Building Portfolios For Long-Term Growth

We seek out companies within our preferred themes with sustainable growth characteristics trading at attractive valuations that do not reflect their long-term potential. More specifically, we look for companies that have the opportunity to dominate their industries. We look for industries that will benefit from consolidation because it creates the opportunity to provide higher value-added products, price them at a premium and earn high margins.

We identify these opportunities within the context of long-term sustainable growth trends. The long-term impact of secular trends is often underestimated. Some never gain traction. But those that do will be so disruptive that there is a long period of time over which to benefit. Three trends dominate our thoughts today: the effect of demographics—both the aging population in the developed world and the young population of the emerging world; heightened environmental awareness; and technology—specifically the proliferation of the Internet, demand for data speeds and increasing broadband penetration.

It's more of a coincidence because we build our portfolio from the bottom up. That said, many of the European companies we hold have been selling their products and services internationally for decades. So when we look for companies that are attuned to different end markets, European companies are often better positioned to benefit from the secular growth trends that we've identified. They are adept at going into markets where people speak different languages, where the marketing customs and distribution channels are different. Over the last 20 years, these companies have improved tremendously and their profit margins are higher, now on par with their American peers. Across a range of industries—from consumer goods to airplane parts—some of the European companies are among the best companies in the world.

Linde, a German industrial gas company, is one of four global leaders in this industry, thanks to tremendous consolidation. Linde is benefiting from every growth trend we follow from aging populations in the developed world to energy efficiency to industrialization in the emerging world. The company sells nitrogen for food packaging (a growth industry in the emerging world), hydrogen to oil refineries (demand for cleaner energy) and oxygen to steel mills and hospitals for oxygen masks (demand driven by an aging population). It's a company with a 100-year history and strong positions in many growth markets. It's a company you can hold for a long time and we have. We bought our first shares in 2002.

The commonality is consolidation and the strength of their brands, which gives them pricing power. Take for instance the beer market. There are really only four global providers of beer now, and we own two—SABMiller and Anheuser-Busch InBev. They are all beneficiaries of the end theme that rising disposable incomes in the emerging world are leading to greater consumption rates.

There's a predictable pattern of evolution in consumption that happens with rising incomes. And whether this is happening in beer, personal care products (Unilever) or food products (Nestle), we own consumer companies with global brand recognition that are benefiting from that rise in consumer spending.

China has been such a large driver of global growth over the last decade that it's certainly something we consider. Although the growth rates do not meet consensus forecasts, they are still well ahead of what we're finding anywhere else in the developed world. The economy is shifting from a fixed-asset investment base to becoming consumption driven. When that transition happens, it's challenging but also presents many opportunities for the types of companies we own to expand their brands. At a certain level of wealth, a consumer goes to buy instant noodles for the first time; at another level, they buy a scooter. Eventually, it's a motorcycle, then a car, then a luxury car and financial products.

The Chinese government is very serious aboutmeeting the demands for cleaner air and water. We own beneficiaries across the value chain here, from producers of automotive drive trains to gas pipelines that provide a much cleaner source of energy than coal.

For instance, smog in cities is not unique to China. The prescription is well-known: catalytic converters, diesel particulate filters, turbochargers and all the components that make engines burn fuel more efficiently. We own several companies which may be domiciled outside of China, but are selling components into the Chinese market that are key for reducing auto emissions. For example, IHI in Japan produces turbochargers that improve fuel efficiency in cars. NGK in Japan and Johnson Matthey in the UK both contribute chemical materials used in catalytic converters and the diesel particulate filter parts of the drive train.

We also have a position in Beijing Enterprises, the company controlling most of the important natural gas pipelines in China. This is emblematic of our investment process. We have identified companies that have unique products where demand will exceed supply for the foreseeable future.

We think some investors have preconceptions about Ryanair. We see a company that has dominated its industry for a decade, with margins significantly above its peers, a fantastic management team and has paid back a tremendous amount of cash in the form of share buybacks and dividends. Last year, it suffered two profit warnings. But we still think their growth trend is fantastic. We saw the stock drop twice in a year and thought it was a great opportunity to buy at an attractive valuation.

We've been discussing the growth of the Internet, the penetration of broadband and increasing data speeds for over 10 years. We get excited when we can identify a unique asset, which may be a powerful brand or it may be a copper wire network that was dug under London or Berlin 30 years ago. If it's an asset that can't be replicated, then by definition demand should exceed supply because you can't replicate a unique asset. The growth theme here is that more people are accessing the Internet more often. There are a myriad of ways to benefit, whether it's the devices, the data delivery or the content provider. We're looking for the companies best positioned in that value chain.

In China, we've found key characteristics in Baidu, which has the dominant position in search, and Tencent, which has the dominant market share for communications platforms, mobile messaging and gaming. The unique asset may manifest itself in different ways depending on how the company is positioned.

Carefully consider the Fund's investment objectives, risks and charges and expenses. This and other important information is contained in the Fund's prospectus and summary prospectus, which can be obtained by calling 800.468.1770. Read carefully before investing.

International investments involve special risks, including currency uctuation, lower liquidity, different accounting methods and economic and political systems, and higher transaction costs. These risks typically are greater in emerging markets. Securities of small- and medium-sized companies tend to have a shorter history of operations, be more volatile and less liquid and may have underperformed securities of large companies during some periods. Growth securities may underperform other asset types during a given period.

This material (1) represents the views of the manager as of 15 April 2014, is based on current market conditions which will fl uctuate, is subject to change without notice and does not necessarily represent those of Artisan Partners; (2) is believed to be reliable but there is no guarantee to the information's accuracy or completeness; (3) is for informational purposes only and should not be considered as investment advice or a recommendation. Strategy information provided relates to a representative account in the Artisan Non-U.S. Growth Strategy. The holdings mentioned comprised the following percentages of that representative account as of 31 Mar 2014: Linde AG 3.8%; SABMiller PLC 2.4%; Anheuser-Busch InBev NV 2.5%; Unilever NV 2.6%; Nestle SA 3.2%; IHI Corp 1.4%; NGK Insulators Ltd 2.4%; Johnson Matthey PLC 1.5%; Beijing Enterprises

Holdings Ltd 1.8%; Ryanair Holdings PLC 0.7%; Baidu Inc 3.9%; Tencent Holdings Ltd 1.3%. The Global Industry Classifi cation Standard (GICS) was developed by and is the exclusive property and a service mark of MSCI Inc. (MSCI) and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. (S&P) and is licensed for use by Artisan Partners. Neither MSCI, S&P nor any third party involved in making or compiling the GICS or any GICS classifi cations makes any express or implied warranties or representations with respect to such standard or classifi cation (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability and fi tness for a particular purpose with respect to any of such standard or classifi cation. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of their affi liates or any third party involved in making or compiling the GICS or any GICS classifi cations have any liability for any direct, indirect, special, punitive, consequential or any other damages(including lost profi ts) even if notifi ed of the possibility of such damages. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used to create indices or fi nancial products. This report is not approved or produced by MSCI.

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