QUARTERLY Artisan International Value Fund FactCommentary Sheet Investor Class: ARTKX | Advisor Class: APDKX | Institutional Class: APHKX As of 30 June 2019 Investment Process We seek to invest in high-quality, undervalued companies with strong balance sheets and shareholder-oriented management teams. Undervaluation Determining the intrinsic value of a business is the heart of our research process. Intrinsic value represents the amount that a buyer would pay to own a company’s future cash flows. We seek to invest at a significant discount to our estimate of the intrinsic value of a business. Business Quality We seek to invest in companies with histories of generating strong free cash flow, improving returns on capital and strong competitive positions in their industries. Financial Strength We believe that investing in companies with strong balance sheets helps to reduce the potential for capital risk and provides company management the ability to build value when attractive opportunities are available. Shareholder-Oriented Management Our research process attempts to identify management teams with a history of building value for shareholders. Team Overview Our team has worked together for many years and has implemented a consistent and disciplined investment process. Our team is organized by geographic regions, but within those regions we are generalists who look across all industries. We believe this model enables our analysts to become broad thinkers and gain critical insight across all economic sectors. Portfolio Management N. David Samra Ian P. McGonigle, CFA Joseph Vari Portfolio Manager (Lead) Co-Portfolio Manager Co-Portfolio Manager Investment Results (%) Average Annual Total Returns As of 30 June 2019 QTD YTD 1 Yr 3 Yr 5 Yr 10 Yr Inception Investor Class: ARTKX 3.93 14.33 2.35 8.25 2.95 10.28 11.87 Advisor Class: APDKX 3.97 14.40 2.50 8.41 3.08 10.35 11.91 Institutional Class: APHKX 4.00 14.45 2.60 8.50 3.18 10.51 12.05 MSCI EAFE Index 3.68 14.03 1.08 9.11 2.25 6.90 7.53 MSCI All Country World ex USA Index 2.98 13.60 1.29 9.39 2.16 6.54 8.06 Source: Artisan Partners/MSCI. Returns for periods less than one year are not annualized. Class inception: Investor (23 September 2002); Advisor (1 April 2015); Institutional (1 October 2006). For the period prior to inception, each of Advisor Class and Institutional Class’s performance is the Investor Class’s return for that period (“Linked Performance”). Linked Performance has not been restated to reflect expenses of the Advisor or Institutional Class and each share’s respective returns during that period would be different if such expenses were reflected. Expense Ratios ARTKX APDKX APHKX Semi-Annual Report 31 Mar 20191,2 1.18 1.05 0.95 Prospectus 30 Sep 20183 1.24 1.10 1.01 1Excludes Acquired Fund Fees & Expenses as described in the prospectus. 2Unaudited, annualized for the six-month period. 3See prospectus for further details. Past performance does not guarantee and is not a reliable indicator of future results. Investment returns and principal values will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than that shown. Call 800.344.1770 for current to most recent month-end performance. Quarterly Commentary Artisan International Value Fund As of 30 June 2019 Market Discussion shareholder-oriented management teams that are trading at heavily Markets notched another positive quarter in Q2, despite a spate of discounted valuations will serve our investors and shareholders well macroeconomic and global growth concerns that contributed to a over the long term. sharp correction in May. As the current economic expansion has approached historic length, many prognosticators have begun Portfolio Discussion speculating that a downturn is imminent. The worries include Second-quarter performance was characterized by significant ongoing trade disputes (namely, China-US, but also among many volatility. The largest positive contributors to return were Panalpina, major global economies and blocs), the direction of developed world Arch Capital and RELX—though their positive impact was weighed on monetary policy and the resolution (or lack thereof) of Brexit. At Q2’s by negative contributions from Baidu, Naver and the exposure to end, the US and China agreed to return to the negotiating table— European banks. which soothed nerves, though the two remain far from an agreement. Panalpina’s share price increased by just under 40% in Q2 on the back of competitor DSV’s finalized all-share transaction to acquire the Meanwhile, monetary policy remains as inscrutable as it’s been over company. The combination of the two companies creates a scale the last eight or so years. In March, the ECB announced another round operator in freight forwarding with strong market positions in both air of long-term refinancing operations (TLTRO III), which offers cheap and sea freight. There is also significant synergy potential as the loans to euro zone banks and is intended to spur lending to combined entity reduces fixed overhead costs—which provided a individuals and businesses. (We can’t help but think of Einstein’s boost to the share price during the quarter. definition of insanity.) On one hand, many of the smaller Italian banks will likely benefit from continued access to cheap loans. But on the We first invested in Arch Capital Group, a Bermuda-based insurance other, the vast majority of European banks have recovered from the company, in 2003. Over the vast majority of that holding period, Arch crises of several years ago—the case for unlimited liquidity seems thin earned significant returns from its core insurance and reinsurance at this point. underwriting capability. Property and casualty insurance pricing is dependent on many variables, including loss-cost trends, Interestingly, the “good news is bad news” dynamic—whereby underwriting discipline and the available capital in the industry. markets respond positively to indications from global monetary chiefs Though Arch is a disciplined underwriter, profitability has declined that the economy is weakening and may require ongoing over the last several years due to lower premiums, looser terms and accommodative policy to bolster it—has also made a comeback. The conditions, and significant industry-wide excess capital. Recently, latest instance came shortly after the quarter concluded, when a however, significant natural disasters combined with the demise of relatively solid US jobs report contributed to a down day for markets naïve competition have changed the dynamic among these variables. on diminished expectations for a July rate cut. We have long discussed Pricing in certain insurance lines has started to improve, and the stock that the time for accommodative monetary policy in much of the market has in turn anticipated better pricing and underwriting world has passed and that the path to normalization should performance, pushing Arch’s share price up by 14% in Q2. continue—though we won’t be surprised to see these market dynamics continue until they no longer reasonably can. RELX is a UK-based professional publishing conglomerate which operates four segments: scientific publishing, risk analytics, legal Elsewhere, the UK is becoming increasingly mired in Brexit drama with publishing and exhibitions. The business is characterized by steady no clear resolution as of this writing. In Q2, PM Theresa May growth, high levels of profitability and strong cash flow generation. announced she would step down as the Conservative party leader but The company’s share price declined in 2018 due to concerns about would remain the head of the government until a successor could be competitive challenges to the group’s scientific publishing division. In chosen. Also during the quarter, the UK and EU negotiated a new our analysis, the company does face competitive threats—though deadline (October 31)—though with the added uncertainty of they likely only marginally diminish the company’s growth rate, rather elections thrown in the mix, that date is approaching quickly. than significantly change its economics. Year to date, the market seems to agree: The share price was up 15% for the quarter and is up Contrasting all of this is a raft of initial public offerings—many from 20% YTD. companies not turning profits, yet their shares have rocketed out of the gate at sky-high valuations. Against this backdrop, markets—and The largest individual negative contributor was Baidu, whose share with them, valuations—continue their unabated rise. We find this price declined by 30% in Q2. Year to date, the stock is down 26%, combination difficult to understand but simultaneously believe it detracting 0.85% from the portfolio. We have clearly been too provides a positive backdrop against which highly discerning, active, optimistic in our assumptions surrounding the company’s ability to value-oriented investors can distinguish themselves. Buffett’s grow and should have sold the shares in 2018. At this price, however, admonition to be fearful when others are greedy is as relevant as ever, the shares imply little to no growth or profitability and are and we maintain our conviction that a disciplined approach to significantly undervalued. We first purchased Baidu in 2012 at identifying high-quality, financially sound companies with approximately $94 per share. The valuation was cheap, and the opportunity was compelling. State ownership and censorship of recognition of value growth within the core Korean business is being media assets combined with inexpensive broadband access via pressured by sentiment surrounding Naver’s 73% ownership share of cellular phones in China created a huge, untapped advertising market a Japanese company called Line Corp. Line is a Japan-listed company for the country’s largest Internet platforms, including Tencent, Alibaba that operates as a messaging application similar to WhatsApp in the and Baidu.