UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)



x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2012



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 1-34457

ARTIO GLOBAL INVESTORS INC.

(Exact name of registrant as specified in its charter)



Delaware		13-6174048
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

330 Madison Ave. New York, NY		10017
(Address of principal executive offices)		(Zip Code)

(212) 297-3600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class:		Name of each exchange on which registered:
Class A common stock		New York Stock Exchange

Securities registered pursuant to section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ¨ Yes x No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ¨ Yes x No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T ((§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes ¨ No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

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.



Large accelerated filer	¨	Accelerated filer	x

Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ¨ Yes x No

As of June 30, 2012, the aggregate market value of the voting and non-voting common equity held by non-affiliates was: $75,364,000

The number of shares outstanding of each of the registrant’s classes of common stock, as of February 21, 2013, are:

Class A common stock: 60,548,105

Class B common stock: none

Class C common stock: none

DOCUMENTS INCORPORATED BY REFERENCE

Artio Global Investors Inc. will file an amendment to this Annual Report on Form 10-K or a proxy statement within 120 days for the items required by Part III, Items 10, 11, 12, 13 and 14.

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ARTIO GLOBAL INVESTORS INC.

ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2012

TABLE OF CONTENTS



PART I	3
Item 1. Business	3
Item 1A. Risk Factors	17
Item 1B. Unresolved Staff Comments	29
Item 2. Properties	30
Item 3. Legal Proceedings	30
Item 4. (Removed and Reserved)	30
PART II	30
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	30
Item 6. Selected Financial Data	33
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)	34
Item 7A. Quantitative and Qualitative Disclosures About Market Risk	53
Item 8. Financial Statements and Supplementary Data	55
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	91
Item 9A. Controls and Procedures	91
Item 9B. Other Information	91
PART III	91
Item 10. Directors, Executive Officers and Corporate Governance	91
Item 11. Executive Compensation	91
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	91
Item 13. Certain Relationships and Related Transactions, and Director Independence	91
Item 14. Principal Accountant Fees and Services	91
PART IV	92
Item 15. Exhibits and Financial Statement Schedules	92
SIGNATURES	94

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Performance Information Used in This Annual Report on Form 10-K (“Report”)

We manage investments through “proprietary funds” (which include Securities and Exchange Commission, or SEC, registered mutual funds, 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, to the extent that we manage these types of accounts, 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 at least monthly for compliance with the Global Investment Performance Standards (“GIPS”), and include, for example, “Global Equity” and “High Yield.”

In “Item 1 – Business,” we include performance information about the composites in respect of our principal strategies. We do not include performance information about each of the proprietary funds, sub-advisory accounts, separate accounts and commingled funds invested in such strategies, as the returns generated in each such type of fund or account is substantially similar to the returns presented for the overall composite. Information about our proprietary funds, which compose nearly half of our assets under management, can be readily found through public sources that monitor mutual fund performance.

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 Report, 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, 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 Report. It is not possible to invest directly in any of the indices described above. The returns of these indices, as presented in this Report, have not been reduced by fees and expenses associated with investing in securities, but do include the reinvestment of dividends. In this Report, 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.”

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 Report.

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 Report.

Any Lipper rankings are for Class I mutual fund shares with a five-year track record only. Other classes may have different performance characteristics. Lipper, a wholly-owned subsidiary of Reuters, provides independent insight on global collective investments including mutual funds, retirement funds, hedge funds, fund fees and expenses to the asset management and media communities. Lipper ranks the performance of mutual funds within a classification of funds that have similar investment objectives. Rankings are historical with capital gains and dividends reinvested and do not include the effect of loads. If an expense waiver was in effect, it may have had a material effect on the total return or yield for the period.

Morningstar rankings are for Class I mutual fund shares with a minimum three-year track record. For each mutual fund with at least a three-year history, Morningstar calculates a Morningstar Rating™ based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund’s monthly performance (including the effects of sales charges, loads, and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. The top 10% of funds in each category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars and the bottom 10% receive 1 star. (Each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages.) The Overall Morningstar Rating for a mutual fund is derived from a weighted average of the performance figures associated with its three-, five- and ten-year (if applicable) Morningstar Rating metrics. This investment’s independent Morningstar Rating metric is then compared against the mutual fund universe

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breakpoints to determine its hypothetical rating. The information contained herein: (1) is proprietary to Morningstar; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.

None of the information in this Annual Report on Form 10-K 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.

2 Artio Global Investors Inc. 2012 Annual Report

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PART I

Item 1. Business

Overview

Our Business

Artio Global Investors Inc. (“Investors” or the “Company”) and subsidiaries (collectively, “we,” “us” or “our”) are an asset management company that provides active investment management services to institutional and mutual fund clients. We offer a select group of investment strategies, including High Grade Fixed Income, High Yield, International Equity and Global Equity. International Equities, which were historically our largest strategies, represented 31% of our assets under management (“AuM”) as of December 31, 2012 and 65% of our 2012 revenues. However, our fixed income strategies, which comprised 68% of AuM as of December 31, 2012, have had a more significant impact on our business and growth prospects. As of December 31, 2012, four out of five composites of these strategies had outperformed their benchmarks since inception. Currently, we manage and advise the following investment vehicles through which clients can access our investment capabilities: proprietary funds; commingled institutional investment vehicles; institutional separate accounts; sub-advisory accounts; and a hedge fund. For select new product initiatives, we have invested in the related investment vehicles in order to provide critical mass. We refer to these investments as “seed money investments.” Since the third quarter of 2010, and as of December 31, 2012, we have made aggregate seed money investments of $41 million in our ongoing initiatives.

Our operations and clients are based principally in the U.S.; however, a substantial portion of our AuM are invested outside of the U.S. Our revenues are primarily billed in U.S. dollars, driven by investment management fees earned from managing clients’ assets, and are calculated on the U.S. dollar value of the investment assets we manage for clients. The U.S. dollar value of AuM fluctuates with changes in foreign currency exchange rates. As of December 31, 2012, 36% of our AuM were exposed to currencies other than the U.S. dollar. Changes in foreign currency exchange rates may therefore have a material impact on our revenues. Our expenses are billed and paid primarily in U.S. dollars and are therefore not significantly affected by foreign currency exchange rates. However, our shareholder servicing expenses are driven by average daily market value of proprietary fund AuM and are therefore indirectly impacted by foreign currency exchange rates.

Our primary business objective is to consistently generate superior investment returns for our clients. We manage our investment portfolios based on a philosophy of style-agnostic investing across a broad range of opportunities, focusing on macro-economic factors and broad-based global investment themes. We also emphasize fundamental research and analysis in order to identify specific investment opportunities and capitalize on price inefficiencies. We believe that the depth and breadth of the intellectual capital and experience of our investment professionals, together with this investment philosophy and approach, are central to achieving positive investment performance. We concentrate our resources on meeting our clients’ investment objectives and outsource certain support functions, where appropriate, to industry leaders thereby allowing us to focus our business on the areas where we believe we can add the most value for our clients.

Our distribution efforts target institutions and organizations that demonstrate institutional buying behavior and longer-term investment horizons, such as pension fund consultants, broker dealers, registered investment advisors (“RIAs”), mutual fund platforms and sub-advisory relationships, enabling us to achieve significant leverage from our focused sales force and client service infrastructure. As of December 31, 2012, we provided investment management services to a broad and diversified spectrum of approximately 550 institutional clients, including some of the world’s leading corporations, public and private pension funds, endowments and foundations and major financial institutions through our separate accounts, commingled funds and proprietary funds. We also manage assets for more than 560,000 retail mutual fund shareholders through SEC-registered funds and other retail investors through four funds that we sub-advise for others. We continue to focus our distribution efforts on those markets and client segments where we see demand for our product offerings and that we believe are consistent with our philosophy of focusing on distributors who display institutional buying behavior through their selection process and due diligence.

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Our AuM as of December 31, 2012, by investment vehicle and investment strategy, are as follows:



Investment Vehicles (As of December 31, 2012)		Investment Strategies (As of December 31, 2012)

Proposed Merger

On February 14, 2013, we announced that we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Aberdeen Asset Management PLC, a public limited company organized under the laws of the United Kingdom (“Aberdeen”), and Guardian Acquisition Corporation, a Delaware corporation and an indirect wholly owned subsidiary of Aberdeen (“Merger Subsidiary”) pursuant to which Aberdeen, subject to certain conditions, will acquire us for $2.75 in cash per share.

We currently expect to complete the proposed merger by the end of the second quarter or early in the third quarter of 2013, pending the approval of the merger by our stockholders. The merger is also subject to a number of additional conditions and regulatory approvals, including, but not limited to, U.S. antitrust approval and approval of certain of our mutual fund shareholders. See “We face risks related to our proposed merger with Aberdeen” for additional detail.

Concurrently with the execution of the Merger Agreement, GAM Holding AG (formerly known as Julius Baer Holding Ltd.), a Swiss corporation (“GAM”), and each of Richard Pell, our Chief Investment Officer (“Pell”), and Rudolph-Riad Younes, our Head of International Equity (“Younes,” together with Pell, the “Principals”), entered into voting agreements with Aberdeen, providing that they will vote in favor of the merger. In aggregate, shares owned by GAM and the Principals represented approximately 45% of our outstanding Class A common stock as of February 13, 2013.

The Principals also entered into an amended and restated tax receivable agreement with us and Aberdeen pursuant to which, effective at closing of the proposed merger, the Principals agreed to waive certain provisions relating to a change in control of the Company and Aberdeen agreed to modify certain provisions relating to payments that the Principals were entitled to under the original tax receivable agreement.

Industry Overview

Investment management is the professional management of securities and other assets on behalf of institutional and individual investors. This industry continues to have significant long-term growth potential with capital inflows expected to come from sources such as households, high net worth individuals, pension plans, endowments, foundations and insurance companies.

Traditional investment managers, such as separate account and mutual fund managers, generally manage and advise investment portfolios of equity and fixed income securities. The investment objectives of these portfolios include maximizing total return, capital appreciation, current income and/or tracking the performance of a particular index. Performance is typically evaluated over various time periods based on investment returns relative to the appropriate market index and/or peer group. Traditional managers are generally compensated based on a small percentage of AuM. Managers of such portfolios in the U.S. are

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registered with the SEC under the Advisers Act. Generally, investors have unrestricted access to their capital through market transactions in the case of closed-end funds and exchange-traded funds, or through withdrawals in the case of separate accounts and mutual funds, or open-end funds.

Our Structure

The Company and its subsidiaries comprises Investors and its subsidiaries, including, but not limited to, Artio Global Holdings LLC (“Holdings”), an intermediate holding company that owns Artio Global Management LLC (“Investment Adviser”), a registered investment adviser under the Investment Advisers Act of 1940; Artio Global Institutional Services LLC, which was licensed as a limited-purpose broker-dealer in 2011; and certain investment vehicles, which we consolidate because we have a controlling financial interest in those vehicles (the “Consolidated Investment Products”). The Consolidated Investment Products include Artio Alpha Investment Funds, LLC, which includes the Artio Global Credit Opportunities Fund, a global credit hedge fund, and the Artio Emerging Markets Local Debt Fund, a SEC-registered mutual fund launched in 2011. As of December 31, 2012, Holdings was wholly owned by Investors.

Investment Adviser was organized as a corporation in Delaware on February 1, 1983 and converted to a limited liability company on May 3, 2004. It is our primary operating entity and provides investment management services to institutional and mutual fund clients. It manages and advises the Artio Global Funds (the “Funds”), which are U.S. registered investment companies; commingled institutional investment vehicles; separate accounts; sub-advisory accounts; and a hedge fund.

Our History

2009 Initial Public Offering and Changes in the Principals’ Interests

Prior to the completion of our initial public offering (“IPO”) on September 29, 2009, Investors was a wholly owned subsidiary of GAM, a Swiss corporation (“GAM”), and each of the Principals had a 15% Class B profits interest in Holdings, which was accounted for as compensation. Immediately prior to the IPO, each Principal exchanged his Class B profits interest for a 15% non-voting Class A membership interest in Holdings (“New Class A Units”). Each Principal also purchased, at par value, 9.0 million shares of voting, non-participating, Investors’ Class B common stock. In addition, the Principals entered into a tax receivable agreement with the Company, under which each Principal is entitled to 85% of certain tax benefits realized by us in our tax returns as a result of his exchange of New Class A Units for Class A common stock.

Exchange of New Class A Units

Concurrent with the IPO, we entered into an exchange agreement with the Principals, which granted each Principal and certain permitted transferees the right to exchange New Class A Units for shares of Investors’ Class A common stock, on a one-for-one basis, subject to certain restrictions. In connection with the IPO, each Principal sold 1.2 million shares of New Class A Units, leaving them each with 7.8 million New Class A Units.

Any exchange of New Class A Units is generally a taxable event for the exchanging Principal. As a result, under the exchange agreement, as amended, (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 taxes payable, as defined in the exchange agreement, on such exchange.

In 2010, each Principal exchanged 7.2 million New Class A Units for 7.2 million restricted shares of Class A common stock in accordance with the terms of the exchange agreement. At the time of each exchange, an equivalent number of shares of Class B common stock were surrendered by the Principals and canceled.

To enable the Principals to sell shares of Class A common stock to cover their taxes payable, as defined in the exchange agreement, on the exchanges discussed above, in 2010, we completed a synthetic secondary offering (the “secondary offering”) of approximately 3.8 million shares of Class A common stock at $17.33 per share, before the underwriting discount, for net proceeds of $62.1 million. We used all of the net proceeds to purchase at the same price and retire approximately 1.9 million shares of Class A common stock from each Principal. In connection with the secondary offering in 2010, the underwriters exercised a portion of their option to purchase additional shares of Class A common stock at the secondary offering price, net of the underwriting discount, resulting in the issuance of approximately 0.4 million shares of Class A common stock. We used all of the proceeds to repurchase at the same price and retire approximately 0.2 million shares of Class A common stock from each of the Principals.

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After the exchanges in 2010, each Principal owned 600,000 shares of Class B common stock and 600,000 New Class A Units, representing approximately 1% of the outstanding New Class A Units of Holdings.

In 2012, each Principal exchanged his remaining 600,000 New Class A Units for 600,000 restricted shares of Class A common stock in accordance with the terms of the exchange agreement. At the time of each exchange, an equivalent number of shares of Class B common stock were surrendered by the Principals and canceled. In connection with the 2012 exchanges, we registered 600,000 shares for each Principal, in order to satisfy registration rights we granted to them.

Investment Strategies, Products and Performance

Overview

As of December 31, 2012, we managed six different investment strategies across five asset classes: High Grade Fixed Income; High Yield; International Equity; Global Equity; and Emerging Markets Local Debt.

While each of our investment teams has a distinct process and approach to managing their investment portfolios, we foster an open, collaborative culture that encourages the sharing of ideas and insights across teams. This approach serves to unify and define us as an asset manager and has contributed to investment results across our range of strategies. The following practices are core to each team’s philosophy and process:


•	A team-based approach;


•	A reliance on internally generated research and independent thinking;


•	A belief that broad-based quantitative screening prior to the application of a fundamental research overlay is as likely to hide opportunities as it is to reveal them;


•	A significant emphasis on top-down/macro inputs and broad-based global investment themes to complement unique industry specific bottom-up analysis;


•	An intense focus on risk management, but not an aversion to taking risk that is rewarded with an appropriate premium; and


•	A belief that ultimate investment authority and accountability should reside with individuals within each investment team rather than committees.

We further believe that sharing ideas and analyses across investment teams allows us to leverage our knowledge of markets across the globe. In addition, this collaboration has enabled us to successfully translate profitable ideas from one asset class or market to another across our range of investment strategies.

Our investment capabilities are offered to clients through the following vehicles: proprietary funds, institutional commingled funds, separate accounts, a hedge fund and sub-advisory accounts. While many of our strategies are available through these vehicles, we do not offer all of these vehicles within each strategy. We currently serve as investment advisor to six SEC-registered mutual funds that offer no-load open-end share classes. In addition, we offer one private offshore fund to select offshore clients. Our institutional commingled funds are private pooled investment vehicles which we offer to qualified institutional clients such as public and private pension funds, foundations and endowments, membership organizations and trusts. We similarly manage separate accounts for institutional clients such as public and private pension funds, foundations and endowments and generally offer these accounts to institutional investors making the required minimum initial investment, which varies by strategy. Due to the size of the plans and specific reporting requirements of these investors, a separately managed account is often necessary to meet our clients’ needs. Our sub-advisory accounts include one SEC-registered mutual fund managed pursuant to a sub-advisory agreement and three non-SEC registered funds. Our sub-advisory account services are primarily focused on our Fixed Income strategies and are marketed by GAM.

The investment decisions we make and the activities of our investment professionals may subject us to litigation and damage to our professional reputation if our investment strategies perform poorly. See “Risk Factors – Risks Related to our Business – If our investment strategies perform poorly, clients could withdraw their funds and we could suffer a decline in AuM and/or become subject to litigation which would reduce our earnings” and “Risk Factors – Risks Related to our Business – Employee misconduct could expose us to significant legal liability and reputational harm.”

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Investment Strategies

The table below sets forth the total AuM for each of our investment strategies as of December 31, 2012, the strategy inception date and, for those strategies which we make available through an SEC-registered mutual fund, the Lipper ranking of the Class I shares of such mutual fund against similar funds based on performance since inception.



Strategy	Total AuM as of December 31, 2012		Strategy Inception Date
	(in millions)
High Grade Fixed Income
Total Return Bond	$	5,372	February 1995
U.S. Fixed Income	246		Various
High Yield	4,193		April 2003
International Equity
International Equity I	2,236		May 1995
International Equity II	2,158		April 2005⁽²⁾
Other International Equity	7		Various
Global Equity	110		July 1995
Other⁽¹⁾	10
Total	$	14,332


(1)	Other includes Global Credit Opportunities Fund and Emerging Markets Local Debt Fund.


(2)	We classify within International Equity II certain sub-advised mandates that were initially part of our International Equity I strategy because net client cash flows into these mandates, since 2005, have been invested according to the International Equity II strategy and the overall portfolios of these mandates are currently more similar to our International Equity II strategy.

Set forth below is a description of each of our strategies and their performance.

High Grade Fixed Income

We manage investment grade fixed income strategies that include high grade debt of both U.S. and non-U.S. issuers. Our main offering is our Total Return Bond strategy, also known as the Core Plus strategy, which invests at least 60% of portfolio assets in the U.S. fixed income markets (the “Core”) but also seeks to take advantage of those opportunities available in the investment grade components of non-U.S. markets (the “Plus”). We also offer a Core Plus Plus strategy, which combines our Total Return Bond strategy with allocations to high yield. The High Yield portion of these assets is reflected in the High Yield section of our discussion. In addition, we sub-advise two U.S. fixed income strategies.

We believe an investment grade fixed income portfolio can consistently deliver a source of superior risk-adjusted returns when enhanced through effective duration budgeting, expansion to include foreign sovereign debt, yield curve positioning across multiple curves and sector-oriented credit analysis. The investment process for the investment grade fixed income strategies involves five key steps: (i) market segmentation; (ii) macro fundamental analysis and screening of global macro-economic factors; (iii) internal rating assignment; (iv) target portfolio construction; and (v) risk distribution examination. The portfolio is constantly monitored and rebalanced as needed.

The 11 professionals in our High Grade Fixed Income team are responsible for both the global high grade and U.S. fixed income products which, in the aggregate, accounted for $5.6 billion of our total AuM as of December 31, 2012. We have focused distribution efforts on this strategy since the beginning of 2007 and have increased our AuM invested in these strategies by $3.6 billion as a result. As of December 31, 2012, 36% of the $5.6 billion in AuM were in proprietary funds, 54% were in separate accounts, 5% were in commingled funds and 5% were in sub-advised accounts.


•	Total Return Bond

We launched this product in February 1995 and, as of December 31, 2012, it accounted for approximately $5.4 billion of AuM. As of December 31, 2012, the Total Return Bond Fund (Class I shares) ranked in the 3^rdquartile of its Lipper universe over the past one-year period, 2^nd quartile over the three- and five-year periods and 1^st quartile since inception. The fund carried a Morningstar 5-star rating on its Class I shares and 4-star rating Class A shares as of December 31, 2012.

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•	U.S. Fixed Income

As of December 31, 2012, this product accounted for approximately $0.2 billion of AuM, entirely through sub-advisory arrangements with GAM’s offshore funds. See “Item 8. Financial Statements and Supplementary Data: Notes to the Financial Consolidated Statements, Note 6. Related Party Activities.”

The following table sets forth the changes in AuM for 2012, 2011 and 2010:



	Year Ended December 31,
High Grade Fixed Income	2012			2011			2010
	(in millions)
Beginning AuM	$	5,503		$	5,088		$	5,293
Gross client cash inflows	1,127			1,174			922
Gross client cash outflows	(1,264		)	(1,179		)	(1,537		)
Net client cash flows	(137		)	(5		)	(615		)
Transfers between investment strategies	(101		)	43			10
Total client cash flows	(238		)	38			(605		)
Market appreciation (depreciation)	353			377			400
Ending AuM	$	5,618		$	5,503		$	5,088

The table below sets forth the annualized returns, gross and net (which represent annualized returns prior to and after payment of fees, respectively) of our principal composite, the Total Return Bond (Core Plus) composite, from its inception to December 31, 2012 and in the five-, three- and one-year periods ended December 31, 2012, relative to the performance of the market indices that are most commonly used by our clients to compare the performance of the composite.



	Period Ended December 31, 2012
	Since Inception		5 Years		3 Years		1 Year
Annualized Gross Returns	7.9	%	7.1	%	7.9	%	6.9	%
Annualized Net Returns	7.1	%	6.8	%	7.6	%	6.6	%
Barclays Capital U.S. Aggregate Bond Index	6.6	%	5.9	%	6.2	%	4.2	%
Customized Index⁽¹⁾	6.1	%	5.3	%	5.2	%	3.6	%


(1)	The customized index is composed 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 table below sets forth the annualized returns, gross and net (which represent annualized returns prior to and after payment of fees, respectively) of our principal composite, the Total Return Bond (Core Plus) composite, for the five years ended December 31, 2012, relative to the performance of the market indices that are most commonly used by our clients to compare the performance of the relevant composite.



	Year Ended December 31,
Total Return Bond	2012		2011		2010		2009		2008
Gross Returns	6.9	%	8.4	%	8.4	%	11.2	%	0.9	%
Net Returns	6.6	%	8.1	%	8.1	%	10.9	%	0.6	%
Barclays Capital U.S. Aggregate Bond Index	4.2	%	7.8	%	6.5	%	5.9	%	5.2	%
Customized Index⁽¹⁾	3.6	%	5.9	%	6.2	%	5.4	%	5.6	%


(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 composite returns presented in the tables above are representative of the returns generated by the proprietary funds, sub-advisory accounts, commingled funds and separate accounts invested in our High Grade Fixed Income strategy for 2012 and 2011.

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High Yield

Our High Yield strategy invests in securities issued by non-investment grade issuers in both developed markets and emerging markets. By bringing a global perspective to the management of high yield securities and combining it with a disciplined, credit-driven investment process, we believe we can provide our clients with a more diversified/higher-yielding portfolio that is designed to deliver superior risk-adjusted returns. The investment process for the High Yield strategy seeks to generate high total returns by following five broad-based fundamental investment rules: (i) applying a global perspective on industry risk analysis and the search for investment opportunities; (ii) intensive credit research based on a “business economics” approach; (iii) stop-loss discipline that begins and ends with the question “Why should we not be selling the position?”; (iv) avoiding over-diversification to become more expert on specific credits; and (v) low portfolio turnover. The investment process is primarily a bottom-up approach to investing, bringing together the team’s issuer, industry and asset class research and more macro-economic, industry and sector-based insights. With this information, the team seeks to identify stable to improving credits. Once the team has established a set of “buyable” candidates, it constructs a portfolio through a process of relative value considerations that seek to maximize the total return potential of the portfolio within a set of risk management constraints.

We expanded our High Yield strategy by launching and seeding Artio Global Credit Opportunities Fund, a global credit hedge fund, in September 2010. The fund aims to deliver absolute returns with low volatility and a low correlation to other asset classes by exploiting overlooked areas of value in stressed capital structures and under-researched international credits utilizing the experience of our investment teams. It takes a conservative approach to leverage and invests in bank debt, bonds, credit default swaps, mezzanine capital and equity-like instruments.

The 11 professionals comprising our High Yield team are responsible for managing the High Yield strategy which accounted for approximately $4.2 billion of our total AuM as of December 31, 2012, with 71% of these assets in proprietary funds, 6% in separate accounts, 14% in sub-advised accounts and 9% in commingled funds. The main vehicle for this strategy is the Artio Global High Income Fund, which we launched in December 2002. The fund carried a Morningstar 3-star rating on its Class I shares and Class A shares as of December 31, 2012. The Global High Income Fund also ranked in the 2^nd quartile of its Lipper universe over the one-year period, and the 4^th quartile over the three- year period, the 1^stquartile over the five-year period ending December 31, 2012 and in the top decile since inception, as of December 31, 2012.

The following table sets forth the changes in AuM for 2012, 2011 and 2010:



	Year Ended December 31,
High Yield	2012			2011			2010
	(in millions)
Beginning AuM	$	4,295		$	4,907		$	3,516
Gross client cash inflows	1,656			2,241			3,066
Gross client cash outflows	(2,430		)	(2,712		)	(2,017		)
Net client cash flows	(774		)	(471		)	1,049
Transfers between investment strategies	101			(43		)	(10		)
Total client cash flows	(673		)	(514		)	1,039
Market appreciation (depreciation)	571			(98		)	352
Ending AuM	$	4,193		$	4,295		$	4,907

The table below sets forth the annualized returns, gross and net (which represent annualized returns prior to and after payment of fees, respectively) of our High Yield composite from its inception to December 31, 2012, and in the five-, three-, and one-year periods ended December 31, 2012, relative to the performance of the market indices which are most commonly used by our clients to compare the performance of the composite.



	Period Ended December 31, 2012
High Yield	Since Inception		5 Years		3 Years		1 Year
Annualized Gross Returns	10.9	%	9.7	%	10.0	%	16.3	%
Annualized Net Returns	9.7	%	8.7	%	9.0	%	15.3	%
ML Global High Yield USD Constrained Index	10.5	%	10.4	%	11.7	%	19.3	%

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The table below sets forth the annualized returns, gross and net (which represent annualized returns prior to and after payment of fees, respectively) of our High Yield composite for the five years ended December 31, 2012, relative to the performance of the market indices that are most commonly used by our clients to compare the performance of the relevant composite.



	Year Ended December 31,
High Yield	2012		2011		2010		2009		2008
Gross Returns	16.3	%	0.8	%	13.5	%	56.4	%	(23.6	)%
Net Returns	15.3	%	(0.1	)%	12.4	%	55.0	%	(24.3	)%
ML Global High Yield USD Constrained Index	19.3	%	2.6	%	13.8	%	62.2	%	(27.5	)%

The composite returns presented in the tables above are representative of the returns generated by the proprietary funds, sub-advisory accounts, separate accounts and institutional commingled funds invested in our High Yield strategies for 2012 and 2011.

International Equity

Our International Equity strategies are core strategies that do not attempt to follow either a “growth” or a “value” approach to investing. The International Equity strategies invest in equity securities and equity derivatives in developed and emerging markets outside the U.S. and held approximately 165 positions as of December 31, 2012. We believe that maintaining a diversified core portfolio, driven by dynamic sector and company fundamental analysis, is the key to delivering superior, risk-adjusted, long-term performance in the international equity markets. The investment process for the International Equity strategy is a three phase process consisting of: (i) thinking – conducting broad global fundamental analysis to establish relative values and priorities across and between sectors and geographies; (ii) screening – conducting a detailed fundamental analysis of the competitive relationship between companies and the sectors and countries in which they operate; and (iii) selecting – carefully considering whether the investment opportunity results from (a) an attractive relative value, (b) a catalyst for change, (c) in the case of emerging markets, in a market, sector or region undergoing transformation from emerging toward developed status, (d) a company in a dominant competitive position or (e) a company exhibiting a strong financial position with strong management talent and leadership. The overall objective of our investment process is to create a highly diversified portfolio of the most relatively attractive securities across global developed and emerging markets countries. The portfolio is monitored on a daily basis using a proprietary attribution system that permits us to track how particular investments contribute to performance.

The 18 professionals that comprise this team are responsible for managing International Equity investment strategies which, in the aggregate, accounted for $4.4 billion of our total assets under management as of December 31, 2012, with 49% of these assets in proprietary funds, 27% in separate accounts, 23% in commingled funds and 1% in sub-advised accounts. Both International Equity strategies have suffered from significant declines in AuM since 2009, primarily due to underperformance. In 2012, the Company’s net client cash outflows were $18.6 billion, $16.7 billion of which were related to our International Equity strategies.


•	International Equity I (“IE I”)

We launched this strategy in May 1995 and, as of December 31, 2012, it accounted for approximately $2.2 billion of AuM, including the $1.2 billion Artio International Equity Fund. IE I was closed to new investors in 2005 in order to preserve the return opportunity in our smaller capitalization investments for existing IE I investors. We reopened IE I to certain investors in January 2013 due to increased capacity available within the strategy. As of December 31, 2012, the Artio International Equity Fund ranked in the 4^th quartile of its Lipper universe over the past one-, three- and five-year periods.

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The following table sets forth the changes in AuM for the years ended December 31, 2012, 2011 and 2010:



International Equity I	Year Ended December 31,
International Equity I	2012			2011			2010
	(in millions)
Beginning AuM	$	8,680		$	18,781		$	21,656
Gross client cash inflows	272			952			1,345
Gross client cash outflows	(7,362		)	(8,176		)	(5,520		)
Net client cash flows	(7,090		)	(7,224		)	(4,175		)
Transfers between investment strategies	—			—			—
Total client cash flows	(7,090		)	(7,224		)	(4,175		)
Market appreciation (depreciation)	646			(2,877		)	1,300
Ending AuM	$	2,236		$	8,680		$	18,781


•	International Equity II (“IE II”)

We launched a second International Equity strategy in March 2005. IE II mirrors IE I in all respects except that it does not invest in companies with small capitalizations. However, the International Equity II strategy aims to replicate the returns of the small-cap component of the International Equity I strategy through a substitution strategy. As of December 31, 2011, IE II accounted for approximately $2.2 billion of AuM. As of December 31, 2012, the Artio International Equity Fund II ranked in the 4^th quartile of its Lipper universe for the three- and five-year periods and 3^rd quartile for the one-year period.

The following table sets forth the changes in AuM for the years ended December 31, 2012, 2011 and 2010:



International Equity II	Year Ended December 31,
International Equity II	2012			2011			2010
	(in millions)
Beginning AuM	$	10,897		$	23,272		$	24,716
Gross client cash inflows	443			2,015			3,229
Gross client cash outflows	(10,082		)	(10,781		)	(6,187		)
Net client cash flows	(9,639		)	(8,766		)	(2,958		)
Transfers between investment strategies	—			(39		)	50
Total client cash flows	(9,639		)	(8,805		)	(2,908		)
Market appreciation (depreciation)	900			(3,570		)	1,464
Ending AuM	$	2,158		$	10,897		$	23,272


•	Other International Equity

In addition to our core IE I and IE II strategies, we have several other smaller International Equity strategies that we have developed in response to specific client requests which, in the aggregate, accounted for approximately $7 million in AuM as of December 31, 2012.

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The table below sets forth the annualized returns, gross and net (which represent annualized returns prior to and after payment of fees, respectively) of our largest International Equity composites from their inception to December 31, 2012, and in the five-, three- and one-year periods ended December 31, 2012, relative to the performance of the market indices that are most commonly used by our clients to compare the performance of the relevant composite.



	Period Ended December 31, 2012
	Since Inception		5 Years		3 Years		1 Year
International Equity I
Annualized Gross Returns	10.7	%	(6.9	)%	(0.3	)%	15.7	%
Annualized Net Returns	9.3	%	(7.6	)%	(1.0	)%	14.8	%
MSCI EAFE Index^®	4.5	%	(3.7	)%	3.6	%	17.3	%
MSCI AC World ex USA Index^SM ND	4.9	%	(2.9	)%	3.9	%	16.8	%
International Equity II
Annualized Gross Returns	3.8	%	(6.0	)%	0.2	%	16.6	%
Annualized Net Returns	3.1	%	(6.6	)%	(0.4	)%	15.9	%
MSCI EAFE Index^®	3.7	%	(3.7	)%	3.6	%	17.3	%
MSCI AC World ex USA Index^SM ND	5.2	%	(2.9	)%	3.9	%	16.8	%

The table below sets forth the annualized returns, gross and net (which represent annualized returns prior to and after payment of fees, respectively) of our largest International Equity composites for the five years ended December 31, 2012, relative to the performance of the market indices that are most commonly used by our clients to compare the performance of the relevant composite.



	Year Ended December 31,
	2012		2011		2010		2009		2008
International Equity I
Gross Returns	15.7	%	(21.2	)%	8.8	%	26.0	%	(44.1	)%
Net Returns	8.0	%	(21.8	)%	8.1	%	25.0	%	(44.5	)%
MSCI EAFE Index^®	17.3	%	(12.1	)%	7.8	%	31.8	%	(43.4	)%
MSCI ACWI ex USA Index^SM ND	16.8	%	(13.7	)%	11.2	%	41.4	%	(45.5	)%
International Equity II
Gross Returns	16.6	%	(20.3	)%	8.2	%	26.1	%	(42.2	)%
Net Returns	15.9	%	(20.8	)%	7.5	%	25.4	%	(42.6	)%
MSCI EAFE Index^®	17.3	%	(12.1	)%	7.8	%	31.8	%	(43.4	)%
MSCI ACWI ex USA Index^SM ND	16.8	%	(13.7	)%	11.2	%	41.4	%	(45.5	)%

Global Equity

Global Equity is comprised of a concentrated equity strategy and a diversified equity strategy, both of which invest in companies worldwide. While U.S. investors have traditionally split investment decisions into U.S. versus non-U.S. categories, we believe that a growing number of U.S. investors will adopt the global paradigm and this distinction will evolve into the adoption of true global equity portfolios. The impact of globalization continues to diminish the importance of “country of origin” within the equity landscape and industry considerations have become much more critical in understanding company dynamics, particularly within more developed markets. We believe that our strength in analyzing and allocating to opportunities within developed and emerging markets positions us to effectively penetrate this growing area. Global Equity employs the same investment process as our International Equity strategies, but includes the U.S. equity market in its investing universe.

Two professionals comprise our Global Equity team, one of which also supports the firm’s International Equity strategy. As of December 31, 2012, Global Equity accounted for approximately $0.1 billion of AuM, with 15% of these assets in our proprietary funds and 85% in commingled funds. As of December 31, 2012, the Artio Select Opportunities Fund ranked in the

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4^th quartile of its Lipper universe over the past one- and three- year periods, and in the 3^rd quartile over the past five-year period, and had a 2-star Morningstar rating.

The table below sets forth the changes in assets under management for 2012, 2011 and 2010:



	Year Ended December 31,
Global Equity	2012			2011			2010
	(in millions)
Beginning AuM	$	721		$	1,025		$	618
Gross client cash inflows	6			55			460
Gross client cash outflows	(685		)	(241		)	(141		)
Net client cash flows	(679		)	(186		)	319
Transfers between investment strategies	—			39			(50		)
Total client cash flows	(679		)	(147		)	269
Market appreciation (depreciation)	68			(157		)	138
Ending AuM	$	110		$	721		$	1,025

The table below sets forth the annualized returns, gross and net (which represents annualized returns prior to and after payment of fees, respectively) of our Global Equity composite from its inception to December 31, 2012, and in the five-, three- and one-year periods ended December 31, 2012, relative to the performance of the market indices that are most commonly used by our clients to compare the performance of the composite.



	Period Ended December 31, 2012
Global Equity	Since Inception		5 Years		3 Years		1 Year
Annualized Gross Returns	8.4	%	(3.1	)%	2.9	%	11.9	%
Annualized Net Returns	7.3	%	(3.7	)%	2.3	%	11.2	%
MSCI World Index	5.8	%	(1.2	)%	6.9	%	15.8	%
MSCI AC World Index^SM	5.7	%	(1.2	)%	6.6	%	16.1	%

The table below sets forth the annualized returns, gross and net (which represent annualized returns prior to and after payment of fees, respectively) of our Global Equity composite for the five years ended December 31, 2012, relative to the performance of the market indices that are most commonly used by our clients to compare the performance of the relevant composite.



	Year Ended December 31,
Global Equity	2012			2011		2010		2009		2008
Gross Returns	11.9	%	%	(15.0	)%	14.5	%	32.2	%	(40.8	)%
Net Returns	11.2	%	%	(15.4	)%	13.9	%	31.5	%	(41.2	)%
MSCI World Index	15.8	%	%	(5.5	)%	11.8	%	30.0	%	(40.7	)%
MSCI AC World Index^SM	16.1	%	%	(7.3	)%	12.7	%	34.6	%	(42.2	)%

The composite returns presented in the tables above are representative of the returns generated by the proprietary funds, separate accounts and institutional commingled funds invested in our Global Equity strategy for the periods ended December 31, 2012 and 2011.

Artio Global Credit Opportunities Fund

In September 2010, we launched and seeded Artio Global Credit Opportunities Fund, a global credit hedge fund that is managed by members of our High Yield team. The hedge fund aims to deliver absolute returns with low volatility and a low correlation to other asset classes by exploiting overlooked areas of value in stressed capital structures and under-researched credits utilizing the experience of our investment teams. It takes a conservative approach to leverage and is invested in bank debt, bonds, credit default swaps, mezzanine capital and equity-like instruments. As of December 31, 2012, the fund’s capital totaled $32.2 million, which includes $21.6 million of firm seed money.

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Emerging Markets Local Debt

In May 2011, we launched and seeded the Artio Emerging Markets Local Debt Fund (“EMF”) with $22 million of firm capital. EMF aims to provide a high level of total return consisting of income and capital appreciation by primarily investing in fixed income instruments denominated in emerging market currencies. EMF has approximately $2 million invested from outside investors. As of December 31, 2012, EMF ranked in the 4^th quartile of its Lipper universe for the one-year period.

Distribution and Client Service

We have historically distributed our products largely through intermediaries, including investment consultants, broker dealers, RIAs, mutual fund platforms and sub-advisory relationships. This distribution model has allowed us to achieve significant leverage from a relatively small sales and client service infrastructure. We believe it is important to limit the relative size of our distribution teams to maintain our investment-centric mission, strategy and culture. Historically, we concentrated our distribution efforts primarily on our International Equity strategies. In recent years, we have focused on other strategies as well, including our High Grade Fixed Income and High Yield strategies.

By leveraging our intermediated distribution sources and focusing on institutions and organizations that demonstrate institutional buying behavior and longer-term investment horizons, we have built a balanced and broadly diversified client base across both the institutional and retail investor markets. As of December 31, 2012, 50% of AuM were in proprietary funds and 50% were in other institutional assets, including separate accounts 31%, sub-advisory accounts 6% and commingled funds 13%. 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;

Institutional Distribution and Client Service

As of December 31, 2012, we provided asset management services to approximately 550 institutional clients invested in separate accounts, commingled funds and proprietary funds, including approximately 51 state and local governments nationwide and approximately 176 corporate clients. In addition, we manage assets for approximately 72 foundations; approximately 46 colleges, universities or other educational endowments; approximately 51 of the country’s hospital or healthcare systems; and approximately 36 Taft-Hartley plans and six religious organizations.

Our institutional sales professionals focus their efforts on building strong relationships with the influential institutional consultants in their regions, while seeking to establish direct relationships with the largest potential institutional clients in their region. Their efforts have led to consultant relationships that are broadly diversified across a wide range of consultants. As of December 31, 2012, our largest consultant relationship represented approximately 10% of our total AuM. Our largest individual client represented approximately 10% of our total AuM as of December 31, 2012, and our top ten clients represented approximately 29% of our total AuM as of December 31, 2012.

Our relationship managers generally assume responsibility from the sales professionals for maintaining the client relationship as quickly as is practicable after a new mandate is won. Relationship managers and other client service professionals focus on interacting one-on-one with key clients on a regular basis to update them on investment performance and objectives. We also have a small team of investment professionals in the role of product specialists. These specialists participate in the investment process, but their primary responsibility is communicating any developments in the portfolio with clients and answering questions beyond those where the client service staff can provide adequate responses.

Proprietary Fund and Retail Distribution

Within the proprietary fund and retail marketplace, we have assembled a small team of sales professionals focused on the areas and client segments where we believe it can have meaningful impact. Our approach to retail distribution is to focus on: (i) broker dealers and major intermediaries; (ii) the RIA marketplace; (iii) direct brokerage platforms; and (iv) major financial institutions through sub-advisory channels. In general, their penetration has been greatest in those areas of the intermediated marketplace that display institutional buying behavior.

Broker Dealers

In 2005, we established a broker-dealer sales team that supports the head office product distribution teams of major brokerage firms. This team also seeks to build general awareness of our investment offerings among individual advisors and supports our platform sales, focusing particularly in those areas within each of its distributors where our no-load share classes are most appropriate. These dedicated marketing efforts are supported by internal investment professionals. While recent consolidation

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in the broker-dealer industry has reduced the number of broker-dealer platforms, we believe those organizations with whom we have existing relationships have become larger opportunities as a result. As of December 31, 2012, our largest broker-dealer relationship accounted for approximately 10% of our total AuM.

Registered Investment Advisor

We have actively pursued distribution opportunities in the RIA marketplace. Since 2005, our internal team has marketed our strategies to the RIA community employing communications tailored for the sophisticated RIA. Our professionals maintain relationships with key opinion leaders within the RIA community.

Brokerage Platforms

Our funds are available on various mutual fund platforms including Charles Schwab & Co., Inc., where they have been available since 2000, and on Fidelity’s Funds Network, where they have been available since 1998. As of December 31, 2012, our largest mutual fund platform represented approximately 11% of our total AuM.

Investment Management Fees

We earn investment management fees directly on the proprietary funds, commingled funds and separate accounts that we manage, and indirectly under sub-advisory agreements for proprietary funds and other investment funds. The fees we earn depend on the type of investment product we manage and are typically negotiated after consultation with the client based upon factors such as the level of assets, investment strategy servicing requirements, multiple or related account relationships and client type. Most of our fees are calculated based on daily or monthly average AuM, rather than quarter-end balances. In addition, a small number of separate account clients pay us fees according to the performance of their accounts relative to certain agreed-upon benchmarks, which results in a slightly lower base fee, but allows us to earn higher fees if the relevant investment strategy outperforms the agreed-upon benchmark. We did not earn any performance fees in 2011 or 2012.

Outsourced Operations, Systems and Technology

As an organization, we have developed a business model which focuses the vast majority of our resources on meeting clients’ investment objectives. As a result, we seek to outsource, whenever appropriate, support functions to industry leaders in order to allow us to focus on the areas where we believe we can add the most value for our clients. We monitor the performance of our outsourced service providers.

We outsource middle- and back-office activities to The Northern Trust Company, which has responsibility for trade confirmation, trade settlement, custodian reconciliations, corporate action processing, performance calculation and client reporting as well as custody, fund accounting and transfer agency services for our commingled funds. Our separate and sub-advised accounts outsource their custody services to providers that they select.

Our registered mutual funds outsource their custody, fund accounting and administrative services to State Street Bank and Trust Co. which has responsibility for tracking assets and providing accurate daily valuations used to calculate each fund’s net asset value. In addition, State Street Bank and Trust Co. provides daily and monthly compliance reviews, quarterly fund expense budgeting, monthly fund performance calculations, monthly distribution analysis, SEC reporting, payment of fund expenses and board reporting. It also provides annual and periodic reports, regulatory filings and related services as well as tax preparation services. Our registered mutual funds also outsource distribution to Quasar Distributors LLC and transfer agency services to U.S. Bancorp.

We also outsource the hosting, management and administration of our front-end trading and compliance systems as well as certain information technology and disaster recovery services.

Competition

We compete in all aspects of our business with other investment management companies, some of which are part of substantially larger organizations. We have historically competed principally on the basis of:


•	investment performance;


•	continuity of investment professionals;


•	quality of service provided to clients;


•	corporate positioning and business reputation;

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•	continuity of our selling arrangements with intermediaries; and


•	differentiated products.

For information on the competitive risks we face, see “Risk Factors – Risks Related to our Industry – The investment management business is intensely competitive.”

Employees

As of December 31, 2012, we employed 131 full-time employees and 1 part-time employee, including 41 investment professionals, 22 in distribution and client service, 18 in enterprise risk management and 51 in various other corporate and support functions. In 2012, our headcount was reduced by 53 full-time employees.

None of our employees are subject to collective bargaining agreements. We consider our relationship with our employees to be good and have not experienced interruptions of operations due to labor disagreements.

Properties

Our corporate headquarters and principal offices are located in New York, New York and are under a lease that will expire in 2014. We believe our existing facilities are adequate to meet our requirements.

Legal Proceedings

We have been named in certain litigation. In the opinion of management, the possibility of an outcome from this litigation that is materially adverse to us is remote.

Regulatory Environment and Compliance

Our business is subject to extensive regulation in the U.S. at both the federal and state level, as well as by self-regulatory organizations outside the U.S. Under these laws and regulations, agencies that regulate investment advisors have broad administrative powers, including the power to limit, restrict or prohibit an investment advisor from carrying on its business in the event that it fails to comply with such laws and regulations. Possible sanctions that may be imposed include the suspension of individual employees, limitations on engaging in certain lines of business for specified periods of time, revocation of investment advisor and other registrations, censures and fines.

SEC Regulation

Artio Global Management LLC is registered with the SEC as an investment advisor pursuant to the Advisers Act, and our retail investment company clients are registered under the 1940 Act. As compared to other disclosure-oriented U.S. federal securities laws, the Advisers Act and the 1940 Act, together with the SEC’s rules, regulations and interpretations thereunder, are highly restrictive regulatory statutes. The SEC is authorized to institute proceedings and impose sanctions for violations of the Advisers Act and the 1940 Act, ranging from fines and censures to termination of an advisor’s registration.

Under the Advisers Act, an investment advisor (whether or not registered under the Advisers Act) has fiduciary duties to its clients. The SEC has interpreted these duties to impose standards, requirements and limitations on, among other things: trading for proprietary, personal and client accounts; allocations of investment opportunities among clients; use of “soft dollars”; execution of transactions; and recommendations to clients. On behalf of our mutual fund and investment advisory clients, we make decisions to buy and sell securities for each portfolio, select broker dealers to execute trades and negotiate brokerage commission rates. In connection with these transactions, we may receive “soft dollar” credits from broker dealers that have the effect of reducing certain of our expenses. If our ability to use “soft dollars” were reduced or eliminated as a result of the implementation of new regulations, our operating expenses would likely increase.

The Advisers Act also imposes specific restrictions on an investment advisor’s ability to engage in principal and agency cross transactions. As a registered advisor, we are subject to many additional requirements that cover, among other things, disclosure of information about our business to clients; maintenance of written policies and procedures; maintenance of extensive books and records; restrictions on the types of fees we may charge; custody of client assets; client privacy; advertising; and solicitation of clients. The SEC has legal authority to inspect any investment advisor and typically inspects a registered advisor every two to four years to determine whether the advisor is conducting its activities (i) in accordance with applicable laws, (ii) consistent with disclosures made to clients and (iii) with adequate systems and procedures to ensure compliance.

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A majority of our revenues are derived from our advisory services to investment companies registered under the 1940 Act, such as mutual funds. The 1940 Act imposes significant requirements and limitations on a registered fund, including with respect to its capital structure, investments and transactions. While we exercise broad discretion over the day-to-day management of these funds, every fund is also subject to oversight and management by a board of directors, a majority of whom are not “interested persons” under the 1940 Act. The responsibilities of the board include, among other things, approving our advisory contract with the fund; approving service providers; determining the method of valuing assets; and monitoring transactions involving affiliates. Our advisory contracts with these funds may be terminated by the funds on not more than 60 days’ notice, and are subject to annual renewal by the fund’s board after an initial two year term.

Under the Advisers Act, our investment management agreements may not be assigned without the client’s consent. Under the 1940 Act, advisory agreements with registered funds (such as the mutual funds we manage) terminate automatically upon assignment. The term “assignment” is broadly defined and includes direct assignments as well as assignments that may be deemed to occur upon the transfer, directly or indirectly, of a controlling interest in us.

ERISA-Related Regulation

To the extent that Artio Global Management is a “fiduciary” under ERISA with respect to benefit plan clients, it is subject to ERISA, and to regulations promulgated thereunder. ERISA and applicable provisions of the Internal Revenue Code of 1986, as amended, impose certain duties on persons who are fiduciaries under ERISA, prohibit certain transactions involving ERISA plan clients and provide monetary penalties for violations of these prohibitions.

Non-U.S. Regulation

In addition to the extensive regulation our asset management business is subject to in the U.S., we are also subject to regulation internationally by the Ontario Securities Commission, the Irish Financial Institutions Regulatory Authority, and the Hong Kong Securities and Futures Commission. Our business is also subject to the rules and regulations of the more than 40 countries in which we currently conduct investment activities.

Risk Management and Compliance

Our Enterprise Risk Management Committee focuses on the key risks to which the firm is subject. Our six-person risk management unit is responsible for measuring and monitoring portfolio level risk, portfolio analysis including performance attribution, performance reporting and operational risk. Our legal and compliance functions are integrated into one team of seven full-time professionals as of December 31, 2012. This group is responsible for all legal and regulatory compliance matters, as well as monitoring adherence to client investment guidelines. Senior management is involved at various levels in all of these functions including through active participation on all the firm’s supervisory oversight committees.

For information about our regulatory environment, see “Risk Factors – Risks Related to our Industry – The regulatory environment in which we operate is subject to continual change and regulatory developments designed to increase oversight may adversely affect our business.”

Item 1A. Risk Factors

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 now consider to be material or of which we are not now 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.

Risks Related to the Proposed Merger with Aberdeen

We face risks related to our proposed merger with Aberdeen.

Completion of the proposed merger between the Company and Aberdeen is subject to the satisfaction of various conditions, including the receipt of approval from our stockholders. There is no assurance that all of the various conditions will be satisfied, or that the merger will be completed on the proposed terms, on the expected timing, or at all. The proposed merger contains other inherent risks including:

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•	legal or regulatory proceedings or other matters that affect the timing or ability to complete the transaction as contemplated;


•	the risk that our business will not be integrated successfully;


•	the possibility of disruption to our business from the proposed merger including, increased costs as well as diversion of management time and resources, making it more difficult to maintain business and operational relationships, including relationships with clients;


•	litigation relating to the proposed merger;


•	inability to retain key personnel in advance of completion of proposed merger;


•	developments beyond the companies' control, including but not limited to changes in domestic or global economic conditions; and


•	the risk that the proposed merger is not completed, which could lead to continued or increased client outflows, further declines in investor confidence, failure to retain key personnel, increased reduction in profitability due to costs incurred in connection with the proposed merger and increased potential for stockholder litigation.

Risks Related to our Business

If our investment strategies continue to perform poorly, clients could continue to withdraw their funds and we could suffer further declines in our assets under management and/or become subject to litigation which would reduce our earnings.

The relative performance of our investment strategies is critical in retaining existing clients as well as attracting new clients. If our investment strategies underperform compared to their respective benchmarks or competing products, as our International Equity strategies have since 2009, our earnings could be further reduced because:


•	our existing clients may withdraw their funds from all of our investment strategies, even those which are not underperforming due to concerns regarding firm stability, which would cause the revenues that we generate from investment management fees to decline. In 2011 and 2012 we experienced significant client outflows, which led to a significant decrease in revenues and profitability;


•	our Morningstar and Lipper ratings may decline, or continue to decline for our International Equity strategies, which may adversely affect our ability to attract new assets or retain existing assets, especially assets in the Artio Global Funds;


•	third-party financial intermediaries, advisors or consultants may rate our investment products poorly, which may lead our existing clients to withdraw funds from our investment strategies or to reduce asset inflows from these third parties or their clients; or


•	the mutual funds and other investment funds that we advise or sub-advise may decide not to renew or to terminate the agreements pursuant to which we advise or sub-advise them and we may not be able to replace these relationships.

Our International Equity strategies, which accounted for 31% of our assets under management (“AuM”) as of December 31, 2012, have performed poorly over the past four calendar years. In 2012, net client cash outflows were $18.6 billion, which were primarily related to our International Equity strategies.

Our investment strategies can perform poorly for a number of reasons, including general market conditions and investment decisions that we make. For instance, investment decisions to overweight or underweight specific markets, sectors or individual stocks may lead our strategies to underperform. Additionally, currency positioning relative to the benchmark may adversely affect performance. Further, 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 laws and/or state law.

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Difficult market conditions can adversely affect our business in many ways, including by reducing the value of our AuM 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 agreements are typically based on the market value of our AuM. Investors in open-ended funds can redeem their investments in those funds at any time without prior notice. Our clients may reduce the aggregate amount of AuM 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. As approximately 31% of our asset mix is in equities, we are subject to greater losses in declining markets and greater gains in rising markets. 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 since 2008, amid challenging economic and 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. If our AuM decline for any of these reasons, it would result in lower investment management fees.

In 2012, the MSCI AC World ex USA Index increased 16.83%, while the gross performances of our International Equity I and International Equity II strategies each trailed the index by 1.11% and 0.19%, respectively. Our AuM in 2012 declined 53% throughout the year, driven primarily by net client cash outflows in our International Equity I and II strategies, resulting primarily from continued underperformance.

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

As of December 31, 2012, 31% of our AuM were invested in the International Equity I and International Equity II strategies, and 65% of our investment management fees for the year ended December 31, 2012 were attributable to fees earned from those strategies. However, our fixed income strategies, which comprised 68% of AuM as of December 31, 2012, have had a more significant impact on our business and growth prospects. 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. For example, in 2012 net client cash outflows were 61% of AuM at the beginning of the year for the firm in total, and 85% of the International Equity I and International Equity II strategies in aggregate. We believe that since 2009, the decisions by investors to withdraw their investments or terminate their investment management agreements from our International Equity strategies were driven by poor investment performance. This caused our revenues from those strategies to decline and had an adverse effect on our earnings. Our results have been impacted since 2009 by net client cash outflows from these strategies, and have led to a material adverse effect on our earnings and a decline in overall investor confidence in us. In addition, our smaller strategies, due to their size, may not be able to generate sufficient fees to cover their expenses.

The loss of any key investment professionals, including Messrs. Hopper, Pell, Quigley or 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 are the architects of our International Equity strategies. In addition, Messrs. Hopper and Quigley, the lead portfolio managers of our Fixed Income strategies, possess substantial experience in investing and have developed strong relationships with our clients. The loss of Messrs. Hopper, Pell, Quigley, 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 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. Hopper, Pell, Quigley, Younes, key members of senior management, our investment team or senior marketing personnel.

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Most of our investment strategies consist of investments in the securities of companies located outside of the U.S., which may involve foreign currency exchange, tax, political, social and economic uncertainties and risks.

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 AuM, which, in turn, could result in lower U.S.-dollar denominated revenue. As of December 31, 2012, approximately 36% of our AuM had exposure to currencies other than the U.S. dollar.

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 aggregate amount of our investments in smaller non-U.S. issuers. Non-U.S. legal and regulatory environments, including financial accounting standards and practices, may also be different, and there may be less publicly available information in respect of such companies. These risks could adversely affect the performance of our strategies that are invested in securities of non-U.S. issuers.

We derive 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 AuM 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 December 31, 2012, our largest mutual fund platform and intermediary each represented approximately 11% of our total AuM and our largest sub-advisory relationship represented approximately 4% of our total AuM. 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 consultants. Further, there has an been an increase in consolidation among consultants that could be similarly detrimental, if one of the consolidating consultants has a negative view of us and such view prevails. As of December 31, 2012, the consultant advising the largest portion of our client assets under management represented approximately 10% of our AuM. In addition, the recent economic downturn and consolidation in the broker-dealer industry has led to increased competition to market through broker dealers and higher costs, and may lead to reduced distribution access and further cost increases.

We may be adversely affected by negative publicity.

As a public company that has been facing headwinds, we have been the subject of adverse press coverage from financial analysts that follow the company and other journalists. Negative press coverage and other public statements, regardless of the factual basis for the assertions being made, could affect our ability to retain or attract new clients or could result in some type of investigation by regulators, law enforcement officials or lawsuits. Adverse publicity, governmental scrutiny and legal and enforcement proceedings can also have a negative impact on our reputation and on the morale and performance of our employees, which could adversely affect our businesses and results of operations.

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Our failure to properly control expenses as the business decreases or increases, could adversely affect our ability to generate revenue and affect overall profitability.

We expect there to be significant demands on our infrastructure and investment teams and we cannot assure you that we will be able to manage our expenses effectively as our business reduces, or expands, in size. Any failure to properly manage expenses, could adversely affect our ability to generate revenue. For example, in 2011 and 2012, we implemented organizational changes, which included staff reductions of 12% of total headcount in 2011 and 27% in 2012. We do not believe this affected our revenues in 2011 or 2012, but rather was designed to lower operating costs and more efficiently manage resources for current business conditions. Even if cost reduction measures do not impair our ability to generate revenue, if they are not sufficient to reduce our overall costs, our overall profitability may be adversely affected.

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, there is a general deterioration of market conditions, or concerns about firm stability, it could result in an increase in voluntary employee turnover even if compensation levels remain competitive.

Additionally, we utilize equity awards as part of our compensation strategy and as a means for recruiting and retaining highly skilled talent. Further declines in our stock price or a failure of employees to meet the goals set by the performance-based awards, could result in further deterioration in the value of equity granted, thus lessening the effectiveness of retaining employees through stock-based awards. For example, the awards that were granted in connection with our IPO in 2009 and awards granted in connection with our annual incentive compensation for 2009 through 2011 have substantially declined in value. There can be no assurance that we will continue to successfully attract or retain key personnel.

A change of control of our Company, as we anticipate in connection with the proposed merger, 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, as we anticipate in connection with the proposed merger. 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 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 AuM, 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

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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, certain 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.

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 human 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, for the years ended 2010 through 2012 we experienced trading errors that cost us approximately $1.7 million, $0.2 million, and $0.1 million respectively. 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 a material 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.

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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.

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

Our working capital requirements historically have been met through operating cash flows. We believe our current working capital is sufficient to meet our current obligations. We continue to maintain a strong balance sheet 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 compensate for an increase in expenses, pay dividends to stockholders, invest in our business, or repay future debt obligations.

We also may not be able to secure debt or raise equity.

On March 29, 2012, Holdings prepaid the outstanding balance of $37.5 million borrowed under a $60.0 million term credit facility and terminated both the term credit facility and a $100.0 million revolving credit facility. Both the term credit facility and the revolving credit facility would have matured in October 2012.

If we have cash flow constraints, we may seek to borrow additional funds or raise additional capital. We cannot assure you that we will be able to engage in either type of action with acceptable terms. If we are unable to do so, our ability to operate our business could be impaired. Our ability to obtain debt in the future depends upon, among other things, general economic conditions, conditions of the asset management industry, the state of the capital markets and the Company's performance.

If we were able to secure additional debt, 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 any debt service requirements or force us to modify our operations. Our level of indebtedness could make us more vulnerable to economic downturns and reduce our flexibility in responding to changing business, regulatory and economic conditions. Our ability to make interest and principal payments on any future debt and to borrow funds on favorable terms depends, primarily on the future performance of the business.

Failure to comply with “fair value” pricing, “market timing” and late trading policies and procedures may adversely affect us.

The U.S. Securities and Exchange Commission (“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. 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.

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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 has, in the past, led to a reduction in fees. Fee reductions on existing or future new business could have a material adverse effect on our profit margins and/or results of operations.

We may suffer losses from our seed capital investments.

In September 2010, we launched and seeded a global credit hedge fund with $19 million of firm capital, which aims to deliver absolute returns with low volatility and a low correlation to other asset classes by exploiting overlooked areas of value in stressed capital structures and under-researched international credits utilizing the experience of our investment teams. In May 2011, we launched and seeded a Emerging Markets Local Debt Fund, seeding it with $22 million of firm capital, which aims to provide a high level of total return consisting of income and capital appreciation by investing in fixed income instruments denominated in emerging market currencies. We could suffer losses from these seed capital investments in these strategies.

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

Our insurance costs, including errors and omissions insurance and director and officer insurance, are substantial and can fluctuate from year to year. Insurance costs increased in 2009, but decreased through 2011, then increased again in 2012. 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.

Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.

In the ordinary course of our business, we collect and store sensitive data, including our proprietary business information and that of our customers, and personally identifiable information of our clients and employees, in our data centers and on our networks. The secure maintenance and transmission of this information is critical to our operations. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, regulatory penalties, disrupt our operations, damage our reputation, and cause a loss of confidence in our products and services, which could adversely affect our business.

Risks Related to our Industry

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:

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•	a number of our competitors have greater financial, technical, marketing and other resources, better name recognition and more personnel than we do;


•	there are relatively low barriers impeding entry to new investment funds, including a relatively low cost of entering these businesses;


•	the recent trend toward consolidation in the investment management industry, and the securities business in general, has served to increase the size and strength of a number of our competitors;


•	some investors may prefer to invest with an investment manager that is not publicly traded based on the perception that publicly traded companies may focus on growth to the detriment of performance;


•	some competitors may invest according to different investment styles or in alternative asset classes that the markets may perceive as more attractive than our investment approach;


•	the recent trend toward passive or index investments;


•	some competitors may have a lower cost of capital and access to funding sources that are not available to us, which may create competitive disadvantages for us with respect to investment opportunities; and


•	other industry participants, hedge funds and alternative asset managers may seek to recruit our qualified investment professionals.

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

In addition, many of our competitors have a more diversified business and are not exposed to the same level of business risk as we are as a highly concentrated investment manager.

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. Should 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 “Item 1. Business-Regulatory Environment and Compliance.”

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The regulatory environment in which we operate is subject to continual change and regulatory developments designed to increase oversight may adversely affect our business.

Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations promulgated thereunder, the Sarbanes-Oxley Act and SEC regulations, have created uncertainty for public companies and significantly increased the costs and risks associated with accessing the U.S. public markets. While there is an ordinary evolution to regulation, we believe there will be further regulatory changes as a result of changing laws, 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 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 of 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 “Item 1. Business-Regulatory Environment and Compliance.”

In addition, 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. New laws or regulations could make compliance more difficult and expensive and affect the manner in which we conduct business.

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 included in this annual report is management’s assessment in accordance with Section 404 of the Sarbanes-Oxley Act of 2002. While management believes that our internal control over financial reporting was effective as of December 31, 2012 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.

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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.

Our Board of Directors may, in its sole discretion, change the amount or frequency of dividends or, as it has in the first quarter of 2013, 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 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 payments of dividends on our Class A 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 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. 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. 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 the firm’s operations, we may have to borrow funds and thus, our liquidity and financial condition could be materially adversely affected.

We will be required to pay the Principals most of the tax benefits of any depreciation or amortization deductions we may claim as a result of the tax basis step up we received 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 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. 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. Our analysis of these benefits shows that while we are likely to utilize the amortization expense to generate tax benefits in 2013, in the years following, we may have difficulty recognizing such benefits. Any unused benefits will then be usable in our tax returns only on a carry-forward basis, for a period of 20 years. As a consequence, we recorded a valuation allowance of $178.5 million against these deferred tax assets and certain other deferred tax assets, and reduced Due under tax receivable agreement on the Statement of Financial Position by $141.6 million, reflecting our estimate of the amounts of step-up benefits that will not be usable in reducing our tax liability in the immediate future and the uncertainty of such benefits in later years.

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 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

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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 change in law or regulations, possibly with a retroactive effect.

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 February 1, 2013, during the previous 30 consecutive trading days, the average closing share price of our Class A common stock was $2.00 per share and the average market capitalization of our Class A common stock was approximately $120 million, excluding securities exchangeable for, or convertible into, shares of our Class A common stock.

The price of our Class A common stock could continue to decline.

Since our IPO in September 2009, the price of our common stock has declined 92% as of February 1, 2013, and such declines could continue. From September 24, 2009, to February 1, 2013, our common stock has closed as low as $1.78 per share and as high as $27.25 per share. Factors that may contribute to fluctuations in our stock price include, but are not limited to, investor sentiment regarding the proposed merger, general stock market conditions, general market conditions for the asset management industry, our investment performance, net client cash flows and our operating results. The decline in our stock price could affect employee sentiment as the value of equity an employee holds declines. Further, declines in the stock price could alter client perceptions of our future investment performance or client perceptions regarding the stability of our business.

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:


•	variations in our quarterly operating results or dividends, or a decision to not pay a regular dividend;

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•	failure to meet analysts’ earnings estimates;


•	publication of research reports or press reports about us, our investments or the investment management industry or the failure of securities analysts to cover our Class A common stock;


•	additions or departures of our Principals and other key management personnel;


•	adverse market reaction to any indebtedness we may incur or securities we may issue in the future;


•	actions by stockholders;


•	lack of liquidity in our Class A common stock, which could hinder the ability to sell the stock or lower the price attained;


•	changes in market valuations of similar companies;


•	speculation in the press or investment community;


•	changes or proposed changes in laws or regulations or differing interpretations thereof affecting our business or enforcement of these laws and regulations, or announcements relating to these matters;


•	litigation or governmental investigations;


•	fluctuations in the performance or share price of other industry participants, hedge funds or alternative asset managers;


•	poor investment performance or other complications affecting our funds or current or proposed investments;


•	redemptions by clients of their assets;


•	adverse publicity about the asset management industry generally or individual scandals, specifically;


•	sales of a large number of our Class A common stock or the perception that such sales could occur; and


•	general market and economic conditions.

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 December 31, 2012, we had 60,009,073 outstanding shares of our Class A common stock on a fully diluted basis and 3,293,819 restricted stock units (“RSUs”) granted to employees, excluding dividend equivalents.

As of December 31, 2012, GAM Holdings AG owned 15,880,844 registered shares of our Class A common stock.

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.”

Item 1B. Unresolved Staff Comments.

The Company has no unresolved SEC comments.

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Item 2. Properties.

Our corporate headquarters and principal offices are located at 330 Madison Avenue in New York, New York and are leased under a lease that will expire in 2014. We believe our existing facilities are adequate to meet our requirements.

Item 3. Legal Proceedings.

The Company is aware that, since the announcement of the proposed merger, two putative shareholder class action complaints have been filed against the Company’s board of directors, the Company, and Aberdeen challenging the proposed merger. The complaints are captioned Velvart v. Artio Global Investors, Inc., Case No. 8347-VCL (filed in the Delaware Court of Chancery on or around February 21, 2013) and Fernicola v. Artio Global Investors Inc., No. 650625/2013 (filed in the Supreme Court of New York, New York County, filed on or around February 25, 2013).

The complaints generally allege, among other things, that the individual members of the Company’s board of directors breached their fiduciary duties owed to its public shareholders by approving the Company’s entry into the February 14, 2013 merger agreement (the “Merger Agreement”) with Aberdeen Asset Management PLC and Guardian Acquisition Corporation (together, “Aberdeen”) and failing to take steps to maximize the value of the Company to its public shareholders, and that the Company and Aberdeen aided and abetted such breaches of fiduciary duties. In addition, the complaints allege, among other things, that the proposed transaction undervalues the Company, that the process leading up to the Merger Agreement was flawed, and that certain provisions of the Merger Agreement improperly favor Aberdeen and impede a potential alternative transaction. The complaints generally seek, among other things, declaratory and injunctive relief concerning the alleged fiduciary breaches, injunctive relief prohibiting the defendants from consummating the proposed transaction and other forms of equitable relief. The defendants to these lawsuits believe that the suits are meritless and intend to defend them (and any similar lawsuits that may be filed) vigorously. The Company notes that the ultimate outcome of the litigation is uncertain and unknown, and that relief delaying or enjoining the proposed transaction may have adverse consequences to the Company.

Item 4. Mine Safety Disclosures.

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Shares of our Class A common stock have been traded on the New York Stock Exchange (“NYSE”) under the symbol “ART” since our initial public offering in September 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.



	High		Low		Last Sale		Dividends Declared
2012:
For the quarter ended March 31, 2012	$	5.10	$	4.25	$	4.77	$	0.06
For the quarter ended June 30, 2012	4.82		2.90		3.50		0.02
For the quarter ended September 30, 2012	3.54		2.98		2.98		0.02
For the quarter ended December 31, 2012	2.99		1.78		1.90		0.02

2011:
For the quarter ended March 31, 2011	16.48		14.33		16.16		0.06
For the quarter ended June 30, 2011	17.12		11.30		11.30		0.06
For the quarter ended September 30, 2011	12.10		6.98		7.96		0.06
For the quarter ended December 31, 2011	8.04		4.84		4.88		0.06

We may pay quarterly dividends on our Class A common stock in amounts that reflect management’s view of our financial performance and liquidity. However, we currently do not intend to pay any dividends, quarterly or otherwise.

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On February 21, 2013, the closing price for our Class A shares, as reported on the NYSE, was $2.72.

The approximate number of shareholders of record as of February 21, 2013 was 96 for our Class A common stock and none for both our Class B and Class C common stock.

Investors’ share repurchase activity for each of the three months in the period ended December 31, 2012, was as follows:



Period	Total Number of Shares Repurchased^(a)	Average Price Paid Per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs^(a)	Approximate Shares that May Yet be Purchased Under the Plans or Programs^(a)
October 1, 2012 through October 31, 2012	—	$—	—	2,226,061
November 1, 2012 through November 30, 2012	—	—	—	2,226,061
December 1, 2012 through December 31, 2012	—	—	—	2,226,061
For the quarter ended December 31, 2012	—	—	—	2,226,061


(a)	In December 2010, our Board of Directors authorized a share repurchase program of up to 3.0 million shares of our Class A common stock, which expires on December 31, 2013.

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Common Stock Performance Graph

The following graph compares the cumulative total stockholder return on our Class A common stock from September 24, 2009 (the date our Class A common stock began trading on the NYSE) through December 31, 2012, with the cumulative total return of the Standard and Poor’s 500 Stock Index (“S&P 500”) and the SNL Asset Manager Index. The graph assumes an investment of $100 in our Class A common stock and in each of the two indices on September 24, 2009 and the reinvestment of all dividends, if any. The initial public offering price of our Class A common stock was $26.00 per share.

Total Return Performance

Performance of $100 Chart



Index	9/24/2009		12/31/2009		12/31/2010		12/31/2011		12/31/2012
Artio Global Investors Inc.	$	100.00	$	98.04	$	57.48	$	19.47	$	7.84
SNL Asset Manager Index	100.00		104.02		119.74		103.57		132.88
S&P 500	100.00		105.71		121.63		124.20		144.07

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Item 6. Selected Financial Data.

Set forth below are selected financial data for the last five years. This data should be read in conjunction with, and is qualified in its entirety by reference to, the consolidated financial statements and accompanying notes included elsewhere in this Annual Report on Form 10-K.



	For the Year Ended December 31,
(in thousands, except as indicated and per share information)	2012			2011			2010			2009			2008
Statement of Operations data:
Total revenues and other operating income	$	124,293		$	276,022		$	335,129		$	307,392		$	422,046
Employee compensation and benefits:
Salaries, incentive compensation and benefits	94,893			105,201			98,981			79,035			92,487
Allocation of Class B profits interests	—			—			—			33,663			76,074
Change in redemption value of Class B profits interests	—			—			—			266,110			54,558
Tax receivable agreement	—			—			—			97,909			—
Total employee compensation and benefits	94,893			105,201			98,981			476,717			223,119
Shareholder servicing and marketing	11,429			18,653			20,125			16,886			23,369
General and administrative	35,450			39,460			42,807			42,317			62,833
Total expenses	141,772			163,314			161,913			535,920			309,321
Non-operating income (loss)	148,025			(5,705		)	(1,295		)	(1,395		)	3,181
Income (loss) from continuing operations	130,546			107,003			171,921			(229,923		)	115,906
Income taxes relating to income from continuing operations	176,140			48,397			68,193			134,287			54,755
Net income (loss)	(45,594		)	58,606			103,728			(364,210		)	61,151
Net income attributable to non-controlling interests in Holdings	202			2,114			20,123			14,104			—
Net income (loss) attributable to non-controlling interests in the Consolidated Investment Products	1,714			(1,361		)	44			—			—
Net income (loss) attributable to Artio Global Investors	$	(47,510	)	$	57,853		$	83,561		$	(378,314	)	$	61,151
Attributable to Artio Global Investors per share information – basic and diluted:
Net income (loss)	$	(0.80	)	$	0.99		$	1.58		$	(8.88	)	$	1.46
Cash dividends declared per basic share	$	0.12		$	0.24		$	0.24		$	5.16		$	2.79
Weighted average shares used to calculate per share information – basic	59,263			58,238			52,830			42,620			42,000
Weighted average shares used to calculate per share information – diluted	59,263			58,332			53,003			42,620			42,000
Balance sheet data:
Cash and cash equivalents	$	91,751		$	110,252		$	80,043		$	60,842		$	86,563
Total assets	216,600			433,769			388,447			195,954			319,476
Debt	—			37,500			57,459			60,000			—
Accrued compensation and benefits	27,637			35,530			39,256			31,478			268,925
Total liabilities	62,512			255,501			282,164			191,973			286,231
Total stockholders’ equity	$	141,038		$	162,830		$	103,647		$	6,892		$	33,245
Non-controlling interests	13,050			15,438			2,636			(2,911		)	—
Total equity	$	154,088		$	178,268		$	106,283		$	3,981		$	33,245
Assets under management data (in millions):
Assets under management	$	14,332		$	30,359		$	53,407		$	55,993		$	45,200
Net client cash flows	(18,576		)	(16,697		)	(6,287		)	338			1,930
Market appreciation (depreciation)	2,549			(6,351		)	3,701			10,455			(32,092		)

Notes:

(i)

On September 29, 2009, Artio Global Investors Inc. completed an initial public offering (the “IPO”). Before the IPO, Richard Pell, our Chief Investment Officer (“Pell”) and Rudolph-Riad Younes, our Head of International Equity (“Younes” together with Pell, the “Principals”) each had a 15% profits interest in Artio Global Management LLC, which was accounted for as compensation. Immediately prior to the IPO, each Principal exchanged his profits interest for a non-voting member interest in Artio Global Holdings LLC (“New Class A Units”), which were accounted for as non-controlling interests. Concurrent with the IPO, the Principals entered into an exchange agreement which provided that they could exchange their New Class A Units for shares of Investors’ Class A common stock, which they subsequently did in 2010 and 2012. The Principals also entered into a tax receivable agreement providing them with 85% of certain future tax benefits. In 2009, we recorded compensation expense of $97.9 million representing the present value of the future tax benefits that would have been realized had the Principals exchanged all of their shares at the IPO price.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”).

Introduction

Artio Global Investors Inc. (“Investors” or the “Company”) and subsidiaries (collectively, “we,” “us” or “our”) comprises Investors and its subsidiaries, including Artio Global Holdings LLC (“Holdings”), an intermediate holding company that owns Artio Global Management LLC (“Investment Adviser”), a registered investment adviser under the Investment Advisers Act of 1940, as amended; Artio Global Institutional Services LLC, which is licensed as a limited-purpose broker-dealer; and certain investment vehicles we consolidate because we have a controlling financial interest in them (the “Consolidated Investment Products”). The Consolidated Investment Products have investors whose interests are reflected as Non-controlling interests in the Consolidated Investment Products in the consolidated financial statements.

Our MD&A is provided in addition to the accompanying consolidated financial statements and footnotes to assist readers in understanding our results of operations and liquidity and capital resources. The MD&A is organized as follows:


•	General Overview. Beginning on page 34, we provide a summary of our overall business, the proposed merger, changes in our Principals’ interests, our critical accounting policies and the economic environment and our business environment.


•	Key Performance Indicators. Beginning on page 38, we discuss the operating and financial indicators that guide management’s review of our performance.


•	Assets Under Management. Beginning on page 41, we provide a detailed discussion of our assets under management (“AuM”), which is the major driver of our operating revenues and key performance indicators.


•	Revenues and Other Operating Income. Beginning on page 47, we compare our revenue and other operating income to the two prior years.


•	Operating Expenses. Beginning on page 47, we compare our operating expenses to the two prior years.


•	Non-Operating Income (Loss). Beginning on page 49, we compare our non-operating income (loss) to the prior two years.


•	Income Taxes. Beginning on page 49, we compare our effective tax rates to the two prior years.


•	Liquidity and Capital Resources. Beginning on page 50, we discuss our working capital as of December 31, 2012 and 2011, and cash flows for 2012, 2011 and 2010. Also included is a discussion of the financial capacity available to fund our future activities.


•	New Accounting Standards. Beginning on page 52, we discuss new accounting pronouncements that may apply to us.

•

Cautionary Note Regarding Forward-Looking Statements. Beginning on page 52, we describe the risks and uncertainties that could cause actual results to differ materially from those discussed in forward-looking statements set forth in this MD&A relating to our financial results, operations, business plans and prospects. Such forward-looking statements are based on management’s current expectations about future events, which are inherently susceptible to uncertainty and changes in circumstances.

General Overview

Business

We are an asset management company that provides investment management services to institutional and mutual fund clients. We manage and advise proprietary (mutual) funds; commingled institutional investment vehicles; institutional separate accounts; sub-advisory accounts; and a hedge fund. While our operations and clients are primarily U.S.-based, a substantial portion of our AuM is invested outside of the U.S. Our revenues are billed primarily in U.S. dollars and are calculated based on the U.S. dollar value of the investment assets we manage for clients. Our managed portfolios have exposures to currencies other than the U.S. dollar, which can affect our revenues. As of December 31, 2012, 36% of our AuM were exposed to currencies other than the U.S. dollar. Consequently, changes in foreign currency exchange rates will affect our revenues. Our

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expenses are billed and paid primarily in U.S. dollars and are therefore not significantly impacted by foreign currency exchange rates.

For select new product initiatives, we have invested in the related investment vehicles in order to provide critical mass. We refer to these investments as “seed money investments.” Income from seed money investments is included in non-operating income. This income is, by nature, variable. As of December 31, 2012, we have invested $41 million of capital in our seed money initiatives.

Proposed Merger

We currently expect to complete the proposed merger by the end of the second quarter or early in the third quarter of 2013, pending the approval of the merger by our shareholders. The merger is also subject to a number of additional conditions and regulatory approvals, including, but not limited to, U.S. antitrust approval and approval of certain of our mutual fund shareholders. See Item 1A. Risk Factors, Risks Related to the Proposed Merger with Aberdeen: We face risks related to our proposed merger with Aberdeen for additional detail.

Concurrently with the execution of the Merger Agreement, GAM Holding AG (formerly known as Julius Baer Holding Ltd.), a Swiss corporation (“GAM”), and each of Richard Pell, our Chief Investment Officer (“Pell”), and Rudolph-Riad Younes, our Head of International Equity (“Younes,” together with Pell, the “Principals”), entered into voting agreements with Aberdeen, providing that they will vote in favor of the merger. In aggregate, GAM and the Principals represented approximately 45% of our outstanding Class A common stock as of February 13, 2013.

The proposed merger contains inherent risks, such as the possibility of disruption to our business, including increased costs, as well as diversion of management time and resources, making it more difficult to maintain business and operational relationships, including relationships with clients; inability to retain key personnel in advance of completion of proposed merger; and the risk that the proposed merger is not completed, which could lead to continued or increased client outflows, further declines in investor confidence, failure to retain key personnel, increased reduction in profitability due to costs incurred in connection with the proposed merger and increased potential for stockholder litigation. See Part I, Item 1A. Risk Factors, Risks Related to the Proposed Merger with Aberdeen: We face risks related to our proposed merger with Aberdeen for further considerations regarding the proposed merger.

Changes in the Principals’ Interests

In 2010, the Principals exchanged 14.4 million of their non-voting New Class A membership interests in Holdings (“New Class A Units”) for 14.4 million shares of Investors’ Class A common stock, reducing their membership interests in Holdings to approximately 1% each. At the time of the exchanges, we issued 4.2 million shares of Class A common stock in a synthetic offering to cover the Principals’ taxes payable on the exchanges. We did not retain any of the proceeds related to the synthetic offering.

In April 2012, the Principals exchanged their remaining interests in Holdings for shares of Investors’ Class A common stock, leaving Holdings as a wholly owned subsidiary (see Item 8. Financial Statements and Supplementary Data, Notes to Consolidated Financial Statements, Note 4. Stockholders’ Equity). The Principals’ interests were reflected in the consolidated financial statements as Non-controlling interests in Holdings.

Critical Accounting Policies and Estimates

The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). These principles require management to make estimates and assumptions that affect the reported amounts of assets, liabilities (including contingent liabilities), revenues, and expenses at the date of the consolidated financial

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statements. Actual results could differ from those estimates and may have a material effect on the consolidated financial statements.

Investments owned by the Consolidated Investment Products, and Other Seed Money Investments

Certain of our seed money investments are required to be consolidated.

Fees Receivable and Accrued Fees, Net of Allowance for Doubtful Accounts

Fees receivable and accrued fees, net of allowance for doubtful accounts represent fees earned that have been, or will be, billed to our clients. We review receivables and provide an allowance for doubtful accounts if appropriate.

Investment Management Fees

Investment management fees are recognized as earned. Fees on registered investment companies are computed and billed monthly as a percentage of average daily fair value of the Funds’ AuM. Fees on other vehicles and on separate accounts are computed and billed in accordance with the provisions of the applicable investment management agreements.

The investment management agreements for a small number of accounts and an insignificant amount of assets provide for performance fees. Performance fees, if earned, are recognized on the contractually determined measurement date.

Compensation Plans

Certain of our employees participate in the Artio Global Investors Inc. 2009 Stock Incentive Plan (the “Incentive Plan;” see Item 8. Financial Statements and Supplementary Data, Notes to the Consolidated Financial Statements, Note 11. Share-Based Payments). Some of these awards are performance- or market-based.

For performance-based awards, the conditions correspond with the responsibilities of the recipients and are linked to either investment performance or sales targets, or for market-based awards, relate to increasing the price/earnings multiple of our Class A common stock as compared to our peer group. All of our current performance- and market-based awards have three-year cliff vesting. The fair value of the awards with performance conditions is based on the probable outcome of the performance target and is amortized over the vesting period. In some cases, performance targets may be set on an annual basis and communicated to employees after the initial grant date. In such cases, grant date (for purposes of determining fair value and commencement of amortization) is when the performance targets are approved by the Board of Directors and communicated. The assumptions used to derive the fair value of the performance-based awards are reviewed by management on a quarterly basis. Changes to the fair value of such awards are reflected in Employee compensation and benefits on the Consolidated Statement of Operations.

Income Taxes

The majority of our deferred tax asset would be recoverable over a 15-year period, dependent on our ability to generate sufficient taxable income. Amounts not used in the year generated may be available through carryback or carryforward to other taxable years. We evaluated the recoverability of the deferred tax asset, and in 2012, we recorded a valuation allowance due to our assessment that a portion of the asset is no longer ‘more likely than not’ of being realized. (See Item 8. Financial Statements and Supplementary Data, Notes to the Consolidated Financial Statements, Note 12. Income Taxes.)

Uncertainty in income tax positions is accounted for by recognizing in the consolidated financial statements the benefit of a tax position that we have taken in a jurisdiction when it is more likely than not that the tax position would be sustained upon examination by the tax authorities based on the technical merits of the position. Management considers the facts and circumstances available in order to determine the appropriate tax benefit to recognize including tax legislation and statutes, legislative intent, regulations, rulings and case law. The ultimate outcome of the examination of a tax position may differ from management’s estimate. These differences could have a material impact on our effective tax rate, results of operations, financial position and cash flows.

Interest and penalties relating to tax liabilities are recognized on actual tax liabilities and exposure items. Interest is accrued according to the provisions of the relevant tax law and is reported as Interest expense under Non-operating income (loss) on the Consolidated Statement of Operations. Penalties are accrued and reported as Expenses: General and administrative on the Consolidated Statement of Operations.

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Contingencies

We accrue for estimated costs, including, if applicable, legal costs, when it is probable that a loss has been incurred and the costs can be reasonably estimated. Accruals are reviewed quarterly and are adjusted to reflect the impact of current developments. Differences could exist between the actual outcome of a contingency and management’s estimate.

Although we may not have an explicit obligation to do so, we have, at our discretion, reimbursed client accounts for certain operational losses incurred.

Economic Environment

As an investment manager, we derive substantially all of our operating revenues from providing investment management services to our institutional and mutual fund clients. Such revenues are driven by the amount and composition of our AuM, as well as by our fee structure, making our business results sensitive to the prevailing global economic climate and its impact on investor sentiment and capital markets.

In 2012, most broad-based equity and fixed income markets posted positive returns despite continued concerns surrounding many European countries, the euro and the so-called ‘fiscal cliff’ in the U.S.

Early in the year, the U.S. Federal Reserve Bank (the “Fed”) announced its intention to continue its policy of encouraging growth for the foreseeable future. In the third quarter of 2012, the Fed announced it would begin expanding holdings of Treasury and mortgage-backed securities. In December 2012, it announced plans to keep interest rates low as long as the nation’s unemployment rate remained above 6.5%. However, it is expected to see risk markets slightly tighter (in spread) and for the ten year Treasury to trade in a range between 1.5% and 2.5% by the end of 2013. With the Fed’s new directive, it is also not unreasonable to think that there will be some market and rate volatility in 2013.

Also during 2012, euro zone governments established a permanent rescue fund, the European Stability Mechanism (the “ESM”), which was designed to lend money and allow countries to maintain a buffer to earn a top credit rating. In July 2012, the European Central Bank (the “ECB”) lowered its benchmark interest rate and the bank's president stated that the organization would do “whatever it takes” to save the euro. In December 2012, European finance ministers agreed to place more than 100 large banks in the euro area under the supervision of the ECB, while smaller banks will remain overseen by national regulators. This gives the ECB a role similar to that of the Fed and provided investors with a sign that Europe's leaders are taking steps to maintain the viability of the euro.

Business Environment

The International Equity strategies, which historically comprised the largest percentage of AuM, saw significant net client cash outflows in 2012. By contrast, our fixed income strategies only experienced modest net client cash outflows, which was offset by market appreciation, leaving our fixed income AuM consistent with the level at the beginning of the year. By asset size, as of December 31, 2012, fixed income represented our largest product group. Given this proportional shift and their lower fee rates, asset growth within our fixed income strategies would result in a slower pace of revenue growth than would result if it came from growth in our equities strategies. We believe that our fixed income strategies provide our best opportunity for asset growth in the immediate future, but believe this could be tempered by net client cash outflows in our International Equity strategies.

In 2012, we made the decision to discontinue our U.S. Equity strategies. Results for 2012 include expenses of $11.2 million associated with winding down these strategies, as well as other expenses associated with reductions we made to our cost base due to decreased AuM and associated revenues.

We have deferred tax assets, excluding the impact of the valuation allowance, totaling $174.2 million that resulted from a step-up in tax basis associated with the conversion of shares by certain shareholders. These tax benefits are shared with the converting shareholders under a tax receivable agreement (see Item 8. Financial Statements and Supplementary Data, Notes to the Consolidated Financial Statements, Note 6. Related Party Activities: Exchange Agreement and Tax Receivable Agreement). The amortization of the step-up for tax purposes occurs annually for approximately 15 years in amounts ranging from approximately $23 million to $52 million a year.

Our analysis of these benefits shows that while we are likely to utilize the amortization expense to generate tax benefits in 2013, in the years following, we may have difficulty recognizing such benefits. Any unused benefits will then be usable in our tax returns only on a carry-forward basis, for a period of 20 years. As a consequence, we recorded a valuation allowance of

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$178.5 million against these deferred tax assets and certain other deferred tax assets, and reduced Due under tax receivable agreement on the Statement of Financial Position.

In 2012, we eliminated the service requirement for employee stock awards issued at our initial public offering (“IPO”). The cost of the unvested awards was accelerated and is included in 2012 results. The awards will continue to vest according to their original schedule.

Changing and refining our business strategy is only possible with sufficient liquid resources. We generated positive operating cash flows during 2012 and as of December 31, 2012, had a cash balance, excluding cash held by our seed money investments, of $90.9 million. This allowed us to prepay our outstanding term loan balance and provides us with funds for both operating purposes and investment in future growth initiatives. If our revenues continue to decline, we may not generate sufficient cash flow to cover operations in the future.

Key Performance Indicators

Our management reviews our performance on a monthly basis, focusing on the indicators described below.



	As of and for the Year Ended December 31,
(in millions, except basis points, percentages and per share amounts)	2012			2011			2010
Operating indicators
AuM	$	14,332		$	30,359		$	53,407
Average AuM^(a)	21,816			44,427			52,930
Net client cash flows	(18,576		)	(16,697		)	(6,287		)
Market appreciation (depreciation)	2,549			(6,351		)	3,701

Financial indicators
Investment management fees	123			277			334
Effective fee rate (basis points)^(b)	56.4			62.4			63.1
Adjusted operating income^(c)	18			131			184
Adjusted operating margin^(d)	14.4		%	47.5		%	55.0		%
Adjusted EBITDA^(c)	26			142			189
Adjusted EBITDA margin^(d)	20.9		%	51.4		%	56.4		%
Adjusted compensation ratio^(c)(e)	49.3		%	31.5		%	26.2		%
Adjusted net income attributable to Artio Global Investors^(c)	15			73			103
Diluted earnings per share	$	(0.80	)	$	0.99		$	1.58
Adjusted diluted earnings per share^(f)	$	0.25		$	1.23		$	1.72


(a)	Average AuM is computed on the beginning-of-first-month balance and all end-of-month balances within the year.


(b)	The effective fee rate is computed by dividing investment management fees by average AuM for the year.

(c)

See the “Adjusted Performance Measures” section of this MD&A for reconciliations of Employee compensation and benefits to Adjusted compensation; Operating income (loss) before income tax expense to Adjusted operating income; Net income (loss) to Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”); and Net income (loss) attributable to Artio Global Investors to Adjusted net income attributable to Artio Global Investors.


(d)	Adjusted operating and Adjusted EBITDA margins are calculated by dividing Adjusted operating income and Adjusted EBITDA by Total revenues and other operating income.


(e)	Calculated as Adjusted compensation^(c) divided by Total revenues and other operating income.


(f)	Adjusted diluted earnings per share is calculated by dividing Adjusted net income attributable to Artio Global Investors by Adjusted weighted average diluted shares (see the “Adjusted Performance Measures” section of this MD&A).

Operating Indicators

Our revenues are driven by the amount and composition of our AuM, as well as by our fee structure. As a result, management closely monitors our AuM. We believe average AuM is more useful than quarter-end AuM in analyzing performance during a period, as most of our fees are calculated based on daily or monthly AuM, rather than quarter-end balances of AuM, although period-end AuM may be a better indicator of future revenues.

Net client cash flows represent purchases by new or existing clients, less redemptions. Our net client cash flows are driven by a number of factors, including the performance of our investment strategies relative to their respective benchmark and/or peers,

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absolute levels of performance, the competitiveness of our fee rates, the success of our marketing and client service efforts, clients’ appetite for risk and the general state of equity and fixed income markets. Net client cash outflows were $18.6 billion for 2012, mostly from our International Equity strategies. In our view, this primarily reflects underperformance in our International Equity strategies during 2009 through 2012.

Financial Indicators

Management reviews certain financial ratios to monitor progress with internal forecasts and our business drivers, and compare our firm with others in the asset management industry. The effective fee rate represents the amount of investment management fees we earn divided by the average dollar value of AuM we manage. This information can be used as an indicator of the contribution of our products to revenues. Adjusted operating and Adjusted EBITDA margins are important indicators of our profitability and the efficiency of our business model. (See the “Adjusted Performance Measures” section of this MD&A for a discussion of financial indicators not prepared in conformity with GAAP. Other ratios shown in the table on page 38 allow us to review expenses in comparison with our revenues.

Investment management fees are earned from managing clients’ assets and therefore fluctuate with the total value of AuM, the composition of AuM among our investment vehicles and investment strategies, and changes in the investment management fee rates on our products. Fees from our International Equity strategies are our primary revenue source and as a percentage of Investment management fees were approximately 65% in 2012, 83% in 2011 and 87% in 2010. The decrease in revenue percentage from our International Equity strategies primarily reflects net client cash outflows in 2011 and 2012.

Our effective fee rate for 2012 was 56.4 basis points and has declined in recent years due primarily to a greater proportion of our AuM being in fixed income strategies, which typically have lower average fee rates than our equity strategies.

Our Adjusted operating and Adjusted EBITDA margins in 2012 declined significantly, as revenues declined faster than expenses. We expect our margins to continue to be under pressure in 2013, as our AuM at the end of 2012 was less than half its level at the end of 2011.

Adjusted Performance Measures

Certain of our financial indicators are adjusted versions of balances in our consolidated financial statements and are not prepared in conformity with GAAP. We believe these adjusted financial indicators are meaningful as they are more representative of our ongoing expense base than their GAAP counterparts. We exclude the amortization expense associated with equity awards granted to employees at the time of our IPO in 2009 (since it was awarded as a consequence of our IPO and not in the ordinary course of business), severance and other costs associated with the organizational changes put in place during 2011 and 2012, a valuation allowance on a deferred tax asset (since the deferred tax asset arose primarily out of a an exchange transaction rather than from our operations), expenses related to the winding down of our U.S. Equity strategies, reductions in infrastructure requirements and the indemnification of a tax obligation of one of our funds.

We also present Adjusted net income attributable to Artio Global Investors per diluted share, which assumes the full exchange of our Principals’ non-controlling interests for Class A common stock at the beginning of each period presented. (This adjustment does not conform with GAAP, for those periods in which the shares are antidilutive. In such periods, the adjustment has the effect of increasing earnings per share.) As there are no longer any non-controlling interests in Holdings, this adjustment will not be made in future periods.

These adjustments are reflected in Adjusted operating income, Adjusted operating margin, Adjusted compensation ratio, Adjusted net income attributable to Artio Global Investors, Adjusted EBITDA, Adjusted EBITDA margin and Adjusted diluted earnings per share. Adjusted EBITDA and Adjusted EBITDA margin also exclude non-operating income and the indemnification of a tax obligation of one our funds. We have adjusted Income taxes to reflect the appropriate effective tax rate for each period after taking into consideration these non-GAAP adjustments.

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The following table reconciles Employee compensation and benefits to Adjusted compensation, Operating income before income tax expense to Adjusted operating income, Net income to Adjusted EBITDA, and Net income attributable to Artio Global Investors to Adjusted net income attributable to Artio Global Investors.



	Year Ended December 31,
(in thousands)	2012			2011			2010
Employee compensation and benefits	$	94,893		$	105,201		$	98,981
Less compensation adjustments:
Staff reduction costs	10,340			7,630			—
Amortization expense of IPO-related restricted stock unit grants (“RSUs”)	23,272			10,679			11,055
Total compensation adjustments	33,612			18,309			11,055
Adjusted compensation	$	61,281		$	86,892		$	87,926

Operating income (loss) before income tax expense	$	(17,479	)	$	112,708		$	173,216
Add: total compensation adjustments	33,612			18,309			11,055
Add: indemnification charge	1,064			—			—
Add: other chargesassociated with a staff reduction	666			—			—
Adjusted operating income	$	17,863		$	131,017		$	184,271

Net income (loss)	$	(45,594	)	$	58,606		$	103,728
Less: interest income	(4,682		)	(3,170		)	(279		)
Add: interest expense	377			2,006			2,601
Add: income taxes	176,140			48,397			68,193
Add: depreciation and amortization	33,238			24,547			15,724
EBITDA	159,479			130,386			189,967
Add: other non-operating (income) loss^(a)	(143,720		)	6,869			(1,027		)
Add: staff reduction costs, excluding amortization	8,527			4,519			—
Add: indemnification charge	1,064			—			—
Add: other chargesassociated with a staff reduction	666			—			—
Adjusted EBITDA	$	26,016		$	141,774		$	188,940

Net income (loss) attributable to Artio Global Investors	$	(47,510	)	$	57,853		$	83,561
Add: total compensation adjustments	33,612			18,309			11,055
Add: non-controlling interests in Holdings	202			2,114			20,123
Add: indemnification charge	1,064			—			—
Add: other charges associated with a staff reduction	666			—			—
Add: reduction in liability under tax receivable agreement	(141,555		)	—			—
Tax impact of adjustments - valuation allowance	178,483			—			—
Tax impact of adjustments - other	(9,961		)	(4,904		)	(11,279		)
Adjusted net income attributable to Artio Global Investors	$	15,001		$	73,372		$	103,460

Weighted average diluted shares	59,263			58,332			53,003
Adjusted weighted average diluted shares^(b)	59,922			59,532			60,114


(a)	Other non-operating (income) loss primarily represents a reduction in liability under a tax receivable agreement and gains and losses on investments of the Consolidated Investment Products.

(b)

Adjusted weighted average diluted shares for years prior to the Principal’s exchanges in April 2012 assumes the Principals have fully exchanged all of their New Class A Units for Class A common stock. The additional shares are antidilutive in accordance with GAAP. Adjusted weighted average diluted shares for 2012, include the dilutive impact of the unvested RSUs which are anti-dilutive under GAAP.

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Assets under Management (“AuM”)

Our AuM is the most important driver of our financial performance. Changes to our AuM, the distribution of our AuM among our investment products and investment strategies, and the effective fee rates on our products, all affect our operating results from one year to another.

The amount and composition of our AuM are influenced by a variety of factors including, among other things:


•	investment performance, including our investment decisions and fluctuations in both the financial markets and foreign currency exchange rates;


•	client cash flows into and out of our investment products;


•	the mix of AuM among our various strategies; and


•	our introduction or closure of investment strategies and products.

During 2012, we managed assets across 10 different strategies, within six asset classes, including:


•	High Grade Fixed Income;


•	High Yield;


•	Emerging Markets Local Debt:


•	International Equity:


•	Global Equity; and


•	U.S. Equity.

In 2012, we made the decision to discontinue our four U.S. Equity strategies. The AuM of these strategies was $178.3 million as of December 31, 2011, and $226.9 million as of December 31, 2010.

The following table sets forth a summary of our AuM by investment vehicle type as of December 31, 2012, 2011 and 2010:



	As of December 31,						As a % of AuM as of December 31,
(in millions, except percentages)	2012		2011		2010		2012		2011		2010
Proprietary funds^(a)
A shares	$	2,334	$	4,214	$	7,421
I shares^(b)	4,868		9,152		15,592
Total	7,202		13,366		23,013		50.2	%	44.0	%	43.1	%
Institutional commingled funds	1,793		4,912		9,236		12.5		16.2		17.3
Separate accounts	4,496		9,799		16,801		31.4		32.3		31.4
Sub-advisory accounts	841		2,282		4,357		5.9		7.5		8.2
Ending AuM	$	14,332	$	30,359	$	53,407	100.0	%	100.0	%	100.0	%

(a)

Proprietary funds include both SEC-registered funds and private offshore funds. SEC-registered mutual funds within our proprietary funds are: Artio International Equity Fund; Artio International Equity Fund II; Artio Total Return Bond Fund; Artio Global High Income Fund; Artio Select Opportunities Fund Inc.; Artio Emerging Markets Local Debt Fund and four U.S. Equity funds which were liquidated in 2012.


(b)	Amounts invested in private offshore funds and in the hedge fund are categorized as “I” shares.

The different fee structures associated with each type of investment vehicle make the composition of our AuM an important determinant of the investment management fees we earn. We typically earn higher effective investment management fee rates from our proprietary funds and institutional commingled funds than on our separate and sub-advised accounts.

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The following table sets forth the changes in AuM by investment vehicle type.



	For the Year Ended December 31,									YE 12/11 % Change		YE 11/10 % Change
(in millions, except percentages)	2012			2011			2010			YE 12/11 % Change		YE 11/10 % Change
Proprietary Funds:
Beginning AuM	$	13,366		$	23,013		$	24,482		(42	)%	(6	)%
Gross client cash inflows^(a)	3,074			5,320			5,989			(42	)	(11	)
Gross client cash outflows	(10,311		)	(11,833		)	(8,919		)	13		(33	)
Net client cash flows	(7,237		)	(6,513		)	(2,930		)	(11	)	(122	)
Transfers between investment vehicles	52			(38		)	—			*		*
Total client cash flows	(7,185		)	(6,551		)	(2,930		)	(10	)	(124	)
Market appreciation (depreciation)	1,021			(3,096		)	1,461			133		*
Ending AuM	$	7,202		$	13,366		$	23,013		(46	)	(42	)
Institutional Commingled Funds:
Beginning AuM	$	4,912		$	9,236		$	9,198		(47	)	—
Gross client cash inflows^(a)	167			420			802			(60	)	(48	)
Gross client cash outflows	(3,912		)	(3,666		)	(1,451		)	(7	)	(153	)
Net client cash flows	(3,745		)	(3,246		)	(649		)	(15	)	*
Transfers between investment vehicles	118			237			22			(50	)	*
Total client cash flows	(3,627		)	(3,009		)	(627		)	(21	)	*
Market appreciation (depreciation)	508			(1,315		)	665			139		*
Ending AuM	$	1,793		$	4,912		$	9,236		(63	)	(47	)
Separate Accounts:
Beginning AuM	$	9,799		$	16,801		$	17,854		(42	)	(6	)
Gross client cash inflows^(a)	227			398			1,521			(43	)	(74	)
Gross client cash outflows	(6,193		)	(5,589		)	(3,912		)	(11	)	(43	)
Net client cash flows	(5,966		)	(5,191		)	(2,391		)	(15	)	(117	)
Transfers between investment vehicles	(170		)	(199		)	(22		)	15		*
Total client cash flows	(6,136		)	(5,390		)	(2,413		)	(14	)	(123	)
Market appreciation (depreciation)	833			(1,612		)	1,360			152		*
Ending AuM	$	4,496		$	9,799		$	16,801		(54	)	(42	)
Sub-advisory Accounts:
Beginning AuM	$	2,282		$	4,357		$	4,459		(48	)	(2	)
Gross client cash inflows^(a)	90			390			904			(77	)	(57	)
Gross client cash outflows	(1,718		)	(2,137		)	(1,221		)	20		(75	)
Net client cash flows	(1,628		)	(1,747		)	(317		)	7		*
Transfers between investment vehicles	—			—			—			—		—
Total client cash flows	(1,628		)	(1,747		)	(317		)	7		*
Market appreciation (depreciation)	187			(328		)	215			157		*
Ending AuM	$	841		$	2,282		$	4,357		(63	)	(48	)
Total AuM:
Beginning AuM	$	30,359		$	53,407		$	55,993		(43	)	(5	)
Gross client cash inflows^(a)	3,558			6,528			9,216			(45	)	(29	)
Gross client cash outflows	(22,134		)	(23,225		)	(15,503		)	5		(50	)
Net client cash flows	(18,576		)	(16,697		)	(6,287		)	(11	)	(166	)
Transfers between investment vehicles	—			—			—			—		—
Total client cash flows	(18,576		)	(16,697		)	(6,287		)	(11	)	(166	)
Market appreciation (depreciation)	2,549			(6,351		)	3,701			140		*
Ending AuM	$	14,332		$	30,359		$	53,407		(53	)	(43	)

* Calculation not meaningful.


(a)	Gross client cash inflows exclude dividend reinvestment.

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The gross performance of our Artio Total Return Bond Strategy outperformed the 4.2% return of the Barclays Capital US Aggregate Bond Index by 2.7% for 2012. Over the course of the year, returns benefited from several factors including asset allocation, particularly spread sectors (such as commercial mortgage-backed securities and corporates), which outperformed in what was a slow growth environment. In addition, an underweight stance to agency mortgage-backed securities and overall security selection were positive contributors. These more than offset the drag caused by an overweight to asset-backed securities and exposure to select foreign government bonds, specifically Canadian and Australian.

With European high yield markets outperforming their U.S. counterpart, the Artio High Yield Strategy's decision to underweight Europe was a major cause of its gross performance trailing the BofA Merrill Lynch Global High Yield Constrained Index of 19.3% by 3.0%. Other detractors included exposure to leveraged loans and an underweight stance in the emerging market corporate category. Combined, these more then offset the positive impact that came from U.S. ratings allocations (overweight B and CCC credits and underweight BB credits), overall issue selection and overweight exposure to emerging market sovereign debt. We believe that the Lipper rankings are more relevant from a marketing and performance perspective. The Global High Income Fund ranked in the 2^nd quartile of its Lipper universe over the one-year period, and the 4^th quartile over the three- year period, the 1^stquartile over the five-year period ending December 31, 2012 and in the top decile since inception, as of December 31, 2012.

The International Equity strategies’ performance improved during 2012 but fell short of benchmark. The MSCI All Country World ex-USA Index (the “IE Index”) increased 16.8% for 2012 and the gross performance of our International Equity I strategy trailed the IE Index by 1.1% and our International Equity II strategy trailed the IE Index by 0.2%. For 2012, on a geographic basis, exposure to emerging markets accounted for the largest negative impact. Positioning in developed markets proved beneficial with strong stock selection in healthcare and an overweight to consumer discretionary stocks offset the drag that came from materials sector holdings. Exposure to Japan, both an underweight and stock selection, was also a contributor. During 2011, the gross performance of our International Equity I strategy trailed the IE Index by 7.5% and our International Equity II strategy trailed the IE Index by 6.6%. During 2010, the gross performance of our International Equity I strategy trailed the IE Index by 2.3% and our International Equity II strategy trailed the IE Index by 3.0%.

Net client cash flows across all investment vehicles decreased $1.9 billion during 2012 compared to 2011, mainly as a result of:


•	a $0.9 billion increase in our International Equity II strategy’s net client cash outflows;


•	a $0.5 billion increase in our Global Equity strategy’s net client cash outflows;


•	a $0.3 billion increase in our High Yield strategy’s net client cash outflows, due primarily to redemptions from mutual fund clients who may have shorter time horizons than institutional clients:


•	a $0.1 billion increase in our High Grade Fixed Income strategies’ net client cash outflows, due primarily to redemptions from institutional clients and a decrease in net inflows from mutual fund clients, partially offset by a reduction in net client cash outflows from out low margin short-term U.S. dollar fixed income products; and


•	a $0.1 billion increase in our U.S. Equity strategy’s net client cash outflows.

partially offset by:


•	a $0.1 billion decrease in our International Equity I strategy’s net client cash outflows.

Net client cash flows across all investment vehicles decreased $10.4 billion during 2011 compared to 2010, mainly as a result of:


•	a $5.8 billion increase in our International Equity II strategy’s net client cash outflows;


•	a $3.0 billion increase in our International Equity I strategy’s net client cash outflows;


•	a $1.5 billion decrease in our High Yield strategy’s net client cash flows, as 2011 had net client cash outflows compared to net client cash inflows in 2010;


•	a $0.5 billion decrease in our Global Equity strategy’s net client cash flows, as 2011 had net client cash outflows compared to net client cash inflows in 2010; and


•	a $0.1 billion decrease in our U.S. Equity strategy’s net client cash flows, as 2011 had net client cash outflows compared to net client cash inflows in 2010,

partially offset by:


•	a $0.6 billion decrease in our High Grade Fixed Income strategy’s net client cash outflows.

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Proprietary Funds

Net client cash flows related to proprietary funds decreased $0.7 billion during 2012 compared to 2011, mainly as a result of:


•	a $0.5 billion decrease in our Global High Income Fund’s net client cash flows, as 2012 had net client cash outflows compared to net client cash inflows in 2011;


•	a $0.3 billion decrease in our Total Return Bond Fund’s net client cash inflows;


•	a $0.1 billion increase in our International Equity I Fund’s net client cash outflows;


•	a $0.1 billion increase in our U.S. Equity Fund’s net client cash outflows,

partially offset by:


•	a $0.3 billion decrease in our International Equity II Fund’s net client cash outflows.

Net client cash flows related to proprietary funds decreased $3.6 billion during 2011 compared to 2010, mainly as a result of:


•	a $2.0 billion increase in our International Equity II Fund’s net client cash outflows;


•	a $1.3 billion increase in our International Equity I Fund’s net client cash outflows; and


•	a $0.8 billion decrease in our Global High Income Fund’s net client cash inflows,

partially offset by:


•	a $0.6 billion increase in our Global Fixed Income Fund’s net client cash flows, as 2011 had net client cash inflows compared to net client cash outflows in 2010.

Institutional Commingled Funds

Net client cash flows related to institutional commingled funds decreased $0.5 billion during 2012 compared to 2011, mainly as a result of:


•	a $0.4 billion increase in our International Equity II strategy’s net client cash outflows;


•	a $0.3 billion decrease in our Global Equity strategy’s net client cash flows, as 2012 had net client cash outflows compared to net client cash inflows in 2011,

partially offset by:


•	a $0.2 billion decrease in our International Equity I strategy’s net client cash outflows.

Net client cash flows related to institutional commingled funds decreased $2.6 billion during the 2011 compared to 2010, mainly as a result of:


•	a $1.8 billion increase in our International Equity II strategy’s net client cash outflows;


•	a $0.7 billion increase in our International Equity I strategy’s net client cash outflows, and


•	a $0.1 billion decrease in our Global Equity strategy’s net client cash inflows.

Separate Accounts

Net client cash flows related to separate accounts decreased $0.8 billion during 2012 compared to 2011, mainly as a result of:


•	a $0.2 billion increase in our International Equity II strategy’s net client cash outflows;


•	a $0.2 billion decrease in our High Grade Fixed Income strategy’s net client cash flows, as 2012 had net client cash outflows compared to net client cash inflows in 2011;


•	a $0.2 billion increase in our Global Equity strategy’s net client cash outflows; and


•	a $0.1 billion increase in our High Yield strategy’s net client cash outflows.

Net client cash flows related to separate accounts decreased $2.8 billion during 2011 compared to 2010, mainly as a result of:


•	a $1.4 billion increase in our International Equity II strategy’s net client cash outflows;


•	a $1.1 billion increase in our International Equity I strategy’s net client cash outflows;

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•	a $0.4 billion decrease in our Global Equity strategy’s net client cash flows, as 2011 had net client cash outflows compared to net client cash inflows in 2010; and


•	a $0.2 billion decrease in our High Yield strategy’s net client cash flows, as 2011 had net client cash outflows compared to net client cash inflows in 2010,

partially offset by:


•	a $0.3 billion increase in our High Grade Fixed Income strategy’s net client cash flows, as 2011 had net client cash inflows compared to net client cash outflows in 2010.

Sub-Advisory Accounts

Net client cash flows related to sub-advised accounts increased $0.1 billion during 2012 compared to 2011, mainly as a result of:


•	a $0.4 billion decrease in our low margin short-term U.S. dollar fixed income product’s net client cash outflows; and


•	a $0.3 billion decrease in our High Yield strategy’s net client cash outflows,

partially offset by:


•	a $0.5 billion increase in our International Equity II strategy’s net client cash outflows.

Net client cash flows related to sub-advised accounts decreased $1.4 billion during 2011 compared to 2010, as a result of:


•	a $0.6 billion increase in our International Equity II strategy’s net client cash outflows;


•	a $0.5 billion decrease in our High Yield strategy’s net client cash flows, as 2011 had net client cash outflows compared to net client cash inflows in 2010; and


•	a $0.2 billion increase in our low margin short-term U.S. dollar fixed income products’ net client cash outflows.

Fair Value of AuM

The valuation policies of the proprietary funds are approved by their boards of directors. Valuation of institutional commingled funds is similar to that of the proprietary funds. Responsibility for the valuation of separate accounts rests with the custodians of our clients’ accounts. Fair value polices for sub-advised accounts are determined by the primary adviser.

Fair value measurements are determined using a valuation hierarchy based on the transparency of the inputs to the valuation techniques used to measure fair value. Classification within the hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The valuation hierarchy contains three levels: (i) valuation inputs comprising unadjusted quoted market prices for identical assets or liabilities in active markets (“Level 1”); (ii) valuation inputs comprising quoted prices for identical assets or liabilities in markets that are not active, quoted market prices for similar assets and liabilities in active markets, and other observable inputs directly or indirectly related to the asset or liability being measured (“Level 2”); and (iii) valuation inputs that are unobservable and are significant to the fair value measurement (“Level 3”). Unobservable inputs are inputs that reflect our own assumptions about the assumptions participants would use in pricing the asset or liability, developed based on the best information available in the circumstances. Classification is also determined as Level 3 if fair value is obtained from third party pricing services with a single non-binding broker quote as the underlying valuation source.

Assets for which market quotations are readily available, are valued at fair value on the basis of quotations furnished by a pricing service or provided by securities dealers. Equity investments are generally valued using the last sale price or official closing price taken from the primary market in which each security trades, or if no sales occurred during the day, at the mean of the current quoted bid and asked prices. Fixed income securities are generally valued using prices provided directly by independent third party services or provided directly from one or more broker dealers or market makers.

The pricing services may use valuation models or matrix pricing, which considers yield or prices with respect to comparable bond quotations from bond dealers or by reference to other securities that are considered comparable in such characteristics as rating, interest rate and maturity date, to determine current value. Assets and liabilities initially expressed in foreign currency are converted into U.S. dollar values. Short-term U.S. dollar-denominated investments of appropriate credit quality that mature in 60 days or less are valued on the basis of amortized cost. Investments in net asset value-based investment vehicles are valued at the net asset value (“NAV”) of the underlying fund.

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When market quotations or exchange rates are not readily available, or if the primary adviser believes that such market quotations do not accurately reflect fair value, fair values are determined in good faith in accordance with the valuation policies. For options, swaps and warrants, a fair value price may be determined using an industry accepted modeling tool using inputs, which may include yield data, risk free rate, volatility, contract terms, and others, as applicable. In addition, we may, through our pricing committee, determine the fair value price based upon multiple factors as set forth in the valuation policies. These inputs may include prices of similar securities, yield data, the financial condition of the issuer, and other factors, as applicable. We use both market and income approaches.

The closing prices of domestic or foreign securities may not reflect their market values at the New York market close if an event that materially affects the value of those securities has occurred since the closing prices were established on the domestic or foreign market. Under certain conditions, we “fair value” foreign securities. This is generally accomplished by adjusting the closing price for movements in other correlated indices, securities, derivatives, etc. Fair value pricing may cause the value of the security to be different from the closing value on the non-U.S. exchange and may affect the calculation of a fund’s NAV. Certain funds may “fair value” securities in other situations, for example, when a particular foreign market is closed but the funds are open. Fair value pricing may be applied to both mutual funds and commingled fund assets.

When “fair value” techniques are used, Level 1 securities are revalued and considered Level 2 securities after such revaluations. Fair value techniques were employed as of December 31, 2012, but not as of December 31, 2011 and 2010. As a result, a much higher percentage of the overall portfolio was considered to be Level 2 as of December 31, 2012.

The table below shows the composition of the investments in securities of the proprietary funds and institutional commingled funds by Levels 1, 2, and 3 as of December 31, 2012, 2011 and 2010.



(in millions)	Total^(a)		Level 1 Quoted Prices		Level 2 Other Observable Inputs		Level 3 Significant Unobservable Inputs
December 31, 2012:
Proprietary funds	$	7,185	$	456	$	6,470	$	259
Institutional commingled funds	1,792		336		1,435		21
December 31, 2011:
Proprietary funds	13,289		8,109		4,878		302
Institutional commingled funds	4,912		4,324		572		16
December 31, 2010:
Proprietary funds	22,527		16,780		5,488		259
Institutional commingled funds	9,082		8,517		556		9


(a)	Total differs from aggregate AuM due to uninvested cash, among other factors.

We are not responsible for fair valuing the assets of separate accounts or sub-advised accounts, and do not have access to the fair value methodology of the custodians responsible for such valuation. Accordingly, we do not compute fair value data for these assets. The table below represents our estimate of what the data for our separate accounts and sub-advised assets might have been had we made such a computation.



(in millions)	Total^(a)		Level 1 Quoted Prices		Level 2 Other Observable Inputs		Level 3 Significant Unobservable Inputs
December 31, 2012	$	5,402	$	1,281	$	4,061	$	60
December 31, 2011	12,203		7,808		4,364		31
December 31, 2010	20,876		15,588		5,249		39


(a)	Total differs from aggregate AuM due to uninvested cash, among other factors.

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Revenues and Other Operating Income

Our revenues are driven by investment management fees earned from managing clients’ assets. Investment management fees fluctuate based on the total value of AuM, composition of AuM among our investment vehicles and among our investment strategies, changes in the investment management fee rates on our products and, for the few accounts on which we are eligible to earn performance based fees, the investment performance of those accounts.

The impact of net client cash flows to AuM during a period are not fully reflected in Revenues until the subsequent period.

The following table sets forth average AuM, the effective fee rate and Total revenues and other operating income for 2012, 2011 and 2010.



(in thousands, except for Average AuM, effective fee rate and percentages)	Year Ended December 31,						YE 12/11 % Change	YE 11/10 % Change
	2012		2011		2010		YE 12/11 % Change	YE 11/10 % Change
Average AuM (in millions)	$	21,816	$	44,427	$	52,930

Artio Global Investors Inc. 10-K