As filed with the Securities and Exchange Commission on June 1, 2010

Registration No. 333-166992

­ ­

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Amendment No. 1

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)

 

330 Madison Avenue

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 Avenue

New York, NY 10017

(212) 297-3600

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

 

 

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, please 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):

 

(Do not check if a smaller reporting company)

 

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.

 

 

Subject to Completion. Dated June 1, 2010.

 

3,700,000 Shares

 

 

 

Class A Common Stock

 

 

 

 

Artio Global Investors Inc. is offering 3,700,000 shares of Class A common stock. The Class A common stock is listed on the New York Stock Exchange under the symbol “ART”. On May 28, 2010, the last reported sale price of our Class A common stock was $18.49 per share.

 

In connection with the completion of our initial public offering, we entered into an exchange agreement with Richard Pell, our Chief Executive Officer and Chief Investment Officer, and Rudolph-Riad Younes, our Head of International Equity, to whom we collectively refer as our Principals. The exchange agreement grants each Principal and certain permitted transferees, the right to exchange his New Class A Units, which represent membership interests in Artio Global Holdings LLC (an intermediate holding company), for shares of our Class A common stock, on a one-for-one basis, subject to certain restrictions.

 

Any exchange of New Class A Units is generally a taxable event for the exchanging Principal. As a result, under the exchange agreement, each Principal is permitted to sell shares of Class A common stock in connection with any exchange up to an amount necessary to generate proceeds (after deducting discounts and commissions) sufficient to cover the taxes payable on such exchange calculated at an assumed tax rate, which is subject to change.

 

In connection with this offering, we expect each Principal to exchange an aggregate of 5,350,000 New Class A Units for 5,350,000 shares of Class A common stock (inclusive of the 3,000,000 New Class A Units each Principal exchanged for shares of Class A common stock prior to this offering) and to surrender an equivalent number of shares of Class B common stock on or before the date of the closing of this offering, leaving each with 2,450,000 New Class A Units. As a result of such exchanges, in accordance with the terms of the exchange agreement, each of the Principals has elected to sell to us a number of New Class A Units and/or shares of Class A common stock at a price equal to the offering price (net of underwriting discount) of the Class A common stock in this offering in order to cover taxes payable on such exchanges. Accordingly, we will use the net proceeds of this offering to purchase 1,850,000 New Class A Units from each of our Principals and, if the underwriters exercise in full their option to purchase additional shares, to repurchase and retire 250,000 shares of Class A common stock from each of our Principals. We will not retain any proceeds from the sale of shares of our Class A common stock.

 

See “Risk Factors” on page 17 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.

 

 

 

 

 

To the extent the underwriters sell more than 3,700,000 shares of Class A common stock, the underwriters have the option to purchase up to an additional 500,000 shares of Class A common stock from Artio Global Investors Inc. at the 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          , 2010.

Goldman, Sachs & Co.

 

 

 

 

 

 

Prospectus dated          , 2010.

 

Historical Returns of Largest Global and International Investment Strategies

(Returns Since Strategy Inception Through March 31, 2010)*

 

 

 

 

 

TABLE OF CONTENTS

 

 

 

 

 

We have not authorized anyone to provide any information or to make any representations other than those contained or incorporated by reference in this prospectus or in any free writing prospectuses we have prepared. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. 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:

 

 

Performance Information Used in This Prospectus

 

We manage investments through “proprietary funds” (the “Artio Global 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 Index^sm 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.

 

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.

 

PROSPECTUS SUMMARY

	•	our International Equity I composite has outperformed its benchmark, the MSCI AC World ex USA Indexsm ND, by 7.67% on an annualized basis since its inception in 1995 through March 31, 2010 (calculated on a gross basis before payment of fees);
	•	as of March 31, 2010, eight out of nine publicly-reported composites had also outperformed their benchmarks on a gross basis since inception; and
	•	as of March 31, 2010, six out of nine mutual funds (as represented by the Class I-shares), representing over 99% of our mutual fund assets under management, were rated 4- or 5- stars by Morningstar and of those nine funds, six were in the top quartile of Lipper rankings for performance since inception.

	•	each new investment strategy and offering must provide the potential for attractive risk adjusted returns for clients in these new strategies without negatively affecting return prospects for existing clients;
	•	new client segments or distribution sources must value our approach and be willing to appropriately compensate us for our services; and
	•	new product offerings and client segments must be consistent with the broad investment mission and not alter the investment-centric nature of our firm’s culture.

		Period Ended April 30, 2010
		Since
International Equity I		Inception				5 Years				3 Years				1 Year				YTD				One Month
Annualized Gross Returns			12.7	%			6.1	%			(9.1	)%			34.5	%			0.2	%			(0.5	)%
Annualized Net Returns			11.2	%			5.2	%			(9.8	)%			33.5	%			(0.1	)%			(0.5	)%
MSCI EAFE Index®			4.5	%			3.9	%			(8.9	)%			34.4	%			(1.0	)%			(1.8	)%
MSCI AC World ex USA Indexsm ND			5.1	%			6.5	%			(5.9	)%			40.4	%			0.7	%			(0.9	)%
International Equity II
Annualized Gross Returns			5.6	%			6.3	%			(8.0	)%			32.8	%			(0.5	)%			(0.6	)%
Annualized Net Returns			4.9	%			5.6	%			(8.6	)%			31.9	%			(0.8	)%			(0.7	)%
MSCI EAFE Index®			3.3	%			3.9	%			(8.9	)%			34.4	%			(1.0	)%			(1.8	)%
MSCI AC World ex USA Indexsm ND			5.8	%			6.5	%			(5.9	)%			40.4	%			0.7	%			(0.9	)%

		Since
Total Return Bond		Inception				5 Years				3 Years				1 Year				YTD				One Month
Annualized Gross Returns			8.0	%			6.3	%			7.2	%			13.5	%			3.8	%			1.3	%
Annualized Net Returns			7.1	%			5.7	%			6.8	%			13.1	%			3.6	%			1.3	%
Barclays Capital U.S. Aggregate Bond Index			6.7	%			5.4	%			6.3	%			8.3	%			2.8	%			1.0	%
Customized Index(1)			6.3	%			5.0	%			6.2	%			7.8	%			1.6	%			0.6	%

		Since
High Yield		Inception				5 Years				3 Years				1 Year				YTD				One Month
Annualized Gross Returns			11.7	%			10.3	%			8.8	%			43.8	%			7.0	%			2.1	%
Annualized Net Returns			10.5	%			9.1	%			7.7	%			42.4	%			6.6	%			2.0	%
ML Global High Yield USD Constrained Index			10.4	%			8.7	%			7.4	%			47.9	%			6.5	%			1.9	%

		Since
Global Equity		Inception				5 Years				3 Years				1 Year				YTD				One Month
Annualized Gross Returns			9.7	%			5.8	%			(5.3	)%			42.6	%			3.8	%			0.1	%
Annualized Net Returns			8.5	%			4.9	%			(5.9	)%			41.8	%			3.6	%			0.1	%
MSCI World Index			5.7	%			3.4	%			(6.8	)%			37.0	%			3.3	%			0.0	%
MSCI AC World Indexsm			5.6	%			4.4	%			(5.7	)%			39.3	%			3.3	%			0.2	%

		Since
US Equity		Inception								3 Years				1 Year				YTD				One Month
Multi-Cap
Annualized Gross Returns			5.0	%							(0.7	)%			48.5	%			9.0	%			2.3	%
Annualized Net Returns			4.1	%							(1.5	)%			47.4	%			8.7	%			2.3	%
Russell 3000® Index			0.7	%							(4.6	)%			40.9	%			8.2	%			2.2	%
Mid-Cap
Annualized Gross Returns			4.0	%							(2.8	)%			49.3	%			11.4	%			3.7	%
Annualized Net Returns			3.2	%							(3.4	)%			48.1	%			11.1	%			3.6	%
Russell Mid-Cap® Index			2.6	%							(3.3	)%			50.8	%			12.8	%			3.8	%
Small-Cap
Annualized Gross Returns			10.7	%							6.4	%			66.9	%			16.6	%			3.8	%
Annualized Net Returns			9.7	%							5.6	%			65.3	%			16.2	%			3.7	%
Russell 2000® Index			2.0	%							(2.8	)%			48.9	%			15.0	%			5.7	%
Micro-Cap
Annualized Gross Returns			3.4	%							(1.7	)%			70.3	%			21.8	%			3.6	%
Annualized Net Returns			2.5	%							(2.6	)%			68.7	%			21.4	%			3.5	%
Russell 2000® Index			2.0	%							(2.8	)%			48.9	%			15.0	%			5.7	%
Russell Micro-Cap® Index			(1.2	)%							(6.3	)%			54.5	%			19.2	%			8.5	%

(1)		The customized index is comprised of 80% of the Merrill Lynch 1-10 year U.S. Government/Corporate Index and 20% of the JP Morgan Global Government Bond (non-U.S.) Index.

	•	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 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 deterioration in global economic and market conditions over the past two years has adversely affected and may continue to adversely affect our business.

(1)	Represents shares beneficially owned by Messrs. Pell and Younes, including shares held by their respective grantor retained annuity trust (“GRAT”) as to which they retain beneficial ownership.

Price per share of Class A common		Aggregate number of shares				Increase (decrease) in aggregate
stock (net of assumed underwriting		of Class A common				number of shares of Class A
discounts and commissions)		stock sold in this offering				common stock sold in this offering
$23.49			3,327,639				(372,361	)
$22.49			3,381,242				(318,758	)
$21.49			3,439,833				(260,167	)
$20.49			3,504,144				(195,856	)
$19.49			3,575,054				(124,946	)
$18.49			3,653,635				(46,365	)
$17.49			3,741,201				41,201
$16.49			3,839,387				139,387

Class A common stock we are offering		3,700,000 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”		42,141,675 shares of Class A common stock. If all holders of New Class A Units (other than us) immediately after this offering 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, 60,097,519 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”		1,200,000 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). When a New Class A Unit is exchanged by a Principal for a share of Class A common stock, a share of Class B common stock held by such Principal is cancelled. At the time of the Exchange and the purchase of New Class A Units in connection with this offering, 14,400,000 shares of Class B common stock will be surrendered and cancelled.
Class C common stock to be outstanding immediately after this offering		16,755,844 shares of Class C common stock. Shares of Class C common stock have economic rights (including rights to dividends and distributions upon liquidation) equal to the economic rights of the Class A common stock. If GAM 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 September 29, 2011, 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 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. GAM entered into a shareholders agreement under which it agreed that, to the extent it has voting power as a 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 GAM owns shares of our Class C common stock constituting at least 10% of our outstanding common stock, it is entitled to appoint a member to our Board of Directors or to exercise observer rights. GAM has appointed an observer to our Board, but may in the future decide to appoint a member to our Board in lieu of exercising such observer rights.
		Following the application of the net proceeds of this offering, our Principals will each have approximately 9.9% of the voting power in us through their respective ownership of the shares of our Class A and Class B common stock, and GAM will have approximately 27.9% through its ownership of the shares of our Class C common stock.

Use of proceeds		We estimate that the net proceeds from the sale of shares of our Class A common stock in this offering will be approximately $65.0 million, or approximately $73.8 million if the underwriters exercise their option to purchase additional shares of Class A common stock in full, based on an offering price of $18.49 per share, in each case after deducting assumed underwriting discounts payable by us.

		We intend to use the net proceeds from this offering to purchase 1,850,000 New Class A Units and, if the underwriters exercise in full their option to purchase additional shares, to repurchase and retire 250,000 shares of Class A common stock, from each of Richard Pell and Rudolph-Riad Younes. We will not retain any of the net proceeds from this offering.
		As a result of the Exchange and purchase of New Class A Units, we expect to incur payment obligations to our Principals of approximately $153.4 million in the aggregate (assuming no changes in the relevant tax law and that we can earn sufficient taxable income to realize the full tax benefits generated by the exchange and/or purchase of an aggregate of 14,400,000 New Class A Units) over the 15-year period from the assumed year of Exchange and purchase based on an assumed price of $21.49 per share of our Class A common stock (the last reported sale price for our Class A common stock on May 18, 2010, which is the date on which each Principal exchanged 3,000,000 shares of New Class A Units for 3,000,000 shares of Class A common stock). See “Related Party Transactions — Tax Receivable Agreement”.
Dividend policy		In respect of each of the last quarter of 2009 and the first quarter of 2010, we declared a cash dividend of $0.06 per share of Class A 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”.
		As a holding company, we have no material assets other than our ownership of New Class A Units of Holdings and, accordingly, 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 subsidiaries’ operations in an amount sufficient to cover dividends, if any, declared by us. If 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”

	•	1,200,000 shares of Class A common stock reserved for issuance upon the exchange of the remaining New Class A Units held by the Principals and 16,755,844 shares of Class A common stock reserved for issuance upon the conversion of the Class C common stock held by GAM;
	•	7,319,502 shares of Class A common stock reserved for issuance under the Artio Global Investors Inc. 2009 Stock Incentive Plan; and

	•	2,277,300 shares of Class A common stock, reserved for delivery upon vesting of outstanding restricted stock units.

		Historical																				Pro Forma
														Three Months								Three Months
														Ended								Ended				Year Ended
		Years Ended December 31,												March 31,								March 31,				December 31,
		2009				2008				2007				2010				2009				2010				2009
		(In thousands, except per share data)
Statement of Income Data:
Revenues and other operating income:
Investment management fees		$	305,335			$	425,003			$	445,558			$	85,287			$	62,816			$	85,287			$	305,335
Net gains (losses) on securities held for deferred compensation			1,970				(2,856	)			—				321				(273	)			321				1,970
Foreign currency gains (losses)			87				(101	)			186				23				(16	)			23				87
Total revenues and other operating income			307,392				422,046				445,744				85,631				62,527				85,631				307,392
Expenses:
Employee compensation and benefits
Salaries, incentive compensation and benefits			79,036				92,487				92,277				25,169				16,940				24,726				88,274
Allocation of Class B profits interests			33,662				76,074				83,512				—				10,215				—				—
Change in redemption value of Class B profits interests			266,110				54,558				76,844				—				18,126				—				—
Tax Receivable Agreement			97,909				—				—				—				—				—				—

		Historical																				Pro Forma
														Three Months								Three Months
														Ended								Ended				Year Ended
		Years Ended December 31,												March 31,								March 31,				December 31,
		2009				2008				2007				2010				2009				2010				2009
		(In thousands, except per share data)
Total employee compensation and benefits			476,717				223,119				252,633				25,169				45,281				24,726				88,274
Shareholder servicing and marketing			16,886				23,369				25,356				4,548				3,069				4,548				16,886
General and administrative			42,317				62,833				50,002				10,285				8,174				10,285				34,144
Total expenses			535,920				309,321				327,991				40,002				56,524				39,559				139,304
Non-operating income (loss)			(1,395	)			3,181				7,034				(661	)			(81	)			(661	)			(3,592	)
Income (loss) from continuing operations before income tax expense			(229,923	)			115,906				124,787				44,968				5,922				45,411				164,496
Income tax expense			134,287				54,755				58,417				14,767				2,877				19,142				69,830
Income from continuing operations			(364,210	)			61,151				66,370				30,201				3,045				26,269				94,666
Income from discontinued operations, net of taxes			—				—				1,616				—				—				—				—
Net income (loss)			(364,210	)			61,151				67,986				30,201				3,045				26,269				94,666
Less: Net income attributable to non-controlling interests			14,104				—				—				11,333				—				874				3,252
Net income (loss) attributable to Artio Global Investors		$	(378,314	)		$	61,151			$	67,986			$	18,868			$	3,045			$	25,395			$	91,414
Income (loss) from continuing operations		$	(8.88	)		$	1.46			$	1.58			$	0.42			$	0.07			$	0.43			$	1.55
Income from discontinued operations, net of taxes			—				—				0.04				—				—				—				—
Net income (loss) attributable to Artio Global Investors per share information —
Basic:		$	(8.88	)		$	1.46			$	1.62			$	0.42			$	0.07			$	0.43			$	1.55
Diluted:			(8.88	)			1.46				1.62				0.42				0.07			$	0.43			$	1.55
Cash dividends per basic share		$	5.16			$	2.79			$	1.43			$	0.06			$				$				$
Weighted average shares used to calculate per share information —
Basic:			42,620				42,000				42,000				44,460				42,000				59,304				58,890
Diluted:			42,620				42,000				42,000				44,629				42,000				60,510				60,090

		As of				As of
		December 31,				December 31,				As of March 31, 2010
		2009				2008				Historical				Pro Forma
		(In thousands)
Statement of Financial Position Data:
Cash and cash equivalents		$	60,842			$	86,563			$	74,771			$	74,771
Total assets			195,954				319,476				210,077				390,559
Accrued compensation and benefits			31,478				268,925				10,896				10,896
Long-term debt			60,000				—				60,000				60,000
Total liabilities			191,973				286,231				176,094				329,504
Total stockholders’ equity			6,892				33,245				26,497				60,479
Non-controlling interests			(2,911	)			—				7,486				576
Total equity		$	3,981			$	33,245			$	33,983			$	61,055

		Years Ended December 31,												Three Months Ended March 31,
		2009				2008				2007				2010				2009
		(In millions)
Selected Unaudited Operating Data (excluding legacy activities):
Assets under management(1)		$	55,993			$	45,200			$	75,362			$	56,417			$	38,941
Net client cash flows(2)			338				1,930				12,150				95				222
Market appreciation (depreciation)(3)			10,455				(32,092	)			9,726				329				(6,481	)

(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.

 

We face a variety of significant and diverse risks, many of which are inherent in our business. Described below are certain risks that we currently believe could materially affect us. Other risks and uncertainties that we do not presently consider to be material or of which we are not presently aware may become important factors that affect us in the future. The occurrence of any of the risks discussed below could materially and adversely affect our business, prospects, financial condition, results of operations or cash flow. You should carefully consider each of the risks below, together with all other information contained in or incorporated by reference in, this prospectus before deciding to invest in shares of our Class A common stock.

 

Risks Related to our Business

 

The loss of any key investment professionals, including Messrs. Pell and Younes, or members of our senior management team and senior marketing personnel could have a material adverse effect on our business.

 

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 Messrs. Pell and Younes, who were the architects of our International Equity strategies. Messrs. Pell and Younes, as well as other key members of our investment team, possess substantial experience in investing and have developed strong relationships with our clients. The purchase of New Class A Units and repurchase of Class A common stock in connection with this offering will result in a reduction in the interests Messrs. Pell and Younes hold in us and in Holdings. The loss of either of Messrs. Pell or Younes 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 Messrs. Pell or Younes or other key members of senior management, our investment team, or senior marketing personnel.

 

We also anticipate that it will be necessary for us to hire additional investment professionals, both within our existing teams and 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, as our International Equity strategies did in 2009 and in the first quarter of 2010, our earnings could be reduced because:

 

 

 

Our investment strategies can perform poorly for a number of reasons, including general market conditions and investment decisions that we make. For instance, heading into 2009, our positioning in International Equity proved too defensive, as markets turned decidedly positive in March. This caused performance to suffer as markets improved. The rallies witnessed in financials and emerging markets in early March 2009 in response to global stimulus, led to our underperformance given our underweight to both of these areas. Although we made adjustments during this period, the speed and amplitude of the move negatively impacted us and as a result, we significantly underperformed relative to our respective benchmarks in 2009. During the second half of the year, the strategies were repositioned to take advantage of positive market tailwinds which had a stabilizing effect, resulting in more muted underperformance for the second half of 2009, but our full year results did trail the index, which could impact net client cash inflows in 2010. During the first quarter of 2010, the continued underweight Japan and overweight to Europe and emerging markets, hindered performance in January and February, but proved beneficial to relative performance in March. In contrast, when our strategies experience strong results relative to the market or other asset classes, 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 2009, our International Equity strategies performed well below historical averages on a relative basis.

 

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 March 31, 2010, approximately 82% 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.

 

Recent economic conditions in certain European Union member states, Greece in particular, have adversely affected investor sentiment, particularly with respect to international investments. As the Greek government has attempted to tackle its debt crisis, concerns have grown over other members of European Union with swelling debt levels, including, Spain, Portugal, Italy and Ireland. As concerns over an escalating eurozone sovereign debt crisis have intensified, the U.S. dollar has strengthened against most major currencies.

 

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. Clients in commingled funds and separately managed accounts may redeem their investments typically with 30 to 60 days’ notice. 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. During extreme periods of market illiquidity, we may be forced to accept a lower price on securities in order to meet redemption requests. 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.

 

For example, during 2008 and the early part of 2009, the global economic and financial crisis led to dramatic declines across financial markets. Global equity markets fell, particularly as the financial crisis intensified in the third and fourth quarters of 2008 and the first quarter of 2009. The sizeable declines in stock prices worldwide resulted in substantial withdrawals from equity funds during 2008 throughout the asset management industry. Although the economic environment began to improve in early March of 2009 and continued to gain momentum throughout the year in response to substantial global stimulus efforts resulting in improved returns for global stocks and bonds and positive flows into equity and fixed income products over that time period, the recent credit crisis faced by Greece, Portugal, Spain and other indebted countries has led to a dramatic increase in volatility across markets. While the governments of the 16 euro nations have agreed to a package to contain the crisis, it remains to be seen how effective this will be in calming financial markets and the effect it will have on potential redemptions or withdrawals by our clients and/or our investment performance.

 

Our ability to retain and attract qualified employees is critical to the success of our business and the failure to do so may materially adversely affect our performance.

 

Our people are our most important resource and competition for qualified employees is intense. In order to attract and retain qualified employees, we must compensate our employees at competitive rates and we strive to remain above the median for our peer group. Typically employee compensation is a significant expense, is highly variable and changes with performance. If we are unable to continue to attract and retain qualified employees, or do so at rates necessary to maintain our competitive position, or if compensation costs required to attract and retain employees increase, our performance, including our competitive position, could be materially adversely affected. Our compensation program is designed to attract, retain and motivate employees, however, in the event our investment strategies underperform or there is a general deterioration of market conditions, a lack of motivation or productivity among employees may result, even if compensation levels remain competitive.

 

Additionally, we have begun to incorporate equity awards as part of our compensation strategy and as a means for recruiting and retaining this highly skilled talent. A decline in our stock price could result in a significant deterioration in the value of restricted stock units granted, thus lessening the effectiveness of retaining employees through stock-based awards. There can be no assurance that we will continue to successfully attract and retain key personnel.

 

We derive a substantial portion of our revenues from a limited number of our strategies.

 

As of March 31, 2010, 81% of our assets under management were concentrated in the International Equity I and International Equity II strategies, and 89% of our investment management fees for the quarter ended March 31, 2010 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 and retain assets within 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.

 

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 proprietary 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 March 31, 2010, our largest mutual fund platform represented approximately 10% of our total assets under management, our largest intermediary accounted for approximately 5% of our total assets under management and our largest sub-advisory relationship represented approximately 2% 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 March 31, 2010, 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 six years may not be indicative of future growth.

 

Our assets under management have increased from approximately $7.5 billion as of December 31, 2003 to approximately $56.3 billion as of April 30, 2010. The growth of our business will depend on, among other things, global market conditions and volatility, 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 two years. In addition, the growth in our assets under management since December 31, 2004 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 and strengthening of the U.S. dollar. 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 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 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, investment performance calculations 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.

 

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. 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 access to 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 any of 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, assess and manage the full spectrum of our risks including, market, fiduciary, operational, legal, regulatory 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 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 use of leverage may expose us to substantial risks that may adversely affect our growth strategy and business.

 

In September 2009, Holdings established a $110.0 million credit facility consisting of a $60.0 million three-year term credit facility and a $50.0 million three-year revolving credit facility. In October 2009, Holdings borrowed $60.0 million under the term credit facility. The incurrence of this debt exposes 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 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 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.

 

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 may decide to utilize 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 reliance on 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 seed new products and to fund additional operating expenses 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”.

 

Failure to effectively manage our cash flow, liquidity and capital position could negatively affect our business.

 

We expect to fund our currently planned operations with existing capital resources, including cash flows from operations and our debt facility. We remain in the process of strengthening our liquidity and capital position. If we are unable to effectively manage our cash flows and liquidity position or unable to continue to generate and maintain positive operating cash flows and operating income in the future, we may not be able to repay our debt obligations, compensate for an increase in expenses, pay dividends to stockholders or invest in our business.

 

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 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 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, 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.

 

The cost of insuring our business and providing benefits to our employees is substantial and may increase.

 

Our insurance costs and the costs of our benefit plans are substantial and have increased in recent years. In 2009, insurance costs increased as coverage was extended to meet the needs of being a public company. 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. Higher insurance costs and incurred deductibles would reduce our net income.

 

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, Investment Adviser, 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 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, Investment Adviser undergoes a change of control. If such an assignment occurs, we cannot be certain that Investment Adviser 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. Our IPO constituted a change of control for purposes of the 1940 Act. We obtained all necessary approvals in connection with the IPO, but for the two years following the IPO, we will remain subject to the limits on “unfair burdens” which could be adverse to our interests.

 

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 Exchange Act, 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 to which our asset management business is subject 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. Further, as our international distribution channels expand, we will be subject to an increasing amount of international regulation. Our business is already 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 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.

 

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:

 

 

 

If we are unable to compete effectively, our earnings would be reduced and our business could be materially adversely affected.

 

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.

 

Failure to maintain effective internal control over financial reporting could have a material adverse effect on our business and stock price.

 

As a public company, we must maintain effective internal control over financial reporting and we must produce a management assessment in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 for the period ended December 31, 2010. While management believes that our internal control over financial reporting was effective as of March 31, 2010, because internal control over financial reporting is complex and may change over time to adapt to changes in our business, we cannot assure you that our internal control over financial reporting will be effective in the future. If we are not able to maintain effective internal control over financial reporting, we may not be able to produce reliable financial reporting and our independent registered public accounting firm may not be able to certify the effectiveness of our internal control over financial reporting as of the required dates. Matters affecting our internal controls may cause us to be unable to report our financial information accurately and/or on a timely basis and thereby subject us to adverse regulatory consequences, including sanctions or investigations by the SEC, or violations of applicable stock exchange listing rules, and result in a breach of the covenants under our credit facility. There could also be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our financial statements. Confidence in the reliability of our financial statements is also likely to suffer if we report, or our independent registered public accounting firm reports, a material weakness in our internal

control over financial reporting. This could lead to a material adverse effect on our business, a decline in our share price and impair our ability to raise capital.

 

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.

 

We intend to continue to pay cash dividends to holders of our Class A and Class C common stock on a quarterly basis. 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 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 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 have no material assets other than our ownership of New Class A Units of Holdings and we have no independent means of generating revenue. Holdings is treated as a partnership for U.S. federal and state income tax purposes and, as such, is not subject to U.S. federal and state income tax. Instead, taxable income is allocated to its members, i.e. to us and the Principals. Accordingly, we incur income taxes on our proportionate share of any net taxable income of Holdings and also incur expenses related to our operations. We intend to cause Holdings to distribute cash to its members (i.e. to us and the Principals). However, its ability to make such distributions is 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 or to fund our operations, we may have to borrow funds and thus, our liquidity and financial condition could be materially adversely affected.

 

We may not be able to realize all or a portion of the tax benefits of any depreciation or amortization deductions that we currently expect to be available (and that are currently reflected in our pro forma balance sheet) resulting from the Principals’ exchanges of New Class A Units and our purchase of other New Class A Units from the Principals.

 

Our ability to benefit from any depreciation or amortization deductions, which we currently expect to be available as a result of the increases in tax basis created by the Principals’ exchanges of New Class A Units and our purchase of other New Class A Units from the Principals, depends on a number of assumptions, including that we earn sufficient taxable income each year during the 15-year period over which such deductions are available and that there are no adverse changes in applicable law or regulations. Our pro forma balance sheet reflects a deferred tax asset, a corresponding liability for amounts due under the tax receivable agreement and an increase in stockholders’ equity related to our 15% share of this expected benefit. If our actual taxable income were insufficient and/or there were adverse changes in applicable law or regulations, we may be unable to realize this expected benefit and our cash flows and stockholders’ equity could be negatively affected. See “Related Party Transactions — Tax Receivable Agreement”.

 

We will be required to pay the principals most of the tax benefits of any depreciation or amortization deductions we may claim as a result of the tax basis step up we receive in connection with their exchanges of New Class A Units and our purchase of other New Class A Units.

 

Any taxable exchanges by the Principals of New Class A Units for shares of our Class A common stock and any purchases by us of other New Class A Units (including the exchanges that occurred prior to this offering and the purchases that will occur in connection with this offering) are expected to result in increases in the tax basis in the tangible and intangible assets of 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 (“IRS”) might challenge all or part of this tax basis increase, and a court might sustain such a challenge.

 

We entered into a tax receivable agreement with the Principals, pursuant to which we agreed to pay them 85% of the amount of the reduction 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 the increases in tax basis created by their exchanges or our purchases of New Class A Units. 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. At the time of the IPO, we de-recognized this deferred tax asset recorded on our balance sheet. Following the IPO, we recorded 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 established 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 provides 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 Holdings attributable to the exchanged New Class A Units, the payments that we may make to the Principals will be substantial. See “Related Party Transactions — Tax Receivable Agreement”.

 

As a result of the Exchange and purchase of New Class A Units in connection with this offering, we expect to incur payment obligations to our Principals of approximately $153.4 million in the aggregate (assuming no changes in the relevant tax law and that we can earn sufficient taxable income to realize the full tax benefits generated by the exchange and/or purchase of an aggregate of 14,400,000 New Class A Units) over the 15-year period from the assumed year of Exchange and purchase based on an assumed price of $21.49 per share of our Class A common stock (the last reported sale price for our Class A common stock on May 18, 2010, which is the date on which each Principal exchanged 3,000,000 shares of New Class A Units for 3,000,000 shares of Class A common stock). See “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 benefits 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. In addition, the availability of the tax benefits may be limited by changes in law or regulations, possibly with retroactive effects.

 

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 authorizes 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 Related to Our Class A common stock

 

An active market for our Class A common stock may not be sustained.

 

Shares of our Class A common stock are listed on the New York Stock Exchange (“NYSE”) under the symbol “ART”. We are required to comply with the NYSE’s listing standards in order to maintain the listing of our Class A common stock on the exchange. The NYSE has the authority to delist our Class A common stock if, during any period of 30 consecutive trading days, the average closing share price falls below $1.00 or the average market capitalization of our Class A common stock falls below $50.0 million and, at the same time, total stockholders’ equity is less than $50.0 million, and in either case we are unable to satisfy these standards within the time periods specified under NYSE regulations. In addition, the NYSE has the authority to delist our Class A common stock if the NYSE determines that the trading price of our shares is abnormally low or we otherwise fail to comply with applicable NYSE regulations or criteria used in evaluating continued listing status. As of May 28, 2010, during the previous 30 consecutive trading days, the average closing share price of our Class A common stock was $21.63 per share and the average market capitalization of our Class A common stock was approximately $634.8 million, excluding securities exchangeable for, or convertible into, shares of our Class A common stock.

 

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.

 

The market price of our Class A common stock may be highly volatile and could be subject to wide fluctuations. See “Price Range of Our Class A Common Stock”. In addition, the trading volume in our Class A common stock may fluctuate and cause significant price variations to occur, which may limit or prevent investors from readily selling their Class A common stock and may otherwise negatively affect the liquidity of our Class A common stock. If the market price of our Class A common stock declines significantly, holders may be unable to resell their Class A common stock at or above their purchase price, if at all. We cannot provide any assurance 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:

 

 

The price of our Class A common stock may decline due to the large number of shares eligible for future sale and for exchange into Class A common stock.

 

The market price of our Class A common stock could decline as a result of sales of a large number of our Class A common stock 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 sell equity securities in the future at a time and price that we deem appropriate. As of March 31, 2010, we had 60,089,143 outstanding shares of our Class A common stock on a fully exchanged basis (assuming all New Class A Units are exchanged for, and all shares of Class C common stock are converted into, shares of Class A common stock) and 2,277,300 restricted stock units granted to employees.

 

Following the application of the net proceeds of this offering and assuming that the underwriters do not exercise their option to purchase additional shares, Richard Pell will own 5,350,000 shares of our Class A common stock and 600,000 New Class A Units of Holdings, which are exchangeable for shares of Class A common stock, and Rudolph-Riad Younes will own 5,350,000 shares of our Class A common stock and 600,000 New Class A Units of Holdings, which are exchangeable for shares of Class A common stock. GAM will own 16,755,844 shares of our Class C common stock which are convertible upon sale into shares of our Class A common stock. Each of our Principals and GAM has registration rights permitting them to sell their stock, subject to transfer restrictions in the case of our Principals. See “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”.

 

We have made statements under the captions “Prospectus Summary”, “Risk Factors”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” 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.

 

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.

 

The “Risk Factors” section of this prospectus lists various important factors that could cause actual results to differ materially from future and historical results. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.

 

In this prospectus, we state that we may experience a reduced number of clients, and net client cash flows, as a result of underperformance or decreased portfolio rebalancing following recent market turbulence. Many factors influence our overall number of mandates, as well as levels of net client cash flows, including, but not limited to, the performance of our investment strategies, interest in the particular strategies we offer and general market and economic conditions.

 

We intend to continue to pay quarterly cash dividends. Our first cash dividend was paid in the first quarter of 2010 (in respect of the fourth quarter of 2009) and was $0.06 per share of our Class A common stock and Class C common stock. Our Board of Directors also declared a dividend of $0.06 per share of our Class A common stock and Class C common stock in April 2010 (in respect of the first quarter of 2010), payable to stockholders of record as of May 12, 2010, on May 26, 2010. We funded each of these dividends, and intend to fund our 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 Holdings, participate on a pro rata basis in distributions by 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 have no material assets other than our ownership of New Class A Units of Holdings and certain related tax assets. Accordingly, we depend on distributions from Holdings to fund any dividends and taxes we pay. We cause Holdings to distribute cash to its members, including us, in an amount sufficient to cover any dividends we declare. When Holdings makes such distributions, other holders of New Class A Units (i.e., our Principals) 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, 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 existing or future 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. Holdings’ term debt facility and revolving credit facility contain covenants limiting 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 Holdings is in default under the term debt facility or the revolving credit facility.

 

We are taxable as a corporation for U.S. federal income tax purposes and therefore holders of our Class A common stock are not taxed directly on our earnings. Distributions of cash or other property that we pay to our stockholders constitutes dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits (as determined under 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 declared by us in respect of the periods indicated:

 

 

These dividends were not declared pursuant to any agreement. The dividends we declared in respect of the first three quarters of 2009 were payable to our former sole stockholder which, prior to the IPO, held all of our outstanding common stock. The dividends we declared in respect of the fourth quarter of 2009 and the first quarter of 2010 were paid in respect of our Class A common stock and Class C common stock.

 

We estimate that the net proceeds from this offering, after deducting estimated underwriting discounts and commissions, will be approximately $65.0 million, or approximately $73.8 million if the underwriters exercise in full their option to purchase additional shares of Class A common stock, based on an assumed public offering price of $18.49 per share (the last reported sale price for our Class A common stock on May 28, 2010).

 

We intend to use the net proceeds from this offering to purchase 1,850,000 New Class A Units and, if the underwriters exercise in full their option to purchase additional shares, to repurchase and retire 250,000 shares of Class A common stock, from each of Richard Pell and Rudolph-Riad Younes. We will not retain any of the net proceeds from this offering.

 

As a result of the Exchange and purchase of New Class A Units, we expect to incur payment obligations to our Principals of approximately $153.4 million in the aggregate (assuming no changes in the relevant tax law and that we can earn sufficient taxable income to realize the full tax benefits generated by the exchange and/or purchase of an aggregate of 14,400,000 New Class A Units) over the 15-year period from the assumed year of Exchange and purchase based on an assumed price of $21.49 per share of our Class A common stock (the last reported sale price for our Class A common stock on May 18, 2010, which is the date on which each Principal exchanged 3,000,000 shares of New Class A Units for 3,000,000 shares of Class A common stock). See “Related Party Transactions — Tax Receivable Agreement”.

 

Shares of our Class A common stock have been listed and traded on the NYSE under the symbol “ART” since September 24, 2009. The following table sets forth, for the periods indicated, the high, low and last sale prices in dollars on the NYSE for our Class A common stock and the dividends per share we declared with respect to the periods indicated.

 

 

There is no trading market for shares of our Class B or Class C common stock.

 

On May 28, 2010, the last reported sale price for our Class A common stock on the NYSE was $18.49 per share. As of May 28, 2010, there were approximately 79 stockholders of record of our Class A common stock, four stockholders of record of our Class B common stock and one stockholder of record of our Class C common stock. These figures do not reflect the beneficial ownership or shares held in nominee name, nor do they include holders of any restricted stock units.

 

The following table sets forth our cash and cash equivalents and our capitalization as of March 31, 2010:

 

 

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.

 

 

The following unaudited pro forma consolidated financial statements present the consolidated statements of operations 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 prior to: (i) January 1, 2009, with respect to the unaudited pro forma consolidated statements of operations and (ii) March 31, 2010, with respect to the unaudited pro forma consolidated statement of financial position. In this pro forma presentation, we assume that the IPO took place before January 1, 2009. 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:

 

 

 

 

The amount of the deferred tax asset and amounts payable under the tax receivable agreement arising from the step-up in tax basis in connection with the exchanges and purchases of New Class A Units in connection with this offering is based on the value of Class A common stock on the date of each relevant exchange or purchase. The Principals exchanged 6,000,000 New Class A Units for an equivalent number of shares of our Class A common stock on May 18, 2010. The value of the deferred tax asset associated with the step-up in basis in connection with such exchange and corresponding amounts payable under the tax receivable agreement presented in our pro forma statement of financial position is based on a price of $21.49 per share (the last reported sale price for our Class A common stock on May 18, 2010, the date on which such exchange occurred). We expect the Principals to either exchange or sell an additional 8,400,000 New Class A Units in connection with this offering. The value of the deferred tax asset associated with the step-up in basis in connection with the exchange or sale of such additional 8,400,000 New Class A Units presented in our pro forma statement of financial position is also based on an assumed price of $21.49 per share, which may

differ from the closing price of our Class A common stock on the date such New Class A Units are in fact exchanged or sold. Each positive or negative change of $1.00 per share in the value of our Class A common stock from the assumed price of $21.49 on the actual date of exchange or sale of such 8,400,000 New Class A Units will have a $4.8 million positive or negative impact on the related deferred tax asset and a $4.1 million positive or negative impact on the amounts due to the Principals under the tax receivable agreement as presented in our pro forma statement of financial position.

 

The unaudited pro forma consolidated financial information is included for informational purposes only. It should not be relied upon as being indicative of our statement of operations or financial position had the transactions described above been completed on the dates assumed. The unaudited pro forma consolidated financial information also does not project the statement of operations or financial position for any future period or date.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2009

 

 

The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 2010