 11,540
12/97 12,814 11,079 11,418 11,193
14,714 12,402 12,651 12,514
14,607 12,394 12,461 12,144
13,068 10,325 10,614 9,914
12/98 17,090 13,059 12,570 12,063
17,162 13,505 12,512 11,485
19,839 14,912 13,870 12,958
19,601 14,165 12,678 12,123
12/99 26,984 19,757 14,862 15,464
34,037 23,930 16,361 17,707
34,299 22,158 15,623 17,113
38,105 22,717 16,687 17,760
12/00 34,311 17,436 16,088 16,432
30,390 13,062 14,400 14,550
34,092 15,175 15,773 16,378
26,430 10,957 12,956 13,240
12/01 33,266 13,922 15,183 15,627
32,583 13,676 15,828 16,205
28,545 11,179 14,317 14,485
23,386 9,259 11,792 12,114
12/02 25,230 10,107 12,726 12,912
24,418 10,105 12,425 12,421
28,132 12,000 14,694 14,734
9/03 29,822 12,860 15,639 15,598
33,253 14,424 17,824 17,635
3/04 34,930 15,121 18,741 18 414
AVERAGE ANNUAL TOTAL RETURNS (as of 3/31/04)
- --------------------------------------------------------------------------------
SINCE
FUND / INDEX 1-YEAR 5-YEAR INCEPTION
- --------------------------------------------------------------------------------
Artisan Mid Cap Fund 43.05% 15.27% 20.33%
- --------------------------------------------------------------------------------
Russell Midcap/R Growth Index 49.63 2.29 6.31
- --------------------------------------------------------------------------------
Russell Midcap/R Index 50.83 8.42 9.74
- --------------------------------------------------------------------------------
Lipper Mid-Cap Core Funds Index 48.25 9.90 9.45
- --------------------------------------------------------------------------------
THE PERFORMANCE QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT GUARANTEE
FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN
THE FUND WILL FLUCTUATE, SO THAT AN INVESTOR'S SHARES IN THE FUND, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. FOR MONTH-
END PERFORMANCE INFORMATION, VISIT WWW.ARTISANFUNDS.COM OR CALL 800.344.1770.
See page 70 for a description of each index.
14
- ----------
FOURTEEN
- --------------------------------------------------------ARTISAN MID CAP FUND----
INVESTING ENVIRONMENT AND PERFORMANCE DISCUSSION
During the first half of the fiscal year, there were plenty of indications that
the economy was in a sustained recovery and it showed in the GDP growth figures.
It also became clear that consumers would not have to support growth any longer
by themselves. Corporate earnings were strong and businesses started to spend.
Manufacturing activity and industrial production were both very strong
throughout the period. However, as of March 31, 2004, corporations had not begun
hiring at a pace that would be consistent with the level of growth, which has
left some uncertainties. The upcoming presidential election, the direction of
domestic monetary and fiscal policy, the resurgence of terrorism and the
prevalence of unstable geopolitical situations worldwide also created some
questions. While our portfolio is always built from the bottom up, in a period
in which the array of potential outcomes was quite wide, we were especially
diligent in anticipating change and not allowing any single economic sector to
dominate the portfolio.
SECTOR REVIEW
The largest contributors to Fund returns during the period were our holdings in
the technology sector. Within the sector, our telecom equipment providers,
Nortel Networks Corporation and Avaya Inc., and semiconductor companies, PMC-
Sierra, Inc. and Xilinx, Inc., were among the best performers. During the
period, Nortel Networks rose almost 45% after it signed a number of contracts
anticipated to boost future earnings and we trimmed our position into the gain.
Avaya also increased about 45%. It paid down a portion of its high interest
debt, new product sales offset legacy product declines and order sizes
increased. PMC and Xilinx have ties to the communication markets as suppliers of
semiconductors. PMC, with its diverse sales mix, saw an increase in demand
across all markets. We sold the stock into the share price strength. Xilinx
appreciated due to growth of its market share in key segments. Seagate
Technology, a market leader in hard disk drives, was sold off during the period.
It came under pressure when it became apparent that risks related to industry
price competition, and overall enterprise and mobile demand, were not
dissipating. We had a gain in the stock and sold our position.
Our telecom service providers, Sprint PCS (PCS) and Western Wireless
Corporation, performed well amid merger speculation following Cingular's offer
for AT&T Wireless. We sold PCS into the price strength after news that Sprint
Corp. would roll the tracking stocks back into a single stock in April. Western
was a new purchase during the period, and we maintained our position because we
liked the profitable growth potential of its international operations and the
recent improvements in its domestic subscriber numbers.
A number of our technology related holdings in the producer durables sector
weighed on performance. Two of our electronic components stocks were among our
weakest performers, but we decided to take a different course with each holding.
Novellus Systems, Inc. declined on management's more conservative outlook for
new orders relative to its competitors. After that announcement, we became
concerned that the company might be losing market share, and we closed out our
position. KLA-Tencor Corporation traded down, but we elected to maintain our
position because we did not believe its fundamentals were deteriorating. KLA
historically has been one of the most profitable companies in its industry, and
we thought it possessed a high-quality balance sheet and had the potential to
deliver significant operating leverage as the capital spending cycle unfolded.
Repair and operating products distributor W.W. Grainger, Inc. was another weak
performer in the area. It fell modestly after it announced uninspiring earnings
and noted that increased costs to upgrade systems could impact 2004 results.
The healthcare sector produced a number of the strongest relative contributors
compared to our benchmarks. Early in the period, healthcare stocks in general
were aided by the passage of a Medicare prescription drug benefit bill by
Congress, which ultimately was signed by the President. Separate from that news,
a number of our stocks had positive company specific news that added to stock
strength.
[PHOTO]
ANDREW C. STEPHENS
Lead Portfolio Manager
[PHOTO]
JAMES D. HAMEL
Associate Portfolio Manager
800.344.1770 o WWW.ARTISANFUNDS.COM
15
---------
FIFTEEN
- ----ARTISAN MID CAP FUND--------------------------------------------------------
Drug manufacturer Andrx Corporation did well due to the announcement of a new
management team, which is expected to refocus the company on its core generic
business from the branded business that historically weighed on its earnings
growth. Pharmacy benefit manager Caremark Rx, Inc. announced that it had won a
huge federal contract and other key sales that were expected to improve
earnings. Anthem, Inc., a health benefits provider, announced it had received
approval to merge with WellPoint Health Networks Inc. It showed solid
enrollment/membership and better pricing due to its strong market share, low
costs and new products. Medical devices manufacturer Boston Scientific
Corporation is focused on specific technologies such as drug eluting stents (a
stent is a tube placed in an artery or vein to provide support and keep it
open). It reported strong initial results for its TAXUS product, a cardiac
stent.
SECTOR DIVERSIFICATION
SECTOR 9/30/03 3/31/04 SECTOR 9/30/03 3/31/04
- --------------------------------------------------------------------------------
Auto & Transportation 5.2% 4.2% Other 0.4% 0.8%
- --------------------------------------------------------------------------------
Consumer Discretionary 24.1 23.7 Other Energy 4.8 3.5
- --------------------------------------------------------------------------------
Consumer Staples 1.6 2.6 Producer Durables 7.8 8.5
- --------------------------------------------------------------------------------
Financial Services 12.4 13.6 Technology 22.2 20.4
- --------------------------------------------------------------------------------
Healthcare 13.3 14.4 Utilities 0.7 1.1
- --------------------------------------------------------------------------------
Integrated Oils 0.0 0.0 Other assets less liabilities 4.5 4.1
- --------------------------------------------------------------------------------
Materials & Processing 3.0 3.1 TOTAL 100.0%100.0%
- --------------------------------------------------------------------------------
As a percentage of total net assets as of 9/30/03 and 3/31/04, respectively.
Financials stocks benefited from rising equity markets and a favorable interest
rate environment and our security selection was fairly strong, which yielded
positive results. Commercial finance company CIT Group Inc. reduced its
commercial paper issuance, reached an agreement to sell its venture capital
portfolio and accelerated a charge-off, all of which served to upgrade the
health of its balance sheet. Online broker Ameritrade Holding Corporation
reported an increase in trading volume, lower expenses due to acquisition
synergies and generated a significant amount of excess cash. Capital One
Financial Corporation, a new buy in the first half of the period, announced that
credit trends were improving (leading to lower loss assumptions) and that assets
were expected to rise.
One other positive gainer of note was energy company Smith International, Inc.
Smith produced solid results because it was able to push through some price
increases to its customers. Its international operations continued to grow, and
the company's management team has a strong history of creating value.
We were hurt by some of our transportation stocks. Southwest Airlines Co., a
former top holding, weakened early in the period on concerns about higher fuel
costs and weak outlook for passenger traffic. Trucking firm Swift Transportation
Co., Inc.'s share price dropped as the market tried to digest the potential
impact of higher fuel costs, new federally mandated hours of service regulations
and a review of driver logs. We elected to secure our gains in both stocks and
closed out our positions in favor of other opportunities.
16
--------
SIXTEEN
- --------------------------------------------------------ARTISAN MID CAP FUND----
FUND CHANGES
At the end of the period, the portfolio was broadly exposed to the economy via
established franchises. We felt the portfolio was well balanced, with a skew
toward slightly larger companies when compared to our relevant benchmark
indices. The sector allocations in the portfolio remained largely the same
throughout the period. Our transactions occurred in a diverse group of
industries.
A number of the larger purchases we made during the six month period, not
previously mentioned, included: The Bear Stearns Companies Inc., investment bank
and broker; Iron Mountain Incorporated, business records management; Fisher
Scientific International Inc., provider of products and services to the
scientific research, clinical laboratory and industrial safety markets; EOG
Resources, Inc., oil and gas driller; and Aetna Inc., healthcare benefits
provider. Bear Stearns is a diverse franchise exposed to improving capital
market fundamentals. Iron Mountain showed better profitability, grew its sales
force and we were able to purchase shares at what we considered to be an
attractive price. We bought Fisher Scientific because we thought management made
the correct decision to focus more heavily on high margin proprietary products
and its distribution network had created a significant competitive advantage.
EOG historically has shown strong returns on its investments, driven by a tight
control over costs and a history of successful reserve additions. Aetna's
industry exhibited solid fundamentals and we liked the company's expense
reductions, focused marketing efforts and attractive price relative to other
providers.
TOP 10 HOLDINGS
COMPANY NAME %
- --------------------------------------------------------------------------------
CIT Group Inc. 1.8%
- --------------------------------------------------------------------------------
Ameritrade Holding Corporation 1.8
- --------------------------------------------------------------------------------
Avaya Inc. 1.7
- --------------------------------------------------------------------------------
Invitrogen Corporation 1.7
- --------------------------------------------------------------------------------
Anthem, Inc. 1.6
- --------------------------------------------------------------------------------
Danaher Corporation 1.5
- --------------------------------------------------------------------------------
Thermo Electron Corporation 1.5
- --------------------------------------------------------------------------------
Xilinx, Inc. 1.5
- --------------------------------------------------------------------------------
Univision Communications Inc. 1.5
- --------------------------------------------------------------------------------
KLA-Tencor Corporation 1.5
- --------------------------------------------------------------------------------
TOTAL 16.1%
- --------------------------------------------------------------------------------
As a percentage of total net assets as of 3/31/04. Top 10 Holdings are
determined by security, not issuer. Securities of the same issuer are not
aggregated.
Our new positions were funded in part by the sales of a variety of holdings.
Southwest Airlines Co., Novellus Systems, Inc. and Seagate Technologies, Inc.
happened to be three of the largest sales, but there were a number of additional
sales of note. The list included: Omnicom Group Inc. (advertising and
marketing), Rockwell Automation, Inc. (discrete industrial automation), Linear
Technology Corporation (integrated circuits), Mattel Inc. (toys), XL Capital
Limited (insurance), SEI Investments Company (investment management), The New
York Times Company (newspaper publishing), The Williams Companies, Inc. (natural
gas), Network Associates, Inc. (security technology) and AmeriSourceBergen
Corporation (pharmaceuticals).
800.344.1770 o WWW.ARTISANFUNDS.COM
17
----------
SEVENTEEN
ARTISAN
MID CAP VALUE
FUND
- ----HIGHLIGHTS------------------------------------------------------------------
o The six months ended March 31, 2004, marked the three-year anniversary of
Artisan Mid Cap Value Fund. The Fund has outperformed both the Russell
Midcap/R Value Index and its peer group, as measured by the Lipper Mid-Cap
Value Funds Index, over that period.
o Our security selection within the financial services sector contributed the
most to our return during the six months ended March 31, 2004, while our
stocks in the transportation sector were a source of negative performance
compared to our benchmark.
- ----INVESTMENT APPROACH---------------------------------------------------------
Our goal is to invest in companies that are priced below our estimate of the
value of the business and that provide a controlled level of risk. It is
important to complement stock price value with a company that is financially
strong and possesses favorable economics. Our focus is on individual companies,
rather than on economic or market trends.
The Fund often finds investment opportunities in companies that are in the midst
of a turnaround, are in transition, are experiencing declining earnings and/or
have earnings short-falls.
- ----PERFORMANCE REVIEW----------------------------------------------------------
Artisan Mid Cap Value Fund outperformed the Russell Midcap/R Value Index and its
peer group during the semi-annual period ended March 31, 2004 and since the
Fund's inception. However, the Fund underperformed for the one year ended March
31, 2004.
FUND STATISTICS
Net Assets............................ $132.0 Mil.
Number of Holdings............................. 50
Median Market Cap....................... $3.2 Bil.
Weighted Avg. Market Cap................ $5.3 Bil.
Weighted Avg. Growth Rate (3-5 yr).......... 12.7%
Weighted Harmonic Avg. P/E (2004E).......... 13.4X
Source: Factset/Artisan Partners. All statistics are as of 3/31/04.
GROWTH OF AN ASSUMED $10,000 INVESTMENT (3/28/01 to 3/31/04)
[CHART APPEARS HERE]
ARTISAN MID CAP VALUE FUND ($15,113)
Russell Midcap/R Value Index ($14,149)
Russell Midcap/R Index ($13,142)
Lipper Mid-Cap Value Funds Index ($14,046)
ARTISAN Russell Lipper
MID CAP Midcap/R Russell Mid-Cap
VALUE Value Midcap/R Value
FUND Index Index Funds Index
------ ------- ------- ----------
3/28/01 (inception) 10,000 10,000 10,000 10,000
10,070 10,150 10,098 10,093
6/01 11,180 10,865 11,061 11,146
9/01 9,150 9,610 9,085 9,777
12/01 10,693 10,766 10,647 11,206
3/02 11,328 11,616 11,099 11,904
6/02 10,915 11,074 10,040 10,870
9/02 9,331 9,086 8,269 8,972
12/02 10,279 9,728 8,924 9,563
3/03 10,088 9,333 8,713 9,159
6/03 11,742 11,003 10,304 10,916
9/03 12,327 11,657 10,967 11,590
12/03 14,065 13,431 12,499 13,301
3/04 15,113 14,149 13,142 14,046
AVERAGE ANNUAL TOTAL RETURNS (as of 3/31/04)
- --------------------------------------------------------------------------------
SINCE
FUND / INDEX 1-YEAR 3-YEAR INCEPTION
- --------------------------------------------------------------------------------
Artisan Mid Cap Value Fund 49.81% 14.49% 14.71%
- --------------------------------------------------------------------------------
Russell Midcap/R Value Index 51.60 11.71 12.23
- --------------------------------------------------------------------------------
Russell Midcap/R Index 50.83 9.18 9.51
- --------------------------------------------------------------------------------
Lipper Mid-Cap Value Funds Index 53.35 11.64 11.96
- --------------------------------------------------------------------------------
THE PERFORMANCE QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT GUARANTEE
FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN
THE FUND WILL FLUCTUATE, SO THAT AN INVESTOR'S SHARES IN THE FUND, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. THE FUND'S
PERFORMANCE REFLECTS ARTISAN PARTNERS' UNDERTAKING TO LIMIT THE FUND'S
EXPENSES, WHICH MAY BE TERMINATED AT ANY TIME, HAS BEEN IN EFFECT SINCE THE
FUND'S INCEPTION, AND HAS HAD A MATERIAL IMPACT ON THE FUND'S PERFORMANCE,
WHICH WOULD HAVE BEEN LOWER IN ITS ABSENCE. FOR MONTH-END PERFORMANCE
INFORMATION, VISIT WWW.ARTISANFUNDS.COM OR CALL 800.344.1770. See page 70 for a
description of each index.
18
- --------
EIGHTEEN
- --------------------------------------------------ARTISAN MID CAP VALUE FUND----
INVESTING ENVIRONMENT AND PERFORMANCE DISCUSSION
As investors, we are by our nature more disposed to looking at long-term trends
than short-term activity when thinking about the stocks we own, and the same
holds true when considering our performance. The semi-annual reporting period
marked the three-year anniversary of the Fund. Since the Fund's inception, we
are pleased to have accumulated annualized gains that were better than our peer
group and benchmark as measured by the Lipper Mid-Cap Value Funds Index and the
Russell Midcap/R Value Index. It is over these longer periods that we aim to
provide you with strong results.
During the last six months, the domestic market increased a fairly sizeable
amount and generally the indices comprised of small-cap stocks experienced the
largest gains. For the most part, economic data and earnings were fairly strong
throughout the period and provided a tailwind for growth. Based on our own
observations, the only governor on economic growth and stock prices seemed to be
less-than-stellar expansion in employment. As a value conscious investor,
finding new investment ideas was somewhat difficult due to the upward trajectory
of stock prices.
Within the Russell Midcap/R Value Index, every sector posted a double-digit
return. The most favored sectors were producer durables, technology, materials
and processing and consumer discretionary, while the laggards were
transportation, utilities and consumer staples.
The Fund outperformed the benchmark primarily due to our security selection. Our
stocks in the financial services, energy and consumer related sectors were among
our best relative performers. The transportation sector and our paper companies
(part of the materials and processing sector) detracted from results. Also, we
closed out the period not owning any technology stocks because of our general
concern about pricing in the sector. Relative to the Russell Midcap/R Value
Index, this hurt performance.
In the financials sector we benefited the most from the strength of Countrywide
Financial Corporation, The Student Loan Corporation and our insurance stocks.
Mortgage lender Countrywide Financial (our top holding as of 03/31/04) was the
Fund's largest positive contributor. It gained market share in loan origination
and grew its loan servicing business, which translated to strong earnings
growth. Management has been building its servicing portfolio to diversify its
earnings stream in anticipation of a falloff in mortgage demand when interest
rates rise. The company has also made an effort to expand its banking operation.
The Student Loan Corporation reported a solid improvement in earnings primarily
attributable to growth in its loan portfolio. In addition, although the cost of
post-secondary education has risen, there have been a fairly limited number of
competitors in the private loan market and the federal student loan limits have
not been raised in more than a decade. A number of our insurers, such as
Alleghany Corporation, Arch Capital Group Ltd. and White Mountains Insurance
Group, Ltd. (WTM), also performed very well. WTM was the largest contributor.
Its Folksamerica unit acquired a profitable book of reinsurance business from
CNA Financial, and it announced that it was partnering with Warren Buffett's
Berkshire Hathaway to purchase the life insurance and investment operations of
Safeco Corp.
The energy sector has been one of our largest sector weights compared to our
benchmark for more than two years. During the period, higher average oil and gas
prices provided support for earnings and we have been attracted to their strong
cash flow characteristics compared to other sectors. XTO Energy Inc. and Apache
Corporation, two of our top holdings, each outperformed the benchmark sector
return. XTO's gains were driven by a successful acquisition and development
strategy that led to strong production growth. Apache set a record high for
production early in the period and had a solid inventory of international
exploration opportunities.
[PHOTO]
JAMES C. KIEFFER
Portfolio Co-Manager
[PHOTO]
SCOTT C. SATTERWHITE
Portfolio Co-Manager
800.344.1770 o WWW.ARTISANFUNDS.COM
19
---------
NINETEEN
- ----ARTISAN MID CAP VALUE FUND--------------------------------------------------
SECTOR DIVERSIFICATION
SECTOR 9/30/03 3/31/04 SECTOR 9/30/03 3/31/04
- --------------------------------------------------------------------------------
Auto & Transportation 3.7% 3.6% Other 1.5% 1.3%
- --------------------------------------------------------------------------------
Consumer Discretionary 14.6 17.9 Other Energy 14.1 15.3
- --------------------------------------------------------------------------------
Consumer Staples 10.2 5.6 Producer Durables 3.5 2.2
- --------------------------------------------------------------------------------
Financial Services 33.5 35.6 Technology 1.5 0.0
- --------------------------------------------------------------------------------
Healthcare 0.7 3.6 Utilities 4.8 4.6
- --------------------------------------------------------------------------------
Integrated Oils 0.0 0.0 Other assets less liabilities 5.7 5.6
- --------------------------------------------------------------------------------
Materials & Processing 6.2 4.7 TOTAL 100.0%100.0%
- --------------------------------------------------------------------------------
As a percentage of total net assets as of 9/30/03 and 3/31/04, respectively.
Apparel manufacturer Polo Ralph Lauren Corporation, jewelry retailer Zale
Corporation and furniture manufacturer Furniture Brands International, Inc.
paced a strong relative return for our consumer stocks. Polo was able to
leverage trends in women's apparel with its new Lauren line and continued to
improve its European operations. Zale management has executed well, improved
product quality and done a better job marketing. In addition, the company's
newly launched outlet stores (strip mall strategy) did better than expected and
carried a lower rent structure. Furniture Brand's share price experienced some
ups and downs over the course of the last year and during the semi-annual
reporting period, but overall the performance trend was higher. The company
started to see an increase in order rates at its middle and high price points.
One stock in the area that performed poorly was supermarket company Safeway Inc.
It was pressured by competition, a decision to cancel the sale of its Chicago
area chain and a labor strike.
Two of our stocks were acquired and both transactions proved profitable. We
purchased shares of Concord EFS, Inc., a credit card transaction processor,
early in the period because we were attracted to what we considered to be its
historically strong return on capital, lack of debt, and history of repurchasing
stock. We were aware at the time that it might merge with rival First Data
Corporation, but the merger was challenged by the Department of Justice (DOJ).
As it turned out, the companies struck a deal with the DOJ and the value of the
stock rose before the transaction. Consumer products company Dial Corporation
was purchased at a premium by German consumer products group, Henkel KGaA.
Our transportation stocks were among the worst performers in the Fund. Trucking
firm Swift Transportation Co., Inc. was hurt by new hours of service
regulations, higher fuel costs and news of a regulatory review of driver log
documentation. Tidewater, Inc., a workboat company that services the oil
industry, performed well early, but ended up roughly flat by the end of the
period after management's announcement regarding lower vessel utilization in its
international operations. However, Tidewater has a fairly low debt level and the
largest fleet of vessels supporting the offshore energy industry.
Our paper stocks, MeadWestvaco Corporation and Domtar Inc., posted positive
returns, but did not perform as well as other materials stocks. They both were
hurt by the negative influence of imports. Additionally, Meadwestvaco was hurt
by soft pricing and high energy costs and Domtar by a weakening U.S. dollar and
news of a decline in shipments. Pentair, Inc., a diversified manufacturer,
helped offset some of the negative contribution. Management at the company
repositioned the company toward a singular focus on water and announced an
acquisition of Wisconsin Energy Corp.' s water products unit. The company's
announcement of the potential divestment of its less profitable tools business
was another move in that direction.
20
- --------
TWENTY
- --------------------------------------------------ARTISAN MID CAP VALUE FUND----
FUND CHANGES
The strength of the economy and corporate earnings pushed stock prices markedly
higher during the period. Although we worked hard to come up with new names to
place in the portfolio, finding ideas that met our criteria for investment
became progressively more difficult during the period. However, we did initiate
positions in a number of quality companies, from a variety of sectors.
We made two new purchases in the healthcare sector, which increased our
allocation to the area. Universal Health Services, Inc., a healthcare management
company, was purchased on the basis of improving hospital admissions and a
stable pricing environment. We purchased Pharmaceutical Product Development,
Inc., a contract research organization, because of its management team,
historically solid profitability and strong balance sheet. Our consumer
discretionary allocation also increased due to the addition of video retailer
Blockbuster Inc. and auto parts retailer AutoZone, Inc. At Blockbuster, we were
attracted to what we considered to be a highly discounted share price. Also, we
thought that the negative growth sentiment surrounding the home video industry
was overdone. We liked AutoZone's historically strong cash flow characteristics,
profitability and management's diligence with capital. Elsewhere in the Fund we
purchased BorgWarner Inc., a transmission and engine systems manufacturer, The
Sherwin-Williams Company, a paints and coatings producer, and Equitable
Resources, Inc., a natural gas utility.
TOP 10 HOLDINGS
COMPANY NAME %
- --------------------------------------------------------------------------------
Countrywide Financial Corporation 5.6%
- --------------------------------------------------------------------------------
Apache Corporation 5.0
- --------------------------------------------------------------------------------
The Student Loan Corporation 4.8
- --------------------------------------------------------------------------------
Alleghany Corporation 3.9
- --------------------------------------------------------------------------------
White Mountains Insurance Group Ltd. 3.7
- --------------------------------------------------------------------------------
Polo Ralph Lauren Corporation 3.6
- --------------------------------------------------------------------------------
EOG Resources, Inc. 3.1
- --------------------------------------------------------------------------------
Liz Claiborne Inc. 3.0
- --------------------------------------------------------------------------------
Furniture Brands International, Inc. 3.0
- --------------------------------------------------------------------------------
Nuveen Investments, Inc., Class A 2.8
- --------------------------------------------------------------------------------
TOTAL 38.5%
- --------------------------------------------------------------------------------
As a percentage of total net assets as of 3/31/04. Top 10 Holdings are
determined by security, not issuer. Securities of the same issuer are not
aggregated.
In addition to Dial's acquisition, we also closed out positions in three other
stocks. Arrow Electronics, Inc. and Centex Corporation were sold after reaching
our target price range. Notably, the sale of Arrow reduced our technology
exposure to zero at the end of the period. We sold Weatherford International,
Ltd. on what we considered to be weaker fundamentals.
800.344.1770 o WWW.ARTISANFUNDS.COM
21
----------
TWENTY-ONE
ARTISAN
SMALL CAP FUND
- ----HIGHLIGHTS------------------------------------------------------------------
o For the six months ended March 31, 2004 Artisan Small Cap Fund outperformed
the Russell 2000/R Growth Index and performed roughly in line with the
Russell 2000/R Index.
o Our stocks in the healthcare sector were a major source of gains compared to
both indices.
o The energy and technology sectors were two areas of underperformance relative
to both indices.
- ----INVESTMENT APPROACH---------------------------------------------------------
We use a bottom-up investment process to identify well-managed small companies
whose growth and profit potential are not yet fully recognized by investors.
During the security selection process, our analysis is aimed at addressing four
questions about a company:
1) Is the company growing earnings?
2) Does the company have a competitive advantage?
3) Is the company investing capital wisely?
4) Is the company's stock trading at a reasonable price?
- ----PERFORMANCE REVIEW----------------------------------------------------------
The six months ended March 31, 2004 was a strong period for stocks of all sizes.
Every sector in the Russell 2000/R Index posted meaningful returns.
FUND STATISTICS
Net Assets............................ $166.9 Mil.
Number of Holdings............................. 81
Median Market Cap..................... $790.3 Mil.
Weighted Avg. Market Cap.............. $890.6 Mil.
Weighted Avg. Growth Rate (3-5 yr).......... 17.7%
Weighted Harmonic Avg. P/E (2004E).......... 21.6X
Median P/E (2004E).......................... 23.0X
Source: Factset/Artisan Partners. All statistics are as of 3/31/04.
GROWTH OF AN ASSUMED $10,000 INVESTMENT (3/28/95 to 3/31/04)
[CHART APPEARS HERE]
ARTISAN SMALL CAP FUND ($22,775)
Russell 2000/R Growth Index ($17,351)
Russell 2000/R Index ($25,633)
Lipper Small-Cap Core Funds Index ($28,340)
ARTISAN Russell Lipper
SMALL 2000/R Russell Small-Cap
CAP Growth 2000/R Core
FUND Index Index Funds Index
------ ------- ------- ----------
3/28/95 (inception) 10,000 10,000 10,000 10,000
10,050 9,963 10,022 10,005
11,520 10,951 10,962 10,707
12,650 12,197 12,044 11,874
12/95 13,283 12,377 12,305 12,193
14,059 13,088 12,933 13,036
14,785 13,853 13,580 13,903
14,160 13,735 13,626 13,989
12/96 14,858 13,771 14,335 14,475
14,150 12,326 13,594 13,683
16,459 14,490 15,797 16,003
18,627 16,942 18,149 18,686
12/97 18,226 15,554 17,541 17,693
19,566 17,401 19,305 19,618
18,883 16,402 18,405 18,712
13,976 12,735 14,697 14,595
12/98 15,771 15,745 17,094 17,049
13,891 15,480 16,167 15,610
15,672 17,763 18,681 17,992
15,530 16,889 17,500 17,224
12/99 18,795 22,529 20,728 20,489
21,211 24,621 22,196 22,602
20,759 22,806 21,357 22,241
19,685 21,900 21,594 22,866
12/00 18,531 17,476 20,102 21,909
17,744 14,819 18,794 20,243
20,774 17,483 21,479 23,353
16,571 12,574 17,014 19,268
12/01 20,795 15,864 20,602 23,471
20,481 15,553 21,422 24,308
17,886 13,112 19,633 22,199
13,575 10,290 15,431 17,919
12/02 14,833 11,063 16,382 18,957
14,427 10,634 15,646 17,978
17,865 13,202 19,311 21,674
18,811 14,584 21,064 23,257
21,288 16,433 24,123 26,711
3/04 22,775 17,351 25,633 28,340
AVERAGE ANNUAL TOTAL RETURNS (as of 3/31/04)
- --------------------------------------------------------------------------------
SINCE
FUND / INDEX 1-YEAR 5-YEAR INCEPTION
- --------------------------------------------------------------------------------
Artisan Small Cap Fund 57.86% 10.39% 9.57%
- --------------------------------------------------------------------------------
Russell 2000/R Growth Index 63.16 2.31 6.31
- --------------------------------------------------------------------------------
Russell 2000/R Index 63.83 9.66 11.01
- --------------------------------------------------------------------------------
Lipper Small-Cap Core Funds Index 57.64 12.67 12.26
- --------------------------------------------------------------------------------
THE PERFORMANCE QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT GUARANTEE
FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN
THE FUND WILL FLUCTUATE, SO THAT AN INVESTOR'S SHARES IN THE FUND, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. FOR MONTH-
END PERFORMANCE INFORMATION, VISIT WWW.ARTISANFUNDS.COM OR CALL 800.344.1770.
See page 70 for a description of each index.
22
- ----------
TWENTY-TWO
- ------------------------------------------------------ARTISAN SMALL CAP FUND----
INVESTING ENVIRONMENT AND PERFORMANCE DISCUSSION
The six months ended March 31, 2004 was a strong period for U.S. stocks of all
sizes. Small-cap stocks were the leading performers and value stocks outpaced
growth. Economic data was fairly strong across the board. Manufacturing reports
indicated that corporations were beginning to participate in and contribute to
the economic rebound, interest rates remained at very low levels, inflation was
relatively tame and corporate earnings were solid. Merger and acquisition
activity appeared to be on the rise. However, late in the period renewed
concerns about terrorism resurfaced and the employment data released seemed to
indicate that the economic recovery was not as robust as expected. This shook
consumer confidence somewhat and caused the performance of small stocks to tail
off in February and March.
Virtually every sector in the Russell 2000/R and Russell 2000/R Growth indices
posted double-digit returns. Energy stocks were among the leading gainers as
rising demand drove oil and gas prices higher. The materials sector was also one
of the better performers due to generally higher commodity prices. The consumer
areas benefited from strong consumer spending, the potential for increased tax
rebate checks and low interest rates. The weakest performers relative to the
averages were the technology, utilities and transportation sectors.
In the Fund, our stock selection in the healthcare, consumer discretionary and
financial services sectors was the main driver behind strong results in those
areas. Although our energy and technology stocks contributed positively to
performance, we underperformed our benchmarks in both sectors.
The healthcare sector was our strongest contributor relative to our benchmarks.
One factor early in the period that helped drive returns was the signing of a
Medicare prescription drug benefit bill. Although we could not estimate the
long-term impact of the bill, it had a positive share price impact on specialty
pharmaceutical distributor Priority Healthcare Corporation and on Lifepoint
Hospitals, Inc., a rural provider. We continued to hold Lifepoint, but sold
Priority into the share price gains after it reached our price target. One of
the best performers in the area was animal healthcare company VCA Antech, Inc.
Its management team did a solid job growing the animal hospital and laboratory
segments. Historically, we have generally avoided what we consider to be early-
stage biotechnology stocks in favor of "tools" providers (equipment, service and
supplies) such as drug development services provider Inveresk Research Group,
Inc. and research tools provider Charles River Laboratories International, Inc.
and that decision paid off during the period. Inveresk made a number of
acquisitions that have contributed to its growth. It historically has been one
of the most profitable companies in its industry and has had a very diverse
client base. Charles River also made a number of strategic acquisitions that
expanded its range of services and positioned it to potentially benefit from
growth in the pre-clinical development of new drugs.
Universal Technical Institute, Inc. (UTI) and The First Marblehead Corporation
(FMD), both new purchases, were our two leading gainers in the consumer
discretionary sector. UTI is a post secondary education provider, and FMD is a
private student loan company. During the period, gains in UTI were driven by
student population growth, which has increased sales, and controlled
compensations costs, which have helped improve profitability. FMD rose after it
signed up Chase Manhattan Bank, the second largest federal student lender, as a
customer. Chase announced plans to offer FMD's private student loans directly to
consumers as an alternative to Sallie Mae's products, which it currently offers.
Two additional strong performers were risk consultant Kroll Inc. and gaming
machine manufacturer Alliance Gaming Corporation. Kroll has a history of
profitable acquisitions, a recognizable brand name and a balanced sales mix.
Alliance benefited from an increase in cashless slot machine sales. Moreover,
the company has been profitable and pricing has been good.
[PHOTO]
CARLENE M. ZIEGLER
Portfolio Co-Manager
[PHOTO]
MARINA T. CARLSON
Portfolio Co-Manager
800.344.1770 o WWW.ARTISANFUNDS.COM
23
------------
TWENTY-THREE
- ----ARTISAN SMALL CAP FUND------------------------------------------------------
SECTOR DIVERSIFICATION
SECTOR 9/30/03 3/31/04 SECTOR 9/30/03 3/31/04
- --------------------------------------------------------------------------------
Auto & Transportation 3.3% 5.4% Other 0.0% 0.0%
- --------------------------------------------------------------------------------
Consumer Discretionary 18.1 23.3 Other Energy 5.5 4.5
- --------------------------------------------------------------------------------
Consumer Staples 1.6 0.0 Producer Durables 7.6 9.3
- --------------------------------------------------------------------------------
Financial Services 11.8 8.1 Technology 22.0 24.0
- --------------------------------------------------------------------------------
Healthcare 15.7 15.4 Utilities 2.1 2.2
- --------------------------------------------------------------------------------
Integrated Oils 0.8 0.0 Other assets less liabilities 6.7 2.7
- --------------------------------------------------------------------------------
Materials & Processing 4.8 5.1 TOTAL 100.0%100.0%
- --------------------------------------------------------------------------------
As a percentage of total net assets as of 9/30/03 and 3/31/04, respectively.
In the financial sector, our banking stocks did very well. Two of the better
performers were Texas Capital Bancshares, Inc., primarily a commercial lender
focused on the middle market, and commercial real estate company Greater Bay
Bancorp, which is concentrated in the San Francisco bay area. Texas Capital
positioned itself to develop relationships with local businesses and gain market
share from larger national lenders. Recent earnings reflected this strategy and
were considerably improved. Greater Bay exhibited good expense control and
stable overall credit quality in its loan portfolio. We sold our position in the
stock subsequent to its appreciation.
Two standout performers not found in the healthcare, consumer discretionary or
financial sectors were railroad company Genesee & Wyoming, Inc. and construction
and industrial materials distributor Hughes Supply, Inc. Genesee announced that
it was purchasing three short-line railroads that it expected would immediately
add to earnings and its Australian earnings were above expectations due to
strong China demand. We sold Genesee after it reached our estimate of intrinsic
value. Hughes benefited from strong economic data related to industrial
production and specifically solid construction spending data.
Our energy stocks, which primarily were equipment and service companies, were
among the worst relative performers. They were pressured by flat equipment and
services demand from oil companies.
In the technology sector we had a number of standout performers, but their gains
were partially offset by disappointment in other stocks. Aeroflex Incorporated
(microelectronic components manufacturer) and Extreme Networks, Inc. (network
infrastructure equipment provider) were up over 50% and 40%, respectively. We
sold Extreme into the gains and continue to hold Aeroflex. Planar Systems, Inc.
(electronic displays) fell due to concerns about falling market share in its
medical business and we eventually sold our position due to its reduced growth
outlook. Storage networking provider Dot Hill Systems Corp., a new purchase
during the period, was under pressure due to an additional share issuance and
sales concerns at its largest customer.
24
- ------------
TWENTY-FOUR
- ------------------------------------------------------ARTISAN SMALL CAP FUND----
FUND CHANGES
During the reporting period we had a number of transactions. We sold a number of
names that were, in our opinion, at the high end of their intrinsic value range,
or where better options presented themselves, and bought stocks that moved into
an attractive range on weakness. In addition, we took advantage of the price
swings by trading in some of our core positions on the basis of their intrinsic
values. The consumer discretionary sector increased the most as a percentage of
the portfolio while the financial services sector decreased the greatest amount.
The additions in the consumer discretionary sector were from a variety of
industries. We already mentioned First Marblehead and Universal Technical
Institute. Other stocks purchased included: The Gymboree Corporation, children's
clothing retailer; Too, Inc., a "tween" girls clothing retailer and former
holding; FindWhat.com, internet advertiser; and School Specialty, Inc.,
education supplies provider. A portion of the purchases were funded from the
proceeds received after selling Shuffle Master, Inc., Stage Stores, Inc., Linens
'n Things, Inc. and Men's Wearhouse, Inc., which reached our price targets. Lin
TV Corporation was sold when we believed that its growth prospects had
diminished.
Within the financial services sector, in addition to Greater Bay Bancorp, we
sold Selective Insurance Group, Inc., ProAssurance Corporation, PrivateBancorp,
Inc. and Jefferies Group, Inc. after each had reached our estimate of intrinsic
value. Two new buys in financials were First National Bankshares of Florida,
Inc., which was spun off from F.N.B. Corporation, and HealthExtras, Inc., a
pharmacy benefit manager.
TOP 10 HOLDINGS
COMPANY NAME %
- --------------------------------------------------------------------------------
Kroll Inc. 2.0%
- --------------------------------------------------------------------------------
Axcelis Technologies, Inc. 1.8
- --------------------------------------------------------------------------------
DSP Group, Inc. 1.8
- --------------------------------------------------------------------------------
AMERIGROUP Corporation 1.7
- --------------------------------------------------------------------------------
Spartech Corporation 1.7
- --------------------------------------------------------------------------------
Avocent Corporation 1.7
- --------------------------------------------------------------------------------
Anteon International Corporation 1.6
- --------------------------------------------------------------------------------
Pacer International, Inc. 1.6
- --------------------------------------------------------------------------------
FactSet Research Systems Inc. 1.6
- --------------------------------------------------------------------------------
Macrovision Corporation 1.6
- --------------------------------------------------------------------------------
TOTAL 17.1%
- --------------------------------------------------------------------------------
As a percentage of total net assets as of 3/31/04. Top 10 Holdings are
determined by security, not issuer. Securities of the same issuer are not
aggregated.
There were a number of notable transactions in other sectors. We initiated
positions in non-union trucker Overnite Corporation, Medicaid managed care
provider AMERIGROUP Corporation, battery and light manufacturer Rayovac
Corporation, stationary air compressor manufacturer Gardner Denver, Inc.,
transportation services company Forward Air Corporation and Packeteer, Inc.
Packeteer offers software and products to monitor network bandwidth to ensure
that low-priority applications do not bog down mission-critical applications.
Mid Atlantic Medical Services, Inc., a managed healthcare provider, rose after
receiving a premium takeout offer of stock and cash from UnitedHealth Group
Incorporated. We closed out our position in the stock subsequent to the news
because UnitedHealth does not meet our market cap criteria. We also sold Techne
Corporation, Zoll Medical Corporation, Actuant Corporation and Cimarex Energy
Company after they reached our target price. ESCO Technologies, Inc. was sold
when we became uncomfortable that it could meet our expectations for future
growth. Lattice Semiconductor Corporation was sold due to disappointing earnings
growth.
800.344.1770 o WWW.ARTISANFUNDS.COM
25
------------
TWENTY-FIVE
ARTISAN
SMALL CAP VALUE
FUND
- ----HIGHLIGHTS------------------------------------------------------------------
o Small value stocks led small growth stocks in both quarters of the six month
period ended March 31, 2004. Nevertheless, both styles posted strong gains.
o The strongest contributor to performance was the energy sector as oil and gas
prices provided support for strong earnings growth in the area.
o Our stocks in the transportation sector underperformed both indices.
- ----INVESTMENT APPROACH---------------------------------------------------------
Our goal is to invest in companies that are priced below our estimate of the
value of the business and that provide a controlled level of risk. It is
important to complement stock price value with a company that is financially
strong and possesses favorable economics. Our focus is on individual companies,
rather than on economic or market trends.
The Fund often finds investment opportunities in companies that are in the midst
of a turnaround, are undiscovered or unsponsored, have hidden assets, and/or are
in the process of a major change.
- ----PERFORMANCE REVIEW----------------------------------------------------------
For the six months ended March 31, 2004 Artisan Small Cap Value Fund
outperformed the Russell 2000/R Index and trailed the Russell 2000/R Value
Index. Since inception, the Fund has outperformed both indices and its peers, as
measured by the Lipper Small-Cap Value Funds Index.
FUND STATISTICS
Net Assets.............................. $1.1 Bil.
Number of Holdings............................. 95
Median Market Cap..................... $769.3 Mil.
Weighted Avg. Market Cap.............. $980.0 Mil.
Median P/B Value............................. 1.9X
Median P/E Ratio (2004E).................... 17.0X
Source: Factset/Artisan Partners. All statistics are as of 3/31/04.
GROWTH OF AN ASSUMED $10,000 INVESTMENT (9/29/97 to 3/31/04)
[CHART APPEARS HERE]
ARTISAN SMALL CAP VALUE FUND ($21,717)
Russell 2000/R Value Index ($18,241)
Russell 2000/R Index ($14,206)
Lipper Small-Cap Value Funds Index ($17,742)
ARTISAN Russell Lipper
SMALL CAP 2000/R Russell Small-Cap
VALUE Value 2000/R Value
FUND Index Index Funds Index
------ ------- ------- ----------
9/29/97 (inception) 10,000 10,000 10,000 10,000
9,990 10,051 10,058 10,041
10,310 10,220 9,722 9,881
11,220 11,073 10,700 10,769
11,370 10,673 10,201 10,295
9,079 8,765 8,146 8,277
12/98 9,717 9,560 9,474 9,218
9,270 8,634 8,960 8,247
11,258 10,063 10,354 9,755
10,790 9,276 9,699 9,015
12/99 11,215 9,418 11,488 9,339
11,391 9,778 12,302 9,730
11,733 9,969 11,837 9,858
12,517 10,700 11,968 10,535
12/00 13,550 11,568 11,141 10,904
13,794 11,680 10,416 11,175
15,114 13,040 11,904 12,595
13,330 11,301 9,430 10,781
12/01 15,589 13,190 11,418 12,781
17,052 14,454 11,873 13,801
16,573 14,147 10,881 13,238
13,856 11,135 8,553 10,745
12/02 14,896 11,683 9,079 11,349
14,306 11,090 8,671 10,695
16,887 13,610 10,703 13,135
17,555 14,661 11,674 14,337
20,936 17,061 13,369 16,744
3/04 21,717 18,241 14,206 17,742
AVERAGE ANNUAL TOTAL RETURNS (as of 3/31/04)
- --------------------------------------------------------------------------------
SINCE
FUND / INDEX 1-YEAR 5-YEAR INCEPTION
- --------------------------------------------------------------------------------
Artisan Small Cap Value Fund 51.81% 18.56% 12.67%
- --------------------------------------------------------------------------------
Russell 2000/R Value Index 64.49 16.14 9.69
- --------------------------------------------------------------------------------
Russell 2000/R Index 63.83 9.66 5.55
- --------------------------------------------------------------------------------
Lipper Small-Cap Value Funds Index 65.89 16.56 9.22
- --------------------------------------------------------------------------------
THE PERFORMANCE QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT GUARANTEE
FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN
THE FUND WILL FLUCTUATE, SO THAT AN INVESTOR'S SHARES IN THE FUND, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. FOR MONTH-
END PERFORMANCE INFORMATION, VISIT WWW.ARTISANFUNDS.COM OR CALL 800.344.1770.
See page 70 for a description of each index.
26
- ----------
TWENTY-SIX
- ------------------------------------------------ARTISAN SMALL CAP VALUE FUND----
INVESTING ENVIRONMENT AND PERFORMANCE DISCUSSION
The period ended March 31, 2004 was a particularly strong period for small
stocks and value stocks, although domestic stocks of all sizes and styles
performed very well. As a small-cap value investor, the rise in prices during
the period made finding new investment ideas harder and the risk/reward ratio of
the average stock less appealing. The increase in stock prices has been
supported by favorable economic data and accommodative interest rates, but the
nature of our investment style requires us to be somewhat skeptical. We remain
committed to our process and our goal of achieving strong returns over the long
term.
The Russell 2000/R Value Index did not seem to pause much during the period and
was among the best performing domestic indices. Two of the leading performers
were energy and materials stocks as commodity prices strengthened amid strong
demand from areas such as China. The consumer staples, technology and utilities
sectors were a few of the laggards.
The Fund benefited from its overweight allocation to energy stocks as the
average price for oil and gas moved higher during the period and helped produce
strong earnings growth. Our financial services stocks were another area of
strength. Interest rates remained at low levels throughout the period, laying a
strong foundation for this interest rate sensitive sector. Most of the
technology stocks we looked at did not meet our criteria for investment and our
underweight exposure to the sector compared to the benchmark contributed
positively to our performance. Although the consumer discretionary,
transportation and materials sectors recorded positive gains for the Fund, they
did not keep pace with the benchmark, which hurt relative results.
We have liked energy stocks for some time, which resulted in a large position
relative to the Russell 2000/R Value Index. To the benefit of the Fund, oil and
gas prices supported strong earnings growth for these stocks. However, it was
not just the strength in commodity prices that attracted us to stocks in the
area. As a group, these stocks traded at prices we considered attractive
compared to other sectors and produced what we considered to be strong amounts
of cash flow. Our largest gainer in the sector was Veritas DGC Inc., an oil
services company with a focus on seismic data. Its stock price more than doubled
during the period. A number of items drove the share price strength, including a
report that highlighted solid sales from its library of seismic data and the
announcement of a new CEO. Stone Energy Corporation, one of our top holdings,
also contributed meaningfully to performance. It did a good job managing costs
and its operational outlook showed improvement after a number of successes in
the Gulf of Mexico. The prices of two of our other energy stocks, Core
Laboratories N.V. and Atwood Oceanics Inc., were up 51% and 48%, respectively.
One negative in an otherwise strong period for our energy stocks was Forest Oil
Corporation. Its share price fell late in the period causing it to underperform
the sector after cutting its estimates of proved reserves more than the market
expected. One final note was the announcement of the potential acquisition by
Plains Exploration & Production Company of Nuevo Energy Company, which were both
holdings throughout the period. Both stocks benefited from the news because the
acquisition potentially could create meaningful cost savings, a larger asset
base and stronger cash flows, providing support for a healthier balance sheet
and the potential for further expansion and growth.
Title insurer Stewart Information Services Corporation was the leading
contributor to our performance in the financial services sector. Its key revenue
drivers, including rising home prices, home sales, and refinancing transactions,
all remained strong, providing support for increasing revenues. Strong earnings
also allowed Stewart to recommence its dividend. Late in the period, refinancing
activity slowed and the shares weakened. We used the softness to add to our
position. Two additional holdings that performed well were insurance broker
Hilb, Rogal & Hobbs Company (formerly known as Hilb, Rogal and Hamilton Company)
and venture capital investment company Capital Southwest Corporation. We built
our position
[PHOTO]
SCOTT C. SATTERWHITE
Portfolio Co-Manager
[PHOTO]
JAMES C. KIEFFER
Portfolio Co-Manager
800.344.1770 o WWW.ARTISANFUNDS.COM
27
------------
TWENTY-SEVEN
- ----ARTISAN SMALL CAP VALUE FUND------------------------------------------------
in Hilb (it is now a top five holding) early in the period when its stock
weakened due to concerns about insurance pricing. Subsequent to the increase in
our position, Hilb announced that its transition to a new sales model had been
effective, the integration plan for the company was being implemented and that
it had a full pipeline of acquisition opportunities. Capital Southwest's
management team led by William Thomas has had a good long-term record of growing
the company's net asset value.
SECTOR DIVERSIFICATION
SECTOR 9/30/03 3/31/04 SECTOR 9/30/03 3/31/04
- --------------------------------------------------------------------------------
Auto & Transportation 8.2% 7.4% Other 0.0% 0.0%
- --------------------------------------------------------------------------------
Consumer Discretionary 23.0 25.5 Other Energy 17.8 20.5
- --------------------------------------------------------------------------------
Consumer Staples 0.9 0.4 Producer Durables 4.9 5.1
- --------------------------------------------------------------------------------
Financial Services 12.9 15.1 Technology 1.5 1.5
- --------------------------------------------------------------------------------
Healthcare 1.3 1.0 Utilities 4.2 4.6
- --------------------------------------------------------------------------------
Integrated Oils 1.0 1.2 Other assets less liabilities 8.1 5.8
- --------------------------------------------------------------------------------
Materials & Processing 16.2 11.9 TOTAL 100.0%100.0%
- --------------------------------------------------------------------------------
As a percentage of total net assets as of 9/30/03 and 3/31/04, respectively.
The technology sector, which was among the leading gainers for most of 2003, did
not perform as well as many of the other sectors during the period. Our lack of
exposure to the sector, which hurt performance in 2003, was a positive
contributor to relative returns during the period. We did not own many stocks in
the sector because, in general, we thought the stocks we looked into were being
overvalued. In fact, our only holdings at the end of the period were CommScope,
Inc., a coaxial cable manufacturer and BearingPoint, Inc., a technology
consulting firm. We sold webMethods, Inc. and Arrow Electronics, Inc. after each
had reached our estimate of full value.
The performance of our consumer discretionary holdings, while strong, was not on
par with that of the benchmark sector return. As a result, this sector hurt our
relative performance. Apparel manufacturer Kellwood Company, our largest
holding, was one of the laggards. Although we believed there were many
characteristics that made the company an attractive top holding, including a
shift towards more profitable businesses, a streamlining of operations, a
potential acquisition and strong earnings, a planned debt financing that would
impact its interest expense and somewhat slower sales prevented a stronger
advance in the stock's price. Discount footwear retailer Payless ShoeSource,
Inc., also a larger holding, trailed other retailers due to a heavy promotional
environment that weighed on profits. A number of our service organizations such
as Coinstar, Inc., FTI Consulting, Inc. and Medical Staffing Network Holdings,
Inc. also hurt results. Jewelry retailer Zale Corporation was a holding in the
sector that outperformed. Zale management has executed well, improved product
quality and done a better job marketing. In addition, the company's newly
launched outlet stores (strip mall strategy) did better than expected and
carried a lower rent structure.
Building materials company Eagle Materials Inc. (formerly Centex Construction
Products, Inc.) benefited from strong housing demand and posted a solid return.
During the period, it was spun-off from Centex Corporation and the spin-off was
accompanied by a 500% increase to the company's dividend. However, our
investment in construction services company EMCOR Group, Inc. offset that
success. EMCOR fell due to project issues at its U.K. operations. Management
noted that it was considering various alternatives at its U.K. unit to reduce
further earnings pressure.
28
- ------------
TWENTY-EIGHT
- ------------------------------------------------ARTISAN SMALL CAP VALUE FUND----
FUND CHANGES
Our investment process seeks to find stocks that are attractive based on our
criteria of undemanding valuation, strong financial condition and good
economics. Consequently, the strength of the stock market during the period made
it more difficult to find new investment ideas that met our valuation criteria.
As a result, our largest positions were basically the same throughout the
period.
Our sector exposures did change to some degree. The consumer discretionary
sector increased as a percentage of the portfolio primarily due to the purchases
of home video entertainment companies Hollywood Entertainment Corporation and
Movie Gallery, Inc. We thought that the negative growth sentiment surrounding
the home video industry was overdone. Two additional purchases in the sector
were coin counting and processing company Coinstar and restructuring and
bankruptcy consultant FTI Consulting. While coin counting is on the surface a
very uninteresting business, we thought Coinstar's proprietary technology,
management team, and growth strategy made it an interesting opportunity. FTI
became attractive after a selloff in the latter part of 2003. We sold retailers
Neiman Marcus Group, Inc. and OfficeMax, Inc. when they reached our price target
range.
Conversely, our allocation to the materials sector decreased. We sold Armor
Holdings, Inc., Duquesne Light, Kaydon Corporation, Schnitzer Steel Industries,
Inc. and Great Lakes Chemical Corporation after they reached our target price
ranges. Wellman, Inc., a polyester products manufacturer, experienced some
downward pressure on profitability and, although management conducted a debt
refinancing and continued its cost reduction program, we felt it was going to be
a long process and closed out our position. One new purchase in the area was
tunnel and pipeline repair company Insituform Technologies, Inc.
TOP 10 HOLDINGS
COMPANY NAME %
- --------------------------------------------------------------------------------
Kellwood Company 3.7%
- --------------------------------------------------------------------------------
Stewart Information Services Corporation 3.2
- --------------------------------------------------------------------------------
Hilb, Rogal & Hobbs Company
(formerly known as Hilb, Rogal and Hamilton Company) 3.2
- --------------------------------------------------------------------------------
Zale Corporation 3.1
- --------------------------------------------------------------------------------
Stone Energy Corporation 3.0
- --------------------------------------------------------------------------------
Forest Oil Corporation 2.4
- --------------------------------------------------------------------------------
Payless ShoeSource, Inc. 2.1
- --------------------------------------------------------------------------------
Simpson Manufacturing Co., Inc. 2.0
- --------------------------------------------------------------------------------
PNM Resources, Inc. 1.8
- --------------------------------------------------------------------------------
ADVO, Inc. 1.8
- --------------------------------------------------------------------------------
TOTAL 26.3%
- --------------------------------------------------------------------------------
As a percentage of total net assets as of 3/31/04. Top 10 Holdings are
determined by security, not issuer. Securities of the same issuer are not
aggregated.
Other purchases included: Post Properties, Inc., real estate investment trust;
National Processing, Inc., transaction processing; General Cable Corporation,
copper, aluminum and fiber optic wire and cable products manufacturer; and
Remington Oil and Gas Corporation, an independent oil and gas producer. These
purchases were partially funded by the sales of Polaris Industries, Inc.,
Sensient Technologies Corporation, Cousins Properties, Inc. and Chateau
Communities, Inc.
800.344.1770 o WWW.ARTISANFUNDS.COM
29
------------
TWENTY-NINE
------
ARTIX
------
ARTISAN INTERNATIONAL FUND (ARTIX)
SCHEDULE OF INVESTMENTS - March 31, 2004 (Unaudited)
SHARES
HELD VALUE
========== ==========
COMMON AND PREFERRED STOCKS - 98.9%
AUSTRALIA - 0.8%
Commonwealth Bank of Australia 3,138,890 $79,736,906
BELGIUM - 1.4%
Interbrew 5,186,822 142,756,452
BRAZIL - 1.7%
Banco Bradesco S.A. (ADR) 9,750 469,463
Banco Bradesco S.A., Preferred 529,339 25,315,032
Banco Itau Holding Financeira S.A., Preferred 178,301,400 16,587,889
Petroleo Brasileiro S.A. (ADR) 1,262,800 42,303,800
Telesp Celular Participacoes S.A.,
Preferred (ADR)(1) 10,109,200 92,296,996
--------------
176,973,180
CANADA - 2.8%
CanWest Global Communications Corporation(1) 4,004,998 35,643,458
Corus Entertainment, Inc., Class B 3,015,450 63,777,521
EnCana Corporation 4,275,200 184,987,282
--------------
284,408,261
CZECH REPUBLIC - 0.8%
Cesky Telecom, a.s. 6,122,504 77,932,363
DENMARK - 1.1%
A P Moller - Maersk A/S 3,300 23,538,736
H. Lundbeck A/S 603,250 11,604,026
Novo Nordisk A/S, Class B 1,651,950 76,645,854
--------------
111,788,616
FINLAND - 0.5%
Nokia OYJ 2,627,800 53,880,133
FRANCE - 3.7%
Credit Argricole S.A. 1,717,890 44,873,980
JC Decaux S.A.(1) 8,233,500 184,101,572
M6 Metropole Television 1,294,100 38,814,855
Rhodia S.A. 6,353,129 19,758,251
Sodexho Alliance S.A. 782,731 23,833,008
Total S.A. 349,000 64,093,846
--------------
375,475,512
GERMANY - 12.9%
Allianz AG 2,895,622 315,402,340
DaimlerChrysler AG 671,180 28,035,137
Deutsche Boerse AG 2,279,689 129,382,574
Deutsche Telekom AG(1) 9,949,990 178,817,626
Henkel KGaA, Preferred 2,482,043 205,366,310
Hypo Real Estate Holding AG(1) 709,117 19,900,506
KDG Investors, L.P. (1)(2)(3) - -
Linde AG 2,752,583 145,799,900
Muenchener Rueckversicherungs-Gesellschaft AG 2,428,108 269,732,073
ProSiebenSat.1 Media AG, Preferred 987,495 19,543,444
--------------
1,311,979,910
GREECE - 0.1%
Hellenic Telecommunications Organization S.A. 650,800 9,151,955
SHARES
HELD VALUE
========== ==========
HONG KONG - 1.9%
China Mobile (Hong Kong) Limited 10,194,500 $ 30,154,276
Citic Pacific Limited 18,818,400 53,127,260
CNOOC Limited(1) 157,960,600 67,398,847
Hong Kong & China Gas Company Limited 24,395,700 41,636,764
--------------
192,317,147
ISRAEL - 0.1%
Check Point Software Technologies Ltd.(1)(4) 444,200 10,114,434
ITALY - 0.9%
Eni S.p.A. 521,900 10,495,688
Saipem S.p.A. 8,778,608 87,407,960
--------------
97,903,648
JAPAN - 17.8%
AEON Co., Ltd. 221,100 9,528,617
All Nippon Airways Co., Ltd. 6,286,000 21,599,923
The Bank of Yokohoma, Ltd.(1) 15,405,500 90,494,467
Credit Saison Co., Ltd. 1,778,300 53,424,956
East Japan Railway Co. 19,046 99,996,756
The Fuji Fire and Marine Insurance Co., Ltd. 804,900 2,271,350
Fuji Television Network, Inc. 6,018 16,924,452
Fuji Television Network, Inc. - Bonus shares 5,013 13,953,736
Honda Motor Co., Ltd. 5,460,800 251,589,384
Japan Airlines System Corp. 19,202,000 65,244,594
Japan Tobacco, Inc. 5,499 40,166,425
KEYENCE Corp. 156,350 38,057,647
KOMATSU Ltd. 3,417,300 21,648,203
Nikko Cordial Corp. 34,800,200 230,475,961
Nippon Broadcasting System, Inc. 162,380 8,182,512
Nomura Holdings, Inc. 6,892,000 125,357,201
ORIX Corp. 97,700 10,793,560
Promise Co., Ltd. 2,117,000 145,285,310
SMC Corp. 329,100 39,200,758
Sumitomo Mitsui Financial Group, Inc. 12,023 88,858,377
The Sumitomo Trust and Banking Co., Ltd. 12,263,300 81,570,926
Tokyo Broadcasting System, Inc. 2,082,100 41,767,903
TOKYU Corp. 13,938,400 87,227,881
UFJ Holdings, Inc. 13,753 87,387,685
Vodafone Holdings K.K. 37,637 92,480,415
Yamato Transport Co., Ltd. 3,022,700 50,714,398
--------------
1,814,203,397
LUXEMBOURG - 0.5%
RTL Group 849,486 54,143,371
MEXICO - 2.5%
Grupo Televisa S.A. (ADR) 3,431,900 162,466,146
Wal-Mart de Mexico S.A. de C.V., Series V 29,419,200 89,506,373
--------------
251,972,519
NETHERLANDS - 4.9%
ASML Holding N.V.(1) 8,790,646 161,116,026
ASML Holding N.V., NY Shares(1)(4) 971,600 17,809,428
Fortis 12,173,376 259,029,013
Koninklijke Ahold NV(1) 7,145,606 58,499,695
--------------
496,454,162
30
- ------
THIRTY
------
ARTIX
------
- -----------------------------------------------------SCHEDULE OF INVESTMENTS----
SHARES
HELD VALUE
========== ==========
NORWAY - 0.9%
Telenor ASA 12,702,300 $88,148,688
REPUBLIC OF KOREA - 1.6%
Samsung Electronics Co., Ltd. 285,560 142,474,875
Samsung Electronics Co., Ltd., Preferred 68,390 20,073,475
--------------
162,548,350
RUSSIA - 1.3%
LUKOIL (ADR) 848,600 105,862,850
Mobile Telesystems (ADR) 214,000 28,141,000
--------------
134,003,850
SINGAPORE - 1.6%
DBS Group Holdings Ltd. 9,746,734 83,832,857
Singapore Telecommunications Ltd. 60,011,500 83,518,573
--------------
167,351,430
SPAIN - 5.4%
Altadis, S.A. 2,272,281 68,852,430
Industria de Diseno Textil, S.A. 2,363,345 54,616,678
Promotora de Informaciones, S.A. 8,307,954 147,673,539
Repsol YPF, S.A. 6,801,212 140,956,202
Telefonica, S.A. 9,293,480 140,629,596
--------------
552,728,445
SWEDEN - 2.4%
Telefonaktiebolaget LM Ericsson(1) 55,338,100 153,228,178
Telefonaktiebolaget LM Ericsson (ADR)(1) 3,220,400 89,366,100
--------------
242,594,278
SWITZERLAND - 12.1%
CIBA Specialty Chemicals AG(1) 187,256 12,774,339
Clariant AG(5) 8,590,222 121,337,521
Credit Suisse Group 5,601,731 194,054,836
Julius Baer Holding, Ltd., Class B 252,224 72,845,914
Nestle S.A., Class B 1,041,511 265,463,052
Roche Holding AG 1,291,000 126,069,245
Serono S.A. 151,578 93,536,395
Swiss Re 878,633 60,528,436
UBS AG 3,911,760 290,468,823
--------------
1,237,078,561
TAIWAN - 0.9%
Chunghwa Telecom Co., Ltd., (ADR) 4,999,300 88,537,603
THAILAND - 0.0%(6)
Advanced Info Service PLC 2,337,100 4,972,553
UNITED KINGDOM - 18.3%
Allied Domecq PLC 4,099,509 34,084,296
BP PLC 5,719,400 47,999,823
British Sky Broadcasting Group PLC 15,910,256 198,678,716
Cadbury Schweppes PLC 2,945,723 23,258,062
Compass Group PLC 37,118,509 244,908,584
Diageo PLC 8,541,251 111,453,072
Imperial Chemical Industries PLC(5) 48,099,946 199,846,558
ITV PLC 116,930,280 286,759,974
Kesa Electricals PLC 12,283,370 60,812,679
Kingfisher PLC 38,770,516 205,859,884
Marks & Spencer Group PLC 42,364,124 217,143,961
Tesco PLC 50,982,868 230,590,873
--------------
1,861,396,482
--------------
TOTAL COMMON AND PREFERRED STOCKS (Cost $8,285,997,410) 10,080,552,206
PAR
AMOUNT VALUE
========== ==========
SHORT-TERM INVESTMENTS
(CASH EQUIVALENTS) - 1.1%
Repurchase agreement with State Street
Bank and Trust Company, 0.75%, dated 3/31/04,
due 4/1/04, maturity value $109,529,282,
collateralized by $9,719,702 market value
Federal National Mortgage Association Note,
1.875%, due 12/15/04, $51,002,800 market value
Federal National Mortgage Association Note,
2.625%, due 11/15/06, $51,004,493 market value
Federal National Mortgage Association Note,
2.000%, due 4/8/05 (Cost $109,527,000) $109,527,000 $109,527,000
---------------
TOTAL INVESTMENTS - 100.0% (Cost $8,395,524,410) 10,190,079,206
OTHER ASSETS LESS LIABILITIES - (0.0%)(6) (1,052,720)
---------------
TOTAL NET ASSETS - 100.0%(7) $10,189,026,486
===============
(1) Non-income producing security.
(2) Valued at a fair value in accordance with procedures established by the
Board of Directors of Artisan Funds.
(3) Private investment partnership which is restricted as to resale. Total
investment cost of $10 million, made through capital contributions on
3/6/00, 7/10/00, and 5/15/01. Value at March 31, 2004 represents 0.0% of
total net assets.
(4) Principally traded in the United States.
(5) Affiliated company as defined by the Investment Company Act of 1940. See
Note 7 to the financial statements.
(6) Represents less than 0.1% of total net assets.
(7) Percentages for the various classifications relate to total net assets.
(ADR) American Depository Receipt
PORTFOLIO DIVERSIFICATION - MARCH 31, 2004
VALUE PERCENTAGE
=========== ==========
Consumer Discretionary $ 2,469,848,629 24.2%
Consumer Staples 1,213,852,292 11.9
Energy 751,506,298 7.4
Financials 2,778,080,433 27.3
Healthcare 307,855,519 3.0
Industrials 417,353,761 4.1
Information Technology 686,120,297 6.7
Materials 499,516,569 4.9
Telecommunication Services 914,781,644 9.0
Utilities 41,636,764 0.4
---------------- --------
TOTAL COMMON AND PREFERRED STOCKS 10,080,552,206 98.9
Total short-term investments 109,527,000 1.1
---------------- --------
TOTAL INVESTMENTS 10,190,079,206 100.0
OTHER ASSETS LESS LIABILITIES (1,052,720) (0.0)*
---------------- --------
TOTAL NET ASSETS $10,189,026,486 100.0%
================ ========
*Represents less than 0.1% of total net assets
The accompanying notes are an integral part of the financial statements.
31
----------
THIRTY-ONE
------
ARTJX
------
- ----ARTISAN INTERNATIONAL SMALL CAP FUND (ARTJX)--------------------------------
SCHEDULE OF INVESTMENTS - March 31, 2004 (Unaudited)
SHARES
HELD VALUE
========== ==========
COMMON AND PREFERRED STOCKS - 99.1%
AUSTRALIA - 3.2%
APN News & Media Limited 1,369,188 $3,989,932
John Fairfax Holdings Limited 3,992,129 10,141,165
RG Capital Radio Limited 1,987,800 4,473,359
---------------
18,604,456
AUSTRIA - 1.9%
Telekom Austria AG 657,876 9,461,723
Wienerberger AG 44,800 1,486,901
---------------
10,948,624
BELGIUM - 1.7%
Colruyt N.V. 86,910 9,657,806
BRAZIL - 1.6%
Telesp Celular Participacoes S.A.,
Preferred (ADR)(1) 1,001,200 9,140,956
CANADA - 3.9%
CanWest Global Communications Corporation(1) 560,700 4,990,087
Corus Entertainment, Inc., Class B 406,600 8,599,692
Precision Drilling Corporation(1) 202,000 9,451,284
---------------
23,041,063
CHINA - 0.3%
Beijing Capital International
Airport Company Limited 5,490,600 1,972,831
COLOMBIA - 0.5%
Bancolombia S.A., Preferred (ADR) 400,600 3,028,536
DENMARK - 1.4%
Bryggerigruppen A/S 121,830 8,106,712
FINLAND - 0.4%
Elisa Oyj, Class A(1) 136,200 2,293,707
FRANCE - 7.0%
Camaieu 89,802 8,682,105
Clarins S.A. 206,965 12,873,236
Eramet SLN 84,828 4,744,505
JC Decaux S.A.(1) 359,958 8,048,683
Remy Cointreau S.A. 212,603 6,873,302
---------------
41,221,831
GERMANY - 4.6%
AMB Generali Holding AG 31,200 2,370,191
Grenkeleasing AG 4,873 167,784
Hypo Real Estate Holding AG(1) 513,510 14,411,033
Stada Arzneimittel AG 191,657 9,746,541
---------------
26,695,549
GREECE - 0.8%
Chipita International S.A. 342,050 1,320,260
Coca-Cola Hellenic Bottling Company S.A. 137,720 3,511,123
---------------
4,831,383
SHARES
HELD VALUE
========== ==========
HONG KONG - 3.2%
China Resources Power Holdings
Company Limited(1) 11,152,400 $6,475,883
Hong Kong Exchanges & Clearing Limited 3,760,000 8,033,673
Panva Gas Holdings Limited(1) 8,552,700 4,362,671
---------------
18,872,227
INDIA - 1.2%
Biocon, Ltd.(1)(2) 60,000 435,986
Satyam Infoway Limited (ADR)(1) 974,556 6,860,874
---------------
7,296,860
ITALY - 2.3%
Gruppo Editoriale L'Espresso S.p.A. 2,319,900 13,659,823
JAPAN - 7.9%
Creed Corporation 2,505 10,939,915
Komeri Company, Ltd. 458,100 12,861,184
The Seiyu, Ltd.(1) 1,887,000 7,480,261
Toho Company, Ltd. 510,800 8,383,817
Yakult Honsha Company, Ltd. 426,800 6,787,998
---------------
46,453,175
MALAYSIA - 1.3%
AMMB Holdings Berhad 7,073,740 7,520,503
MEXICO - 0.8%
Controladora Comercial Mexicana S.A.
de C.V., UBC 3,850,700 4,943,199
NETHERLANDS - 3.4%
Euronext N.V. 304,800 9,085,880
N.V. Holdingmaatschappij De Telegraaf 475,959 10,706,831
---------------
19,792,711
NORWAY - 2.8%
Opera Software ASA(1) 159,000 220,215
Smedvig ASA, Class B 713,400 5,460,331
TGS Nopec Geophysical Company ASA(1) 602,100 10,818,875
---------------
16,499,421
PANAMA - 4.6%
Banco Latinoamericano de Exportaciones,
S.A., E Shares(3)(4) 1,489,914 27,116,435
PORTUGAL - 2.0%
Impresa - Sociedade Gestora de
Participacoes, S.A.(1) 1,094,784 5,383,054
Sonae, S.G.P.S., S.A. 5,616,500 6,420,798
---------------
11,803,852
REPUBLIC OF KOREA - 3.5%
Fine Tec Corporation(3) 1,073,500 4,887,845
Gwangju Shinsegae Company, Ltd. 21,080 660,100
Hanil Cement Company, Ltd. 95,205 5,057,338
Kangwon Land, Inc. 468,756 6,153,585
Korea Information Service, Inc. 80,890 2,042,623
Shinsegae Food System Company, Ltd. 48,155 1,965,767
---------------
20,767,258
RUSSIA - 4.7%
AO VimpelCom (ADR)(1) 188,600 19,612,514
Wimm-Bill-Dann Foods OJSC (ADR)(1) 399,400 7,768,330
---------------
27,380,844
32
- ----------
THIRTY-TWO
------
ARTJX
------
- -----------------------------------------------------SCHEDULE OF INVESTMENTS----
SHARES
HELD VALUE
========== ==========
SINGAPORE - 2.9%
Fraser & Neave Limited 1,966,320 $17,147,457
SPAIN - 0.9%
Recoletos Grupo de Comunicacion, S.A. 677,541 5,305,366
SWEDEN - 3.0%
Elekta AB, B shares(1) 385,124 7,245,311
JM AB 271,300 4,528,855
Nobia AB 290,000 2,900,768
Oriflame Cosmetics S.A. (SDR)(1) 102,300 2,880,068
---------------
17,555,002
SWITZERLAND - 16.4%
Baloise Holding Limited 214,100 8,971,166
Bank Sarasin & Cie AG, B shares 4,418 6,972,578
Bobst Group AG 183,429 6,079,320
Clariant AG(3) 300,600 4,245,997
Kuoni Reisen Holding AG, B shares 8,200 2,992,701
Schindler Holding AG, Participation Certificates 32,961 9,597,640
SEZ Holding AG(1) 65,950 2,310,657
SEZ Holding AG, Rights(1)(2) 65,950 -
SIG Holding AG 108,784 15,859,415
Straumann AG 98,315 16,990,322
Sulzer AG 61,652 15,324,822
Synthes-Stratec, Inc. 6,750 6,919,116
---------------
96,263,734
THAILAND - 3.5%
Bangkok Bank Public Company Limited(1) 1,816,500 4,374,041
Land and Houses Public Company Limited -
Foreign Shares 10,281,800 3,301,075
Land and Houses Public Company Limited -
Local Shares 21,163,400 6,255,458
National Finance Public Company Limited 17,395,700 6,781,863
---------------
20,712,437
UNITED KINGDOM - 7.4%
Capital Radio PLC 442,200 3,955,299
GWR Group PLC 1,056,987 5,344,803
Intertek Group PLC 1,062,200 10,146,073
John Wood Group PLC 3,237,382 7,745,717
MFI Furniture Group PLC 2,675,418 7,238,245
SMG PLC 4,088,475 8,879,074
---------------
43,309,211
---------------
TOTAL COMMON AND PREFERRED STOCKS (Cost $451,037,112) 581,942,969
PAR
AMOUNT VALUE
========== ==========
SHORT-TERM INVESTMENTS (CASH EQUIVALENTS) - 0.8%
Repurchase agreement with State Street Bank
and Trust Company, 0.75%, dated 3/31/04,
due 4/1/04, maturity value $4,387,091,
collateralized by $4,479,768 market value
Federal National Mortgage Association Note,
2.625%, due 11/15/06 (Cost $4,387,000) $4,387,000 $4,387,000
---------------
TOTAL INVESTMENTS - 99.9% (Cost $455,424,112) 586,329,969
OTHER ASSETS LESS LIABILITIES - 0.1% 631,936
---------------
TOTAL NET ASSETS - 100.0%(5) $586,961,905
===============
(1) Non-income producing security.
(2) Valued at a fair value in accordance with procedures established by the
Board of Directors of Artisan Funds.
(3) Affiliated company as defined by the Investment Company Act of 1940. See
Note 7 to the financial statements.
(4) Principally traded in the United States.
(5) Percentages for the various classifications relate to total net assets.
(ADR) American Depository Receipt
(SDR) Swedish Depository Receipt
PORTF0LIO DIVERSIFICATION - MARCH 31, 2004
VALUE PERCENTAGE
=========== ==========
Consumer Discretionary $154,856,704 26.4%
Consumer Staples 92,793,118 15.8
Energy 33,476,207 5.7
Financials 109,773,598 18.7
Healthcare 41,337,276 7.0
Industrials 52,129,143 8.9
Information Technology 14,279,591 2.4
Materials 29,907,255 5.1
Telecommunication Services 42,551,523 7.3
Utilities 10,838,554 1.8
-------------- ---------
TOTAL COMMON AND PREFERRED STOCKS 581,942,969 99.1
Total short-term investments 4,387,000 0.8
-------------- ---------
TOTAL INVESTMENTS 586,329,969 99.9
OTHER ASSETS LESS LIABILITIES 631,936 0.1
-------------- ---------
TOTAL NET ASSETS $586,961,905 100.0%
============== =========
The accompanying notes are an integral part of the financial statements.
33
-------------
THIRTY-THREE
------
ARTKX
------
ARTISAN INTERNATIONAL VALUE FUND (ARTKX)
SCHEDULE OF INVESTMENTS - March 31, 2004 (Unaudited)
SHARES
HELD VALUE
========== ==========
COMMON AND PREFERRED STOCKS - 91.5%
AUSTRALIA - 2.4%
Rinker Group, Ltd. 341,000 $1,807,916
Rinker Group, Ltd. (ADR) 15,000 796,950
---------------
2,604,866
BERMUDA - 0.9%
Arch Capital Group, Ltd.(1)(2) 23,900 1,004,517
DENMARK - 0.2%
Jyske Bank A/S(1) 2,980 158,437
FRANCE - 3.5%
Aventis S.A. 22,395 1,721,943
Vivendi Universal S.A.(1) 78,260 2,075,058
---------------
3,797,001
GERMANY - 5.0%
Henkel KGaA 47,250 3,601,090
Pfeiffer Vacuum Technology AG 17,920 647,848
Schering AG 24,260 1,148,430
---------------
5,397,368
HONG KONG - 4.7%
Asia Satellite Telecommunications Holdings, Ltd. 634,500 1,139,913
Guoco Group, Ltd. 502,000 3,977,890
---------------
5,117,803
ITALY - 6.2%
Caltagirone Editore S.p.A. 165,559 1,261,783
Cementir S.p.A. Cementerie del Tirreno 1,806,137 5,483,880
---------------
6,745,663
JAPAN - 10.2%
Ichiyoshi Securities Co., Ltd. 375,000 2,627,538
Meitec Corporation 98,600 3,719,326
NIPPONKOA Insurance Company, Ltd. 192,000 1,286,327
Olympus Corporation 158,000 3,397,034
---------------
11,030,225
MEXICO - 0.9%
Grupo Aeroportuario del Sureste S.A. de C.V. (ADR) 47,890 998,506
NETHERLANDS - 13.5%
Euronext N.V. 210,934 6,287,799
Hunter Douglas N.V. 50,605 2,551,077
Royal Numico N.V.(1) 47,900 1,413,146
Wolters Kluwer N.V. 257,700 4,406,379
---------------
14,658,401
SHARES
HELD VALUE
========== ==========
NEW ZEALAND - 5.2%
Telecom Corporation of New Zealand, Ltd. 943,201 $3,645,295
Tower, Ltd.(1) 1,936,824 1,984,098
---------------
5,629,393
NORWAY - 0.6%
Statoil ASA 54,195 661,714
REPUBLIC OF KOREA - 4.6%
Lotte Chilsung Beverage Co., Ltd. 3,030 1,715,269
Lotte Chilsung Beverage Co., Ltd., Preferred 580 111,553
Lotte Confectionary Co., Ltd. 4,125 1,799,032
Samchully Co., Ltd. 25,150 1,320,625
---------------
4,946,479
SWITZERLAND - 12.3%
Givaudan S.A. 10,791 5,509,392
Gurit-Heberlein AG 1,049 786,388
Pargesa Holding AG 855 2,374,906
PubliGroupe S.A.(1) 2,027 659,005
Schindler Holding AG 2,659 846,642
Tamedia AG 13,562 1,123,701
Zehnder Group AG 2,232 2,025,488
---------------
13,325,522
UNITED KINGDOM - 21.3%
Brit Insurance Holdings PLC(1) 1,715,785 2,636,779
Cable & Wireless PLC (ADR)(1) 51,100 363,832
Carpetright PLC 55,860 1,033,216
Diageo PLC 378,926 4,944,530
MFI Furniture Group PLC 1,513,000 4,093,366
Rotork PLC 188,900 1,338,496
Signet Group PLC 1,504,350 3,045,551
Unilever PLC (ADR) 140,425 5,659,127
---------------
23,114,897
---------------
TOTAL COMMON AND PREFERRED STOCKS (Cost $87,100,664) 99,190,792
34
- -----------
THIRTY-FOUR
------
ARTKX
------
- -----------------------------------------------------SCHEDULE OF INVESTMENTS----
SHARES
HELD VALUE
========== ==========
SHORT-TERM INVESTMENTS (CASH EQUIVALENTS) - 7.8%
Repurchase agreement with State Street Bank
& Trust Company, 0.75%, dated 3/31/04, due 4/1/04,
maturity value $8,445,176, collateralized by
$8,616,514 market value Federal National
Mortgage Association Note, 2.625%,
due 11/15/06 (Cost $8,445,000) $8,445,000 $8,445,000
---------------
TOTAL INVESTMENTS - 99.3% (COST $95,545,664) 107,635,792
OTHER ASSETS LESS LIABILITIES - 0.7% 803,317
---------------
TOTAL NET ASSETS - 100.0%(3) $108,439,109
===============
(1) Non-income producing security.
(2) Principally traded in the United States.
(3) Percentages for the various classifications relate to total net assets.
(ADR) American Depository Receipt
PORTFOLIO DIVERSIFICATION - MARCH 31, 2004
VALUE PERCENTAGE
=========== ==========
Consumer Discretionary $ 20,249,137 18.7%
Consumer Staples 24,753,137 22.8
Energy 661,714 0.6
Financials 22,338,291 20.6
Healthcare 6,267,407 5.8
Industrials 9,576,307 8.8
Information Technology - 0.0
Materials 8,875,134 8.2
Telecommunication Services 5,149,040 4.8
Utilities 1,320,625 1.2
-------------- ---------
TOTAL COMMON AND PREFERRED STOCKS 99,190,792 91.5
Total short-term investments 8,445,000 7.8
-------------- ---------
TOTAL INVESTMENTS 107,635,792 99.3
OTHER ASSETS LESS LIABILITIES 803,317 0.7
-------------- ---------
TOTAL NET ASSETS $108,439,109 100.0%
============== =========
The accompanying notes are an integral part of the financial statements.
35
------------
THIRTY-FIVE
------
ARTMX
------
ARTISAN MID CAP FUND (ARTMX)
SCHEDULE OF INVESTMENTS - March 31, 2004 (Unaudited)
SHARES
HELD VALUE
========== ==========
COMMON STOCKS - 95.9%
AUTO & TRANSPORTATION - 4.2%
AIR TRANSPORT - 2.5%
Expeditors International of Washington, Inc. 1,228,800 $ 48,525,312
FedEx Corporation 472,900 35,543,164
JetBlue Airways Corporation(1) 1,327,400 33,569,946
---------------
117,638,422
AUTO PARTS: ORIGINAL EQUIPMENT - 0.3%
Dana Corporation 763,400 15,161,124
AUTO TRUCKS & PARTS - 1.4%
PACCAR Inc. 1,142,900 64,276,696
CONSUMER DISCRETIONARY - 23.7%
ADVERTISING AGENCIES - 1.0%
Lamar Advertising Company(1) 1,190,500 47,881,910
CABLE TELEVISION SERVICES - 0.7%
Echostar Communications Corporation(1) 1,032,300 33,807,825
CASINOS & GAMBLING - 0.9%
International Game Technology 974,600 43,818,016
CONSUMER ELECTRONICS - 2.7%
DoubleClick Inc.(1) 1,443,600 16,240,500
Electronic Arts Inc.(1) 731,800 39,487,928
VeriSign, Inc.(1) 1,184,100 19,644,219
Yahoo! Inc.(1) 1,111,200 53,993,208
---------------
129,365,855
COSMETICS - 0.9%
The Estee Lauder Companies Inc. 984,800 43,666,032
HOTEL/MOTEL - 0.8%
Starwood Hotels & Resorts Worldwide, Inc. 935,100 37,871,550
RADIO & TV BROADCASTERS - 2.1%
Univision Communications Inc.(1) 2,147,200 70,879,072
XM Satellite Radio Holdings Inc.(1) 1,007,600 28,212,800
---------------
99,091,872
RESTAURANTS - 1.6%
Starbucks Corporation(1) 944,300 35,647,325
Wendy's International, Inc. 977,300 39,766,337
---------------
75,413,662
SHARES
HELD VALUE
========== ==========
CONSUMER DISCRETIONARY (CONTINUED)
RETAIL - 6.9%
American Eagle Outfitters, Inc.(1) 1,488,600 $ 40,132,656
CarMax, Inc.(1) 1,520,600 44,401,520
Costco Wholesale Corporation(1) 1,127,500 42,348,900
Dollar Tree Stores, Inc.(1) 1,423,300 43,965,737
Fisher Scientific International Inc.(1) 857,200 47,180,288
Kohl's Corporation(1) 965,200 46,648,116
Linens 'n Things, Inc.(1) 466,300 16,511,683
Staples, Inc. 1,753,700 44,526,443
---------------
325,715,343
SERVICES: COMMERCIAL - 5.3%
Accenture Ltd - Class A(1) 2,438,300 60,469,840
Getty Images, Inc.(1) 627,500 33,872,450
InterActiveCorp(1) 1,498,600 47,340,774
Iron Mountain Incorporated(1) 1,309,400 58,438,522
Robert Half International Inc.(1) 2,157,387 50,957,481
---------------
251,079,067
TEXTILES: APPAREL MANUFACTURERS - 0.8%
Jones Apparel Group, Inc. 1,081,100 39,081,765
CONSUMER STAPLES - 2.6%
BEVERAGE: BREWERS (WINERIES) - 0.7%
Constellation Brands, Inc.(1) 963,500 30,928,350
BEVERAGE: SOFT DRINKS - 1.0%
The Pepsi Bottling Group, Inc. 1,506,700 44,824,325
DRUG & GROCERY STORE CHAINS - 0.9%
Whole Foods Market, Inc. 541,100 40,555,445
FINANCIAL SERVICES - 13.6%
BANKS: OUTSIDE NEW YORK CITY - 0.7%
CapitalSource Inc.(1) 1,512,500 33,955,625
DIVERSIFIED FINANCIAL SERVICES - 1.8%
CIT Group Inc. 2,275,600 86,586,580
FINANCE COMPANIES - 1.2%
Capital One Financial Corporation 772,000 58,231,960
FINANCIAL DATA PROCESSING SERVICES & SYSTEMS - 2.1%
Fair Isaac Corporation 971,450 35,049,916
Paychex, Inc. 1,798,300 64,019,480
---------------
99,069,396
FINANCIAL MISCELLANEOUS - 2.1%
MGIC Investment Corporation 1,034,600 66,452,358
Willis Group Holdings Limited 901,600 33,539,520
---------------
99,991,878
36
- ----------
THIRTY-SIX
------
ARTMX
------
- -----------------------------------------------------SCHEDULE OF INVESTMENTS----
SHARES
HELD VALUE
========== ==========
FINANCIAL SERVICES (CONTINUED)
INSURANCE: PROPERTY-CASUALTY - 0.5%
Platinum Underwriters Holdings, Ltd. 715,800 $22,941,390
INVESTMENT MANAGEMENT COMPANIES - 1.0%
T. Rowe Price Group, Inc. 903,600 48,640,788
SAVINGS & LOANS - 1.1%
Golden West Financial Corporation 476,500 53,344,175
SECURITIES BROKERAGE & SERVICES - 3.1%
Ameritrade Holding Corporation(1) 5,532,300 85,197,420
The Bear Stearns Companies Inc. 686,000 60,148,480
---------------
145,345,900
HEALTHCARE - 14.4%
BIOTECHNOLOGY RESEARCH & PRODUCTION - 3.5%
Biogen Idec Inc.(1) 538,000 29,912,800
Invitrogen Corporation(1) 1,099,100 78,794,479
Millennium Pharmaceuticals, Inc.(1) 3,335,900 56,376,710
---------------
165,083,989
DRUGS & PHARMACEUTICALS - 3.8%
Allergan, Inc. 423,100 35,608,096
Andrx Corporation(1) 925,400 25,170,880
IVAX Corporation(1) 1,520,500 34,621,785
MedImmune, Inc.(1) 1,024,700 23,650,076
Mylan Laboratories Inc. 2,704,900 61,482,377
---------------
180,533,214
ELECTRONICS: MEDICAL SYSTEMS - 0.6%
Varian Medical Systems, Inc.(1) 353,300 30,493,323
HEALTH CARE MANAGEMENT SERVICES - 2.9%
Aetna Inc. 526,000 47,192,720
Caremark Rx, Inc.(1) 1,726,900 57,419,425
Cerner Corporation(1) 678,900 30,679,491
---------------
135,291,636
HEALTH CARE SERVICES - 1.6%
Anthem, Inc.(1) 815,800 73,944,112
MEDICAL & DENTAL INSTRUMENTS & SUPPLIES - 2.0%
Boston Scientific Corporation(1) 1,092,500 46,300,150
Zimmer Holdings, Inc.(1) 643,900 47,506,942
---------------
93,807,092
MATERIALS & PROCESSING - 3.1%
CHEMICALS - 0.8%
Ecolab Inc. 1,277,400 36,444,222
CONTAINERS & PACKAGING: PAPER & PLASTIC - 1.0%
Smurfit-Stone Container Corporation(1) 2,724,500 47,923,955
COPPER - 0.5%
Freeport-McMoRan Copper & Gold Inc. 627,800 24,540,702
METAL FABRICATING - 0.8%
Precision Castparts Corp. 812,400 35,769,972
SHARES
HELD VALUE
========== ==========
OTHER - 0.8%
MULTI-SECTOR COMPANIES - 0.8%
Eaton Corporation 650,000 $36,523,500
OTHER ENERGY - 3.5%
MACHINERY: OIL WELL EQUIPMENT & SERVICES - 2.4%
Smith International, Inc.(1) 1,173,500 62,793,985
Weatherford International Ltd.(1) 1,247,200 52,419,816
---------------
115,213,801
OIL: CRUDE PRODUCERS - 1.1%
EOG Resources, Inc. 1,085,100 49,795,239
PRODUCER DURABLES - 8.5%
DIVERSIFIED PRODUCTION - 1.5%
Danaher Corporation 771,200 72,006,944
ELECTRICAL EQUIPMENT & COMPONENTS - 1.3%
Molex Incorporated 1,969,600 59,856,144
ELECTRONICS: INSTRUMENTS GAUGES & METERS - 1.5%
Thermo Electron Corporation(1) 2,545,800 71,995,224
HOMEBUILDING - 0.9%
Centex Corporation 771,900 41,728,914
OFFICE FURNITURE & BUSINESS EQUIPMENT - 1.8%
Diebold, Incorporated 970,900 46,719,708
Xerox Corporation(1) 2,627,800 38,287,046
---------------
85,006,754
PRODUCTION TECHNOLOGY EQUIPMENT - 1.5%
KLA-Tencor Corporation(1) 1,403,800 70,681,330
TECHNOLOGY - 20.4%
COMMUNICATIONS TECHNOLOGY - 7.5%
Advanced Fibre Communications, Inc.(1) 1,513,000 33,331,390
Avaya Inc.(1) 5,118,500 81,281,780
Avocent Corporation(1) 1,236,100 45,476,119
Corning Incorporated(1) 4,261,900 47,648,042
Juniper Networks, Inc.(1) 1,235,000 32,122,350
Nortel Networks Corporation(1) 4,303,700 25,563,978
Symbol Technologies, Inc. 3,571,200 49,282,560
TIBCO Software Inc.(1) 4,883,900 39,901,463
---------------
354,607,682
COMPUTER SERVICES SOFTWARE & SYSTEMS - 4.5%
Adobe Systems Incorporated 1,195,400 47,134,622
BEA Systems, Inc.(1) 2,026,800 25,861,968
Cognos Incorporated(1) 1,413,400 43,900,204
Macromedia, Inc.(1) 1,845,400 37,037,178
Novell, Inc.(1) 2,934,100 33,390,058
VERITAS Software Corporation(1) 878,400 23,637,744
---------------
210,961,774
COMPUTER TECHNOLOGY - 1.8%
Apple Computer, Inc.(1) 1,244,500 33,663,725
NVIDIA Corporation(1) 1,070,700 28,362,843
SanDisk Corporation(1) 817,400 23,189,638
---------------
85,216,206
37
------------
THIRTY-SEVEN
------
ARTMX
------
- ----SCHEDULE OF INVESTMENTS-----------------------------------------------------
SHARES
HELD VALUE
========== ==========
TECHNOLOGY (CONTINUED)
ELECTRONICS - 2.2%
Avid Technology, Inc.(1) 849,100 $39,168,983
Vishay Intertechnology, Inc.(1) 3,109,700 66,360,998
---------------
105,529,981
ELECTRONICS: SEMI-CONDUCTORS/COMPONENTS - 4.4%
Agere Systems Inc., Class A(1) 12,582,800 40,390,788
Agere Systems Inc., Class B(1) 6,341,100 19,784,232
Broadcom Corporation(1) 613,200 24,019,044
Jabil Circuit, Inc.(1) 1,776,100 52,270,623
Xilinx, Inc.(1) 1,887,700 71,732,600
---------------
208,197,287
UTILITIES - 1.1%
UTILITIES: TELECOMMUNICATIONS - 1.1%
Western Wireless Corporation(1) 2,297,400 53,690,238
---------------
TOTAL COMMON STOCKS (Cost $3,766,968,596) 4,533,128,186
PAR
AMOUNT VALUE
========== ==========
SHORT-TERM INVESTMENTS
(CASH EQUIVALENTS) - 4.0%
Repurchase agreement with State Street Bank
and Trust Company, 0.75%, dated 3/31/04,
due 4/1/04, maturity value $187,105,898,
collateralized by $37,846,119 market value
Federal National Mortgage Association Note,
2.010%, due 7/21/05, $51,003,175 market value
Federal National Mortgage Association Note,
1.875%, due 12/15/04 $51,004,651 market value
Federal National Mortgage Association Note,
5.500%, due 2/15/06, and $51,001,516 market
value Federal National Mortgage Association
Note, 2.875%, due 10/15/05
(Cost $187,102,000) $187,102,000 $187,102,000
---------------
TOTAL INVESTMENTS - 99.9% (Cost $3,954,070,596) 4,720,230,186
OTHER ASSETS LESS LIABILITIES - 0.1% 6,074,168
---------------
TOTAL NET ASSETS - 100.0%(2) $4,726,304,354
===============
(1) Non-income producing security.
(2) Percentages for the various classifications relate to total net assets.
The accompanying notes are an integral part of the financial statements.
38
- ------------
THIRTY-EIGHT
------
ARTQX
------
ARTISAN MID CAP VALUE FUND (ARTQX)
SCHEDULE OF INVESTMENTS - March 31, 2004 (Unaudited)
SHARES
HELD VALUE
========== ==========
COMMON STOCKS - 94.4%
AUTO & TRANSPORTATION - 3.6%
AUTO PARTS: ORIGINAL EQUIPMENT - 1.1%
BorgWarner Inc. 17,000 $1,442,110
TRANSPORTATION MISCELLANEOUS - 1.4%
Tidewater, Inc. 64,800 1,822,824
TRUCKERS - 1.1%
Swift Transportation Co., Inc.(1) 82,300 1,413,091
CONSUMER DISCRETIONARY - 17.9%
HOUSEHOLD FURNISHINGS - 3.0%
Furniture Brands International, Inc. 122,200 3,934,840
RETAIL - 6.0%
AutoZone, Inc.(1) 23,100 1,985,907
Blockbuster Inc. 69,500 1,216,250
Michaels Stores, Inc. 27,000 1,312,740
Zale Corporation(1) 55,900 3,440,645
---------------
7,955,542
SERVICES: COMMERCIAL - 2.3%
Republic Services, Inc. 111,700 3,023,719
TEXTILES: APPAREL MANUFACTURERS - 6.6%
Liz Claiborne Inc. 108,400 3,977,196
Polo Ralph Lauren Corporation 139,500 4,782,060
---------------
8,759,256
CONSUMER STAPLES - 5.6%
DRUG & GROCERY STORE CHAINS - 1.2%
Safeway Inc.(1) 77,200 1,588,776
FOODS - 2.8%
Hormel Foods Corporation 18,300 536,739
Tyson Foods, Inc., Class A 173,600 3,133,480
---------------
3,670,219
TOBACCO - 1.6%
Loews Corporation - Carolina Group 78,000 2,133,300
SHARES
HELD VALUE
========== ==========
FINANCIAL SERVICES - 35.6%
BANKS: OUTSIDE NEW YORK CITY - 1.2%
TCF Financial Corporation 30,100 $1,537,207
FINANCE: SMALL LOAN - 4.8%
The Student Loan Corporation 41,200 6,386,412
FINANCIAL DATA PROCESSING SERVICES
& SYSTEMS - 1.8%
Deluxe Corporation 59,700 2,393,970
INSURANCE: MULTI-LINE - 8.4%
Alleghany Corporation(1) 20,808 5,145,818
Loews Corporation 40,900 2,415,554
Old Republic International Corporation 144,950 3,559,972
---------------
11,121,344
INSURANCE: PROPERTY-CASUALTY - 7.1%
Arch Capital Group Ltd.(1) 43,600 1,832,508
Everest Re Group, Ltd. 10,600 905,664
PartnerRe Ltd. 30,100 1,699,145
White Mountains Insurance Group, Ltd. 9,400 4,930,300
---------------
9,367,617
REAL ESTATE INVESTMENT TRUSTS (REIT) - 0.4%
Catellus Development Corporation 21,285 553,623
SAVINGS & LOANS - 3.5%
Golden West Financial Corporation 16,900 1,891,955
Washington Federal, Inc. 106,360 2,715,371
---------------
4,607,326
SECURITIES BROKERAGE & SERVICES - 8.4%
Countrywide Financial Corporation 77,000 7,384,300
Nuveen Investments, Inc., Class A 132,300 3,685,878
---------------
11,070,178
HEALTHCARE - 3.6%
DRUGS & PHARMACEUTICALS - 1.0%
Mylan Laboratories Inc. 57,300 1,302,429
HEALTH CARE FACILITIES - 1.5%
Pharmaceutical Product Development, Inc.(1) 65,700 1,957,203
HEALTH CARE MANAGEMENT SERVICES - 1.1%
Universal Health Services, Inc. 32,400 1,492,668
39
-----------
THIRTY-NINE
------
ARTQX
------
- ----SCHEDULE OF INVESTMENTS-----------------------------------------------------
SHARES
HELD VALUE
========== ==========
MATERIALS & PROCESSING - 4.7%
PAINTS & COATINGS - 1.6%
The Sherwin-Williams Company 56,800 $2,182,824
PAPER - 2.0%
Domtar Inc. 165,800 1,991,258
MeadWestvaco Corporation 22,719 642,721
---------------
2,633,979
STEEL - 1.1%
Harsco Corporation 33,100 1,506,050
OTHER - 1.3%
MULTI-SECTOR COMPANIES - 1.3%
Wesco Financial Corporation 4,430 1,714,410
OTHER ENERGY - 15.3%
OFFSHORE DRILLING - 1.5%
Diamond Offshore Drilling, Inc. 80,800 1,954,552
OIL: CRUDE PRODUCERS - 12.3%
Apache Corporation 153,346 6,619,947
EOG Resources, Inc. 90,100 4,134,689
Newfield Exploration Company(1) 53,500 2,564,255
XTO Energy Inc. 114,108 2,880,073
---------------
16,198,964
UTILITIES: GAS PIPELINES - 1.5%
Equitable Resources, Inc. 45,700 2,029,994
PRODUCER DURABLES - 2.2%
DIVERSIFIED PRODUCTION - 2.2%
Dover Corporation 25,900 1,004,143
Pentair, Inc. 32,800 1,935,200
---------------
2,939,343
UTILITIES - 4.6%
UTILITIES: ELECTRICAL - 1.4%
Cinergy Corporation 44,800 1,831,872
UTILITIES: GAS DISTRIBUTORS - 1.1%
Sempra Energy 43,800 1,392,840
UTILITIES: MISCELLANEOUS - 1.4%
Vectren Corporation 72,600 1,791,042
UTILITIES: TELECOMMUNICATIONS - 0.7%
Telephone and Data Systems, Inc. 12,800 907,136
---------------
TOTAL COMMON STOCKS (Cost $98,913,691) 124,616,660
PAR
AMOUNT VALUE
========== ==========
SHORT-TERM INVESTMENTS
(CASH EQUIVALENTS) - 5.2%
Repurchase agreement with State Street Bank
and Trust Company, 0.75%, dated 3/31/04,
due 4/1/04, maturity value $6,872,143,
collateralized by $7,011,926 market value
Federal National Mortgage Association Note,
1.875%, due 12/15/04 (Cost $6,872,000) $6,872,000 $6,872,000
---------------
TOTAL INVESTMENTS - 99.6% (Cost $105,785,691) 131,488,660
OTHER ASSETS LESS LIABILITIES - 0.4% 532,177
---------------
TOTAL NET ASSETS - 100.0%(2) $ 132,020,837
===============
(1) Non-income producing security.
(2) Percentages for the various classifications relate to total net assets.
The accompanying notes are an integral part of the financial statements.
40
- ------
FORTY
------
ARTSX
------
ARTISAN SMALL CAP FUND (ARTSX)
SCHEDULE OF INVESTMENTS - March 31, 2004 (Unaudited)
SHARES
HELD VALUE
========== ==========
COMMON STOCKS - 97.3%
AUTO & TRANSPORTATION - 5.4%
AIR TRANSPORT - 1.2%
AirTran Holdings, Inc.(1) 170,000 $2,019,600
TRUCKERS - 4.2%
Forward Air Corporation(1) 56,400 1,853,868
Overnite Corporation 106,700 2,454,100
Pacer International, Inc.(1) 122,800 2,706,512
---------------
7,014,480
CONSUMER DISCRETIONARY - 23.3%
CONSUMER ELECTRONICS - 1.4%
FindWhat.com(1) 111,200 2,407,480
CONSUMER PRODUCTS - 1.4%
RC2 Corporation(1) 83,700 2,301,750
EDUCATION SERVICES - 0.4%
Bright Horizons Family Solutions, Inc.(1) 13,000 613,080
ENTERTAINMENT - 1.0%
Alliance Gaming Corporation(1) 50,100 1,609,713
LEISURE TIME - 0.9%
Steinway Musical Instruments, Inc.(1) 47,400 1,519,170
RADIO & TV BROADCASTERS - 1.3%
Regent Communications, Inc.(1) 332,400 2,163,924
RESTAURANTS - 1.2%
RARE Hospitality International, Inc.(1) 75,250 2,088,187
RETAIL - 6.2%
Christopher & Banks Corporation 95,450 2,014,950
Fred's, Inc. 50,600 1,228,062
The Gymboree Corporation(1) 144,900 2,429,973
School Specialty, Inc.(1) 72,200 2,568,154
Too, Inc.(1) 101,000 2,115,950
---------------
10,357,089
SERVICES: COMMERCIAL - 9.5%
The Advisory Board Company(1) 60,700 2,218,585
Autobytel Inc.(1) 66,200 873,840
The First Marblehead Corporation(1) 86,000 2,532,700
Harris Interactive Inc.(1) 183,800 1,549,434
Hudson Highland Group, Inc.(1) 40,500 1,129,140
Kroll Inc.(1) 123,500 3,315,975
Universal Technical Institute, Inc.(1) 41,900 1,678,095
Waste Connections, Inc.(1) 63,000 2,507,400
---------------
15,805,169
SHARES
HELD VALUE
========== ==========
FINANCIAL SERVICES - 8.1%
BANKS: OUTSIDE NEW YORK CITY - 3.9%
Community First Bankshares, Inc. 70,800 $2,275,512
First National Bankshares of Florida, Inc. 117,300 2,060,961
Texas Capital Bancshares, Inc.(1) 136,200 2,209,164
---------------
6,545,637
FINANCIAL INFORMATION SERVICES - 1.6%
FactSet Research Systems Inc. 63,500 2,702,560
INSURANCE: MULTI-LINE - 1.2%
HealthExtras, Inc.(1) 169,800 1,949,304
REAL ESTATE INVESTMENT TRUSTS (REIT) - 1.4%
La Quinta Corporation(1) 301,800 2,275,572
HEALTHCARE - 15.4%
BIOTECHNOLOGY RESEARCH & PRODUCTION - 1.3%
Charles River Laboratories International, Inc.(1) 49,900 2,138,215
DRUGS & PHARMACEUTICALS - 0.9%
Taro Pharmaceutical Industries Ltd.(1) 26,000 1,507,740
HEALTH CARE FACILITIES - 1.9%
LifePoint Hospitals, Inc.(1) 52,900 1,710,786
United Surgical Partners International, Inc.(1) 45,300 1,537,482
---------------
3,248,268
HEALTH CARE MANAGEMENT SERVICES - 1.7%
AMERIGROUP Corporation(1) 62,300 2,847,110
HEALTH CARE SERVICES - 3.4%
Inveresk Research Group, Inc.(1) 81,700 2,321,914
LabOne, Inc.(1) 72,200 2,194,880
Odyssey HealthCare, Inc.(1) 58,200 1,097,070
---------------
5,613,864
MEDICAL & DENTAL INSTRUMENTS & SUPPLIES - 4.7%
American Medical Systems Holdings, Inc.(1) 72,200 1,913,300
PSS World Medical, Inc.(1) 177,800 1,989,582
Respironics, Inc.(1) 32,000 1,728,640
SOLA International, Inc.(1) 95,200 2,213,400
---------------
7,844,922
MEDICAL SERVICES - 1.5%
VCA Antech, Inc.(1) 69,000 2,458,470
41
---------
FORTY-ONE
------
ARTSX
------
- ----SCHEDULE OF INVESTMENTS-----------------------------------------------------
SHARES
HELD VALUE
========== ==========
MATERIALS & PROCESSING - 5.1%
BUILDING MATERIALS - 1.1%
Hughes Supply, Inc. 34,300 $1,797,320
BUILDING: ROOFING & WALLBOARD - 1.3%
ElkCorp 82,100 2,224,089
CONTAINERS & PACKAGING: METAL & GLASS - 1.0%
Anchor Glass Container Corporation 101,800 1,608,440
PLASTICS - 1.7%
Spartech Corporation 113,900 2,836,110
OTHER ENERGY - 4.5%
MACHINERY: OIL WELL EQUIPMENT & SERVICES - 3.4%
Pride International, Inc.(1) 101,400 1,729,884
Varco International, Inc.(1) 112,300 2,022,523
W-H Energy Services, Inc.(1) 129,500 1,873,865
---------------
5,626,272
OIL: CRUDE PRODUCERS - 1.1%
Unit Corporation(1) 67,600 1,853,592
PRODUCER DURABLES - 9.3%
AEROSPACE - 1.5%
MTC Technologies, Inc.(1) 100,500 2,523,555
ELECTRICAL EQUIPMENT & COMPONENTS - 2.2%
Cherokee International, LLC(1) 84,100 1,211,040
Technitrol, Inc.(1) 128,400 2,413,920
---------------
3,624,960
MACHINERY: INDUSTRIAL/SPECIALTY - 1.3%
Gardner Denver, Inc.(1) 78,700 2,131,196
MANUFACTURING -1.5%
Rayovac Corporation(1) 90,600 2,591,160
PRODUCTION TECHNOLOGY EQUIPMENT - 1.8%
Axcelis Technologies, Inc.(1) 270,700 3,010,184
TELECOMMUNICATIONS EQUIPMENT - 1.0%
Tollgrade Communications, Inc.(1) 109,300 1,744,428
TECHNOLOGY - 24.0%
COMMUNICATIONS TECHNOLOGY - 7.4%
Anixter International Inc. 82,300 2,324,975
Avocent Corporation(1) 76,100 2,799,719
Inter-Tel Incorporated 53,400 1,605,204
Packeteer, Inc.(1) 127,900 1,688,280
Tekelec(1) 132,700 2,201,493
Verisity Ltd.(1) 191,400 1,772,364
---------------
12,392,035
SHARES
HELD VALUE
========== ==========
TECHNOLOGY (CONTINUED)
COMPUTER SERVICES SOFTWARE & SYSTEMS - 10.0%
Anteon International Corporation(1) 93,800 $2,709,882
Borland Software Corporation(1) 202,200 1,835,976
Hyperion Solutions Corporation(1) 56,800 2,354,360
Macrovision Corporation(1) 143,300 2,676,844
Micromuse Inc.(1) 207,900 1,621,620
Progress Software Corporation(1) 106,500 2,554,935
Serena Software Inc.(1) 81,700 1,662,595
Witness Systems, Inc.(1) 103,500 1,337,220
---------------
16,753,432
COMPUTER TECHNOLOGY - 1.1%
Dot Hill Systems Corp.(1) 182,300 1,826,646
ELECTRICAL & ELECTRONICS - 0.9%
Plexus Corp.(1) 79,600 1,416,084
ELECTRONICS - 1.7%
Aeroflex Incorporated(1) 107,700 1,449,642
Semtech Corporation(1) 59,800 1,365,234
---------------
2,814,876
ELECTRONICS: SEMI-CONDUCTORS/COMPONENTS - 1.8%
DSP Group, Inc.(1) 114,800 2,953,804
ELECTRONICS: TECHNOLOGY - 1.1%
Coherent, Inc.(1) 71,100 1,869,219
UTILITIES - 2.2%
UTILITIES: TELECOMMUNICATIONS - 2.2%
Alamosa Holdings, Inc.(1) 273,700 1,598,408
Commonwealth Telephone Enterprises, Inc.(1) 11,300 463,413
TNS Inc.(1) 89,700 1,717,755
---------------
3,779,576
---------------
TOTAL COMMON STOCKS (Cost $132,169,650) 162,408,282
PAR
AMOUNT VALUE
========== ==========
SHORT TERM INVESTMENTS
(CASH EQUIVALENTS) - 2.0%
Repurchase agreement with State Street Bank
and Trust Company, 0.75%, dated 3/31/04,
due 4/1/04, maturity value $3,225,067,
collateralized by $3,293,787 market value
Federal National Mortgage Association Note,
1.875%, due 12/15/04 (Cost $3,225,000) $3,225,000 $3,225,000
---------------
TOTAL INVESTMENTS - 99.3% (Cost $135,394,650) 165,633,282
OTHER ASSETS LESS LIABILITIES - 0.7% 1,241,834
---------------
TOTAL NET ASSETS - 100.0%(2) $ 166,875,116
===============
(1) Non-income producing security.
(2) Percentages for the various classifications relate to total net assets.
The accompanying notes are an integral part of the financial statements.
42
- ---------
FORTY-TWO
------
ARTVX
------
ARTISAN SMALL CAP VALUE FUND (ARTVX)
SCHEDULE OF INVESTMENTS - March 31, 2004 (Unaudited)
SHARES
HELD VALUE
========== ==========
COMMON STOCKS - 94.2%
AUTO & TRANSPORTATION - 7.4%
AUTO PARTS: AFTER MARKET - 1.7%
Superior Industries International, Inc. 529,900 $ 18,779,656
AUTO PARTS: ORIGINAL EQUIPMENT - 1.3%
BorgWarner Inc. 168,100 14,259,923
SHIPPING - 1.6%
Kirby Corporation(1) 499,600 16,881,484
TRUCKERS - 2.8%
Arkansas Best Corporation 317,500 8,505,825
Heartland Express, Inc. 232,100 5,287,238
USF Corporation 469,500 16,066,290
---------------
29,859,353
CONSUMER DISCRETIONARY - 25.5%
ADVERTISING AGENCIES - 1.8%
ADVO, Inc. 598,600 19,286,892
COMMERCIAL INFORMATION SERVICES - 0.9%
ProQuest Company(1) 333,200 9,719,444
CONSUMER ELECTRONICS - 0.5%
Register.com, Inc.(1) 210,204 1,244,408
THQ Inc.(1) 213,700 4,323,151
---------------
5,567,559
ENTERTAINMENT - 2.8%
Hollywood Entertainment Corporation(1) 1,269,300 17,211,708
Movie Gallery, Inc. 637,300 12,484,707
---------------
29,696,415
HOUSEHOLD FURNISHINGS - 1.4%
Ethan Allen Interiors Inc. 359,900 14,849,474
PUBLISHING: MISCELLANEOUS - 0.1%
Courier Corporation 26,868 1,202,343
RADIO & TV BROADCASTERS - 0.7%
World Wrestling Entertainment, Inc. 485,400 7,014,030
RESTAURANTS - 1.7%
IHOP Corp. 221,600 7,631,904
Papa John's International, Inc.(1) 295,600 10,003,104
---------------
17,635,008
RETAIL - 7.1%
1-800 CONTACTS, INC.(1) 289,300 5,094,573
Payless ShoeSource, Inc.(1) 1,587,300 22,158,708
Russ Berrie and Company, Inc. 46,900 1,641,500
School Specialty, Inc.(1) 396,800 14,114,176
Zale Corporation(1) 543,500 33,452,425
---------------
76,461,382
SHARES
HELD VALUE
========== ==========
CONSUMER DISCRETIONARY (CONTINUED)
SERVICES: COMMERCIAL - 4.3%
Coinstar, Inc.(1) 340,900 $5,410,083
Cross Country Healthcare, Inc.(1) 338,000 5,627,700
FTI Consulting, Inc.(1) 343,400 5,721,044
Medical Staffing Network Holdings, Inc.(1) 583,700 4,593,719
Pegasus Solutions, Inc.(1) 324,600 3,791,328
Roto-Rooter, Inc. 145,600 7,360,080
Watson Wyatt & Company(1) 552,300 13,940,052
---------------
46,444,006
TEXTILES APPAREL MANUFACTURERS - 3.7%
Kellwood Company 1,002,950 39,365,787
WHOLESALERS - 0.5%
United Stationers Inc.(1) 134,800 5,675,080
CONSUMER STAPLES - 0.4%
FOODS - 0.4%
Ralcorp Holdings, Inc.(1) 141,500 4,305,845
FINANCIAL SERVICES - 15.1%
FINANCIAL DATA PROCESSING SERVICES & SYSTEMS - 1.7%
CCC Information Services Group Inc.(1) 278,500 4,948,945
John H. Harland Company 250,800 7,804,896
National Processing, Inc.(1) 294,900 5,603,100
---------------
18,356,941
FINANCIAL MISCELLANEOUS - 4.5%
LandAmerica Financial Group, Inc. 307,700 13,926,502
Stewart Information Services Corporation(2) 880,600 34,607,580
---------------
48,534,082
INSURANCE: LIFE - 0.7%
Scottish Re Group Limited 279,800 6,768,362
INSURANCE: MULTI-LINE - 4.7%
Hilb, Rogal and Hamilton Company 895,700 34,126,170
Hub International Limited 302,300 5,547,205
PICO Holdings, Inc.(1)(2) 647,900 10,644,997
---------------
50,318,372
INSURANCE: PROPERTY-CASUALTY - 2.2%
Arch Capital Group Ltd.(1) 213,600 8,977,608
IPC Holdings, Ltd. 232,700 9,166,053
White Mountains Insurance Group, Ltd. 10,100 5,297,450
---------------
23,441,111
INVESTMENT MANAGEMENT COMPANIES - 1.0%
Capital Southwest Corporation 138,000 10,384,500
REAL ESTATE INVESTMENT TRUSTS (REIT) - 0.3%
Post Properties, Inc. 119,400 3,438,720
43
-----------
FORTY-THREE
-----
ARTVX
-----
- ----SCHEDULE OF INVESTMENTS-----------------------------------------------------
SHARES
HELD VALUE
========== ==========
HEALTHCARE - 1.0%
MEDICAL & DENTAL INSTRUMENTS & SUPPLIES - 0.6%
National Dentex Corporation(1)(2) 224,500 $6,106,400
MEDICAL SERVICES - 0.4%
America Service Group Inc.(1) 131,800 4,520,740
INTEGRATED OILS - 1.2%
OIL: INTEGRATED DOMESTIC - 1.2%
Cimarex Energy Co.(1) 441,100 12,747,790
MATERIALS & PROCESSING - 11.9%
AGRICULTURE FISHING & RANCHING - 0.4%
Delta and Pine Land Company 191,300 4,772,935
BUILDING: CEMENT - 1.5%
Eagle Materials Inc. 208,000 12,240,800
Eagle Materials Inc., Class B 56,200 3,282,080
---------------
15,522,880
BUILDING MATERIALS - 2.7%
Butler Manufacturing Company 166,500 3,737,925
LSI Industries Inc. 317,062 3,855,474
Simpson Manufacturing Co., Inc. 429,600 21,028,920
---------------
28,622,319
CHEMICALS - 1.1%
Albemarle Corporation 366,500 10,628,500
American Pacific Corporation 130,500 1,039,955
---------------
11,668,455
CONSTRUCTION - 0.7%
EMCOR Group, Inc.(1) 218,500 8,018,950
COPPER - 1.5%
Mueller Industries, Inc. 468,300 15,917,517
METAL FABRICATING - 1.1%
Quanex Corporation 227,100 9,649,479
Roanoke Electric Steel Corporation 165,400 2,332,140
---------------
11,981,619
MISCELLANEOUS MATERIALS AND PROCESSING - 0.6%
Insituform Technologies, Inc.(1) 405,300 6,334,839
REAL ESTATE - 2.3%
Jones Lang LaSalle Incorporated(1) 420,900 10,821,339
LNR Property Corporation 84,100 4,501,873
Trammell Crow Company(1) 670,100 9,401,503
---------------
24,724,715
SHARES
HELD VALUE
========== ==========
OTHER ENERGY - 20.5%
ENERGY: MISCELLANEOUS - 1.2%
Veritas DGC Inc.(1) 618,300 $12,798,810
MACHINERY: OIL WELL EQUIPMENT & SERVICES - 1.1%
Core Laboratories N.V.(1) 525,600 11,142,720
OFFSHORE DRILLING - 1.2%
Atwood Oceanics, Inc.(1) 364,100 12,958,319
OIL: CRUDE PRODUCERS - 17.0%
Cabot Oil & Gas Corporation 497,850 15,214,296
Evergreen Resources, Inc.(1) 522,100 17,934,135
Forest Oil Corporation(1) 1,013,758 25,597,389
Nuevo Energy Company(1) 489,200 15,928,352
Plains Exploration & Production Company(1) 683,655 12,743,329
Prima Energy Corporation(1) 319,400 11,035,270
Range Resources Corporation 504,700 6,122,011
Remington Oil and Gas Corporation(1) 216,200 4,269,950
Spinnaker Exploration Company(1) 264,200 9,490,064
St. Mary Land & Exploration Company 498,800 16,674,884
Stone Energy Corporation(1) 652,100 32,252,866
Tom Brown, Inc.(1) 403,500 15,171,600
---------------
182,434,146
PRODUCER DURABLES - 5.1%
AEROSPACE - 0.6%
United Industrial Corporation 308,200 5,837,308
ELECTRICAL EQUIPMENT & COMPONENTS - 2.0%
General Cable Corporation(1) 735,300 5,426,514
The Genlyte Group Incorporated(1) 286,600 16,061,064
---------------
21,487,578
MACHINE TOOLS - 0.8%
Lincoln Electric Holdings, Inc. 312,400 8,794,060
MACHINERY: INDUSTRIAL/SPECIALTY - 1.1%
Thomas Industries Inc. 212,900 6,706,350
Woodward Governor Company 80,000 5,099,200
---------------
11,805,550
POWER TRANSMISSION EQUIPMENT - 0.6%
Regal-Beloit Corporation 308,200 6,157,836
TECHNOLOGY - 1.5%
COMMUNICATIONS TECHNOLOGY - 0.4%
CommScope, Inc.(1) 290,300 4,833,495
COMPUTER SERVICES SOFTWARE & SYSTEMS - 1.1%
BearingPoint, Inc.(1) 1,088,500 11,668,720
44
- ----------
FORTY-FOUR
------
ARTVX
------
- -----------------------------------------------------SCHEDULE OF INVESTMENTS----
SHARES
HELD VALUE
========== ==========
UTILITIES - 4.6%
UTILITIES: ELECTRICAL - 3.1%
Black Hills Corporation 168,300 $5,363,721
El Paso Electric Company(1) 644,000 8,912,960
PNM Resources, Inc. 648,500 19,487,425
---------------
33,764,106
UTILITIES: GAS DISTRIBUTORS - 0.6%
NUI Corporation 387,900 6,559,389
UTILITIES: TELECOMMUNICATIONS - 0.9%
IDT Corporation, Class B 342,300 6,897,345
IDT Corporation, Class C 120,200 2,388,374
---------------
9,285,719
---------------
TOTAL COMMON STOCKS (Cost $728,824,777) 1,008,712,684
PAR
AMOUNT VALUE
========== ==========
SHORT-TERM INVESTMENTS
(CASH EQUIVALENTS) - 5.6%
Repurchase agreement with State Street Bank
and Trust Company, 0.75%, dated 3/31/04,
due 4/1/04, maturity value $60,151,253,
collateralized by $10,356,231 market value
Federal National Mortgage Association Note,
1.875% due 12/15/04 and $51,002,909 market
value Federal National Mortgage Association
Note, 1.875% due 9/15/05 (Cost $60,150,000) $60,150,000 $60,150,000
---------------
TOTAL INVESTMENTS - 99.8% (Cost $788,974,777) 1,068,862,684
OTHER ASSETS LESS LIABILITIES - 0.2% 2,477,789
---------------
TOTAL NET ASSETS - 100.0%(3) $1,071,340,473
===============
(1) Non-income producing security.
(2) Affiliated company as defined by the Investment Company Act of 1940. See
note 7 to the financial statements.
(3) Percentages for the various classifications relate to total net assets.
The accompanying notes are an integral part of the financial statements.
45
-----------
FORTY-FIVE
ARTISAN FUNDS, INC.
STATEMENTS OF ASSETS & LIABILITIES - March 31, 2004 (Unaudited)
INTERNATIONAL INTERNATIONAL
SMALL CAP
===============================
ASSETS:
Investments in securities, unaffiliated, at value...... $9,759,368,127 $545,692,692
Investments in securities, affiliated, at value ....... 321,184,079 36,250,277
Short-term investments (repurchase agreements),
at value ............................................ 109,527,000 4,387,000
-------------------------------
TOTAL INVESTMENTS...................................... 10,190,079,206 586,329,969
Cash ................................................. 561 70
Receivable from investments sold....................... 92,637,319 3,326,883
Receivable from forward currency contracts............. 95,463,623 6,925,876
Receivable from fund shares sold....................... 39,807,930 393,471
Dividends and interest receivable...................... 22,897,189 2,491,832
-------------------------------
TOTAL ASSETS........................................... 10,440,885,828 599,468,101
LIABILITIES:
Payable for investments purchased...................... 39,891,450 4,903,069
Payable for forward currency contracts................. 95,681,588 6,926,063
Payable for fund shares redeemed....................... 110,990,781 174,235
Payable for operating expenses......................... 3,292,098 245,780
Payable for withholding taxes.......................... 2,003,425 257,049
-------------------------------
TOTAL LIABILITIES...................................... 251,859,342 12,506,196
-------------------------------
TOTAL NET ASSETS ......................................$10,189,026,486 $586,961,905
===============================
NET ASSETS CONSIST OF:
Fund shares issued and outstanding.....................$10,059,095,106 $419,633,230
Net unrealized appreciation (depreciation) on
investments and foreign currency
related transactions ................................ 1,794,740,760 130,850,191
Accumulated undistributed net
investment income (loss) ............................ (6,879,722) 326,901
Accumulated undistributed net realized gains
(losses) on investments and foreign currency
related transactions ................................(1,657,929,658) 36,151,583
-------------------------------
..................................................$10,189,026,486 $586,961,905
===============================
SUPPLEMENTARY INFORMATION:
Net assets
Investor Shares................................... $6,340,539,996 $586,961,905
Institutional Shares.............................. $3,848,486,490
Shares outstanding
Investor Shares................................... 316,067,102 35,124,739
Institutional Shares.............................. 190,984,305
Net asset value, offering price and
redemption price per share
Investor Shares................................... $20.06 $16.71
Institutional Shares.............................. $20.15
Cost of securities of unaffiliated issuers held........ $8,091,374,636 $436,772,818
Cost of securities of affiliated issuers held.......... $304,149,774 $18,651,294
46
- ---------
FORTY-SIX
INTERNATIONAL MID CAP SMALL CAP
VALUE MID CAP VALUE SMALL CAP VALUE
=============================================================================
ASSETS:
Investments in securities, unaffiliated, at value...... $99,190,792 $4,533,128,186 $124,616,660 $162,408,282 $957,353,707
Investments in securities, affiliated, at value ....... - - - - 51,358,977
Short-term investments (repurchase agreements),
at value............................................... 8,445,000 187,102,000 6,872,000 3,225,000 60,150,000
-----------------------------------------------------------------------------
TOTAL INVESTMENTS...................................... 107,635,792 4,720,230,186 131,488,660 165,633,282 1,068,862,684
Cash ................................................. 712 507 15 729 378
Receivable from investments sold....................... - 34,257,452 3,087,750 1,765,251 3,400,862
Receivable from forward currency contracts............. 6,566,361 - - - -
Receivable from fund shares sold....................... 8,835,686 31,661,009 965,298 921,072 2,896,545
Dividends and interest receivable...................... 306,306 832,549 69,726 19,577 381,830
-----------------------------------------------------------------------------
TOTAL ASSETS........................................... 123,344,857 4,786,981,703 135,611,449 168,339,911 1,075,542,299
LIABILITIES:
Payable for investments purchased...................... 8,208,673 36,769,466 3,419,178 1,283,765 3,732,675
Payable for forward currency contracts................. 6,548,792 - - - -
Payable for fund shares redeemed....................... 15,989 22,825,619 133,843 77,654 182,901
Payable for operating expenses......................... 108,457 1,082,264 36,631 103,376 286,250
Payable for withholding taxes.......................... 23,837 - 960 - -
-----------------------------------------------------------------------------
TOTAL LIABILITIES...................................... 14,905,748 60,677,349 3,590,612 1,464,795 4,201,826
-----------------------------------------------------------------------------
TOTAL NET ASSETS ...................................... $108,439,109 $4,726,304,354 $132,020,837 $166,875,116 $1,071,340,473
=============================================================================
NET ASSETS CONSIST OF:
Fund shares issued and outstanding..................... $ 95,057,038 $4,196,136,235 $103,727,713 $138,506,794 $767,156,320
Net unrealized appreciation (depreciation)
on investments and foreign currency
related transactions ................................ 12,095,514 766,159,590 25,703,071 30,238,632 279,887,907
Accumulated undistributed net investment
income (loss) ....................................... (198,962) (15,158,979) 105,225 (636,783) 78,199
Accumulated undistributed net realized gains
(losses) on investments and foreign currency
related transactions ................................ 1,485,519 (220,832,492) 2,484,828 (1,233,527) 24,218,047
-----------------------------------------------------------------------------
.................................................. $108,439,109 $4,726,304,354 $132,020,837 $166,875,116 $1,071,340,473
=============================================================================
SUPPLEMENTARY INFORMATION:
Net assets
Investor Shares................................... $108,439,109 $3,617,006,673 $132,020,837 $166,875,116 $1,071,340,473
Institutional Shares.............................. $1,109,297,681
Shares outstanding
Investor Shares................................... 6,153,089 133,562,612 8,972,245 11,002,155 64,241,443
Institutional Shares.............................. 40,619,544
Net asset value, offering price and
redemption price per share
Investor Shares................................... $17.62 $27.08 $14.71 $15.17 $16.68
Institutional Shares.............................. $27.31
Cost of securities of unaffiliated issuers held........ $95,545,664 $3,954,070,596 $105,785,691 $135,394,650 $757,259,093
Cost of securities of affiliated issuers held.......... $- $- $- $- $31,715,684
The accompanying notes are an integral part of the financial statements.
47
------------
FORTY-SEVEN
ARTISAN FUNDS, INC.
STATEMENTS OF OPERATIONS
INTERNATIONAL
=============================================
Period Ended Period Ended Year Ended
3/31/04(1) 9/30/03(3) 6/30/03
=============================================
INVESTMENT INCOME:
Interest................................ $462,942 $304,072 $2,825,610
Dividends, from unaffiliated issuers(2). 42,718,547 33,361,570 176,343,076
Dividends, from affiliated issuers(2)... 3,064,723 3,627,004 2,344,814
Other income ........................... 1,822,621 412,122 2,995,772
---------------------------------------------
TOTAL INVESTMENT INCOME................. 48,068,833 37,704,768 184,509,272
EXPENSES:
Advisory fees........................... 45,243,199 20,395,030 66,306,063
Transfer agent fees
Investor Shares.................... 5,368,069 2,693,210 8,331,967
Institutional Shares............... 14,919 8,409 32,233
Shareholder communications
Investor Shares.................... 535,668 506,499 1,177,617
Institutional Shares............... 10,013 4,797 19,011
Custodian fees.......................... 2,800,027 1,208,462 3,945,008
Accounting fees......................... 37,251 19,918 73,299
Professional fees....................... 610,638 93,801 301,743
Registration fees
Investor Shares.................... 23,451 29,428 124,912
Institutional Shares............... 20,003 31,250 127,627
Directors' fees......................... 126,789 43,746 180,436
Other operating expenses................ 187,141 51,890 163,719
---------------------------------------------
Total operating expenses before
amounts waived or paid by
the Adviser .......................... 54,977,168 25,086,440 80,783,635
Less amounts waived or paid
by the Adviser ....................... - (21,084) -
---------------------------------------------
NET EXPENSES............................ 54,977,168 25,065,356 80,783,635
---------------------------------------------
NET INVESTMENT INCOME (LOSS)............ (6,908,335) 12,639,412 103,725,637
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS:
Net realized gain (loss) on:
Investments(2)..................... (168,620,097) 74,854,666 (529,007,531)
Foreign currency
related transactions ............ (2,974,636) (1,317,643) (10,809,131)
---------------------------------------------
(171,594,733) 73,537,023 (539,816,662)
Net increase (decrease) in unrealized
appreciation/depreciation on:
Investments........................ 2,101,921,248 409,874,381 (423,541,570)
Foreign currency
related transactions ............ (695,359) 538,027 52,282
---------------------------------------------
2,101,225,889 410,412,408 (423,489,288)
---------------------------------------------
NET GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY RELATED
TRANSACTIONS ......................... 1,929,631,156 483,949,431 (963,305,950)
---------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS ..... $1,922,722,821 $496,588,843 $(859,580,313)
=============================================
(1) For the period from October 1, 2003 to March 31, 2004. Unaudited.
(2) INCLUDING
NET OF NET OF NET REALIZED
FOREIGN TAXES FOREIGN TAXES GAIN (LOSS)
WITHHELD ON WITHHELD ON ON INVESTMENTS
YEAR OR DIVIDENDS, DIVIDENDS, FROM
PERIOD UNAFFILIATED AFFILIATED AFFILIATED
FUND ENDED ISSUERS ISSUERS ISSUERS
International 3/31/04 $4,266,275 $340,525 $(46,413,966)
9/30/03 3,660,412 393,960 (1,994,615)
6/30/03 22,229,774 14,358 (7,613,533)
International Small Cap 3/31/04 674,251 1,109 -
9/30/03 263,662 - -
6/30/03 360,630 - -
International Value 3/31/04 37,511 - -
9/30/03 18,376 - -
6/30/03 23,791 - -
(3) For the period from July 1, 2003 to September 30, 2003. Artisan Funds
changed its fiscal year-end from June 30 to September 30 effective
September 30, 2003.
(4) From commencement of operations (September 23, 2002) to June 30, 2003.
48
- ------------
FORTY-EIGHT
INTERNATIONAL SMALL CAP INTERNATIONAL VALUE
============================================ ============================================
Period Ended Period Ended Year Ended Period Ended Period Ended Year Ended
3/31/04(1) 9/30/03(3) 6/30/03 3/31/04(1) 9/30/03(3) 6/30/03(4)
============================================ ============================================
INVESTMENT INCOME:
Interest.................................. $99,348 $27,958 $143,060 $14,929 $2,635 $4,562
Dividends, from unaffiliated issuers(2)... 4,983,204 1,324,009 2,217,762 367,691 118,457 169,431
Dividends, from affiliated issuers(2)..... 148,991 - 80,239 - - -
Other income ............................. 69,303 - - 13,115 - -
-------------------------------------------- --------------------------------------------
TOTAL INVESTMENT INCOME................... 5,300,846 1,351,967 2,441,061 395,735 121,092 173,993
EXPENSES:
Advisory fees............................. 3,284,477 972,488 1,489,029 257,243 49,178 48,398
Transfer agent fees
Investor Shares...................... 415,164 145,453 275,010 95,346 26,705 51,951
Institutional Shares.................
Shareholder communications
Investor Shares...................... 41,414 24,857 39,746 10,355 4,104 4,661
Institutional Shares.................
Custodian fees............................ 297,237 91,709 142,237 43,515 6,621 25,123
Accounting fees........................... 26,611 13,940 52,449 30,217 13,197 38,600
Professional fees......................... 17,171 27,557 29,781 8,031 26,810 20,911
Registration fees
Investor Shares...................... 12,852 32,678 47,636 11,122 7,528 45,137
Institutional Shares.................
Directors' fees........................... 6,223 1,279 3,133 1,526 750 -
Other operating expenses.................. 22,073 3,402 26,919 16,401 3,221 8,267
-------------------------------------------- --------------------------------------------
Total operating expenses before amounts
waived or paid by the Adviser .......... 4,123,222 1,313,363 2,105,940 473,756 138,114 243,048
Less amounts waived or paid
by the Adviser ......................... - (8,129) - - (39,758) (124,348)
-------------------------------------------- --------------------------------------------
NET EXPENSES.............................. 4,123,222 1,305,234 2,105,940 473,756 98,356 118,700
-------------------------------------------- --------------------------------------------
NET INVESTMENT INCOME (LOSS).............. 1,177,624 46,733 335,121 (78,021) 22,736 55,293
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS:
Net realized gain (loss) on:
Investments(2)....................... 43,665,453 5,281,076 3,302,104 1,510,265 497,624 130,388
Foreign currency
related transactions .............. (14,057) (202,732) (152,047) (13,283) (4,859) (2,222)
-------------------------------------------- --------------------------------------------
.................................. 43,651,396 5,078,344 3,150,057 1,496,982 492,765 128,166
Net increase (decrease) in unrealized
appreciation/depreciation on:
Investments.......................... 66,068,123 37,030,177 28,634,982 8,390,480 1,374,411 2,325,237
Foreign currency
related transactions .............. (20,542) 79,419 (112,904) 3,524 1,525 337
-------------------------------------------- --------------------------------------------
.................................. 66,047,581 37,109,596 28,522,078 8,394,004 1,375,936 2,325,574
-------------------------------------------- --------------------------------------------
NET GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY RELATED
TRANSACTIONS ........................... 109,698,977 42,187,940 31,672,135 9,890,986 1,868,701 2,453,740
-------------------------------------------- --------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS ....... $110,876,601 $42,234,673 $32,007,256 $9,812,965 $1,891,437 $2,509,033
============================================ ============================================
The accompanying notes are an integral part of the financial statements.
49
-----------
FORTY-NINE
ARTISAN FUNDS, INC.
STATEMENTS OF OPERATIONS (continued)
MID CAP
MID CAP VALUE
==================================================== ================
Period Ended Period Ended Year Ended Period Ended
3/31/04(1) 9/30/03(2) 6/30/03 3/31/04(1)
==================================================== ================
INVESTMENT INCOME:
Interest..................................... $690,303 $315,857 $1,630,118 $23,706
Dividends, from unaffiliated issuers......... 7,689,453 2,975,086 13,653,667 805,421
Dividends, from affiliated issuers........... - - - -
Other income................................. 376,769 - - -
---------------------------------------------------- ----------------
TOTAL INVESTMENT INCOME...................... 8,756,525 3,290,943 15,283,785 829,127
EXPENSES:
Advisory fees................................ 20,069,399 8,025,858 22,682,765 508,692
Transfer agent fees
Investor Shares............................ 3,086,240 1,184,401 3,493,286 121,625
Institutional Shares....................... 10,986 5,986 23,232
Shareholder communications
Investor Shares............................ 281,853 239,560 535,187 17,857
Institutional Shares....................... 3,547 1,739 5,954
Custodian fees............................... 209,461 102,873 308,898 14,578
Accounting fees.............................. 32,507 17,082 61,059 19,395
Professional fees............................ 60,041 43,312 116,996 1,809
Registration fees
Investor Shares............................ 21,361 38,952 89,446 8,534
Institutional Shares....................... 7,822 13,218 46,330
Directors' fees.............................. 52,606 16,707 60,352 1,584
Organizational costs......................... - - - -
Other operating expenses..................... 79,681 24,596 68,466 29,828
---------------------------------------------------- ----------------
Total operating expenses before
amounts waived or paid by the Adviser ..... 23,915,504 9,714,284 27,491,971 723,902
Less amounts waived or paid by the Adviser... - (14,194) - -
---------------------------------------------------- ----------------
NET EXPENSES................................. 23,915,504 9,700,090 27,491,971 723,902
---------------------------------------------------- ----------------
NET INVESTMENT INCOME (LOSS)................. (15,158,979) (6,409,147) (12,208,186) 105,225
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS:
Net realized gain (loss) on:
Investments................................ 311,573,480 105,075,097 (325,149,190) 3,542,991
Foreign currency related transactions...... - - - -
---------------------------------------------------- ----------------
.............................................. 311,573,480 105,075,097 (325,149,190) 3,542,991
Net increase (decrease) in unrealized
appreciation/depreciation on:
Investments................................ 340,819,500 90,208,363 376,988,686 16,269,866
Foreign currency related transactions...... - - - -
---------------------------------------------------- ----------------
340,819,500 90,208,363 376,988,686 16,269,866
---------------------------------------------------- ----------------
NET GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY RELATED TRANSACTIONS ..... 652,392,980 195,283,460 51,839,496 19,812,857
---------------------------------------------------- ----------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ................ $637,234,001 $188,874,313 $39,631,310 $19,918,082
==================================================== ================
(1) For the period from October 1, 2003 to March 31, 2004. Unaudited.
(2) For the period from July 1, 2003 to September 30, 2003. Artisan Funds
changed its fiscal year-end from June 30 to September 30 effective
September 30, 2003.
(3) Including $11,901 from affiliated issuers.
50
- ------
FIFTY
MID CAP VALUE SMALL CAP
================================== ==================================================
Period Ended Year Ended Period Ended Period Ended Year Ended
9/30/03(2) 6/30/03 3/31/04(1) 9/30/03(2) 6/30/03
================================== ==================================================
INVESTMENT INCOME:
Interest..................................... $10,830 $37,287 $21,360 $9,188 $33,988
Dividends, from unaffiliated issuers......... 214,293 516,255 280,595 78,581 385,213
Dividends, from affiliated issuers........... - - - - -
Other income................................. 7,032 - 11,519 - -
---------------------------------- --------------------------------------------------
TOTAL INVESTMENT INCOME...................... 232,155 553,542 313,474 87,769 419,201
EXPENSES:
Advisory fees................................ 181,557 383,960 742,651 312,469 1,009,495
Transfer agent fees
Investor Shares............................ 53,008 144,557 110,022 63,528 191,523
Institutional Shares.......................
Shareholder communications
Investor Shares............................ 12,082 22,307 27,311 17,975 40,347
Institutional Shares.......................
Custodian fees............................... 6,529 19,814 24,059 13,088 49,518
Accounting fees.............................. 10,528 40,717 21,084 12,319 40,539
Professional fees............................ 22,867 27,020 2,559 25,353 29,834
Registration fees
Investor Shares............................ 8,631 39,025 13,743 8,833 30,980
Institutional Shares.......................
Directors' fees.............................. 750 3,000 1,831 750 3,045
Organizational costs......................... - - - - -
Other operating expenses..................... 252 4,510 6,997 1,881 11,285
---------------------------------- --------------------------------------------------
Total operating expenses before amounts
waived or paid by the Adviser ............. 296,204 684,910 950,257 456,196 1,406,566
Less amounts waived or paid
by the Adviser ............................ (7,129) - - (7,243) -
---------------------------------- --------------------------------------------------
NET EXPENSES................................. 289,075 684,910 950,257 448,953 1,406,566
---------------------------------- --------------------------------------------------
NET INVESTMENT INCOME (LOSS)................. (56,920) (131,368) (636,783) (361,184) (987,365)
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS:
Net realized gain (loss) on:
Investments................................ 1,143,665 (110,623) 19,071,316 4,973,748 (22,436,510)
Foreign currency related transactions...... - - - - -
---------------------------------- --------------------------------------------------
1,143,665 (110,623) 19,071,316 4,973,748 (22,436,510)
Net increase (decrease) in unrealized
appreciation/depreciation on:
Investments................................ 2,308,116 6,300,648 8,635,179 1,464,390 20,333,623
Foreign currency related transactions...... - - - - -
---------------------------------- --------------------------------------------------
2,308,116 6,300,648 8,635,179 1,464,390 20,333,623
---------------------------------- --------------------------------------------------
NET GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY RELATED TRANSACTIONS ..... 3,451,781 6,190,025 27,706,495 6,438,138 (2,102,887)
---------------------------------- --------------------------------------------------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM OPERATIONS ..... $3,394,861 $6,058,657 $27,069,712 $6,076,954 $(3,090,252)
================================== ==================================================
SMALL CAP
==================================================
Period Ended Period Ended Year Ended
3/31/04(1) 9/30/03(2) 6/30/03
==================================================
INVESTMENT INCOME:
Interest..................................... $222,957 $102,376 $338,332
Dividends, from unaffiliated issuers......... 4,965,127 1,399,853 5,371,224
Dividends, from affiliated issuers........... 381,846 - -
Other income................................. 67,190 9,039 -
--------------------------------------------------
TOTAL INVESTMENT INCOME...................... 5,637,120 1,511,268 5,709,556
EXPENSES:
Advisory fees................................ 4,671,196 1,880,540 5,714,589
Transfer agent fees
Investor Shares............................ 708,375 282,606 891,648
Institutional Shares.......................
Shareholder communications
Investor Shares............................ 40,001 27,715 61,062
Institutional Shares.......................
Custodian fees............................... 50,996 25,059 91,142
Accounting fees.............................. 20,759 11,480 44,472
Professional fees............................ 17,319 27,583 52,514
Registration fees
Investor Shares............................ 11,665 18,009 48,401
Institutional Shares.......................
Directors' fees.............................. 11,941 3,767 15,036
Organizational costs......................... - - 1,768
Other operating expenses..................... 26,669 4,928 14,184
--------------------------------------------------
Total operating expenses before amounts
waived or paid by the Adviser ............. 5,558,921 2,281,687 6,934,816
Less amounts waived or paid
by the Adviser ............................ - (7,683) -
--------------------------------------------------
NET EXPENSES................................. 5,558,921 2,274,004 6,934,816
--------------------------------------------------
NET INVESTMENT INCOME (LOSS)................. 78,199 (762,736) (1,225,260)
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS:
Net realized gain (loss) on:
Investments................................ 38,674,172(3) 18,221,191 (20,174,753)
Foreign currency related transactions...... - - -
--------------------------------------------------
38,674,172 18,221,191 (20,174,753)
Net increase (decrease) in unrealized
appreciation/depreciation on:
Investments................................ 150,227,554 10,070,646 36,753,479
Foreign currency related transactions...... - - -
--------------------------------------------------
150,227,554 10,070,646 36,753,479
--------------------------------------------------
NET GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY RELATED TRANSACTIONS ..... 188,901,726 28,291,837 16,578,726
--------------------------------------------------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM OPERATIONS ..... $188,979,925 $27,529,101 $15,353,466
==================================================
The accompanying notes are an integral part of the financial statements.
51
---------
FIFTY-ONE
ARTISAN FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
INTERNATIONAL
==============================================
Period Ended Period Ended Year Ended
3/31/04(1) 9/30/03(2) 6/30/03
==============================================
OPERATIONS:
Net investment income (loss)............ $(6,908,335) $12,639,412 $103,725,637
Net realized gain (loss) on:
Investments........................ (168,620,097) 74,854,666 (529,007,531)
Foreign currency related
transactions .................... (2,974,636) (1,317,643) (10,809,131)
Net increase (decrease) in unrealized
appreciation/depreciation on:
Investments........................ 2,101,921,248 409,874,381 (423,541,570)
Foreign currency related
transactions .................... (695,359) 538,027 52,282
----------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ............ 1,922,722,821 496,588,843 (859,580,313)
DIVIDENDS AND DISTRIBUTIONS PAID
TO SHAREHOLDERS:
Net investment income:
Investor Shares.................... (59,414,324) - (31,901,533)
Institutional Shares............... (42,472,917) - (18,341,682)
Net realized gains on
investment transactions:
Investor Shares.................... - - -
Institutional Shares............... - - -
----------------------------------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS
PAID TO SHAREHOLDERS ................. (101,887,241) - (50,243,215)
FUND SHARE ACTIVITIES:
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM FUND
SHARE ACTIVITIES ..................... (531,202,160) 244,966,499 1,716,020,036
----------------------------------------------
TOTAL INCREASE (DECREASE) IN
NET ASSETS ........................... 1,289,633,420 741,555,342 806,196,508
----------------------------------------------
Net assets, beginning of period......... 8,899,393,066 8,157,837,724 7,351,641,216
----------------------------------------------
NET ASSETS, END OF PERIOD...............$10,189,026,486 $8,899,393,066 $8,157,837,724
==============================================
Accumulated undistributed net
investment income (loss) .............. $(6,879,722) $101,915,854 $90,594,085
==============================================
(1) For the period from October 1, 2003 to March 31, 2004. Unaudited.
(2) For the period July 1, 2003 to September 30, 2003. Artisan Funds changed
its fiscal year-end from June 30 to September 30 effective September 30,
2003.
(3) For the period from commencement of operations (September 23, 2002) through
June 30, 2003.
52
- ---------
FIFTY-TWO
INTERNATIONAL SMALL CAP INTERNATIONAL VALUE
============================================ ============================================
Period Ended Period Ended Year Ended Period Ended Period Ended Period Ended
3/31/04(1) 9/30/03(2) 6/30/03 3/31/04(1) 9/30/03(2) 6/30/03(3)
============================================ ============================================
OPERATIONS:
Net investment income (loss)............ $1,177,624 $46,733 $335,121 $(78,021) $22,736 $55,293
Net realized gain (loss) on:
Investments........................ 43,665,453 5,281,076 3,302,104 1,510,265 497,624 130,388
Foreign currency related
transactions .................... (14,057) (202,732) (152,047) (13,283) (4,859) (2,222)
Net increase (decrease) in unrealized
appreciation/depreciation on:
Investments........................ 66,068,123 37,030,177 28,634,982 8,390,480 1,374,411 2,325,237
Foreign currency related
transactions .................... (20,542) 79,419 (112,904) 3,524 1,525 337
-------------------------------------------- --------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ............ 110,876,601 42,234,673 32,007,256 9,812,965 1,891,437 2,509,033
DIVIDENDS AND DISTRIBUTIONS
PAID TO SHAREHOLDERS:
Net investment income:
Investor Shares.................... (1,142,161) - - (191,806) - -
Institutional Shares...............
Net realized gains on
investment transactions:
Investor Shares.................... (15,685,346) - (236,073) (636,769) - -
-------------------------------------------- --------------------------------------------
Institutional Shares...............
TOTAL DIVIDENDS AND DISTRIBUTIONS
PAID TO SHAREHOLDERS ................. (16,827,507) - (236,073) (828,575) - -
FUND SHARE ACTIVITIES:
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM FUND
SHARE ACTIVITIES ..................... 101,588,268 110,508,433 132,312,967 75,840,773 5,433,053 13,780,423
-------------------------------------------- --------------------------------------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS ........................ 195,637,362 152,743,106 164,084,150 84,825,163 7,324,490 16,289,456
-------------------------------------------- --------------------------------------------
Net assets, beginning of period......... 391,324,543 238,581,437 74,497,287 23,613,946 16,289,456 -
-------------------------------------------- --------------------------------------------
NET ASSETS, END OF PERIOD............... $586,961,905 $391,324,543 $238,581,437 $108,439,109 $23,613,946 $16,289,456
============================================ ============================================
Accumulated undistributed net
investment income (loss) ............. $326,901 $291,438 $162,036 $(198,962) $70,865 $53,071
============================================ ============================================
The accompanying notes are an integral part of the financial statements.
53
------------
FIFTY-THREE
ARTISAN FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS (continued)
MID CAP
MID CAP VALUE
==================================================== ================
Period Ended Period Ended Year Ended Period Ended
3/31/04(1) 9/30/03(2) 6/30/03 3/31/04(1)
==================================================== ================
OPERATIONS:
Net investment income (loss)................. $(15,158,979) $(6,409,147) $(12,208,186) $105,225
Net realized gain (loss) on:
Investments................................. 311,573,480 105,075,097 (325,149,190) 3,542,991
Foreign currency related
transactions .............................. - - - -
Net increase (decrease) in unrealized
appreciation/depreciation on:
Investments................................. 340,819,500 90,208,363 376,988,686 16,269,866
Foreign currency related transactions....... - - - -
---------------------------------------------------- ----------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ................. 637,234,001 188,874,313 39,631,310 19,918,082
DIVIDENDS AND DISTRIBUTIONS PAID
TO SHAREHOLDERS:
Net investment income:
Investor Shares............................. - - - -
Institutional Shares........................ - - -
Net realized gains on investment
transactions:
Investor Shares............................. - - - (1,599,811)
Institutional Shares........................ - - -
---------------------------------------------------- ----------------
TOTAL DIVIDENDS AND DISTRIBUTIONS
PAID TO SHAREHOLDERS ...................... - - - (1,599,811)
FUND SHARE ACTIVITIES:
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM FUND SHARE ACTIVITIES........ 576,311,750 208,283,211 770,633,859 36,302,447
---------------------------------------------------- ----------------
TOTAL INCREASE (DECREASE) IN
NET ASSETS ................................ 1,213,545,751 397,157,524 810,265,169 54,620,718
---------------------------------------------------- ----------------
Net assets, beginning of period.............. 3,512,758,603 3,115,601,079 2,305,335,910 77,400,119
---------------------------------------------------- ----------------
NET ASSETS, END OF PERIOD.................... $4,726,304,354 $3,512,758,603 $3,115,601,079 $132,020,837
==================================================== ================
Accumulated undistributed net
investment income (loss) .................. $(15,158,979) $- $- $105,225
==================================================== ================
(1) For the period from October 1, 2003 to March 31, 2004. Unaudited.
(2) For the period July 1, 2003 to September 30, 2003. Artisan Funds changed
its fiscal year-end from June 30 to September 30 effective September 30,
2003.
54
- ----------
FIFTY-FOUR
MID CAP VALUE SMALL CAP
================================== ==================================================
Period Ended Year Ended Period Ended Period Ended Year Ended
9/30/03(2) 6/30/03 3/31/04(1) 9/30/03(2) 6/30/03
================================== ==================================================
OPERATIONS:
Net investment income (loss)................. $ (56,920) $ (131,368) $ (636,783) $ (361,184) $ (987,365)
Net realized gain (loss) on:
Investments................................. 1,143,665 (110,623) 19,071,316 4,973,748 (22,436,510)
Foreign currency related
transactions .............................. - - - - -
Net increase (decrease) in unrealized
appreciation/depreciation on:
Investments................................. 2,308,116 6,300,648 8,635,179 1,464,390 20,333,623
Foreign currency related transactions....... - - - - -
---------------------------------- --------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ................. 3,394,861 6,058,657 27,069,712 6,076,954 (3,090,252)
DIVIDENDS AND DISTRIBUTIONS PAID
TO SHAREHOLDERS:
Net investment income:
Investor Shares............................. - - - - -
Institutional Shares........................
Net realized gains on investment
transactions:
Investor Shares............................. - - - - (629,095)
Institutional Shares........................
---------------------------------- --------------------------------------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS
PAID TO SHAREHOLDERS ...................... - - - - (629,095)
FUND SHARE ACTIVITIES:
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM FUND SHARE ACTIVITIES........ 9,507,195 36,457,011 11,931,878 5,759,810 (12,182,933)
---------------------------------- --------------------------------------------------
TOTAL INCREASE (DECREASE) IN
NET ASSETS ................................ 12,902,056 42,515,668 39,001,590 11,836,764 (15,902,280)
---------------------------------- --------------------------------------------------
Net assets, beginning of period.............. 64,498,063 21,982,395 127,873,526 116,036,762 131,939,042
---------------------------------- --------------------------------------------------
NET ASSETS, END OF PERIOD.................... $77,400,119 $64,498,063 $166,875,116 $127,873,526 $116,036,762
================================== ==================================================
Accumulated undistributed net
investment income (loss) .................. $- $- $(636,783) $- $-
================================== ==================================================
SMALL CAP
====================================================
Period Ended Period Ended Year Ended
3/31/04(1) 9/30/03(2) 6/30/03
====================================================
OPERATIONS:
Net investment income (loss)................. $ 78,199 $ (762,736) $ (1,225,260)
Net realized gain (loss) on:
Investments................................. 38,674,172 18,221,191 (20,174,753)
Foreign currency related
transactions .............................. - - -
Net increase (decrease) in unrealized
appreciation/depreciation on:
Investments................................. 150,227,554 10,070,646 36,753,479
Foreign currency related transactions....... - - -
----------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ................. 188,979,925 27,529,101 15,353,466
DIVIDENDS AND DISTRIBUTIONS PAID
TO SHAREHOLDERS:
Net investment income:
Investor Shares............................. - - -
Institutional Shares........................
Net realized gains on investment
transactions:
Investor Shares............................. (11,783,598) - (22,600,376)
Institutional Shares........................
----------------------------------------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS
PAID TO SHAREHOLDERS ...................... (11,783,598) - (22,600,376)
FUND SHARE ACTIVITIES:
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM FUND SHARE ACTIVITIES........ 118,988,575 45,076,888 86,250,860
----------------------------------------------------
TOTAL INCREASE (DECREASE) IN
NET ASSETS ................................ 296,184,902 72,605,989 79,003,950
----------------------------------------------------
Net assets, beginning of period.............. 775,155,571 702,549,582 623,545,632
----------------------------------------------------
NET ASSETS, END OF PERIOD.................... $1,071,340,473 $775,155,571 $702,549,582
====================================================
Accumulated undistributed net
investment income (loss) .................. $78,199 $- $-
====================================================
The accompanying notes are an integral part of the financial statements.
55
----------
FIFTY-FIVE
ARTISAN FUNDS, INC.
FINANCIAL HIGHLIGHTS - For a share outstanding throughout each period
NET TOTAL
NET ASSET NET REALIZED AND INCOME DIVIDENDS
YEAR OR VALUE INVESTMENT UNREALIZED (LOSS) FROM FROM NET
PERIOD BEGINNING INCOME GAIN (LOSS) INVESTMENT INVESTMENT
ENDED OF PERIOD (LOSS)(1) ON INVESTMENTS OPERATIONS INCOME
==============================================================================
INTERNATIONAL FUND ------------------------------------------------------------------------------
Investor Shares 3/31/04(4) $16.54 $(0.02) $3.72 $3.70 $(0.18)
------------------------------------------------------------------------------
9/30/03(5) 15.63 0.02 0.89 0.91 -
------------------------------------------------------------------------------
6/30/03 18.15 0.20 (2.62) (2.42) (0.10)
------------------------------------------------------------------------------
6/30/02 19.53 0.15 (1.46) (1.31) (0.07)
------------------------------------------------------------------------------
6/30/01 30.16 0.10 (7.18) (7.08) -
------------------------------------------------------------------------------
6/30/00 18.67 (0.03) 12.08 12.05 (0.02)
------------------------------------------------------------------------------
6/30/99 16.25 0.08 2.62 2.70 (0.04)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Institutional Shares 3/31/04(4) $16.63 $ - $3.73 $3.73 $(0.21)
------------------------------------------------------------------------------
9/30/03(5) 15.71 0.03 0.89 0.92 -
------------------------------------------------------------------------------
6/30/03 18.24 0.25 (2.65) (2.40) (0.13)
------------------------------------------------------------------------------
6/30/02 19.62 0.18 (1.46) (1.28) (0.10)
------------------------------------------------------------------------------
6/30/01 30.22 0.16 (7.21) (7.05) -
------------------------------------------------------------------------------
6/30/00 18.70 0.03 12.09 12.12 (0.06)
------------------------------------------------------------------------------
6/30/99 16.26 0.11 2.62 2.73 (0.05)
------------------------------------------------------------------------------
INTERNATIONAL SMALL CAP FUND ------------------------------------------------------------------------------
Investor Shares 3/31/04(4) $13.84 $ 0.04 $3.35 $3.39 $(0.03)
------------------------------------------------------------------------------
9/30/03(5) 12.10 - 1.74 1.74 -
------------------------------------------------------------------------------
6/30/03 10.50 0.03 1.59 1.62 -
------------------------------------------------------------------------------
6/30/02(7) 10.00 - 0.50(8) 0.50 -
------------------------------------------------------------------------------
INTERNATIONAL VALUE FUND ------------------------------------------------------------------------------
Investor Shares 3/31/04(4) $14.32 $(0.02) $3.71 $3.69 $(0.09)
------------------------------------------------------------------------------
9/30/03(5) 13.01 0.02 1.29 1.31 -
------------------------------------------------------------------------------
6/30/03(9) 10.00 0.09 2.92 3.01 -
------------------------------------------------------------------------------
(1) Computed based on average shares outstanding.
(2) Periods less than 12 months (where applicable) are not annualized.
(3) Periods less than 12 months (where applicable) are annualized.
(4) For the period from October 1, 2003 to March 31, 2004. Unaudited.
(5) For the period from July 1, 2003 to September 30, 2003. The Artisan Funds
changed its fiscal year-end from June 30 to September 30 effective
September 30, 2003.
(6) The ratios of expenses to average net assets and net investment loss to
average net assets exclude expenses waived or paid by the Adviser. Absent
expenses waived or paid by the Adviser, the ratios of expenses to average
net assets and net investment loss to average net assets would have been as
follows (periods less than 12 months, where applicable, are annualized):
RATIO OF NET
RATIO OF INVESTMENT
YEAR OR EXPENSES TO INCOME (LOSS)
PERIOD AVERAGE TO AVERAGE
FUND ENDED NET ASSETS NET ASSETS
International Investor Shares 9/30/03 1.23% 0.49%
International Institutional Shares 9/30/03 1.00 0.73
International Small Cap Investor Shares 9/30/03 1.69 0.05
International Value Investor Shares 9/30/03 2.80 (0.34)
6/30/03 5.02 (1.43)
56
- ----------
FIFTY-SIX
RATIO OF RATIO OF NET
DISTRIBUTIONS TOTAL NET ASSET NET ASSETS EXPENSES INVESTMENT
FROM NET DIVIDENDS VALUE END OF TO AVERAGE INCOME (LOSS) PORTFOLIO
REALIZED AND END TOTAL PERIOD NET TO AVERAGE TURNOVER
GAINS DISTRIBUTIONS OF PERIOD RETURN(2) (MILLIONS) ASSETS(3) NET ASSETS(3) RATE(2)
=======================================================================================================
INTERNATIONAL FUND -------------------------------------------------------------------------------------------------------
Investor Shares $- $(0.18) $20.06 22.5% $6,340.5 1.21% (0.22)% 31.69%
-------------------------------------------------------------------------------------------------------
- - 16.54 5.8 5,544.7 1.23(6) 0.49(6) 15.23
-------------------------------------------------------------------------------------------------------
- (0.10) 15.63 (13.3) 5,182.8 1.20 1.35 37.13
-------------------------------------------------------------------------------------------------------
- (0.07) 18.15 (6.7) 5,289.6 1.21 0.82 50.67
-------------------------------------------------------------------------------------------------------
(3.55) (3.55) 19.53 (24.7) 3,907.1 1.22 0.45 72.01
-------------------------------------------------------------------------------------------------------
(0.54) (0.56) 30.16 65.6 3,734.8 1.27 (0.10) 99.02
-------------------------------------------------------------------------------------------------------
(0.24) (0.28) 18.67 17.4 943.9 1.38 0.59 79.41
-------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
Institutional Shares $- $(0.21) $20.15 22.6% $3,848.5 1.00% (0.02)% 31.69%
-------------------------------------------------------------------------------------------------------
- - 16.63 5.9 3,354.7 1.00(6) 0.73(6) 15.23
-------------------------------------------------------------------------------------------------------
- (0.13) 15.71 (13.1) 2,975.0 1.01 1.68 37.13
-------------------------------------------------------------------------------------------------------
- (0.10) 18.24 (6.5) 2,062.0 1.01 1.01 50.67
-------------------------------------------------------------------------------------------------------
(3.55) (3.55) 19.62 (24.5) 1,486.6 1.03 0.70 72.01
-------------------------------------------------------------------------------------------------------
(0.54) (0.60) 30.22 66.0 1,136.2 1.08 0.09 99.02
-------------------------------------------------------------------------------------------------------
(0.24) (0.29) 18.70 17.6 179.6 1.17 0.68 79.41
-------------------------------------------------------------------------------------------------------
INTERNATIONAL SMALL CAP FUND-------------------------------------------------------------------------------------------------------
Investor Shares $(0.49) $(0.52) $16.71 25.0% $587.0 1.57% 0.45% 40.68%
-------------------------------------------------------------------------------------------------------
- - 13.84 14.5 391.3 1.68(6) 0.06(6) 13.28
-------------------------------------------------------------------------------------------------------
(0.02) (0.02) 12.10 15.5 238.6 1.77 0.28 62.79
-------------------------------------------------------------------------------------------------------
- - 10.50 5.0 74.5 2.39 (0.02) 25.14
-------------------------------------------------------------------------------------------------------
INTERNATIONAL VALUE FUND -------------------------------------------------------------------------------------------------------
Investor Shares $(0.30) $(0.39) $17.62 26.2% $108.4 1.84% (0.30)% 11.75%
-------------------------------------------------------------------------------------------------------
- - 14.32 10.1 23.6 2.00(6) 0.46(6) 9.30
-------------------------------------------------------------------------------------------------------
- - 13.01 30.1 16.3 2.45(6) 1.14(6) 17.42
-------------------------------------------------------------------------------------------------------
(7) For the period from commencement of operations (December 21, 2001) through
June 30, 2002.
(8) The amount shown may not correlate with the aggregate gains and losses of
portfolio securities due to the timing of subscriptions and redemptions of
Fund shares.
(9) For the period from commencement of operations (September 23, 2002) through
June 30, 2003.
The accompanying notes are an integral part of the financial statements.
57
------------
FIFTY-SEVEN
ARTISAN FUNDS, INC.
FINANCIAL HIGHLIGHTS (continued) - For a share outstanding throughout each
period
NET TOTAL
NET ASSET NET REALIZED AND INCOME DIVIDENDS
YEAR OR VALUE INVESTMENT UNREALIZED (LOSS) FROM FROM NET
PERIOD BEGINNING INCOME GAIN (LOSS) INVESTMENT INVESTMENT
ENDED OF PERIOD (LOSS) ON INVESTMENTS OPERATIONS INCOME
==============================================================================
MID CAP FUND ------------------------------------------------------------------------------
Investor Shares 3/31/04(3) $23.11 $(0.10)(4) $ 4.07 $ 3.97 $ -
------------------------------------------------------------------------------
9/30/03(5) 21.81 (0.05)(4) 1.35 1.30 -
------------------------------------------------------------------------------
6/30/03 22.13 (0.11)(4) (0.21)(6) (0.32) -
------------------------------------------------------------------------------
6/30/02 26.43 (0.19)(4) (4.11) (4.30) -
------------------------------------------------------------------------------
6/30/01 27.57 (0.13)(4) 0.02(6) (0.11) -
------------------------------------------------------------------------------
6/30/00 16.67 (0.18)(4) 11.91 11.73 -
------------------------------------------------------------------------------
6/30/99 13.69 (0.16)(4) 4.41 4.25 -
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Institutional Shares 3/31/04(3) $23.28 $(0.07)(4) $ 4.10 $ 4.03 $ -
------------------------------------------------------------------------------
9/30/03(5) 21.96 (0.03)(4) 1.35 1.32 -
------------------------------------------------------------------------------
6/30/03 22.24 (0.07)(4) (0.21)(6) (0.28) -
------------------------------------------------------------------------------
6/30/02 26.48 (0.13)(4) (4.11) (4.24) -
------------------------------------------------------------------------------
6/30/01 27.57 (0.08)(4) 0.02(6) (0.06) -
------------------------------------------------------------------------------
MID CAP VALUE FUND ------------------------------------------------------------------------------
Investor Shares 3/31/04(3) $12.22 $ 0.01(4) $ 2.72 $ 2.73 $ -
------------------------------------------------------------------------------
9/30/03(5) 11.64 (0.01)(4) 0.59 0.58 -
------------------------------------------------------------------------------
6/30/03 10.82 (0.03)(4) 0.85 0.82 -
------------------------------------------------------------------------------
6/30/02 11.18 (0.09)(4) (0.19) (0.28) -
------------------------------------------------------------------------------
6/30/01(7) 10.00 (0.01)(4) 1.19 1.18 -
------------------------------------------------------------------------------
SMALL CAP FUND ------------------------------------------------------------------------------
Investor Shares 3/31/04(3) $12.53 $(0.06)(4) $ 2.70 $ 2.64 $ -
------------------------------------------------------------------------------
9/30/03(5) 11.90 (0.04)(4) 0.67 0.63 -
------------------------------------------------------------------------------
6/30/03 11.99 (0.10)(4) 0.07(6) (0.03) -
------------------------------------------------------------------------------
6/30/02 13.99 (0.13)(4) (1.81) (1.94) -
------------------------------------------------------------------------------
6/30/01 14.69 (0.09)(4) 0.05(6) (0.04) -
------------------------------------------------------------------------------
6/30/00 11.09 (0.10)(4) 3.70 3.60 -
------------------------------------------------------------------------------
6/30/99 14.66 (0.08) (2.53) (2.61) -
------------------------------------------------------------------------------
SMALL CAP VALUE FUND ------------------------------------------------------------------------------
Investor Shares 3/31/04(3) $13.67 $ - (4)(8) $ 3.21 $ 3.21 $ -
------------------------------------------------------------------------------
9/30/03(5) 13.15 (0.01)(4) 0.53 0.52 -
------------------------------------------------------------------------------
6/30/03 13.48 (0.03)(4) 0.20 0.17 -
------------------------------------------------------------------------------
6/30/02 13.05 (0.01)(4) 1.16 1.15 (0.01)
------------------------------------------------------------------------------
6/30/01 10.63 0.05(4) 2.91 2.96 (0.05)
------------------------------------------------------------------------------
6/30/00 10.59 0.06(4) 0.36 0.42 (0.03)
------------------------------------------------------------------------------
6/30/99 11.37 (0.03) (0.21)(6) (0.24) -
------------------------------------------------------------------------------
(1) Periods less than 12 months (where applicable) are not annualized.
(2) Periods less than 12 months (where applicable) are annualized.
(3) For the period from October 1, 2003 to March 31, 2004. Unaudited.
(4) Computed based on average shares outstanding.
(5) For the period from July 1, 2003 to September 30, 2003. The Artisan Funds
changed its fiscal year-end from June 30 to September 30 effective
September 30, 2003.
(6) The amount shown may not correlate with the aggregate gains and losses of
portfolio securities due to the timing of subscriptions and redemptions of
Fund shares.
(7) For the period from commencement of operations (March 28, 2001) through
June 30, 2001.
(8) Less than $0.01.
58
- -----------
FIFTY-EIGHT
RATIO OF RATIO OF NET
DISTRIBUTIONS TOTAL NET ASSET NET ASSETS EXPENSES INVESTMENT
FROM NET DIVIDENDS VALUE END OF TO AVERAGE INCOME (LOSS) PORTFOLIO
REALIZED AND END TOTAL PERIOD NET TO AVERAGE TURNOVER
GAINS DISTRIBUTIONS OF PERIOD RETURN(1) (MILLIONS) ASSETS(2) NET ASSETS(2) RATE(1)
=======================================================================================================
MID CAP FUND -------------------------------------------------------------------------------------------------------
Investor Shares $- $- $27.08 17.1% $3,617.0 1.17% (0.76)% 57.36%
-------------------------------------------------------------------------------------------------------
- - 23.11 6.0 2,583.2 1.20(9) (0.81)(9) 26.52
-------------------------------------------------------------------------------------------------------
- - 21.81 (1.4) 2,286.6 1.20 (0.56) 102.85
-------------------------------------------------------------------------------------------------------
- - 22.13 (16.3) 1,855.5 1.22 (0.77) 121.14
-------------------------------------------------------------------------------------------------------
(1.03) (1.03) 26.43 (0.6) 1,333.6 1.31 (0.52) 153.95
-------------------------------------------------------------------------------------------------------
(0.83) (0.83) 27.57 72.9 225.0 1.40 (0.79) 245.69
-------------------------------------------------------------------------------------------------------
(1.27) (1.27) 16.67 35.8 43.3 2.00(9) (1.13)(9) 202.84
-------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
Institutional Shares $- $- $27.31 17.3% $1,109.3 0.96% (0.55)% 57.36%
-------------------------------------------------------------------------------------------------------
- - 23.28 6.1 929.6 0.98(9) (0.59)(9) 26.52
-------------------------------------------------------------------------------------------------------
- - 21.96 (1.3) 829.0 1.00 (0.36) 102.85
-------------------------------------------------------------------------------------------------------
- - 22.24 (16.0) 449.8 1.02 (0.56) 121.14
-------------------------------------------------------------------------------------------------------
(1.03) (1.03) 26.48 (0.4) 212.2 1.08 (0.29) 153.95
-------------------------------------------------------------------------------------------------------
MID CAP VALUE FUND -------------------------------------------------------------------------------------------------------
Investor Shares $(0.24) $(0.24) $14.71 22.6% $132.0 1.42% 0.21% 22.56%
-------------------------------------------------------------------------------------------------------
- - 12.22 5.0 77.4 1.59(9) (0.31)(9) 11.90
-------------------------------------------------------------------------------------------------------
- - 11.64 7.6 64.5 1.78 (0.34) 45.55
-------------------------------------------------------------------------------------------------------
(0.08) (0.08) 10.82 (2.4) 22.0 1.95(9) (0.82)(9) 167.70
-------------------------------------------------------------------------------------------------------
- - 11.18 11.8 13.2 1.84(9) (0.52)(9) 40.72
-------------------------------------------------------------------------------------------------------
SMALL CAP FUND -------------------------------------------------------------------------------------------------------
Investor Shares $- $- $15.17 21.1% $166.9 1.28% (0.86)% 60.59%
-------------------------------------------------------------------------------------------------------
- - 12.53 5.3 127.9 1.44(9) (1.16)(9) 30.18
-------------------------------------------------------------------------------------------------------
(0.06) (0.06) 11.90 (0.1) 116.0 1.39 (0.98) 127.41
-------------------------------------------------------------------------------------------------------
(0.06) (0.06) 11.99 (13.9) 131.9 1.31 (1.00) 139.72
-------------------------------------------------------------------------------------------------------
(0.66) (0.66) 13.99 0.1 145.4 1.34 (0.68) 147.13
-------------------------------------------------------------------------------------------------------
- - 14.69 32.5 185.4 1.35 (0.79) 193.76
-------------------------------------------------------------------------------------------------------
(0.96) (0.96) 11.09 (17.0) 174.6 1.37 (0.67) 155.38
-------------------------------------------------------------------------------------------------------
SMALL CAP VALUE FUND -------------------------------------------------------------------------------------------------------
Investor Shares $(0.20) $(0.20) $16.68 23.7% $1,071.3 1.17% 0.02% 17.77%
-------------------------------------------------------------------------------------------------------
- - 13.67 4.0 775.2 1.20(9) (0.40)(9) 12.20
-------------------------------------------------------------------------------------------------------
(0.50) (0.50) 13.15 1.9 702.5 1.21 (0.21) 49.57
-------------------------------------------------------------------------------------------------------
(0.71) (0.72) 13.48 9.7 623.5 1.20 (0.10) 33.59
-------------------------------------------------------------------------------------------------------
(0.49) (0.54) 13.05 28.8 460.3 1.20 0.45 40.77
-------------------------------------------------------------------------------------------------------
(0.35) (0.38) 10.63 4.2 261.7 1.35 0.60 38.19
-------------------------------------------------------------------------------------------------------
(0.54) (0.54) 10.59 (1.0) 77.8 1.66 (0.45) 49.29
-------------------------------------------------------------------------------------------------------
(9) The ratios of expenses to average net assets and net investment loss to
average net assets exclude expenses waived or paid by the Adviser. Absent
expenses waived or paid by the Adviser, the ratios of expenses to average
net assets and net investment loss to average net assets would have been as
follows (periods less than 12 months, where applicable, are annualized):
RATIO OF NET
RATIO OF INVESTMENT
YEAR OR EXPENSES TO INCOME (LOSS)
PERIOD AVERAGE TO AVERAGE
FUND ENDED NET ASSETS NET ASSETS
Mid Cap Investor Shares 9/30/03 1.20% (0.81)%
6/30/99 2.12 (1.25)
Mid Cap Institutional Shares 9/30/03 0.98 (0.59)
Mid Cap Value Investor Shares 9/30/03 1.63 (0.35)
6/30/02 2.53 (1.40)
6/30/01 5.17 (3.84)
Small Cap Investor Shares 9/30/03 1.46 (1.18)
Small Cap Value Investor Shares 9/30/03 1.20 (0.41)
The accompanying notes are an integral part of the financial statements.
59
----------
FIFTY-NINE
ARTISAN FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS - March 31, 2004 (Unaudited)
(1) ORGANIZATION:
Artisan Funds, Inc. ("Artisan Funds") was incorporated on January 5, 1995,
as a Wisconsin corporation and is registered under the Investment Company
Act of 1940, as amended. Artisan Funds is a series comprised of seven open-
end, diversified mutual funds (each a "Fund" and collectively the "Funds"):
FUND NAME INCEPTION DATE
- --------------------------------------------------------------------------------
Artisan International Fund
("International Fund" or "International") December 28, 1995
- --------------------------------------------------------------------------------
Artisan International Small Cap Fund
("International Small Cap Fund" or "International Small Cap") December 21, 2001
- --------------------------------------------------------------------------------
Artisan International Value Fund
("International Value Fund" or "International Value") September 23, 2002
- --------------------------------------------------------------------------------
Artisan Mid Cap Fund ("Mid Cap Fund" or "Mid Cap") June 27, 1997
- --------------------------------------------------------------------------------
Artisan Mid Cap Value Fund
("Mid Cap Value Fund" or "Mid Cap Value") March 28, 2001
- --------------------------------------------------------------------------------
Artisan Small Cap Fund ("Small Cap Fund" or "Small Cap") March 28, 1995
- --------------------------------------------------------------------------------
Artisan Small Cap Value Fund
("Small Cap Value Fund" or "Small Cap Value") September 29, 1997
- --------------------------------------------------------------------------------
Each Fund's investment objective is to seek long-term capital growth. Each
Fund offers shares of capital stock of the class designated Investor
Shares. International Fund and Mid Cap Fund began offering a second class
of capital shares, Institutional Shares, effective July 1, 1997 and July 1,
2000, respectively. Institutional Shares are sold to institutional
investors meeting certain minimum investment requirements. Each class of
shares has equal rights with respect to portfolio assets and voting
privileges. Each class has exclusive voting rights with respect to any
matters involving only that class. Income, non-class specific expenses and
realized and unrealized gains and losses are allocated daily to each class
of shares based upon the relative net asset value of outstanding shares.
Expenses attributable to a particular class of shares, such as transfer
agency fees, shareholder communication expenses and registration fees, are
allocated directly to that class.
Each class of the Funds has an indefinite number of shares authorized with
a $0.01 par value.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the Funds,
which are in accordance with accounting principles generally accepted in
the United States of America.
(a) Security valuation - The net asset value ("NAV") of the shares of each
Fund was determined as of the close of regular session trading on the
New York Stock Exchange ("NYSE") (usually 3:00 p.m., Central time, but
sometimes earlier) each day the NYSE was open for regular session
trading. NAV was determined by dividing the value of each Fund's
securities and other assets, less its liabilities, by the number of
outstanding shares of that Fund.
In determining NAV, each equity security traded on a securities
exchange was valued at the last current sale price as of the time of
valuation on the exchange on which the security is principally traded
(the "principal exchange"), or lacking any current reported sale on
the principal exchange at the time of valuation, at the most recent
bid quotation on the principal exchange, except that securities listed
on the London Stock Exchange were valued at the London Stock Exchange
official closing price, or lacking an official closing price, at the
last current sales price as of the time of valuation on the London
Stock Exchange, or if neither the official closing price nor a last
current sales price was available, at the mean of the most recent bid
and asked quotations as of the time of valuation, and each security
traded in the Nasdaq Stock Market ("Nasdaq") was valued at the Nasdaq
Official Closing Price ("NOCP"), as determined by Nasdaq, or lacking
an NOCP, the last current reported sale price as of the time of
valuation on Nasdaq, or lacking any current reported sale on Nasdaq at
the time of valuation, at the most recent bid quotation on Nasdaq.
Short-term investments maturing within sixty days of the valuation
date were valued at amortized cost, which approximates market.
Securities for which prices were not readily available were valued by
a valuation committee at a fair value determined in good faith under
consistently applied procedures established by and under the general
60
- -------
SIXTY
- -----------------------------------------------NOTES TO FINANCIAL STATEMENTS----
supervision of the Board of Directors. A price was considered not to
be readily available if, among other things, the valuation committee
believed that the price determined as described in the preceding
paragraph did not reflect a fair value of the security.
International Fund, International Small Cap Fund and International
Value Fund generally invest a significant portion (and perhaps as much
as substantially all of their total assets) in securities traded on a
principal exchange outside the United States ("non-U.S. securities")
and each of the other Funds has the ability to invest in non-U.S.
securities (although they did not do so during the period). The
markets in which non-U.S. securities trade are sometimes open on days
when the NYSE is not open and the Funds do not calculate their NAVs,
and sometimes are not open on days when the Funds do calculate their
NAVs. Even on days on which both the foreign market and the NYSE are
open, several hours may have passed between the time when trading in
the foreign market closed and the Funds calculate their NAVs.
The Artisan Funds valuation committee concluded that a price
determined under the Funds' valuation procedures was not readily
available if, among other things, the valuation committee believed
that the value of the security might have been materially affected by
events occurring after the close of the market in which the security
was principally traded but before the determination of NAV
("subsequent events"). A subsequent event might include a company-
specific development (for example, announcement of a merger that is
made after the close of the local market), a development that might
affect an entire market or region (for example, imposition of foreign
exchange controls by a foreign government), or a potentially global
development (such as a terrorist attack that may be expected to have
an impact on investor expectations world-wide). Artisan Funds
monitored for subsequent events using several tools, including
reviewing changes in the values of certain U.S. market indexes and a
statistical model used by the Funds to make broad projections of NAV
fluctuation based on changes in certain U.S. market indexes and
securities prices weighted to reflect each Fund's geographic
weightings. A movement of more than a designated magnitude by any of
these tools resulted in a meeting of the Artisan Funds valuation
committee, which considered whether a subsequent event had occurred
and whether local market closing prices continued to represent fair
values for potentially affected non-U.S. securities.
(b) Income taxes - No provision has been made for federal income taxes
since each Fund intends to i) comply with all provisions of subchapter
M of the Internal Revenue Code applicable to regulated investment
companies and ii) distribute to its shareholders substantially all of
its taxable income as well as net realized gains from the sale of
investment securities. The Funds may utilize earnings and profits
distributed to shareholders on redemption of Fund shares as part of
the dividends paid deduction.
(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 a spot market
rate of exchange on the day of valuation. Purchases and sales of
investments and dividend and interest income are translated to U.S.
dollars using a 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.
International Fund, International Small Cap Fund and International
Value Fund may enter 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 or loss. International Fund,
International Small Cap Fund and International Value Fund could be
exposed to loss if the counterparties fail to perform under these
contracts.
61
----------
SIXTY-ONE
- ----NOTES TO FINANCIAL STATEMENTS-----------------------------------------------
(e) Repurchase agreements - Each Fund may enter into repurchase agreements
with institutions that Artisan Partners Limited Partnership (the
"Adviser") has determined are creditworthy pursuant to criteria
adopted by the Funds' Board of Directors. Repurchase agreements are
recorded at cost and are collateralized in an amount greater than or
equal to the repurchase price plus accrued interest. To the extent
that the proceeds from any sale of such collateral upon a default in
the obligation to repurchase were less than the repurchase price, the
Fund would suffer a loss.
(f) Securities lending - Each Fund may enter into securities lending
transactions with borrowers approved by the Funds' Board of Directors.
Income from securities lending transactions is included in Other
income on the Statement of Operations. International Fund earned
income from securities lending transactions as follows:
PERIOD ENDED PERIOD ENDED YEAR ENDED
3/31/04 9/30/03 6/30/03
----------------------------------------------------------------------
International Fund $113,385 $185,160 $2,995,772
As of March 31, 2004 there were no securities on loan. Each Fund's
risks in entering into securities lending arrangements are that the
borrower may not provide additional collateral when required, return
the securities when due, or, if the borrower defaults, the Fund may
experience delays in selling collateral or the collateral may not be
sufficient to cover the value of securities lent.
(g) Commission recapture - Each of the Artisan Funds may direct portfolio
trades, subject to obtaining best price and execution, to various
brokers who have agreed to rebate a portion of the commissions
generated. Such rebates are made directly to the applicable Fund as
cash payments and are included in Other income on the Statements of
Operations as follows:
PERIOD ENDED PERIOD ENDED
FUND 3/31/04 9/30/03
----------------------------------------------------------------------
International $1,709,236 $ 226,962
International Small Cap 69,303 -
International Value 13,115 -
Mid Cap 376,769 -
Mid Cap Value - 7,032
Small Cap 11,519 -
Small Cap Value 67,190 9,039
(h) Use of estimates - The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States of America 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.
(i) Indemnifications - In the normal course of business, the Funds enter
into contracts in which the Funds agree to indemnify the other party
or parties against various potential costs or liabilities. The Funds'
maximum exposure under these arrangements is unknown. No claim has
been made for indemnification pursuant to any such agreement.
(j) Other - Dividend income less foreign taxes withheld, if any, is
recorded on the ex-dividend date, except that certain dividends from
private placements and foreign securities are recorded as soon as the
information becomes available to the Funds. Interest income is
reported on the accrual basis. Distributions to shareholders are
recorded on the ex-dividend date. Expenses attributable to the Funds
are generally allocated to each Fund based on net assets. Expenses
attributable to a particular Fund are allocated directly to that Fund.
62
- ----------
SIXTY-TWO
The character of income and net realized gains and losses may differ
for financial statement and tax purposes and may result in
reclassification of permanent differences among certain capital
accounts.
International Small Cap Fund and International Value Fund generally
impose a 2% redemption fee on shares held 90 days or less. These
redemption fees are recorded as a reduction in the cost of shares
redeemed.
(3) TRANSACTIONS WITH AFFILIATES:
The Adviser, with which the officers and certain directors of Artisan Funds
are affiliated, provides investment advisory and administrative services to
the Funds. In exchange for these services, each Fund (with the exception of
International Small Cap 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
International Small Cap Fund pays a monthly management fee to the Adviser
at an annual rate of 1.250% of average daily net assets.
Shares of Artisan Funds are offered for sale by Artisan Distributors LLC
("Distributors"). Distributors is wholly-owned by the Adviser. All
distribution expenses relating to the Funds are paid by the Adviser.
Each Fund also incurs other expenses for services such as maintaining
shareholder records and furnishing shareholder statements and reports. The
Adviser has voluntarily undertaken to waive or reimburse International
Value Fund for any ordinary operating expenses in excess of 2.00% of
average daily net assets annually. For the periods ended March 31, 2004 and
September 30, 2003 and year ended June 30, 2003, these waivers and
reimbursements totaled $0, $39,758 and $124,348, respectively.
During the period ended September 30, 2003, the Adviser agreed to reimburse
expenses related to the change in the Funds' fiscal year from June 30 to
September 30. These reimbursements are reflected in the Statements of
Operations for the period ended September 30, 2003.
Each director who is not an interested person of Artisan Funds or the
Adviser receives an annual retainer of $60,000, plus a fee for each board
or committee meeting attended (other than a committee meeting held on the
same day as a board meeting) of $3,000 for an in-person meeting and $500
for a telephonic meeting as well as reimbursement of expenses related to
his duties as a director of Artisan Funds. In addition, each chairman of a
board committee who is a non-interested director and each non-interested
director performing services deemed by the board to be substantially
equivalent to those of a committee chair receives a supplemental annual
retainer of $5,000. These fees are generally allocated to each Fund in
proportion to the Funds' net assets.
(4) ORGANIZATIONAL COSTS:
Organizational costs incurred prior to July 1, 1998 are amortized over
sixty months. These expenses were paid by the Adviser and have been
reimbursed by the Funds over the same time period.
(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 (a)
$75 million or (b) the lesser of (i) 10% of its total assets (after giving
effect to the loan) or (ii) the maximum amount the Fund may borrow under
the Investment Company Act, the
63
------------
SIXTY-THREE
- ----NOTES TO FINANCIAL STATEMENTS-----------------------------------------------
limitations included in the Fund's prospectus, or any limit or restriction
under any law or regulation to which the Fund is subject or any agreement
to which the Fund or Artisan Funds is a party; provided that the aggregate
borrowings by all Funds may not exceed $100 million. Artisan Funds pays a
commitment fee at the annual rate 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
minimal borrowings under the line of credit during the period ended March
31, 2004 and the year ended June 30, 2003. There were no borrowings under
the line of credit during the period ended September 30, 2003.
(6) INVESTMENT TRANSACTIONS:
The cost of securities purchased and the proceeds from the sale of
securities (excluding short-term securities) for the period ended March 31,
2004 were as follows:
FUND SECURITY PURCHASES SECURITY SALES
----------------------------------------------------------------------
International $3,020,474,794 $3,573,910,335
----------------------------------------------------------------------
International Small Cap 296,876,877 203,213,688
----------------------------------------------------------------------
International Value 73,100,815 6,042,092
----------------------------------------------------------------------
Mid Cap 2,853,142,732 2,344,346,665
----------------------------------------------------------------------
Mid Cap Value 53,683,282 21,854,872
----------------------------------------------------------------------
Small Cap 101,853,779 86,416,902
----------------------------------------------------------------------
Small Cap Value 265,588,549 158,253,583
----------------------------------------------------------------------
(7) TRANSACTIONS IN SECURITIES OF AFFILIATES:
If one or more of the Funds owns, in the aggregate, 5% or more of the
outstanding voting securities of a portfolio company, that company is
deemed to be an affiliate of the Funds under the Investment Company Act of
1940. During the period ended March 31, 2004, the Funds held securities of
affiliates or purchased and sold securities of affiliates in open market
transactions and received dividends from affiliates as summarized below:
3/31/04
SHARE -------------------------
BALANCE PURCHASE SALES REALIZED DIVIDEND SHARE
FUND SECURITY 9/30/03 COST COST GAIN/(LOSS) INCOME BALANCE VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL Clariant AG 8,999,193 $5,521,021 $18,846,723 $(7,923,084) $- 8,590,222 $121,337,521
- ------------------------------------------------------------------------------------------------------------------------------------
Imperial Chemical
Industries PLC 59,764,246 - 55,995,084 (17,624,550) 3,064,723 48,099,946 199,846,558
- ------------------------------------------------------------------------------------------------------------------------------------
Rhodia S.A.(1) 9,177,312 - 30,717,066 (20,866,332) - 6,353,129 19,758,251
- ------------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL Banco Latinoamericano 1,458,614 494,576 - - 148,991 1,489,914 27,116,435
SMALL CAP de Exportaciones,
S.A., E Shares
- ------------------------------------------------------------------------------------------------------------------------------------
Clariant AG 265,600 502,646 - - - 300,600 4,245,997
- ------------------------------------------------------------------------------------------------------------------------------------
Fine Tec Corporation(2) - 5,538,782 - - - 1,073,500 4,887,845
- ------------------------------------------------------------------------------------------------------------------------------------
SMALL CAP National Dentex 189,900 728,857 - - - 224,500 6,106,400
VALUE Corporation(3)
- ------------------------------------------------------------------------------------------------------------------------------------
PICO Holdings, Inc.(2)(3)550,800 1,487,525 - - - 647,900 10,644,997
- ------------------------------------------------------------------------------------------------------------------------------------
Stewart Information
Services Corporation(2) 737,600 5,156,139 432,970 11,901 381,846 880,600 34,607,580
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Issuer was no longer an affiliate as of March 31, 2004.
(2) Issuer was not an affiliate as of September 30, 2003.
(3) Non-income producing security.
64
- ----------
SIXTY-FOUR
- -----------------------------------------------NOTES TO FINANCIAL STATEMENTS----
(8) INFORMATION FOR FEDERAL INCOME TAX PURPOSES:
9/30/03
GROSS GROSS NET APPRECIATION ------------------------------
COST OF UNREALIZED UNREALIZED (DEPRECIATION) UNDISTRIBUTED UNDISTRIBUTED
FUND INVESTMENTS APPRECIATION DEPRECIATION ON INVESTMENTS ORDINARY INCOME LONG-TERM GAIN
-------------------------------------------------------------------------------------------------------------------------------
International $8,529,485,226 $1,952,994,094 $(292,400,114) $1,660,593,980 $101,850,701 $ -
-------------------------------------------------------------------------------------------------------------------------------
International Small Cap 455,655,681 136,959,270 (6,284,982) 130,674,288 7,887,377 743,211
-------------------------------------------------------------------------------------------------------------------------------
International Value 95,548,247 12,260,591 (173,046) 12,087,545 828,246 -
-------------------------------------------------------------------------------------------------------------------------------
Mid Cap 3,967,657,284 787,128,986 (34,556,084) 752,572,902 - -
-------------------------------------------------------------------------------------------------------------------------------
Mid Cap Value 105,924,245 25,853,256 (288,841) 25,564,415 430,440 237,214
-------------------------------------------------------------------------------------------------------------------------------
Small Cap 137,564,065 30,675,979 (2,606,762) 28,069,217 - -
-------------------------------------------------------------------------------------------------------------------------------
Small Cap Value 790,199,154 281,778,238 (3,114,708) 278,663,530 - -
-------------------------------------------------------------------------------------------------------------------------------
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.
The tax basis of dividends and long-term capital gain distributions paid
during the period ended March 31, 2004 and year ended June 30, 2003,
capital loss carryovers as of September 30, 2003 and capital loss
carryovers utilized during the period ended September 30, 2003 are as
follows:
PERIOD ENDED
PERIOD ENDED 3/31/04 YEAR ENDED 6/30/03 9/30/03 9/30/03
-----------------------------------------------------------------------------------------------------------
ORDINARY LONG-TERM ORDINARY LONG-TERM NET CAPITAL CAPITAL LOSS CAPITAL LOSS
INCOME CAPITAL GAIN INCOME CAPITAL GAIN LOSS CARRYOVER CARRYOVER
FUND DIVIDENDS DISTRIBUTIONS DIVIDENDS DISTRIBUTIONS CARRYOVERS(1) EXPIRATION UTILIZED
---------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL $101,887,241 $ - $50,243,215 $ - $116,228,014 2008 $ -
694,241,382 2009
384,841,928 2010
202,299,105 2011
---------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL SMALL CAP 12,868,473 3,959,034 236,073 - - -
---------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL VALUE(2) 828,575 - - - - -
---------------------------------------------------------------------------------------------------------------------------------
MID CAP - - - - 166,421,032 2009 11,589,556
333,252,323 2010
---------------------------------------------------------------------------------------------------------------------------------
MID CAP VALUE 920,430 679,381 - - - 406,002
---------------------------------------------------------------------------------------------------------------------------------
SMALL CAP - - - 629,095 13,948,829 2010 -
3,601,756 2011
---------------------------------------------------------------------------------------------------------------------------------
SMALL CAP VALUE 2,241,194 9,542,404 6,321,911 16,278,465 1,664,820 2010 7,210,055
---------------------------------------------------------------------------------------------------------------------------------
(1) Capital gain distributions will resume in the future to the extent
gains are realized in excess of the available carryforwards.
(2) Commencement of operations - September 23, 2002.
There were no dividends or long-term capital gain distributions paid during
the period ended September 30, 2003.
65
----------
SIXTY-FIVE
- ----NOTES TO FINANCIAL STATEMENTS-----------------------------------------------
(9) FUND SHARE ACTIVITIES:
Capital share transactions for the Funds were as follows:
INTERNATIONAL
INTERNATIONAL SMALL CAP
============================== ===============
Investor Institutional Investor
Period ended March 31, 2004 Shares Shares Shares
====================================== ============================== ===============
Proceeds from shares issued............. $1,729,934,735 $187,949,605 $142,007,008
Net asset value of shares issued
in reinvestment of dividends
and distributions ................... 54,530,763 38,442,969 16,704,120
Cost of shares redeemed.................(2,119,420,366) (422,639,866) (57,122,860)(1)
------------------------------ ----------------
Net increase (decrease) from fund
share transactions ................... $(334,954,868) $(196,247,292) $101,588,268
============================== ===============
Shares sold............................. 93,240,540 10,027,709 9,369,244
Shares issued in reinvestment
of dividends and distributions ....... 3,107,166 2,183,019 1,141,772
Shares redeemed......................... (115,461,161) (22,912,943) (3,650,961)
------------------------------ ----------------
Net increase (decrease)
in capital shares .................... (19,113,455) (10,702,215) 6,860,055
============================== ===============
INTERNATIONAL
INTERNATIONAL SMALL CAP
============================== ===============
Investor Institutional Investor
Period ended September 30, 2003 Shares Shares Shares
====================================== ============================== ===============
Proceeds from shares issued............. $1,653,682,408 $222,370,761 $118,234,351
Net asset value of shares issued
in reinvestment of dividends
and distributions ................... - - -
Cost of shares redeemed.................(1,607,024,622) (24,062,048) (7,725,918)(3)
------------------------------ ----------------
Net increase (decrease) from fund
share transactions ................... $ 46,657,786 $198,308,713 $110,508,433
============================== ===============
Shares sold............................. 102,140,758 13,738,314 9,146,005
Shares issued in reinvestment
of dividends and distributions ....... - - -
Shares redeemed......................... (98,579,720) (1,477,132) (592,457)
------------------------------ ----------------
Net increase (decrease)
in capital shares .................... 3,561,038 12,261,182 8,553,548
============================== ===============
(1) Net of redemption fees of $57,335.
(2) Net of redemption fees of $2,307.
(3) Net of redemption fees of $48,643.
(4) Net of redemption fees of $509.
66
- ----------
SIXTY-SIX
INTERNATIONAL SMALL CAP
VALUE MID CAP MID CAP VALUE SMALL CAP VALUE
============================================================================================
Investor Investor Institutional Investor Investor Investor
Period ended March 31, 2004 Shares Shares Shares Shares Shares Shares
====================================================================================================================================
Proceeds from shares issued............. $78,813,618 $1,000,175,050 $53,818,266 $44,142,437 $23,239,049 $198,052,265
Net asset value of shares issued
in reinvestment of dividends
and distributions ................... 788,115 - - 1,567,572 - 10,992,907
Cost of shares redeemed................. (3,760,960)(2) (438,235,442) (39,446,124) (9,407,562) (11,307,171) (90,056,597)
--------------------------------------------------------------------------------------------
Net increase (decrease) from fund
share transactions ................... $75,840,773 $561,939,608 $14,372,142 $36,302,447 $11,931,878 $118,988,575
============================================================================================
Shares sold............................. 4,677,017 38,636,194 2,175,557 3,203,775 1,584,631 12,522,986
Shares issued in reinvestment
of dividends and distributions ....... 52,262 - - 121,706 - 747,307
Shares redeemed......................... (224,817) (16,838,970) (1,481,484) (686,864) (787,003) (5,716,249)
--------------------------------------------------------------------------------------------
Net increase (decrease)
in capital shares .................... 4,504,462 21,797,224 694,073 2,638,617 797,628 7,554,044
============================================================================================
INTERNATIONAL SMALL CAP
VALUE MID CAP MID CAP VALUE SMALL CAP VALUE
============================================================================================
Investor Investor Institutional Investor Investor Investor
Period ended September 30, 2003 Shares Shares Shares Shares Shares Shares
====================================================================================================================================
Proceeds from shares issued............. $5,774,285 $320,410,216 $56,462,660 $15,855,003 $10,625,353 $74,751,717
Net asset value of shares issued
in reinvestment of dividends
and distributions ................... - - - - - -
Cost of shares redeemed................. (341,232)(4) (161,733,175) (6,856,490) (6,347,808) (4,865,543) (29,674,829)
--------------------------------------------------------------------------------------------
Net increase (decrease) from fund
share transactions ................... $5,433,053 $158,677,041 $49,606,170 $9,507,195 $5,759,810 $45,076,888
============================================================================================
Shares sold............................. 421,672 13,957,902 2,468,566 1,323,657 839,721 5,442,976
Shares issued in reinvestment
of dividends and distributions ....... - - - - - -
Shares redeemed......................... (25,017) (7,041,572) (296,096) (529,220) (385,700) (2,163,557)
--------------------------------------------------------------------------------------------
Net increase (decrease)
in capital shares .................... 396,655 6,916,330 2,172,470 794,437 454,021 3,279,419
============================================================================================
67
------------
SIXTY-SEVEN
- ----NOTES TO FINANCIAL STATEMENTS-----------------------------------------------
(9) FUND SHARE ACTIVITIES (CONTINUED):
Capital share transactions for the Funds were as follows:
INTERNATIONAL
INTERNATIONAL SMALL CAP
============================== ===============
Investor Institutional Investor
Period ended June 30, 2003 Shares Shares Shares
====================================== ============================== ===============
Proceeds from shares issued.............$ 6,609,449,427 $1,265,372,555 $156,597,326
Net asset value of shares issued
in reinvestment of dividends
and distributions ................... 29,416,168 16,663,234 233,838
Cost of shares redeemed.................(6,063,741,583) (141,139,765) (24,518,197)(1)
------------------------------ ----------------
Net increase (decrease) from fund
share transactions ................... $ 575,124,012 $1,140,896,024 $132,312,967
============================== ===============
Shares sold............................. 448,720,763 84,658,208 15,036,137
Shares issued in reinvestment
of dividends and distributions ....... 1,986,215 1,121,348 24,615
Shares redeemed......................... (410,530,756) (9,434,864) (2,445,304)
------------------------------ ----------------
Net increase (decrease)
in capital shares .................... 40,176,222 76,344,692 12,615,448
============================== ===============
(1) Net of redemption fees of $76,057.
(2) For the period from commencement of operations (September 23, 2002) to June
30, 2003.
(3) Net of redemption fees of $578.
(10) CHANGE IN INDEPENDENT AUDITORS
The Board of Directors and the audit committee of the Board of Directors
recommended and approved Ernst & Young LLP as the Funds' independent
auditors on August 26, 2003. PricewaterhouseCoopers LLP previously served
as the Funds' independent auditors. There were no disagreements with the
previous independent auditors and an unqualified opinion was issued on the
June 30, 2003 financial statements of Artisan Funds.
(11) LITIGATION
Artisan Funds and the Adviser are defendants in a lawsuit that seeks
certification of a plaintiff class consisting of all persons in the United
States who held shares in International Fund for a period of more than 14
days during the five years prior to the filing of the lawsuit. The suit
seeks compensatory and punitive damages, as well as interest, costs and
attorney's fees. The lawsuit alleges, in summary, that Artisan Funds and
the Adviser exposed long-term International Fund shareholders to trading by
market timers by allegedly (a) failing to properly evaluate daily whether a
significant event affecting the value of International Fund's securities
had occurred after foreign markets had closed but before the calculation of
the Fund's NAV; (b) failing to implement the Fund's portfolio valuation and
share pricing policies and procedures; (c) allowing portfolio valuation and
share policies and procedures that benefited market timers at the expense
of long-term shareholders; and (d) failing to know and implement applicable
rules and regulations concerning the calculation of NAV. Artisan Funds and
the Adviser intend to defend the lawsuit vigorously. Artisan Funds does not
believe that the pending action will have a material affect on the
financial statements of any Fund.
68
- -----------
SIXTY-EIGHT
INTERNATIONAL SMALL CAP
VALUE MID CAP MID CAP VALUE SMALL CAP VALUE
============================================================================================
Investor Investor Institutional Investor Investor Investor
Period ended June 30, 2003 Shares Shares Shares Shares Shares Shares
====================================================================================================================================
Proceeds from shares issued............. $14,046,764 $1,165,389,769 $364,499,717 $ 48,987,982 $ 53,637,048 $ 218,256,845
Net asset value of shares issued
in reinvestment of dividends
and distributions ................... - - - - 615,881 21,684,627
Cost of shares redeemed................. (266,341)(3) (740,991,149) (18,264,478) (12,530,971) (66,435,862) (153,690,612)
--------------------------------------------------------------------------------------------
Net increase (decrease) from fund
share transactions ................... $13,780,423 $ 424,398,620 $346,235,239 $36,457,011 $(12,182,933) $ 86,250,860
============================================================================================
Shares sold............................. 1,275,274 58,902,392 18,444,267 4,746,201 5,277,657 18,453,943
Shares issued in reinvestment
of dividends and distributions ....... - - - - 62,909 1,946,555
Shares redeemed......................... (23,302) (37,879,947) (921,013) (1,238,891) (6,597,238) (13,245,797)
--------------------------------------------------------------------------------------------
Net increase (decrease)
in capital shares .................... 1,251,972 21,022,445 17,523,254 3,507,310 (1,256,672) 7,154,701
============================================================================================
69
----------
SIXTY-NINE
- ----PROXY VOTING POLICIES AND PROCEDURES----------------------------------------
You may obtain a description of the Artisan Funds' proxy voting policies and
procedures, without charge, upon request by calling 800.344.1770. That
information also is included in Artisan Funds' statement of additional
information, which is available on the Securities and Exchange Commission's
website at http://www.sec.gov.
- ----NOTES ON MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE------------------------
The discussions of each Fund included in this Semi-Annual Report include
statistical information about the portfolios of each of the Artisan Funds.
Except as otherwise noted, that information is as of March 31, 2004; it varies
with changes in a Fund's portfolio investments. The performance information for
each Fund relative to its benchmark index discussed in this Report was prepared
by the Adviser using information reported by FactSet Databases. Artisan Funds
may consider an issuer to be from a particular country if (i) its principal
securities trading market is in that country; (ii) alone or on a consolidated
basis it derives more of its annual revenue from goods produced, sales made or
services performed in that country than any other country; or (iii) it is
organized under the laws of, or has a principal office in that country. By
applying these tests, it is possible that Artisan Funds could deem a particular
issuer to be from more than one country.
DEFINITIONS OF PORTFOLIO STATISTICS
MARKET CAPITALIZATION is the aggregate value of all a company's outstanding
common stock. Market capitalization is calculated by FactSet using the price as
of the most recent month-end multiplied by the number of shares outstanding as
shown in the financial statements of the issuer. MEDIAN MARKET CAP provides a
measure of the market capitalization value of the companies in a portfolio.
Equal numbers of companies in the portfolio have market capitalizations higher
and lower than the median. WEIGHTED AVERAGE MARKET CAP is the average of the
market capitalizations of the companies in the portfolio weighted by the size of
each company's position within the portfolio. WEIGHTED AVERAGE GROWTH RATE is
the average of the 3-5 year forecasted growth rates of each company in the
portfolio, weighted by the size of the company's position within the portfolio.
MEDIAN PRICE/BOOK VALUE measures the median ratio of portfolio stock prices to
each stock's book value of equity per share. WEIGHTED HARMONIC AVERAGE P/E
measures the price/earnings ratio of the Fund, excluding negative earners,
weighted by the size of the company's position within the portfolio. The
earnings figures used are estimates for the current calendar year. MEDIAN P/E
measures the median ratio of the portfolio stock prices to each stock's
earnings. The earnings figures used are estimates for the current calendar year.
DESCRIPTIONS OF INDICES
Each Fund's performance is compared in this report to changes in at least two
indices - a broad-based index of changes in prices of securities in the market
in which the Fund invests and a peer group index of other mutual funds that are
categorized by Lipper, Inc., an independent monitor of mutual fund performance,
in the same general category as the Fund. All of the indices are unmanaged and
their returns include reinvested dividends. Unlike the Funds' returns, the
returns of each index, except each Lipper index, do not include the payment of
sales commissions or other expenses that would be incurred in the purchase or
sale of the securities included in that index.
70
--------
SEVENTY
- ------------------------NOTES ON MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE----
The indices to which the Funds are compared are:
ARTISAN INTERNATIONAL, ARTISAN INTERNATIONAL SMALL CAP AND ARTISAN INTERNATIONAL
VALUE FUNDS - MORGAN STANLEY CAPITAL INTERNATIONAL EAFE/R INDEX (EAFE) is a
market-weighted index of companies in developed markets, excluding the U.S. and
Canada. EAFE's average annual return since inception of the International Fund
is based upon a starting date of December 31, 1995.
ARTISAN INTERNATIONAL SMALL CAP FUND - MORGAN STANLEY CAPITAL INTERNATIONAL
EAFE/R SMALL CAP INDEX is a market-weighted index of small companies in
developed markets, excluding the U.S. and Canada.
ARTISAN INTERNATIONAL VALUE FUND - MORGAN STANLEY CAPITAL INTERNATIONAL EAFE/R
VALUE INDEX is a market-weighted index of companies in developed markets,
excluding the U.S. and Canada, with lower price-to-book ratios.
ARTISAN MID CAP FUND - RUSSELL MIDCAP/R INDEX is a market-weighted index of
about 800 medium-sized U.S. companies. The RUSSELL MIDCAP/R GROWTH INDEX is a
market-weighted index of those medium-sized companies included in the Russell
Midcap/R Index with higher price-to-book ratios and higher forecasted growth
values.
ARTISAN MID CAP VALUE FUND - RUSSELL MIDCAP/R INDEX is a market-weighted index
of about 800 medium-sized U.S. companies. The RUSSELL MIDCAP/R VALUE INDEX is a
market-weighted index of those medium-sized companies included in the Russell
Midcap/R Index with lower price-to-book ratios and lower forecasted growth
values.
ARTISAN SMALL CAP FUND - RUSSELL 2000/R INDEX is a market-weighted index of
about 2,000 small U.S. companies. RUSSELL 2000/R GROWTH INDEX is a market-
weighted index of those small companies included in the Russell 2000/R Index
with higher price-to-book ratios and higher forecasted growth values.
ARTISAN SMALL CAP VALUE FUND - RUSSELL 2000/R INDEX is a market-weighted index
of about 2,000 small U.S. companies. The RUSSELL 2000/R VALUE INDEX is a market-
weighted index of those small companies included in the Russell 2000/R Index
with lower price-to-book ratios and lower forecasted growth values.
Each LIPPER INDEX, except the Lipper International Small-Cap Funds Index,
reflects the net asset weighted returns of the 30 largest mutual funds tracked
by Lipper in the category reflected in the name of the index. The Lipper
International Small-Cap Funds Index reflects the net asset value weighted return
of the ten largest international small-cap funds tracked by Lipper. Artisan
International Fund, Artisan Mid Cap Fund and Artisan Small Cap Value Fund are
included in their respective Lipper indices.
TRADEMARKS
Trademarks and copyrights relating to the indices and products of portfolio
companies mentioned in this report are owned by their respective owners. Except
as otherwise indicated, the trademarks, including names, logos, slogans and
service marks appearing in this report are the property of Artisan Partners
Limited Partnership and may not be copied, reproduced, published or in any way
used without written permission.
71
-----------
SEVENTY-ONE
[LOGO]
ARTISAN FUNDS
P.O. BOX 8412
BOSTON, MA 02266-8412
800.344.1770
WWW.ARTISANFUNDS.COM
5/28/04 - A4060
------------------------
[LOGO]
ARTISAN
------------------------
------------------------
SEMI-ANNUAL
REPORT
MARCH 31, 2004
------------------------
ARTISAN
INTERNATIONAL FUND
------------
ARTISAN MID CAP FUND
------------
Institutional Shares
------------------------
ARTISAN FUNDS, INC.
INSTITUTIONAL SHARES
- -----------------------------------------------------------TABLE OF CONTENTS----
- ---------------------------------------
02 MANAGEMENT'S DISCUSSION
OF FUND PERFORMANCE
- ---------------------------------------
02 Artisan International Fund
- ---------------------------------------
06 Artisan Mid Cap Fund
- ---------------------------------------
- ---------------------------------------
10 SCHEDULES OF INVESTMENTS
- ---------------------------------------
10 Artisan International Fund
- ---------------------------------------
12 Artisan Mid Cap Fund
- ---------------------------------------
- ---------------------------------------
15 STATEMENTS OF
ASSETS & LIABILITIES
- ---------------------------------------
- ---------------------------------------
16 STATEMENTS OF OPERATIONS
- ---------------------------------------
- ---------------------------------------
17 STATEMENTS OF
CHANGES IN NET ASSETS
- ---------------------------------------
- ---------------------------------------
18 FINANCIAL HIGHLIGHTS
- ---------------------------------------
- ---------------------------------------
20 NOTES TO FINANCIAL STATEMENTS
- ---------------------------------------
- ---------------------------------------
27 PROXY VOTING POLICIES
AND PROCEDURES
- ---------------------------------------
- ---------------------------------------
27 NOTES ON
MANAGEMENT'S DISCUSSION
OF FUND PERFORMANCE
- ---------------------------------------
- --------------------------------------------------------------------------------
ARTISAN FUNDS
P.O. BOX 8412
BOSTON, MA 02266-8412
This report and the unaudited financial statements contained herein are provided
for the general information of the shareholders of Artisan International Fund
and Artisan Mid Cap Fund, Institutional Shares. This report is not authorized
for distribution to prospective investors unless preceded or accompanied by an
effective prospectus. For more complete information on the Funds, including fees
and expenses, please call 800.399.1770 for a free prospectus. Read it carefully
before you invest or send money.
Company discussions are for illustration only and are not intended as
recommendations of individual stocks. The discussions present information about
the companies believed to be accurate, and the views of the portfolio managers,
as of March 31, 2004. That information and those views may change and the Funds
disclaim any obligation to advise shareholders of any such changes.
Artisan Funds offered through Artisan Distributors LLC, member NASD.
ARTISAN
INTERNATIONAL FUND
INSTITUTIONAL SHARES
- ----HIGHLIGHTS------------------------------------------------------------------
o During the six months ended March 31, 2004, Artisan International Fund
outperformed the MSCI EAFE/R Index.
o Our stock selections in the technology sector and media industry were the
primary reasons for our outperformance.
o The Swiss equity market trailed the broader average and our overweight
position, compared to the MSCI EAFE/R Index, detracted from our relative
returns.
- ----INVESTMENT APPROACH---------------------------------------------------------
We use a bottom-up investment process to construct a portfolio of international
growth companies of all market capitalizations. The investment team conducts its
own fundamental analysis with particular emphasis on:
1) Well-managed companies focused on increasing shareholder value;
2) Sustainable growth prospects;
3) Reasonable valuations;
4) Dominant or increasing market shares or direct exposure to an identified
theme.
- ----PERFORMANCE REVIEW----------------------------------------------------------
The halfway point of our fiscal year marked the end of a strong twelve months
for stocks. The Fund returned almost 60% and outpaced its benchmark, the MSCI
EAFE/R Index, and peers, as measured by the Lipper International Fund Index.
FUND STATISTICS
Net Assets.................................. $10.2 Bil.
Number of Holdings................................. 109
Weighted Avg. Market Cap.................... $26.8 Bil.
Weighted Avg. Growth Rate (3-5 yr)............... 10.8%
Weighted Harmonic Avg. P/E (2004E)............... 17.2X
Source: Factset/Artisan Partners. All statistics are as of 3/31/04.
GROWTH OF AN ASSUMED $10,000 INVESTMENT (7/1/97 to 3/31/04)
[CHART APPEARS HERE]
ARTISAN INTERNATIONAL FUND - INSTITUTIONAL SHARES ($19,331)
MSCI EAFE/R Index ($11,428)
Lipper International Funds Index ($12,372)
ARTISAN
INTERNATIONAL Lipper
FUND - MSCI International
INSTITUTIONAL EAFE/R Funds
SHARES Index Index
------ ------ ------
7/1/97 (Inception of Institutional Shares) 10,000 10,000 10,000
10,166 9,930 10,192
12/97 9,525 9,152 9,412
11,453 10,498 10,808
12,440 10,610 10,900
10,094 9,102 9,180
12/98 12,621 10,982 10,604
14,045 11,135 10,740
14,632 11,418 11,336
15,375 11,919 11,718
12/99 22,927 13,943 14,616
26,985 13,929 14,706
24,285 13,377 14,015
21,601 12,298 12,986
12/00 20,544 11,968 12,464
17,917 10,324 10,838
18,329 10,188 10,902
15,768 8,789 9,272
12/01 17,322 9,402 10,055
17,472 9,449 10,302
17,134 9,249 10,107
13,478 7,424 8,125
12/02 14,077 7,903 8,665
12,096 7,254 7,902
14,892 8,652 9,460
15,764 9,355 10,207
18,218 10,953 11,784
3/04 19,331 11,428 12,372
AVERAGE ANNUAL TOTAL RETURNS (as of 3/31/04)
- --------------------------------------------------------------------------------
SINCE
FUND / INDEX 1-YEAR 5-YEAR INCEPTION
- --------------------------------------------------------------------------------
Artisan International Fund 59.82% 6.60% 10.26%
- --------------------------------------------------------------------------------
MSCI EAFE/R Index 57.54 0.52 2.00
- --------------------------------------------------------------------------------
Lipper International Funds Index 56.57 2.87 3.20
- --------------------------------------------------------------------------------
THE PERFORMANCE QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT GUARANTEE
FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN
THE FUND WILL FLUCTUATE, SO THAT AN INVESTOR'S SHARES IN THE FUND, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. FOR MONTH-
END PERFORMANCE INFORMATION, CALL 800.399.1770. INTERNATIONAL FUND'S
PERFORMANCE INFORMATION SHOWN DOES NOT REFLECT THE DEDUCTION OF A 2% REDEMPTION
FEE ON SHARES HELD BY AN INVESTOR FOR 90 DAYS OR LESS AND, IF REFLECTED, THE
FEE WOULD REDUCE THE PERFORMANCE QUOTED. THE REDEMPTION FEE WAS EFFECTIVE MAY
1, 2004. See page 27 for a description of each index.
02
----
TWO
- --------------------------------------------------ARTISAN INTERNATIONAL FUND----
INVESTING ENVIRONMENT AND PERFORMANCE DISCUSSION
During the six months ended March 31, 2004, international equity markets
continued to add to the gains that began roughly twelve months prior to the
period end. Returns were supported by low interest rates around the globe, tax
cuts in the U.S. and advancing earnings. Virtually every area of the market
advanced, but the leaders were small-caps, many emerging markets and value-
oriented stocks. The U.S. dollar weakened against a range of currencies, which
enhanced absolute returns for domestic investors with securities denominated in
those currencies. Late in the period, the Madrid terrorist attacks, uncertainty
after the elections in Taiwan and continued tension in the Middle East caused
some pause in the markets, but the reaction was not strong enough to erase the
strength of the returns.
We benefited from the strength of our stock selection during the period. Leading
contributors were our media selections, technology stocks and financials
holdings. We were hurt by our exposure to certain consumer industries and our
chemicals stocks. On a country basis, we added value to returns due to our
investments in certain emerging markets and Japan, while our investments in
Switzerland were a drag on results as the Swiss market did not perform as well
as the broader average.
SECTOR REVIEW
The consumer sectors together remain our largest weighting relative to the MSCI
EAFE/R Index, although we did trim our exposure. The media industry was a strong
contributor to performance. However, relative to the benchmark, the returns of
our clothing retailers, food retailers, food products and beverage companies
detracted from those gains. The market favored other industries and a few of our
larger positions were weak.
In the media industry, leading performers in the Fund were JCDecaux S.A.,
Promotora de Informaciones S.A. (Prisa) and ITV PLC. JCDecaux, the French
outdoor advertising company, improved profitability by lowering spending and its
success in doing so was affirmed by speculation of a possible merger of its
outdoor operations with Viacom of the U.S. Prisa, a Spanish media company,
benefited from solid sales growth and expanded profitability due to
restructuring and cost cutting. British media company ITV was formed from the
combination of the former Granada PLC and Carlton Communications PLC companies
and began trading under the ITV name in February. We held both stocks prior to
the merger and our combined position after the merger made ITV a Top 10 Holding.
Food retailer Tesco PLC, food products company Nestle S.A., and clothing
retailer Marks & Spencer Group PLC underperformed relative to the benchmark.
Tesco reported strong sales growth, but that was overshadowed by the unexpected
announcement of an additional share issuance. Nestle reported solid sales growth
and earnings, but it suffered from higher expectations. Marks & Spencer's share
price weakened due to slower sales and certain supply chain issues.
Our investments in a few select industry-leading technology companies allowed us
to add value in that area. The best individual performer was Telefonaktiebolaget
LM Ericsson (Ericsson), a Swedish manufacturer of wireless communications
equipment. Over the past two years, Ericsson has undergone a significant
restructuring program and pushed through cost cutting goals ahead of
expectations. This led to a strong increase in profitability. Samsung
Electronics Co., Ltd. also posted a strong gain as overall handset shipment
growth was robust and Europe emerged as one of the fastest growing areas for
exports. Finally, Dutch semiconductor equipment manufacturer ASML Holding N.V.
benefited from strong orders and improved profits.
Our financial stocks made a meaningful contribution to the Fund's return. One of
the leaders was Japanese consumer finance company Promise Co. Ltd. It benefited
from lower costs after a reduction in write-offs due to a decline in personal
bankruptcies. In addition, the company announced a notable increase in the
number of new customer loan accounts and sold its credit card business to focus
more on the core loan business. A number of the Japanese banks we owned recorded
meaningful gains. Two of the best performers were UFJ
[PHOTO]
MARK L. YOCKEY
Portfolio Manager
03
-----
THREE
ARTISAN INTERNATIONAL FUND
Holdings, Inc. and The Bank of Yokohama Ltd. UFJ acquired a credit card company,
which was an additional step in its efforts to focus on the retail business.
Bank of Yokohama advanced as it cut costs and improved profit growth. Finally,
German insurer Allianz AG, our largest holding, performed roughly in line with
the financial sector return, but continued to improve the performance of many of
its business units. The company further reduced its cross-shareholdings in other
German financial companies and sold its stake in Beiersdorf, maker of Nivea
products.
SECTOR DIVERSIFICATION
Sector 9/30/03 3/31/04 Sector 9/30/03 3/31/04
- --------------------------------------------------------------------------------
Consumer Discretionary 24.9% 24.2% Information Technology 1.9% 6.7%
- --------------------------------------------------------------------------------
Consumer Staples 16.5 11.9 Materials 7.4 4.9
- --------------------------------------------------------------------------------
Energy 4.7 7.4 Telecommunication Services 7.9 9.0
- --------------------------------------------------------------------------------
Financials 24.2 27.3 Utilities 0.3 0.4
- --------------------------------------------------------------------------------
Healthcare 6.9 3.0 Other assets less liabilities 1.9 1.1
- --------------------------------------------------------------------------------
Industrials 3.4 4.1 TOTAL 100.0%100.0%
- --------------------------------------------------------------------------------
As a percentage of total net assets as of 9/30/03 and 3/31/04, respectively.
Although oil and gas prices trended higher during the period, energy stocks in
general trailed the market. We favored emerging market and smaller energy
companies and our selections outpaced the sector return. The two best performers
in the area were Russian oil company LUKOIL and Chinese oil refiner China
Petroleum & Chemical Corporation (Sinopec). LUKOIL announced earnings in
January, which indicated that profitability levels remained healthy due to solid
production growth and cost reductions. Growth in China and its increased demand
for commodities helped Sinopec.
In the chemicals industry, we were hurt by the performance of CIBA Specialty
Chemicals AG and Rhodia S.A. CIBA recently announced the acquisition of a paper
chemicals company that we thought aligned well with its own paper chemicals
division. However, investors seemed to believe the price paid for the assets was
excessive. Rhodia was pressured by financing and liquidity issues and, as of
March 31, 2004, we started to move out of our position. Imperial Chemical
Industries PLC offset some of the negative effect by disposing of its food
ingredients unit in an ongoing restructuring effort.
COUNTRY & CURRENCY REVIEW
Our country allocations, all of which were driven by our security selection,
contributed marginally to performance. Our overweight exposure to the
underperforming Swiss market was an area of negative performance relative to the
MSCI EAFE/R Index. However, many emerging markets outperformed the major markets
and our exposure to those areas and the strength of gains in our Japanese
holdings helped drive a strong relative result. Our security selection also
contributed to our gains in excess of the MSCI EAFE/R Index.
Fund returns benefited from our exposure to currencies that appreciated relative
to the U.S. dollar. When local currencies were converted back to U.S. dollars,
at the depreciated level, the translation effect enhanced absolute returns. This
effect was muted late in the period as the U.S. dollar appreciated marginally
versus a group of currencies.
TOP 5 COUNTRY ALLOCATIONS
United Kingdom........ 18.3%
Japan................. 17.8
Germany............... 12.9
Switzerland........... 12.1
Spain.................. 5.4
As a percentage of total net assets as of 3/31/04.
04
-----
FOUR
- --------------------------------------------------ARTISAN INTERNATIONAL FUND----
FUND CHANGES
Within our sector and industry allocations, we reduced our consumer and
healthcare exposure during the six months ended March 31, 2004. We used the
proceeds to increase our allocations to energy, technology and financials. On a
country level, we increased our Japanese exposure and reduced European exposure.
The Far East has seen some of the world's highest growth rates. For the first
time in years, it seemed to us that Japan might be on a sustainable path to an
economic recovery, fueled in large part by the continued growth of the Chinese
economy. Europe was behind the curve, with low, albeit improving, economic
growth that was partly dampened by the strong euro and the Madrid terrorist
attacks. Our weight in emerging markets was left basically unchanged, although
we reduced our Mexican exposure. We sold a number of holdings when they reached
our assessment of their full valuations, and others when we lost confidence in
their investment prospects. We replaced them with potentially more promising
stocks within our themes at what we consider to be more attractive valuations.
In the consumer areas, we sold Carrefour S.A., Next PLC and Wolters Kluwer N.V.
and we pared our positions in other stocks. The relative performance of the
consumer staples group served to reduce our weighting further. Among our
healthcare holdings, we closed out our position in French pharmaceutical company
Sanofi-Synthelabo S.A. because we did not believe that its attempt at a hostile
takeover of its larger, slower growth competitor, Aventis, was a good use of
capital. We sold Novartis AG because of the potential for slowing earnings
growth and reduced profitability.
TOP 10 HOLDINGS
COMPANY NAME COUNTRY %
- --------------------------------------------------------------------------------
Allianz AG Germany 3.1%
- --------------------------------------------------------------------------------
UBS AG Switzerland 2.9
- --------------------------------------------------------------------------------
ITV PLC United Kingdom 2.8
- --------------------------------------------------------------------------------
Muenchener Rueckversicherungs-Gesellschaft AG Germany 2.6
- --------------------------------------------------------------------------------
Nestle S.A., Class B Switzerland 2.6
- --------------------------------------------------------------------------------
Fortis Netherlands 2.5
- --------------------------------------------------------------------------------
Honda Motor Co. Ltd. Japan 2.5
- --------------------------------------------------------------------------------
Compass Group PLC United Kingdom 2.4
- --------------------------------------------------------------------------------
Tesco PLC United Kingdom 2.3
- --------------------------------------------------------------------------------
Nikko Cordial Corp. Japan 2.3
- --------------------------------------------------------------------------------
TOTAL 26.0%
- --------------------------------------------------------------------------------
As a percentage of total net assets as of 3/31/04. Top 10 Holdings are
determined by security, not issuer. Securities of the same issuer are not
aggregated.
The purchases of Italian oil services company Saipem S.p.A., Italian oil and gas
exploration company ENI S.p.A. and small positions in Total S.A. and BP PLC
increased our energy exposure. Samsung Electronics was the largest purchase in
the technology sector. Our increase in Japan was a primary reason for the
increase in our financials weight. Although we believed there was remaining risk
in the Japanese financial industry, the overall improvement of the economic
situation and the recovering stock market led us to initiate some positions in
banks and consumer finance companies. The stocks added included: UFJ, Nomura
Holdings, Inc., Bank of Yokohama, Sumitomo Mitsui Financial Group, Inc., Credit
Saison Co. Ltd. and ORIX Corp. We invested slowly in Japan because deflation was
still prevalent and Japan was continuing to deal with increasingly challenging
demographics.
REGION ALLOCATION
Europe................ 67.2%
Asia/Pacific.......... 24.6
Latin America.......... 4.2
North America.......... 2.8
Middle East............ 0.1
As a percentage of total net assets as of 3/31/04.
05
-----
FIVE
ARTISAN
MID CAP FUND
INSTITUTIONAL SHARES
- ----HIGHLIGHTS------------------------------------------------------------------
o During the six months ended March 31, 2004, Artisan Mid Cap Fund trailed the
Russell Midcap/R and Russell Midcap/R Growth Indices.
o The technology and healthcare sectors were two of the leading contributors
to Fund performance compared to both indices.
o Our stocks in the producer durables sector underperformed both benchmarks.
- ----INVESTMENT APPROACH---------------------------------------------------------
We use a bottom-up investment process to identify well-managed mid-sized
companies whose growth and profit potential are not yet fully recognized by
investors. Specifically, we spend most of our time answering three questions
about a company before we will invest in it:
1) Does the company exhibit franchise characteristics?
2) Is the company positioned for long-term growth and at an early stage in its
profit cycle?
3) Is the stock of the company trading at a reasonable discount to our estimate
of its private market value?
- ----PERFORMANCE REVIEW----------------------------------------------------------
Since inception, Artisan Mid Cap Fund has outperformed the Russell Midcap/R
Growth Index and under-performed the Russell Midcap/R Index.
FUND STATISTICS
Net Assets................................... $4.7 Bil.
Number of Holdings................................. 102
Median Market Cap............................ $5.8 Bil.
Weighted Avg. Market Cap..................... $8.5 Bil.
Weighted Avg. Growth Rate (3-5 yr)............... 17.2%
Weighted Harmonic Avg. P/E (2004E)............... 22.8X
Source: Factset/Artisan Partners. All statistics are as of 3/31/04.
GROWTH OF AN ASSUMED $10,000 INVESTMENT (7/1/00 to 3/31/04)
[CHART APPEARS HERE]
ARTISAN MID CAP FUND - INSTITUTIONAL SHARES ($10,270)
Russell Midcap/R Growth Index ($6,824)
Russell Midcap/R Index ($11,996)
Lipper Mid-Cap Core Funds Index ($10,760)
ARTISAN Lipper
MID CAP Russell Mid-Cap
FUND - Midcap/R Russell Core
INSTITUTIONAL Growth Midcap/R Funds
SHARES Index Index Index
------ ------ ------ ------
7/1/00 (Inception of Institutional Shares) 10,000 10,000 10,000 10,000
11,114 10,252 10,681 10,378
12/00 10,011 7,869 10,298 9,602
8,871 5,895 9,217 8,502
6/01 9,962 6,849 10,096 9,571
7,732 4,945 8,293 7,737
12/01 9,736 6,283 9,719 9,132
9,537 6,172 10,131 9,469
6/02 8,364 5,045 9,164 8,464
6,856 4,179 7,548 7,079
12/02 7,397 4,561 8,146 7,545
7,164 4,561 7,953 7,258
6/02 8,258 5,416 9,406 8,610
8,759 5,804 10,011 9,114
9,770 6,510 11,409 10,305
3/04 10,270 6,824 11,996 10,760
AVERAGE ANNUAL TOTAL RETURNS (as of 3/31/04)
- --------------------------------------------------------------------------------
SINCE
FUND / INDEX 1-YEAR INCEPTION
- --------------------------------------------------------------------------------
Artisan Mid Cap Fund 43.36% 0.71%
- --------------------------------------------------------------------------------
Russell Midcap/R Growth Index 49.63 -9.69
- --------------------------------------------------------------------------------
Russell Midcap/R Index 50.83 4.97
- --------------------------------------------------------------------------------
Lipper Mid-Cap Core Funds Index 48.25 1.97
- --------------------------------------------------------------------------------
THE PERFORMANCE QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT GUARANTEE
FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN
THE FUND WILL FLUCTUATE, SO THAT AN INVESTOR'S SHARES IN THE FUND, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. FOR MONTH-
END PERFORMANCE INFORMATION, CALL 800.399.1770. See page 27 for a description of
each index.
06
- ----
SIX
- --------------------------------------------------------ARTISAN MID CAP FUND----
INVESTING ENVIRONMENT AND PERFORMANCE DISCUSSION
During the first half of the fiscal year, there were plenty of indications that
the economy was in a sustained recovery and it showed in the GDP growth figures.
It also became clear that consumers would not have to support growth any longer
by themselves. Corporate earnings were strong and businesses started to spend.
Manufacturing activity and industrial production were both very strong
throughout the period. However, as of March 31, 2004, corporations had not begun
hiring at a pace that would be consistent with the level of growth, which has
left some uncertainties. The upcoming presidential election, the direction of
domestic monetary and fiscal policy, the resurgence of terrorism and the
prevalence of unstable geopolitical situations worldwide also created some
questions. While our portfolio is always built from the bottom up, in a period
in which the array of potential outcomes was quite wide, we were especially
diligent in anticipating change and not allowing any single economic sector to
dominate the portfolio.
SECTOR REVIEW
The largest contributors to Fund returns during the period were our holdings in
the technology sector. Within the sector, our telecom equipment providers,
Nortel Networks Corporation and Avaya Inc., and semiconductor companies, PMC-
Sierra, Inc. and Xilinx, Inc., were among the best performers. During the
period, Nortel Networks rose almost 45% after it signed a number of contracts
anticipated to boost future earnings and we trimmed our position into the gain.
Avaya also increased about 45%. It paid down a portion of its high interest
debt, new product sales offset legacy product declines and order sizes
increased. PMC and Xilinx have ties to the communication markets as suppliers of
semiconductors. PMC, with its diverse sales mix, saw an increase in demand
across all markets. We sold the stock into the share price strength. Xilinx
appreciated due to growth of its market share in key segments. Seagate
Technology, a market leader in hard disk drives, was sold off during the period.
It came under pressure when it became apparent that risks related to industry
price competition, and overall enterprise and mobile demand, were not
dissipating. We had a gain in the stock and sold our position.
Our telecom service providers, Sprint PCS (PCS) and Western Wireless
Corporation, performed well amid merger speculation following Cingular's offer
for AT&T Wireless. We sold PCS into the price strength after news that Sprint
Corp. would roll the tracking stocks back into a single stock in April. Western
was a new purchase during the period, and we maintained our position because we
liked the profitable growth potential of its international operations and the
recent improvements in its domestic subscriber numbers.
A number of our technology related holdings in the producer durables sector
weighed on performance. Two of our electronic components stocks were among our
weakest performers, but we decided to take a different course with each holding.
Novellus Systems, Inc. declined on management's more conservative outlook for
new orders relative to its competitors. After that announcement, we became
concerned that the company might be losing market share, and we closed out our
position. KLA-Tencor Corporation traded down, but we elected to maintain our
position because we did not believe its fundamentals were deteriorating. KLA
historically has been one of the most profitable companies in its industry, and
we thought it possessed a high-quality balance sheet and had the potential to
deliver significant operating leverage as the capital spending cycle unfolded.
Repair and operating products distributor W.W. Grainger, Inc. was another weak
performer in the area. It fell modestly after it announced uninspiring earnings
and noted that increased costs to upgrade systems could impact 2004 results.
The healthcare sector produced a number of the strongest relative contributors
compared to our benchmarks. Early in the period, healthcare stocks in general
were aided by the passage of a Medicare prescription drug benefit bill by
Congress, which ultimately was signed by the President. Separate from that news,
a number of our stocks had positive company specific news that added to stock
strength.
[PHOTO]
ANDREW C. STEPHENS
Lead Portfolio Manager
[PHOTO]
JAMES D. HAMEL
Associate Portfolio Manager
07
-----
SEVEN
- ----ARTISAN MID CAP FUND--------------------------------------------------------
Drug manufacturer Andrx Corporation did well due to the announcement of a new
management team, which is expected to refocus the company on its core generic
business from the branded business that historically weighed on its earnings
growth. Pharmacy benefit manager Caremark Rx, Inc. announced that it had won a
huge federal contract and other key sales that were expected to improve
earnings. Anthem, Inc., a health benefits provider, announced it had received
approval to merge with WellPoint Health Networks Inc. It showed solid
enrollment/membership and better pricing due to its strong market share, low
costs and new products. Medical devices manufacturer Boston Scientific
Corporation is focused on specific technologies such as drug eluting stents (a
stent is a tube placed in an artery or vein to provide support and keep it
open). It reported strong initial results for its TAXUS product, a cardiac
stent.
SECTOR DIVERSIFICATION
Sector 9/30/03 3/31/04 Sector 9/30/03 3/31/04
- --------------------------------------------------------------------------------
Auto & Transportation 5.2% 4.2% Other 0.4% 0.8%
- --------------------------------------------------------------------------------
Consumer Discretionary 24.1 23.7 Other Energy 4.8 3.5
- --------------------------------------------------------------------------------
Consumer Staples 1.6 2.6 Producer Durables 7.8 8.5
- --------------------------------------------------------------------------------
Financial Services 12.4 13.6 Technology 22.2 20.4
- --------------------------------------------------------------------------------
Healthcare 13.3 14.4 Utilities 0.7 1.1
- --------------------------------------------------------------------------------
Integrated Oils 0.0 0.0 Other assets less liabilities 4.5 4.1
- --------------------------------------------------------------------------------
Materials & Processing 3.0 3.1 TOTAL 100.0%100.0%
- --------------------------------------------------------------------------------
As a percentage of total net assets as of 9/30/03 and 3/31/04, respectively.
Financials stocks benefited from rising equity markets and a favorable interest
rate environment and our security selection was fairly strong, which yielded
positive results. Commercial finance company CIT Group Inc. reduced its
commercial paper issuance, reached an agreement to sell its venture capital
portfolio and accelerated a charge-off, all of which served to upgrade the
health of its balance sheet. Online broker Ameritrade Holding Corporation
reported an increase in trading volume, lower expenses due to acquisition
synergies and generated a significant amount of excess cash. Capital One
Financial Corporation, a new buy in the first half of the period, announced that
credit trends were improving (leading to lower loss assumptions) and that assets
were expected to rise.
One other positive gainer of note was energy company Smith International, Inc.
Smith produced solid results because it was able to push through some price
increases to its customers. Its international operations continued to grow, and
the company's management team has a strong history of creating value.
We were hurt by some of our transportation stocks. Southwest Airlines Co., a
former top holding, weakened early in the period on concerns about higher fuel
costs and weak outlook for passenger traffic. Trucking firm Swift Transportation
Co., Inc.' s share price dropped as the market tried to digest the potential
impact of higher fuel costs, new federally mandated hours of service regulations
and a review of driver logs. We elected to secure our gains in both stocks and
closed out our positions in favor of other opportunities.
08
- -----
EIGHT
- --------------------------------------------------------ARTISAN MID CAP FUND----
FUND CHANGES
At the end of the period, the portfolio was broadly exposed to the economy via
established franchises. We felt the portfolio was well balanced, with a skew
toward slightly larger companies when compared to our relevant benchmark
indices. The sector allocations in the portfolio remained largely the same
throughout the period. Our transactions occurred in a diverse group of
industries.
A number of the larger purchases we made during the six month period, not
previously mentioned, included: The Bear Stearns Companies Inc., investment bank
and broker; Iron Mountain Incorporated, business records management; Fisher
Scientific International Inc., provider of products and services to the
scientific research, clinical laboratory and industrial safety markets; EOG
Resources, Inc., oil and gas driller; and Aetna Inc., healthcare benefits
provider. Bear Stearns is a diverse franchise exposed to improving capital
market fundamentals. Iron Mountain showed better profitability, grew its sales
force and we were able to purchase shares at what we considered to be an
attractive price. We bought Fisher Scientific because we thought management made
the correct decision to focus more heavily on high margin proprietary products
and its distribution network had created a significant competitive advantage.
EOG historically has shown strong returns on its investments, driven by a tight
control over costs and a history of successful reserve additions. Aetna's
industry exhibited solid fundamentals and we liked the company's expense
reductions, focused marketing efforts and attractive price relative to other
providers.
TOP 10 HOLDINGS
COMPANY NAME %
- --------------------------------------------------------------------------------
CIT Group Inc. 1.8%
- --------------------------------------------------------------------------------
Ameritrade Holding Corporation 1.8
- --------------------------------------------------------------------------------
Avaya Inc. 1.7
- --------------------------------------------------------------------------------
Invitrogen Corporation 1.7
- --------------------------------------------------------------------------------
Anthem, Inc. 1.6
- --------------------------------------------------------------------------------
Danaher Corporation 1.5
- --------------------------------------------------------------------------------
Thermo Electron Corporation 1.5
- --------------------------------------------------------------------------------
Xilinx, Inc. 1.5
- --------------------------------------------------------------------------------
Univision Communications Inc. 1.5
- --------------------------------------------------------------------------------
KLA-Tencor Corporation 1.5
- --------------------------------------------------------------------------------
TOTAL 16.1%
- --------------------------------------------------------------------------------
As a percentage of total net assets as of 3/31/04. Top 10 Holdings are
determined by security, not issuer. Securities of the same issuer are not
aggregated.
Our new positions were funded in part by the sales of a variety of holdings.
Southwest Airlines Co., Novellus Systems, Inc. and Seagate Technologies, Inc.
happened to be three of the largest sales, but there were a number of additional
sales of note. The list included: Omnicom Group Inc. (advertising and
marketing), Rockwell Automation, Inc. (discrete industrial automation), Linear
Technology Corporation (integrated circuits), Mattel Inc. (toys), XL Capital
Limited (insurance), SEI Investments Company (investment management), The New
York Times Company (newspaper publishing), The Williams Companies, Inc. (natural
gas), Network Associates, Inc. (security technology) and AmeriSourceBergen
Corporation (pharmaceuticals).
09
-----
NINE
ARTISAN INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS - March 31, 2004 (Unaudited)
SHARES
HELD VALUE
============ ============
COMMON AND PREFERRED STOCKS - 98.9%
AUSTRALIA - 0.8%
Commonwealth Bank of Australia 3,138,890 $79,736,906
BELGIUM - 1.4%
Interbrew 5,186,822 142,756,452
BRAZIL - 1.7%
Banco Bradesco S.A. (ADR) 9,750 469,463
Banco Bradesco S.A., Preferred 529,339 25,315,032
Banco Itau Holding Financeira S.A., Preferred 178,301,400 16,587,889
Petroleo Brasileiro S.A. (ADR) 1,262,800 42,303,800
Telesp Celular Participacoes S.A.,
Preferred (ADR)(1) 10,109,200 92,296,996
--------------
176,973,180
CANADA - 2.8%
CanWest Global Communications Corporation(1) 4,004,998 35,643,458
Corus Entertainment, Inc., Class B 3,015,450 63,777,521
EnCana Corporation 4,275,200 184,987,282
--------------
284,408,261
CZECH REPUBLIC - 0.8%
Cesky Telecom, a.s. 6,122,504 77,932,363
DENMARK - 1.1%
A P Moller - Maersk A/S 3,300 23,538,736
H. Lundbeck A/S 603,250 11,604,026
Novo Nordisk A/S, Class B 1,651,950 76,645,854
--------------
111,788,616
FINLAND - 0.5%
Nokia OYJ 2,627,800 53,880,133
FRANCE - 3.7%
Credit Argricole S.A. 1,717,890 44,873,980
JC Decaux S.A.(1) 8,233,500 184,101,572
M6 Metropole Television 1,294,100 38,814,855
Rhodia S.A. 6,353,129 19,758,251
Sodexho Alliance S.A. 782,731 23,833,008
Total S.A. 349,000 64,093,846
--------------
375,475,512
GERMANY - 12.9%
Allianz AG 2,895,622 315,402,340
DaimlerChrysler AG 671,180 28,035,137
Deutsche Boerse AG 2,279,689 129,382,574
Deutsche Telekom AG(1) 9,949,990 178,817,626
Henkel KGaA, Preferred 2,482,043 205,366,310
Hypo Real Estate Holding AG(1) 709,117 19,900,506
KDG Investors, L.P. (1)(2)(3) - -
Linde AG 2,752,583 145,799,900
Muenchener Rueckversicherungs-Gesellschaft AG 2,428,108 269,732,073
ProSiebenSat.1 Media AG, Preferred 987,495 19,543,444
--------------
1,311,979,910
GREECE - 0.1%
Hellenic Telecommunications Organization S.A. 650,800 9,151,955
SHARES
HELD VALUE
============ ============
HONG KONG - 1.9%
China Mobile (Hong Kong) Limited 10,194,500 $ 30,154,276
Citic Pacific Limited 18,818,400 53,127,260
CNOOC Limited(1) 157,960,600 67,398,847
Hong Kong & China Gas Company Limited 24,395,700 41,636,764
--------------
192,317,147
ISRAEL - 0.1%
Check Point Software Technologies Ltd.(1)(4) 444,200 10,114,434
ITALY - 0.9%
Eni S.p.A. 521,900 10,495,688
Saipem S.p.A. 8,778,608 87,407,960
--------------
97,903,648
JAPAN - 17.8%
AEON Co., Ltd. 221,100 9,528,617
All Nippon Airways Co., Ltd. 6,286,000 21,599,923
The Bank of Yokohoma, Ltd.(1) 15,405,500 90,494,467
Credit Saison Co., Ltd. 1,778,300 53,424,956
East Japan Railway Co. 19,046 99,996,756
The Fuji Fire and Marine Insurance Co., Ltd. 804,900 2,271,350
Fuji Television Network, Inc. 6,018 16,924,452
Fuji Television Network, Inc. - Bonus shares 5,013 13,953,736
Honda Motor Co., Ltd. 5,460,800 251,589,384
Japan Airlines System Corp. 19,202,000 65,244,594
Japan Tobacco, Inc. 5,499 40,166,425
KEYENCE Corp. 156,350 38,057,647
KOMATSU Ltd. 3,417,300 21,648,203
Nikko Cordial Corp. 34,800,200 230,475,961
Nippon Broadcasting System, Inc. 162,380 8,182,512
Nomura Holdings, Inc. 6,892,000 125,357,201
ORIX Corp. 97,700 10,793,560
Promise Co., Ltd. 2,117,000 145,285,310
SMC Corp. 329,100 39,200,758
Sumitomo Mitsui Financial Group, Inc. 12,023 88,858,377
The Sumitomo Trust and Banking Co., Ltd. 12,263,300 81,570,926
Tokyo Broadcasting System, Inc. 2,082,100 41,767,903
TOKYU Corp. 13,938,400 87,227,881
UFJ Holdings, Inc. 13,753 87,387,685
Vodafone Holdings K.K. 37,637 92,480,415
Yamato Transport Co., Ltd. 3,022,700 50,714,398
--------------
1,814,203,397
LUXEMBOURG - 0.5%
RTL Group 849,486 54,143,371
MEXICO - 2.5%
Grupo Televisa S.A. (ADR) 3,431,900 162,466,146
Wal-Mart de Mexico S.A. de C.V., Series V 29,419,200 89,506,373
--------------
251,972,519
NETHERLANDS - 4.9%
ASML Holding N.V.(1) 8,790,646 161,116,026
ASML Holding N.V., NY Shares(1)(4) 971,600 17,809,428
Fortis 12,173,376 259,029,013
Koninklijke Ahold NV(1) 7,145,606 58,499,695
--------------
496,454,162
10
- ----
TEN
- -----------------------------------------------------SCHEDULE OF INVESTMENTS----
SHARES
HELD VALUE
============ ============
NORWAY - 0.9%
Telenor ASA 12,702,300 $88,148,688
REPUBLIC OF KOREA - 1.6%
Samsung Electronics Co., Ltd. 285,560 142,474,875
Samsung Electronics Co., Ltd., Preferred 68,390 20,073,475
--------------
162,548,350
RUSSIA - 1.3%
LUKOIL (ADR) 848,600 105,862,850
Mobile Telesystems (ADR) 214,000 28,141,000
--------------
134,003,850
SINGAPORE - 1.6%
DBS Group Holdings Ltd. 9,746,734 83,832,857
Singapore Telecommunications Ltd. 60,011,500 83,518,573
--------------
167,351,430
SPAIN - 5.4%
Altadis, S.A. 2,272,281 68,852,430
Industria de Diseno Textil, S.A. 2,363,345 54,616,678
Promotora de Informaciones, S.A. 8,307,954 147,673,539
Repsol YPF, S.A. 6,801,212 140,956,202
Telefonica, S.A. 9,293,480 140,629,596
--------------
552,728,445
SWEDEN - 2.4%
Telefonaktiebolaget LM Ericsson(1) 55,338,100 153,228,178
Telefonaktiebolaget LM Ericsson (ADR)(1) 3,220,400 89,366,100
--------------
242,594,278
SWITZERLAND - 12.1%
CIBA Specialty Chemicals AG(1) 187,256 12,774,339
Clariant AG(5) 8,590,222 121,337,521
Credit Suisse Group 5,601,731 194,054,836
Julius Baer Holding, Ltd., Class B 252,224 72,845,914
Nestle S.A., Class B 1,041,511 265,463,052
Roche Holding AG 1,291,000 126,069,245
Serono S.A. 151,578 93,536,395
Swiss Re 878,633 60,528,436
UBS AG 3,911,760 290,468,823
--------------
1,237,078,561
TAIWAN - 0.9%
Chunghwa Telecom Co., Ltd., (ADR) 4,999,300 88,537,603
THAILAND - 0.0%(6)
Advanced Info Service PLC 2,337,100 4,972,553
UNITED KINGDOM - 18.3%
Allied Domecq PLC 4,099,509 34,084,296
BP PLC 5,719,400 47,999,823
British Sky Broadcasting Group PLC 15,910,256 198,678,716
Cadbury Schweppes PLC 2,945,723 23,258,062
Compass Group PLC 37,118,509 244,908,584
Diageo PLC 8,541,251 111,453,072
Imperial Chemical Industries PLC(5) 48,099,946 199,846,558
ITV PLC 116,930,280 286,759,974
Kesa Electricals PLC 12,283,370 60,812,679
Kingfisher PLC 38,770,516 205,859,884
Marks & Spencer Group PLC 42,364,124 217,143,961
Tesco PLC 50,982,868 230,590,873
--------------
1,861,396,482
--------------
TOTAL COMMON AND PREFERRED STOCKS (Cost $8,285,997,410) 10,080,552,206
PAR
AMOUNT VALUE
============ ============
SHORT-TERM INVESTMENTS
(CASH EQUIVALENTS) - 1.1%
Repurchase agreement with State Street
Bank and Trust Company, 0.75%, dated 3/31/04,
due 4/1/04, maturity value $109,529,282,
collateralized by $9,719,702 market value
Federal National Mortgage Association Note,
1.875%, due 12/15/04, $51,002,800 market value
Federal National Mortgage Association Note,
2.625%, due 11/15/06, $51,004,493 market
value Federal National Mortgage Association
Note, 2.000%, due 4/8/05 (Cost $109,527,000) $109,527,000 $109,527,000
--------------
TOTAL INVESTMENTS - 100.0% (COST $8,395,524,410) 10,190,079,206
OTHER ASSETS LESS LIABILITIES - (0.0%)(6) (1,052,720)
--------------
TOTAL NET ASSETS - 100.0%(7) $10,189,026,486
===============
(1) Non-income producing security.
(2) Valued at a fair value in accordance with procedures established by the
Board of Directors of Artisan Funds.
(3) Private investment partnership which is restricted as to resale. Total
investment cost of $10 million, made through capital contributions on
3/6/00, 7/10/00, and 5/15/01. Value at March 31, 2004 represents 0.0% of
total net assets.
(4) Principally traded in the United States.
(5) Affiliated company as defined by the Investment Company Act of 1940. See
Note 7 to the financial statements.
(6) Represents less than 0.1% of total net assets.
(7) Percentages for the various classifications relate to total net assets.
(ADR) American Depository Receipt
- --------------------------------------------------------------------------------
PORTFOLIO DIVERSIFICATION - MARCH 31, 2004
VALUE PERCENTAGE
========== ==========
Consumer Discretionary $2,469,848,629 24.2%
Consumer Staples 1,213,852,292 11.9
Energy 751,506,298 7.4
Financials 2,778,080,433 27.3
Healthcare 307,855,519 3.0
Industrials 417,353,761 4.1
Information Technology 686,120,297 6.7
Materials 499,516,569 4.9
Telecommunication Services 914,781,644 9.0
Utilities 41,636,764 0.4
--------------- ---------------
TOTAL COMMON AND PREFERRED STOCKS 10,080,552,206 98.9
Total short-term investments 109,527,000 1.1
--------------- ---------------
TOTAL INVESTMENTS 10,190,079,206 100.0
OTHER ASSETS LESS LIABILITIES (1,052,720) (0.0)*
--------------- ---------------
TOTAL NET ASSETS $10,189,026,486 100.0%
=============== ===============
*Represents less than 0.1% of total net assets
The accompanying notes are an integral part of the financial statements.
11
--------
ELEVEN
ARTISAN MID CAP FUND
SCHEDULE OF INVESTMENTS - March 31, 2004 (Unaudited)
SHARES
HELD VALUE
============ ============
COMMON STOCKS - 95.9%
AUTO & TRANSPORTATION - 4.2%
AIR TRANSPORT - 2.5%
Expeditors International of Washington, Inc. 1,228,800 $48,525,312
FedEx Corporation 472,900 35,543,164
JetBlue Airways Corporation(1) 1,327,400 33,569,946
--------------
117,638,422
AUTO PARTS: ORIGINAL EQUIPMENT - 0.3%
Dana Corporation 763,400 15,161,124
AUTO TRUCKS & PARTS - 1.4%
PACCAR Inc. 1,142,900 64,276,696
CONSUMER DISCRETIONARY - 23.7%
ADVERTISING AGENCIES - 1.0%
Lamar Advertising Company(1) 1,190,500 47,881,910
CABLE TELEVISION SERVICES - 0.7%
Echostar Communications Corporation(1) 1,032,300 33,807,825
CASINOS & GAMBLING - 0.9%
International Game Technology 974,600 43,818,016
CONSUMER ELECTRONICS - 2.7%
DoubleClick Inc.(1) 1,443,600 16,240,500
Electronic Arts Inc.(1) 731,800 39,487,928
VeriSign, Inc.(1) 1,184,100 19,644,219
Yahoo! Inc.(1) 1,111,200 53,993,208
--------------
129,365,855
COSMETICS - 0.9%
The Estee Lauder Companies Inc. 984,800 43,666,032
HOTEL/MOTEL - 0.8%
Starwood Hotels & Resorts Worldwide, Inc. 935,100 37,871,550
RADIO & TV BROADCASTERS - 2.1%
Univision Communications Inc.(1) 2,147,200 70,879,072
XM Satellite Radio Holdings Inc.(1) 1,007,600 28,212,800
--------------
99,091,872
RESTAURANTS - 1.6%
Starbucks Corporation(1) 944,300 35,647,325
Wendy's International, Inc. 977,300 39,766,337
--------------
75,413,662
SHARES
HELD VALUE
============ ============
CONSUMER DISCRETIONARY (CONTINUED)
RETAIL - 6.9%
American Eagle Outfitters, Inc.(1) 1,488,600 $40,132,656
CarMax, Inc.(1) 1,520,600 44,401,520
Costco Wholesale Corporation(1) 1,127,500 42,348,900
Dollar Tree Stores, Inc.(1) 1,423,300 43,965,737
Fisher Scientific International Inc.(1) 857,200 47,180,288
Kohl's Corporation(1) 965,200 46,648,116
Linens 'n Things, Inc.(1) 466,300 16,511,683
Staples, Inc. 1,753,700 44,526,443
--------------
325,715,343
SERVICES: COMMERCIAL - 5.3%
Accenture Ltd - Class A(1) 2,438,300 60,469,840
Getty Images, Inc.(1) 627,500 33,872,450
InterActiveCorp(1) 1,498,600 47,340,774
Iron Mountain Incorporated(1) 1,309,400 58,438,522
Robert Half International Inc.(1) 2,157,387 50,957,481
--------------
251,079,067
TEXTILES: APPAREL MANUFACTURERS - 0.8%
Jones Apparel Group, Inc. 1,081,100 39,081,765
CONSUMER STAPLES - 2.6%
BEVERAGE: BREWERS (WINERIES) - 0.7%
Constellation Brands, Inc.(1) 963,500 30,928,350
BEVERAGE: SOFT DRINKS - 1.0%
The Pepsi Bottling Group, Inc. 1,506,700 44,824,325
DRUG & GROCERY STORE CHAINS - 0.9%
Whole Foods Market, Inc. 541,100 40,555,445
FINANCIAL SERVICES - 13.6%
BANKS: OUTSIDE NEW YORK CITY - 0.7%
CapitalSource Inc.(1) 1,512,500 33,955,625
DIVERSIFIED FINANCIAL SERVICES - 1.8%
CIT Group Inc. 2,275,600 86,586,580
FINANCE COMPANIES - 1.2%
Capital One Financial Corporation 772,000 58,231,960
FINANCIAL DATA PROCESSING SERVICES & SYSTEMS - 2.1%
Fair Isaac Corporation 971,450 35,049,916
Paychex, Inc. 1,798,300 64,019,480
--------------
99,069,396
FINANCIAL MISCELLANEOUS - 2.1%
MGIC Investment Corporation 1,034,600 66,452,358
Willis Group Holdings Limited 901,600 33,539,520
--------------
99,991,878
12
- -------
TWELVE
- -----------------------------------------------------SCHEDULE OF INVESTMENTS----
SHARES
HELD VALUE
============ ============
FINANCIAL SERVICES (CONTINUED)
INSURANCE: PROPERTY-CASUALTY - 0.5%
Platinum Underwriters Holdings, Ltd. 715,800 $22,941,390
INVESTMENT MANAGEMENT COMPANIES - 1.0%
T. Rowe Price Group, Inc. 903,600 48,640,788
SAVINGS & LOANS - 1.1%
Golden West Financial Corporation 476,500 53,344,175
SECURITIES BROKERAGE & SERVICES - 3.1%
Ameritrade Holding Corporation(1) 5,532,300 85,197,420
The Bear Stearns Companies Inc. 686,000 60,148,480
--------------
145,345,900
HEALTHCARE - 14.4%
BIOTECHNOLOGY RESEARCH & PRODUCTION - 3.5%
Biogen Idec Inc.(1) 538,000 29,912,800
Invitrogen Corporation(1) 1,099,100 78,794,479
Millennium Pharmaceuticals, Inc.(1) 3,335,900 56,376,710
--------------
165,083,989
DRUGS & PHARMACEUTICALS - 3.8%
Allergan, Inc. 423,100 35,608,096
Andrx Corporation(1) 925,400 25,170,880
IVAX Corporation(1) 1,520,500 34,621,785
MedImmune, Inc.(1) 1,024,700 23,650,076
Mylan Laboratories Inc. 2,704,900 61,482,377
--------------
180,533,214
ELECTRONICS: MEDICAL SYSTEMS - 0.6%
Varian Medical Systems, Inc.(1) 353,300 30,493,323
HEALTH CARE MANAGEMENT SERVICES - 2.9%
Aetna Inc. 526,000 47,192,720
Caremark Rx, Inc.(1) 1,726,900 57,419,425
Cerner Corporation(1) 678,900 30,679,491
--------------
135,291,636
HEALTH CARE SERVICES - 1.6%
Anthem, Inc.(1) 815,800 73,944,112
MEDICAL & DENTAL INSTRUMENTS & SUPPLIES - 2.0%
Boston Scientific Corporation(1) 1,092,500 46,300,150
Zimmer Holdings, Inc.(1) 643,900 47,506,942
--------------
93,807,092
MATERIALS & PROCESSING - 3.1%
CHEMICALS - 0.8%
Ecolab Inc. 1,277,400 36,444,222
CONTAINERS & PACKAGING: PAPER & PLASTIC - 1.0%
Smurfit-Stone Container Corporation(1) 2,724,500 47,923,955
COPPER - 0.5%
Freeport-McMoRan Copper & Gold Inc. 627,800 24,540,702
METAL FABRICATING - 0.8%
Precision Castparts Corp. 812,400 35,769,972
SHARES
HELD VALUE
============ ============
OTHER - 0.8%
MULTI-SECTOR COMPANIES - 0.8%
Eaton Corporation 650,000 $36,523,500
OTHER ENERGY - 3.5%
MACHINERY: OIL WELL EQUIPMENT & SERVICES - 2.4%
Smith International, Inc.(1) 1,173,500 62,793,985
Weatherford International Ltd.(1) 1,247,200 52,419,816
--------------
115,213,801
OIL: CRUDE PRODUCERS - 1.1%
EOG Resources, Inc. 1,085,100 49,795,239
PRODUCER DURABLES - 8.5%
DIVERSIFIED PRODUCTION - 1.5%
Danaher Corporation 771,200 72,006,944
ELECTRICAL EQUIPMENT & COMPONENTS - 1.3%
Molex Incorporated 1,969,600 59,856,144
ELECTRONICS: INSTRUMENTS GAUGES & METERS - 1.5%
Thermo Electron Corporation(1) 2,545,800 71,995,224
HOMEBUILDING - 0.9%
Centex Corporation 771,900 41,728,914
OFFICE FURNITURE & BUSINESS EQUIPMENT - 1.8%
Diebold, Incorporated 970,900 46,719,708
Xerox Corporation(1) 2,627,800 38,287,046
--------------
85,006,754
PRODUCTION TECHNOLOGY EQUIPMENT - 1.5%
KLA-Tencor Corporation(1) 1,403,800 70,681,330
TECHNOLOGY - 20.4%
COMMUNICATIONS TECHNOLOGY - 7.5%
Advanced Fibre Communications, Inc.(1) 1,513,000 33,331,390
Avaya Inc.(1) 5,118,500 81,281,780
Avocent Corporation(1) 1,236,100 45,476,119
Corning Incorporated(1) 4,261,900 47,648,042
Juniper Networks, Inc.(1) 1,235,000 32,122,350
Nortel Networks Corporation(1) 4,303,700 25,563,978
Symbol Technologies, Inc. 3,571,200 49,282,560
TIBCO Software Inc.(1) 4,883,900 39,901,463
--------------
354,607,682
COMPUTER SERVICES SOFTWARE & SYSTEMS - 4.5%
Adobe Systems Incorporated 1,195,400 47,134,622
BEA Systems, Inc.(1) 2,026,800 25,861,968
Cognos Incorporated(1) 1,413,400 43,900,204
Macromedia, Inc.(1) 1,845,400 37,037,178
Novell, Inc.(1) 2,934,100 33,390,058
VERITAS Software Corporation(1) 878,400 23,637,744
--------------
210,961,774
COMPUTER TECHNOLOGY - 1.8%
Apple Computer, Inc.(1) 1,244,500 33,663,725
NVIDIA Corporation(1) 1,070,700 28,362,843
SanDisk Corporation(1) 817,400 23,189,638
--------------
85,216,206
13
---------
THIRTEEN
- ----SCHEDULE OF INVESTMENTS-----------------------------------------------------
SHARES
HELD VALUE
============ ============
TECHNOLOGY (CONTINUED)
ELECTRONICS - 2.2%
Avid Technology, Inc.(1) 849,100 $39,168,983
Vishay Intertechnology, Inc.(1) 3,109,700 66,360,998
--------------
105,529,981
ELECTRONICS: SEMI-CONDUCTORS/COMPONENTS - 4.4%
Agere Systems Inc., Class A(1) 12,582,800 40,390,788
Agere Systems Inc., Class B(1) 6,341,100 19,784,232
Broadcom Corporation(1) 613,200 24,019,044
Jabil Circuit, Inc.(1) 1,776,100 52,270,623
Xilinx, Inc.(1) 1,887,700 71,732,600
--------------
208,197,287
UTILITIES - 1.1%
UTILITIES: TELECOMMUNICATIONS - 1.1%
Western Wireless Corporation(1) 2,297,400 53,690,238
--------------
TOTAL COMMON STOCKS (Cost $3,766,968,596) 4,533,128,186
PAR
AMOUNT VALUE
============ ============
SHORT-TERM INVESTMENTS
(CASH EQUIVALENTS) - 4.0%
Repurchase agreement with State Street Bank
and Trust Company, 0.75%, dated 3/31/04,
due 4/1/04, maturity value $187,105,898,
collateralized by $37,846,119 market value
Federal National Mortgage Association Note,
2.010%, due 7/21/05, $51,003,175 market
value Federal National Mortgage Association
Note, 1.875%, due 12/15/04 $51,004,651
market value Federal National Mortgage
Association Note, 5.500%, due 2/15/06,
and $51,001,516 market value Federal
National Mortgage Association Note,
2.875%, due 10/15/05
(Cost $187,102,000) $187,102,000 $187,102,000
--------------
TOTAL INVESTMENTS - 99.9% (Cost $3,954,070,596) 4,720,230,186
OTHER ASSETS LESS LIABILITIES - 0.1% 6,074,168
--------------
TOTAL NET ASSETS - 100.0%(2) $4,726,304,354
==============
(1) Non-income producing security.
(2) Percentages for the various classifications relate to total net assets.
The accompanying notes are an integral part of the financial statements.
14
- ---------
FOURTEEN
ARTISAN FUNDS, INC.
STATEMENTS OF ASSETS & LIABILITIES - March 31, 2004 (Unaudited)
INTERNATIONAL MID CAP
------------- -------------
ASSETS:
Investments in securities, unaffiliated, at value.................................... $ 9,759,368,127 $4,533,128,186
Investments in securities, affiliated, at value ..................................... 321,184,079 -
Short-term investments (repurchase agreements), at value............................. 109,527,000 187,102,000
------------------ ------------------
TOTAL INVESTMENTS.................................................................... 10,190,079,206 4,720,230,186
Cash ............................................................................... 561 507
Receivable from investments sold..................................................... 92,637,319 34,257,452
Receivable from forward currency contracts........................................... 95,463,623 -
Receivable from fund shares sold..................................................... 39,807,930 31,661,009
Dividends and interest receivable.................................................... 22,897,189 832,549
------------------ ------------------
TOTAL ASSETS......................................................................... 10,440,885,828 4,786,981,703
LIABILITIES:
Payable for investments purchased.................................................... 39,891,450 36,769,466
Payable for forward currency contracts............................................... 95,681,588 -
Payable for fund shares redeemed..................................................... 110,990,781 22,825,619
Payable for operating expenses....................................................... 3,292,098 1,082,264
Payable for withholding taxes........................................................ 2,003,425 -
------------------ ------------------
TOTAL LIABILITIES.................................................................... 251,859,342 60,677,349
------------------ ------------------
TOTAL NET ASSETS .................................................................... $10,189,026,486 $4,726,304,354
================== ==================
NET ASSETS CONSIST OF:
Fund shares issued and outstanding................................................... $10,059,095,106 $4,196,136,235
Net unrealized appreciation (depreciation) on investments and
foreign currency related transactions ............................................ 1,794,740,760 766,159,590
Accumulated undistributed net investment income (loss)............................... (6,879,722) (15,158,979)
Accumulated undistributed net realized gains (losses) on
investments and foreign currency related transactions ............................. (1,657,929,658) (220,832,492)
------------------ ------------------
................................................................................ $10,189,026,486 $4,726,304,354
================== ==================
SUPPLEMENTARY INFORMATION:
Net assets
Investor Shares................................................................. $6,340,539,996 $3,617,006,673
Institutional Shares............................................................ $3,848,486,490 $1,109,297,681
Shares outstanding
Investor Shares................................................................. 316,067,102 133,562,612
Institutional Shares............................................................ 190,984,305 40,619,544
Net asset value, offering price and redemption price per share
Investor Shares................................................................. $20.06 $27.08
Institutional Shares............................................................ $20.15 $27.31
Cost of securities of unaffiliated issuers held...................................... $8,091,374,636 $3,954,070,596
Cost of securities of affiliated issuers held........................................ $304,149,774 $-
The accompanying notes are an integral part of the financial statements.
15
-------
FIFTEEN
ARTISAN FUNDS, INC.
STATEMENTS OF OPERATIONS
INTERNATIONAL MID CAP
======================================== ========================================
PERIOD ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED PERIOD ENDED YEAR ENDED
3/31/04(1) 9/30/03(3) 6/30/03 3/31/04(1) 9/30/03(3) 6/30/03
======================================== ========================================
INVESTMENT INCOME:
Interest....................................... $462,942 $304,072 $2,825,610 $690,303 $315,857 $1,630,118
Dividends, from unaffiliated issuers(2)........ 42,718,547 33,361,570 176,343,076 7,689,453 2,975,086 13,653,667
Dividends, from affiliated issuers(2).......... 3,064,723 3,627,004 2,344,814 - - -
Other income .................................. 1,822,621 412,122 2,995,772 376,769 - -
------------------------------------------- ----------------------------------------
TOTAL INVESTMENT INCOME........................ 48,068,833 37,704,768 184,509,272 8,756,525 3,290,943 15,283,785
EXPENSES:
Advisory fees.................................. 45,243,199 20,395,030 66,306,063 20,069,399 8,025,858 22,682,765
Transfer agent fees
Investor Shares........................... 5,368,069 2,693,210 8,331,967 3,086,240 1,184,401 3,493,286
Institutional Shares...................... 14,919 8,409 32,233 10,986 5,986 23,232
Shareholder communications
Investor Shares........................... 535,668 506,499 1,177,617 281,853 239,560 535,187
Institutional Shares...................... 10,013 4,797 19,011 3,547 1,739 5,954
Custodian fees................................. 2,800,027 1,208,462 3,945,008 209,461 102,873 308,898
Accounting fees................................ 37,251 19,918 73,299 32,507 17,082 61,059
Professional fees.............................. 610,638 93,801 301,743 60,041 43,312 116,996
Registration fees
Investor Shares........................... 23,451 29,428 124,912 21,361 38,952 89,446
Institutional Shares...................... 20,003 31,250 127,627 7,822 13,218 46,330
Directors' fees................................ 126,789 43,746 180,436 52,606 16,707 60,352
Other operating expenses....................... 187,141 51,890 163,719 79,681 24,596 68,466
------------------------------------------- ----------------------------------------
Total operating expenses before amounts
waived or paid by the Adviser ............... 54,977,168 25,086,440 80,783,635 23,915,504 9,714,284 27,491,971
Less amounts waived or paid by the Adviser..... - (21,084) - - (14,194) -
------------------------------------------- ----------------------------------------
NET EXPENSES................................... 54,977,168 25,065,356 80,783,635 23,915,504 9,700,090 27,491,971
------------------------------------------- ----------------------------------------
NET INVESTMENT INCOME (LOSS)................... (6,908,335) 12,639,412 103,725,637 (15,158,979) (6,409,147) (12,208,186)
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS:
Net realized gain (loss) on:
Investments(2)............................ (168,620,097) 74,854,666 (529,007,531) 311,573,480 105,075,097 (325,149,190)
Foreign currency related transactions..... (2,974,636) (1,317,643) (10,809,131) - - -
------------------------------------------- ----------------------------------------
(171,594,733) 73,537,023 (539,816,662) 311,573,480 105,075,097 (325,149,190)
Net increase (decrease) in unrealized
appreciation/depreciation on:
Investments............................... 2,101,921,248 409,874,381 (423,541,570) 340,819,500 90,208,363 376,988,686
Foreign currency related transactions..... (695,359) 538,027 52,282 - - -
------------------------------------------- ----------------------------------------
2,101,225,889 410,412,408 (423,489,288) 340,819,500 90,208,363 376,988,686
------------------------------------------- ----------------------------------------
NET GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCY RELATED TRANSACTIONS ............... 1,929,631,156 483,949,431 (963,305,950) 652,392,980 195,283,460 51,839,496
------------------------------------------- ----------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS .................. $1,922,722,821 $496,588,843 $(859,580,313) $637,234,001 $188,874,313 $39,631,310
=========================================== ========================================
(1) For the period from October 1, 2003 to March 31, 2004. Unaudited.
(2) NET OF NET OF INCLUDING NET
FOREIGN TAXES FOREIGN TAXES REALIZED GAIN
WITHHELD ON WITHHELD ON (LOSS) ON
YEAR OR DIVIDENDS, DIVIDENDS, INVESTMENTS FROM
PERIOD UNAFFILIATED AFFILIATED AFFILIATED
FUND ENDED ISSUERS ISSUERS ISSUERS
International 3/31/04 $ 4,266,275 $340,525 $ (46,413,966)
9/30/03 3,660,412 393,960 (1,994,615)
6/30/03 22,229,774 14,358 (7,613,533)
(3) For the period from July 1, 2003 to September 30, 2003. Artisan Funds
changed its fiscal year-end from June 30 to September 30 effective
September 30, 2003.
The accompanying notes are an integral part of the financial statements.
16
-------
SIXTEEN
ARTISAN FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
INTERNATIONAL MID CAP
========================================= ==========================================
PERIOD ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED PERIOD ENDED YEAR ENDED
3/31/04(1) 9/30/03(2) 6/30/03 3/31/04(1) 9/30/03(2) 6/30/03
========================================= ==========================================
OPERATIONS:
Net investment income (loss)....... $(6,908,335) $12,639,412 $103,725,637 $(15,158,979) $(6,409,147) $(12,208,186)
Net realized gain (loss) on:
Investments................... (168,620,097) 74,854,666 (529,007,531) 311,573,480 105,075,097 (325,149,190)
Foreign currency
related transactions ....... (2,974,636) (1,317,643) (10,809,131) - - -
Net increase (decrease) in unrealized
appreciation/depreciation on:
Investments................... 2,101,921,248 409,874,381 (423,541,570) 340,819,500 90,208,363 376,988,686
Foreign currency
related transactions ....... (695,359) 538,027 52,282 - - -
---------------------------------------------- -------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS 1,922,722,821 496,588,843 (859,580,313) 637,234,001 188,874,313 39,631,310
DIVIDENDS AND DISTRIBUTIONS
PAID TO SHAREHOLDERS:
Net investment income:
Investor Shares............... (59,414,324) - (31,901,533) - - -
Institutional Shares.......... (42,472,917) - (18,341,682) - - -
Net realized gains on
investment transactions:
Investor Shares............... - - - - - -
Institutional Shares.......... - - - - - -
---------------------------------------------- -------------------------------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS
PAID TO SHAREHOLDERS ............ (101,887,241) - (50,243,215) - - -
FUND SHARE ACTIVITIES:
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM FUND
SHARE ACTIVITIES ................ (531,202,160) 244,966,499 1,716,020,036 576,311,750 208,283,211 770,633,859
---------------------------------------------- -------------------------------------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS ................... 1,289,633,420 741,555,342 806,196,508 1,213,545,751 397,157,524 810,265,169
---------------------------------------------- -------------------------------------------
Net assets, beginning of period.... 8,899,393,066 8,157,837,724 7,351,641,216 3,512,758,603 3,115,601,079 2,305,335,910
---------------------------------------------- -------------------------------------------
NET ASSETS, END OF PERIOD.......... $10,189,026,486 $8,899,393,066 $8,157,837,724 $4,726,304,354 $3,512,758,603 $3,115,601,079
============================================== ===========================================
Accumulated undistributed
net investment income (loss) .... $(6,879,722) $101,915,854 $90,594,085 $(15,158,979) $- $-
============================================== ===========================================
(1) For the period from October 1, 2003 to March 31, 2004. Unaudited.
(2) For the period July 1, 2003 to September 30, 2003. Artisan Funds changed
its fiscal year-end from June 30 to September 30 effective September 30,
2003.
The accompanying notes are an integral part of the financial statements.
17
---------
SEVENTEEN
ARTISAN FUNDS, INC.
FINANCIAL HIGHLIGHTS - For a share outstanding throughout each period
Net Asset Net Net Realized Total Income Dividends
Year or Value Investment and Unrealized (Loss) from from Net
Period Beginning Income Gain (Loss) on Investment Investment
Ended of Period (Loss)(1) Investments Operations Income
===============================================================================================================
INTERNATIONAL FUND ---------------------------------------------------------------------------------------------------------------
Institutional Shares 3/31/04(4) $16.63 $- $3.73 $3.73 $(0.21)
---------------------------------------------------------------------------------------------------------------
9/30/03(5) 15.71 0.03 0.89 0.92 -
---------------------------------------------------------------------------------------------------------------
6/30/03 18.24 0.25 (2.65) (2.40) (0.13)
---------------------------------------------------------------------------------------------------------------
6/30/02 19.62 0.18 (1.46) (1.28) (0.10)
---------------------------------------------------------------------------------------------------------------
6/30/01 30.22 0.16 (7.21) (7.05) -
---------------------------------------------------------------------------------------------------------------
6/30/00 18.70 0.03 12.09 12.12 (0.06)
---------------------------------------------------------------------------------------------------------------
6/30/99 16.26 0.11 2.62 2.73 (0.05)
---------------------------------------------------------------------------------------------------------------
MID CAP FUND ---------------------------------------------------------------------------------------------------------------
Institutional Shares 3/31/04(4) $23.28 $(0.07) $ 4.10 $ 4.03 $-
---------------------------------------------------------------------------------------------------------------
9/30/03(5) 21.96 (0.03) 1.35 1.32 -
---------------------------------------------------------------------------------------------------------------
6/30/03 22.24 (0.07) (0.21)(7) (0.28) -
---------------------------------------------------------------------------------------------------------------
6/30/02 26.48 (0.13) (4.11) (4.24) -
---------------------------------------------------------------------------------------------------------------
6/30/01 27.57 (0.08) 0.02(7) (0.06) -
---------------------------------------------------------------------------------------------------------------
(1) Computed based on average shares outstanding.
(2) Periods less than 12 months (where applicable) are not annualized.
(3) Periods less than 12 months (where applicable) are annualized.
(4) For the period from October 1, 2003 to March 31, 2004. Unaudited.
(5) For the period from July 1, 2003 to September 30, 2003. The Artisan Funds
changed its fiscal year-end from June 30 to September 30 effective
September 30, 2003.
(6) The ratios of expenses to average net assets and net investment loss to
average net assets exclude expenses waived or paid by the Adviser. Absent
expenses waived or paid by the Adviser, the ratios of expenses to average
net assets and net investment loss to average net assets would have been as
follows (periods less than 12 months, where applicable, are annualized):
RATIO OF NET
RATIO OF INVESTMENT INCOME
FUND YEAR OR EXPENSES TO (LOSS) TO
PERIOD AVERAGE AVERAGE
ENDED NET ASSETS NET ASSETS
International Institutional Shares 9/30/03 1.00% 0.73%
Mid Cap Institutional Shares 9/30/03 0.98 (0.59)
(7) The amount shown may not correlate with the aggregate gains and losses of
portfolio securities due to the timing of subscriptions and redemptions of
Fund shares.
18
- --------
EIGHTEEN
Ratio of Net
Distributions Net Asset Net Assets Ratio of Investment
from Net Total Value End of Expenses Income (Loss) Portfolio
Realized Dividends and End Total Period to Average to Average Turnover
Gains Distributions of Period Return(2) (millions) Net Assets(3) Net Assets(3) Rate(2)
===============================================================================================================
INTERNATIONAL FUND ---------------------------------------------------------------------------------------------------------------
Institutional Shares $- $(0.21) $20.15 22.6% $3,848.5 1.00% (0.02)% 31.69%
---------------------------------------------------------------------------------------------------------------
- - 16.63 5.9 3,354.7 1.00(6) 0.73(6) 15.23
---------------------------------------------------------------------------------------------------------------
- (0.13) 15.71 (13.1) 2,975.0 1.01 1.68 37.13
---------------------------------------------------------------------------------------------------------------
- (0.10) 18.24 (6.5) 2,062.0 1.01 1.01 50.67
---------------------------------------------------------------------------------------------------------------
(3.55) (3.55) 19.62 (24.5) 1,486.6 1.03 0.70 72.01
---------------------------------------------------------------------------------------------------------------
(0.54) (0.60) 30.22 66.0 1,136.2 1.08 0.09 99.02
---------------------------------------------------------------------------------------------------------------
(0.24) (0.29) 18.70 17.6 179.6 1.17 0.68 79.41
---------------------------------------------------------------------------------------------------------------
MID CAP FUND ---------------------------------------------------------------------------------------------------------------
Institutional Shares $- $- $27.31 17.3% $1,109.3 0.96% (0.55)% 57.36%
---------------------------------------------------------------------------------------------------------------
- - 23.28 6.1 929.6 0.98(6) (0.59)(6) 26.52
---------------------------------------------------------------------------------------------------------------
- - 21.96 (1.3) 829.0 1.00 (0.36) 102.85
---------------------------------------------------------------------------------------------------------------
- - 22.24 (16.0) 449.8 1.02 (0.56) 121.14
---------------------------------------------------------------------------------------------------------------
(1.03) (1.03) 26.48 (0.4) 212.2 1.08 (0.29) 153.95
---------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
19
---------
NINETEEN
ARTISAN FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS - March 31, 2004 (Unaudited)
(1) ORGANIZATION:
Artisan Funds, Inc. ("Artisan Funds") was incorporated on January 5, 1995,
as a Wisconsin corporation and is registered under the Investment Company
Act of 1940, as amended. Artisan Funds is a series comprised of seven open-
end, diversified mutual funds. Artisan International Fund and Artisan Mid
Cap Fund, two series of Artisan Funds, (each a "Fund" and collectively the
"Funds") commenced operations on December 28, 1995 and June 27, 1997,
respectively. Each Fund's investment objective is to seek long-term capital
growth.
The Funds offer shares of capital stock of two classes - Institutional
Shares and Investor Shares. International Fund and Mid Cap Fund began
offering Institutional Shares effective July 1, 1997 and July 1, 2000,
respectively. Institutional Shares are sold to institutional investors
meeting certain minimum investment requirements. Each class of shares has
equal rights with respect to portfolio assets and voting privileges. Each
class has exclusive voting rights with respect to any matters involving
only that class. Income, non-class specific expenses and realized and
unrealized gains and losses are allocated daily to each class of shares
based upon the relative net asset value of outstanding shares. Expenses
attributable to a particular class of shares, such as transfer agency fees,
shareholder communication expenses and registration fees, are allocated
directly to that class.
Each class of the Funds has an indefinite number of shares authorized with
a $0.01 par value.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the Funds,
which are in accordance with accounting principles generally accepted in
the United States of America.
(a) Security valuation - The net asset value ("NAV") of the shares of each
Fund was determined as of the close of regular session trading on the
New York Stock Exchange ("NYSE") (usually 3:00 p.m., Central time, but
sometimes earlier) each day the NYSE was open for regular session
trading. NAV was determined by dividing the value of each Fund's
securities and other assets, less its liabilities, by the number of
outstanding shares of that Fund.
In determining NAV, each equity security traded on a securities
exchange was valued at the last current sale price as of the time of
valuation on the exchange on which the security is principally traded
(the "principal exchange"), or lacking any current reported sale on
the principal exchange at the time of valuation, at the most recent
bid quotation on the principal exchange, except that securities listed
on the London Stock Exchange were valued at the London Stock Exchange
official closing price, or lacking an official closing price, at the
last current sales price as of the time of valuation on the London
Stock Exchange, or if neither the official closing price nor a last
current sales price was available, at the mean of the most recent bid
and asked quotations as of the time of valuation, and each security
traded in the Nasdaq Stock Market ("Nasdaq") was valued at the Nasdaq
Official Closing Price ("NOCP"), as determined by Nasdaq, or lacking
an NOCP, the last current reported sale price was of the time of
valuation on Nasdaq, or lacking any current reported sale on Nasdaq at
the time of valuation, at the most recent bid quotation on Nasdaq.
Short-term investments maturing within sixty days of the valuation
date were valued at amortized cost, which approximates market.
Securities for which prices were not readily available were valued by
a valuation committee at a fair value determined in good faith under
consistently applied procedures established by and under the general
supervision of the Board of Directors. A price was considered not to
be readily available if, among other things, the valuation committee
believed that the price determined as described in the preceding
paragraph did not reflect a fair value of the security.
20
- -------
TWENTY
- -----------------------------------------------NOTES TO FINANCIAL STATEMENTS----
International Fund generally invests a significant portion (and
perhaps as much as substantially all of its total assets) in
securities traded on a principal exchange outside the United States
("non-U.S. securities") and Mid Cap Fund has the ability to invest in
non-U.S. securities (although it did not do so during the period). The
markets in which non-U.S. securities trade are sometimes open on days
when the NYSE is not open and International Fund does not calculate
its NAV, and sometimes are not open on days when the Fund does
calculate its NAV. Even on days on which both the foreign market and
the NYSE are open, several hours may have passed between the time when
trading in the foreign market closed and International Fund calculates
its NAV.
The Artisan Funds valuation committee concluded that a price
determined under the Funds' valuation procedures was not readily
available if, among other things, the valuation committee believed
that the value of the security might have been materially affected by
events occurring after the close of the market in which the security
was principally traded but before the determination of NAV
("subsequent events"). A subsequent event might include a company-
specific development (for example, announcement of a merger that is
made after the close of the local market), a development that might
affect an entire market or region (for example, imposition of foreign
exchange controls by a foreign government), or a potentially global
development (such as a terrorist attack that may be expected to have
an impact on investor expectations world-wide). Artisan Funds
monitored for subsequent events using several tools, including
reviewing changes in the values of certain U.S. market indexes and a
statistical model used by the Funds to make broad projections of NAV
fluctuation based on changes in certain U.S. market indexes and
securities prices weighted to reflect each Fund's geographic
weightings. A movement of more than a designated magnitude by any of
these tools resulted in a meeting of the Artisan Funds valuation
committee, which considered whether a subsequent event had occurred
and whether local market closing prices continued to represent fair
values for potentially affected non-U.S. securities.
(b) Income taxes - No provision has been made for federal income taxes
since each Fund intends to i) comply with all provisions of subchapter
M of the Internal Revenue Code applicable to regulated investment
companies and ii) distribute to its shareholders substantially all of
its taxable income as well as net realized gains from the sale of
investment securities. The Funds may utilize earnings and profits
distributed to shareholders on redemption of Fund shares as part of
the dividends paid deduction.
(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 a spot market
rate of exchange on the day of valuation. Purchases and sales of
investments and dividend and interest income are translated to U.S.
dollars using a 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.
International Fund may enter 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 or loss. International Fund could be
exposed to loss if the counterparties fail to perform under these
contracts.
21
----------
TWENTY-ONE
- ----NOTES TO FINANCIAL STATEMENTS-----------------------------------------------
(e) Repurchase agreements - Each Fund may enter into repurchase agreements
with institutions that Artisan Partners Limited Partnership (the
"Adviser") has determined are creditworthy pursuant to criteria
adopted by the Funds' Board of Directors. Repurchase agreements are
recorded at cost and are collateralized in an amount greater than or
equal to the repurchase price plus accrued interest. To the extent
that the proceeds from any sale of such collateral upon a default in
the obligation to repurchase were less than the repurchase price, the
Fund would suffer a loss.
(f) Securities lending - Each Fund may enter into securities lending
transactions with borrowers approved by the Funds' Board of Directors.
Income from securities lending transactions is included in Other
income on the Statement of Operations. International Fund earned
income from securities lending transactions as follows:
PERIOD ENDED PERIOD ENDED YEAR ENDED
3/31/04 9/30/03 6/30/03
----------------------------------------------------------------------
International Fund $113,385 $185,160 $2,995,772
As of March 31, 2004 there were no securities on loan. Each Fund's
risks in entering into securities lending arrangements are that the
borrower may not provide additional collateral when required or return
the securities when due. If the borrower defaults, the Fund may
experience delays in selling collateral or the collateral may not be
sufficient to cover the value of securities lent.
(g) Commission recapture - Each of the Artisan Funds may direct portfolio
trades, subject to obtaining best price and execution, to various
brokers who have agreed to rebate a portion of the commissions
generated. Such rebates are made directly to the applicable Fund as
cash payments and are included in Other income on the Statements of
Operations as follows:
PERIOD ENDED PERIOD ENDED
FUND 3/31/04 9/30/03
----------------------------------------------------------------------
International $1,709,236 $ 226,962
Mid Cap 376,769 -
(h) Use of estimates - The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States of America 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.
(i) Indemnifications - In the normal course of business, the Funds enter
into contracts in which the Funds agree to indemnify the other party
or parties against various potential costs or liabilities. The Funds'
maximum exposure under these arrangements is unknown. No claim has
been made for indemnification pursuant to any such agreement.
(j) Other - Dividend income less foreign taxes withheld, if any, is
recorded on the ex-dividend date, except that certain dividends from
private placements and foreign securities are recorded as soon as the
information becomes available to the Funds. Interest income is
reported on the accrual basis. Distributions to shareholders are
recorded on the ex-dividend date. Expenses attributable to the Funds
are generally allocated to each Fund based on net assets. Expenses
attributable to a particular Fund are allocated directly to that Fund.
The character of income and net realized gains and losses may differ
for financial statement and tax purposes and may result in
reclassification of permanent differences among certain capital
accounts.
22
- ----------
TWENTY-TWO
(3) TRANSACTIONS WITH affiliates:
The Adviser, with which the officers and certain directors of Artisan Funds
are affiliated, provides investment advisory and administrative services to
the Funds. In exchange for these services, each Fund pays a monthly
management fee to the Adviser as follows:
AVERAGE DAILY NET ASSETS ANNUAL RATE
------------------------- -----------
Less than $500 million 1.000%
$500 million to $750 million 0.975
$750 million to $1 billion 0.950
Greater than $1 billion 0.925
Shares of Artisan Funds are offered for sale by Artisan Distributors LLC
("Distributors"). Distributors is wholly-owned by the Adviser. All
distribution expenses relating to the Funds are paid by the Adviser.
Each Fund also incurs other expenses for services such as maintaining
shareholder records and furnishing shareholder statements and reports.
During the period ended September 30, 2003, the Adviser agreed to reimburse
expenses related to the change in the Funds' fiscal year from June 30 to
September 30. These reimbursements are reflected in the Statements of
Operations for the period ended September 30, 2003.
Each director who is not an interested person of Artisan Funds or the
Adviser receives an annual retainer of $60,000, plus a fee for each board
or committee meeting attended (other than a committee meeting held on the
same day as a board meeting) of $3,000 for an in-person meeting and $500
for a telephonic meeting as well as reimbursement of expenses related to
his duties as a director of Artisan Funds. In addition, each chairman of a
board committee who is a non-interested director and each non-interested
director performing services deemed by the board to be substantially
equivalent to those of a committee chair receives a supplemental annual
retainer of $5,000. These fees are generally allocated to each Fund in
proportion to the Funds' net assets.
(4) 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 (a)
$75 million or (b) the lesser of (i) 10% of its total assets (after giving
effect to the loan) or (ii) the maximum amount the Fund may borrow under
the Investment Company Act, the limitations included in the Fund's
prospectus, or any limit or restriction under any law or regulation to
which the Fund is subject or any agreement to which the Fund or Artisan
Funds is a party; provided that the aggregate borrowings by all Funds may
not exceed $100 million. Artisan Funds pays a commitment fee at the annual
rate 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 minimal borrowings under
the line of credit during the period ended March 31, 2004, and the year
ended June 30, 2003. There were no borrowings under the line of credit
during the period ended September 30, 2003.
(5) INVESTMENT TRANSACTIONS:
The cost of securities purchased and the proceeds from the sale of
securities (excluding short-term securities) for the period ended March 31,
2004, were as follows:
FUND SECURITY PURCHASES SECURITY SALES
---------------------------------------------------------------------------
International $3,020,474,794 $3,573,910,335
---------------------------------------------------------------------------
Mid Cap 2,853,142,732 2,344,346,665
---------------------------------------------------------------------------
23
-------------
TWENTY-THREE
- ----NOTES TO FINANCIAL STATEMENTS-----------------------------------------------
(6) TRANSACTIONS IN SECURITIES OF AFFILIATES:
If one or more of the Funds owns, in the aggregate, 5% or more of the
outstanding voting securities of a portfolio company, that company is
deemed to be an affiliate of the Funds under the Investment Company Act of
1940. During the period ended March 31, 2004, International Fund held
securities of affiliates or purchased and sold securities of affiliates in
open market transactions and received dividends from affiliates as
summarized below:
3/31/04
SHARE -----------------------
BALANCE PURCHASE SALES REALIZED DIVIDEND SHARE
SECURITY 9/30/03 COST COST GAIN/(LOSS) INCOME BALANCE VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
Clariant AG 8,999,193 $5,521,021 $18,846,723 $(7,923,084) $- 8,590,222 $121,337,521
- ------------------------------------------------------------------------------------------------------------------------------------
Imperial Chemical Industries PLC 59,764,246 - 55,995,084 (17,624,550) 3,064,723 48,099,946 199,846,558
- ------------------------------------------------------------------------------------------------------------------------------------
Rhodia S.A.(1) 9,177,312 - 30,717,066 (20,866,332) - 6,353,129 19,758,251
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Issuer was no longer an affiliate as of March 31, 2004.
(7) INFORMATION FOR FEDERAL INCOME TAX PURPOSES:
9/30/03
GROSS GROSS NET APPRECIATION --------------------------------
COST OF UNREALIZED UNREALIZED (DEPRECIATION) UNDISTRIBUTED UNDISTRIBUTED
FUND INVESTMENTS APPRECIATION DEPRECIATION ON INVESTMENTS ORDINARY INCOME LONG-TERM GAIN
- ------------------------------------------------------------------------------------------------------------------------------------
International $8,529,485,226 $1,952,994,094 $(292,400,114) $1,660,593,980 $101,850,701 $-
- ------------------------------------------------------------------------------------------------------------------------------------
Mid Cap 3,967,657,284 787,128,986 (34,556,084) 752,572,902 - -
- ------------------------------------------------------------------------------------------------------------------------------------
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.
The tax basis of dividends and long-term capital gain distributions paid
during the period ended March 31, 2004 and year ended June 30, 2003,
capital loss carryovers as of September 30, 2003 and capital loss
carryovers utilized during the period ended September 30, 2003 are as
follows:
PERIOD ENDED
PERIOD ENDED 3/31/04 YEAR ENDED 6/30/03 9/30/03 9/30/03
----------------------------------------------------------------------------------------------------
ORDINARY LONG-TERM ORDINARY LONG-TERM NET CAPITAL CAPITAL LOSS CAPITAL LOSS
INCOME CAPITAL GAIN INCOME CAPITAL GAIN LOSS CARRYOVER CARRYOVER
FUND DIVIDENDS DISTRIBUTIONS DIVIDENDS DISTRIBUTIONS CARRYOVERS(1) EXPIRATION UTILIZED
- ------------------------------------------------------------------------------------------------------------------------------------
International $101,887,241 $- $50,243,215 $- $116,228,014 2008 $-
694,241,382 2009
384,841,928 2010
202,299,105 2011
- ------------------------------------------------------------------------------------------------------------------------------------
Mid Cap - - - - 166,421,032 2009 11,589,556
333,252,323 2010
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Capital gain distributions will resume in the future to the extent gains
are realized in excess of the available carryforwards.
There were no dividends or long-term capital gain distributions paid during
the period ended September 30, 2003.
24
- -----------
TWENTY-FOUR
- -----------------------------------------------NOTES TO FINANCIAL STATEMENTS----
(8) FUND SHARE ACTIVITIES:
Capital share transactions for the Funds were as follows:
INTERNATIONAL MID CAP
=================================== ===================================
Investor Institutional Investor Institutional
Period ended March 31, 2004 Shares Shares Shares Shares
=========================================================================================== ===================================
Proceeds from shares issued....................... $1,729,934,735 $187,949,605 $1,000,175,050 $53,818,266
Net asset value of shares issued in
reinvestment of dividends and distributions ... 54,530,763 38,442,969 - -
Cost of shares redeemed........................... (2,119,420,366) (422,639,866) (438,235,442) (39,446,124)
------------------------------------- -------------------------------------
Net increase (decrease) from fund
share transactions........................... $(334,954,868) $(196,247,292) $561,939,608 $14,372,142
===================================== =====================================
Shares sold....................................... 93,240,540 10,027,709 38,636,194 2,175,557
Shares issued in reinvestment
of dividends and distributions............... 3,107,166 2,183,019 - -
Shares redeemed................................... (115,461,161) (22,912,943) (16,838,970) (1,481,484)
------------------------------------- -------------------------------------
Net increase (decrease) in capital shares......... (19,113,455) (10,702,215) 21,797,224 694,073
===================================== =====================================
INTERNATIONAL MID CAP
=================================== ===================================
Investor Institutional Investor Institutional
Period ended September 30, 2003 Shares Shares Shares Shares
=========================================================================================== ===================================
Proceeds from shares issued....................... $1,653,682,408 $222,370,761 $320,410,216 $56,462,660
Net asset value of shares issued in
reinvestment of dividends and distributions ... - - - -
Cost of shares redeemed........................... (1,607,024,622) (24,062,048) (161,733,175) (6,856,490)
------------------------------------- -------------------------------------
Net increase (decrease) from fund
share transactions........................... $46,657,786 $198,308,713 $158,677,041 $49,606,170
===================================== =====================================
Shares sold....................................... 102,140,758 13,738,314 13,957,902 2,468,566
Shares issued in reinvestment
of dividends and distributions............... - - - -
Shares redeemed................................... (98,579,720) (1,477,132) (7,041,572) (296,096)
------------------------------------- -------------------------------------
Net increase (decrease) in capital shares......... 3,561,038 12,261,182 6,916,330 2,172,470
===================================== =====================================
INTERNATIONAL MID CAP
=================================== ===================================
Investor Institutional Investor Institutional
Period ended June 30, 2003 Shares Shares Shares Shares
=========================================================================================== ===================================
Proceeds from shares issued....................... $ 6,609,449,427 $1,265,372,555 $1,165,389,769 $364,499,717
Net asset value of shares issued in
reinvestment of dividends and distributions ... 29,416,168 16,663,234 - -
Cost of shares redeemed........................... (6,063,741,583) (141,139,765) (740,991,149) (18,264,478)
------------------------------------- -------------------------------------
Net increase (decrease) from fund
share transactions........................... $ 575,124,012 $1,140,896,024 $ 424,398,620 $346,235,239
===================================== =====================================
Shares sold....................................... 448,720,763 84,658,208 58,902,392 18,444,267
Shares issued in reinvestment
of dividends and distributions............... 1,986,215 1,121,348 - -
Shares redeemed................................... (410,530,756) (9,434,864) (37,879,947) (921,013)
------------------------------------- -------------------------------------
Net increase (decrease) in capital shares......... 40,176,222 76,344,692 21,022,445 17,523,254
===================================== =====================================
25
- ------------
TWENTY-FIVE
- ----NOTES TO FINANCIAL STATEMENTS-----------------------------------------------
(9) CHANGE IN INDEPENDENT AUDITORS
The Board of Directors and the audit committee of the Board of Directors
recommended and approved Ernst & Young LLP as the Funds' independent
auditors on August 26, 2003. PricewaterhouseCoopers LLP previously served
as the Funds' independent auditors. There were no disagreements with the
previous independent auditors and an unqualified opinion was issued on the
June 30, 2003 financial statements of Artisan Funds.
(10) LITIGATION
Artisan Funds and the Adviser are defendants in a lawsuit that seeks
certification of a plaintiff class consisting of all persons in the United
States who held shares in International Fund for a period of more than 14
days during the five years prior to the filing of the lawsuit. The suit
seeks compensatory and punitive damages, as well as interest, costs and
attorney's fees. The lawsuit alleges, in summary, that Artisan Funds and
the Adviser exposed long-term International Fund shareholders to trading by
market timers by allegedly (a) failing to properly evaluate daily whether a
significant event affecting the value of International Fund's securities
had occurred after foreign markets had closed but before the calculation of
the Fund's NAV; (b) failing to implement the Fund's portfolio valuation and
share pricing policies and procedures; (c) allowing portfolio valuation and
share policies and procedures that benefited market timers at the expense
of long-term shareholders; and (d) failing to know and implement applicable
rules and regulations concerning the calculation of NAV. Artisan Funds and
the Adviser intend to defend the lawsuit vigorously. Artisan Funds does not
believe that the pending action will have a material affect on the
financial statements of any Fund.
26
- -----------
TWENTY-SIX
- ----------------------------------------PROXY VOTING POLICIES AND PROCEDURES----
You may obtain a description of Artisan Funds' proxy voting policies and
procedures, without charge, upon request by calling 800.399.1770. That
information also is included in Artisan Funds' statement of additional
information, which is available on the Securities and Exchange Commission's
website at http://www.sec.gov.
- ------------------------NOTES ON MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE----
The discussions of each Fund included in this Semi-Annual Report include
statistical information about the portfolios of each of the Artisan Funds.
Except as otherwise noted, that information is as of March 31, 2004; it varies
with changes in a Fund's portfolio investments. The performance information for
each Fund relative to its benchmark index discussed in this Report was prepared
by the Adviser using information reported by FactSet Databases. Artisan Funds
may consider an issuer to be from a particular country if (i) its principal
securities trading market is in that country; (ii) alone or on a consolidated
basis it derives more of its annual revenue from goods produced, sales made or
services performed in that country than any other country; or (iii) it is
organized under the laws of, or has a principal office in that country. By
applying these tests, it is possible that Artisan Funds could deem a particular
issuer to be from more than one country.
DEFINITIONS OF PORTFOLIO STATISTICS
MARKET CAPITALIZATION is the aggregate value of all a company's outstanding
common stock. Market capitalization is calculated by FactSet using the price as
of the most recent month-end multiplied by the number of shares outstanding as
shown in the financial statements of the issuer. MEDIAN MARKET CAP provides a
measure of the market capitalization value of the companies in a portfolio.
Equal numbers of companies in the portfolio have market capitalizations higher
and lower than the median. WEIGHTED AVERAGE MARKET CAP is the average of the
market capitalizations of the companies in the portfolio weighted by the size of
each company's position within the portfolio. WEIGHTED AVERAGE GROWTH RATE is
the average of the 3-5 year forecasted growth rates of each company in the
portfolio, weighted by the size of the company's position within the portfolio.
WEIGHTED HARMONIC AVERAGE P/E measures the price/earnings ratio of the Fund,
excluding negative earners, weighted by the size of the company's position
within the portfolio. The earnings figures used are estimates for the current
calendar year.
DESCRIPTIONS OF INDICES
Each Fund's performance is compared in this report to changes in at least two
indices - a broad-based index of changes in prices of securities in the market
in which the Fund invests and a peer group index of other mutual funds that are
categorized by Lipper, Inc., an independent monitor of mutual fund performance,
in the same general category as the Fund. All of the indices are unmanaged and
their returns include reinvested dividends. Unlike the Funds' returns, the
returns of each index, except each Lipper index, do not include the payment of
sales commissions or other expenses that would be incurred in the purchase or
sale of the securities included in that index.
27
------------
TWENTY-SEVEN
- ----NOTES ON MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE------------------------
The indices to which the Funds are compared are:
ARTISAN INTERNATIONAL FUND - MORGAN STANLEY CAPITAL INTERNATIONAL EAFE/R INDEX
(EAFE) is a market-weighted index of companies in developed markets, excluding
the U.S. and Canada.
ARTISAN MID CAP FUND - RUSSELL MIDCAP/R INDEX is a market-weighted index of
about 800 medium-sized U.S. companies. The RUSSELL MIDCAP/R GROWTH INDEX is a
market-weighted index of those medium-sized companies included in the Russell
Midcap/R Index with higher price-to-book ratios and higher forecasted growth
values.
Each LIPPER INDEX reflects the net asset weighted returns of the 30 largest
mutual funds tracked by Lipper in the category reflected in the name of the
index. Artisan International Fund and Artisan Mid Cap Fund are included in their
respective Lipper indices.
TRADEMARKS
Trademarks and copyrights relating to the indices and products of portfolio
companies mentioned in this report are owned by their respective owners. Except
as otherwise indicated, the trademarks, including names, logos, slogans and
service marks appearing in this report are the property of Artisan Partners
Limited Partnership and may not be copied, reproduced, published or in any way
used without written permission.
28
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TWENTY-EIGHT
[LOGO]
ARTISAN FUNDS
P.O. BOX 8412
BOSTON, MA 02266-8412
800.399.1770
5/28/04 - A4060
ITEM 2. CODE OF ETHICS.
Not required for this filing.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not required for this filing.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not required for this filing.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not required for this filing.
ITEM 6. SCHEDULE OF INVESTMENTS.
Not required for this filing.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 10. CONTROLS AND PROCEDURES.
(a) Based on an evaluation of the disclosure controls and procedures (as defined
in Rule 30a-3(c) under the Investment Company Act of 1940, the "Disclosure
Controls") as of a date within 90 days prior to the filing date (the "Filing
Date") of this Form N-CSR (the "Report"), the Disclosure Controls are
effectively designed to ensure that information required to be disclosed by the
registrant in the Report is recorded, processed, summarized and reported by the
Filing Date, including ensuring that information required to be disclosed in the
Report is accumulated and communicated to the registrant's management, including
the registrant's principal executive officer and principal financial officer, as
appropriate to allow timely decisions regarding required disclosure.
(b) There were no changes in the registrant's internal controls over financial
reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940)
that occurred during the registrant's most recent fiscal half-year that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 11. EXHIBITS.
(a)(1) Not required for this filing.
(2) Certifications of Andrew A. Ziegler, Principal Executive Officer and
Lawrence A. Totsky, Principal Financial Officer, pursuant to Rule
30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)),
attached hereto as Exhibits (a)(2)(i) and (a)(2)(ii)
(b) Certification of Andrew A. Ziegler, Principal Executive Officer, and
Lawrence A. Totsky, Principal Financial Officer, pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, attached hereto as Exhibit (b)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Artisan Funds, Inc.
By: /s/ Andrew A. Ziegler
-----------------------------------
Andrew A. Ziegler
Principal Executive Officer
Date: June 4, 2004
-----------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Andrew A. Ziegler
-----------------------------------
Andrew A. Ziegler
Principal Executive Officer
Date: June 4, 2004
-----------------------------------
By: /s/ Lawrence A. Totsky
-----------------------------------
Lawrence A. Totsky
Principal Financial Officer
Date: June 4, 2004
-----------------------------------