Artio Global Investors Inc. : Artio Global Investors Reports Second Quarter 2012 Results; Announces Dividend of $0.02 Per Share

Artio Global Investors Inc. (NYSE: ART) ("Artio Global Investors", together with its subsidiaries, "Artio Global" or the "Company") today reported its results for the quarter ended June 30, 2012.

Financial Update

• Adjusted¹ net income attributable to Artio Global Investors of $3.2 million, or $0.05 per diluted share, for the second quarter of 2012 (GAAP net income attributable to Artio Global Investors of $1.5 million, or $0.03 per diluted share)
• Assets under management of $21.2 billion as of June 30, 2012
• Investment management fees of $33.3 million for the second quarter of 2012
• Effective fee rate² of 56.7 basis points for the second quarter of 2012
• Adjusted EBITDA of $8.7 million for the second quarter of 2012
• Quarterly dividend of $0.02 per share on Class A common stock
• Today, the Company announced a reduction of its workforce by 25 employees. This reduction, along with other cost reductions achieved during the first six months of 2012, will result in annualized operating expense savings of approximately $20 million, mostly related to compensation. No portfolio managers or research analysts within its International Equity, High Yield or High Grade Fixed Income strategies were included in the workforce reduction.

The Company's adjusted results for all periods exclude the amortization of restricted stock units ("RSUs") granted at the time of the Company's initial public offering ("IPO"), and assume for the periods prior to the Principals'³ exchanges on April 24, 2012⁴, that the Principals' non-controlling interests have been fully exchanged for shares of Class A common stock. The Company's adjusted results for the three and six months ended June 30, 2012, and the three months ended March 31, 2012, exclude certain costs associated with organizational changes. The Company's adjusted results for the six months ended June 30, 2012, and the three months ended March 31, 2012, also exclude the write-off of unamortized debt issuance costs in connection with the early repayment of the Company's term debt. Adjusted results are presented to provide more meaningful comparisons between periods.

For the second quarter of 2012, adjusted net income attributable to Artio Global Investors was $3.2 million, or $0.05 per diluted share, a decrease of 50% and 55%, respectively, from adjusted net income attributable to Artio Global Investors of $6.5 million, or $0.11 per diluted share, for the first quarter of 2012, and a decrease of 86% and 87%, respectively, from adjusted net income attributable to Artio Global Investors of $23.3 million, or $0.39 per diluted share, for the second quarter of 2011.

On a GAAP basis, net income attributable to Artio Global Investors for the second quarter of 2012 was $1.5 million, or $0.03 per diluted share, a decrease of 67% and 63%, respectively, from net income attributable to Artio Global Investors of $4.6 million, or $0.08 per diluted share, for the first quarter of 2012, and a decrease of 93% and 92%, respectively, from net income attributable to Artio Global Investors of $21.2 million, or $0.36 per diluted share, for the second quarter of 2011.

For the first six months of 2012, adjusted net income attributable to Artio Global Investors was $9.7 million, or $0.16 per diluted share, a decrease in each case of 80% from adjusted net income attributable to Artio Global Investors of $47.5 million, or $0.80 per diluted share, for the first six months of 2011.

On a GAAP basis, net income attributable to Artio Global Investors for the first six months of 2012 was $6.1 million, or $0.10 per diluted share, a decrease in each case of 86% from net income attributable to Artio Global Investors of $43.2 million, or $0.74 per diluted share, for the first six months of 2011.

The following table compares the Company's GAAP results and adjusted results. See Exhibits 3 - 5 of this news release for a reconciliation of the Company's GAAP results to adjusted results.

Business Update⁷

• Net client cash outflows moderated to $4.5 billion for the second quarter of 2012
• The Company has decided to refocus on its long-established expertise in cross-border investing and will therefore discontinue its US Equity strategies. This action will enable the Company to better manage its resources for current business conditions.

Management Commentary

"We are realigning our business in order to focus on the asset classes where we believe active investment management offers the greatest opportunities to benefit clients," said Richard Pell, Chairman, Chief Executive Officer and Chief Investment Officer. "Accordingly, we are closing our US Equity strategies, which at the end of the second quarter represented less than one percent of the firm's total assets under management."

"This action, together with other cost reduction efforts, will result in meaningful operating expense savings. Most importantly, it enables us to concentrate our resources on our long?established expertise in cross?border investing in both equity and fixed income markets, and to continue pursuing growth and diversification opportunities within these core product areas."

Second Quarter of 2012 Comparison with Second Quarter of 2011

Assets Under Management and Net Client Cash Flows

Assets under management were $21.2 billion as of June 30, 2012, down $25.7 billion, or 55%, from $46.8 billion as of June 30, 2011, due to net client cash outflows and market depreciation.

Net client cash outflows for the second quarter of 2012 were $4.5 billion, driven primarily by net client cash outflows from our International Equity I and II, and High Yield strategies.⁸

Revenues and Other Operating Income

Revenues and other operating income for the second quarter of 2012 totaled $32.7 million, down 58% from $78.2 million for the second quarter of 2011. The decrease was driven primarily by lower investment management fees of $33.3 million for the second quarter of 2012, down 57% from $78.2 million for the second quarter of 2011, due to lower average assets under management and a decrease in the effective fee rate.

Expenses

Employee Compensation and Benefits

For the second quarter of 2012, adjusted employee compensation and benefits expenses were $16.5 million, down 29% from $23.2 million for the second quarter of 2011. The decrease was due primarily to lower incentive compensation accruals and lower headcount.

GAAP employee compensation and benefits expenses for the second quarter of 2012 were $19.4 million, down 25% from $25.8 million for the second quarter of 2011, due primarily to the reasons noted above.

Shareholder Servicing and Marketing Expenses

Shareholder servicing and marketing expenses for the second quarter of 2012 were $3.0 million, down 41% from $5.2 million for the second quarter of 2011, driven primarily by lower platform costs, reflecting a decrease in average assets under management in proprietary funds.

General and Administrative Expenses

General and administrative expenses for the second quarter of 2012 were $7.7 million, a decrease of 25% from $10.4 million for the second quarter of 2011, due primarily to lower expenses across most categories.

Non-operating Income (Loss)

Adjusted non-operating loss for the second quarter of 2012 was $1.2 million, compared to $0.1 million for the second quarter of 2011, primarily reflecting losses on seed capital investments in the second quarter of 2012.

GAAP non-operating loss for the second quarter of 2012 was $1.4 million, compared to $0.2 million for the second quarter of 2011, due primarily to the reason noted above.

Income Taxes

For the second quarter of 2012, the adjusted effective tax rate was 22.0%, 18.9 percentage points lower than the 40.9% adjusted effective tax rate for the second quarter of 2011. The decrease was due primarily to a tax benefit in the second quarter of 2012 resulting from the reversal of a tax liability reserve upon settlement of an uncertain tax position.

GAAP income tax benefit for the second quarter of 2012 was $0.3 million compared to GAAP income tax expense of $14.9 million for the second quarter of 2011, due primarily to a 97% decrease in income before income tax expense and the reason noted above.

Second Quarter of 2012 Comparison with First Quarter of 2012

Assets Under Management

Assets under management were $21.2 billion as of June 30, 2012, a decrease of $5.5 billion, or 21%, from $26.6 billion as of March 31, 2012, due to net client cash outflows and market depreciation.

Revenues and Other Operating Income

Revenues and other operating income for the second quarter of 2012 totaled $32.7 million, down 26% from $43.9 million for the first quarter of 2012, driven primarily by lower investment management fees. Investment management fees were $33.3 million for the second quarter of 2012, down 22% from $42.8 million for the first quarter of 2012, due to a decrease in average assets under management and a decrease in the effective fee rate.

Expenses

Employee Compensation and Benefits

For the second quarter of 2012, adjusted employee compensation and benefits expenses were $16.5 million, a decrease of 17% from $19.9 million for the first quarter of 2012, due primarily to lower incentive compensation accruals.

GAAP employee compensation and benefits expenses for the second quarter of 2012 were $19.4 million, a decrease of 13% from $22.3 million for the first quarter of 2012, due primarily to the reason noted above.

Shareholder Servicing and Marketing Expenses

Shareholder servicing and marketing expenses for the second quarter of 2012 were $3.0 million, a decrease of 16% from $3.6 million for the first quarter of 2012, due primarily to lower platform costs, reflecting a decrease in average assets under management in proprietary funds.

General and Administrative Expenses

Adjusted general and administrative expenses were $7.7 million for the second quarter of 2012, a decrease of 19% from $9.6 million for the first quarter of 2012, due primarily to lower expenses across most categories.

GAAP general and administrative expenses were $7.7 million for the second quarter of 2012, a decrease of 20% from $9.7 million for the first quarter of 2012, due primarily to the reason noted above.

Non-operating Income (Loss)

Adjusted non-operating loss for the second quarter of 2012 was $1.2 million, down from adjusted non-operating income of $1.9 million for the first quarter of 2012, primarily reflecting losses on seed capital investments in the second quarter of 2012, as compared to gains in the first quarter of 2012.

GAAP non-operating loss for the second quarter of 2012 was $1.4 million, down from GAAP non-operating income of $2.6 million for the first quarter of 2012 due primarily to the reason noted above.

Income Taxes

For the second quarter of 2012, the adjusted effective tax rate was 22.0%, 27.2 percentage points lower than the 49.2% adjusted effective tax rate for the first quarter of 2012. The decrease was due primarily to a tax benefit in the second quarter of 2012 resulting from the reversal of a tax liability reserve upon settlement of an uncertain tax position and the write-off of a deferred tax asset related to the vesting of RSUs at a price below their grant date price in the first quarter of 2012.

GAAP income tax benefit for the second quarter of 2012 was $0.3 million compared to GAAP income tax expense of $5.3 million for the first quarter of 2012 due primarily to a 90% decrease in income before income tax expense and the reasons noted above.

Liquidity and Capital

As of June 30, 2012, the Company had cash (excluding amounts held in the Company's Consolidated Investment Products) of $59.9 million, seed capital investments in our strategies of $47.3 million and investments held for deferred compensation of $10.1 million.

Total stockholders' equity on the Statement of Financial Position was $175.7 million as of June 30, 2012, compared to $162.8 million as of December 31, 2011.

Share Repurchase

No shares were repurchased during the second quarter of 2012. As of June 30, 2012, the Company retained authorization from the Board of Directors to repurchase 2,226,061 shares of its Class A common stock through December 31, 2013.

Shares

As of June 30, 2012, there were 59,561,559 total shares of Class A common stock outstanding.

On April 24, 2012, each of the Principals exchanged their remaining 600,000 New Class A Units, held in the intermediate holding company, into an equivalent amount of shares of Class A common stock.

Dividend

On July 23, 2012, the Board of Directors declared a dividend of $0.02 per share on the Class A common stock for the second quarter of 2012, which is payable on August 27, 2012, to stockholders of record as of the close of business on August 13, 2012.

Teleconference and Webcast Details

The Company will host a conference call for analysts and investors to review second quarter 2012 results, today, August 3, 2012, beginning at 8:00 a.m. (Eastern Time). The call will be open to the public and can be accessed by dialing +1-888-680-0860 (inside the United States) or +1-617-213-4852 (outside the United States). The number should be dialed at least ten minutes prior to the start of the call. The passcode for the call will be 63549328. A simultaneous webcast of the call (on a listen-only basis), as well as an audio replay, will be available at www.ir.artioglobal.com.

About Us

Artio Global Investors Inc. is the indirect holding company of Artio Global Management LLC ("Artio Global"), a registered investment adviser that actively invests in global equity and fixed income markets, primarily for institutional and intermediary clients. Headquartered in New York, Artio Global also has offices in Los Angeles, Toronto, London and Sydney.

Artio Global offers a select group of equity and fixed income strategies, including International Equity, Global Equity, High Grade Fixed Income, High Yield and Local Emerging Markets Debt. Access to these strategies is offered through a variety of investment vehicles, including separate accounts, commingled funds and mutual funds.

For more information, please visit www.artioglobal.com.

Cautionary Note Regarding Forward-Looking Statements

In addition to historical information, this news release may, and the related remarks do, contain forward?looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the intrinsic value of our common stock, investor behavior, net client cash flows, our compensation costs and adjusted compensation ratio, future tax rate, use of our free cash flow, potential share repurchases and declaration of dividends. These forward?looking statements are based on the Company's current assumptions, expectations and projections about future events. Words like "believe", "anticipate", "intend", "estimate", "expect", "project", and similar expressions are used to identify forward?looking statements, although not all forward-looking statements contain these words. These forward?looking statements discuss matters that necessarily involve a number of risks and uncertainties that could cause actual results to differ materially from those expressed or implied by the forward?looking statements.

Among the factors that could cause actual results to differ from those expressed or implied by a forward?looking statement are those described in the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's report on Form 10?K (File No. 001?34457) filed with the Securities and Exchange Commission on February 29, 2012. Other unknown or unpredictable factors also could have material adverse effects on the Company's future results, performance, or achievements.

Any forward?looking statements in this news release and the related remarks speak only as of the date of this news release. The related remarks may contain information about the Company subsequent to June 30, 2012. The Company is not under any obligation and does not intend to make publicly available any update or other revisions to any forward?looking statements to reflect circumstances existing after the date of this news release or to reflect the occurrence of future events even if experience or future events make it clear that any expected results expressed or implied by those forward?looking statements will not be realized.

Fund Performance and Other Disclaimers

Lipper rankings are for Class I mutual fund shares with three- and five-year track records 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 and 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. A fund's independent Morningstar Rating metric is then compared against the mutual fund universe 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.

Data presented reflect past performance, which is no guarantee of future results. © 2012 Morningstar, Inc. All Rights Reserved.

This news release is not sales material, nor is it an offer to sell or a solicitation of an offer to buy any securities, nor shall there be any sale of securities in any state or jurisdiction in which any such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

¹ See Exhibits 3 - 5 of this news release for a reconciliation of the Company's U.S. GAAP results to its non-GAAP adjusted results ("adjusted").

² Effective fee rate is defined as annualized investment management fees (based on the number of days in the period) divided by the average assets under management for the period.

³ Richard Pell, Chairman, Chief Executive Officer and Chief Investment Officer, and Rudolph-Riad Younes, Head of International Equity, are collectively referred to as the "Principals".

⁴ On April 24, 2012, each of the Principals exchanged their remaining 600,000 New Class A Units, held in the intermediate holding company, for an equivalent amount of shares of Class A common stock.

⁵ Represents total revenues and other operating income.

⁶ See Exhibit 6 for a reconciliation of Net Income to Adjusted EBITDA.

⁷ See section entitled "Fund Performance and Other Disclaimers" and Exhibit 9 of this news release for further information about Lipper and Morningstar rankings.

⁸ See Exhibit 8 for more information on "Assets under Management by Investment Strategy".