S-1/A 1 y77426a7sv1za.htm AMENDMENT NO. 7 TO FORM S-1 sv1za
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As filed with the Securities and Exchange Commission on September 8, 2009
Registration No. 333-149178
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
 
Amendment No. 7
to
Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
 
 
Artio Global Investors Inc.
(Exact Name of Registrant as Specified in Its Charter)
 
         
Delaware
  6282   13-6174048
(State or Other Jurisdiction of
Incorporation or Organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification Number)
 
330 Madison Ave.
New York, NY 10017
(212) 297-3600
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)
 
 
 
 
ADAM SPILKA
General Counsel and Corporate Secretary
Artio Global Investors Inc.
330 Madison Ave.
New York, NY 10017
(212) 297-3600
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)
 
 
 
 
Copies to:
 
         
MICHAEL KAPLAN
Davis Polk & Wardwell LLP
450 Lexington Ave.
New York, NY 10017
(212) 450-4000
  CATHERINE CLARKIN
JAY CLAYTON
Sullivan & Cromwell LLP
125 Broad Street
New York, NY 10004
(212) 558-4000
  JAMES GERKIS
Proskauer Rose LLP
1585 Broadway
New York, NY 10036
(212) 969-3000
 
Approximate date of commencement of proposed sale to the public:  As soon as practicable after the effective date of this Registration Statement.
 
If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  o
 
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o           
 
If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o           
 
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o           
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
             
Large accelerated filer o
  Accelerated filer o   Non-accelerated filer þ
(Do not check if a smaller reporting company)
  Smaller reporting company o
 
 
 
 
CALCULATION OF REGISTRATION FEE
 
                         
            Proposed Maximum
    Proposed Maximum
    Amount of
Title of Each Class of
    Amount to be
    Offering
    Aggregate
    Registration
Securities to be Registered
    Registered(1)     Price Per Share(2)     Offering Price(1)     Fee(3)
Class A common stock, par value $0.001 per share
    26,910,000     $26.00     $699,660,000     $27,497
                         
 
 
(1) Includes additional shares of Class A common stock that the underwriters have the option to purchase.
 
(2) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(a) of the Securities Act of 1933, as amended.
 
(3) Previously paid $39,300.
 
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
 


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The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
 
 
Subject to Completion. Dated September 8, 2009.
 
23,400,000 Shares
 
(ARTIO GLOBAL INVESTORS LOGO )
 
Class A Common Stock
 
 
This is an initial public offering of shares of Class A common stock of Artio Global Investors Inc. All of the shares of Class A common stock included in this offering are being sold by Artio Global Investors Inc.
 
Prior to this offering, there has been no public market for the Class A common stock. It is currently estimated that the initial public offering price per share will be between $24.00 and $26.00. The Class A common stock of Artio Global Investors Inc. has been approved for listing on the New York Stock Exchange under the symbol “ART”.
 
The net proceeds of this offering will be used to repurchase an aggregate of 21.0 million shares of Class C common stock from our parent, Julius Baer Holding Ltd., 1.2 million shares of Class A common stock from Richard Pell, our Chief Executive Officer and Chief Investment Officer, and 1.2 million shares of Class A common stock from Rudolph-Riad Younes, our Head of International Equity. Following the application of the net proceeds of this offering and, after giving effect to the transactions described herein, Julius Baer Holding Ltd. will have approximately 35% of the voting power in Artio Global Investors Inc. through its ownership of the shares of our Class C common stock, and Richard Pell and Rudolph-Riad Younes, whom we collectively refer to as our Principals, will each have approximately 13% of the voting power through their respective ownership of the shares of our Class B common stock. Investors that purchase shares of Class A common stock in this offering will have approximately 39% of the voting power. Shares of the Class A common stock and Class B common stock each entitle the holder to one vote per share. Shares of Class C common stock entitle the holders to an aggregate vote equal to the greater of (1) the number of votes they would be entitled to on a one-vote-per-share basis and (2) 20% of the combined voting power of all classes of common stock. Julius Baer Holding Ltd. will enter into a shareholders agreement under which it will agree that, to the extent it has a vote as holder of the Class C common stock greater than that which it would be entitled to on a one-vote-per-share basis, it will on all matters vote such excess on the same basis and in the same proportion as the votes cast by the holders of our Class A and Class B common stock.
 
See “Risk Factors” on page 18 to read about factors you should consider before buying shares of the Class A common stock.
 
 
Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
 
 
                 
   
Per Share
   
Total
 
 
Initial public offering price
  $           $        
Underwriting discount
  $       $  
                 
Proceeds, before expenses, to Artio Global Investors Inc
  $       $  
                 
 
To the extent that the underwriters sell more than 23,400,000 shares of Class A common stock, the underwriters have the option to purchase up to an additional 3,510,000 shares from Artio Global Investors Inc. at the initial public offering price less the underwriting discount.
 
 
The underwriters expect to deliver the shares of Class A common stock against payment in New York, New York on          , 2009.
 
Goldman, Sachs & Co.
 
 
BofA Merrill Lynch
 
Deutsche Bank Securities UBS Investment Bank
 
 
Keefe, Bruyette & Woods
 
 
Prospectus dated          , 2009.


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Historical Returns of Largest Global and International Investment Strategies
(Returns Since Strategy Inception Through June 30, 2009)*
 
 
     
International Equity I   International Equity II
     
Inception: May 1995
AuM: $19.1bn
  Inception: April 2005
AuM: $20.4bn
 
(Intl Equity I II Graph)
 
     
Global Equity   Total Return Bond
     
Inception: July 1995
AuM: $0.5bn
  Inception: February 1995
AuM: $3.9bn
 
(Global Total Graph)
 
 
High Yield
 
Inception: April 2003
AuM: $2.0bn
 
(High Yield Graph)
 
 
 
        * Note: Historical returns presented above represent an aggregate of various performance composites and are not indicative of future returns, or of returns of other strategies. The above five strategies accounted for 97.9% of assets under management (“AuM”) at June 30, 2009. For additional details on investment performance and unabbreviated names of each strategy’s benchmarks, please see pages 120-131 of this prospectus. See also “Performance Information Used in this Prospectus”.


 

 
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PROSPECTUS
 
         
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 EX-5
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 EX-10.19
 EX-10.20
 EXX-10.21
 EX-10.22
 EX-23.1
 
 
 
Through and including          , 2009 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to unsold allotments or subscriptions.
 
No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus. You must not rely on any unauthorized information or representations. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date.
 
 
Except where the context requires otherwise, in this prospectus:
 
  •  “Artio Global Investors Inc.”, the “company”, “we”, “us” and “our” refer to Artio Global Investors Inc. and, unless the context otherwise requires, its direct and indirect subsidiaries;
 
  •  “operating company” and “Artio Global Holdings” refer to Artio Global Holdings LLC and, unless the context otherwise requires, its subsidiary Artio Global Management LLC, or “Artio Global Management”, our “operating subsidiary”; and
 
  •  “parent” and “Julius Baer Holding Ltd.” refer to Julius Baer Holding Ltd., a Zurich-based financial holding company whose shares are listed on the SIX Swiss Exchange, our parent company and sole stockholder prior to the consummation of this offering. On May 20, 2009, Julius Baer Holding Ltd. announced its intention to separate its private banking and asset management businesses into two distinct independently-listed corporate groups. Following completion of the separation, Julius Baer Holding Ltd. will be renamed GAM Holding Ltd. and will hold any remaining shares of our Class C common stock then held by Julius Baer Holding


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  Ltd. “Julius Baer Group Ltd.” will comprise Julius Baer Holding Ltd.’s former private banking business and will have shares listed on the SIX Swiss Exchange. Julius Baer Group Ltd. will not receive any shares of our common stock as a result of the separation.
 
Performance Information Used in This Prospectus
 
We manage investments through “proprietary funds” (which include Securities and Exchange Commission, or SEC, registered mutual funds such as our Artio International Equity Fund, and private offshore funds that are not SEC registered) and other types of accounts. Funds and other accounts that are managed by us with a broadly common investment objective are referred to as being part of the same “strategy”. We measure the results both of our individual funds and of our “composites”, which represent the aggregate performance of substantially all client accounts (including discretionary, fee-paying, non-taxable and taxable accounts, private offshore, institutional commingled and mutual funds) invested in the same general investment strategy. Our composites are reviewed annually for compliance with the Global Investment Performance Standards (“GIPS”), and include, for example, “Global Equity” and “High Yield”.
 
None of the information in this prospectus or the registration statement constitutes either an offer or a solicitation to buy or sell any fund securities, nor is any such information a recommendation for any fund security or investment service.
 
Results for any investment strategy described herein, and for different investment products within a strategy, are affected by numerous factors, including different material market or economic conditions; different advisory fees, brokerage commissions and other expenses; and the reinvestment of dividends or other earnings. The returns for any strategy may be positive or negative, and past performance does not guarantee future results.
 
Throughout this prospectus, we present the annualized returns of our investment strategies on a “gross” and “net” basis, which represent annualized returns before and after payment of fees, respectively. In connection with this presentation, we have also disclosed the returns of certain market indices or “benchmarks” for the comparable period. Indices that are used for these performance comparisons are unmanaged and have differing volatility, credit and other characteristics. You should not assume that there is any material overlap between the securities included in the portfolios of our investment strategies during these periods and those that comprise any Merrill Lynch Index, any MSCI Index, any Russell Index, the Citigroup USD 3 Month EUR Deposit Index, the Barclays Capital U.S. Aggregate TR Value Index, or the S&P 500® Index referred to in this prospectus. It is not possible to invest directly in any of the indices described above. The returns of these indices, as presented in this prospectus, have not been reduced by fees and expenses associated with investing in securities, but do include the reinvestment of dividends. In this prospectus, we refer to the date on which we began tracking the performance of an investment strategy as that strategy’s “inception date”, and to the date an investment strategy began managing capital as that strategy’s “launch date”.
 
Each Russell Index referred to in this prospectus is a registered trademark or trade name of The Frank Russell Company. The Frank Russell Company is the owner of all copyrights relating to these indices and is the source of the performance statistics of these indices that are referred to in this prospectus.
 
The MSCI EAFE® Index and the MSCI EAFE® and Canada Index, which we refer to as the MSCI EAFE® and Canada Index, are trademarks of MSCI Inc. The MSCI AC World ex USA Indexsm ND is a service mark of MSCI Inc. MSCI Inc. is the owner of all copyrights relating to these indices and is the source of the performance statistics of these indices that are referred to in this prospectus.
 
We refer to the Barclays Capital U.S. Aggregate TR Value Index as the Barclays Capital U.S. Aggregate Index. Barclays Capital is the source of the performance statistics of this index that are referred to in this prospectus.


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The S&P 500® Index is a registered trademark of Standard & Poor’s, a division of The McGraw-Hill Companies, Inc., which is the owner of all copyrights relating to this index and the source of the performance statistics of this index that are referred to in this prospectus.
 
In this prospectus we present Morningstar, Inc. (“Morningstar”) and Lipper Analytical Services, Inc. (“Lipper”) ratings for our SEC registered mutual funds. The Morningstar ratings refer to the ratings by Morningstar of the Class A and Class I shares of our SEC registered mutual funds and are based on a 5-star scale. The Lipper ratings refer to the ratings by Lipper of the Class I shares of our SEC registered mutual funds and are based on a percentile. Morningstar and Lipper provide independent, third-party ratings using their own defined methodologies.
 
Unless we tell you otherwise, all performance information that we present, including assets under management, relate to the operations that are part of our company as of the time of this offering. In previous years, our company conducted certain businesses that are no longer part of our continuing operations, which we refer to as “legacy” or “discontinued” businesses. For a description of these businesses, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. In most cases, those businesses are considered discontinued operations in our financial statements. In order to make the information comparable, we present performance information exclusive of such legacy businesses, unless otherwise indicated.
 
Any discrepancies in any table included in this prospectus between totals and the sums of the amounts listed are due to rounding.


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PROSPECTUS SUMMARY
 
This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information that you should consider before deciding to invest in our Class A common stock. You should read this entire prospectus carefully, including the “Risk Factors” section, our historical consolidated financial statements and the notes thereto, and unaudited pro forma financial information, each included elsewhere in this prospectus.
 
Our Business
 
We are an asset management company that provides investment management services to institutional and mutual fund clients. We are best known for our International Equity strategies, which represented 84% of our assets under management as of June 30, 2009. We also offer a broad range of other investment strategies, including High Grade Fixed Income, High Yield and Global Equity. As of June 30, 2009, all the composites of these strategies had outperformed their benchmarks since inception. In addition, since 2006, we have further expanded our investment offerings by launching a series of U.S. equity strategies. Our superior investment performance has enabled us to attract a diverse group of clients and to increase our assets under management from $7.5 billion as of December 31, 2003 to $53.3 billion as of August 31, 2009, representing a compound annual growth rate, or CAGR, of 41%. This has driven a similar growth in our total revenues and other operating income, from $106.3 million to $422.0 million for the years ended December 31, 2004 and 2008, respectively, representing a CAGR of 41%. Our revenues consist almost entirely of investment management fees which are based primarily on the fair value of our assets under management rather than investment performance-based fees. We believe that our record of investment excellence and range of investment strategies position us well for continued growth.
 
Our primary business objective is to consistently generate superior investment returns for our clients. We manage our investment portfolios based on a philosophy of style-agnostic investing across a broad range of opportunities, focusing on macro-economic factors and broad-based global investment themes. We also emphasize fundamental research and analysis in order to identify specific investment opportunities and capitalize on price inefficiencies. We believe that the depth and breadth of the intellectual capital and experience of our investment professionals, together with this investment philosophy and approach, have been the key drivers of the strong relative returns we have generated for clients over the past decade. As an organization, we concentrate our resources on meeting our clients’ investment objectives and we seek to outsource, whenever appropriate, support functions to industry leaders thereby allowing us to focus our business on the areas where we believe we can add the most value.
 
Our distribution efforts target institutions and organizations that demonstrate institutional buying behavior and longer-term investment horizons, such as pension fund consultants, broker dealers, registered investment advisors, or RIAs, mutual fund platforms and sub-advisory relationships, enabling us to achieve significant leverage from a relatively small sales force and client service infrastructure. As of June 30, 2009, we provided investment management services to a broad and diversified spectrum of approximately 1,200 institutional clients, including some of the world’s leading corporations, public and private pension funds, endowments and foundations and major financial institutions through our separate accounts, commingled funds and proprietary funds. We also managed assets for more than 758,000 retail mutual fund shareholders through SEC-registered Artio Global Investment Funds and other retail investors through 17 funds that we sub-advise for others.
 
In the mid-1990’s, our Principals assumed responsibility for managing our International Equity strategy. In the years that followed, our superior performance began to attract attention from third parties such as Morningstar, which awarded a 5-star rating to the Artio International Equity Fund in 1999. Consequently, we began to attract significant inflows. Since 1999, we have expanded to other strategies, added portfolio managers and increased our assets under management to $53.3 billion as of August 31, 2009. Revenues from our parent and its affiliates represented less than 1.5% of total


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revenues and other operating income for each of the years ended December 31, 2006, 2007 and 2008 and the six months ended June 30, 2008 and 2009.
 
As a holding company, we conduct all of our business activities through Artio Global Management LLC, a subsidiary of our direct subsidiary Artio Global Holdings LLC (an intermediate holding company). Net profits and net losses of Artio Global Holdings will be allocated, and distributions will be made, approximately 74% to us and approximately 13% to each of our Principals, after giving effect to the transactions described herein. See “Our Structure and Reorganization”.
 
Competitive Strengths
 
We believe our success as an investment management company is based on the following competitive strengths:
 
  •  Long-Term Track Record of Superior Investment Performance.  We have a well-established track record of achieving superior investment returns across our key investment strategies relative to our competitors and the relevant benchmarks. Our longest-standing composite, the International Equity I composite, has outperformed its benchmark, the MSCI AC World ex USA Indexsm ND, by 8.1% on an annualized basis since its inception in 1995 through June 30, 2009 (calculated on a gross basis before payment of fees). As of June 30, 2009, each of our next four largest composites had also outperformed their benchmarks on a gross basis since inception. As of June 30, 2009, four of our five funds eligible for a Morningstar rating and representing over 99% of our assets were rated 4- or 5- stars by Morningstar and of those five funds, three were in the top quartile of Lipper rankings for performance since inception. Although our composites and mutual funds have achieved superior investment performance since inception, declines in global capital markets adversely affected and may continue to adversely affect returns on our investment strategies. As a result, our assets under management have declined from $71.5 billion as of March 31, 2008 to $53.3 billion as of August 31, 2009.
 
  •  Experienced Investment Professionals and Management Team.  We have an investment-centric culture that has enabled us to maintain a consistent investment philosophy and to attract and retain world-class professionals. Our current team of lead portfolio managers averages approximately 20 years of industry experience among them and our team of senior managers (including marketing and sales directors and client service managers) averages approximately 24 years of industry experience.
 
  •  Leading Position in International Equity.  We have a leading position in international equity investment management and our strategies have attracted a disproportionate share of net asset flows in both the institutional and mutual fund markets in recent years. As of December 31, 2008, we ranked as the 11th largest manager of international equity assets for U.S. institutional, tax-exempt clients and the 11th largest manager of international equity mutual funds in the United States, according to Pensions & Investments and Strategic Insight, respectively. We believe that we are well-positioned to take advantage of opportunities in this attractive asset class over the next several years. However, in the first six months of 2009, our International Equity strategies have generated returns that are well below their benchmarks, which, despite our strong long-term investment performance, could negatively impact our competitive position.
 
  •  Strong Track Records in Other Investment Strategies.  In addition to our leading position in international equity, we enjoy strong long-term track records in several of our other key strategies. Our Total Return Bond Fund ranked in the 3rd quartile of its Lipper universe over the one-year period, in the 2nd quartile of its Lipper universe over the three-year period and in the 1st decile of its Lipper universe over the five-year period ended June 30, 2009 and since inception, as of June 30, 2009. Our Global High Income Fund ranked in the 1st quartile of its Lipper universe over the one-year period and in the top decile over the three and five-year


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  periods ended June 30, 2009 and since inception, as of June 30, 2009. Our Global Equity Fund ranked in the 3rd quartile of its Lipper universe over the one-year period, in the 1st quartile of its Lipper universe over the three-year period ended June 30, 2009 and in the 2nd quartile of its Lipper universe since inception, as of June 30, 2009.
 
  •  Strong Relationships with Institutional Clients.  We focus our efforts on institutions and organizations that demonstrate institutional buying behavior and longer-term investment horizons. As of June 30, 2009, we provided investment management services to approximately 1,200 institutional clients invested in separate accounts, commingled funds or proprietary funds. We have found that while institutional investors generally have a longer and more extensive due diligence process prior to investing, this results in clients who are more focused on our method of investing and our long-term results, and, as a result, our institutional relationships tend to be longer, with less year-to-year turnover, than is typical among retail clients.
 
  •  Effective and Diverse Distribution.  Our assets under management are distributed through multiple channels. By utilizing our intermediated distribution sources and focusing on institutions and organizations that exhibit institutional buying behavior, we are able to achieve significant leverage from a relatively small sales force and client service infrastructure. We have developed strong relationships with most of the major pension and industry consulting firms, which have allowed us access to a broad range of institutional clients. As of June 30, 2009, no single consulting firm represented greater than approximately 5% of our assets under management and our largest individual client represented approximately 4% of our total assets under management. We access retail investors through our relationships with intermediaries such as RIAs and broker dealers as well as through mutual fund platforms and sub-advisory relationships. Although recent consolidation in the broker-dealer industry has reduced the number of broker-dealer platforms, we believe it will provide us with opportunities to reach additional retail investors through our existing relationships.
 
  •  Strong Organic Growth in Assets under Management and Sustained Net Client Inflows. In the period from December 31, 2003 through August 31, 2009, our assets under management grew from $7.5 billion to $53.3 billion, representing a CAGR of 41%. Until mid-2008, our assets under management growth was the result of a combination of general market appreciation, our record of outperforming the relevant benchmarks and an increase in net client cash inflows, which we define as the amount by which client additions to new and existing accounts exceed withdrawals from client accounts. However, since mid-2008, market depreciation has had a significant negative impact on our assets under management. During the period between December 31, 2003 and June 30, 2009, net client inflows represented 107% of our overall growth, including $1.9 billion of net client cash inflows during the year ended December 31, 2008, $1.0 billion of net client cash inflows during the six months ended June 30, 2009 and $0.4 billion of net client cash flows for the months of July and August 2009. The negative markets in 2008 and early 2009 reinforce the importance of sustained net client inflows in supporting our long-term growth in assets under management.
 
  •  Focused Business Model.  Our business model is designed to focus the vast majority of our resources on meeting our clients’ investment objectives. Accordingly, we take internal ownership of the aspects of our operations that directly influence the investment process, our client relationships and risk management, while seeking to outsource, whenever appropriate, support functions, including middle- and back-office activities, to industry leaders whose services we closely monitor. This allows us to focus our efforts where we believe we can add the most value. We believe this approach has resulted in an efficient and streamlined operating model, which has generated strong operating margins, limited fixed expenses and an ability to maintain profitability during difficult periods.


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Strategy
 
We seek to achieve consistent and superior long-term investment performance for our clients. Our strategy for continued success and future growth is guided by the following principles:
 
  •  Continue to Capitalize on our Strong Position in International Equity.  We expect to continue to grow our International Equity assets under management. Our International Equity II strategy, launched in March 2005 as a successor strategy to our International Equity I strategy (which is currently closed to new investors), has produced attractive investment returns relative to industry benchmarks since inception and has grown to $20.4 billion in assets under management in four years (as of June 30, 2009). We believe we have the capacity to handle substantial additional assets within our International Equity II strategy. In addition to continuing to grow our International Equity strategies, we plan to continue to leverage our experience in International Equity to grow our Global Equity strategy in order to capitalize on increasing flows into this strategy from investors in the United States.
 
  •  Grow our other Investment Strategies.  Historically, we concentrated our distribution efforts primarily on our International Equity strategies. In recent years, we have focused on expanding and growing our other strategies, including our High Grade Fixed Income and High Yield strategies which have experienced significant growth in assets under management as a result. We expect our U.S. Equity strategies to provide additional growth now that they have achieved their three-year performance track records, which are an important pre-requisite to investing for many institutional investors. In July 2009, Morningstar awarded the following ratings for Class I shares: 5-star rating for Artio US Smallcap Fund, 3-star rating for Artio US Multicap Fund, 3-star rating for Artio US Midcap Fund and 2-star rating for Artio US Microcap Fund. We also intend to continue to initiate new product offerings in additional asset classes where we believe our investment professionals have the potential to produce attractive risk-adjusted returns.
 
  •  Further Extend our Distribution Capabilities.  We continue to focus on expanding our distribution capabilities into those markets and client segments where we see demand for our product offerings and which we believe are consistent with our philosophy of focusing on distributors who display institutional buying behavior through their selection process and due diligence. We have selectively strengthened our international distribution by expanding into Canada and expect to further develop our international distribution over time.
 
  •  Maintain a Disciplined Approach to Growth.  We are an investment-centric firm that focuses on the delivery of superior long-term investment returns for our clients through the application of our established investment processes and risk management discipline. While we have generated significant growth in our assets under management over the past several years and have continued to develop a broader range of investment offerings, we are focused on long-term success and we will only pursue expansion opportunities that are consistent with our operating philosophy.
 
  •  Continue to Focus on Risk Management.  We manage risk at multiple levels throughout the organization, including directly by the portfolio manager, at the Chief Investment Officer level, under the Enterprise Risk Management Committee, among a dedicated risk management group and through our legal and compliance team. Our approach to managing portfolio-level risk is not designed to avoid taking risks, but to seek to ensure that the risks we choose to take are rewarded with an appropriate premium opportunity for those risks. This approach to managing portfolio-level risk has contributed significantly to our strong relative investment performance and will continue to be an integral component of our investment processes.


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Risk Factors
 
An investment in our Class A common stock involves substantial risks and uncertainties. These risks and uncertainties include, among others, those listed below:
 
  •  The loss of either of our Principals or other key investment professionals or members of our senior management team could have a material adverse effect on our business. Our ability to attract and retain qualified investment professionals is critical to our success.
 
  •  If our investment strategies perform poorly for any reason, including due to a declining stock market, general economic downturn or otherwise, clients could withdraw their funds and we could suffer a decline in assets under management, which would reduce our earnings.
 
  •  The recent deterioration in global economic and market conditions has adversely affected and may continue to adversely affect our business.
 
  •  The historical returns of our existing investment strategies may not be indicative of their future results or of the results of investment strategies we are in the process of developing.
 
  •  Most of our investment strategies consist of investments in the securities of issuers located outside of the United States, which involve foreign currency exchange, tax, political, social and economic uncertainties and risks.
 
  •  We derive a substantial portion of our revenues from a limited number of our products.
 
The foregoing is not a comprehensive list of the risks and uncertainties we face. Investors should carefully consider all of the information in this prospectus, including information under “Risk Factors”, prior to making an investment in our Class A common stock.


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Our Structure and Reorganization
 
The diagram below depicts our organizational structure immediately after the consummation of this offering and related transactions.
 
(FLOW CHART)
 
Note: Percentages in this table include the 7,200 shares of fully-vested Class A common stock expected to be awarded to our non-employee directors in connection with this offering, but exclude the approximately 2.1 million restricted stock units, each of which represents the right to receive one share of our Class A common stock upon the lapse of restrictions, which generally lapse over a five-year period, expected to be awarded to our employees (other than our Principals) in connection with this offering.
 
(1) Represents shares beneficially owned by Messrs. Pell and Younes, including shares held by grantor retained annuity trusts (“GRATs”) as to which they retain beneficial ownership.


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As a holding company, we conduct all of our business activities through Artio Global Management LLC, a subsidiary of our direct subsidiary Artio Global Holdings LLC, an intermediate holding company. Net profits and net losses of Artio Global Holdings will be allocated, and distributions will be made, approximately 74% to us and approximately 13% to each of our Principals, after giving effect to the transactions described herein.
 
Reorganization Transactions
 
In connection with this offering, we will enter into a series of transactions to reorganize our capital structure and effectuate a separation from our parent company. We refer throughout this prospectus to the transactions described below as the “reorganization” or the “reorganization transactions”.
 
Revisions to our Organization.  Prior to this offering, each of our Principals has a 15% profits interest in Artio Global Management LLC, our operating subsidiary, but this interest is subject to vesting and includes certain put and call rights. Prior to this offering, we contributed our interests in Artio Global Management LLC to Artio Global Holdings LLC. Immediately prior to this offering, our Principals will each contribute their interests in Artio Global Management LLC to Artio Global Holdings LLC and we will amend and restate Artio Global Holdings’ operating agreement to, among other things, modify its capital structure by creating a single new class of units called “New Class A Units”, approximately 70% of which will be issued to us and approximately 15% of which will be issued to each of our Principals, in each case, upon receipt of those contributions, before giving effect to the transactions described herein. The New Class A Units issued to our Principals will be fully vested and will not be subject to any put and call rights. Following such steps, Artio Global Management will be 100% owned by Artio Global Holdings, and our Principals’ interests in Artio Global Management will instead be indirect through their ownership of interests in Artio Global Holdings. Upon completion of this offering, there will be approximately 60,007,200 New Class A Units issued and outstanding, including 7,200 New Class A Units, corresponding to the shares of fully-vested Class A common stock expected to be awarded to our non-employee directors in connection with this offering.
 
Revisions to our Capitalization Structure.  Julius Baer Holding Ltd., our parent company and existing stockholder, owns all of our outstanding capital stock, consisting of 42,000,000 shares of Class C common stock. Immediately prior to this offering, we will amend and restate our certificate of incorporation to authorize three classes of common stock, Class A common stock, Class B common stock and Class C common stock.
 
Class A Shares.  Shares of our Class A common stock will be issued to the public in this offering. Class A common stock will entitle holders to one vote per share and economic rights (including rights to dividends and distributions upon liquidation).
 
Class B Shares.  Immediately prior to this offering, all of our authorized shares of Class B common stock will be issued to the Principals, in an amount equal to the number of New Class A Units to be issued simultaneously to the Principals. Class B common stock will entitle holders to one vote per share but will have no economic rights (including no rights to dividends and distributions upon liquidation).
 
Class C Shares.  Our parent owns all of our outstanding common stock, consisting of 42,000,000 shares of Class C common stock, equal to the number of New Class A Units to be issued to Artio Global Investors Inc. immediately prior to the closing of this offering. Each share of Class C common stock has economic rights (including rights to dividends and distributions upon liquidation) equal to the economic rights of each share of the Class A common stock. In order to allow Julius Baer Holding Ltd., when selling the remainder of its holdings, to avail itself of certain Swiss tax exemptions that require it to have voting rights equal to 20% of the combined voting power of the common stock, the outstanding shares of Class C common stock will have an aggregate vote equal to the greater of (1) the number of votes they would be entitled to on a one-vote-per-share basis and (2) 20% of the combined voting power of all classes of common stock. Prior to this offering, Julius Baer Holding Ltd.


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will enter into a shareholders agreement under which it will agree that, to the extent it has voting power as holder of the Class C common stock in excess of that which it would be entitled to on a one-vote-per-share basis, it will on all matters vote the shares representing such excess on the same basis and in the same proportion as the votes cast by the holders of our Class A and Class B common stock.
 
If Julius Baer Holding Ltd. transfers any shares of Class C common stock to anyone other than any of its subsidiaries or us, such shares will automatically convert into shares of Class A common stock. In addition, on the second anniversary of the completion of this offering, any outstanding shares of Class C common stock will automatically convert into Class A common stock.
 
Following this offering, we will own a number of New Class A Units equal to the aggregate number of shares of our Class A and Class C common stock then outstanding.
 
Incurrence of New Debt and Related Distributions.  In connection with this offering, Artio Global Holdings has established a $60.0 million term debt facility which, together with available cash, will fund a distribution to us that we will use to fund a distribution to our parent, and will also be utilized to provide working capital for our business and, potentially, seed capital for future investment products. In addition, Artio Global Holdings has entered into a $50.0 million revolving credit facility to be used primarily for working capital needs. Our distribution to our parent, which we have declared prior to this offering, will be calculated as $40.1 million plus total stockholder’s equity as of the date of this offering and is estimated to be $201.3 million on a pro forma basis (approximately $161.2 million of which will be paid shortly after the completion of this offering and $40.1 million of which will be payable within one year of the completion of this offering).
 
New Agreements with the Principals.  In connection with the closing of this offering, we will enter into an exchange agreement with the Principals that will grant each Principal and certain permitted transferees the right to exchange his New Class A Units, which represent ownership rights in Artio Global Holdings, for shares of our Class A common stock on a one-for-one basis, subject to certain restrictions. The exchange agreement will permit each Principal to exchange a number of New Class A Units for shares of Class A common stock that we will repurchase in connection with this offering as described under “Use of Proceeds”. Each Principal will also be permitted to exchange additional New Class A Units that he owns at the time of this offering at any time following the completion of this offering. Any exchange of New Class A Units will generally be a taxable event for the exchanging Principal. As a result, at any time following the expiration of the underwriters’ lock-up, 180 days after the date of this prospectus, subject to extension as described under “Underwriting”, each Principal will be permitted to sell shares of Class A common stock in connection with any exchange in an amount necessary to generate proceeds (after deducting discounts and commissions) sufficient to cover the taxes payable on such exchange (the amount of shares permitted to be sold determined based upon the stock price on the date of exchange, whether or not such shares are sold then or thereafter). In addition, each Principal will be permitted to sell up to 20% of the remaining shares of Class A common stock that he owns (calculated assuming all New Class A Units have been exchanged by him) on or after the first anniversary of the pricing of this offering and an additional 20% of such remaining shares of Class A common stock on or after each of the next four anniversaries. As a result, each Principal will, over time, have the ability to convert his illiquid ownership interests in Artio Global Holdings into Class A common stock that can more readily be sold in the public markets. The exchange agreement will also include certain non-compete restrictions applicable to each of the Principals. See “Relationships and Related Party Transactions — Exchange Agreement”.
 
The exchange of units for stock by the Principals is expected to generate tax savings for us. We will enter into an agreement with the Principals that will provide for the payment by us to each of the Principals of 85% of the amount of reduction in tax payments created by each Principal’s exchanges, if any, in U.S. federal, state and local income tax that we realize as a result of the exchanges referred to above by each such Principal. See “Relationships and Related Party Transactions — Tax Receivable Agreement”.


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New Compensation Arrangements with our Senior Management.  Prior to this offering we have not had employment contracts with our senior management, other than our Principals, or granted equity-based incentive compensation to our employees. We expect to enter into new employment agreements with our Principals and certain other senior members of management that will become effective on completion of this offering. We also expect to grant 7,200 shares of fully-vested Class A common stock (subject to transfer restrictions) to non-employee directors and 2,147,132 restricted stock units to our employees (other than our Principals) in connection with this offering, which generally vest over a five-year period.
 
New Arrangements with our Parent.  Prior to this offering, we obtained from our parent certain services and paid it license fees. Following this offering, we will no longer be required to pay license fees to our parent. We will enter into a transition services agreement pursuant to which Julius Baer Group Ltd. will provide us, and we will provide Julius Baer Group Ltd., with a limited number of services for a transitional period following this offering. In addition, we will enter into an indemnification and co-operation agreement with Julius Baer Holding under which Julius Baer Holding will indemnify us for any future losses relating to certain of our legacy activities. See “Relationships and Related Party Transactions — Transition Services and Indemnification Agreements”.
 
New Agreement with our Parent and the Principals.  In connection with this offering, we will enter into a registration rights agreement with the Principals and our parent to provide customary registration rights, including demand registration rights and piggyback registration rights. See “Relationships and Related Party Transactions — Registration Rights Agreement”.
 
Distributions and Expenses Associated with our Existing Owners
 
Certain elements of the reorganization transactions described above will cause distributions and other payments to be made to our existing owners or will require us to record expenses related to such owners. The following is a summary of such items as described in this prospectus:
 
  •  Artio Global Holdings declared a distribution prior to this offering to us that we will use to fund a distribution to our parent. Our distribution will be calculated as $40.1 million plus total stockholder’s equity as of the date of this offering and is estimated to be $201.3 million on a pro forma basis (approximately $161.2 million of which will be paid shortly after the completion of this offering and $40.1 million of which will be payable within one year of the completion of this offering).
 
  •  Based on an assumed offering price of $25.00 per share (the midpoint of the price range set forth on the cover of this prospectus), we will use $495.6 million of the net proceeds of this offering to repurchase 21.0 million shares of Class C common stock from Julius Baer Holding Ltd. in order to enable Julius Baer Holding Ltd. to monetize and reduce its shareholding in us, and we will use $28.3 million of the net proceeds of this offering to repurchase 1.2 million shares of Class A common stock from Richard Pell, and $28.3 million of the net proceeds of this offering to repurchase 1.2 million shares of Class A common stock from Rudolph-Riad Younes, which shares they will receive upon conversion of an equivalent amount of New Class A Units immediately prior to this offering.
 
  •  As a result of this offering, the unvested component of each Principal’s Class B profits interest will completely vest. We will record compensation charges of $212.6 million relating to this acceleration and $99.6 million relating to the tax receivable agreement we will enter into with our Principals, or $312.2 million in total.
 
  •  In contemplation of this offering, we accelerated the vesting of the unvested portion of a deferred compensation plan for our Principals in December 2008 and made payments of $7.0 million to each of our Principals.


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  •  Historically our operating subsidiary has made distributions to the Principals relating to their profits interests. From January 1, 2008 to July 31, 2009, our operating subsidiary has made distributions of $363.9 million in the aggregate, $222.0 million of which were to us (and which in turn financed $131.0 million of dividends to Julius Baer Holding Ltd.) and $141.9 million of which were, in the aggregate, to our Principals.
 
  •  In connection with this offering, each of our Principals will exchange his Class B profits interests in Artio Global Management for New Class A Units in Artio Global Holdings. Upon such exchange, we will no longer have an obligation to repurchase the Class B profits interests of each Principal and each Principal will no longer have the ability to put his interests to us. In connection with this offering, we will pay out to our Principals the unpaid balance of their aggregate allocation of profits interests, as of immediately prior to this offering. This amount was $11.4 million as of June 30, 2009.
 
Distributions
 
                                 
                Rudolph
       
    Julius Baer
    Richard
    -Riad
       
Distributions
  Holding Ltd.     Pell     Younes     Total  
 
Estimated distribution to be made following this offering(1)
  $  201,311,000     $ 5,779,695     $ 5,580,895     $  212,671,590  
Total net proceeds used to repurchase shares of Class C common stock
    495,600,000                   495,600,000  
Total net proceeds used to repurchase shares of Class A common stock
          28,320,000       28,320,000       56,640,000  
Payment (December 2008) relating to vesting of Principals’ deferred compensation plan
          7,008,750       7,008,750       14,017,500  
Distributions related to profits interests during 2008
          48,438,329 (2)     49,297,328 (2)     97,735,657  
Distributions related to profits interests during 2009 (to July 31)
          22,671,959 (2)     21,540,759 (2)     44,212,718  
Dividends during 2008 and 2009 (to July 31)
    131,000,000                   131,000,000  
 
 
(1) Actual distribution to Julius Baer Holding will be $40.1 million plus total stockholder’s equity as of the date of this offering; actual distribution to Mr. Pell and Mr. Younes represents the unpaid portion of the profits interests relating to 2009 which will be based on our pre-tax profits from January 1, 2009 to the completion of this offering.
 
(2) Each Principal is entitled to receive distributions relating to his 15% share of the profits of Artio Global Management, as defined in the operating agreement.
 
Future Distributions
 
Following this offering, we intend to make (or cause our operating company to make) the following distributions:
 
  •  Pursuant to the tax receivable agreement we will enter into with the Principals in connection with this offering, we will pay each of them 85% of the amount of the reduction in tax payments that we would otherwise be required to pay, if any, in U.S. federal, state and local income tax that we actually realize as a result of each Principal’s exchanges of New Class A Units for shares of our Class A common stock. Assuming no material changes in the relevant tax law and that we can earn sufficient taxable income to realize the full tax benefits generated by such exchanges, such payments would total $263.6 million over the 15-year period from the


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  assumed year of exchange based on an assumed price of $25.00 per share of our Class A common stock (the midpoint of the price range set forth on the cover of this prospectus) at the time of the exchange of all of Principals’ New Class A Units. The amount and timing of these payments will vary depending on a number of factors, including the timing of exchanges, the price of our Class A common stock at the time of the exchange, the extent to which such exchanges are taxable, the amount and timing of our income and the tax rates then applicable, and could differ materially from this hypothetical payment amount.
 
  •  Artio Global Holdings will make distributions on a quarterly basis to us and the Principals, on a pro rata basis based on ownership interests, in amounts sufficient to pay taxes payable on earnings, calculated using an assumed tax rate.
 
  •  Beginning in 2010, we intend to pay quarterly dividends on shares of our Class A common stock and Class C common stock, which we expect to fund from our portion of distributions made by our operating company to us and the Principals on a pro rata basis based on ownership interests. The first quarterly dividend payment, which will be paid in the first quarter, is expected to be $0.06 per share and we expect to fund it by an aggregate distribution by our operating company of approximately $3.6 million, approximately 74% of which will be distributed to us and approximately 13% of which will be distributed to each of Messrs. Pell and Younes, after giving effect to the transactions described herein. See “Dividend Policy and Dividends”. The declaration and payment of all future dividends, if any, will be at the sole discretion of our board of directors and may be discontinued at any time. In determining the amount of any future dividends, our board of directors will take into account any legal or contractual limitations, our actual and anticipated future earnings, cash flow, debt service and capital requirements and the amount of distributions to us from our operating company.
 
Our Parent
 
Our parent and sole stockholder prior to the consummation of this offering is Julius Baer Holding Ltd., a Zurich-based financial holding company whose shares are listed on the SIX Swiss Exchange. On May 20, 2009, our parent announced its intention to separate its private banking and asset management businesses into two distinct independently-listed corporate groups. Following completion of the separation, Julius Baer Holding Ltd. will be renamed GAM Holding Ltd. and will hold any remaining shares of our Class C common stock then held by Julius Baer Holding Ltd. Julius Baer Group Ltd. will comprise Julius Baer Holding Ltd.’s former private banking business. Julius Baer Group Ltd. will not receive any shares of our common stock as a result of the separation.
 
Our parent has agreed to distribute to Julius Baer Group Ltd. the first $300.0 million of any distributions that it receives from us within 12 months of the completion of the separation (including any net proceeds from this offering or any future offering that will be used to repurchase shares of Class C common stock from our parent which will be retired).
 
We do not expect the separation of our parent’s private banking and asset management businesses to have a material impact on us.
 
Our Corporate Information
 
Our headquarters are located at 330 Madison Ave, New York, NY 10017. Our telephone number at this address is (212) 297-3600 and our website address is www.artioglobal.com. Information contained on our website is not part of this prospectus. The company was incorporated on November 21, 1962 in Delaware.


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THE OFFERING
 
Class A common stock we are offering 23,400,000 shares of Class A common stock.
 
Class A common stock to be outstanding immediately after this offering and the application of the net proceeds as described under “— Use of Proceeds” 23,407,200 shares of Class A common stock. If all holders of New Class A Units (other than us) immediately after this offering and the reorganization elected to exchange them for shares of our Class A common stock and all shares of Class C common stock were converted into shares of Class A common stock, 60,007,200 shares of Class A common stock would be outstanding immediately after this offering.
 
Class B common stock to be outstanding immediately after this offering and the application of the net proceeds as described under “— Use of Proceeds” 15,600,000 shares of Class B common stock. Shares of our Class B common stock have voting but no economic rights (including no rights to dividends and distributions upon liquidation) and will be issued in an amount equal to the number of New Class A Units issued in the reorganization to the Principals. When a New Class A Unit is exchanged by a Principal for a share of Class A common stock, the corresponding share of Class B common stock will be cancelled. See “Relationships and Related Party Transactions — Exchange Agreement”.
 
Class C common stock to be outstanding immediately after this offering and the application of the net proceeds as described under “— Use of Proceeds” 21,000,000 shares of Class C common stock. Shares of Class C common stock will have economic rights (including rights to dividends and distributions upon liquidation) equal to the economic rights of the Class A common stock. If Julius Baer Holding Ltd. transfers any shares of Class C common stock to anyone other than any of its subsidiaries or us, such shares will automatically convert into an equal number of shares of Class A common stock. In addition, on the second anniversary of this offering, any outstanding shares of Class C common stock will automatically convert into Class A common stock on a one-for-one basis.
 
Voting rights One vote per share of Class A common stock and Class B common stock. Shares of Class C common stock will have an aggregate vote equal to the greater of (1) the number of votes they would be entitled to on a one-vote-per-share basis and (2) 20% of the combined voting power of all classes of common stock. Julius Baer Holding Ltd. will enter into a shareholders agreement under which it will agree that, to the


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extent it has voting power as holder of the Class C common stock in excess of that which it would be entitled to on a one-vote-per-share basis, it will on all matters vote the shares representing such excess on the same basis and in the same proportion as the votes cast by the holders of our Class A and Class B common stock. Under this shareholders agreement, as long as Julius Baer Holding Ltd. owns shares of our Class C common stock constituting at least 10% of our outstanding common stock, it will be entitled to appoint a member to our board of directors or to exercise observer rights. Julius Baer Holding Ltd. has opted to exercise its observer rights but may in the future decide to appoint a member to our board of directors in lieu of exercising such observer rights.
 
Use of proceeds We estimate that the net proceeds from the sale of shares of our Class A common stock by us in this offering will be approximately $552.2 million, or approximately $635.1 million if the underwriters exercise their option to purchase additional shares of Class A common stock in full, based on an assumed initial public offering price of $25.00 per share (the midpoint of the price range set forth on the cover of this prospectus), in each case after deducting assumed underwriting discounts payable by us.
 
We intend to use the net proceeds from this offering to repurchase and retire an aggregate of 21.0 million shares of Class C common stock (24.5 million shares of Class C common stock if the underwriters exercise in full their option to purchase additional shares) from our parent and to repurchase 1.2 million shares of Class A common stock from Richard Pell and 1.2 million shares of Class A common stock from Rudolph-Riad Younes. We will not retain any of the net proceeds.
 
Dividend policy Following this offering, we intend to pay quarterly cash dividends. We expect that our first dividend will be paid in the first quarter of 2010 (in respect of the fourth quarter of 2009) and will be $0.06 per share of our Class A common stock and Class C common stock.
 
The declaration and payment of all future dividends, if any, will be at the sole discretion of our board of directors and may be discontinued at any time. In determining the amount of any future dividends, our board of directors will take into account any legal or contractual limitations, our actual and anticipated future earnings, cash flow, debt service and capital requirements and the amount of distributions to us from our operating company. See “Dividend Policy and Dividends”.
 
As a holding company, we will have no material assets other than our ownership of New Class A Units of Artio Global Holdings and, accordingly, will depend on distributions from it to fund any dividends we may pay. We intend to cause it to make distributions to us with available cash generated from its


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subsidiaries’ operations in an amount sufficient to cover dividends, if any, declared by us. If Artio Global Holdings makes such distributions, the other holders of New Class A Units will be entitled to receive equivalent distributions on a pro rata basis.
 
Risk Factors The “Risk Factors” section included in this prospectus contains a discussion of factors that you should carefully consider before deciding to invest in shares of our Class A common stock.
 
New York Stock Exchange symbol “ART”
 
The number of shares of Class A common stock outstanding immediately after this offering excludes:
 
  •  15,600,000 shares of Class A common stock reserved for issuance upon the exchange of the New Class A Units held by the Principals, 2,400,000 shares of Class A common stock repurchased from our Principals in connection with this offering and held as treasury stock and 21,000,000 shares of Class A common stock reserved for issuance upon the conversion of the Class C common stock held by our parent, in each case that will be outstanding immediately after this offering; and
 
  •  9,692,800 shares of Class A common stock reserved for issuance under the Artio Global Investors Inc. 2009 Stock Incentive Plan, of which 2,147,132 will be reserved for delivery upon vesting of restricted stock units (each of which represents the right to receive one share of our Class A common stock upon the lapse of restrictions, which generally lapse over a five-year period), expected to be awarded to our employees (other than our Principals) in connection with this offering.
 
Unless otherwise indicated in this prospectus, all information in this prospectus (other than historical financial information) (i) assumes that 23,400,000 shares of our Class A common stock will be sold at $25.00 per share (the midpoint of the price range set forth on the cover of this prospectus) and no exercise by the underwriters of their option to purchase additional shares of Class A common stock, (ii) gives effect to the filing of an amendment to our certificate of incorporation effecting a 10,500:1 stock split of our common stock into 42,000,000 shares of Class C common stock that was effected as of August 28, 2009 and (iii) reflects the inclusion of 7,200 shares of fully-vested Class A common stock, expected to be awarded to our non-employee directors in connection with this offering.


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SUMMARY SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
 
The following tables set forth the summary historical and pro forma consolidated financial and other data for Artio Global Investors Inc. and subsidiaries as of the dates and for the periods indicated. In accordance with Securities and Exchange Commission’s Staff Accounting Bulletin Topic 4:C, the summary of selected consolidated statement of income data for the years ended December 31, 2006, 2007 and 2008, and the six months ended June 30, 2008 and 2009 give retroactive effect to a 10,500:1 stock split that was effected as of August 28, 2009. The summary of selected consolidated statement of income data for the years ended December 31, 2006, 2007 and 2008 and the selected consolidated statement of financial position data as of December 31, 2007 and 2008 have been derived from our audited consolidated financial statements, included elsewhere in the prospectus. The selected consolidated statement of income data for the six months ended June 30, 2008 and 2009 and the consolidated statement of financial position data as of June 30, 2009 have been derived from our unaudited interim consolidated financial statements. These unaudited interim consolidated financial statements have been prepared on substantially the same basis as our audited consolidated financial statements and include all adjustments that we consider necessary for a fair presentation of our consolidated results of operations and financial condition for the periods presented therein. Our results for the six months ended June 30, 2008 and 2009 are not necessarily indicative of our results for a full fiscal year.
 
The unaudited pro forma consolidated financial data gives effect to all of the transactions described under “Unaudited Pro Forma Consolidated Financial Information”, including the incurrence of debt by Artio Global Holdings in connection with this offering, the reorganization transactions and this offering.
 
You should read the summary selected historical and pro forma consolidated financial and other data in conjunction with “Our Structure and Reorganization”, “Unaudited Pro Forma Consolidated Financial Information”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, the historical consolidated financial statements and related notes and the unaudited pro forma financial statements and related notes included elsewhere in this prospectus.
 
                                                         
    Historical     Pro Forma  
                      Six Months
          Six Months
 
                      Ended
    Year Ended
    Ended
 
    Year Ended December 31,     June 30,     December 31,
    June 30,
 
    2006     2007     2008     2008     2009     2008     2009  
    (In thousands, except per share data)  
 
Statement of Income Data:
                                                       
Revenues and other operating income:
                                                       
Investment management fees
  $ 300,432     $ 445,558     $ 425,003     $ 243,507     $ 132,576     $ 425,003     $ 132,576  
Net gains (losses) on securities held for deferred compensation
                (2,856 )     (601 )     712       (2,856 )     712  
Foreign currency gains (losses)
          186       (101 )     (21 )     32       (101 )     32  
                                                         
Total revenues and other operating income
    300,432       445,744       422,046       242,885       133,320       422,046       133,320  
Expenses:
                                                       
Employee compensation and benefits
                                                       
Salaries, incentive compensation and benefits
    69,677       92,277       92,487       52,854       34,917       101,165       43,695  
Allocation of Class B profits interests
    53,410       83,512       76,074       43,991       21,472              
Change in redemption value of Class B profits interests
    46,932       76,844       54,558       36,433       35,538              
                                                         
Total employee compensation and benefits
    170,019       252,633       223,119       133,278       91,927       101,165       43,695  
Interest expense
                                  3,317       1,658  


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    Historical     Pro Forma  
                      Six Months
          Six Months
 
                      Ended
    Year Ended
    Ended
 
    Year Ended December 31,     June 30,     December 31,
    June 30,
 
    2006     2007     2008     2008     2009     2008     2009  
    (In thousands, except per share data)  
 
Shareholder servicing and marketing
    20,134       25,356       23,369       12,725       7,208       23,369       7,208  
General and administrative
    31,510       50,002       62,833       34,665       17,578       47,972       15,164  
                                                         
Total expenses
    221,663       327,991       309,321       180,668       116,713       175,823       67,725  
                                                         
Operating income before income tax expense
    78,769       117,753       112,725       62,217       16,607       246,223       65,595  
Non-operating income (loss)
    3,288       7,034       3,181       1,397       (333 )     100       (333 )
                                                         
Income from continuing operations before income tax expense
    82,057       124,787       115,906       63,614       16,274       246,323       65,262  
Income tax expense
    38,514       58,417       54,755       31,992       7,874       79,622       21,146  
                                                         
Income from continuing operations
    43,543       66,370       61,151       31,622       8,400       166,701       44,116  
Income from discontinued operations, net of taxes
    1,231       1,616                                
                                                         
Net income(2)
    44,774       67,986       61,151       31,622       8,400       166,701       44,116  
Less: Net income attributable to non-controlling interests
                                  61,836       16,271  
                                                         
Net income attributable to Artio Global Investors(2)
  $ 44,774     $ 67,986     $ 61,151     $ 31,622     $ 8,400     $ 104,865     $ 27,845  
                                                         
Basic net income per share attributable to Artio Global Investors Class A (pro forma only) and Class C common stockholders: Income per share from continuing operations before discontinued operations(1)
  $ 1.04     $ 1.58     $ 1.46     $ 0.75     $ 0.20     $ 2.36     $ 0.62  
Income per share from discontinued operations, net of taxes(1)
    0.03       0.04                                
                                                         
Net income per share(1)
  $ 1.07     $ 1.62     $ 1.46     $ 0.75     $ 0.20     $ 2.36     $ 0.62  
                                                         
Diluted net income per share attributable to Artio Global Investors Class A (pro forma only) and Class C common stockholders: Income per share before discontinued operations(1)
  $ 1.04     $ 1.58     $ 1.46     $ 0.75     $ 0.20     $ 2.30     $ 0.61  
Income per share from discontinued operations, net of taxes(1)
    0.03       0.04                                
                                                         
Net income per share(1)
  $ 1.07     $ 1.62     $ 1.46     $ 0.75     $ 0.20     $ 2.30     $ 0.61  
                                                         
Dividends declared per basic share(1)
  $     $ 1.43     $ 2.79     $ 1.95     $ 0.33     $ 2.63     $ 0.31  
                                                         
Weighted average Class A (pro forma only) and Class C common shares used in basic net income per share(1)
    42,000       42,000       42,000       42,000       42,000       44,483       44,897  
Weighted average Class A (pro forma only) and Class C common shares used in diluted net income per share(1)
    42,000       42,000       42,000       42,000       42,000       60,290       60,601  
 
 
(1) Historical data as recast to give retroactive effect to a 10,500:1 stock split that was effected as of August 28, 2009.
 
(2) Pro forma results are before non-recurring charges directly attributable to the transaction.
 

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    As of
    As of
    As of June 30,
 
    December 31,
    December 31,
    2009  
    2007     2008     Historical     Pro Forma  
    (In thousands)  
 
Statement of Financial Position Data:
                               
Cash and cash equivalents
  $ 133,447     $ 86,563     $ 111,324     $ 17,652  
Total assets
    355,355       319,476       306,145       129,030  
Accrued compensation and benefits
    245,245       268,925       264,253       15,464  
Long-term debt
                      60,000  
Total liabilities
    266,261       286,231       278,500       163,233  
Total Artio Global Investors stockholder’s equity (deficit)
  $ 89,094     $ 33,245     $ 27,645     $ (23,863 )
Non-controlling interests
                      (10,340 )
                                 
Total equity (deficit)
  $ 89,094     $ 33,245     $ 27,645     $ (34,203 )
                                 
 
                                         
          Six Months Ended
 
    Year Ended December 31,     June 30,  
    2006     2007     2008     2008     2009  
    (In millions)  
 
Selected Unaudited Operating Data (excluding legacy activities):
                                       
Assets under management(1)
  $ 53,486     $ 75,362     $ 45,200     $ 72,604     $ 46,826  
Net client cash flows(2)
    7,582       12,150       1,930       4,991       973  
Market appreciation (depreciation)(3)
    11,054       9,726       (32,092 )     (7,749 )     653  
 
 
(1) Reflects the amount of money our clients have invested in our strategies as of the period-end date.
 
(2) Reflects the amount of money our clients have invested in our strategies during the period, net of outflows and excluding appreciation (depreciation) due to changes in market value.
 
(3) Represents the appreciation (depreciation) of the value of assets under our management during the period due to market performance and fluctuations in exchange rates.

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RISK FACTORS
 
You should carefully consider each of the risks below, together with all of the other information contained in this prospectus, before deciding to invest in shares of our Class A common stock. If any of the following risks develop into actual events, our business, financial condition or results of operations could be negatively affected, the market price of your shares could decline and you could lose all or part of your investment.
 
Risks Related to our Business
 
The loss of either of our Principals or other key investment professionals or members of our senior management team could have a material adverse effect on our business. Our ability to attract and retain qualified investment professionals is critical to our success.
 
We depend on the skills and expertise of qualified investment professionals and our success depends on our ability to retain the key members of our investment team and to attract new qualified investment professionals. In particular, we depend on our Principals, who were the architects of our International Equity strategies. Our Principals, as well as other key members of our investment team, possess substantial experience in investing and have developed strong relationships with our clients. The loss of either of our Principals or any of our other key investment professionals could limit our ability to successfully execute our business strategy and may prevent us from sustaining the performance of our investment strategies or adversely affect our ability to retain existing and attract new client assets. In addition, our investment professionals and senior marketing personnel have direct contact with our institutional separate account clients and their consultants, and with key individuals within each of our other distribution sources and the loss of these personnel could jeopardize those relationships and result in the loss of such accounts. We do not carry any “key man” insurance that would provide us with proceeds in the event of the death or disability of our Principals or other key members of our investment team.
 
We also anticipate that it will be necessary for us to hire additional investment professionals as we further diversify our investment products and strategies. Competition for employees with the necessary qualifications is intense and we may not be successful in our efforts to recruit and retain the required personnel. Our ability to retain and attract these personnel will depend heavily on the amount of compensation we offer. Compensation levels in the investment management industry are highly competitive and can fluctuate significantly from year to year. Consequently, our profitability could decline as we compete for personnel. An inability to recruit and retain qualified personnel could affect our ability to provide acceptable levels of service to our clients and funds and hinder our ability to attract new clients and investors to our strategies, each of which could have a material adverse effect on our business.
 
If our investment strategies perform poorly, clients could withdraw their funds and we could suffer a decline in assets under management and/or become subject to litigation which would reduce our earnings.
 
The performance of our investment strategies is critical in retaining existing clients as well as attracting new clients. If our investment strategies perform poorly for any reason, our earnings could be reduced because:
 
  •  our existing clients may withdraw their funds from our investment strategies, which would cause the revenues that we generate from investment management fees to decline;
 
  •  our Morningstar and Lipper ratings may decline, which may adversely affect the ability of our funds to attract new or retain existing assets;
 
  •  third-party financial intermediaries, advisors or consultants may rate our investment products poorly, which may lead our existing clients to withdraw funds from our investment strategies or to reduce asset inflows from these third parties or their clients; or


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  •  the mutual funds and other investment funds that we advise or sub-advise may decide not to renew or to terminate the agreements pursuant to which we advise or sub-advise them and we may not be able to replace these relationships.
 
Our investment strategies can perform poorly for a number of reasons, including general market conditions and investment decisions that we make. In addition, while we seek to deliver long-term value to our clients, volatility may lead to under-performance in the near-term, which could impair our earnings. The global economic environment deteriorated sharply in 2008, particularly in the third and fourth quarters, with virtually every class of financial asset experiencing significant price declines and volatility as a result of the global financial crisis. In the period from January 1, 2008 through August 31, 2009, our assets under management decreased by approximately 29% primarily as a result of general market conditions. Our largest strategy has under-performed to date in 2009 compared to its benchmarks as we avoided certain sectors that have outperformed the market.
 
In contrast, when our strategies experience strong results relative to the market, clients’ allocations to our strategies may increase relative to their other investments and we could suffer withdrawals as our clients rebalance their investments to fit their asset allocation preferences.
 
While clients do not have legal recourse against us solely on the basis of poor investment results, if our investment strategies perform poorly, we are more likely to become subject to litigation brought by dissatisfied clients. In addition, to the extent clients are successful in claiming that their losses resulted from fraud, negligence, willful misconduct, breach of contract or other similar misconduct, such clients may have remedies against us, our investment funds, our investment professionals and/or our affiliates under the federal securities law and/or state law.
 
The historical returns of our existing investment strategies may not be indicative of their future results or of the investment strategies we are in the process of developing.
 
We have presented the historical returns of our existing investment strategies under “Business — Investment Strategies, Products and Performance”. The historical returns of our strategies and the rankings we have received in the past should not be considered indicative of the future results of these strategies or of any other strategies that we may be in the process of developing or that we may develop in the future. Our strategies’ returns have benefited during some periods from investment opportunities and positive economic and market conditions. More recent general economic and market conditions have negatively affected investment opportunities and our strategies’ returns, and there can be no assurance that such negative conditions will not continue or that, in the future, we will be able to identify and invest in profitable investment opportunities within our current or future strategies. For example, in the first six months of 2009, our International Equity strategies performed well below historical averages on a relative basis.
 
Difficult market conditions can adversely affect our business in many ways, including by reducing the value of our assets under management and causing clients to withdraw funds, each of which could materially reduce our revenues and adversely affect our financial condition.
 
The fees we earn under our investment management fee agreements are typically based on the market value of our assets under management. Investors in open-end funds can redeem their investments in those funds at any time without prior notice and our clients may reduce the aggregate amount of assets under management with us for any number of reasons, including investment performance, changes in prevailing interest rates and financial market performance. In addition, the prices of the securities held in the portfolios we manage may decline due to any number of factors beyond our control, including, among others, a declining stock market, general economic downturn, political uncertainty or acts of terrorism. As we have seen in connection with the market dislocations of 2008 and 2009, in difficult market conditions, the pace of client redemptions or withdrawals from our investment strategies could accelerate if clients move assets to investments they perceive as offering greater opportunity or lower risk. Any of these sources of declining assets under management would result in lower investment management fees.


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For example, since the beginning of 2008, we have seen historically difficult market conditions as world financial markets have experienced record volatility and many key market indices have declined substantially. Global equity markets fell in 2008, particularly as the financial crisis intensified in the third and fourth quarters. For example, by year-end the MSCI All Country World Index (ex-US) was down 41% in local currency terms and 45% in U.S. dollar terms. In addition, equity market volatility reached extreme levels around the world, evidenced by dramatically higher average levels for the VSTOXX and VIX indices.
 
The sizeable decline in stock prices worldwide resulted in substantial withdrawals from equity funds during 2008 throughout the asset management industry. By the end of 2008, it was clear that the U.S. and other major economies were in recession, and despite the coordinated efforts of governments around the world to stabilize financial markets, volatility persisted. Economic conditions worsened in the first quarter of 2009 and the flight to quality continued. As a result, we continue to operate in a challenging business environment, and the economic outlook remains uncertain for the remainder of the year.
 
As a result of these market conditions, we have experienced an increase in client redemptions and our assets under management have also decreased substantially since the end of the second quarter of 2008. If our revenue declines without a commensurate reduction in our expenses, our net income will be reduced and our business may be negatively affected.
 
Most of our investment strategies consist of investments in the securities of companies located outside of the united states, which may involve foreign currency exchange, tax, political, social and economic uncertainties and risks.
 
As of June 30, 2009, approximately 85% of our assets under management across our investment strategies were invested in strategies that primarily invest in securities of companies located outside the United States. Fluctuations in foreign currency exchange rates could negatively affect the returns of our clients who are invested in these strategies. In addition, an increase in the value of the U.S. dollar relative to non-U.S. currencies is likely to result in a decrease in the U.S. dollar value of our assets under management, which, in turn, could result in lower U.S.-dollar denominated revenue.
 
Investments in non-U.S. issuers may also be affected by tax positions taken in countries or regions in which we are invested as well as political, social and economic uncertainty, particularly as a result of the recent decline in economic conditions. Many financial markets are not as developed, or as efficient, as the U.S. financial market, and, as a result, liquidity may be reduced and price volatility may be higher. Liquidity may also be adversely affected by political or economic events within a particular country, and by increasing the size of our investments in smaller non-U.S. issuers. Non-U.S. legal and regulatory environments, including financial accounting standards and practices, may also be different, and there may be less publicly available information in respect of such companies. These risks could adversely affect the performance of our strategies that are invested in securities of non-U.S. issuers.
 
We derive a substantial portion of our revenues from a limited number of our strategies.
 
As of June 30, 2009, over 84% of our assets under management were concentrated in the International Equity I and International Equity II strategies, and 93% of our investment management fees for the six months ended June 30, 2009 were attributable to fees earned from those strategies. As a result, our operating results are substantially dependent upon the performance of those strategies and our ability to attract positive net client flows into those strategies. In addition, our smaller strategies, due to their size, may not be able to generate sufficient fees to cover their expenses. If a significant portion of the investors in either the International Equity I or International Equity II strategies decided to withdraw their investments or terminate their investment management agreements for any reason, including poor investment performance or adverse market conditions, our revenues from those strategies would decline and it could have a material adverse effect on our earnings.


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We derive substantially all of our revenues from contracts that may be terminated on short notice.
 
We derive substantially all of our revenues from investment advisory and sub-advisory agreements, almost all of which are terminable by clients upon short notice. Our investment management agreements with mutual funds, as required by law, are generally terminable by the funds’ board of directors or a vote of the majority of the funds’ outstanding voting securities on not more than 60 days’ written notice. After an initial term, each fund’s investment management agreement must be approved and renewed annually by the independent members of such fund’s board of directors. Our sub-advisory agreements are generally terminable on not more than 60 days’ notice. These investment management agreements may be terminated or not renewed for any number of reasons. The decrease in revenues that could result from the termination of a material contract could have a material adverse effect on our business.
 
We depend on third-party distribution sources to market our investment strategies and access our client base.
 
Our ability to grow our assets under management is highly dependent on access to third-party intermediaries, including RIAs and broker dealers. We also provide our services to retail clients through mutual fund platforms and sub-advisory relationships. As of June 30, 2009, our largest mutual fund platform represented approximately 9% of our total assets under management, our largest intermediary accounted for approximately 6% of our total assets under management and our largest sub-advisory relationship represented approximately 4% of our total assets under management. We cannot assure you that these sources and client bases will continue to be accessible to us on commercially reasonable terms, or at all. The absence of such access could have a material adverse effect on our earnings. Our institutional separate account business is highly dependent upon referrals from pension fund consultants. Many of these consultants review and evaluate our products and our firm from time to time. Poor reviews or evaluations of either a particular product or of us may result in client withdrawals or may impair our ability to attract new assets through these intermediaries. As of June 30, 2009, the consultant advising the largest portion of our client assets under management represented approximately 5% of our assets under management. In addition, the recent economic downturn and consolidation in the broker-dealer industry have led to increased competition to market through broker dealers and higher costs, and may lead to reduced distribution access and further cost increases.
 
The significant growth we have experienced over the past five years has been and may continue to be difficult to sustain.
 
Our assets under management have increased from approximately $7.5 billion as of December 31, 2003 to approximately $53.3 billion as of August 31, 2009. Our August 31, 2009 assets under management represent a substantial decline from our quarter-end high of $75.4 billion as of December 31, 2007, but still represent a significant rate of growth that has been and may continue to be difficult to sustain. The growth of our business will depend on, among other things, our ability to devote sufficient resources to maintaining existing investment strategies and developing new investment strategies, our success in producing attractive returns from our investment strategies, our ability to extend our distribution capabilities, our ability to deal with changing market conditions, our ability to maintain adequate financial and business controls and our ability to comply with new legal and regulatory requirements arising in response to both the increased sophistication of the investment management market and the significant market and economic events of the last 18 months. In addition, the growth in our assets under management since December 31, 2003 has benefited from a general depreciation of the U.S. dollar relative to many of the currencies in which we invest and such currency trends may not continue, as evidenced by recent volatility. If we believe that in order to continue to produce attractive returns from our investment strategies we should close certain of those strategies to new investors, we may choose to do so. In addition, we expect there to be significant demand on our infrastructure and investment team and we cannot assure you that we will be able to manage our growing business effectively or that we will be able to sustain the level of growth we have


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achieved historically, and any failure to do so could adversely affect our ability to generate revenue and control our expenses.
 
Our failure to comply with investment guidelines set by our clients, including the boards of mutual funds, could result in damage awards against us and a loss of assets under management, either of which could cause our earnings to decline.
 
As an investment advisor, we have a fiduciary duty to our clients. When clients retain us to manage assets on their behalf, they generally specify certain guidelines regarding investment allocation and strategy that we are required to follow in the management of their portfolios. In addition, the boards of mutual funds we manage generally establish similar guidelines regarding the investment of assets in those funds. We are also required to invest the mutual funds’ assets in accordance with limitations under the U.S. Investment Company Act of 1940, as amended (the “1940 Act”), and applicable provisions of the Internal Revenue Code of 1986, as amended. Our failure to comply with these guidelines and other limitations could result in losses to a client or an investor in a fund which, depending on the circumstances, could result in our making clients or fund investors whole for such losses. If we believed that the circumstances did not justify a reimbursement, or clients and investors believed the reimbursement offered was insufficient, they could seek to recover damages from us or could withdraw assets from our management or terminate their investment management agreement. Any of these events could harm our reputation and cause our earnings to decline.
 
We outsource a number of services to third-party vendors and if they fail to perform properly, we may suffer financial loss and liability to our clients.
 
We have developed a business model that is primarily focused on our investment strategies. Accordingly, we seek to outsource, whenever appropriate, support functions. The services we outsource include middle- and back-office activities such as trade confirmation, trade settlement, custodian reconciliations and client reporting services as well as our front-end trading system and data center, data replication, file transmission, secure remote access and disaster recovery services. The ability of the third-party vendors to perform their functions properly is highly dependent on the adequacy and proper functioning of their communication, information and computer systems. If these systems of the third-party vendors do not function properly, or if the third-party vendors fail to perform their services properly or choose to discontinue providing services to us for any reason, or if we are unable to renew any of our key contracts on similar terms or at all, it could cause our earnings to decline or we could suffer financial losses, business disruption, liability to clients, regulatory intervention or damage to our reputation.
 
A change of control of our company could result in termination of our investment advisory agreements.
 
Under the 1940 Act, each of the investment advisory agreements for SEC registered mutual funds that our subsidiary, Artio Global Management LLC, advises automatically terminates in the event of an assignment. Each fund’s board and shareholders must therefore approve a new agreement in order for our subsidiary to continue to act as its advisor. In addition, under the U.S. Investment Advisers Act of 1940, as amended (the “Advisers Act”), each of the investment advisory agreements for the separate accounts we manage may not be “assigned” without the consent of the client.
 
An assignment of our subsidiary’s investment management agreements may occur if, among other things, Artio Global Management LLC undergoes a change of control. If such an assignment occurs, we cannot be certain that Artio Global Management LLC will be able to obtain the necessary approvals from the boards and shareholders of the SEC registered funds that it advises, or the necessary consents from clients whose funds are managed pursuant to separate accounts. Under the 1940 Act, if an SEC registered fund’s investment advisor engages in a transaction that results in the assignment of its investment management agreement with the fund, the advisor may not impose an “unfair burden” on that fund as a result of the transaction for a two-year period after the transaction is completed. It is expected that this offering will constitute a change of control for purposes of the 1940


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Act. We have obtained all necessary approvals in connection with this offering, but will be subject to the limits on “unfair burdens” for the next two years which could be adverse to our interests.
 
Operational risks may disrupt our business, result in losses or limit our growth.
 
We are heavily dependent on the capacity and reliability of the communications, information and technology systems supporting our operations, whether owned and operated by us or by third parties. Operational risks such as trading errors or interruption of our financial, accounting, trading, compliance and other data processing systems, whether caused by fire, other natural disaster or pandemic, power or telecommunications failure, act of terrorism or war or otherwise, could result in a disruption of our business, liability to clients, regulatory intervention or reputational damage, and thus materially adversely affect our business. The risks related to trading errors are increased by the recent extraordinary market volatility, which can magnify the cost of an error, and by the company’s increased use of derivatives in client accounts, which brings additional operational complexity. For example, in 2008 we suffered trading errors that cost us approximately $5.5 million. Insurance and other safeguards might not be available or might only partially reimburse us for our losses. Although we have back-up systems in place, our back-up procedures and capabilities in the event of a failure or interruption may not be adequate. The inability of our systems to accommodate an increasing volume of transactions also could constrain our ability to expand our businesses. Additionally, any upgrades or expansions to our operations and/or technology may require significant expenditures and may increase the probability that we will suffer system degradations and failures. We also depend on our headquarters in New York City, where a majority of our employees are located, for the continued operation of our business. Any significant disruption to our headquarters could have a material adverse effect on us.
 
Employee misconduct could expose us to significant legal liability and reputational harm.
 
We are vulnerable to reputational harm as we operate in an industry where integrity and the confidence of our clients are of critical importance. Our employees could engage in misconduct that adversely affects our business. For example, if an employee were to engage in illegal or suspicious activities, we could be subject to regulatory sanctions and suffer serious harm to our reputation (as a consequence of the negative perception resulting from such activities), financial position, client relationships and ability to attract new clients. Our business often requires that we deal with confidential information. If our employees were to improperly use or disclose this information, we could suffer serious harm to our reputation, financial position and current and future business relationships. It is not always possible to deter employee misconduct, and the precautions we take to detect and prevent this activity may not always be effective. Misconduct by our employees, or even unsubstantiated allegations of misconduct, could result in an adverse effect on our reputation and our business.
 
If our techniques for managing risk are ineffective, we may be exposed to material unanticipated losses.
 
In order to manage the significant risks inherent in our business, we must maintain effective policies, procedures and systems that enable us to identify, monitor and control our exposure to market, operational, legal and reputational risks. Our risk management methods may prove to be ineffective due to their design or implementation, or as a result of the lack of adequate, accurate or timely information or otherwise. If our risk management efforts are ineffective, we could suffer losses that could have a material adverse effect on our financial condition or operating results. Additionally, we could be subject to litigation, particularly from our clients, and sanctions or fines from regulators.
 
Our techniques for managing risks in client portfolios may not fully mitigate the risk exposure in all economic or market environments, or against all types of risk, including risks that we might fail to identify or anticipate. Any failures in our risk management techniques and strategies to accurately quantify such risk exposure could limit our ability to manage risks in those portfolios or to seek positive, risk-adjusted returns. In addition, any risk management failures could cause portfolio losses to be significantly greater than historical measures predict. Our more qualitative approach to


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managing those risks could prove insufficient, exposing us to material unanticipated losses in the value of client portfolios and therefore a reduction in our revenues.
 
Our failure to adequately address conflicts of interest could damage our reputation and materially adversely affect our business.
 
Potential, perceived and actual conflicts of interest are inherent in our existing and future investment activities. For example, certain of our strategies have overlapping investment objectives and potential conflicts of interest may arise with respect to our decisions regarding how to allocate investment opportunities among those strategies. In addition, investors (or holders of our Class A common stock) may perceive conflicts of interest regarding investment decisions for strategies in which our investment professionals, who have and may continue to make significant personal investments, are personally invested. Potential, perceived or actual conflicts of interest could give rise to investor dissatisfaction, litigation or regulatory enforcement actions. Adequately addressing conflicts of interest is complex and difficult and we could suffer significant reputational harm if we fail, or appear to fail, to adequately address potential, perceived or actual conflicts of interest.
 
Our business depends on strong brand recognition and, if we are not successful in our rebranding efforts as a result of our change in name, our business could be materially affected.
 
In June 2008 we changed our name from Julius Baer Americas Inc. to Artio Global Investors Inc. and in October 2008 we changed the names of our mutual funds. The impact of these changes on our business cannot be fully predicted, and the lack of an established brand image for the new name in the marketplace may disrupt our sales and adversely affect our business. If the rebranding effort is not accepted by our clients, creates confusion in the market, or if there are negative connotations associated with our new name that we cannot successfully address, our business may be adversely affected.
 
As part of our rebranding, we may be required to devote a substantial amount of time and resources to reestablish our identity. We have no significant experience in the type of marketing that will be required to reestablish our identity and we cannot assure you that these efforts will be successful.
 
Our reputation, revenues and business prospects could be adversely impacted by events relating to our parent or any of Its affiliates.
 
Immediately following this offering and, after giving effect to the transactions described herein, our parent will have approximately 35% of our outstanding voting power. We exercise no control over the activities of our parent or its affiliates. We may be subject to reputational harm if our parent or any of its affiliates have, or in the future were to, among other things, engage in poor business practices, experience adverse results, be subject to litigation or otherwise damage their reputations or business prospects. Any of these events might in turn adversely affect our own reputation, our revenues and our business prospects.
 
Our use of leverage may expose us to substantial risks.
 
In connection with this offering, Artio Global Holdings has established a $60.0 million term debt facility which, together with available cash, will fund a distribution to us that we will use to fund a distribution to our parent, and will also be utilized to provide working capital for our business and, potentially, seed capital for future investment products. In addition, Artio Global Holdings has entered into a $50.0 million revolving credit facility to be used primarily for working capital needs. The incurrence of this debt will expose us to the typical risks associated with the use of leverage. Increased leverage makes it more difficult for us to withstand adverse economic conditions or business plan variances, to take advantage of new business opportunities, or to make necessary capital expenditures. The agreements governing our debt facilities may contain covenant restrictions that limit our ability to conduct our business, including restrictions on our ability to incur additional indebtedness. A substantial portion of our cash flow could be required for debt service and, as a


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result, might not be available for our operations or other purposes. Any substantial decrease in net operating cash flows or any substantial increase in expenses could make it difficult for us to meet our debt service requirements or force us to modify our operations. Our level of indebtedness may make us more vulnerable to economic downturns and reduce our flexibility in responding to changing business, regulatory and economic conditions.
 
Failure to comply with “fair value” pricing, “market timing” and late trading policies and procedures may adversely affect us.
 
The SEC has adopted rules that require mutual funds to adopt “fair value” pricing procedures to address time zone arbitrage, selective disclosure procedures to protect mutual fund portfolio information and procedures to ensure compliance with a mutual fund’s disclosed market timing policy. Recent SEC rules also require our mutual funds to ensure compliance with their own market timing policies. Our mutual funds are subject to these rules and, in the event of our non-compliance, we may be required to disgorge certain revenue. In addition, we could have penalties imposed on us, be required to pay fines or be subject to private litigation, any of which could decrease our future income, or negatively affect our current business or our future growth prospects. During periods of market volatility there is often an increased need to adjust a security’s price to approximate its fair value. This in turn increases the risk that we could breach the fair value pricing and market timing rules.
 
We are subject to risks relating to new initiatives which may adversely affect our growth strategy and business.
 
A key component of our growth strategy is to focus on achieving superior, long-term investment performance. Any new initiative we pursue will be subject to numerous risks, some unknown and some known, which may be different from and in addition to the risks we face in our existing business, including, among others, risks associated with newly established strategies without any operating history, risks associated with potential, perceived or actual conflicts of interest, risks relating to the misuse of confidential information, risks due to potential lack of liquidity in the securities in which these initiatives invest and risks due to a general lack of liquidity in the global financial market that could make it harder to obtain equity or debt financing.
 
In developing any new initiatives, we intend to leverage the expertise and research of our current investment professionals, which may place significant strain on resources and distract our investment professionals from the strategies that they currently manage. This leverage of our existing investment teams may also increase the possibility of a conflict of interest arising, given the differing fee structures associated with these new initiatives. Our growth strategy may require significant investment, including capital commitments to our future hedge fund strategies as well as the hiring of additional investment professionals, which may place significant strain on our financial, operational and management resources. We cannot assure you that we will be able to achieve our growth strategy or that we will succeed in any new initiatives. Failure to achieve or manage such growth could have a material adverse effect on our business, financial condition and results of operations. See “Business — Investment Strategies, Products and Performance — New Initiatives”.
 
The cost of insuring our business is substantial and may increase.
 
Our insurance costs are substantial and can fluctuate significantly from year to year. Insurance costs increased in 2008 and additional increases in the short term are possible. In addition, certain insurance coverage may not be available or may only be available at prohibitive costs. As we renew our insurance policies, we may be subject to additional costs resulting from rising premiums, the assumption of higher deductibles and/or co-insurance liability and, to the extent certain of our U.S. funds purchase separate director and officer and/or error and omission liability coverage, an increased risk of insurance companies disputing responsibility for joint claims. In addition, we intend to obtain additional liability insurance for our directors and officers in connection with this offering. Higher insurance costs and incurred deductibles would reduce our net income.


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Risks Related to our Industry
 
We are subject to extensive regulation.
 
We are subject to extensive regulation in the United States, primarily at the federal level, including regulation by the SEC under the 1940 Act and the Advisers Act by the Department of Labor under the Employee Retirement Income Security Act of 1974, as amended, or ERISA, as well as regulation by the Financial Industry Regulatory Authority, Inc., or FINRA, and state regulators. The mutual funds we manage are registered with the SEC as investment companies under the 1940 Act. The Advisers Act imposes numerous obligations on investment advisors including record keeping, advertising and operating requirements, disclosure obligations and prohibitions on fraudulent activities. The 1940 Act imposes similar obligations, as well as additional detailed operational requirements, on registered investment companies, which must be strictly adhered to by their investment advisors.
 
In addition, our mutual funds are subject to the USA PATRIOT Act of 2001, which requires each fund to know certain information about its clients and to monitor their transactions for suspicious financial activities, including money laundering. The U.S. Office of Foreign Assets Control, or OFAC, has issued regulations requiring that we refrain from doing business, or allowing our clients to do business through us, in certain countries or with certain organizations or individuals on a list maintained by the U.S. government. Our failure to comply with applicable laws or regulations could result in fines, censure, suspensions of personnel or other sanctions, including revocation of the registration of any of our subsidiaries as a registered investment advisor.
 
In addition to the extensive regulation our asset management business is subject to in the United States, we are also subject to regulation internationally by the Ontario Securities Commission, the Irish Financial Institutions Regulatory Authority and the Hong Kong Securities and Futures Commission. Our business is also subject to the rules and regulations of the more than 40 countries in which we currently conduct investment activities. Failure to comply with applicable laws and regulations in the foreign countries where we invest could result in fines, suspensions of personnel or other sanctions. See “Regulatory Environment and Compliance”.
 
The regulatory environment in which we operate is subject to continual change and regulatory developments designed to increase oversight may adversely affect our business.
 
The legislative and regulatory environment in which we operate has undergone significant changes in the recent past and while there is an ordinary evolution to regulation, we believe there will be significant regulatory changes in our industry, which will result in subjecting participants to additional regulation. The requirements imposed by our regulators are designed to ensure the integrity of the financial markets and to protect customers and other third parties who deal with us, and are not designed to protect our stockholders. Consequently, these regulations often serve to limit our activities, including through customer protection and market conduct requirements. New laws or regulations, or changes in the enforcement of existing laws or regulations, applicable to us and our clients may adversely affect our business. Our ability to function in this environment will depend on our ability to constantly monitor and promptly react to legislative and regulatory changes. For investment management firms in general, there have been a number of highly publicized regulatory inquiries that focus on the mutual fund industry. These inquiries already have resulted in increased scrutiny in the industry and new rules and regulations for mutual funds and their investment managers. This regulatory scrutiny may limit our ability to engage in certain activities that might be beneficial to our stockholders. See “Regulatory Environment and Compliance”.
 
In addition, as a result of the recent economic downturn, acts of serious fraud in the asset management industry and perceived lapses in regulatory oversight, U.S. and non-U.S. governmental and regulatory authorities may increase regulatory oversight of our businesses. We may be adversely affected as a result of new or revised legislation or regulations imposed by the SEC, other U.S. or non-U.S. governmental regulatory authorities or self-regulatory organizations that supervise the financial markets. We also may be adversely affected by changes in the interpretation or enforcement of existing laws and rules by these governmental authorities and self-regulatory organizations. It is


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impossible to determine the extent of the impact of any new laws, regulations or initiatives that may be proposed, or whether any of the proposals will become law. Compliance with any new laws or regulations could make compliance more difficult and expensive and affect the manner in which we conduct business.
 
We may not be able to maintain our current fee structure as a result of industry pressure to reduce fees or as a result of changes in our business mix, which could have an adverse effect on our profit margins and results of operations.
 
We may not be able to maintain our current fee structure as a result of industry pressures to reduce fees (including those arising out of legal challenges to the long-established criteria for determining the reasonableness of fees) or as a result of changes in our business mix. Although our investment management fees vary from product to product, historically we have competed primarily on the basis of our performance and not on the level of our investment management fees relative to those of our competitors. In recent years, however, there has been a general trend toward lower fees in the investment management industry. In order to maintain our fee structure in a competitive environment, we must be able to continue to provide clients with investment returns and service that incentivize our investors to pay our fees. We cannot assure you that we will succeed in providing investment returns and service that will allow us to maintain our current fee structure.
 
The board of directors of each mutual fund we manage must make certain findings as to the reasonableness of our fees and can renegotiate them annually which, in the past, has led to a reduction in fees. Fee reductions on existing or future new business could have an adverse effect on our profit margins and/or results of operations. For more information about our fees see “Business — Investment Management Fees” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.
 
The investment management business is intensely competitive.
 
The investment management business is intensely competitive, with competition based on a variety of factors, including investment performance, continuity of investment professionals and client relationships, the quality of services provided to clients, corporate positioning and business reputation, continuity of selling arrangements with intermediaries and differentiated products. A number of factors, including the following, serve to increase our competitive risks:
 
  •  a number of our competitors have greater financial, technical, marketing and other resources, better name recognition and more personnel than we do;
 
  •  there are relatively low barriers impeding entry to new investment funds, including a relatively low cost of entering these businesses;
 
  •  the recent trend toward consolidation in the investment management industry, and the securities business in general, has served to increase the size and strength of a number of our competitors;
 
  •  some investors may prefer to invest with an investment manager that is not publicly traded based on the perception that publicly traded companies focus on growth to the detriment of performance;
 
  •  some competitors may invest according to different investment styles or in alternative asset classes that the markets may perceive as more attractive than our investment approach;
 
  •  some competitors may have a lower cost of capital and access to funding sources that are not available to us, which may create competitive disadvantages for us with respect to investment opportunities; and
 
  •  other industry participants, hedge funds and alternative asset managers may seek to recruit our qualified investment professionals.
 
If we are unable to compete effectively, our earnings would be reduced and our business could be materially adversely affected.


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The investment management industry faces substantial litigation risks which could materially adversely affect our business, financial condition or results of operations or cause significant reputational harm to us.
 
We depend to a large extent on our network of relationships and on our reputation in order to attract and retain clients. If a client is not satisfied with our services, such dissatisfaction may be more damaging to our business than to other types of businesses. We make investment decisions on behalf of our clients that could result in substantial losses to them. If our clients suffer significant losses, or are otherwise dissatisfied with our services, we could be subject to the risk of legal liabilities or actions alleging negligent misconduct, breach of fiduciary duty, breach of contract, unjust enrichment and/or fraud. These risks are often difficult to assess or quantify and their existence and magnitude often remain unknown for substantial periods of time, even after an action has been commenced. We may incur significant legal expenses in defending against litigation. Substantial legal liability or significant regulatory action against us could materially adversely affect our business, financial condition or results of operations or cause significant reputational harm to us.
 
Risks Related to this Offering
 
There is no existing market for our Class A common stock, and we do not know if one will develop, which may cause our Class A common stock to trade at a discount from Its initial offering price and make it difficult to sell the shares you purchase.
 
Prior to this offering, there has not been a public market for our Class A common stock and we cannot predict the extent to which investor interest in us will lead to the development of an active trading market on the New York Stock Exchange, or NYSE, or otherwise, or how liquid that market might become. If an active trading market does not develop, you may have difficulty selling your shares of Class A common stock at an attractive price, or at all. The initial public offering price for our Class A common stock will be determined by negotiations between us and the representative of the underwriters and may not be indicative of prices that will prevail in the open market following this offering. Consequently, you may not be able to sell shares of our Class A common stock at prices equal to or greater than the price you paid in this offering.
 
The market price and trading volume of our Class A common stock may be volatile, which could result in rapid and substantial losses for our stockholders.
 
Even if an active trading market develops, the market price of our Class A common stock may be highly volatile and could be subject to wide fluctuations. In addition, the trading volume on our Class A common stock may fluctuate and cause significant price variations to occur. If the market price of our Class A common stock declines significantly, you may be unable to resell your shares of Class A common stock at or above your purchase price, if at all. We cannot assure you that the market price of our Class A common stock will not fluctuate or decline significantly in the future. Some of the factors that could negatively affect the price of our Class A common stock, or result in fluctuations in the price or trading volume of our Class A common stock, include:
 
  •  variations in our quarterly operating results;
 
  •  failure to meet the market’s earnings expectations;
 
  •  publication of research reports about us or the investment management industry, or the failure of securities analysts to cover our Class A common stock after this offering;
 
  •  departures of our Principals or additions/departures of other key personnel;
 
  •  adverse market reaction to any indebtedness we may incur or securities we may issue in the future;
 
  •  actions by stockholders;
 
  •  changes in market valuations of similar companies;
 
  •  actual or anticipated poor performance in our underlying investment strategies;


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  •  changes or proposed changes in laws or regulation, or differing interpretations thereof, affecting our business, or enforcement of these laws and regulations, or announcements relating to these matters;
 
  •  adverse publicity about the investment management industry, generally, or individual scandals specifically;
 
  •  litigation and governmental investigations; and
 
  •  general market and economic conditions.
 
Future sales of our Class A common stock in the public market could lower our stock price, and any additional capital raised by us through the sale of equity or convertible securities may dilute your ownership in us.
 
The market price of our Class A common stock could decline as a result of sales of a large number of shares of our Class A common stock by Julius Baer Holding Ltd. or the Principals after completion of this offering, or the perception that such sales could occur. These sales, or the possibility that these sales may occur, also might make it more difficult for us to raise additional capital by selling equity securities in the future, at a time and price that we deem appropriate.
 
Pursuant to the lock-up agreements described under “Underwriting”, our existing stockholders, directors and officers may not sell, otherwise dispose of or hedge any shares of our Class A common stock or securities convertible or exercisable into or exchangeable for shares of Class A common stock, subject to certain exceptions, for the 180-day period following the date of this prospectus, without the prior written consent of Goldman, Sachs & Co. Pursuant to a registration rights agreement that we will enter into with Julius Baer Holding Ltd. and the Principals, we will agree to use our reasonable best efforts to file registration statements from time to time for the sale of the shares of our Class A common stock, including Class A common stock which is deliverable upon exchange of New Class A Units or the conversion of Class C common stock held by them now or in the future. See “Relationships and Related Party Transactions — Registration Rights Agreement”.
 
We cannot predict the size of future issuances of our Class A common stock or the effect, if any, that future issuances and sales of shares of our Class A common stock may have on the market price of our Class A common stock. Sales or distributions of substantial amounts of our Class A common stock (including shares issued in connection with an acquisition), or the perception that such sales could occur, may cause the market price of our Class A common stock to decline. See “Shares Eligible for Future Sale”.
 
Fulfilling our public company financial reporting and other regulatory obligations will be expensive and time consuming and may strain our resources.
 
As a public company, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, and will be required to implement specific corporate governance practices and adhere to a variety of reporting requirements under the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) and the related rules and regulations of the SEC, as well as the rules of the NYSE.
 
In accordance with Section 404 of Sarbanes-Oxley, our management will be required to conduct an annual assessment of the effectiveness of our internal control over financial reporting and include a report on these internal controls in the annual reports we will file with the SEC on Form 10-K. In addition, we will be required to have our independent registered public accounting firm provide an opinion regarding the effectiveness of our internal controls. We are in the process of reviewing our internal control over financial reporting and are establishing formal policies, processes and practices related to financial reporting and to the identification of key financial reporting risks, assessment of their potential impact and linkage of those risks to specific areas and controls within our organization. If we are not able to implement the requirements of Section 404 in a timely manner or with adequate compliance, we may be subject to adverse regulatory consequences and there could be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our


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financial statements. This could have a material adverse effect on us and lead to a decline in the price of our Class A common stock.
 
The Securities Exchange Act of 1934, as amended, will require us to file annual, quarterly and current reports with respect to our business and financial condition. Compliance with these requirements will place significant additional demands on our legal, accounting and finance staff and on our accounting, financial and information systems and will increase our legal and accounting compliance costs as well as our compensation expense as we will be required to hire additional accounting, finance, legal and internal audit staff with the requisite technical knowledge.
 
As a public company we will also need to enhance our investor relations, marketing and corporate communications functions. These additional efforts may strain our resources and divert management’s attention from other business concerns, which could have a material adverse effect on our business, financial condition and results of operations.
 
You will suffer immediate and substantial dilution and may experience additional dilution in the future.
 
We expect that the initial public offering price per share of our Class A common stock will be substantially higher than the pro forma net tangible book value per share of our Class A common stock immediately after this offering, and after giving effect to the exchange of all outstanding New Class A Units for shares of our Class A common stock and the conversion of all outstanding shares of Class C common stock into shares of our Class A common stock. As a result, you will pay a price per share that substantially exceeds the book value of our assets after subtracting our liabilities. At an offering price of $25.00 (the midpoint of the range set forth on the cover of this prospectus), you will incur immediate and substantial dilution in an amount of $24.90 per share of our Class A common stock. See “Dilution”.
 
Anti-takeover provisions in our amended and restated certificate of incorporation and bylaws could discourage a change of control that our stockholders may favor, which could negatively affect the market price of our Class A common stock.
 
Provisions in our amended and restated certificate of incorporation and bylaws may make it more difficult and expensive for a third party to acquire control of us even if a change of control would be beneficial to the interests of our stockholders. For example, our amended and restated certificate of incorporation, which will be in effect at the time this offering is consummated, will authorize the issuance of preferred stock that could be issued by our board of directors to thwart a takeover attempt. The market price of our Class A common stock could be adversely affected to the extent that the provisions of our amended and restated certificate of incorporation and bylaws discourage potential takeover attempts that our stockholders may favor. See “Description of Capital Stock” for additional information on the anti-takeover measures applicable to us.
 
Risks Relating to our Structure
 
Our ability to pay regular dividends to our stockholders is subject to the discretion of our board of directors and may be limited by our holding company structure and applicable provisions of Delaware law.
 
Following completion of this offering, we intend to pay cash dividends to our Class A and Class C stockholders on a quarterly basis, beginning in the first quarter of 2010. Our board of directors may, in its sole discretion, change the amount or frequency of dividends or discontinue the payment of dividends entirely. In addition, as a holding company, we will be dependent upon the ability of our subsidiaries to generate earnings and cash flows and distribute them to us so that we may pay dividends to our stockholders. We expect to cause Artio Global Holdings to make distributions to its members, including us. However, its ability to make such distributions will be subject to its operating results, cash requirements and financial condition, the applicable provisions of Delaware law which may limit the amount of funds available for distribution to its members, its compliance with covenants and financial ratios related to existing or future indebtedness, and its other agreements with third


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parties. In addition, each of the companies in the corporate chain must manage its assets, liabilities and working capital in order to meet all of its cash obligations, including the payment of dividends or distributions. As a consequence of these various limitations and restrictions, we may not be able to make, or may have to reduce or eliminate, the payment of dividends on our Class A and Class C common stock.
 
Our ability to pay taxes and expenses may be limited by our holding company structure and applicable provisions of Delaware law.
 
As a holding company, we will have no material assets other than our ownership of New Class A Units of Artio Global Holdings and will have no independent means of generating revenue. Artio Global Holdings will be treated as a partnership for U.S. federal income tax purposes and, as such, will not be subject to U.S. federal income tax. Instead, taxable income will be allocated to its members, including us and the Principals. Accordingly, we will incur income taxes on our proportionate share of any net taxable income of Artio Global Holdings and will also incur expenses related to our operations. We intend to cause Artio Global Holdings to distribute cash to its members (the Principals and us). However, its ability to make such distributions will be subject to various limitations and restrictions as set forth in the preceding risk factor. If, as a consequence of these various limitations and restrictions, we do not have sufficient funds to pay tax or other liabilities to fund our operations, we may have to borrow funds and thus, our liquidity and financial condition could be materially adversely affected.
 
We will be required to pay the Principals most of the tax benefit of any depreciation or amortization deductions we may claim as a result of the tax basis step up we receive in connection with the future exchanges of New Class A Units.
 
Any taxable exchanges by the Principals of New Class A Units for shares of our Class A common stock are expected to result in increases in the tax basis in the tangible and intangible assets of Artio Global Holdings connected with such New Class A Units. The increase in tax basis is expected to reduce the amount of tax that we would otherwise be required to pay in the future, although the Internal Revenue Service, or IRS, might challenge all or part of this tax basis increase, and a court might sustain such a challenge.
 
We will enter into a tax receivable agreement with the Principals, pursuant to which we will agree to pay each of them 85% of the amount of the reduction in tax payments, if any, in U.S. federal, state and local income tax that we realize (or are deemed to realize upon an early termination of the tax receivable agreement or a change of control, both discussed below) as a result of these increases in tax basis created by such Principal’s exchanges. We have previously recorded a deferred tax asset on our historical financial statements with respect to the tax basis increase that we would have received in connection with our prior obligation to redeem certain interests of our Principals. Upon this offering we will de-recognize this deferred tax asset recorded on our balance sheet. Following this offering, we will record a deferred tax asset upon the exchange of each Principal’s New Class A Units for shares of our Class A common stock. In conjunction with the establishment of the deferred tax asset we will establish a related liability for amounts due under the tax receivable agreement. The actual increase in tax basis, as well as the amount and timing of any payments under this agreement, will vary depending on a number of factors, including the timing of each Principal’s exchanges, the price of our Class A common stock at the time of the exchange, the extent to which such exchanges are taxable, the amount and timing of our income and the tax rates then applicable. Payments under the tax receivable agreement are expected to give rise to certain additional tax benefits attributable to further increases in basis or, in certain circumstances, in the form of deductions for imputed interest. Any such benefits are covered by the tax receivable agreement and will increase the amounts due thereunder. In addition, the tax receivable agreement will provide for interest accrued from the due date (without extensions) of the corresponding tax return to the date of payment specified by the tax receivable agreement. We expect that, as a result of the size and increases in the tax basis of the tangible and intangible assets of Artio Global Holdings attributable to the exchanged New Class A


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Units, the payments that we may make to the Principals will be substantial. See “Relationships and Related Party Transactions — Tax Receivable Agreement”.
 
Moreover, if we exercise our right to terminate the tax receivable agreement early, we will be obligated to make an early termination payment to the Principals, or their transferees, based upon the net present value (based upon certain assumptions and deemed events set forth in the tax receivable agreement, including the assumption that we would have enough taxable income in the future to fully utilize the tax benefit resulting from any increased tax basis that results from an exchange and that any New Class A Units that the Principals or their transferees own on the termination date are deemed to be exchanged on the termination date) of all payments that would be required to be paid by us under the tax receivable agreement. If certain change of control events were to occur, we would be obligated to make payments to the Principals using certain assumptions and deemed events similar to those used to calculate an early termination payment.
 
We will not be reimbursed for any payments previously made under the tax receivable agreement if such basis increase is successfully challenged by the IRS. As a result, in certain circumstances, payments could be made under the tax receivable agreement in excess of our cash tax savings.
 
Our amended and restated certificate of incorporation contains a provision renouncing our interest and expectancy in certain corporate opportunities.
 
Our amended and restated certificate of incorporation will provide for the allocation of certain corporate opportunities between us and Julius Baer Holding Ltd. Under these provisions, neither Julius Baer Holding Ltd., nor any director, officer or employee of Julius Baer Holding Ltd. or any of its subsidiaries will have any duty to refrain from engaging, directly or indirectly, in the same business activities or similar business activities or lines of business in which we operate. Therefore, a director or officer of our company who also serves as a director, officer or employee of Julius Baer Holding Ltd. or any of its subsidiaries may pursue certain acquisition or other opportunities that may be complementary to our business and, as a result, such acquisition or other opportunities may not be available to us. These potential conflicts of interest could have a material adverse effect on our business, financial condition, results of operations or prospects if attractive corporate opportunities are allocated by Julius Baer Holding Ltd. to itself or its other affiliates instead of to us. The terms of our amended and restated certificate of incorporation are more fully described in “Description of Capital Stock”.


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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
We have made statements under the captions “Prospectus Summary”, “Risk Factors”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, “Business” and in other sections of this prospectus that are forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “may”, “might”, “will”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue”, the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to risks, uncertainties and assumptions, may include projections of our future financial performance, our anticipated growth strategies, descriptions of new business initiatives and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements, including those factors discussed under the caption entitled “Risk Factors”.
 
Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. We are under no duty to update any of these forward-looking statements after the date of this prospectus to conform our prior statements to actual results or revised expectations.


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OUR STRUCTURE AND REORGANIZATION
 
The diagram below depicts our organizational structure immediately after the consummation of this offering and related transactions.
 
(FLOW CHART)
 
Note: Percentages in this table include the 7,200 shares of fully-vested Class A common stock expected to be awarded to our non-employee directors in connection with this offering, but exclude the approximately 2.1 million restricted stock units, each of which represents the right to receive one share of our Class A common stock upon the lapse of restrictions, which generally lapse over a five-year period, expected to be awarded to our employees (other than our Principals) in connection with this offering.
 
(1) Represents shares beneficially owned by Messrs. Pell and Younes, including shares held by GRATs as to which they retain beneficial ownership.
 
Artio Global Holdings LLC
 
As a holding company, we conduct all of our business activities through our direct subsidiary Artio Global Holdings LLC, an intermediate holding company, which holds our ownership interest in Artio Global Management LLC, our operating subsidiary.


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Prior to this offering, we contributed our interests in Artio Global Management LLC to Artio Global Holdings LLC. Immediately prior to this offering, our Principals will each contribute their interests in Artio Global Management LLC to Artio Global Holdings LLC and we will amend and restate Artio Global Holdings’ operating agreement to, among other things, modify its capital structure by creating a single new class of units called “New Class A Units”, approximately 70.0% of which will be issued to us and approximately 15.0% of which will be issued to each of our Principals, in each case, upon receipt of those contributions, before giving effect to the transactions described herein. See “Relationships and Related Party Transactions — Amended and Restated Limited Liability Company Agreement of Artio Global Holdings LLC”. The New Class A Units issued to our Principals will be fully vested and will not be subject to any put and call rights. Following such steps, Artio Global Management will be 100% owned by Artio Global Holdings, and our Principals’ interests in Artio Global Management will instead be indirect through their ownership of interests in Artio Global Holdings. Upon completion of this offering, there will be approximately 60,007,200 New Class A Units issued and outstanding, including 7,200 New Class A Units, corresponding to the shares of fully-vested Class A common stock expected to be awarded to our non-employee directors in connection with this offering.
 
Artio Global Investors Inc.
 
Julius Baer Holding Ltd., our parent company and existing stockholder, owns all of our outstanding capital stock, consisting of 42,000,000 shares of Class C common stock. Immediately prior to this offering, we will amend and restate our certificate of incorporation to authorize three classes of common stock, Class A common stock, Class B common stock and Class C common stock, each having the terms described in “Description of Capital Stock”.
 
Class A Shares.  Shares of our Class A common stock will be issued to the public in this offering. Class A common stock will entitle holders to one vote per share and economic rights (including rights to dividends and distributions upon liquidation).
 
Class B Shares.  Immediately prior to this offering, all of our authorized shares of Class B common stock will be issued to the Principals, in an amount equal to the number of New Class A Units to be issued simultaneously to the Principals. Class B common stock will entitle holders to one vote per share but will have no economic rights (including no rights to dividends and distributions upon liquidation).
 
Class C Shares.  Our parent owns all of our outstanding common stock, consisting of 42,000,000 shares of Class C common stock, equal to the number of New Class A Units to be issued to Artio Global Investors Inc. immediately prior to the closing of this offering. Each share of Class C common stock has economic rights (including rights to dividends and distributions upon liquidation) equal to the economic rights of each share of the Class A common stock. In order to allow Julius Baer Holding Ltd., when selling the remainder of its holdings, to avail itself of certain Swiss tax exemptions that require it to have voting rights equal to 20% of the combined voting power of the common stock, the outstanding shares of Class C common stock will have an aggregate vote equal to the greater of (1) the number of votes they would be entitled to on a one-vote-per-share basis and (2) 20% of the combined voting power of all classes of common stock. Prior to this offering, Julius Baer Holding Ltd. will enter into a shareholders agreement under which it will agree that, to the extent it has voting power as holder of the Class C common stock in excess of that which it would be entitled to on a one-vote-per-share basis, it will on all matters vote the shares representing such excess on the same basis and in the same proportion as the votes cast by the holders of our Class A and Class B common stock.
 
If Julius Baer Holding Ltd. transfers any shares of Class C common stock to anyone other than any of its subsidiaries or us, such shares will automatically convert into shares of Class A common stock. In addition, on the second anniversary of the completion of this offering, any outstanding shares of Class C common stock will automatically convert into Class A common stock.
 
Following this offering, we will own a number of New Class A Units equal to the aggregate number of shares of Class A and Class C common stock then outstanding.
 
In connection with this offering, we have adopted the Artio Global Investors Inc. 2009 Stock Incentive Plan. We expect to make initial grants of 7,200 shares of fully-vested Class A common stock


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(subject to transfer restrictions) to our non-employee directors and 2,147,132 restricted stock units to our employees (other than our Principals) under this plan on the date of the closing of this offering, which generally vest over a five-year period, and to make future equity awards under this plan to our directors and employees as appropriate. See “Management — Artio Global Investors Inc. 2009 Stock Incentive Plan”.
 
The table below sets forth the number of shares of Class A, Class B and Class C common stock and New Class A Units (i) issued and outstanding following the reorganization transactions described below under “— Offering Transactions”, but prior to the completion of this offering and the application of the net proceeds as described under “Use of Proceeds”, (ii) issued and/or repurchased in connection with completion of this offering and the application of the net proceeds, and (iii) issued and outstanding immediately following completion of this offering, after giving effect to the application of the net proceeds. As set forth in the table below, following completion of this offering, the total number of New Class A Units issued and outstanding will equal the aggregate number of shares of Class A, Class B and Class C common stock issued and outstanding.
 
                         
          Transactions in
       
          Connection with
    Immediately
 
    Pre-Offering     Offering     Post-Offering  
 
Artio Global Investors Inc.
                       
Class A common stock
                       
Public
          23,400,000 (1)     23,400,000  
Non-employee directors
          7,200 (2)     7,200  
Richard Pell
          1,200,000 (3)      
              (1,200,000 )(3)        
Rudolph-Riad Younes
          1,200,000 (3)      
              (1,200,000 )(3)        
                         
Total Class A common stock
                  23,407,200  
                         
Class B common stock
                       
Richard Pell
    9,000,000       (1,200,000 )(4)     7,800,000  
Rudolph-Riad Younes
    9,000,000       (1,200,000 )(4)     7,800,000  
                         
Total Class B common stock
    18,000,000               15,600,000  
                         
Class C common stock
                       
Julius Baer Holding Ltd. 
    42,000,000       (21,000,000 )(5)     21,000,000  
                         
Total Class C common stock
    42,000,000               21,000,000  
                         
Total Class A, Class B and Class C common stock issued and outstanding
    60,000,000               60,007,200  
                         
Class A common stock reserved for issuance
                       
under compensation plans
    9,700,000 (6)     (7,200 )     9,692,800  
for Julius Baer Holding Ltd. upon conversion of Class C common stock
    42,000,000       (21,000,000 )     21,000,000  
for Principals upon exchange of New Class A Units
    18,000,000       (2,400,000 )     15,600,000  
                         
Total Class A common stock reserved for issuance
    69,700,000               46,292,800  
                         
Artio Global Holdings LLC
                       
New Class A Units issued and outstanding
                       
Artio Global Investors Inc. 
    42,000,000       2,407,200 (7)     44,407,200  
Richard Pell
    9,000,000       (1,200,000 )(8)     7,800,000  
Rudolph-Riad Younes
    9,000,000       (1,200,000 )(8)     7,800,000  
                         
Total New Class A Units issued and outstanding
    60,000,000               60,007,200  
                         
 
 
(1) Represents the 23,400,000 shares of Class A common stock we will issue to the public in connection with this offering.


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(2) Represents the 7,200 shares of fully-vested Class A common stock (subject to transfer restrictions) that we expect to award to our non-employee directors in connection with this offering. The table does not reflect as outstanding the 2,147,132 restricted stock units, each of which represents the right to receive one share of our Class A common stock upon the lapse of restrictions, which generally lapse over a five-year period, that we expect to grant to our employees (other than our Principals) in connection with this offering.
 
(3) Represents the effect of the issuance of 1,200,000 shares of Class A common stock to each of the Principals upon exchange of an equivalent number of New Class A Units and subsequent repurchase of such shares by us with a portion of the net proceeds of this offering.
 
(4) Corresponds to the number of New Class A Units to be exchanged by each of the Principals for shares of Class A common stock.
 
(5) Represents the 21,000,000 shares of Class C common stock we will repurchase and retire from Julius Baer Holding Ltd.
 
(6) We will reserve 9,700,000 shares of Class A common stock for issuance under the Artio Global Investors Inc. 2009 Stock Incentive Plan to be effective upon the closing of this offering.
 
(7) Corresponds to the aggregate number of: (i) New Class A Units that we will receive from the Principals in exchange for shares of Class A common stock and (ii) New Class A Units that we will receive when we issue shares of Class A common stock to our non-employee directors pursuant to the Artio Global Investors Inc. 2009 Stock Incentive Plan.
 
(8) Corresponds to the number of New Class A Units the Principals will provide to us in exchange for shares of Class A common stock that we will then repurchase from each of our Principals.
 
Offering Transactions
 
Upon the consummation of this offering, Artio Global Investors Inc. will use the net proceeds from this offering to repurchase and retire an aggregate of 21.0 million shares of Class C common stock (assuming the underwriters do not exercise their option to purchase additional shares) from our parent, Julius Baer Holding Ltd., and to repurchase 1.2 million shares of Class A common stock from Richard Pell, and 1.2 million shares of Class A common stock from Rudolph-Riad Younes in order to enable our parent and our Principals to liquidate a portion of their shareholding in us. We will not retain any of the net proceeds. See “Use of Proceeds”.
 
Incurrence of New Debt and Related Distributions.  In connection with this offering, Artio Global Holdings has established a $60.0 million term debt facility which, together with available cash, will fund a distribution to us that we will use to fund a distribution to our parent, and will also be utilized to provide working capital for our business and, potentially, seed capital for future investment products. In addition, Artio Global Holdings has entered into a $50.0 million revolving credit facility to be used primarily for working capital needs. Our distribution to our parent, which we have declared prior to this offering, will be calculated as $40.1 million plus total stockholder’s equity as of the date of this offering and is estimated to be $201.3 million on a pro forma basis (approximately $161.2 million, of which will be paid shortly after the completion of this offering and $40.1 million of which will be payable within one year of the completion of this offering).
 
New Agreements with the Principals.  In connection with the closing of this offering, we will enter into an exchange agreement with the Principals under which, subject to certain exchange and other restrictions, including notice requirements, from time to time, each Principal and certain permitted transferees will have the right to exchange his New Class A Units, which represent ownership rights in Artio Global Holdings, for shares of Class A common stock of our company on a one-for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications and other similar transactions. The exchange agreement will permit each Principal to exchange a number of New Class A Units for shares of Class A common stock that we will repurchase in connection with this offering as described under “Use of Proceeds”. Each Principal will also be permitted to exchange additional New Class A Units that he owns at the time of this offering at any time


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following the completion of this offering. Any exchange of New Class A Units will generally be a taxable event for the exchanging Principal. As a result, at any time following the expiration of the underwriters’ lock-up, 180 days after the date of this prospectus, subject to extension as described under “Underwriting”, each Principal will be permitted to sell shares of Class A common stock in connection with any exchange in an amount necessary to generate proceeds (after deducting discounts and commissions) sufficient to cover the taxes payable on such exchange (the amount of shares permitted to be sold determined based upon the stock price on the date of exchange, whether or not such shares are sold then or thereafter). In addition, each Principal will be permitted to sell up to 20% of the remaining shares of Class A common stock that he owns (calculated assuming all New Class A Units have been exchanged by him) on or after the first anniversary of the pricing of this offering and an additional 20% of such remaining shares of Class A common stock on or after each of the next four anniversaries. As a result, each Principal will, over time, have the ability to convert his illiquid ownership interests in Artio Global Holdings into Class A common stock that can be more readily sold on the NYSE. The exchange agreement will also include certain non-compete restrictions applicable to each of the Principals. See “Relationships and Related Party Transactions — Exchange Agreement”.
 
New Compensation Arrangements with our Senior Management.  Prior to this offering we have not had employment contracts with our senior management, other than our Principals, or granted equity-based incentive compensation to our employees. We expect to enter into new employment agreements with our Principals and certain other senior members of management that will become effective on completion of this offering. We also expect to grant 7,200 shares of fully-vested Class A common stock (subject to transfer restrictions) to non-employee directors and 2,147,132 restricted stock units to our employees (other than our Principals) in connection with this offering, which generally vest over a five-year period. In addition, in contemplation of this offering, the unvested benefit under the deferred compensation plan for our Principals, described under “Management — Executive Compensation — Summary Compensation Table — Nonqualified Deferred Compensation”, was completely vested during 2008 and paid out.
 
New Arrangements with our Parent.  Prior to this offering, we obtained from our parent certain services and paid it license fees. Following this offering, we will no longer be required to pay license fees to our parent. We will enter into a transition services agreement pursuant to which Julius Baer Group Ltd. will provide us, and we will provide Julius Baer Group Ltd., with a limited number of services for a transitional period following this offering. In addition, we will enter into an indemnification and co-operation agreement with Julius Baer Holding under which Julius Baer Holding will indemnify us for any future losses relating to certain of our legacy activities. See “Relationships and Related Party Transactions — Transition Services and Indemnification Agreements”.
 
New Agreement with our Parent and the Principals.  In connection with this offering, we will enter into a registration rights agreement with the Principals and our parent to provide customary registration rights, including demand registration rights and piggyback registration rights. See “Relationships and Related Party Transactions — Registration Rights Agreement”.
 
As a result of the transactions described above, which we collectively refer to as the “reorganization” or the “reorganization transactions”:
 
  •  we will become the sole managing member of Artio Global Holdings, the entity through which we operate our business. We will have an approximate 74% economic interest in Artio Global Holdings and a 100% voting interest and control its management (subject to certain limited exceptions with respect to certain fundamental matters). As a result, we will consolidate the financial results of Artio Global Holdings and will record a non-controlling interest on our balance sheet for the economic interest in it held by the other existing members, which initially will be the Principals;
 
  •  each Principal will initially hold 7,800,000 shares of our Class B common stock and 7,800,000 New Class A Units, and we will hold 44,407,200 New Class A Units, which includes 7,200 New


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  Class A Units corresponding to the shares of Class A common stock expected to be awarded to our non-employee directors in connection with this offering;
 
  •  through their holdings of our Class B common stock, each Principal will have approximately 13% of the voting power in Artio Global Investors;
 
  •  through its holdings of our Class C common stock, Julius Baer Holding Ltd. will have approximately 35% of the voting power in Artio Global Investors (or approximately 29.1% if the underwriters exercise in full their option to purchase additional shares). Julius Baer Holding Ltd. will enter into a shareholders agreement under which it will agree that, to the extent it has voting power as holder of the Class C common stock in excess of that which it would be entitled to on a one-vote-per-share basis, it will on all matters vote the shares representing such excess on the same basis and in the same proportion as the votes cast by the holders of our Class A and Class B common stock. Under this shareholders agreement, Julius Baer Holding Ltd. will have the right to designate one member of our board of directors as long as it (together with its subsidiaries) owns at least 10% of the aggregate number of shares outstanding of our common stock;
 
  •  the new investors will collectively have approximately 39% of the voting power in Artio Global Investors (or approximately 44.9% if the underwriters exercise in full their option to purchase additional shares) and our non-employee directors will collectively have less than 0.1% of the voting power in Artio Global Investors through their holdings of shares of stock (subject to transfer restrictions) that we expect to grant to them in connection with this offering; and
 
  •  the New Class A Units held by the Principals are exchangeable for shares of our Class A common stock on a one-for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications and other similar transactions. In connection with an exchange, a corresponding number of shares of our Class B common stock will be cancelled. However, the exchange of New Class A Units for shares of our Class A common stock will not affect our Class B common stockholders’ voting power since the votes represented by the cancelled shares of our Class B common stock will be replaced with the votes represented by the shares of Class A common stock for which such New Class A Units are exchanged.
 
Holding Company Structure
 
We are a holding company and, immediately after the consummation of the reorganization transactions and this offering, our sole asset will be our approximate 74% equity interest in Artio Global Holdings and our controlling interest and related rights as its sole managing member. Our only business following this offering will be to act as the sole managing member of Artio Global Holdings, and, as such, we will operate and control all of the business and affairs of Artio Global Holdings and will consolidate its financial results into our consolidated financial statements.
 
The number of New Class A Units we will own equals the number of outstanding shares of our Class A common stock and Class C common stock. The economic interest represented by each New Class A Unit that we will own will correspond to one of our shares of Class A common stock or Class C common stock, and the total number of New Class A Units owned by us and the holders of our Class B common stock will equal the sum of outstanding shares of our Class A, Class B and Class C common stock. In addition, you should note that:
 
  •  if Julius Baer Holding Ltd. transfers any shares of Class C common stock to anyone other than any of its subsidiaries or us, such shares will automatically convert into shares of Class A common stock. In addition, on the second anniversary of the completion of this offering, any outstanding shares of Class C common stock will automatically convert into Class A common stock;
 
  •  a share of Class B common stock cannot be transferred except in connection with a transfer of a New Class A Unit. Further, a New Class A Unit cannot be exchanged with Artio Global Holdings for a share of our Class A common stock without the corresponding share of our


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  Class B common stock being delivered together at the time of exchange, at which time, such Class B common stock will be automatically cancelled; and
 
  •  we do not intend to list our Class B common stock or Class C common stock on any stock exchange.
 
As a member of Artio Global Holdings, we incur U.S. federal, state and local income taxes on our allocable share of any of its net taxable income. The operating agreement of Artio Global Holdings provides that it shall make quarterly cash distributions on a pro rata basis to its members at least to the extent necessary to provide funds to pay the members’ tax obligations (calculated at an assumed tax rate), if any, with respect to the earnings of the operating company. See “Relationships and Related Party Transactions — Amended and Restated Limited Liability Company Agreement of Artio Global Holdings LLC”.
 
As a result of a U.S. federal income tax election made by Artio Global Holdings, the income tax basis of the assets of Artio Global Holdings connected with the New Class A Units we acquire upon a taxable exchange with a Principal will be adjusted to reflect the amount that we have paid for the New Class A Units. We intend to enter into an agreement with the Principals that will provide for the payment by us to each of them of 85% of the amount of reduction in tax payments, if any, in U.S. federal, state and local income tax that we realize from our increased tax basis in the assets of Artio Global Holdings created by each Principal’s exchanges and the U.S. federal income tax election referred to above. See “Relationships and Related Party Transactions — Tax Receivable Agreement”.


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USE OF PROCEEDS
 
We estimate that the net proceeds from the sale of shares of our Class A common stock by us in this offering will be approximately $552.2 million, or approximately $635.1 million if the underwriters exercise in full their option to purchase additional shares of Class A common stock, based on an assumed initial public offering price of $25.00 per share (the midpoint of the price range set forth on the cover of this prospectus), in each case after deducting assumed underwriting discounts payable by us.
 
We intend to use the net proceeds from this offering to repurchase and retire an aggregate of 21.0 million shares of Class C common stock (24.5 million shares of Class C common stock if the underwriters exercise in full their option to purchase additional shares) from our parent, Julius Baer Holding Ltd., and to repurchase 1.2 million shares of Class A common stock from Richard Pell and 1.2 million shares of Class A common stock from Rudolph-Riad Younes in order to enable our parent and our Principals to liquidate a portion of their respective shareholdings in us. We will not retain any of the net proceeds. As a result, the per share repurchase price of the 21.0 million shares of Class C common stock held by our parent and the 1.2 million shares of Class A common stock held by each of our Principals will equal the offering price of our Class A common stock in this offering, less the underwriting discount. If the assumed initial public offering price is $25.00, then the repurchase price per share of Class A and Class C common stock will be $23.60. A $1.00 change in the assumed initial public offering price will increase or decrease the net proceeds by $23.4 million and will correspondingly increase or decrease the repurchase price paid to Julius Baer Holding Ltd. and our Principals.


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DIVIDEND POLICY AND DIVIDENDS
 
Dividend Policy
 
Following this offering, we intend to pay quarterly cash dividends. We expect that our first dividend will be paid in the first quarter of 2010 (in respect of the fourth quarter of 2009) and will be $0.06 per share of our Class A common stock and Class C common stock. We intend to fund our initial dividend, as well as any future dividends, from our portion of distributions made by our operating company from its available cash generated from operations. The holders of our Class B common stock will not be entitled to any cash dividends in their capacity as stockholders, but will, in their capacity as members of Artio Global Holdings, participate on a pro rata basis in distributions by Artio Global Holdings.
 
The declaration and payment of all future dividends, if any, will be at the sole discretion of our board of directors. In determining the amount of any future dividends, our board of directors will take into account: (i) the financial results of the operating company, (ii) our available cash, as well as anticipated cash requirements (including debt servicing), (iii) our capital requirements and the capital requirements of our subsidiaries (including the operating company), (iv) contractual, legal, tax and regulatory restrictions on, and implications of, the payment of dividends by us to our stockholders or by our subsidiaries (including the operating company) to us, (v) general economic and business conditions and (vi) any other factors that our board of directors may deem relevant.
 
As a holding company, we will have no material assets other than our ownership of New Class A Units of Artio Global Holdings and, accordingly, will depend on distributions from it to fund any dividends we may pay. We intend to cause Artio Global Holdings to distribute cash to its members, including us, in an amount sufficient to cover dividends, if any, declared by us. If Artio Global Holdings makes such distributions, other holders of New Class A Units (i.e., our Principals) will be entitled to receive equivalent distributions on a pro rata basis.
 
Our dividend policy has certain risks and limitations, particularly with respect to liquidity. Although we expect to pay dividends according to our dividend policy, we may not pay dividends according to our policy, or at all, if, among other things, Artio Global Holdings is unable to make distributions to us as a result of its operating results, cash requirements and financial condition, the applicable laws of the State of Delaware (which may limit the amount of funds available for distribution), its compliance with covenants and financial ratios related to anticipated indebtedness (including the term debt facility and revolving credit facility) and its other agreements with third parties. Under Delaware law, we may only pay dividends from legally available surplus or, if there is no such surplus, out of our net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. Surplus is defined as the excess of a company’s total assets over the sum of its total liabilities plus the par value of its outstanding capital stock. Under Delaware law, our board of directors can use the fair value of assets and liabilities, rather than book value, in making this determination. To the extent we do not have sufficient cash to pay dividends, we may decide not to pay dividends. By paying cash dividends rather than investing that cash in our future growth, we risk slowing the pace of our growth, or not having a sufficient amount of cash to fund our operations or unanticipated capital expenditures. Artio Global Holdings’ term debt facility and revolving credit facility contain covenants limiting Artio Global Holdings’ ability to make dividend payments if its consolidated leverage ratio (as defined in the credit facility agreement) would exceed 1.5x on a pro forma basis after giving effect to such payments or if Artio Global Holdings is in default under the term debt facility or the revolving credit facility. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Future Capital Requirements”.
 
We are taxable as a corporation for U.S. federal income tax purposes and therefore holders of our Class A common stock will not be taxed directly on our earnings. Distributions of cash or other property that we pay to our stockholders will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits (as determined under


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U.S. federal income tax rules). If the amount of a distribution by us to our stockholders exceeds our current and accumulated earnings and profits, such excess will be treated first as a tax-free return of capital to the extent of a holder’s basis in the Class A common stock and thereafter as capital gain.
 
Historical Dividend Information
 
The following table sets forth the total ordinary dividends paid by us during the periods indicated:
 
         
Period
 
Amount
 
    (In thousands)  
 
Year ended December 31, 2004
     
Year ended December 31, 2005
  $ 30,000  
Year ended December 31, 2006
  $  
Year ended December 31, 2007
  $ 60,100  
Year ended December 31, 2008
  $ 117,000  
Year ended December 31, 2009 (through August 31, 2009)
  $ 14,000  
 
These dividends were not declared pursuant to any agreement.


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CAPITALIZATION
 
The following table sets forth our cash and cash equivalents and our capitalization as of June 30, 2009:
 
  •  on an actual basis; and
 
  •  on a pro forma basis after giving effect to the transactions described under “Unaudited Pro Forma Consolidated Financial Information”, including the expected incurrence of debt by Artio Global Holdings in connection with this offering and the application of the net proceeds thereof, the reorganization transactions and this offering.
 
You should read the following table in conjunction with our consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this prospectus.
 
                 
    As of June 30, 2009  
(In thousands except shares and per share amounts)   Actual     Pro Forma  
 
Cash and cash equivalents
  $ 111,324     $ 17,652  
                 
Long-term debt
  $     $ 60,000  
Artio Global Investors stockholder’s equity (deficit):
               
Class A common stock, $0.001 par value per share, none authorized and outstanding on an actual basis, 500,000,000 shares authorized and 25,807,200 shares issued and 23,407,200 shares outstanding on a pro forma basis
  $     $ 26  
Class B common stock, $0.001 par value per share, none authorized and outstanding on an actual basis, 50,000,000 shares authorized and 15,600,000 shares issued and outstanding on a pro forma basis
          16  
Class C common stock, $0.01 par value per share, 210,000,000 shares authorized and 42,000,000 shares issued and outstanding on an actual basis, 21,000,000 shares issued and outstanding on a pro forma
basis(1)
    420       210  
Additional paid-in capital(1)
    17,930       640,588  
Retained earnings (deficit)
    9,295       (608,063 )
Treasury Stock (2,400,000 shares of Class A common stock), at cost
          (56,640 )
                 
Artio Global Investors stockholder’s equity (deficit)
    27,645       (23,863 )
Non-controlling interests
          (10,340 )
                 
Total equity (deficit)
  $ 27,645     $ (34,203 )
                 
Total capitalization
  $ 27,645     $ 25,797  
                 
 
 
(1) As recast to give retroactive effect to a 10,500:1 stock split that was effected as of August 28, 2009.


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DILUTION
 
If you invest in our Class A common stock, your interest will be diluted to the extent of the difference between the initial public offering price per share of our Class A common stock and the pro forma, as adjusted net tangible book value (deficit) per share of our Class A common stock immediately after this offering. Dilution results from the fact that the per share offering price of the Class A common stock is substantially in excess of the net tangible book value (deficit) per share attributable to the existing equity holders. Net tangible book value represents net book equity excluding intangible assets, if any.
 
Our pro forma, net tangible book value (deficit) as of June 30, 2009 was approximately $(40.1) million, or approximately $(0.67) per share of 60.0 million shares of our Class A common stock. Pro forma, net tangible book value represents the amount of total tangible assets less total liabilities, after giving effect to the reorganization and the incurrence by Artio Global Holdings of $60.0 million of indebtedness and the declaration and assumed distribution to us by Artio Global Holdings (calculated as $40.1 million plus total stockholder’s equity as of the date of this offering, estimated to be $201.3 million (on a pro forma basis)) that we will use to fund a distribution to our parent which has been declared prior to this offering (approximately $161.2 million of which will be paid shortly after the completion of this offering and $40.1 million of which will be payable within one year of the completion of this offering). Pro forma, as adjusted, net tangible book value (deficit) per share represents pro forma net tangible book value divided by the number of shares of Class A common stock outstanding after giving effect to the reorganization transactions and assuming that (1) the Principals have exchanged all of their New Class A Units for shares of our Class A common stock on a one-for-one basis and we have benefited from the resulting increase in tax basis, (2) the holder of Class C common stock has converted all of its shares of Class C common stock into shares of our Class A common stock on a one-for-one basis and (3) the 2,147,132 restricted stock units that we expect to issue to our employees (other than our Principals) and the 7,200 shares of fully-vested Class A common stock (subject to transfer restrictions) that we expect to issue to our non-employee directors in connection with this offering, have vested.
 
After giving effect to the sale of 23,400,000 shares of Class A common stock that we are offering at an assumed initial public offering price of $25.00 per share (the midpoint of the price range set forth on the cover of this prospectus), the deduction of assumed underwriting discounts payable by us and the use of the estimated net proceeds as described under “Use of Proceeds”, our pro forma, as adjusted net tangible book value at June 30, 2009 was $6.4 million, or $0.10 per share of Class A common stock, assuming that (1) the Principals have exchanged all of their New Class A Units for shares of our Class A common stock on a one-for-one basis and we have benefited from the resulting increase in tax basis, (2) the holder of Class C common stock has converted all of its shares of Class C common stock into shares of our Class A common stock on a one-for-one basis and (3) the 2,147,132 restricted stock units that we expect to issue to our employees (other than our Principals) and the 7,200 shares of fully-vested Class A common stock (subject to transfer restrictions) that we expect to issue to our non-employee directors in connection with this offering, have vested.


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The following table illustrates the immediate increase in pro forma net tangible book value of $0.77 per share for existing equity holders and the immediate dilution of $24.90 per share to new stockholders purchasing Class A common stock in this offering, assuming the underwriters do not exercise their option to purchase additional shares.
 
                         
Assumed initial public offering price per share
                  $ 25.00  
Pro forma, net tangible book value (deficit) per share as of June 30, 2009
          $ (0.67 )        
Increase (decrease) in pro forma, net tangible book value per share attributable to:
                       
Underwriters discount of $1.40 per share on sale of 23,400,000 shares of Class A common stock
  $ (0.53 )                
Repurchase of 21,000,000 shares of Class C common stock and 2,400,000 shares of Class A common stock at a $1.40 per share discount to offering price
  $ 0.53                  
Issuance of 2,147,132 shares of Class A common stock to employees upon vesting of 2,147,132 restricted stock units and issuance of 7,200 shares of fully-vested Class A common stock to our directors
  $ 0.02                  
Recognition of benefit relating to increased tax basis
  $ 0.75                  
                         
Increase in pro forma, net tangible book value per share
          $ 0.77          
                         
Less pro forma, as adjusted net tangible book value per share after this offering
                  $ 0.10  
                         
Dilution in pro forma, as adjusted net tangible book value per share to new investors
                  $ 24.90  
 
The following table sets forth, on the same pro forma basis, as of June 30, 2009, the number of shares of Class A common stock purchased from us, the total consideration paid, or to be paid, and the average price per share paid, or to be paid, by existing stockholders and by the new investors, assuming that (1) the Principals have exchanged all of their New Class A Units for shares of our Class A common stock on a one-for-one basis and we have benefited from the resulting increase in tax basis and (2) the holder of Class C common stock has converted all of its shares of Class C common stock into shares of our Class A common stock on a one-for-one basis, calculated at an assumed initial public offering price of $25.00 per share (the midpoint of the range set forth on the cover page of this prospectus), before deducting estimated underwriting discounts payable by us:
 
                                         
    Shares
    Total
    Average
 
    Purchased     Consideration     Price per
 
    Number     Percent     Amount     Percent     Share  
 
Existing stockholders
    36,600,000       61 %                  
New investors
    23,400,000       39 %   $ 585,000,000       100 %   $ 25.00  
Total
    60,000,000       100 %   $ 585,000,000       100 %        
 
The table above does not give effect to the issuance of 7,200 shares of fully-vested Class A common stock (subject to transfer restrictions) that we expect to grant under our incentive compensation plans to our non-employee directors or the approximately 2.1 million restricted stock units, each of which represents the right to receive one share of our Class A common stock upon the lapse of restrictions, which generally lapse over a five-year period, that we expect to grant to our employees (other than our Principals) in connection with this offering.


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If the underwriters exercise their option to purchase additional shares of Class A common stock in full:
 
  •  the pro forma percentage of shares of our Class A common stock held by existing equity holders will decrease to approximately 55.1% of the total number of pro forma shares of our Class A common stock outstanding after this offering; and
 
  •  the pro forma number of shares of our Class A common stock held by new investors will increase to approximately 44.9% of the total pro forma shares of our Class A common stock outstanding after this offering.
 
If the underwriters exercise their option to purchase additional shares of Class A common stock in full, pro forma, as adjusted net tangible book value would be approximately $0.10 per share, representing no impact to existing equity holders and there would be an immediate dilution of approximately $24.90 per share to new investors.
 
A $1.00 increase (decrease) in the assumed initial public offering price of $25.00 per share of Class A common stock (the midpoint of the price range set forth on the cover of this prospectus), would increase (decrease) total consideration paid by new investors in this offering and by all investors by $23.4 million, and would increase (decrease) the average price per share paid by new investors (excluding existing New Class A Unit holders) by $1.00, and would increase (decrease) pro forma, as adjusted net tangible book value per share by $0.03, assuming the number of shares of Class A common stock offered by us, as set forth on the cover page of this prospectus, remains the same and without deducting the estimated underwriting discounts payable by us in connection with this offering.


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UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
 
The following unaudited pro forma consolidated financial statements present the consolidated statements of income and financial position of Artio Global Investors Inc. and subsidiaries, assuming that all of the transactions described in the bullet points below had been completed as of: (i) January 1, 2008 with respect to the unaudited pro forma consolidated statements of income and (ii) June 30, 2009 with respect to the unaudited pro forma consolidated statement of financial position. The pro forma adjustments are based on available information and upon assumptions that our management believes are reasonable in order to reflect, on a pro forma basis, the impact of these transactions and this offering on the historical financial information of Artio Global Investors Inc. and subsidiaries. These adjustments are described in the notes to the unaudited pro forma consolidated financial statements.
 
The pro forma adjustments give effect to the following transactions:
 
  •  Artio Global Holdings’ incurrence, in connection with this offering, of $60.0 million of indebtedness and the application of the net proceeds of the debt, together with available cash, to fund a distribution to us that we will use to fund a distribution to Julius Baer Holding Ltd. Our distribution, which we have declared prior to this offering, will be calculated as $40.1 million plus total stockholder’s equity as of the date of this offering and is estimated to be $201.3 million on a pro forma basis (approximately $161.2 million of which will be paid shortly after the completion of this offering and $40.1 million of which will be payable within one year of the completion of this offering);
 
  •  the reorganization transactions described in “Our Structure and Reorganization”, including (i) an amendment to the operating agreement of our operating subsidiary that will result in the complete acceleration of the unvested portion of the Class B profits interest of each Principal and the elimination of both our obligation to repurchase such interests and the ability of each Principal to put its interest to our operating subsidiary and (ii) the receipt by each of the Principals of 9.0 million New Class A Units of Artio Global Holdings, which New Class A Units are exchangeable into shares of our Class A common stock on a one-for-one basis;
 
  •  the receipt by each Principal of 9.0 million shares of our Class B common stock, each share of which will be cancelled upon the exchange of one New Class A Unit for one share of Class A common stock;
 
  •  the elimination of costs related to each Principal’s deferred compensation arrangement;
 
  •  the issuance of 7,200 shares of fully-vested Class A common stock (subject to transfer restrictions) to our non-employee directors and 2,147,132 restricted stock units to our employees (other than our Principals) in connection with this offering, which generally vest over a five-year period. Of the total grant of stock subject to transfer restrictions and restricted stock units, the 7,200 shares of fully-vested Class A common stock are entitled to non-forfeitable dividends and as such are considered participating securities;
 
  •  the establishment of new employment agreements with each of our Principals, providing for a $500,000 annual base salary and $3.5 million minimum target annual bonus for each of the Principals;
 
  •  the establishment of a tax receivable agreement with our Principals;
 
  •  the elimination of license fees paid to Julius Baer Holding Ltd. after the completion of this offering; and
 
  •  the sale of 23.4 million shares of our Class A common stock in this offering at an assumed offering price of $25.00 per share (the midpoint of the price range set forth on the cover of this prospectus) and the application of the net proceeds therefrom, after payment of the assumed underwriting discounts payable by us to repurchase and retire 21.0 million shares of Class C common stock from Julius Baer Holding Ltd. and to repurchase 1.2 million shares of Class A


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common stock from each of the Principals, which they will receive immediately prior to this offering in exchange for 1.2 million New Class A Units in Artio Global Holdings and 1.2 million shares of our Class B common stock held by each Principal.
 
Pro forma basic net income per share attributable to our Class A and Class C common stock for the year ended December 31, 2008 and the six months ended June 30, 2009 was computed by dividing pro forma net income attributable to such shares by the 44,483,066 and 44,897,319 shares outstanding as of such dates. Shares of stock subject to transfer restrictions expected to be awarded to our non-employee directors and restricted stock units expected to be awarded to our employees (other than our Principals) totaling 83,066 and 497,319 shares as of December 31, 2008 and June 30, 2009, respectively, are included as they are considered participating securities.
 
Pro forma diluted net income per share for the year ended December 31, 2008 and the six months ended June 30, 2009 was computed by dividing pro forma net income attributable to our Class A and Class C common stockholders, as adjusted to reflect the exchange of each Principal’s respective interest in our operating company for shares of our Class A common stock, which results in the elimination of the non-controlling interests, as well as an increase in our effective tax rate, by 60,290,193 and 60,600,882 shares of our Class A and Class C common stock, which includes the impact of the shares of stock expected to be awarded to our non-employee directors and the unvested restricted stock units expected to be awarded to employees (other than our Principals) in connection with this offering.
 
The unaudited pro forma consolidated financial information is included for informational purposes only and does not purport to reflect our statement of income or financial position that would have occurred had we operated as a public company during the periods presented. The unaudited pro forma consolidated financial information should not be relied upon as being indicative of our statement of income or financial position had the transactions contemplated in connection with the reorganization and this offering been completed on the dates assumed. The unaudited pro forma consolidated financial information also does not project the statement of income or financial position for any future period or date. We have not made any pro forma adjustments relating to reporting, compliance, investor relations and other incremental costs that we may incur as a public company.


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UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
For the Year Ended December 31, 2008
 
                         
    Actual     Adjustments     Pro Forma  
    (In thousands, except share and per
 
    share amounts)  
 
Revenues and other operating income:
                       
Investment management fees
  $ 425,003     $       $ 425,003  
Net (losses) on securities held for deferred compensation
    (2,856 )             (2,856 )
Foreign currency (losses)
    (101 )             (101 )
                         
Total revenues and other operating income
    422,046               422,046  
Expenses
                       
Employee compensation and benefits
                       
Salaries, incentive compensation and benefits
    92,487       7,200 (a)     101,165  
              10,356 (b)        
              (8,878 )(c)        
Allocation of Class B profits interests
    76,074       (76,074 )(d)      
Change in redemption value of Class B profits interests
    54,558       (54,558 )(d)      
                         
Total employee compensation and benefits
    223,119       (121,954 )     101,165  
Interest expense
          2,700 (e)     3,317  
              617 (e)        
Shareholder servicing and marketing
    23,369               23,369  
General and administrative
    62,833       (6,414 )(f)     47,972  
              (8,447 )(g)        
                         
Total expenses
    309,321       (133,498 )     175,823  
                         
Operating income before income tax expense
    112,725       133,498       246,223  
Non-operating income
    3,181       (3,081 )(h)     100  
                         
Income before income tax expense
    115,906       130,417       246,323  
Income tax expense
    54,755       56,940 (i)     79,622  
              (32,073 )(j)        
                         
Net income before non-recurring charges directly attributable to the transaction
    61,151       105,550       166,701  
Less: Net income attributable to non-controlling interests
          61,836 (k)     61,836  
                         
Net income attributable to Artio Global Investors before non-recurring charges directly attributable to the transaction
  $ 61,151     $ 43,714 (l)   $ 104,865  
                         


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    Actual     Adjustments     Pro Forma  
    (In thousands, except share and per
 
    share amounts)  
 
Basic net income per share attributable to Artio Global Investors Class A (pro forma only) and Class C common stockholders before non-recurring charges directly attributable to the transaction
  $ 1.46             $ 2.36  
                         
Diluted net income per share attributable to Artio Global Investors Class A (pro forma only) and Class C common stockholders before non-recurring charges directly attributable to the transaction
  $ 1.46             $ 2.30 (o)
                         
Cash dividends declared per Class A (pro forma only) and Class C basic share
  $ 2.79             $ 2.63  
                         
Weighted average shares used in basic net income per share attributable to Artio Global Investors Class A (pro forma only) and Class C common stockholders
    42,000,000       23,400,000 (m)     44,483,066  
                         
              (21,000,000 )(m)        
              2,400,000 (m)        
              (2,400,000 )(m)        
              7,200 (n)        
              75,866 (n)        
Weighted average shares used in diluted net income per share attributable to Artio Global Investors Class A (pro forma only) and Class C common stockholders
    42,000,000       207,127 (b)(n)     60,290,193  
                         
              23,400,000 (m)        
              (21,000,000 )(m)        
              2,400,000 (m)        
              (2,400,000 )(m)        
              15,600,000 (n)        
              7,200 (n)        
              75,866 (n)        
 
The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements.

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UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
For the Six Months Ended June 30, 2009
 
                         
    Actual     Adjustments     Pro Forma  
    (In thousands, except share and per
 
    share amounts)  
 
Revenues and other operating income:
                       
Investment management fees
  $ 132,576     $       $ 132,576  
Net gains on securities held for deferred compensation
    712               712  
Foreign currency (losses)
    32               32  
                         
Total revenues and other operating income
    133,320               133,320  
Expenses
                       
Employee compensation and benefits
                       
Salaries, incentive compensation and benefits
    34,917       3,600 (a)     43,695  
              5,178 (b)        
              (c)        
Allocation of Class B profits interests
    21,472       (21,472 )(d)      
Change in redemption value of Class B profits interests
    35,538       (35,538 )(d)      
                         
Total employee compensation and benefits
    91,927       (48,232 )     43,695  
Interest expense
          1,350 (e)     1,658  
              308 (e)        
Shareholder servicing and marketing
    7,208               7,208  
General and administrative
    17,578       (1,614 )(f)     15,164  
              (800 )(g)        
                         
Total expenses
    116,713       (48,988 )     67,725  
                         
Operating income before income tax expense
    16,607       48,988       65,595  
Non-operating income (loss)
    (333 )     (h)     (333 )
                         
Income before income tax expense
    16,274       48,988       65,262  
Income tax expense
    7,874       21,388 (i)     21,146  
              (8,116 )(j)        
                         
Net income before non-recurring charges directly attributable to the transaction
    8,400       35,716       44,116  
Less: Net income attributable to non-controlling interests
          16,271 (k)     16,271  
                         
Net income attributable to Artio Global Investors before non-recurring charges directly attributable to the transaction
  $ 8,400     $ 19,445 (l)   $ 27,845  
                         


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    Actual     Adjustments     Pro Forma  
    (In thousands, except share and per
 
    share amounts)  
 
Basic net income per share attributable to Artio Global Investors Class A (pro forma only) and Class C common stockholders before non-recurring charges directly attributable to the transaction
  $ 0.20             $ 0.62  
                         
Diluted net income per share attributable to Artio Global Investors Class A (pro forma only) and Class C common stockholders before non-recurring charges directly attributable to the transaction
  $ 0.20             $ 0.61 (o)
                         
Cash dividends declared per Class A (pro forma only) and Class C basic share
  $ 0.33             $ 0.31  
                         
Weighted average shares used in basic net income per share attributable to Artio Global Investors Class A (pro forma only) and Class C common stockholders
    42,000,000       23,400,000 (m)     44,897,319  
                         
              (21,000,000 )(m)        
              2,400,000 (m)        
              (2,400,000 )(m)        
              7,200 (n)        
              75,866 (n)        
              414,253 (n)        
Weighted average shares used in diluted net income per share attributable to Artio Global Investors Class A and Class C common stockholders
    42,000,000       103,563 (b)(n)     60,600,882  
                         
              23,400,000 (m)        
              (21,000,000 )(m)        
              2,400,000 (m)        
              (2,400,000 )(m)        
              15,600,000 (n)        
              7,200 (n)        
              75,866 (n)        
              414,253 (n)        
 
The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements.

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Notes to Unaudited Pro Forma Consolidated Statement of Income
For the Year Ended December 31, 2008 and the Six Months Ended June 30, 2009
 
(a) Represents incremental salary and bonus expense payable to the Principals pursuant to new compensation arrangements in effect upon completion of this offering. Our historical compensation arrangements with each of our Principals included an annual salary of $0.4 million, as well as distributions associated with the allocation of each Principal’s profits interest. Upon the consummation of this offering, each of the Principals will enter into an employment agreement with us that provides for an annual base salary of not less than $0.5 million and an annual bonus for each calendar year, targeted at a minimum of $3.5 million annually for each of the first two years after the date of the completion of this offering. This adjustment represents the aggregate increase of $7.2 million in salaries, incentive compensation and benefits expense for the year ended December 31, 2008 and an increase of $3.6 million for the six months ended June 30, 2009.
 
(b) In connection with this offering, we expect to grant 7,200 shares of fully-vested Class A common stock (subject to transfer restrictions) to our non-employee directors and 2,147,132 restricted stock units to our employees (other than our Principals), approximating $53.9 million in value assuming an initial offering price of $25.00 per share. Approximately $51.8 million of these securities will vest pro rata, on an annual basis, over a 5-year period from the date of grant, while approximately $2.1 million will vest no later than February 2010. This adjustment represents the increase in compensation expense associated with the amortization of these awards of $10.4 million in salaries, incentive compensation and benefits expense for the year ended December 31, 2008 and $5.2 million for the six months ended June 30, 2009. For purposes of the pro forma statements of income, we have excluded the impact of the $2.1 million charge for the securities that are expected to vest no later than February 2010, as that adjustment only occurs in the first year after the offering and not thereafter.
 
(c) In December 2007, in contemplation of this offering, we accelerated the vesting of the unvested portion of a deferred compensation arrangement for our Principals to December 2008 and made payments of $7.0 million to each of our Principals. Historically, the vesting of this plan was reflected as a compensation charge within the consolidated financial statements. We will no longer record compensation charges relating to this deferred compensation arrangement and this adjustment to eliminate this expense represents an aggregate decrease of $8.9 million in salaries, incentive compensation and benefits expense for the year ended December 31, 2008 and has no impact for the six months ended June 30, 2009.
 
(d) Immediately prior to this offering, each of our Principals will contribute his interests in Artio Global Management LLC to Artio Global Holdings LLC and we will amend and restate Artio Global Holdings’ operating agreement to, among other things, modify its capital structure by creating a single new class of units called “New Class A Units”, approximately 70% of which will be issued to us and approximately 15% of which will be issued to each of our Principals, in each case, upon receipt of those contributions, and before giving effect to the transactions described herein (following these transactions, we will own approximately 74% and the Principals will each own approximately 13%). We will also issue shares of Class B common stock to each Principal in an amount equal to the number of New Class A Units held by such Principal. Accordingly, we will no longer record as a compensation expense the allocation of income relating to the profits interests of the Principals or changes in the redemption value of each Principal’s Class B profits interests. Upon completion of this offering, each of our Principals will be fully vested in his New Class A Units of Artio Global Holdings and our Class B common stock. This adjustment represents the aggregate decrease of $54.6 million and $35.5 million in change in redemption value of our Principals’ profits interests for the year ended December 31, 2008 and six months ended June 30, 2009, respectively, and the aggregate decrease of $76.1 million and $21.5 million in allocation of profits interests to our Principals for the year ended December 31, 2008 and six months ended June 30, 2009, respectively.


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(e) Represents interest expense of $2.7 million and $1.4 million on our $60 million term debt facility, as well as the amortization of deferred financing costs and the commitment fee on our $50 million revolving credit facility of $0.6 million and $0.3 million for the year ended December 31, 2008 and six months ended June 30, 2009, respectively. Borrowings under our term debt facility will bear interest at a rate equal to, at our option, (i) LIBOR plus 300 basis points when our consolidated leverage ratio (as defined in the credit facility agreement) is less than or equal to 1.0 to 1.0 (“pricing tier 1”), 350 basis points when our consolidated leverage ratio is less than or equal to 1.5 to 1.0 but greater than 1.0 to 1.0 (“pricing tier 2”) and 400 basis points when our consolidated leverage ratio is greater than 1.5 to 1.0 (“pricing tier 3”) or (ii) the “base rate” (calculated as the highest of (x) the federal funds rate plus 50 basis points per annum, (y) the rate of interest per annum publicly announced from time to time by the administrative agent under our term debt facility as its prime rate (the “prime rate”) and (except under certain circumstances) (z) LIBOR plus 100 basis points) plus 200 basis points under pricing tier 1; 250 basis points under pricing tier 2 and 300 basis points under pricing tier 3. Interest is payable on our term debt facility in arrears (x) at our option, on a one-, two- or three-month basis, if related to a LIBOR borrowing or (y) quarterly, in the case of a base rate borrowing. The interest rate is assumed to be 4.5% for purposes of determining interest expense in the pro forma consolidated statement of income. A 1/4% change in interest rates would change interest expense by $0.2 million per year. Financing costs of $1.1 million, or 1.0% of both the $60 million term debt and $50 million revolving credit facility, and will be paid from the proceeds of the debt and be amortized over three years. The annual commitment fee on our $50.0 million revolving credit facility is 50 basis points under pricing tier 1; 60 basis points under pricing tier 2 and 75 basis points under pricing tier 3.
 
(f) Represents license fees paid to our parent, Julius Baer Holding Ltd., that will not be payable after this offering. This adjustment represents an aggregate decrease of $6.4 million in general and administrative costs for the year ended December 31, 2008 and a decrease of $1.6 million for the six months ended June 30, 2009.
 
(g) We have incurred expenses that are directly associated with this offering and are not expected to recur. Because these expenses are non-recurring, we have eliminated them. The result of this adjustment is an aggregate decrease in general and administrative costs of $8.4 million and $0.8 million for the year ended December 31, 2008 and six months ended June 30, 2009, respectively.
 
(h) We will earn reduced interest income as a result of significantly lower cash balances following the cash distribution to our parent. This adjustment represents the estimated decrease in non-operating income of $3.1 million for the year ended December 31, 2008 and has no impact for the six months ended June 30, 2009, calculated by adjusting non-operating income to reflect a very low cash balance. Although we had significant investable cash balances during the six months ended June 30, 2009, our interest income for the period amounted to $0.2 million as a result of low interest rates as well as our decision to leave our corporate cash balances in our operating account, which had unlimited insurance from the Federal Deposit Insurance Corporation, but earned no interest. Offsetting the interest income earned was $0.5 million of mark-to-market losses on U.S. Treasuries.


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(i) Reflects the income tax expense relating to the adjustments set forth above. This adjustment relates to the year ended December 31, 2008:
 
                 
    Pro Forma
     
    Footnote Reference      
 
Increase/(decrease) in pre-tax income:
               
Incremental increase in salary and incentive compensation expense
    (a )     $(7 .2) million
Increase in compensation expense associated with share grants to employees
    (b )     (10 .4)
Elimination of deferred compensation charge
    (c )     8 .9
Elimination of compensation expense associated with the allocation of income relating to profits interest
    (d )     76 .1
Elimination of compensation charge associated with the changes in redemption value of our Principals’ profits interests
    (d )     54 .6
Increased expenses due to interest costs, commitment fee as well as amortization of deferred financing costs
    (e )     (3 .3)
Elimination of license fees expense that will be no longer payable to our Parent
    (f )     6 .4
Reduction in general and administrative costs associated with offering-related expenses
    (g )     8 .4
Reduction in non-operating income associated with lower investable cash balances
    (h )     (3 .1)
                 
Increase in pre-tax income
            $130 .4 million
Effective tax rate
            43 .7%*
                 
Tax effect
            $56 .9 million
                 
 
 
* Effective tax rate utilized represents the incremental tax rate for the year ended December 31, 2008.


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This adjustment relates to the six months ended June 30, 2009:
 
                 
    Pro Forma
     
    Footnote Reference      
 
Increase/(decrease) in pre-tax income:
               
Incremental increase in salary and incentive compensation expense
    (a )     $(3 .6) million
Increase in compensation expense associated with share grants to employees
    (b )     (5 .2)
Elimination of deferred compensation charge
    (c )      
Elimination of compensation expense associated with the allocation of income relating to our Principals’ profits interests
    (d )     21 .5
Elimination of compensation charge associated with the changes in redemption value of our Principals’ profits interests
    (d )     35 .5
Increased expenses due to interest costs as well as amortization of deferred financing costs
    (e )     (1 .7)
Elimination of license fees expense that will be no longer payable to our Parent
    (f )     1 .6
Reduction in general & administrative costs associated with offering-related expenditure
    (g )     0 .8
                 
Increase in pre-tax income
            $48 .9 million
Effective tax rate
            43 .7%*
                 
Tax effect
            $21 .4 million
                 
 
 
* Effective tax rate utilized represents the incremental tax rate for the six months ended June 30, 2009.
 
(j) Subsequent to this offering, we expect that our financial statements will reflect a significant reduction in our effective income tax rate, which we define as income tax expense divided by income before income tax expense, as a result of the reclassification of our Principals’ economic interests in Artio Global Management from Class B profits interests to non-controlling interests. The non-controlling interests are treated as partnership interests for U.S. federal income tax purposes and, therefore, the federal and state tax liabilities associated with the income allocated to such interests are the responsibility of the Principals and not us. The financial statement presentation requirements of U.S. generally accepted accounting principles mandate that income before income tax expense include the income attributable to us as well as to our Principals. Because income tax expense excludes U.S. federal and state taxes for the income attributable to each of our Principals, but includes each Principal’s portion of New York City Unincorporated Business Tax, the result should be, for financial statement presentation purposes, a significantly lower effective tax rate. As each Principal’s non-controlling interests are exchanged into shares of our Class A common stock, we expect, for financial statement presentation purposes, that our effective income tax rate will increase because more income from Artio Global Holdings will be attributable to us, and therefore we will be responsible for the tax liabilities on a greater proportion of the income before income tax expense. This adjustment represents an aggregate decrease in income tax expense of $32.1 million for the year ended December 31, 2008 and $8.1 million for the six months ended June 30, 2009.


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(k) The New Class A Units in Artio Global Holdings that are owned by our Principals will be considered non-controlling interests for financial accounting purposes. The amount of non-controlling interests represents the proportional interest in the pro forma income of Artio Global Holdings owned by each of our Principals, net of New York City Unincorporated Business Tax. This adjustment amounted to $61.8 million for the year ended December 31, 2008 and $16.3 million for the six months ended June 30, 2009. The amount of the non-controlling interest, from a Statement of Income perspective, can be derived by multiplying the income before income tax expense, on the Statement of Income, by the Principals’ aggregate pro forma interest in Artio Global Management of 26.0% for the year ended December 31, 2008 and 25.8% for the six months ended June 30, 2009, and reducing the result by our operating subsidiary’s effective rate of New York City Unincorporated Business Tax of 3.3%.
 
(l) The pro forma adjustments made to the unaudited pro forma consolidated statement of income reflect only adjustments which will have a continuing impact on our results of operations. The following charges therefore are reflected only in the unaudited pro forma consolidated statement of financial position (as decreases to retained earnings) as such charges will be incurred at the time of the reorganization transactions and are not expected to have a continuing impact on our results of operations after the transactions.
 
                 
          Amount Reflected in
 
    Pro Forma
    June 30, 2009
 
    Footnote Reference
    Unaudited Statement
 
    for Statement of
    of Financial
 
    Financial Position     Position Information  
    (In millions)  
 
Compensation expense relating to acceleration of the vesting of our Principals’ interests and establishment of a tax receivable agreement with our Principals
    (d )   $ (312.2 )
De-recognition of deferred tax asset
    (d )     (103.9 )
                 
Total non-recurring charges
          $ (416.1 )
                 
 
No tax was computed on the compensation expense adjustment of $312.2 million, as the deferred tax asset was to be de-recognized as part of the transaction.
 
The amounts set forth above exclude the $2.1 million of charges reflecting the grant of restricted stock units to employees (other than our Principals), more fully discussed in footnote (b) to the pro forma statement of income, that will vest no later than February 2010.
 
(m) New investors in this offering will own shares of our Class A common stock. The pro forma effect of this offering and the repurchase of shares of Class C common stock from Julius Baer Holding Ltd. and shares of Class A common stock from our Principals are:
 
  •  the issuance of 23.4 million shares of Class A common stock;
 
  •  the exchange by each of our Principals of 1.2 million New Class A Units (together with the corresponding shares of Class B common stock) for 1.2 million shares of Class A common stock; and
 
  •  the repurchase and retirement by us of 21.0 million shares of Class C common stock owned by Julius Baer Holding Ltd. and the repurchase by us of 1.2 million shares of Class A common stock from each of our Principals.
 
(n) Assumes exchange and issuance of the following securities, which would have a dilutive impact on earnings per share:


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  •  the exchange by each of our Principals of an additional 7.8 million New Class A Units (together with the corresponding shares of Class B common stock) for an additional 7.8 million shares of Class A common stock; and
 
  •  the issuance of approximately 7,200 shares of fully-vested Class A common stock subject to transfer restrictions to our non-employee directors and 2,147,132 restricted stock units to our employees (other than our Principals) in connection with this offering, which generally vest over a five-year period. Of the total grant of stock and restricted stock units, 7,200 shares are entitled to non-forfeitable dividends and as such are considered participating securities. These securities are included in computing basic earnings per share. Additionally, 75,866 restricted stock units issued to employees will vest no later than February 2010 and are therefore included within the calculation of basic earnings per share for the year ended December 31, 2008 and six months ended June 30, 2009. The remaining 2,071,266 restricted stock units will vest pro rata over a five-year period, 414,253 shares of which are included within the calculation of basic earnings per share for the six months ended June 30, 2009. Using the treasury stock method, the dilutive impact of the stock subject to transfer restrictions and restricted stock units issuance to weighted average shares used in diluted earnings per share would be 207,127 shares for the year ended December 31, 2008 and 103,563 shares for the six months ended June 30, 2009. The assumptions underlying the computation of the dilutive shares are as follows:
 
                 
    Unaudited Pro forma
    Unaudited Pro Forma
 
    For the Year Ended
    For the Six Months
 
    December 31,
    Ended June 30,
 
    2008     2009  
 
Market price equals initial public offering price
  $ 25.00     $ 25.00  
Stock subject to transfer restrictions (other than participating securities) issued to our non-employee directors and restricted stock units issued to employees assumed to vest (other than our Principals)
    2,071,266       1,657,013  
Shares assumed repurchased under the treasury stock method
    1,864,139       1,553,450  
                 
Dilutive impact as of the end of the period
    207,127       103,563  
                 
 
(o) For purposes of calculating diluted pro forma, as adjusted, net income per share attributable to Class A and Class C common stockholders, we are required to assume the full exchange of our Principals’ Class A Units into shares of our Class A common stock if the exchange would be dilutive to earnings per share. Because the assumed full exchange would be dilutive to earnings per share, it is also necessary to recast the pro forma statement of income to reflect the elimination of the non-controlling interests and resulting increase in our effective tax rate. As discussed in footnotes (j) and (k) above, the non-controlling interests are treated as partnership interests for U.S. federal income tax purposes and, therefore, the federal and state liabilities associated with the income allocated to such interests are the responsibility of the Principals and not us. Income tax expense on the unaudited pro forma consolidated statement of income excludes U.S. federal and state taxes for the income attributable to each of our Principals except for each Principal’s portion of New York City Unincorporated Business Tax of 3.3%. Such income is assumed to be taxed at our overall incremental effective tax rate. Recast diluted pro forma net


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income per share attributable to Class A and Class C common stockholders for the year ended December 31, 2008 and the six months ended June 30, 2009 follow:
 
                 
    Unaudited Pro forma
    Unaudited Pro Forma
 
    For the Year Ended
    For the Six Months Ended
 
    December 31,
    June 30,
 
    2008     2009  
    (In thousands, except share and per share amounts)  
 
Net income attributable to Artio Global Investors
  $ 104,865     $ 27,845  
Add: Income tax expense
    79,622       21,146  
Net income attributable to non-controlling interests
    61,836       16,271  
                 
Income before income tax expense
    246,323       65,262  
Less: Artio Global Investors income tax expense, as adjusted
    107,545       28,493  
                 
Net income, as adjusted, attributable to Artio Global Investors, excluding the impact of non-controlling interests
  $ 138,778     $ 36,769  
                 
Diluted, as adjusted, net income per share attributable to Artio Global Investors Class A and Class C common stockholders
  $ 2.30     $ 0.61  
                 
Weighted average shares used in diluted net income per share attributable to Artio Global Investors Class A and Class C common stockholders
    60,290,193       60,600,882  
                 


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UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As of June 30, 2009
 
                         
    Actual     Adjustments     Pro Forma  
    (In thousands, except shares and per share amounts)  
 
Assets
                       
Cash and cash equivalents
  $ 111,324     $ 58,900  (a)   $ 17,652  
              (141,211 )(b)        
              552,240  (c)        
              (56,640 )(c)        
              (495,600 )(c)        
              (11,361 )(d)        
Marketable securities, at fair value
    28,622       (20,000 )(b)     8,622  
Fees receivable and accrued fees, net of allowance for doubtful accounts
    46,309               46,309  
Deferred taxes, net
    107,335       (103,863 )(d)     42,792  
              39,320  (e)        
Property and equipment, net
    9,290               9,290  
Other assets
    3,265       1,100  (a)     4,365  
                         
Total assets
  $ 306,145     $ (177,115 )   $ 129,030  
                         
Liabilities and stockholder’s equity (deficit)
                       
Long-term debt
  $     $ 60,000  (a)   $ 60,000  
Accrued compensation and benefits
    264,253       312,184  (d)     15,464  
              (549,612 )(d)        
              (11,361 )(d)        
Accounts payable and accrued expenses
    8,586               8,586  
Due to affiliates
    972       40,100  (b)     41,072  
Amounts payable pursuant to tax receivable agreement
          33,422  (e)     33,422  
Other liabilities
    4,689               4,689  
                         
Total liabilities
    278,500       (115,267 )     163,233  
                         
Artio Global Investors stockholder’s equity (deficit)
                       
Common stock
                       
Class A common stock — $0.001 par value per share, none authorized and outstanding on an actual basis; and 500,000,000 shares authorized, 25,807,200 shares issued and 23,407,200 outstanding on a pro forma basis
          24  (c)     26  
              2  (c)        
Class B common stock — $0.001 par value per share, none authorized and outstanding on an actual basis; and 50,000,000 shares authorized, 15,600,000 shares issued and outstanding on a pro forma basis
          18  (f)     16  
              (2 )(c)        
Class C common stock — $0.01 par value per share, 210,000,000 authorized; 42,000,000 issued and outstanding on an actual basis (after giving retroactive effect to a 10,500:1 stock split); 21,000,000 shares issued and outstanding on a pro forma basis
    420       (210 )(c)     210  


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    Actual     Adjustments     Pro Forma  
    (In thousands, except shares and per share amounts)  
 
Additional paid-in capital
    17,930       552,216  (c)     640,588  
              (495,390 )(c)        
              549,612  (d)        
              5,898  (e)        
              (18 )(f)        
              10,340  (g)        
Retained earnings (deficit)
    9,295       (201,311 )(b)     (608,063 )
              (312,184 )(d)        
              (103,863 )(d)        
Treasury Stock (2,400,000 shares of Class A common stock on a pro forma basis), at cost
          (56,640 )(c)     (56,640 )
                         
Total Artio Global Investors stockholder’s equity (deficit)
    27,645       (51,508 )     (23,863 )
Non-controlling interests
          (10,340 )(g)     (10,340 )
                         
Total equity (deficit)
    27,645       (61,848 )     (34,203 )
                         
Total liabilities and stockholder’s equity (deficit)
  $ 306,145     $ (177,115 )   $ 129,030  
                         
 
The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements.

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Notes to Unaudited Pro Forma Consolidated Statement of Financial Position
As of June 30, 2009
 
(a) Represents Artio Global Holdings’ incurrence, in connection with this offering, of $60.0 million of indebtedness, which increases cash by $58.9 million after the payment of $1.1 million of structuring fees. The structuring fees will be recorded as an asset within “other assets” in our statement of financial position and amortized over time.
 
(b) Represents a $201.3 million distribution to Julius Baer Holding Ltd. which is comprised of the stockholder’s equity of the company, funded from $141.2 million of cash and $20.0 million of marketable securities, plus an additional amount of $40.1 million that will be payable within one year of the completion of this offering, which is recorded as “due to affiliates”.
 
(c) New investors in this offering will own shares of our Class A common stock. We expect that the net proceeds from this offering will be $552.2 million, which reflects a reduction of $32.8 million relating to the underwriting discount. The pro forma effect of this offering and the repurchase of shares of Class C common stock from Julius Baer Holding Ltd. and shares of Class A common stock from each of our Principals, which also affects the par values of the applicable shares of common stock and paid-in capital, are:
 
                 
          Impact to
 
          Stockholder’s
 
(In thousands except shares and per share amounts)   Per Share     Equity  
 
Class A common stock (at par value):
               
Sale of 23,400,000 shares of Class A common stock in this offering(1)
  $ 0.001     $ 24  
Exchange by each Principal of 1,200,000 New Class A Units and corresponding shares of Class B common stock for shares of Class A common stock(2)
    0.001       2  
Class B common stock (at par value):
               
Exchange by each Principal of 1,200,000 New Class A Units and corresponding shares of Class B common stock for shares of Class A common stock(2)
    0.001       (2 )
Class C common stock (at par value):
               
Repurchase of 21,000,000 shares of Class C common stock owned by Julius Baer Holding Ltd.(3)
    0.01       (210 )
Additional paid-in capital (at cost):
               
Sale of 23,400,000 shares of Class A common stock in this offering(1)
    23.60       552,216  
Repurchase of 21,000,000 shares of Class C common stock owned by Julius Baer Holding Ltd.(3)
    23.60       (495,390 )
Treasury Stock (at cost):
               
Repurchase from each principal of 1,200,000 shares of Class A common stock(3)
    23.60       (56,640 )
 
 
(1) Reflects the recognition of the net proceeds from the sale of 23.4 million shares in this offering of $552.2 million, after deducting underwriting discounts of $32.8 million, assuming an initial public offering price of $25.00 per share of Class A common stock, the midpoint of the price range set forth on the cover of this prospectus, less $1.40 underwriting discount per share. The net proceeds are shown as an increase in our paid-in capital and common stock on the statement of financial position.
 
(2) Reflects the exchange by each of our Principals of 1.2 million New Class A Units (together with the corresponding shares of Class B common stock) for shares of Class A common stock.


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(3) Reflects our use of the net proceeds of this offering to repurchase and retire 21.0 million shares of Class C common stock owned by Julius Baer Holding Ltd. and to repurchase, and record as treasury stock, 1.2 million shares of Class A common stock from each of our Principals at a price equal to the per share net amount raised in the offering.
 
(d) In connection with this offering, each of our Principals will exchange his Class B profits interests in Artio Global Management for New Class A Units in Artio Global Holdings. Upon such exchange, we will no longer have an obligation to repurchase the Class B profits interests of each Principal and each Principal will no longer have the ability to put his interests to us. As a result of these changes to the operating agreement of Artio Global Management, the complete vesting of each Principal’s Class B profits interests and the tax receivable agreement we will enter into with our Principals in connection with this offering, we will incur a compensation charge of $312.2 million, which is charged against retained earnings. The portion of the compensation charge associated with the vesting of the Class B profits interests differs from the total vested and unvested amount reflected in the historical financial statements. The amount reflected in the historical financial statements was based on a model specified in the operating agreement of Artio Global Management, which was believed, in the absence of direct market inputs, to reflect the fair value of the Class B profits interests, while the amount reflected in the pro forma statement of financial position is based on the assumed offering price of the shares of our Class A common stock in this offering, which totals $212.6 million as well as the value of the tax receivable agreement which totals $99.6 million. As a result, the liability we have historically accrued relating to the redemption value of the profits interests of our Principals, as of June 30, 2009, including the charge mentioned above which total $549.6 million, will be reclassified to additional paid-in capital within the consolidated statement of financial position. No deferred tax asset will be computed on the charge and the deferred tax asset of $103.9 million that was historically recognized with respect to the redemption value of the profits interests of our Principals, will be de-recognized upon the completion of this offering and is reflected in the pro forma statement of financial condition as a reduction in stockholder’s equity. In connection with this offering, we will pay out to our Principals the unpaid balance of their aggregate allocation of profits interests, as of immediately prior to this offering. This amount was $11.4 million as of June 30, 2009.
 
(e) We are required to make payments under the tax receivable agreement that we will enter into in connection with this offering. The exchange by each of our Principals of 1.2 million New Class A Units for shares of our Class A common stock on a one-for-one basis is expected to result in an increase in the tax basis of the tangible and intangible assets that would not otherwise have been available. This increase in tax basis will increase, for tax purposes, our depreciation and amortization expense and will therefore reduce the amount of tax that we would be required to pay in the future. The pro forma amount for such increase in our deferred tax assets totals $39.3 million as of June 30, 2009 based on an assumed share price of $25.00 and an incremental tax rate of 43.7%. Accordingly, pursuant to the tax receivable agreement, we will agree to pay each Principal 85% of the actual reduction in U.S. federal, state and local tax payments that we realize as a result of this increase in tax basis created by such Principal’s exchanges. The obligation to pay 85% of the actual reduction in tax payments to our Principals is an obligation of the company. The pro forma liability of $33.4 million payable under this tax receivable agreement is shown as a liability in our statement of financial position as of June 30, 2009. The net deferred tax asset, after payment under this tax receivable agreement, amounted to $5.9 million and is shown as an increase to paid-in capital within the pro forma statement of financial position. Future cash savings and related payments to our Principals in respect of subsequent exchanges would be in addition to these amounts.
 
Any payments made under the tax receivable agreement may give rise to additional tax benefits and additional potential payments under the tax receivable agreement. See “Relationships and Related Party Transactions — Tax Receivable Agreement.” We anticipate that we will account for the income tax effects and corresponding tax receivable agreement effects resulting from the


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future taxable exchanges by our Principals of New Class A Units for shares of our Class A common stock by recognizing an increase in our deferred tax assets, based on enacted tax rates at the date of the exchange. Further, we will evaluate the likelihood that we will realize the benefit represented by the deferred tax asset and, to the extent that we estimate that it is more likely than not that we will not realize the benefit, we will reduce the carrying amount of the deferred tax asset with a valuation allowance. We expect to record the estimated amount of the increase in deferred tax assets, net of any valuation allowance, directly in paid-in capital and we will record a liability for the expected amount we will pay our Principals under the tax receivable agreement (85% of the actual reduction in tax payments), estimated using assumptions consistent with those used in estimating the net deferred tax assets.
 
The computation of the deferred tax benefit takes into account the aforementioned additional tax benefits and additional potential payments made under the tax receivable agreement. The computation of the total deferred tax benefit is as follows:
 
         
Fair value of 1.2 million shares sold upon exchange of New Class A Units by each of the Principals
    $56 .6 million
Assumed future effective tax rate
    43 .7%
         
Tax deduction
    24 .7
Additional deferred tax benefits
    14 .6
         
Total deferred tax benefit
    $39 .3 million
         
 
Therefore, at the date of an exchange of New Class A Units for shares of our Class A common stock, the net effect of the accounting for income taxes and the tax receivable agreement on our financial statements will be a net increase to paid-in capital of 15% of the estimated realizable tax benefit. The effect of subsequent changes in any of our estimates after the date of the exchange will be included in net income. Similarly, the effects of changes in enacted tax rates and in the applicable tax laws will be included in net income.
 
(f) Represents the issuance of 18 million shares of Class B common stock, in the aggregate, to our Principals in the reorganization.
 
(g) Represents the establishment of a non-controlling interest as a result of the reclassification of our Principals’ economic interests held in Artio Global Management from Class B profits interests to non-controlling interests (representing our Principals’ approximately 26% pro forma interest in Artio Global Holdings, which exclude the dilutive impact of the unvested portion of the 2,147,132 restricted stock units that we expect to grant to our employees (other than our Principals) in connection with this offering, totaling 1,657,012, which generally vest over a five-year period).


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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
 
The following selected historical consolidated financial data of Artio Global Investors Inc. and subsidiaries should be read in conjunction with, and are qualified by reference to, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the historical consolidated financial statements and notes thereto included elsewhere in this prospectus. In accordance with Securities and Exchange Commission’s Staff Accounting Bulletin Topic 4:C, the selected consolidated statement of income data for the years ended December 31, 2004, 2005, 2006, 2007 and 2008 and for the six months ended June 30, 2008 and 2009 give retroactive effect to a 10,500:1 stock split that was effected as of August 28, 2009. The selected consolidated statement of income data for the years ended December 31, 2006, 2007, and 2008 and the selected consolidated statement of financial position data as of December 31, 2007 and 2008 have been derived from our audited consolidated financial statements, included elsewhere in this prospectus. The selected consolidated statement of income data for the six months ended June 30, 2008 and 2009 and the consolidated statement of financial position as of June 30, 2009 have been derived from our unaudited interim consolidated financial statements. These unaudited interim consolidated financial statements have been prepared on substantially the same basis as our audited consolidated financial statements and include all adjustments that we consider necessary for a fair presentation of our consolidated results of operations and financial condition for the periods presented therein. Our results for the six months ended June 30, 2008 and 2009 are not necessarily indicative of our results for a full fiscal year.
 
                                                         
          Six Months
 
          Ended June 30,
 
    Year Ended December 31,     (unaudited)  
    2004     2005     2006     2007     2008     2008     2009  
    (In thousands, except per share amounts)  
 
Statement of Income Data:
                                                       
Revenues and other operating income Investment management fees
  $ 106,282     $ 201,285     $ 300,432     $ 445,558     $ 425,003     $ 243,507     $ 132,576  
Net gains (losses) on assets held for deferred compensation
                            (2,856 )     (601 )     712  
Foreign currency gains (losses)
                      186       (101 )     (21 )     32  
                                                         
Total revenues and other operating income
    106,282       201,285       300,432       445,744       422,046       242,885       133,320  
Expenses
                                                       
Employee compensation and benefits Salaries, incentive compensation and benefits
    31,519       52,878       69,677       92,277       92,487       52,854       34,917  
Allocation of Class B profits interests
    13,704       33,748       53,410       83,512       76,074       43,991       21,472  
Change in redemption value of Class B profits interests
          23,557       46,932       76,844       54,558       36,433       35,538  
                                                         
Total employee compensation and benefits
    45,223       110,183       170,019       252,633       223,119       133,278       91,927  
Shareholder servicing and marketing
    7,026       15,130       20,134       25,356       23,369       12,725       7,208  
General and administrative
    24,498       24,590       31,510       50,002       62,833       34,665       17,578  
                                                         
Total expenses
    76,747       149,903       221,663       327,991       309,321       180,668       116,713  
                                                         
Operating income before income tax expense
    29,535       51,382       78,769       117,753       112,725       62,217       16,607  
Non-operating income (loss)
    460       1,391       3,288       7,034       3,181       1,397       (333 )
                                                         
Income from continuing operations before income tax expense
    29,995       52,773       82,057       124,787       115,906       63,614       16,274  
Income tax expense
    13,617       24,123       38,514       58,417       54,755       31,992       7,874  
                                                         
Income from continuing operations
    16,378       28,650       43,543       66,370       61,151       31,622       8,400  
Income (loss) from discontinued operations, net of taxes(1)
    (3,396 )     (2,544 )     1,231       1,616                    
                                                         
Net income
  $ 12,982     $ 26,106     $ 44,774     $ 67,986     $ 61,151     $ 31,622     $ 8,400  
                                                         
 


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          Six Months
 
          Ended June 30,
 
    Year Ended December 31,     (unaudited)  
    2004     2005     2006     2007     2008     2008     2009  
 
Basic and diluted net income per share from continuing operations(2)
  $ 0.39     $ 0.68     $ 1.04     $ 1.58     $ 1.46     $ 0.75     $ 0.20  
Basic and diluted net income (loss) per share from discontinued operations, net of taxes(2)
    (0.08 )     (0.06 )     0.03       0.04                    
                                                         
Basic and diluted net income per share(2)
  $ 0.31     $ 0.62     $ 1.07     $ 1.62     $ 1.46     $ 0.75     $ 0.20  
                                                         
Cash dividends declared per basic share(2)
  $     $ 0.71     $     $ 1.43     $ 2.79     $ 1.95     $ 0.33  
                                                         
Weighted average Class C common shares used in basic and diluted net income per share(2)
    42,000       42,000       42,000       42,000       42,000       42,000       42,000  
                                                         
 
                                                 
          As of
 
          June 30,
 
    As of December 31,     (unaudited)  
    2004     2005     2006     2007     2008     2009  
    (In thousands)  
 
Statement of Financial Position Data:
                                               
Cash and cash equivalents
  $  28,892     $ 16,194     $ 61,055     $ 133,447     $ 86,563     $  111,324  
Assets of discontinued operations(1)
    20,239       22,508       11,722                    
Total assets
    99,132       121,214       244,704       355,355       319,476       306,145  
Accrued compensation and benefits
    28,216       68,880       138,087       245,245       268,925       264,253  
Long-term debt
                                   
Liabilities of discontinued operations(1)
    19,482       6,668       2,725                    
Total liabilities
    59,128       85,104       163,820       266,261       286,231       278,500  
Total stockholder’s equity
    40,004       36,110       80,884       89,094       33,245       27,645  
 
 
(1) Discontinued operations include the former broker-dealer and foreign exchange activities of our company. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — General Overview”.
 
(2) As recast to give retroactive effect to a 10,500:1 stock split that was effected as of August 28, 2009.
 
                                                         
          Six Months
 
          Ended
 
    Year Ended December 31,     June 30,  
    2004     2005     2006     2007     2008     2008     2009  
                (In millions)                    
 
Selected Unaudited Operating Data (excluding legacy activities):
                                                       
Assets under management(1)
  $  21,582     $  34,850     $  53,486     $  75,362     $  45,200     $  72,604     $  46,826  
Net client cash flows(2)
    10,784       8,633       7,582       12,150       1,930       4,991       973  
Market appreciation (depreciation)(3)
    3,282       4,635       11,054       9,726       (32,092 )     (7,749 )     653  
 
 
(1) Reflects the amount of money our clients have invested in our strategies as of the period-end date.
 
(2) Reflects the amount of money our clients have invested in our strategies during the period, net of outflows and excluding appreciation (depreciation) due to changes in market value.
 
(3) Represents the appreciation (depreciation) of the value of assets under our management during the period due to market performance and fluctuations in exchange rates.

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MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this prospectus.
 
The historical financial data discussed below reflect the historical results of operations and financial condition of Artio Global Investors Inc. and subsidiaries and do not give effect to our reorganization. See “Our Structure and Reorganization” and “Unaudited Pro Forma Consolidated Financial Information” included elsewhere in this prospectus for a description of our reorganization and its effect on our historical results of operations.
 
General Overview
 
Business
 
We are an asset management company that provides investment management services to institutional and mutual fund clients. We manage and advise proprietary funds, commingled institutional investment vehicles, institutional separate accounts and sub-advisory accounts. Our operations are based principally in the United States, while our assets under management are invested primarily outside the United States.
 
As a holding company, we conduct all of our business activities through our direct subsidiary Artio Global Holdings, an intermediate holding company that conducts no operations but holds our ownership interest in Artio Global Management, our operating subsidiary. In connection with this offering, Artio Global Holdings’ operating agreement will be amended and restated and we will be its sole managing member. Net profits, net losses and distributions, from cash generated from Artio Global Holdings and its subsidiaries, will be allocated and made to its members pro rata in accordance with the percentages of their respective equity interests. Accordingly, its net profits and net losses will be allocated, and distributions of the operating company will be made, approximately 74% to us and approximately 13% to each of our Principals, after giving effect to the transactions described herein. As sole managing member of Artio Global Holdings, we will continue to operate and control all of its business and affairs and will consolidate its financial results with ours. We will reflect the ownership interest of our Principals as a non-controlling interest in our statement of income and statement of financial condition. For more information on the pro forma impact of the reorganization and this offering, see “Unaudited Pro Forma Consolidated Financial Information”.
 
A significant portion of our current employee compensation and benefits expense relates to our Principals’ economic interests in the business. In May 2004, we granted Class B profits interests in Artio Global Management to our Principals, entitling them to a share of its future income. Subsequent to this offering, the costs of the Class B profits interests will no longer be reflected as compensation expense. The economic interests now represented by the Class B profits interests will be reflected as non-controlling interests.
 
Our historical consolidated financial results include, within discontinued operations, the former broker-dealer and foreign exchange activities of our company. Following the sale by Julius Baer Holding Ltd. of the U.S. private banking business in 2005 and equity brokerage businesses in 2006, we withdrew our broker-dealer registration. Our financial statements also include the results of our foreign exchange activities, conducted within Julius Baer Financial Markets LLC (“JBFM”), which was a wholly owned subsidiary of our company. This activity was initially transferred to our company from an affiliate in December 2005. On December 1, 2007, JBFM was distributed to Julius Baer Holding Ltd., our parent, and is no longer a subsidiary of our company and is therefore reported within discontinued operations. The impact of these activities is described in the notes to our consolidated financial statements, which are included elsewhere in this prospectus.
 
In addition, our historical financial statements also contain legacy activities. A legacy alternative fund-of-funds business was transferred to an affiliate of our parent in 2006, and a former hedge fund


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product was discontinued in 2008. The financial results of these legacy businesses did not satisfy the criteria for discontinued operations treatment because of the similarity to the business activities we currently conduct. They are therefore shown within the respective line items of the financial statements as part of continuing operations. In order to make comparisons more meaningful, we present certain information below excluding such legacy activities.
 
Economic Environment
 
As an investment manager we derive substantially all of our operating revenues from providing investment management services to our institutional and mutual fund clients; such revenues are driven by the amount and composition of our assets under management as well as our fee structure. Accordingly, our business results are highly dependent upon the prevailing global economic climate and its impact on the capital markets.
 
The global economic environment deteriorated sharply in 2008, particularly in the third and fourth quarters, with virtually every class of financial asset experiencing significant price declines and volatility. Several banks and other large financial institutions incurred significant asset valuation write-downs resulting in substantial losses and ultimately their failure, merger or conservatorship.
 
Investors lost confidence in the financial sector and a severe reduction in liquidity and credit availability spread rapidly throughout global credit markets. Heightened risk aversion among investors caused a “flight to quality,” lowering the yield on U.S. Treasury securities, and significantly widening corporate credit spreads. Furthermore, the U.S. dollar, aided by its reserve-currency status, strengthened against other major currencies as investors fled riskier assets. In order to calm financial markets, central governments intervened in traditional and non-traditional ways to ensure the stability of the banking system and continued availability of credit.
 
Global equity markets fell in 2008, particularly as the financial crisis intensified in the third and fourth quarters. For example, by year-end the MSCI All Country World Index (ex-US) was down 41% in local currency terms and 45% in U.S. dollar terms. In addition, equity market volatility reached extreme levels around the world, evidenced by dramatically higher average levels for the VSTOXX and VIX indices.
 
The sizeable decline in stock prices worldwide resulted in substantial withdrawals from equity funds during 2008 throughout the asset management industry. By the end of 2008, it was clear that the U.S. and other major economies were in recession, and despite the coordinated efforts of governments around the world to stabilize financial markets, volatility persisted. Economic conditions worsened in the first quarter of 2009 and, as a result, we continued to operate in a challenging business environment and the economic outlook remains uncertain for the remainder of the year. However, market conditions in the second quarter of 2009 improved, reflecting a more optimistic view of future economic recovery.


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The following table sets forth the effects that economic disruption has had on our business over the past six quarters:
 
                                                 
    Q1 2008     Q2 2008     Q3 2008     Q4 2008     Q1 2009     Q2 2009  
    (Dollars in millions)  
 
Assets under management at end of period(1)
  $  71,501     $  72,604     $  56,648     $  45,200     $  38,941     $  46,826  
Market appreciation (depreciation)(1)
    (6,712 )     (1,038 )     (14,917 )     (9,425 )     (6,481 )     7,134  
Gross client cash inflows(1)(2)
    5,934       4,848       2,912       3,557       2,945       3,178  
Gross client cash outflows(1)(2)
    (3,083 )     (2,707 )     (3,951 )     (5,580 )     (2,723 )     (2,427 )
                                                 
Net client cash inflows (outflows)(1)
    2,851       2,141       (1,039 )     (2,023 )     222       751  
Average assets under management for period(1)
    72,398       74,120       66,525       47,667       40,711       44,067  
Investment management fees
    116.8       126.7       107.6       73.9       62.8       69.8  
MSCI ACWI (ex-US) (US$)
    (9.1 )%     (1.1 )%     (21.9 )%     (22.3 )%     (10.7 )%     27.6 %
MSCI ACWI (ex-US) (local currency)
    (13.4 )%     (0.3 )%     (15.0 )%     (19.5 )%     (7.1 )%     18.7 %
S&P 500
    (9.4 )%     (2.7 )%     (8.4 )%     (21.9 )%     (11.0 )%     15.9 %
Barclays Capital Aggregate Bond
    2.2 %     (1.0 )%     (0.5 )%     4.6 %     0.1 %     1.8 %
Merrill Lynch Global High Yield
    (2.4 )%     1.9 %     (10.5 )%     (18.5 )%     5.1 %     25.3 %
 
 
(1) Excluding legacy activities.
 
(2) Gross client cash inflows and outflows, as well as transfers between funds, are tracked by information systems. We believe the information set forth above is accurate in all material respects, but such data is not subject to our internal controls over financial reporting. In addition, certain of our intermediaries elect to automatically reinvest all cash dividends in our investment vehicles and, to the extent any of such intermediary’s underlying investors do not elect dividend reinvestment but prefer cash, they cause such investor’s newly received shares to be redeemed. Accordingly, the gross flows data set forth above may overstate redemptions, although we do not believe the effect is material.


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Key Performance Indicators
 
Our management reviews our performance on a monthly basis, focusing on the indicators described below.
 
                                         
    For the Year Ended
       
    December 31,     For the Six Months Ended June 30,  
   
2006
   
2007
   
2008
   
2008
   
2009
 
    (Dollars in millions)  
 
Operating indicators(1)
                                       
AuM at end of period
  $ 53,486     $ 75,362     $ 45,200     $ 72,604     $ 46,826  
Average AuM for period(2)
    43,745       66,619       64,776       73,510       42,881  
Net client cash flows
    7,582       12,150       1,930       4,991       973  
Financial indicators
                                       
Investment management fees (dollars in thousands)
  $  300,432     $  445,558     $  425,003     $  243,507     $  132,576  
Effective fee rate (basis points)(3)
    68.7       66.9       65.6       66.3       61.8  
Operating margin(4)
    60.1 %     62.7 %     59.8 %     60.6 %     55.2 %
Compensation as a % of total revenues and other operating income(4)
    22.7 %     20.4 %     19.8 %     19.9 %     26.2 %
Effective tax rate
    46.9 %     46.8 %     47.2 %     50.3 %     48.4 %
 
 
(1) Excluding legacy activities.
 
(2) Average AuM for a period is computed on the beginning-of-month balance and all end-of-month balances in the period.
 
(3) The effective fee rate is computed by dividing annualized investment management fees by average AuM for the period.
 
(4) Operating margin is operating income before income taxes, divided by total revenues and other operating income. In this computation we exclude compensation expenses for allocation of Class B profits interests, change in redemption value of Class B profits interests, and deferred compensation relating to our Principals ($1.4 million, $1.4 million, $8.9 million, $4.4 million and $- million in the periods presented). None of such expenses will continue after this offering.
 
Operating Indicators
 
Our revenues are driven by the amount and composition of our assets under management. As a result, management reviews various aspects of our assets under management. Average assets under management is the average balance of our month-end assets under management for a period of time. We believe this measure is important because it allows us to analyze the change in the size of assets under management over a period of time, which results in a more useful comparison. It also represents a better indication of our revenue stream as our fees are calculated based on daily, monthly, or quarterly assets under management average or periodic balances. Net client cash flows represent sales either to new clients or existing clients, less redemptions. Our net client cash flows are driven by the results of our investment strategies, competitiveness of fee rates, the success of our marketing and client service efforts, and the state of the overall equity and fixed income markets.


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Substantial declines in global equity markets, particularly in the third and fourth quarters of 2008, and a strengthening of the U.S. dollar resulted in our assets under management at year-end 2008 being 40% lower than at the start of the year. In addition, the poor performance of global equity markets, coupled with forecasts of a global recession, discouraged investors from entering or increasing their exposure to equity markets. Despite these challenging market conditions, we had positive net client cash flows of $1.9 billion for the full year 2008. This continues a trend where our growth has come mostly from net client cash inflows. The CAGR of our assets under management was 43.2% from December 31, 2003 to December 31, 2008 while the CAGR of the MSCI All Country World Index (ex-US) was 2.6% over the same period.
 
Economic conditions worsened in the first quarter of 2009. However, market conditions in the second quarter of 2009 improved slightly, reflecting a more optimistic view of future economic recovery. As a result, our assets under management increased 4% in the first half of 2009. Net client cash inflows totaled $973 million in the first half of 2009.
 
While net client cash flows have recently correlated with market sentiment regarding economic conditions, net client cash flows reflect specific client actions, such as rebalancing of portfolios or decisions to switch portfolio managers and can therefore be somewhat volatile. For example, although we experienced positive net client cash flows in the first seven months of 2009, our largest sub-advisory client has indicated to us that they are likely to make a partial redemption of their account and redeem approximately $730 million in October 2009. If we do not have offsetting client cash flows, our net client cash flows and our average assets under management for the month or the quarter may decrease compared to prior periods.
 
Financial Indicators
 
Management reviews certain financial ratios to monitor progress with internal forecasts, understand the underlying business, and compare our firm with others in our industry. The effective fee rate represents the annualized ratio of investment management fees as a percentage of average assets under management, i.e., the amount of investment management fees we earn for each dollar of client assets we manage. We use this information to evaluate the contribution to revenue of our products. Operating margin represents pre-tax operating income from continuing operations (excluding the allocation of Class B profits interests to our Principals, the change in the redemption value of our Principals’ Class B profits interests, and deferred compensation to the Principals) divided by total revenues and other operating income, and is an important indicator of our profitability and the efficiency of our business model. We exclude these expense items relating to our Principals in calculating our operating margin because they are expected to be replaced by non-controlling interests as part of our planned restructuring. Other ratios shown in the table above allow us to manage expenses in comparison with our revenues.
 
Our effective fee rate for the six months ended June 30, 2009 decreased from prior periods due to a change in the composition of our assets under management, which was driven primarily by the market impact on the value of the assets under management in our International Equity strategies, which are our highest margin strategies. Our International Equity strategies represented approximately 90% of assets under management as of June 30, 2008 and approximately 84% of assets under management as of June 30, 2009. Also, we earn higher investment management fees from our proprietary funds than our other investment vehicles. Our proprietary funds have declined from 50% of our assets under management as of December 31, 2006 to 43% of our assets under management as of June 30, 2009.
 
Our operating margin in 2008 was lower than in 2007 because revenues flattened and then declined sharply in the latter half of the year, while general and administrative expenses increased as we prepared for our initial public offering. A significant amount of our expenses are variable in nature. We monitor our cost base to ensure proper alignment with revenues by reducing expenses in light of downward pressure on revenues, while at the same time seeking to maintain our investment in the


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business for the long term and supporting existing client relationships. Although we were able to reduce expenses as revenues declined, the significant decline in revenues had the effect of reducing operating margin.
 
Our operating margin in the first half of 2009 declined further as revenues declined faster than expenses. We anticipate continued pressure on operating margins in the second half of 2009, as we expect revenues to be materially lower in 2009 than in 2008. Although the economic events of the past year have severely impacted our business, we continued to generate strong operating margins, which we believe reflects the strength of our franchise and the variability of our expense base.
 
Assets under Management
 
Changes to our operating results from one period to another are primarily due to changes in our assets under management, changes in the distribution of our assets under management among our investment products and investment strategies, and the effective fee rates on our products.
 
The amount and composition of our assets under management are, and will continue to be, influenced by a variety of factors including, among other things:
 
  •  investment performance, including fluctuations in both the financial markets and foreign currency exchange rates and the quality of our investment decisions;
 
  •  client cash flows into and out of our investment products;
 
  •  the mix of assets under management among our various strategies; and
 
  •  our introduction or closure of investment strategies and products.
 
Our five core investment strategies are: International Equity, Global Equity, U.S. Equity, High Grade Fixed Income and High Yield. See “Business — Investment Strategies, Products and Performance” for additional information on these strategies. We offer investors the ability to invest in each of our strategies through the investment vehicles described below.
 
The following table sets forth our assets under management (including legacy activities) by investment vehicle type as of December 31, 2006, 2007 and 2008 and as of June 30, 2008 and 2009:
 
                                                                                 
                                  As % of AuM  
    As of December 31,     As of June 30,                       June 30,
    June 30,
 
   
2006
   
2007
   
2008
   
2008
   
2009
   
2006
   
2007
    2008    
2008
   
2009
 
    (Dollars in millions)  
 
Proprietary Funds(1)
                                                                               
A shares
  $ 10,865     $ 13,217     $ 6,251     $ 11,702     $ 6,410                                          
I shares(2)
    15,735       23,900       13,215       22,272       13,743                                          
                                                                                 
Total
    26,600       37,117       19,466       33,974       20,153       49.7 %     49.3 %     43.1 %     46.8 %     43.0 %
                                                                                 
Institutional commingled funds
    5,676       9,357       7,056       10,288       7,324       10.6       12.4       15.6       14.2       15.6  
Separate accounts
    16,574       22,897       14,342       21,270       14,778       31.0       30.4       31.7       29.3       31.6  
Sub-advisory accounts
    4,636       5,991       4,336       7,072       4,571       8.7       7.9       9.6       9.7       9.8  
Legacy activities(3)
                4       45                                      
                                                                                 
Ending AuM
  $ 53,486     $ 75,362     $ 45,204     $ 72,649     $ 46,826       100.0 %     100.0 %     100.0 %     100.0 %     100.0 %
                                                                                 
 
 
(1) Proprietary funds include both SEC registered funds and private offshore funds. SEC registered mutual funds within proprietary funds are: Artio International Equity Fund, Artio International Equity Fund II, Artio Total Return Bond Fund, Artio Global High Income Fund, Artio Global Equity Fund Inc., Artio U.S. Micro-cap Fund, Artio U.S. Mid-cap Fund, Artio U.S. Multi-cap Fund, and Artio U.S. Small-cap Fund.
 
(2) Amounts invested in private offshore funds are categorized as “I” Shares.


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(3) Legacy activities relate to a hedge fund product which we discontinued in the fourth quarter of 2008.
 
The different fee structures associated with each type of investment vehicle make the composition of our assets under management an important determinant of the investment management fees we earn. We typically earn higher effective investment management fee rates from our proprietary funds and institutional commingled funds than on our separate and subadvised accounts. In the latter half of 2008, the amount of assets under management related to proprietary funds as a percentage of total assets under management decreased as proprietary fund redemptions exceeded client cash inflows within the proprietary funds, as proprietary funds include a significant number of underlying retail investors. Generally, institutional investors, who typically invest in other vehicles, have longer-term investment horizons than retail proprietary fund investors.
 
Proprietary Funds
 
We offer no-load open-end share classes within our SEC registered mutual funds’ business. We currently serve as investment advisor to nine SEC registered mutual funds. Of these nine SEC registered mutual funds, two are within our International Equity strategy, one is within our High Grade Fixed Income strategy, one is within our High Yield strategy, one is within our Global Equity strategy, and four are within our U.S. Equity strategy.
 
Our open-end funds are not listed on an exchange. These funds issue new shares for purchase and redeem shares from those shareholders who sell. The share price for purchases and redemptions of open-end funds is determined by each fund’s net asset value, which is calculated at the end of each business day. Assets under management in open-end funds vary as a result of both market appreciation and depreciation and the level of new purchases or redemptions of shares of a fund. We earn investment management fees for serving as an investment advisor to these funds, which are based on the average daily net asset value of each fund. Our standard fee rates for our proprietary funds range from 0.35% of assets under management to 1.25% of assets under management, depending on the strategy. Shareholders may redeem their investment in our open-end funds without advance notice on any day the NYSE is open for business.
 
Through financial intermediaries, we offer two share classes in each open-end fund to provide investors with alternatives to best suit their investment needs.
 
  •  Class A shares of the SEC registered open-end funds represented $6.4 billion and $11.7 billion of our assets under management as of June 30, 2009 and June 30, 2008, respectively. These shares are generally offered to investors making initial investments of $1,000 or more. The third-party distributor of our SEC registered mutual funds, Quasar Distributors LLC, receives Rule 12b-1 fees for distribution and/or administrative services on Class A shares, which are generally offset by fees it pays to third-party agents.
 
  •  Class I shares of the SEC registered open-end funds, excluding the offshore funds discussed below, represented $13.5 billion and $21.8 billion of our assets under management as of June 30, 2009 and June 30, 2008, respectively. These shares are generally offered to institutional investors making initial investments of $1 million or more. No Rule 12b-1 distribution and service fees are charged to holders of Class I shares.
 
We also offer two private offshore funds to select offshore clients, one of which is within our International Equity strategy and one of which is a global balanced fund categorized as within our “other” strategy. Private offshore funds represented $224 million and $472 million of our assets under management as of June 30, 2009 and June 30, 2008, respectively. The share price for purchases and redemptions of these offshore funds is determined by each fund’s net asset value, which is calculated at the end of each month. Assets under management in these offshore funds vary as a result of both market appreciation and depreciation and the level of new purchases or redemptions of shares of a fund. The fee rates, in general, decline as the fund size increases. Investment management fees for offshore funds are calculated using the month-end net asset value of each fund. Our standard fee


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rates for our private offshore funds range from 0.15% of assets under management to 0.90% of assets under management, depending on the strategy and the amount of the investment. Clients invested in either of these private offshore funds may redeem their investment on a weekly basis with one day’s notice.
 
Institutional Commingled Funds
 
Institutional commingled funds are pooled investment vehicles offered to institutional clients such as public and private pension funds, foundations and endowments. Our revenues from commingled funds are derived from investment management fees that vary among our different investment strategies. The fee rates, in general, decline as the investment size increases. We earn investment management fees which are based on the average month-end market value of the assets under management during the quarter. Our standard fee rates for our institutional commingled funds range from 0.40% of assets under management to 0.90% of assets under management, depending on the strategy and the amount of the investment. Depending on the vehicle, clients invested in our institutional commingled funds may redeem their investment on either a daily basis with one days’ notice or a monthly basis with 30 days’ notice.
 
Separate Accounts
 
Our separate accounts are primarily managed for institutional clients, such as public and private pension funds, foundations and endowments. Our revenues from separate accounts are typically derived from investment management fees that vary between our different investment strategies. The fee rates, in general, decline as account size increases. In the case of a few institutional separate accounts, we also earn performance fees. Performance fees may be subject to clawback as a result of performance declines subsequent to the most recent measurement date. If such declines occur, the performance fee clawbacks are recognized when the amount is known. Performance fees amounted to (1.2)% and 2.0% of total revenues and other operating income for the six months ended June 30, 2009 and 2008, respectively, and 1.2%, 0.9% and 0.3% of total revenues and other operating income for the years ended December 31, 2008, 2007 and 2006, respectively. Separate accounts are generally offered to institutional investors making the required minimum initial investment, which varies by strategy. We typically earn investment management fees based on either the quarter-end market value or the average of the month-end market values during the quarter. The average investment management fees we earn on these accounts are generally lower than the investment management fees we earn on our proprietary funds and institutional commingled funds. Our standard fee rates for our separate accounts range from 0.18% of assets under management to 0.90% of assets under management, depending on the strategy and the amount of the investment. Separate account clients generally may terminate their account relationship with us at any time without advance notice.
 
Sub-advisory Accounts
 
As of June 30, 2009, we sub-advised seven SEC registered mutual funds pursuant to sub-advisory agreements, all of which are within our International Equity strategies. Under the 1940 Act, the sub-advisory agreements may have an initial term of up to two years and are thereafter subject to the respective fund boards’ annual approvals. In addition, we sub-advise eight offshore funds and two onshore private funds pursuant to contractual arrangements. Of the ten non-SEC registered funds we sub-advise, three are within our International Equity strategies, three are within our High Grade Fixed Income strategies, one is within our High Yield strategy, two are within our Global Equity strategy and one is within our U.S. Equity strategies. We earn investment management fees which are based on the average daily market value of the assets under management. Approximately 40% of the sub-advisory assets as of June 30, 2009 were attributable to one institutional relationship. The average investment management fees we earn on these accounts are generally lower than the investment management fees we earn on our proprietary funds and institutional commingled funds. Our standard fee rates for our sub-advised accounts range from 0.12% of assets under management to 0.80% of


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assets under management, depending on the strategy and the amount of the investment. As managing subscriptions and redemptions are typically the manager’s responsibility, we have no right to restrict redemptions in the funds we sub-advise.
 
Revenues and Other Operating Income
 
Our revenues are driven by investment management fees earned from managing clients’ assets. Investment management fees fluctuate based on the total value of assets under management, composition of assets under management among our investment vehicles and among our investment strategies, changes in the investment management fee rates on our products and, for the few accounts on which we earn performance based fees, the investment performance of those accounts. Performance fees may be subject to clawback as a result of performance declines subsequent to the most recent measurement date. If such declines occur, the performance fee clawbacks are recognized when the amount is known.
 
The following table sets forth investment management fee revenues and average assets under management for the three years ended December 31, 2006, 2007 and 2008 and the six months ended June 30, 2008 and 2009:
 
                                         
    For the Year Ended
       
    December 31,     For the Six Months Ended June 30,  
   
2006
   
2007
   
2008
   
2008
   
2009
 
 
Investment management fees (dollars in thousands)
  $ 300,432     $ 445,558     $ 425,003     $ 243,507     $ 132,576  
Average AuM for period (dollars in millions)(1)
    43,745       66,619       64,776       73,510       42,881  
 
 
(1) Excluding legacy activities.
 
We expect that lower average assets under management will result in investment management fees in 2009 that are materially lower than those in 2008.
 
Operating Expenses
 
We manage our expenses and allocate resources in order to allow us to focus on servicing our clients. As a result, we keep in-house those functions that we believe are necessary for providing investment management, client service and risk management, and outsource others. Our efficient operating structure has positioned us to better manage our costs in challenging market conditions.
 
Many of our operating expenses vary due to a number of factors, including the following:
 
  •  variations in the level of total employee compensation and benefits expense, which change as a result of discretionary bonuses, sales incentives, changes in employee headcount and mix, and competitive factors;
 
  •  changes in shareholder servicing expenses as a result of fluctuations in mutual fund sales, level of redemptions, and market appreciation or depreciation of proprietary funds’ assets under management;
 
  •  changes in the level of our marketing and promotional expenses in response to market conditions, including our efforts to further access distribution channels;
 
  •  the introduction or closure of product initiatives; and
 
  •  increases in expenses such as rent, information technology costs, professional service fees, and data-related costs (including the cost of outsourced services provided by third parties).


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A significant amount of our expenses are correlated to some degree with our revenues or are within our discretion. For example, shareholder servicing is influenced by the value of our proprietary funds’ assets under management. Similarly, certain components of incentive compensation are to a large extent based on our revenues for a particular period.
 
The following table sets forth the main categories of expenses from our consolidated statements of income, expressed as a percentage of total revenues and other operating income, for the three years ended December 31, 2006, 2007 and 2008 and the six months ended June 30, 2008 and 2009:
 
                                         
          For the
 
          Six Months
 
    For the Year
    Ended
 
    Ended December 31,     June 30,  
   
2006
   
2007
   
2008
   
2008
   
2009
 
 
Total revenues and other operating income
    100.0 %     100.0 %     100.0 %     100.0 %     100.0 %
                                         
Salaries, incentive compensation, and benefits
    23.2       20.7       21.9       21.8       26.2  
Allocation of Class B profits interests(1)
    17.8       18.7       18.0       18.1       16.1  
Change in redemption value of Class B profits interests(1)
    15.6       17.3       13.0       15.0       26.7  
                                         
Total employee compensation and benefits
    56.6       56.7       52.9       54.9       69.0  
Shareholder servicing and marketing expenses
    6.7       5.7       5.5       5.2       5.4  
General and administrative expenses
    10.5       11.2       14.9       14.3       13.2  
                                         
Operating income before income taxes
    26.2       26.4       26.7       25.6       12.4  
Non-operating income
    1.1       1.6       0.8       0.6       (0.2 )
                                         
Income before income tax expense
    27.3       28.0       27.5       26.2       12.2  
Income tax expense
    12.8       13.1       13.0       13.2       5.9