**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, 2007


 ̈
              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 000-51682




**HIGHBURY
      FINANCIAL INC.**


(Exact
      Name of Registrant as Specified in Its Charter)




Delaware
              (State
                or other jurisdiction of
              incorporation
                or organization)
            
            20-3187008
              (I.R.S.
                Employer
              Identification
                No.)999
                Eighteenth Street, Ste. 3000, Denver, CO
              (Address
                of principal executive offices)
            
            80202
              (Zip
                Code)


Issuer’s
      telephone number (303) 357-4802




Securities
      registered under Section 12(b) of the Exchange Act:


None




Securities
      registered under Section 12(g) of the Exchange Act:


Title
      of
      Each Class:


Units
      consisting of one share of Common Stock, $.0001 par value per share, and two
      Warrants


Common
      Stock, $.0001 par value per share


Warrants
      to purchase shares of Common Stock




Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act.


YES   ̈ NO x




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 ̈NOx




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 periods as the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days. YES
x NO   ̈




Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K 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
      definitions of “large accelerated filer”, “accelerated filer” and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act. (check
      one)




Large
      accelerated filer  ̈ Accelerated
      filer  ̈




Non-accelerated
      filer x (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  ̈ NO
x




As
      of
      June 30, 2007, the aggregate market value of the Common Stock held by
      non-affiliates of the Registrant was approximately $19,512,627, computed by
      reference to the closing sales price of such Common Stock on June 30, 2007,
      as
      reported on the OTC Bulletin Board. In determining the market value of the
      voting stock held by any non-affiliates, shares of Common Stock of the
      Registrant beneficially owned by directors,


officers,
      stockholders who acquired their shares of common stock prior to the Registrant’s
      initial public offering, and holders of more than 10% of the outstanding shares
      of common stock of the Registrant have been excluded. This determination of
      affiliate status is not necessarily a conclusive determination for other
      purposes.




As
      of
      March 18, 2008, there were 9,126,628 shares of common stock, $0.0001 par value
      per share, outstanding.




DOCUMENTS
      INCORPORATED BY REFERENCE: None







TABLE
        OF CONTENTS


PagePART
                I
            
            
            2ITEM
                1. BUSINESS
            
            2ITEM
                1A. RISK FACTORS
            
            9ITEM
                1B. UNRESOLVED STAFF COMMENTS
            
            17ITEM
                2. PROPERTIES
            
            17ITEM
                3. LEGAL PROCEEDINGS
            
            18ITEM
                4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
            
            18PART
                II
            
            
            18ITEM
                5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
                ISSUER PURCHASES OF EQUITY SECURITIES
            
            18ITEM
                6. SELECTED FINANCIAL DATA
            
            21ITEM
                7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
                OF OPERATIONS
            
            23ITEM
                7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
                RISK
            
            42ITEM
                8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
            
            42ITEM
                9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
                FINANCIAL DISCLOSURE
            
            42ITEM
                9A CONTROLS AND PROCEDURES
            
            42ITEM
                9B. OTHER INFORMATION
            
            43PART
                III
            
            
            43ITEM
                10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
            
            43ITEM
                11. EXECUTIVE COMPENSATION
            
            45ITEM
                12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
                AND
                RELATED STOCKHOLDER MATTERS
            
            46ITEM
                13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
                INDEPENDENCE
            
            49ITEM
                14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
            
            52ITEM
                15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
            
            53SIGNATURES
            
            56FINANCIAL
              STATEMENTS
            
            F-1




i


*FORWARD
      LOOKING STATEMENTS*




This
      Annual Report on Form 10-K includes forward-looking statements within the
      meaning of the Private Securities Litigation Reform Act of 1995, as amended,
      Section 27A of the Securities Act of 1933, as amended, or the Securities Act,
      and Section 21E of the Securities Exchange Act of 1934, as amended, or the
      Exchange Act. These forward-looking statements can be identified by the use
      of
      forward-looking terminology, including the words “believes,” “contemplates,”
“continues,” “estimates,” “anticipates,” “expects,” “intends,” “may,” “will” or
“should,” or, in each case, their negative or other variations or comparable
      terminology. You should read statements that contain these words carefully
      because they:




·
            discuss
                future expectations;




·
            contain
                projections of future results of operations or financial condition;
                or




·
            state
                other “forward-looking” information.




We
      believe it is important to communicate to our stockholders our reasonable
      expectations, beliefs and assumptions which are based on information that is
      currently available to us. However, there may be events in the future that
      we
      are not able to predict accurately or over which we have no control. The risk
      factors and cautionary language discussed in this Annual Report provide examples
      of risks, uncertainties and events that may cause actual results to differ
      materially from the expectations described by us in such forward-looking
      statements, including among other things:




·
            the
                impact of legislative and regulatory actions and reforms and regulatory,
                supervisory or enforcement actions of government agencies relating
                to us;




·
            changes
                in political, economic or industry conditions, the interest rate
                environment or financial and capital markets, which could result
                in
                changes in demand for products or services or in the value of assets
                under
                management;




·
            terrorist
                activities and international hostilities, which may adversely affect
                the
                general economy, financial and capital markets, specific industries,
                and
                us;




·
            changing
                conditions in global financial markets generally and in the equity
                markets
                particularly, and decline or lack of sustained growth in these markets;




·
            our
                business strategy and plans;




·
            the
                introduction, withdrawal, success and timing of business initiatives
                and
                strategies;




·
            harm
                to our reputation;




·
            fluctuations
                in customer demand;




·
            management
                of rapid growth;




·
            the
                impact of fund performance on redemptions;




·
            changes
                in investors’ preference of investing styles;




·
            changes
                in or loss of sub-advisers;




·
            the
                impact of increased competition;




·
            the
                results of future financing efforts;




·
            the
                impact of future acquisitions or divestitures;




·
            the
                relative and absolute investment performance of our investment products;


·
                investment
                    advisory agreements subject to termination or non-renewal;


·
                a
                    substantial reduction in fees received from third parties;
  1


·
                our
                    success in finding or acquiring additional investment management
                    firms on
                    favorable terms and consummating acquisitions of investment management
                    firms;




·
            the
                ability to retain major clients;




·
            the
                ability to attract and retain highly talented professionals;




·
            significant
                limitations or failure of software applications;




·
            expenses
                subject to significant fluctuations; and




·
            the
                impact, extent and timing of technological changes and the adequacy
                of
                intellectual property protection.




*By
      their nature, forward-looking statements involve risks and uncertainties because
      they relate to events and depend on circumstances that may or may not occur
      in
      the future. We caution you that forward-looking statements are not guarantees
      of
      future performance and that our actual results of operations, financial
      condition and liquidity, and developments in the industry in which we operate
      may differ materially from those made in or suggested by the forward-looking
      statements contained in this Annual Report. In addition, even if our results
      of
      operations, financial condition and liquidity, and developments in the industry
      in which we operate, are consistent with the forward-looking statements
      contained in this Annual Report, those results or developments may not be
      indicative of results or developments in subsequent periods. You are cautioned
      not to place undue reliance on these forward-looking statements, which speak
      only as of the date of such statements.*




*All
      forward-looking statements included herein are expressly qualified in their
      entirety by the cautionary statements contained or referred to in this Annual
      Report. Except to the extent required by applicable laws and regulations,
      Highbury undertakes no obligation to update these forward-looking statements
      to
      reflect events or circumstances after the date of this Annual Report or to
      reflect the occurrence of unanticipated events.*




*Unless
      otherwise provided in this Annual Report, references to the “Company,” the
“Registrant,” the “Issuer,” “we,” “us,” and “our” refer to Highbury Financial
      Inc. and its subsidiary. References to Highbury refer solely to Highbury
      Financial Inc. and references to Aston refer solely to Aston Asset Management
      LLC, a subsidiary of Highbury and the former U.S. mutual fund business of ABN
      AMRO. For the period prior to the acquisition, we refer to the former U.S.
      mutual fund business of ABN AMRO as the acquired business.*




**PART
      I**




**ITEM
      1.**  **BUSINESS**




**General**




Highbury,
      a Delaware corporation formed on July 13, 2005, is an investment management
      holding company providing permanent capital solutions to mid-sized investment
      management firms. We pursue acquisition opportunities and seek to establish
      accretive partnerships with high quality investment management firms. Highbury’s
      strategy is to provide permanent equity capital to fund buyouts from corporate
      parents, buyouts of founding or departing partners, growth initiatives, or
      exit
      strategies for private equity funds. This strategy includes leaving material
      equity interests with management teams to align the interests of management
      and
      Highbury’s shareholders and, in general, does not include integrating future
      acquisitions, although Highbury may execute add-on acquisitions for our current
      or future affiliates. We seek to augment and diversify our sources of revenue
      by
      asset class, investment style, distribution channel, client type and management
      team. We intend to fund acquisitions with our revolving credit facility, other
      external borrowings, retained earnings (if any), additional equity and other
      sources of capital, including seller financing and contingent
      payments.




**Aston
      Business Strategy**




Aston,
      a
      65%-owned subsidiary of Highbury, is a platform for internal growth and add-on
      acquisitions. Aston was formed by Highbury for the purpose of acquiring the
      U.S.
      mutual fund business of ABN AMRO. Aston is a registered investment advisor
      and
      the investment manager for a family of 27 no-load mutual funds and a limited
      number of separately managed accounts. Aston’s mutual fund platform is built
      upon providing investment advisory, sales, marketing, compliance, finance,
      operations and administration resources to mutual funds using sub-advisers
      that
      produce institutional quality investment products. Pursuant to the asset
      purchase agreement, dated as of April 20, 2006, referred to in this Annual
      Report on Form 10-K as the asset purchase agreement, among Highbury, Aston
      and
      ABN AMRO Asset Management Holdings, Inc., or AAAMHI, ABN AMRO Investment Fund
      Services, Inc., ABN AMRO Asset Management, Inc., Montag & Caldwell, Inc.,
      Tamro Capital Partners LLC, Veredus Asset Management LLC, and River Road Asset
      Management, LLC, collectively referred to herein as the sellers, on November
      30,
      2006, Highbury acquired substantially all of the sellers’ business of providing
      investment advisory, administration, distribution and related services to the
      U.S. mutual funds specified in the asset purchase agreement. We refer to the
      seller’s business throughout this Annual Report on Form 10-K as the acquired
      business. Pursuant to the limited liability company agreement of Aston which
      Highbury entered into with Aston and members of the Aston management team,
      72%
      of the revenues, or the operating allocation, of Aston is used to pay operating
      expenses of Aston, including salaries and bonuses of all employees of Aston
      (including the Aston management members). The remaining 28% of the revenues,
      or
      owners’ allocation, of Aston is allocated to the owners of Aston. Currently,
      18.2% of total revenue is allocated to Highbury and 9.8% of total revenue is
      allocated to the Aston management members.




2




As
      of
      December 31, 2007, Aston managed approximately $5.1 billion in total assets,
      including mutual fund and separate account assets under management. Aston
      provides investment advisory services to the Aston Funds, a family of 27
      no-load, open-end mutual funds with approximately $5.0 billion in client assets
      as of December 31, 2007. The Aston Funds account for approximately 97% of our
      assets under management. The mutual fund assets have historically grown
      internally, through market appreciation and net positive asset flows, from
      approximately $100 million in assets under management in 1993 to $7.3 billion
      at
      its peak in 2004, although since 2004 cumulative net redemptions and changes
      in
      market values have reduced the mutual fund assets to approximately $5.0 billion
      as of December 31, 2007. Aston also advises approximately $145 million of assets
      under management in separate accounts as of December 31, 2007. In managing
      historical growth and planning for future growth, the acquired business has
      been, and Aston will continue to be, guided by the following business
      strategies.




***Maintain
      and Improve Investment Performance***




Aston
      has
      a long-term record of achieving competitive, risk-adjusted returns on the mutual
      funds managed by its sub-advisers based on ratings from Morningstar
      Ratings TM .
      As of
      December 31, 2007, 10 of the 27 funds carried at least a three-star rating
      from
      Morningstar Ratings TM . These
      ratings are based on past performance, which may not be predictive of future
      results. Aston’s key strategy is to maintain and improve its investment
      performance by actively monitoring its sub-advisers to ensure consistent
      application of the specifically mandated investment philosophy and process
      while
      the sub-advisers actively manage Aston’s portfolios to achieve distinct balances
      of risk and reward. In terms of improving performance, Aston seeks to partner
      with additional investment managers with proven track records as well as provide
      additional support to its current sub-advisers in order to improve the
      sub-advisers’ ability to generate competitive returns while maintaining
      acceptable levels of risk for clients.




Morningstar
      Ratings TM are a
      standard performance measure used in the mutual fund industry to evaluate the
      relative performance of similar mutual funds. Aston believes that many investors
      rely heavily on Morningstar Ratings TM to
      select mutual funds in which to invest. As a result, Aston regularly uses
      Morningstar Ratings TM to
      evaluate the relative performance of its mutual funds. For each fund with at
      least a three-year history, Morningstar calculates a Morningstar
      Rating TM 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 five
      stars, the next 22.5% receive four stars, the next 35% receive three stars,
      the
      next 22.5% receive two stars and the bottom 10% receive one 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 TM for a
      fund is derived from a weighted average of the performance figures associated
      with its 3-, 5- and 10-year (if applicable) Morningstar Rating TM metrics.




***Selectively
      Expand Aston’s Investment Strategies***




Since
      the
      introduction of its first equity funds in 1993, the acquired business has
      expanded its product offerings to include multiple strategies within the equity
      and fixed income asset classes. Historically, Aston has entered into
      sub-advisory agreements with qualified sub-advisers to create new products
      in
      response to demand in the market. Aston intends to continue to expand
      selectively its investment strategies where it believes the application of
      its
      core competencies and process can produce attractive risk-adjusted returns.
      Aston believes that by doing so it can enhance its ability to increase assets
      under management as well as augment and further diversify its sources of
      revenue.




3




***Selectively
      Expand Aston’s Products and Distribution
      Relationships***




Aston
      strives to develop investment products and distribution channels that best
      deliver its strategies to clients of the Aston Funds. It seeks continued
      opportunities to expand its investment products and relationships for the
      delivery of these products. The combination of capacity and established
      investment performance track records creates potential to drive future growth.
      For example, Aston’s client relationship management team continuously identifies
      sources of demand for the funds working closely with a broad network of
      consultants and financial planners and providing information regarding Aston’s
      investment strategies and performance. Aston also continuously expands existing
      relationships and initiates new relationships within a variety of channels
      for
      mutual funds, including 401(k) platforms, fund supermarkets, broker dealers
      and
      financial planners. These third party distribution resources support a variety
      of defined contribution plans and independent financial advisers with demand
      for
      the quality institutional investment styles of Aston.




Aston’s
      sales force includes 17 sales and client service professionals which provide
      Aston with national distribution for new and existing products. Aston’s status
      as an independent, open-architecture platform enables it to incubate new
      products with a variety of investment management firms, regardless of their
      affiliations. Open-architecture refers to an investment platform that can
      distribute investment products that are advised or sub-advised by other firms.
      Previously, the sellers had generally limited new advisory relationships to
      affiliates of the sellers. Aston’s flexibility allows it to establish additional
      mutual funds and new product lines with a broad range of existing and new
      sub-advisers.




Aston
      is
      currently developing additional business lines that offer opportunities for
      growth. For example, Aston is building a separately managed account platform
      that had $145 million of assets under management as of December 31, 2007.
      Between the closing of the acquisition and December 31, 2007, Aston created
      ten
      new funds. These funds are included in the table set forth below in the section
      entitled “Investment Products.” Additionally, Aston opened three new mutual
      funds in the first quarter of 2008. Aston intends to manage its family of mutual
      funds in response to client demands, and may open new funds or close existing
      funds over time, as appropriate. Aston intends to develop a full suite of
      open-end investment products in order to offer clients a diversified portfolio
      of investment options. ****




***Build
      Aston as a Brand Name***




The
      growth of the acquired business occurred under the Alleghany and the sellers’
brands. With the addition of the Aston brand, co-branded with outstanding
      institutional sub-advisers, Aston intends to build upon the historical success
      of the acquired business’ strategy to enhance the credibility, reputation and
      acceptance of the Aston brand name.




***Selectively
      Pursue Accretive Acquisitions***




We
      expect
      that prudent, accretive acquisitions will be a source of growth for Aston’s
      business in the future. Aston’s employees have substantial experience acquiring,
      integrating and managing investment management firms. Prior to the acquisition,
      Aston’s employees were involved in the acquisition or founding of six investment
      management firms over ten years and also founded the acquired business while
      at
      Alleghany Corporation. These initiatives helped fuel the growth of Alleghany’s
      investment businesses from 1986 until its sale to ABN AMRO in 2001. In our
      efforts to pursue accretive acquisitions for Aston, Highbury may elect to
      finance transactions using one or more of the following sources: capital from
      Highbury, external debt, seller financing or contingent payments. Highbury
      also
      intends to seek acquisitions independent of Aston which may be funded by its
      revolving credit facility, other external borrowings, retained earnings (if
      any), additional equity and other sources of capital, including seller financing
      and contingent payments.




**Mutual
      Fund Assets Under Management**




The
      following chart displays the historical growth, since inception, of Aston’s
      mutual fund assets under management (in billions) as of December 31 for each
      calendar year. The chart does not include Aston’s separate account assets under
      management.




4









**Investment
      Products**




Aston
      markets its investment services to its clients through a variety of funds
      designed to suit a client’s individual investment needs. The acquired business
      introduced its first mutual fund in 1993, and as of December 31, 2007 Aston
      managed 27  no-load,
      open-end mutual funds, including 24  equity
      funds and three fixed income funds, with approximately $4.9 billion and $120
      million, respectively, of mutual fund assets under management. The
      open-architecture platform utilizes 15 different entities to manage the funds.




**Fees
      and Revenues**




Aston
      generates revenue by charging mutual funds an advisory fee and an administrative
      fee based on a percentage of invested assets. A portion of the fees are paid
      to
      the sub-advisers, to a third-party sub-administrator and to third-party
      distribution partners. Each fund typically bears all expenses associated with
      its operation and the issuance and redemption of its securities. In particular,
      each fund pays investment advisory fees (to Aston), shareholder servicing fees
      and expenses, fund accounting fees and expenses, transfer agent fees, custodian
      fees and expenses, legal and auditing fees, expenses of preparing, printing
      and
      mailing prospectuses and shareholder reports, registration fees and expenses,
      proxy and annual meeting expenses and independent trustee fees and expenses.
      Aston has agreed with newly organized funds that their expenses will not exceed
      a specified percentage of their net assets during an initial operating period.
      Aston absorbs all advisory fees and other mutual fund expenses in excess of
      these self-imposed limits in the form of expense reimbursements or fee waivers
      and collects as revenue the advisory fee less reimbursements and waivers. As
      of
      December 31, 2007, Aston was reimbursing 22  mutual
      funds whose expenses exceed the applicable expense cap. The Aston/Montag &
Caldwell Growth Fund and the Aston/Optimum Mid Cap Fund account for
      approximately 36% and 18%, respectively, of the revenues of Aston. The assets
      under management that Aston sources through independent financial advisers
      using
      Schwab and Fidelity, as custodians, each generate more than 10% of revenues
      received by Aston. Additionally, as of December 31, 2007, approximately 20%
      of
      our assets under management and 23% of our revenue are generated by customers
      sourced through a firm which was previously affiliated with the sellers but
      was
      subsequently sold to an unaffiliated third party. The following table sets
      forth
      the inception date, assets under management, Morningstar category, overall
      Morningstar Rating TM and the
      reimbursement status for each mutual fund managed as of December 31, 2007.
      These
      ratings are based on past performance, which may not be predictive of future
      results.


5


**Fund**
            
            
            **Inception**
            
            
            **Assets
                Under Management**
              **(in
                millions)**
            
            
            **Morningstar
                Category**
            
            
            **Morningstar**
              **Rating**
            
            
            **Currently
                in Reimbursement?**Equity
                FundsAston/Montag
                & Caldwell Growth
            
            
            1994
            
            $
            2,026
            
            
            Large
                Growth
            
            
            ****Aston/Optimum
                Mid Cap
            
            
            1994
            
            
            918
            
            
            Mid-Cap
                Blend
            
            
            ****Aston
                Value
            
            
            1993
            
            
            402
            
            
            Large
                Value
            
            
            ***
            
            
            YesAston/ABN
                AMRO Growth
            
            
            1993
            
            
            363
            
            
            Large
                Growth
            
            
            **Aston/TAMRO
                Small Cap
            
            
            2000
            
            
            345
            
            
            Small
                Blend
            
            
            ****
            
            
            YesAston/River
                Road Small Cap Value
            
            
            2005
            
            
            278
            
            
            Small
                Value
            
            
            -Aston/Veredus
                Aggressive Growth
            
            
            1998
            
            
            188
            
            
            Small
                Growth
            
            
            **
            
            
            YesAston/ABN
                AMRO Real Estate
            
            
            1997
            
            
            73
            
            
            Specialty-Real
                Estate
            
            
            ***
            
            
            YesAston/Veredus
                Select Growth
            
            
            2001
            
            
            54
            
            
            Large
                Growth
            
            
            *****
            
            
            YesAston/River
                Road Small-Mid Cap Fund
            
            
            2007
            
            
            51
            
            
            Small
                Value
            
            
            -
            
            
            YesAston/Optimum
                Large Cap Opportunity
            
            
            2006
            
            
            33
            
            
            Large
                Growth
            
            
            -
            
            
            YesAston
                Balanced
            
            
            1995
            
            
            33
            
            
            Moderate
                Allocation
            
            
            **Aston/River
                Road Dynamic Equity
            
            
            2005
            
            
            29
            
            
            Mid-Cap
                Value
            
            
            -
            
            
            YesAston/Montag
                & Caldwell Balanced
            
            
            1994
            
            
            18
            
            
            Moderate
                Allocation
            
            
            **
            
            
            YesAston/ABN
                AMRO Global Real Estate
            
            
            2007
            
            
            18
            
            
            Specialty-Real
                Estate
            
            
            -
            
            
            YesAston/TAMRO
                All Cap Value
            
            
            2000
            
            
            14
            
            
            Large
                Blend
            
            
            ****
            
            
            YesAston/Resolution
                Global Equity
            
            
            2007
            
            
            4
            
            
            World
                Stock
            
            
            -
            
            
            YesAston/Veredus
                SciTech
            
            
            2000
            
            
            2
            
            
            Specialty-Technology
            
            
            **
            
            
            YesAston/Neptune
                International
            
            
            2007
            
            
            2
            
            
            Foreign
                Large Growth
            
            
            -
            
            
            YesAston/Barings
                International
            
            
            2007
            
            
            2
            
            
            Foreign
                Large Blend
            
            
            -
            
            
            YesAston/Montag
                & Caldwell Mid Cap Growth
            
            
            2007
            
            
            2
            
            
            Mid-Cap
                Growth
            
            
            -
            
            
            YesAston/SGA
                International Small-Mid Cap
            
            
            2007
            
            
            1
            
            
            Foreign
                Small/Mid Growth
            
            
            -
            
            
            YesAston/Cardinal
                Mid Cap Value
            
            
            2007
            
            
            1
            
            
            Mid-Cap
                Value
            
            
            -
            
            
            YesAston/ClariVest
                Mid Cap Growth
            
            
            2007
            
            
            >0
            
            
            Mid-Cap
                Growth
            
            
            -
            
            
            YesTotal
                Equity Funds
            
            
            
            
            $
            4,857Fixed
                Income Funds:Aston/TCH
                Fixed Income
            
            
            1993
            
            $
            90
            
            
            Intermediate-Term
                Bond
            
            
            ***
            
            
            YesAston/McDonnell
                Municipal Bond
            
            
            1993
            
            
            14
            
            
            Muni
                National Intermediate
            
            
            ***
            
            
            YesAston/TCH
                Investment Grade Bond
            
            
            1995
            
            
            14
            
            
            Short-Term
                Bond
            
            
            ***
            
            
            YesTotal
                Fixed Income Funds
            
            
            
            
            $
            118Total
                Funds
            
            
            
            
            $
            4,975





**Distribution**




Each
      of
      the Aston Funds has a distinct investment objective that has been developed
      to
      provide a broad, comprehensive selection of investment opportunities. This
      strategy gives Aston access to many possible customers and distribution
      channels. Aston distributes the Aston Funds to individuals and institutions.
      While institutions may invest directly through Aston, individuals generally
      purchase shares through retail financial intermediaries. All Aston Funds are
      sold exclusively on a no-load basis, i.e., without a sales commission. No-load
      mutual funds offer investors a low-cost and relatively easy method of investing
      in a variety of stock and bond portfolios. Aston’s “N” class of fund shares is
      sold through financial intermediaries. Those “N” class shares incur an
      additional annual expense equal to 0.25% of the fund’s assets under management
      which is payable to the financial intermediaries for distribution and
      recordkeeping. The institutional “I” class of fund shares, however, bears no
      such fee.




Aston
      pays all of the advertising and promotion expenses for the Aston Funds and
      receives reimbursement from the Aston Funds pursuant to a 12b-1 plan. This
      reimbursement mitigates, but does not completely offset, the advertising and
      promotional expenses. These expenses include advertising and direct mail
      communications to potential fund shareholders as well as a substantial staff
      and
      communications capability to respond to investor inquiries. Marketing efforts
      have traditionally been focused on fee-based intermediaries, including due
      diligence teams, brokers, advisers, financial planners and consultants. However,
      the independent registered advisory channel as well as the 401(k) channel are
      also a specific focus. Aston has a significant focus on marketing efforts
      directed toward participant-directed defined contribution plans such as 401(k)
      plans that invest in mutual funds. Advertising and promotion expenditures vary
      over time based on investor interest, market conditions, new investment
      offerings and the development and expansion of new marketing
      initiatives.




6




**Technology
      and Intellectual Property**




The
      day-to-day mutual fund technology of Aston is outsourced to PFPC, Inc.,
      including fund accounting, sub-administration, custody and transfer agency
      functions. Sub-administration is the provision of services related to the
      administration of a mutual fund on an out-sourced basis. Aston also utilizes
      a
      web based CRM system, which maintains contact information of both clients and
      prospects and is hosted by interlink ONE, Inc. Aston’s website is hosted by
      Sysys Corporation.




**Competition**




We
      face
      substantial competition in every aspect of our business. Competitive factors
      affecting our business include brand recognition, business reputation,
      investment performance, quality of service and the continuity of client
      relationships. Fee competition also affects the business, as do compensation,
      administration, commissions and other expenses paid to
      intermediaries.




Performance
      and price are the principal methods of competition for Aston. Prospective
      clients and mutual fund shareholders will typically base their investment
      decisions on a fund’s ability to generate returns that exceed a market or
      benchmark index, i.e. its performance, and on its fees, i.e. its price.
      Individual mutual fund investors may also base their investment decisions on
      the
      ability to access the mutual funds Aston manages through a particular
      distribution channel. Institutional clients are often advised by consultants
      who
      may include other factors in their decisions for these clients.




We
      compete with a large number of global and U.S. investment advisers, commercial
      banks, brokerage firms and broker-dealers, insurance companies and other
      financial institutions. There are approximately 1,800  domestic
      investment advisers that manage assets in excess of $1 billion according to
      Money Market Directories and, according to the Investment Company Institute,
      mutual fund managers in the United States manage more than $11.7 trillion in
      over 8,000 funds. Aston is considered a small to mid-sized investment advisory
      firm. Many competing firms are parts of larger financial services companies
      and
      attract business through numerous means including retail bank offices,
      investment banking and underwriting contacts, insurance agencies and
      broker-dealers. U.S. banks and insurance companies can now affiliate with
      securities firms. This permitted affiliation has accelerated consolidation
      within the investment advisory and financial services businesses. It has also
      increased the variety of competition for traditional investment advisory firms
      with businesses limited to investing assets on behalf of institutional and
      individual clients. Foreign banks and investment firms have also entered the
      U.S. investment advisory business, either directly or through partnerships
      or
      acquisitions. A number of factors serve to increase our competitive
      risks:




·
            some
                of Aston’s competitors have greater capital and other resources, and offer
                more comprehensive lines of products and services than Aston;




·
            consolidation
                within the investment management industry, and the securities industry
                in
                general, has served to increase the size and strength of a number
                of our
                competitors;




·
            there
                are relatively few barriers to entry by new investment management
                firms,
                and the successful efforts of new entrants, including major banks,
                insurance companies and other financial institutions, have resulted
                in
                increased competition; and




·
            other
                industry participants will from time to time seek to recruit Aston’s
                employees away from Aston.




These
      factors and others could reduce Aston’s revenues and earnings and materially
      adversely affect its business. If the funds have poor performance relative
      to
      their peers, they could lose existing clients and may be unable to attract
      new
      clients. These factors may place Aston at a competitive disadvantage, reduce
      its
      earnings and revenues, and materially adversely affect its business. Aston
      cannot be sure its strategies and efforts to maintain its existing assets and
      attract new business will be successful.




In
      order
      to grow the business, we must be able to compete effectively for assets under
      management. Specifically, the acquired business has historically competed
      principally on the basis of:




·
            investment
                performance;




·
            quality
                of service provided to clients;




7




·
            brand
                recognition and business reputation;




·
            continuity
                of client relationships and of assets under management;




·
            continuity
                of its selling arrangements with intermediaries;




·
            continuity
                of advisory or sub-advisory agreements with excellent managers;




·
            the
                range of products offered;




·
            level
                of fees and commissions charged for services; and




·
            level
                of expenses paid to financial intermediaries related to administration
                and/or distribution.




The
      acquired business has succeeded in growing aggregate assets under management,
      and we believe that we will continue to be able to do so by focusing on
      investment performance and client service and by developing new products and
      new
      distribution capabilities.




**Employees**




Aston
      currently has 37  full-time
      employees, including 6  in
      senior
      management and administration, 6  in
      marketing and communications, 17  in
      sales
      and sales management and 8  in
      operations and compliance.




Highbury
      currently has three executive officers, two of whom are also members of our
      board of directors. Highbury has no employees. These individuals are not
      obligated to devote any specific number of hours to our matters and intend
      to
      devote only as much time as they deem necessary to our affairs.




**Regulation**




Virtually
      all aspects of our company are subject to extensive regulation in the United
      States at both the federal and state level. These laws and regulations are
      primarily intended to protect investment advisory clients and shareholders
      of
      registered investment companies. Under these laws and regulations, agencies
      that
      regulate investment advisers, such as us, have broad administrative powers,
      including the power to limit, restrict or prohibit an investment adviser 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 adviser and other
      registrations, censures, and fines.




Aston
      is
      registered as an investment adviser with the Securities and Exchange Commission
      or SEC. As a registered investment adviser, it is subject to the requirements
      of
      the Investment Advisers Act of 1940, or the Investment Advisers Act, and the
      SEC’s regulations thereunder, as well as to examination by the SEC’s staff. The
      Investment Advisers Act imposes substantive regulation on virtually all aspects
      of Aston’s advisory business and its relationship with its clients. Applicable
      requirements relate to, among other things, fiduciary duties to clients,
      engaging in transactions with clients, maintaining an effective compliance
      program, performance fees, solicitation arrangements, conflicts of interest,
      advertising, and recordkeeping, reporting and disclosure requirements. The
      Aston
      Funds are registered with the SEC under the Investment Company Act of 1940,
      or
      the Investment Company Act. The Investment Company Act imposes additional
      obligations, including detailed operational requirements on both the funds
      and
      their advisers. Moreover, an investment adviser’s contract with a registered
      fund may be terminated by the fund on not more than 60 days’ notice, and is
      subject to annual renewal by the fund’s board after an initial term of up to two
      years. The SEC is authorized to institute proceedings and impose sanctions
      for
      violations of the Investment Advisers Act and the Investment Company Act,
      ranging from fines and censures to termination of an investment adviser’s
      registration. The failure of Aston or registered funds advised by Aston to
      comply with the requirements of the SEC could have a material adverse effect
      on
      us. Under the rules and regulations of the SEC promulgated pursuant to the
      federal securities laws, Aston is subject to periodic examination by the
      SEC.




The
      SEC
      has adopted rules requiring every registered fund to adopt and implement written
      policies and procedures designed to detect and prevent violations of federal
      securities law, to review these policies annually for adequacy and
      effectiveness, and to designate a chief compliance officer reporting directly
      to
      the fund’s board of directors or trustees. Registered advisers must also adopt a
      written compliance program to ensure compliance with the Investment Advisers
      Act
      and appoint a chief compliance officer. Some of the SEC compliance rules, as
      well as other disclosure requirements that have been adopted over the past
      few
      years, are intended to deal with abuses in areas of late trading and market
      timing of mutual funds. These rules require additional and more explicit
      disclosure of market timing policies and procedures, as well as that funds
      have
      formal procedures in place to comply with their representations regarding market
      timing policies.




8




We
      are
      subject to the Employee Retirement Income Security Act of 1974, as amended,
      or
      ERISA, and to regulations promulgated thereunder, insofar as Aston is a
“fiduciary” under ERISA with respect to benefit plan clients. 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. Our failure to comply with these requirements
      could have a material adverse effect on our business.




**Available
      Information**




Highbury
      makes available, free of charge on its website, its annual report on Form 10-K,
      quarterly reports on Form 10-Q, current reports on Form 8-K and amendments
      to
      those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
      Exchange Act of 1934 as soon as reasonably practicable after Highbury
      electronically files such material with, or furnishes it to, the SEC. Reports
      may be viewed and obtained on our website, www.highburyfinancial.com.




The
      public may read and copy any materials we file with the SEC at the SEC’s Public
      Reference Room at 100 F Street, NE., Washington, DC 20549. Information on the
      operation of the Public Reference Room may be obtained by calling the SEC at
      1-800-SEC-0330. The SEC also maintains an Internet site that contains reports,
      proxies and information statements, and other information regarding issuers
      that
      file electronically with the SEC at http://www.sec.gov.




**ITEM
      1A.**  **RISK
      FACTORS**




In
      addition to other information included in this Annual Report on Form 10-K,
      the
      following factors should be considered in evaluating our business and future
      prospects. If any of the following risks occur, our business, financial
      condition and results of operations may be materially adversely affected. In
      that event, the trading price of our securities could decline, and our
      stockholders could lose all or a part of their investment.




**Risks
      Related to the Financial Services Industry and Aston**




***The
      financial services industry faces substantial regulatory risks and we may
      experience reduced revenues and profitability if our services are not regarded
      as compliant with the regulatory regime.***




The
      financial services industry is subject to extensive regulation. Many regulators,
      including U.S. government agencies and self-regulatory organizations, as well
      as
      state securities commissions and attorneys general, are empowered to conduct
      administrative proceedings and investigations that can result in, among other
      things, censure, fine, the issuance of cease-and-desist orders, prohibitions
      against engaging in some lines of business or the suspension or expulsion of
      an
      investment adviser. The requirements imposed by regulators are designed to
      ensure the integrity of the financial markets and not to protect our
      stockholders.




Governmental
      and self-regulatory organizations, including the SEC, FINRA and national
      securities exchanges such as the New York Stock Exchange, impose and enforce
      regulations on financial services companies. The types of regulations to which
      investment advisers and managers are subject are extensive and include, among
      other things: recordkeeping, fee arrangements, client disclosure, custody of
      customer assets, and the conduct of officers and employees.




The
      regulatory environment in which we operate is also subject to modifications
      and
      further regulations. New laws or regulations or changes in the enforcement
      of
      existing laws or regulations applicable to us also may adversely affect our
      business, and our ability to function in this environment depends on our ability
      to constantly monitor and react to these changes. For example, the growing
      trend
      of separating the fees mutual fund managers pay brokerage firms for investment
      research from brokerage commissions may trigger restrictions under the
      Investment Advisers Act of 1940.




9




***We
      may face legal liability that may result in reduced revenues and
      profitability.***




In
      recent
      years, the volume of claims and amount of damages claimed in litigation and
      regulatory proceedings against financial services firms has been increasing.
      Aston’s investment advisory contracts include provisions designed to limit our
      exposure to legal claims relating to services, but these provisions may not
      protect us or may not be adhered to in all cases. We may also be subject to
      claims arising from disputes with employees for alleged discrimination or
      harassment, among other things. The risk of significant legal liability is
      often
      difficult to assess or quantify and its existence and magnitude often remain
      unknown for substantial periods of time. As a result, 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
      harm
      to our reputation, which could seriously harm our business.




There
      have been a number of highly publicized cases involving fraud or other
      misconduct by employees in the financial services industry in recent years,
      and
      we run the risk that employee misconduct could occur. It is not always possible
      to deter or prevent employee misconduct and the precautions we take to prevent
      and detect this activity may not be effective in all cases.




***We
      face strong competition from financial services firms, many of whom have the
      ability to offer clients a wider range of products and services than we offer,
      which could lead to pricing pressures that could have a material adverse affect
      on our revenue and profitability.***




We
      compete with other firms - both domestic and foreign - in a number of areas,
      including the quality of our employees, transaction execution, products and
      services, innovation, reputation and price. We also face significant competition
      as a result of a recent trend toward consolidation in the investment management
      industry. In the past several years, there has been substantial consolidation
      and convergence among companies in this industry. In particular, a number of
      large commercial banks, insurance companies and other broad-based financial
      services firms have established or acquired broker-dealers or have merged with
      other financial institutions. Many of these firms have the ability to offer
      a
      wide range of products such as loans, deposit-taking and insurance, brokerage,
      investment management and investment banking services, which may enhance their
      competitive positions. They also have the ability to support investment
      management activity with commercial banking, investment banking, insurance
      and
      other financial services revenue in an effort to gain market share, which could
      result in pricing pressure on our business. The passage of the
      Gramm-Leach-Bliley Act in 1999 reduced barriers to large institutions’ providing
      a wide range of financial services products and services. We believe, in light
      of increasing industry consolidation and the regulatory overhaul of the
      financial services industry, that competition will continue to increase from
      providers of financial services products. We may fail to attract new business
      and may lose clients if, among other reasons, we are not able to compete
      effectively.




***The
      investment advisory fees we receive may decrease in a market or general economic
      downturn, which would decrease our revenues and net
      income.***




Because
      we are in the investment advisory business, our net income and revenues are
      likely to be subject to wide fluctuations, reflecting the effect of many factors
      on our assets under management, including: general economic conditions;
      securities market conditions; the level and volatility of interest rates and
      equity prices; competitive conditions; liquidity of global markets;
      international and regional political conditions; regulatory and legislative
      developments; monetary and fiscal policy; investor sentiment; availability
      and
      cost of capital; technological changes and events; outcome of legal proceedings;
      changes in currency values; inflation; credit ratings; and the size, volume
      and
      timing of transactions. These and other factors subject us to an increased
      risk
      of asset volatility.




As
      an
      investment management firm, our business could be expected to generate lower
      revenue in a market or general economic downturn. The investment advisory fees
      we receive are based on the market value of the assets under management.
      Accordingly, a decline in the prices of securities would be expected to cause
      our revenue and income to decline by:




·
            causing
                the value of the assets under management to decrease, which would
                result
                in lower investment advisory fees; or




·
            causing
                some of our clients to withdraw funds from our investment management
                business in favor of investments they perceive as offering greater
                opportunity and lower risk, which also would result in lower investment
                advisory fees.




10




***Aston’s
      investment advisory contracts are subject to termination on short notice.
      Termination of a significant number of investment advisory contracts will have
      a
      material impact on our results of operations.***




Aston
      derives almost all of its revenue from investment advisory contracts with the
      Aston Funds. These contracts are typically terminable by the target fund
      trustees without penalty upon relatively short notice (generally not longer
      than
      60 days). We cannot be certain that we will be able to retain the target funds
      as clients. Because the Aston Funds all have the same trustees, it is possible
      that all the contracts with them could be terminated simultaneously. If the
      trustees of the Aston Funds terminate Aston’s investment advisory contracts we
      would lose substantially all of our revenues.




***To
      the extent Aston is forced to compete on the basis of price, it may not be
      able
      to maintain its current fee structure.***




The
      investment management business is highly competitive and has relatively low
      barriers to entry. To the extent Aston is forced to compete on the basis of
      price, it may not be able to maintain its current fee structure. Although
      Aston’s investment management fees vary from product to product, historically
      the acquired business competed primarily on the performance of its products
      and
      not on the level of its investment management fees relative to those of its
      competitors. In recent years, however, there has been a trend toward lower
      fees
      in the investment management industry. In order to maintain its fee structure
      in
      a competitive environment, Aston must be able to continue to provide clients
      with investment returns and services that make investors willing to pay its
      fees. In addition, the board of trustees of the mutual funds managed by Aston
      must make certain findings as to the reasonableness of these fees. We cannot
      be
      certain that Aston will succeed in providing investment returns and service
      that
      will allow it to maintain its current fee structure. Fee reductions on existing
      or future new business could have an adverse effect on our profit margins and
      results of operations.




***Termination
      of Aston’s sub-advisory contracts could have a material adverse impact on the
      Aston Funds’ performance, and consequently, on our revenues and operating
      results.***




As
      of
      December 31, 2007, Aston managed 27  no-load
      mutual funds, comprised of 24  equity
      funds and 3  fixed
      income funds, with approximately $5.0 billion of total mutual fund assets under
      management. Aston utilizes fifteen different entities to manage the funds,
      of
      which five are current or former affiliates of the sellers and ten are
      independent. The sub-advisory contracts with the sellers’ current and former
      affiliates, which are not terminable by the sub-advisers until November 30,
      2011, include limited non-compete provisions and certain capacity guarantees
      in
      appropriate products to benefit the acquired business. While these arrangements
      are intended to ensure that the investment philosophy and process guiding the
      mutual funds in the future are consistent with their historical investment
      philosophy and process, there can be no assurances that these arrangements
      will
      remain in place. If one or more of these sub-advisory contracts is terminated,
      it could have a material adverse impact on the Aston Funds’ performance and on
      our revenues and operating results.




***Aston
      depends on third-party distribution channels to market its investment products
      and access its client base. A substantial reduction in fees from assets under
      management generated by third-party intermediaries could have a material adverse
      effect on its business.***




The
      potential investor base for mutual funds and managed accounts is limited, and
      Aston’s ability to distribute mutual funds and access clients for managed
      accounts is highly dependent on access to the distribution systems and client
      bases of national and regional securities firms, banks, insurance companies,
      defined contribution plan administrators and other intermediaries, which
      generally offer competing internally and externally managed investment products.
      For open-end funds, such intermediaries are paid for their services to fund
      shareholders, in part, through Rule 12b-1 fees. Rule 12b-1 fees are those fees
      designated for promotions, sales, or any other activity connected with the
      distribution of the fund’s shares. In the case of no-load funds, Rule 12b-1 fees
      are usually, but not always, 0.25% of net assets and are used to cover
      advertising and marketing costs. Access to such distribution systems and client
      bases is substantially dependent upon our ability to charge Rule 12b-1 fees
      to
      our funds. To the extent that recent regulatory initiatives prohibit or limit
      the imposition of Rule 12b-1 or similar fees, our access to these distribution
      systems and client bases may be foreclosed in the future. To a lesser extent,
      the managed account business depends on referrals from financial planners and
      other professional advisers, as well as from existing clients. We cannot assure
      you that these channels and client bases will continue to be accessible to
      Aston. The inability to have such access could have a material adverse effect
      on
      our earnings.




While
      we
      expect Aston to continue to diversify and add new distribution channels for
      its
      mutual funds and managed accounts, a significant portion of the growth in the
      acquired business’ assets under management in recent years has been accessed
      through intermediaries. As of December 31, 2007, substantially all of the assets
      under management of the acquired business were attributable to accounts that
      it
      accessed through third-party intermediaries. These intermediaries generally
      may
      terminate their relationships on short notice. Loss of any of the distribution
      channels afforded by these intermediaries, and the inability to access clients
      through new distribution channels, could decrease assets under management and
      adversely affect our results of operations and growth. For
      example, as of December 31, 2007, approximately 20% of our assets under
      management and 23% of our revenue are generated by customers sourced through
      a
      firm which was previously affiliated with the sellers but was subsequently
      sold
      to an unaffiliated third party. In addition, Aston sources assets under
      management through independent financial advisers using Schwab and Fidelity
      as
      custodians and each of these relationships generates more than 10% of revenues
      received by Aston. If any of these parties were to cause their customers to
      withdraw all or a significant portion of these assets, our assets under
      management and revenue could decrease materially.




11




***A
      change of control of our company would automatically terminate our investment
      management agreements with our clients, unless our managed account clients
      consent and, in the case of fund clients, the funds’ board of trustees and
      shareholders voted to continue the agreements.***




Under
      the
      Investment Company Act, an investment management agreement with a fund must
      provide for its automatic termination in the event of its assignment. Under
      the
      Investment Advisers Act, a client’s investment management agreement may not be
“assigned” by the investment adviser without the client’s consent. An investment
      management agreement is considered under both acts to be assigned to another
      party when a controlling block of the adviser’s securities is transferred. An
      assignment of our investment management agreements may occur if, among other
      things, we sell or issue a certain number of additional common shares in the
      future. We cannot be certain that our clients will consent to assignments of
      our
      investment management agreements or approve new agreements with us if a change
      of control occurs. This restriction may discourage potential purchasers from
      considering an acquisition of a controlling interest in Highbury.




***If
      Aston’s advisory contracts are assigned, we may receive a benefit in connection
      with the sale of Aston’s business only if certain conditions are
      met.***




If
      Aston
      sells its business and, as a result, its advisory contracts with registered
      investment companies are assigned, we may receive a benefit in connection with
      its sale of its business only if certain conditions are met following the sale
      and assignment of the advisory contracts. Among these conditions is a
      requirement that no “unfair burden” be imposed on the investment companies as a
      result of the transaction. An unfair burden will be deemed to exist if, during
      the two years after the transaction, the predecessor or successor adviser or
      any
      interested person thereof is entitled to compensation from any person engaged
      in
      transactions with Highbury or from Highbury or its shareholders for other than
      bona fide advisory or administrative services. This restriction may discourage
      potential purchasers from considering an acquisition of a controlling interest
      in Highbury.




***Investors
      in open-end funds can redeem their investments in these funds at any time
      without prior notice, which could adversely affect our
      earnings.***




Open-end
      fund investors may redeem their investments in those funds at any time without
      prior notice. Investors may reduce the aggregate amount of assets under
      management for any number of reasons, including investment performance, changes
      in prevailing interest rates and financial market performance. Poor performance
      relative to other asset management firms tends to result in decreased purchases
      of mutual fund shares and increased redemptions of mutual fund shares.
      Cumulative net redemptions have reduced the mutual fund assets under management
      of the acquired business from $7.3 billion in 2004 to approximately $5.0 billion
      as of December 31, 2007. In a declining stock market, the pace of mutual fund
      redemptions could accelerate. The redemption of investments in mutual funds
      managed by Aston would adversely affect our revenues, which are substantially
      dependent upon the assets under management in our funds. If net redemptions
      of
      investments in the Aston Funds increase, it would cause our revenues to decline,
      which would have a material adverse effect on our earnings.




***A
      decline in the prices of securities, the performance of the Aston Funds or
      changes in investors’ preference of investing styles could lead to a decline in
      our assets under management, revenues and earnings.***




Substantially
      all of our revenues are determined by the amount of assets under management.
      Under Aston’s investment advisory contracts with the Aston Funds, the investment
      advisory fee is typically based on the market value of assets under management.
      In addition, Aston receives asset-based distribution or service fees with
      respect to the open-end funds pursuant to distribution plans adopted under
      provisions of Rule 12b-1 under the Investment Company Act. Accordingly, a
      decline in the prices of securities generally may cause our revenues and net
      income to decline by either (i) causing the value of our assets under management
      to decrease, which would result in lower investment advisory and Rule 12b-1
      fees, or (ii) causing clients to withdraw funds in favor of investments or
      investment styles they perceive to offer greater opportunity or lower risk,
      which would also result in lower fees. While the revenues of Aston are
      diversified across investment styles, the large capitalization growth style
      of
      investing accounts for approximately 50% of assets under management as of
      December 31, 2007. Large capitalization style implies a restriction imposed
      on
      the portfolio manager to select for investment by the fund predominantly equity
      securities of companies that have an average market capitalization of more
      than
      $10 billion and companies whose earnings are expected to grow at a rate that
      is
      above average for their industries or the overall market. The securities markets
      are highly volatile, and securities prices may increase or decrease for many
      reasons, including economic and political events and acts of terrorism beyond
      our control. If a decline in securities prices, fund performance or change
      in
      investors’ preference of investment styles were to cause our revenues to
      decline, it could have a material adverse effect on our earnings.




12




***Loss
      of key employees could lead to the loss of clients, a decline in revenue and
      disruptions to our business.***




Highbury’s
      ability to attract and retain personnel is important to executing its business
      plan of making accretive acquisitions. No executive officer or director of
      Highbury has ever received any compensation for services rendered since
      Highbury’s inception on July 13, 2005. In addition, Aston's ability to attract
      and retain personnel is important to its ability to add new clients and maintain
      existing clients. The market for senior executives, qualified wholesalers,
      compliance professionals, marketing professionals, key managers at the
      sub-advisers and other professionals is competitive. We and the sub-advisers
      may
      not be successful in our efforts to recruit and retain the required personnel
      to
      maintain or grow our business. Loss of a significant number of key personnel
      could have an adverse effect on us.




***Any
      significant limitation or failure of Aston’s software applications and other
      technology systems that are critical to its operations could constrain its
      operations.***




Aston
      is
      highly dependent upon the use of various proprietary and third-party software
      applications and other technology systems to operate the business. Aston uses
      its technology to, among other things, provide reports and other customer
      services to its clients. Any inaccuracies, delays or systems failures in these
      and other processes could subject Aston to client dissatisfaction and losses.
      Although Aston takes protective measures, its technology systems may be
      vulnerable to unauthorized access, computer viruses or other events that have
      a
      security impact, such as an authorized employee or vendor inadvertently causing
      Aston to release confidential information, which could materially damage Aston’s
      operations or cause the disclosure or modification of sensitive or confidential
      information. Moreover, loss of confidential customer identification information
      could cause harm to our reputation. Aston relies heavily on software and
      technology that are licensed from, and supported, upgraded and maintained by,
      third-party vendors. A suspension or termination of certain of these licenses
      or
      the related support, upgrades and maintenance could cause temporary system
      delays or interruption. Potential system failures or breaches and the cost
      necessary to correct them could result in material financial loss, regulatory
      action, breach of client contracts, reputational harm or legal claims and
      liability, which in turn could negatively impact our revenues and
      income.




***We
      could suffer losses in earnings or revenue if our reputation is
      harmed.***




Aston’s
      reputation is important to the success of Highbury. Aston has strong
      relationships with intermediaries and continuity of these relationships is
      based
      on the intermediaries’ trust and confidence in Aston. If Aston’s reputation is
      harmed, existing clients of Aston may reduce amounts held in, or withdraw
      entirely from, funds that Aston advises or funds may terminate their investment
      advisory contracts which could reduce the amount of assets under management
      of
      Aston and cause us to suffer a corresponding loss in earnings or revenues.
      Reputational harm may also cause Aston to lose employees, and we may be unable
      to continue to attract new employees with similar qualifications, motivations
      or
      skills. If we fail to address, or appear to fail to address, successfully and
      promptly, the underlying causes of any reputational harm, we may be unsuccessful
      in repairing any existing harm to our reputation, and our future business
      prospects would likely be affected.




***We
      rely on a few major clients for a significant majority of our business, and
      the
      loss of any of these clients, or adverse developments with respect to the
      financial condition of any of our major clients could reduce our
      revenue.***




Relationships
      with a limited number of clients account for a significant majority of our
      revenue. We expect that Aston’s relationships with these clients will continue
      to account for a substantial portion of our total revenue in future periods.
      Aston’s client, the Aston Funds, a Delaware business trust, which accounts for
      approximately 97% of our assets under management, is comprised of 27  mutual
      funds that are currently managed by Aston. Because all these funds have the
      same
      trustees, it is possible that the contracts with them could be terminated
      simultaneously. Of these 27  funds,
      the Aston/Montag & Caldwell Growth Fund and the Aston/Optimum Mid Cap Fund
      account for approximately 36% and 18%, respectively, of the revenues of Aston.
      Additionally, Aston sources assets under management through a former affiliate
      of the sellers and through independent financial advisers using Schwab and
      Fidelity as custodians. Each of these relationships generates more than 10%
      of
      revenues received by Aston. These various client concentrations leave us
      vulnerable to any adverse change in the financial condition of any of our major
      clients. The loss of any of these relationships may have a material adverse
      impact on our revenues.




13




***If
      we issue capital stock or convertible debt securities in connection with the
      acquisition of another investment management firm, your equity interest in
      us
      could be reduced.***




Highbury
      seeks accretive acquisitions as a source of growth for our business. Other
      than
      our outstanding warrants, we currently have no commitments to issue any
      additional equity or convertible debt securities. However, we may issue a
      substantial number of additional shares of our common stock, preferred stock
      or
      convertible debt securities to complete an acquisition. Our issuance of
      additional shares of common stock, preferred stock or convertible debt
      securities:




·
            may
                significantly reduce your equity interest in
                us;




·
            may
                cause a change in control if a substantial number of our shares of
                common
                stock are issued; and




·
            may
                adversely affect the then-prevailing market price for our common
                stock.




***Difficult
      market conditions may adversely affect our ability to execute our business
      model, which could materially reduce our revenue and cash flow and adversely
      affect our business, results of operations or financial
      condition.***




Our
      business is materially affected by conditions in the United States and global
      financial markets. Economic conditions are outside our control, such as interest
      rates, availability of credit, inflation rates, economic uncertainty, changes
      in
      laws (including laws relating to taxation), commodity prices, and political
      circumstances (including wars, terrorist acts or security operations). These
      factors may affect the level and volatility of securities prices and the
      liquidity and the value of investments, and we may not be able to or may choose
      not to manage our exposure to these market conditions. A general market
      downturn, or a specific market dislocation, may result in lower net inflows
      or
      net outflows and lower returns for Aston, which would adversely affect our
      revenues.




More
      specifically, our business model is focused upon growth through accretive
      acquisitions by Highbury. Current market conditions may make it more difficult
      for us to complete an acquisition through the use of debt financing because
      of
      the reduced availability of debt at appropriate terms. In addition, if we issue
      debt to finance an acquisition, a decrease in our assets under management caused
      by negative market conditions could have an adverse effect on the distributions
      we receive from Aston and potential future affiliates and limit our ability
      to
      repay our borrowings. Our ability to make accretive acquisitions through the
      issuance of additional equity is dependent upon the relationship between the
      market value of our outstanding common stock and the pricing of any acquisition.
      If the price of our common stock remains at or near its current level, it may
      be
      more difficult for us to issue additional equity to finance an acquisition.
      The
      inability to complete accretive acquisitions, including through the use of
      debt
      or equity financing, may negatively impact our growth, results of operations
      or
      financial condition.




**Risks
      Relate** **d** **to the Structure of our Business**




***The
      agreed-upon expense allocation under our revenue sharing arrangement with Aston
      may not be large enough to pay for all of Aston’s operating
      expenses.***




Pursuant
      to the limited liability company agreement of Aston, we receive a specified
      percentage of Aston’s gross revenue, and a percentage of revenue is retained for
      use in paying Aston’s operating expenses. The agreement may not properly
      anticipate or reflect possible changes in Aston’s revenue and expense base, and
      the agreed-upon expense allocation may not be large enough to pay for all of
      Aston’s operating expenses. We may elect to defer the receipt of our share of
      Aston’s revenue to permit Aston to fund such operating expenses, or we may
      restructure our relationship with Aston with the aim of maximizing the long-term
      benefits to us. We cannot be certain, however, that any such deferral or
      restructured relationship would be of any greater benefit to us. Such a deferral
      or restructured relationship might have an adverse effect on our near-term
      or
      long-term profitability and financial condition.




14




***The
      failure to receive regular distributions from Aston will adversely affect us.
      In
      addition our holding company structure results in substantial structural
      subordination that may affect our ability to make payments on our
      obligations.***




Because
      we are a holding company, we receive substantially all of our cash from
      distributions made to us by Aston. Aston’s payment of distributions to us may be
      subject to claims by Aston’s creditors and to limitations applicable to Aston
      under federal and state laws, including securities and bankruptcy laws.
      Additionally, Aston may default on some or all of the distributions that are
      payable to us. As a result, we cannot guarantee we will always receive these
      distributions from Aston. The failure to receive the distributions to which
      we
      are entitled under the Aston limited liability company agreement would adversely
      affect us, and may affect our ability to make payments on our
      obligations.




Our
      right
      to receive any assets of Aston upon its liquidation or reorganization, and
      thus
      the right of our stockholders to participate in those assets, typically would
      be
      subordinated to the claims of Aston’s creditors. In addition, even if we were a
      creditor of Aston, our rights as a creditor would be subordinated to any
      security interest and indebtedness of Aston that is senior to us.




***Aston’s
      autonomy limits our ability to alter its day-to-day activities, and we may
      be
      held responsible for liabilities it incurs.***




Although
      the Aston limited liability company agreement gives us the authority to control
      or vote with respect to Aston’s business activities, we generally are not
      directly involved in managing its day-to-day activities, including satisfaction
      of the contractual terms of the advisory, sub-advisory and other contracts,
      product development, client relationships, compensation programs and compliance
      activities. As a consequence, our financial condition and results of operations
      may be adversely affected by problems stemming from the day-to-day operations
      of
      Aston.




In
      addition, we may be held liable in some circumstances as a control person for
      the acts of Aston or its employees. For example, if Highbury exercises or
      refuses to exercise its approval right as the manager member to settle potential
      litigation and does not use due care in exercising this authority or Aston
      issues securities in violation of laws, Highbury may be exposed to liability
      related to Aston’s actions. While Highbury maintains directors’ and officers’
insurance and Aston maintains errors and omissions and general liability
      insurance in amounts believed to be adequate to cover certain potential
      liabilities, we may have claims that exceed the limits of available insurance
      coverage. Furthermore, insurers may not remain solvent, meet their obligations
      to provide coverage, or coverage may not continue to be available with
      sufficient limits and at a reasonable cost. A judgment against us or Aston
      in
      excess of available insurance coverage could have a material adverse effect
      on
      us.




**Risks
      Relating to Ownership of our Warrants**




***If
      we are unable to maintain a current prospectus relating to the common stock
      underlying our warrants, our warrants may have little or no value and the market
      for our warrants may be limited.***




No
      warrants will be exercisable and we will not be obligated to issue shares of
      common stock unless at the time a holder seeks to exercise such warrant, a
      prospectus relating to the common stock issuable upon exercise of the warrants
      is current and the common stock has been registered or qualified or deemed
      to be
      exempt under the securities laws of the state of residence of the holder of
      the
      warrants. As of the date of this Annual Report on Form 10-K, there is a
      currently effective prospectus relating to the common stock issuable upon
      exercise of the warrants. The SEC declared Post-Effective Amendment No. 3 to
      our
      Registration Statement relating to the common stock underlying our warrants
      effective on May 14, 2007. Under the terms of the warrant agreement between
      Continental Stock Transfer & Trust Company, as warrant agent, and us, we
      have agreed to use our best efforts to maintain a current prospectus relating
      to
      the common stock issuable upon exercise of our warrants until the expiration
      of
      our warrants. However, we may not be able to do so. If the prospectus relating
      to the common stock issuable upon exercise of the warrants is not current or
      if
      the common stock is not qualified or exempt from qualification in the
      jurisdictions in which the holders of the warrants reside, our warrants may
      not
      be exercisable before they expire and we will not net-cash settle the warrants.
      Thus, our warrants may be deprived of any value. The market for our warrants
      may
      be limited, and the warrants may expire worthless and unredeemed.




15




***We
      may choose to redeem our outstanding warrants when a prospectus relating to
      the
      common stock issuable upon exercise of such warrants is not current and the
      warrants are not exercisable.***




We
      may
      redeem the warrants issued as a part of our units (including the warrants sold
      in the private placement to insiders of Highbury simultaneously with our initial
      public offering, referred to throughout this Annual Report on Form 10-K as
      the
      private placement) at any time after the warrants become exercisable in whole
      and not in part, at a price of $0.01 per warrant, upon a minimum of 30 days’
prior written notice of redemption, if and only if, the last sales price of
      our
      common stock equals or exceeds $8.50 per share for any 20 trading days within
      a
      30 trading day period ending three business days before we send the notice
      of
      redemption. Redemption of the warrants could force the warrant holders (i)
      to
      exercise the warrants and pay the exercise price therefor at a time when it
      may
      be disadvantageous for the holders to do so, (ii) to sell the warrants at the
      then current market price when they might otherwise wish to hold the warrants
      or
      (iii) to accept the nominal redemption price which, at the time the warrants
      are
      called for redemption, is likely to be substantially less than the market value
      of the warrants. In addition, even if warrant holders are not able to exercise
      their warrants because there is no current prospectus or the common stock is
      not
      qualified or exempt from qualification in the jurisdictions in which the holders
      of the warrants reside, we can exercise our redemption rights.




***Our
      securities are registered only in specific states, and you may not be able
      to
      exercise your warrants if you are not located in one of such
      states.***




Your
      ability to exercise a warrant will depend on the availability of a state
      securities exemption for such exercise or on our having registered or qualified
      the offer and sale of the shares to be issued upon exercise of the warrant
      under
      the securities laws of the state in which you reside. We registered the sale
      of
      our securities, including the issuance of shares of common stock upon exercise
      of the warrants, in Colorado, Delaware, Illinois, Indiana, New York, Rhode
      Island and Wyoming. In addition, we have sold our securities in Hawaii, where
      both the initial sale and the exercise of warrants is exempt under Hawaii law.
      If you are a resident of any state other than the above referenced states,
      and
      there is no available exemption from the registration requirement of the state
      in which you reside, we may not be able to issue to you shares of common stock
      upon the exercise of your warrants. Holders are not entitled to any cash
      settlement or other compensation as a result of their residency in any state
      in
      which we have not registered or qualified or received an exemption from state
      securities laws. As such, the value of your warrant will be significantly
      reduced and the market for warrants in states for which we have not registered
      or qualified or received an exemption from state securities laws may be
      significantly impaired.




***Our
      outstanding warrants may be exercised in the future, which would increase the
      number of shares eligible for future resale in the public market and result
      in
      dilution to our stockholders. This might have an adverse effect on the market
      price of the common stock.***




Outstanding
      redeemable warrants to purchase an aggregate of 15,820,000 shares of common
      stock became exercisable on January 25, 2007. As of March 18, 2008, none of
      the
      warrants have been exercised. Since December 31, 2007, we have repurchased
      1,836,292 warrants resulting in 13,983,708 warrants outstanding as of March
      18,
      2008. To the extent warrants are exercised, additional shares of our common
      stock will be issued, which will result in dilution to our stockholders and
      increase the number of shares eligible for resale in the public market. Sales
      of
      substantial numbers of such shares in the public market could adversely affect
      the market price of our shares.




**Risks
      Related to Ownership of our Common Stock**




***If
      our stockholders who acquired their shares or warrants prior to or
      contemporaneously with our initial public offering exercise their registration
      rights or sell their securites, it may have an adverse effect on the market
      price of our common stock.***




Our
      stockholders who acquired their shares prior to our initial public offering,
      or
      our initial stockholders, are entitled to demand that we register the resale
      of
      their 1,725,000 shares of common stock owned prior to our initial public
      offering. The holders of the majority of these shares may elect to exercise
      these registration rights or may sell such shares pursuant to rule 144
      under the Securities Act of 1933, as amended, at any time after the date on
      which their shares of common stock are released from escrow, which will be
      January 31, 2009. In addition, our initial stockholders hold 166,667 shares
      and 333,334 warrants that they purchased in a private placement
      contemporaneously with our initial public offering that are now eligible for
      registration. If all these shares are registered, there will be an additional
      1,891,667 shares of common stock eligible for trading in the public market
      (and
      potentially another 333,334 shares of common stock issuable to our initial
      stockholders upon exercise of warrants). In addition, the 166,667 shares and
      333,334 warrants purchased in the private placement contemporaneously with
      the
      initial public offering may be eligible for resale pursuant to Rule 144 under
      the Securities Act of 1933, as amended. The presence of this additional number
      of shares of common stock eligible for trading in the public market may have
      an
      adverse effect on the market price of our common stock.




16




***Our
      securities are quoted on the OTC Bulletin Board, which limits the liquidity
      and
      price of our securities more than if our securities were quoted or listed on
      The
      Nasdaq Stock Market or another national exchange.***




Our
      securities are traded in the over-the-counter market. They are quoted on the
      OTC
      Bulletin Board, an inter-dealer automated quotation system for equity securities
      sponsored and operated by the Financial Industry Regulatory Authority, or FINRA,
      but not included in The Nasdaq Stock Market. Quotation of our securities on
      the
      OTC Bulletin Board limits the liquidity and price of our securities more than
      if
      our securities were quoted or listed on The Nasdaq Stock Market or another
      national exchange. Lack of liquidity limits the price at which you are able
      to
      sell our securities or your ability to sell our securities at all.




***The
      market price for our common stock could be volatile and could decline, resulting
      in a substantial or complete loss of your investment.***




The
      stock
      markets on which our common stock trades have experienced significant price
      and
      volume fluctuations. As a result, the market price of our common stock could
      be
      similarly volatile and investors in our common stock may experience a decrease
      in the value of their shares, including decreases unrelated to our operating
      performance or prospects. The price of our common stock could be subject to
      wide
      fluctuations in response to a number of factors, including:




·
            our
                operating performance and the performance of other similar companies;




·
            actual
                or anticipated differences in our operating results;




·
            changes
                in our revenues or earnings estimates or recommendations by securities
                analysts;




·
            publication
                of research reports about us or our industry by securities analysts;




·
            additions
                and departures of key personnel;




·
            speculation
                in the press or investment community;




·
            actions
                by institutional or other shareholders;




·
            changes
                in accounting principles;




·
            terrorist
                acts; and




·
            general
                market conditions, including factors unrelated to our performance.




***Future
      sales of our common stock may depress the price of our common
      stock.***




As
      of
      March 18, 2008, there were 9,126,628 shares of our common stock outstanding.
      On
      January 25, 2007, 15,820,000 warrants became exercisable of which **** 1,836,292
      have been repurchased by us since December 31, 2007. If all 13,983,708 warrants
      are exercised, 13,983,708 additional shares of our common stock may be issued.
      Sales of a substantial number of these shares in the public market could
      decrease the market price of our common stock. In addition, the perception
      that
      such sales might occur may cause the market price of our common stock to
      decline. Future issuances or sales of our common stock could have an adverse
      effect on the market price of our common stock.




**ITEM
      1B.**  **UNRESOLVED
      STAFF COMMENTS**




None.




**ITEM
      2.**  **PROPERTIES**




We
      do not
      own any real estate or other physical properties. The facilities of Highbury
      are
      maintained at 999 Eighteenth Street, Suite 3000, Denver, Colorado 80202. On
      October 31, 2007, we entered into an office services agreement with Berkshire
      Capital Securities LLC which replaces the office services agreement entered
      into
      between us and Berkshire Capital dated December 21, 2005 and amended on November
      30, 2006. The office services agreement provides for a monthly fixed fee of
      $10,000 for office services including use and access to our office in Denver,
      Colorado and those other office facilities of Berkshire Capital as we may
      reasonably require. In addition, certain employees of Berkshire Capital will
      provide us with financial reporting support on a daily basis. Berkshire Capital
      has the right, pursuant to the agreement, to relocate us, upon ten days written
      notice, to other offices. R. Bruce Cameron, our Chairman of the Board, Richard
      Foote, our President, Chief Executive Officer and Director and R. Bradley Forth,
      our Executive Vice President, Chief Financial Officer and Secretary, are
      affiliated with Berkshire Capital, a registered broker-dealer that provides
      financial advisory services to clients in connection with mergers and
      acquisitions in the financial services industry. We believe, based on rents
      and
      fees for similar services in the Denver, Colorado metropolitan area, that the
      fee charged by Berkshire Capital is at least as favorable as we could have
      obtained from an unaffiliated third party. The agreement is terminable by either
      party upon six months’ prior notice.




17




The
      facilities of Aston are maintained at 120 North LaSalle Street, Suite 2500,
      Chicago, Illinois 60602. The lease expense for the Chicago office was $206,564
      for fiscal year 2007. The term of the lease expires in January 2017. Aston
      also
      leases office space for two satellite offices in New Jersey and California
      under
      various leasing arrangements. The lease for the office in New Jersey will expire
      in May 2008. The lease for the office in California is on a month-to-month
      basis.




We
      believe our office facilities are suitable and adequate for our business as
      it
      is presently conducted. Given the nature of our business and the fact that
      we do
      not own real property, we do not anticipate that compliance with federal, state
      and local provisions regarding the discharge of materials into the environment,
      or otherwise relating to the protection of the environment, will have a material
      effect upon our capital expenditures, earnings or competitive
      position.




**ITEM
      3.**  **LEGAL
      PROCEEDINGS**




Neither
      Highbury nor Aston is currently subject to any material legal proceedings,
      nor,
      to our knowledge, is any material legal proceeding threatened against either
      of
      them. From time to time, we may be a party to certain legal proceedings
      incidental to the normal course of our business. While the outcome of these
      legal proceedings cannot be predicted with certainty, we do not expect that
      these proceedings will have a material effect upon our financial condition
      or
      results of operations.




**ITEM
      4.**  **SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS**




No
      matters were submitted to a vote of our stockholders during the quarter ended
      December 31, 2007, except at the annual meeting of stockholders held on October
      29, 2007. At that meeting, the stockholders approved:




(i)
            the
                election of R. Bruce Cameron as Director to serve for a term of three
                years or until his successor is duly elected and qualified, for which
                voting at the meeting was as follows:8,104,926
                votes cast for; 368,202 votes withheld;
                and




(ii)
            the
                election of Aidan J. Riordan as Director to serve for a term of three
                years or until his successor is duly elected and qualified, for which
                voting at the meeting was as follows: 8,469,626 votes cast for; 3,502
                votes withheld.




**PART
      II**




**ITEM
      5.**  **MARKET
      FOR REGISTRANT** **’** **S
      COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
      SECURITIES**




**Market
      Price and Dividend Data for Highbury Securities**




Highbury’s
      units, common stock and warrants are traded on the Over-the-Counter Bulletin
      Board under the symbols HBRFU, HBRF and HBRFW, respectively. Each of Highbury’s
      units consists of one share of our common stock and two warrants. The following
      table sets forth the range of high and low closing bid prices for the units,
      common stock and warrants for the period indicated since such units, common
      stock and warrants commenced trading. The units commenced public trading on
      January 26, 2006. The common stock and warrants were approved for separate
      public trading on February 21, 2006 and such trading commenced on March 1,
      2006.
      The over-the-counter market quotations reflect inter-dealer prices, without
      retail mark-up, mark-down or commission and may not necessarily reflect actual
      transactions. Prior to January 26, 2006, there was no established public trading
      market for Highbury’s units. Prior to March 1, 2006, there was no established
      public trading market for our common stock or warrants.




18




**Units**
            
            **Common
                Stock**
            
            **Warrants****High**
            
            **Low**
            
            **High**
            
            **Low**
            
            **High**
            
            **Low****Fiscal
                Year 2006****Quarter
                ended****March
                31, 2006**
            
            $
            6.75
            
            $
            6.00
            
            $
            5.50
            
            $
            5.32
            
            $
            0.66
            
            $
            0.53**June
                30, 2006**
            
            $
            8.72
            
            $
            6.79
            
            $
            6.05
            
            $
            5.45
            
            $
            1.31
            
            $
            0.64**September
                30, 2006**
            
            $
            7.40
            
            $
            6.70
            
            $
            5.65
            
            $
            5.46
            
            $
            0.93
            
            $
            0.61**December
                31, 2006**
            
            $
            9.45
            
            $
            7.30
            
            $
            5.93
            
            $
            5.60
            
            $
            1.69
            
            $
            0.81**Fiscal
                Year 2007****Quarter
                ended****March
                31, 2007**
            
            $
            8.66
            
            $
            7.72
            
            $
            5.85
            
            $
            5.46
            
            $
            1.67
            
            $
            1.11**June
                30, 2007**
            
            $
            10.25
            
            $
            8.05
            
            $
            6.75
            
            $
            5.70
            
            $
            1.74
            
            $
            1.13**September
                30, 2007**
            
            $
            9.00
            
            $
            5.08
            
            $
            6.30
            
            $
            4.15
            
            $
            1.65
            
            $
            0.51**December
                31, 2007**
            
            $
            6.60
            
            $
            5.16
            
            $
            5.20
            
            $
            4.15
            
            $
            0.75
            
            $
            0.45


We
      do not
      currently have any equity compensation plans under which our securities are
      authorized for issuance.




**Holders
      of Common Equity**




On
      March
      18, 2008, there were seven holders of record of Highbury’s units, eight holders
      of record of Highbury’s common stock and one holder of record of Highbury’s
      warrants, which do not include beneficial owners of Highbury’s
      securities.




**Dividends**




Highbury
      has not paid any cash dividends on its common stock to date and does not intend
      to pay cash dividends in the foreseeable future. The payment of dividends in
      the
      future will be contingent upon our revenues and earnings, if any, capital
      requirements and general financial condition. The payment of any dividends
      will
      be within the discretion of our board of directors. It is the present intention
      of our board of directors to retain all earnings, if any, for use in our
      business operations and, accordingly, our board does not anticipate declaring
      any dividends in the foreseeable future.




Highbury
      is a holding company and, therefore, our ability to pay dividends, service
      our
      debt and meet our other obligations depends primarily on the ability of our
      sole
      subsidiary, Aston, to make distributions to us. Pursuant to the limited
      liability company agreement of Aston, 18.2% of the total revenue of Aston is
      allocated to Highbury, 9.8% of the total revenue is allocated to the other
      members of Aston and 72% of the total revenue will be retained for use in paying
      operating expenses of Aston. In addition, Aston’s payment of distributions to us
      may be subject to claims by Aston’s creditors and to limitations applicable to
      Aston under federal and state laws, including securities and bankruptcy laws.
      See “Risk Factors--Risks related to the Structure of our Business--The agreed
      upon expense allocation under our revenue sharing arrangement with Aston may
      not
      be large enough to pay for all of Aston’s operating expenses” and “--The failure
      to receive regular distributions from Aston will adversely affect us. In
      addition our holding company structure results in substantial structural
      subordination that may affect our ability to make payments on our obligations”
under Item 1A.




**Performance
      Graph**




The
      following graph provides a comparison of cumulative total stockholder return
      for
      the period from March 1, 2006, the day our common stock began trading
      separately, through December 31, 2007, among the Company, the MSCI US Micro
      Cap
      Index and an asset management industry composite index constructed and used
      by
      the Company, which we refer to as the Peer Group Index. The Peer Group Index
      is
      comprised of the following entities: Affiliated Managers Group, Inc., BlackRock,
      Inc., Eaton Vance Corp., Federated Investors, Inc., Franklin Resources, Inc.,
      GAMCO Investors, Inc., Janus Capital Group Inc., T. Rowe Price Group, Inc.,
      Waddell & Reed Financial, Inc. and W.P. Stewart & Co., Ltd. Prior to
      November 30, 2006, the date we completed the acquisition of the U.S. mutual
      fund
      business of ABN AMRO, we were a corporation in the development stage.
      Accordingly, we have only operated in the investment advisory industry during
      the portion of the period shown in the following graph commencing on November
      30, 2006.




19




COMPARISON
      OF CUMULATIVE TOTAL RETURN*


AMONG
      THE
      COMPANY, THE MSCI US MICRO CAP INDEX,


AND
      THE
      PEER GROUP INDEX









*
      The
      stock performance graph assumes an investment of $100 in the common stock of
      the
      Company (at the per share closing price of the Company’s common stock on March
      1, 2006) and both of the indices described above and assumes that all dividends
      paid by companies included in each index were reinvested. The historical
      information set forth above is not necessarily indicative of future performance.




*The
      foregoing graph shall not be deemed to be “soliciting material” or “filed” or
      incorporated by reference in any previous or future documents filed by the
      Company with the SEC under the Securities Act or the Exchange Act, except to
      the
      extent that the Company specifically incorporates the information by reference
      in any such document.*




**Recent
      Sales of Unregistered Securities**




Highbury
      did not engage in any unregistered sales of securities during the year ended
      December 31, 2007.




**Issuer
      Purchases of Equity Securities**




In
      July
      2007, we entered into Unit Purchase Option Repurchase Agreements with the
      underwriters of our initial public offering pursuant to which we purchased
      the
      unit purchase option from each of the underwriters for aggregate cash payments
      of $1,300,000. The purchase price was the result of arms’ length negotiations.
      The unit purchase option was cancelled upon its repurchase.




On
      December 20, 2007, our Board of Directors approved a Securities Repurchase
      Program authorizing the use of up to $5,000,000 to acquire common shares,
      warrants or a combination thereof in the open market or in any private
      transaction, from time to time and in accordance with applicable laws, rules
      and
      regulations. The Securities Repurchase Program will be in effect until December
      31, 2008 and may be suspended, from time to time and in accordance with
      applicable laws, rules and regulations.




20




We
      did
      not purchase any units, common stock or warrants during the fiscal year ended
      December 31, 2007.




Pursuant
      to the Securities Repurchase Program, in the first quarter of 2008, we
      repurchased 400,372 shares of common stock for total consideration of
      $1,735,611, or approximately $4.33 per share. We also repurchased 1,836,292
      warrants for total consideration of $1,823,046, or approximately $0.99 per
      warrant. We have $1,441,343 remaining under the Securities Repurchase Program
      to
      acquire additional common shares, warrants or a combination
      thereof.




**ITEM
      6.**  **SELECTED
      FINANCIAL DATA**




The
      selected financial data below should be read in conjunction with, and is
      qualified in its entirety by reference to, the consolidated financial statements
      and accompanying notes and “Management’s Discussion and Analysis of Financial
      Condition and Results of Operations” included elsewhere in this Annual Report on
      Form 10-K.




Highbury
      was formed on July 13, 2005. On November 30, 2006, the Company completed its
      acquisition of the U.S. mutual fund business of ABN AMRO. Selected financial
      information is presented below for (i) the U.S. mutual fund business of ABN
      AMRO, or the acquired business, for the periods from January 1, 2003 through
      November 30, 2006, the date of the acquisition, (ii) Highbury for the periods
      from its inception (July 13, 2005) through December 31, 2005, (iii) Highbury’s
      2006 consolidated financial results which include the operations of the acquired
      business for the period from December 1, 2006 through December 31, 2006 and
      (iv)
      Highbury’s 2007 consolidated financial results.




Acquired
                Business
            
            Combined
                (5)
            
            HighburyYear
                Ended December 31, 2003
            
            Year
                Ended December 31, 2004
            
            Year
                Ended December 31, 2005
            
            Eleven
                Months Ended November 30, 2006
            
            Year
                Ended December 31, 2006
            
            Period
                from July 13, 2005 (inception) to December 31, 2005
            
            Year
                Ended December 31, 2006
            
            Year
                Ended December 31, 2007**Statement
                of Income Data**Operating
                revenue
            
            $
            39,677,535
            
            $
            49,247,963
            
            $
            48,927,074
            
            $
            38,476,882
            
            $
            42,304,982
            
            $
            —
            
            $
            3,828,100
            
            $
            42,063,995Distribution
                and sub-advisory costs
            
            $
            (33,531,069
            )
            $
            (40,918,617
            )
            $
            (40,405,752
            )
            $
            (28,830,231
            )
            $
            (30,627,141
            )
            $
            —
            
            $
            (1,796,910
            )
            $
            (19,857,033
            )Compensation
                and related expenses
            
            $
            (3,920,966
            
            $
            (4,416,624
            )
            $
            (5,194,449
            )
            $
            (3,999,963
            )
            $
            (25,109,294
            )
            $
            —
            
            $
            (21,109,331
            )
            $
            (6,643,587
            )Goodwill
                impairment
            
            $
            —
            
            $
            —
            
            $
            (13,344,050
            )
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —Intangible
                asset impairment
            
            $
            —
            
            $
            —
            
            $
            (10,425,533
            )
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            (4,110,000
            )Other
                expenses
            
            $
            (1,625,837
            )
            $
            (2,398,696
            )
            $
            (3,318,263
            )
            $
            (3,552,847
            )
            $
            (4,715,722
            )
            $
            (2,452
            )
            $
            (1,162,875
            )
            $
            (5,949,320
            )Operating
                income (loss)
            
            $
            599,663
            
            $
            1,514,026
            
            $
            (23,760,973
            )
            $
            2,093,841
            
            $
            (18,147,175
            )
            $
            (2,452
            )
            $
            (20,241,016
            )
            $
            5,504,055Other
                income
            
            $
            20,432
            
            $
            31,140
            
            $
            133,524
            
            $
            314,695
            
            $
            2,059,602
            
            $
            —
            
            $
            1,744,907
            
            $
            336,805Minority
                interest
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            6,647,715
            
            $
            —
            
            $
            6,647,715
            
            $
            (4,489,176
            )Income
                taxes
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            (614,812
            )
            $
            —
            
            $
            (614,812
            )
            $
            (498,792
            )Net
                income (loss)
            
            $
            620,095
            
            $
            1,545,166
            
            $
            (23,627,449
            )
            $
            2,408,536
            
            $
            (10,054,670
            )
            $
            (2,452
            )
            $
            (12,463,206
            )
            $
            852,892Earnings
                (loss) per share - basic
            
            
            n/a
            
            
            n/a
            
            
            n/a
            
            
            n/a
            
            
            
            
            $
            (0.00
            )
            $
            (1.38
            )
            $
            0.09Average
                shares outstanding - basic
            
            
            n/a
            
            
            n/a
            
            
            n/a
            
            
            n/a
            
            
            
            
            
            1,725,000
            
            
            9,045,773
            
            
            9,527,000Earnings
                (loss) per share - diluted
            
            
            n/a
            
            
            n/a
            
            
            n/a
            
            
            n/a
            
            
            
            
            $
            (0.00
            )
            $
            (1.38
            )
            $
            0.08Average
                shares outstanding - diluted
            
            
            n/a
            
            
            n/a
            
            
            n/a
            
            
            n/a
            
            
            
            
            
            1,725,000
            
            
            9,045,773
            
            
            10,752,904





21






**Acquired
                Business**
            
            
            **Highbury**Year
                Ended December 31, 2003
            
            
            Year
                Ended December 31, 2004
            
            
            Year
                Ended December 31, 2005
            
            
            Eleven
                Months Ended November 30, 2006
            
            
            Period
                from July 13, 2005 (inception) to December 31, 2005
            
            
            Year
                Ended December 31, 2006
            
            
            Year
                Ended December 31, 2007**Balance
                Sheet Data**Cash
                and cash equivalents
            
            
            n/a
            
            $
            3,158,266
            
            $
            5,239,747
            
            $
            7,966,323
            
            $
            36,902
            
            $
            6,248,705
            
            $
            7,276,545Investments
            
            
            n/a
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            4,635,507Accounts
                receivable
            
            
            n/a
            
            $
            4,193,370
            
            $
            4,074,486
            
            $
            3,480,736
            
            $
            —
            
            $
            3,646,422
            
            $
            3,502,142Intangible
                assets(1)
            
            
            n/a
            
            $
            56,333,333
            
            $
            32,563,750
            
            $
            32,563,750
            
            $
            —
            
            $
            36,426,412
            
            $
            32,316,412Other
                non-current assets
            
            
            n/a
            
            $
            3,159
            
            $
            1,635
            
            $
            1,635
            
            $
            483,492
            
            $
            810,810
            
            $
            2,112,933Total
                assets(2)
            
            
            n/a
            
            $
            63,688,128
            
            $
            41,879,618
            
            $
            44,012,444
            
            $
            520,394
            
            $
            47,367,239
            
            $
            50,113,625Liabilities
            
            
            n/a
            
            $
            4,266,990
            
            $
            3,869,502
            
            $
            3,597,720
            
            $
            497,846
            
            $
            2,511,559
            
            $
            5,491,954Senior
                debt
            
            
            n/a
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —Senior
                convertible debt
            
            
            n/a
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —Mandatory
                convertible securities
            
            
            n/a
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —Other
                long-term obligations
            
            
            n/a
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —Stockholders'
                equity
            
            
            n/a
            
            $
            59,421,138
            
            $
            38,010,116
            
            $
            40,414,724
            
            $
            22,548
            
            $
            44,228,779
            
            $
            43,781,671**Cash
                Flow Data**Operating
                activities
            
            $
            280,014
            
            $
            1,420,696
            
            $
            (134,946
            )
            $
            2,730,504
            
            $
            —
            
            $
            (12,229
            )
            $
            11,376,820Investing
                activities
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            (36,923,503
            )
            $
            (4,772,903
            )Financing
                activities
            
            $
            1,407,219
            
            $
            (833,060
            )
            $
            2,216,427
            
            $
            (3,928
            )
            $
            36,902
            
            $
            43,147,535
            
            $
            (5,576,077
            )**Other
                Financial Data**Adjusted
                EBITDA(3)
            
            
            n/a
            
            
            n/a
            
            
            n/a
            
            
            n/a
            
            $
            (2,452
            )
            $
            1,661,606
            
            $
            5,683,798Cash
                Net Income(4)
            
            
            n/a
            
            
            n/a
            
            
            n/a
            
            
            n/a
            
            $
            (2,452
            )
            $
            1,121,783
            
            $
            4,536,499Assets
                under management (at period end, in millions)Mutual
                funds
            
            $
            6,906
            
            $
            7,223
            
            $
            6,329
            
            $
            5,308
            
            $
            —
            
            $
            5,454
            
            $
            4,975Separate
                accounts
            
            $
            —
            
            $
            22
            
            $
            149
            
            $
            119
            
            $
            —
            
            $
            199
            
            $
            145Total
            
            $
            6,906
            
            $
            7,245
            
            $
            6,478
            
            $
            5,427
            
            $
            —
            
            $
            5,653
            
            $
            5,120




(1)
            Intangible
                assets increased in 2006 as a result of our acquisition of the U.S.
                mutual
                fund business of ABN AMRO on November 30, 2006. We recorded an impairment
                charge to the identifiable intangible related to Aston's advisory
                contract
                with the Aston Funds of $4,110,000 in the fourth quarter of 2007
                as a
                result of net asset outflows from the Aston Funds and recent negative
                market performance. The acquisition and the impairment charge are
                discussed in “Management’s Discussion and Analysis of Financial Condition
                and Results of Operations.”




(2)
            Total
                assets have increased as a result of our initial public offering
                which was
                consummated on January 31, 2006. Our initial public offering is discussed
                in “Management’s Discussion and Analysis of Financial Condition and
                Results of Operations.”




(3)
            Adjusted
                EBITDA means the sum of (a) net income determined in accordance with
                GAAP,
                plus (b) amortization of intangible assets, plus (c) interest expense,
                plus (d) depreciation, plus (e) other non-cash expenses, plus (f)
                income
                tax expense. This definition of Adjusted EBITDA is consistent with
                the
                definition of EBITDA used in our credit facility. We consider non-cash
                expenses to be expenses which we incur for financial reporting purposes
                for which there is no corresponding current or future cash expense.
                As a
                measure of liquidity, we believe that Adjusted EBITDA is useful as
                an
                indicator of our ability to service debt, make new investments and
                meet
                working capital requirements. Adjusted EBITDA is not a measure of
                liquidity under GAAP and should not be considered an alternative
                to cash
                flow from operations. Adjusted EBITDA, as calculated by us, may not
                be
                consistent with computations of EBITDA by other companies. Our use
                of
                Adjusted EBITDA, including reconciliations to cash flow from operations
                and Net Income, is discussed in greater detail in “Management’s Discussion
                and Analysis of Financial Condition and Results of Operations.”




22






(4)
            Cash
                Net Income means the sum of (a) net income determined in accordance
                with
                GAAP, plus (b) amortization of intangible assets, plus (c) deferred
                taxes
                related to intangible assets, plus (d) affiliate depreciation, plus
                (e)
                other non-cash expenses. We consider Cash Net Income an important
                measure
                of our financial performance, as we believe it best represents operating
                performance before non-cash expenses relating to the acquisition
                of our
                interest in our affiliated investment management firm. Cash Net Income
                is
                not a measure of financial performance under GAAP and, as calculated
                by
                us, may not be consistent with computations of Cash Net Income by
                other
                companies. Our use of Cash Net Income, including a reconciliation
                of Cash
                Net Income to Net Income, is discussed in “Management’s Discussion and
                Analysis of Financial Condition and Results of Operations.”




(5)
            The
                information presented in the “Combined” column for 2006 is the arithmetic
                sum of the operating results of Highbury for the year ended December
                31,
                2006, which includes the acquired business’ results from December 1, 2006,
                and the operating results of the acquired business for the 11 months
                ended
                November 30, 2006, which is prior to the date of acquisition. No
                pro forma
                or other adjustments have been made in the presentation of the “Combined”
                financial results.




**ITEM
      7.**  **MANAGEMENT** **’** **S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**




*You
      should read this discussion and analysis of our financial condition and results
      of operations in conjunction with our audited consolidated financial statements
      and the related notes and the audited combined financial statements for the
      U.S.
      Mutual Fund Business of ABN AMRO Asset Management Holdings, Inc. and the related
      notes appearing elsewhere in this Annual Report on Form 10-K. The information
      in
      this section contains forward-looking statements (see “Forward-Looking
      Statements”). Our actual results may differ significantly from the results
      suggested by these forward-looking statements and our historical results. Some
      factors that may cause our results to differ are described in “Risk Factors”
under Item 1A of this Annual Report on Form 10-K. We wish to caution you not
      to
      place undue reliance on these forward-looking statements, which speak only
      as of
      the date made.*




**Overview**




Highbury
      is an investment management holding company providing permanent capital
      solutions to mid-sized investment management firms. We pursue acquisition
      opportunities and seek to establish accretive partnerships with high quality
      investment management firms. Highbury’s strategy is to provide permanent equity
      capital to fund buyouts from corporate parents, buyouts of founding or departing
      partners, growth initiatives, or exit strategies for private equity funds.
      This
      strategy includes leaving material equity interests with management teams to
      align the interests of management and Highbury’s shareholders and, in general,
      does not include integrating our acquisitions, although Highbury may execute
      add-on acquisitions for its current or future affiliates. We seek to augment
      and
      diversify our sources of revenue by asset class, investment style, distribution
      channel, client type and management team. We intend to fund future acquisitions
      with our revolving credit facility, other external borrowings, retained
      earnings (if any), additional equity and other sources of capital, including
      seller financing and contingent payments.




Highbury
      was formed on July 13, 2005, and closed its initial public offering on January
      31, 2006. After deducting the underwriting discounts and commissions and the
      offering expenses, the total net proceeds to Highbury from the offering and
      the
      private placement that Highbury closed contemporaneously with its initial public
      offering, were approximately $43.8 million.




*Business
      Combination* .
      On
      April 20, 2006, Highbury and Aston entered into an asset purchase agreement
      with
      the sellers. Pursuant to the asset purchase agreement, on November 30, 2006,
      we
      acquired substantially all of the sellers’ business of providing investment
      advisory, administration, distribution and related services to the target funds
      specified in the asset purchase agreement. In connection with the consummation
      of the acquisition, Aston entered into agreements with each of the sellers
      that
      managed the target funds prior to the acquisition, pursuant to which each such
      seller now acts as a sub-adviser to the applicable target fund, each of which
      is
      now rebranded an Aston Fund. Pursuant to the asset purchase agreement, the
      sellers have agreed not to terminate these agreements prior to November 30,
      2011.




23




Pursuant
      to the asset purchase agreement, Highbury and Aston paid $38.6 million in cash
      to AAAMHI. The asset purchase agreement provides for a contingent adjustment
      payment in cash on the second anniversary of the date of the closing of the
      acquisition, as follows: in the event the annualized investment advisory fee
      revenue generated under investment advisory contracts between Aston and the
      sellers applicable to the target funds for the six months prior to the second
      anniversary of the date of the closing of the acquisition, or the target
      revenue, (x) exceeds $41.8 million, we will pay to AAAMHI the difference between
      the target revenue and $41.8 million, up to a total aggregate payment of $3.8
      million, or (y) is less than $34.2 million, AAAMHI will pay to us the difference
      between the $34.2 million and the target revenue, up to a total aggregate
      payment of $3.8 million.




The
      acquired business was founded in 1993 within Alleghany Corporation by employees
      of Aston to manage open-end investment funds for retail and institutional
      clients in the United States. Originally, the acquired business employed
      investment advisers affiliated with its parent to manage the assets of the
      funds, while it centralized the distribution, marketing, reporting and other
      operations of the fund family. As the business developed, the acquired business
      created new mutual funds managed by experienced independent investment advisers.
      Historically, the acquired business utilized seven different entities to manage
      the equity funds, of which five were current or former affiliates of the sellers
      and two were independent. Upon consummation of the acquisition, Aston entered
      into long-term contracts with each of these entities pursuant to which they
      will
      sub-advise the funds. The contracts with the sellers’ current and former
      affiliates will not be terminable by the sub-advisers until November 30, 2011.
      In general, sub-advisers unaffiliated with the sellers may terminate their
      sub-advisory contracts upon 60 days' written notice. One existing fixed
      income manager and two new managers were retained to manage three fixed income
      funds. Between the consummation of the acquisition and December 31, 2007, Aston
      opened ten new mutual funds, and now employs 15 different sub-advisors of which
      five are current or former affiliates of the sellers and ten are independent.
      Since December 31, 2007, Aston has created an additional three mutual funds
      with
      three new sub-advisors. Aston’s relationship with the sub-advisers is supported
      by limited non-compete provisions and certain capacity guarantees in certain
      products to benefit Aston. This arrangement is intended to ensure that the
      investment philosophies and processes guiding the mutual funds in the future
      are
      consistent with their historical investment philosophies and
      processes.




As
      of
      December 31, 2007, Aston managed 27 no-load mutual funds, comprised of 24 equity
      funds and 3 fixed income funds, with approximately $5.0 billion of mutual fund
      assets under management. As of December 31, 2007, 10 of the mutual funds carried
      an overall Morningstar Rating TM of three
      stars or better, including four four-star funds and one five-star fund. Twelve
      funds are relatively new and are not currently rated by Morningstar. The 24
      equity funds are classified in eight of the nine Morningstar Rating TM style
      boxes, giving Aston wide coverage of the public equity investment spectrum
      and
      multiple sources of revenue. Aston intends to expand its assets under management
      with a combination of internal growth, new product development and accretive
      acquisitions. The Company believes the development of new products will provide
      growth in the future.




Between
      the consummation of the acquisition and December 31, 2007, Aston opened ten
      new
      equity mutual funds. These funds are set forth in the table below.




**Fund**
            
            **Morningstar
                Category**Aston/River
                Road Small-Mid Cap Fund
            
            Small
                ValueAston/Optimum
                Large Cap Opportunity
            
            Large
                GrowthAston/ABN
                AMRO Global Real Estate
            
            Specialty-Real
                EstateAston/Resolution
                Global Equity
            
            World
                StockAston/Neptune
                International
            
            Foreign
                Large GrowthAston/Barings
                International
            
            Foreign
                Large BlendAston/Montag
                & Caldwell Mid Cap Growth
            
            Mid-Cap
                GrowthAston/SGA
                International Small-Mid Cap
            
            Foreign
                Small/Mid GrowthAston/Cardinal
                Mid Cap Value
            
            Mid-Cap
                ValueAston/ClariVest
                Mid Cap Growth
            
            Mid-Cap
                Growth




During
      the first quarter of 2008, Aston opened three new equity mutual funds: the
      Aston/Smart Allocation ETF Fund, the Aston/MB Enhanced Equity Income Fund and
      the Aston/New Century Absolute Return ETF Fund.




24




Aston
      intends to manage its family of mutual funds in response to client demands,
      and
      may open new funds or close existing funds over time, as appropriate.




In
      addition, Aston may be able to develop new distribution channels
      including:




·
            arrangements
                with banks and insurance companies which, like ABN AMRO, elect to
                divest
                their mutual fund operations but enter into agreements with Aston
                to
                service their customers; and




·
            wholesalers
                focused on the traditional retail broker channel.




*Revenue
      Sharing Arrangement with Aston* .
      Highbury formed Aston on April 19, 2006 and became the sole member of Aston.
      In
      connection with Highbury and Aston entering into the asset purchase agreement,
      the limited liability company agreement of Aston was amended and eight employees
      of the acquired business and ABN AMRO were admitted as members of Aston
      (collectively referred to herein as the Aston management members). Highbury
      owns
      65% of the membership interests of Aston, and the Aston management members
      own
      35% of the membership interests of Aston.




Pursuant
      to the limited liability company agreement, 72% of the revenues, or the
      operating allocation, of Aston is used to pay operating expenses of Aston,
      including salaries and bonuses of all employees of Aston (including the Aston
      management members). The remaining 28% of the revenues, or owners’ allocation,
      of Aston is allocated to the owners of Aston. The owners’ allocation is
      allocated among the members of Aston according to their relative ownership
      interests. Currently, 18.2% of total revenue is allocated to Highbury and 9.8%
      of total revenue is allocated to the Aston management members.




Highbury’s
      contractual share of revenues has priority over the distributions to the Aston
      management members in the event Aston’s actual operating expenses exceed the
      operating allocation. As a result, excess expenses first reduce the portion
      of
      the owners’ allocation allocated to the Aston management members until the Aston
      management members’ allocation is eliminated, then Highbury’s allocation is
      reduced. Any reduction in the distribution of revenues to be paid to Highbury
      is
      required to be paid to Highbury out of any future excess operating allocation
      and the portion of future owners’ allocation allocated to the Aston management
      members, with interest.




*Business
      Overview* .
      Commencing with the acquisition on November 30, 2006 of the acquired business,
      we derive most of our revenue from the provision of investment management and
      related services. Aston generates revenue by charging mutual funds an advisory
      fee and an administrative fee based on a percentage of invested assets. A
      portion of the fees are paid to the sub-advisers, to a third-party
      sub-administrator and to third-party distribution partners. Each fund typically
      bears all expenses associated with its operation and the issuance and redemption
      of its securities. In particular, each fund pays investment advisory fees (to
      Aston), shareholder servicing fees and expenses, fund accounting fees and
      expenses, transfer agent fees, custodian fees and expenses, legal and auditing
      fees, expenses of preparing, printing and mailing prospectuses and shareholder
      reports, registration fees and expenses, proxy and annual meeting expenses
      and
      independent trustee fees and expenses. Aston has guaranteed many of the funds
      that their expenses will not exceed a specified percentage of their net assets.
      Aston absorbs all advisory fees and other mutual fund expenses in excess of
      these self-imposed limits in the form of expense reimbursements or fee waivers
      and collects as revenue the advisory fee less reimbursements and waivers. As
      of
      December 31, 2007, Aston was reimbursing 22 mutual funds whose expenses exceed
      the applicable expense cap.




Relationships
      with a limited number of clients account for a significant majority of our
      revenue. We expect that Aston’s relationships with these clients will continue
      to account for a substantial portion of our total revenue in future periods.
      Aston’s client, the Aston Funds, a Delaware business trust, which accounts for
      approximately 97% of our assets under management, is comprised of 27 mutual
      funds that are currently managed by Aston. Because all these funds have the
      same
      trustees, it is possible that the contracts with them could be terminated
      simultaneously. Of these 27 funds, the Aston/Montag & Caldwell Growth Fund
      and the Aston/Optimum Mid Cap Fund account for approximately 36% and 18%,
      respectively, of the revenues of Aston. The assets under management that Aston
      sources through independent financial advisers using Schwab and Fidelity, as
      custodians, each generate more than 10% of revenues received by Aston.
      Additionally, as of December 31, 2007, approximately 20% of our assets under
      management and 23% of our revenues are generated by customers sourced through
      a
      firm which was previously affiliated with the sellers but was subsequently
      sold
      to an unaffiliated third party. These various client concentrations leave us
      vulnerable to any adverse change in the financial condition of any of our major
      clients. The loss of any of these relationships may have a material adverse
      impact on our revenues.




25




Our
      level
      of profitability will depend on a variety of factors, including:




·
            those
                affecting the global financial markets generally and the equity markets
                particularly, which could potentially result in considerable increases
                or
                decreases in our assets under management;




·
            the
                level of revenue, which is dependent on our ability to maintain or
                increase assets under management by maintaining existing investment
                advisory relationships and fee structures, marketing our services
                successfully to new clients and obtaining favorable investment results;




·
            our
                ability to maintain certain levels of operating profit margins;




·
            the
                availability and cost of the capital with which we finance our existing
                and new acquisitions;




·
            our
                success in making new acquisitions and the terms upon which such
                transactions are completed;




·
            the
                level of intangible assets and the associated amortization expense
                resulting from our acquisitions;




·
            the
                level of expenses incurred for holding company operations; and




·
            the
                level of taxation to which we are subject.




**Key
      Operating Measures**




We
      use
      the following key measures to evaluate and assess our business:




·
            *Assets
                Under Management*.
                As of December 31, 2007, Aston is the investment manager for 27 open-end
                mutual funds, comprised of 24 equity and 3 fixed income funds. Aston
                generates revenues by charging each fund investment advisory and
                administrative fees (collected in monthly installments), each of
                which are
                equal to a percentage of the daily weighted average assets under
                management of the fund. Assets under management change on a daily
                basis as
                a result of client investments and withdrawals and changes in the
                market
                value of securities held in the mutual funds. We carefully review
                net
                asset flows into the mutual funds, trends in the equity markets and
                the
                investment performance of the mutual funds, both absolutely and relative
                to their peers, to monitor their effects on the overall level of
                assets
                under management.




·
            *Total
                Revenue*.
                Total revenue for Aston is equal to the sum of the advisory fees,
                administrative fees and money market service fees earned by the business
                in a given period. We operate Aston under a revenue sharing structure
                through which Highbury receives a fixed percentage (18.2%) of the
                total
                revenue, net of sub-administrative fees, earned by Aston. In addition,
                Highbury earns interest income on its cash balances which we recognize
                as
                non-operating income on the financial
                statements.




·
            *Weighted
                Average Fee Basis*.
                The weighted average fee basis is equal to the total revenue earned
                in a
                specific period divided by the weighted average assets under management
                for that period. Because each fund has a different fee schedule,
                the
                weighted average fee basis provides us with a single indicator of
                the
                business’ ability to generate fees on its total assets under management
                across all products.




·
            *Total
                Operating Expenses*.
                The total operating expenses include the operating expenses of Aston
                as
                well as Highbury. At the Aston level, we monitor total operating
                expenses
                relative to Aston’s total revenue to ensure there is sufficient operating
                margin to cover expenses. We expect total operating expenses (including
                distribution and sub-advisory costs and excluding certain non-cash,
                non-recurring items) to equal approximately 72% of the total revenue
                of
                Aston, as provided in Aston’s limited liability company agreement. At the
                Highbury level, we incur operating expenses in connection with our
                pursuit
                of accretive acquisitions, including expenses for travel, entertainment
                and due diligence. We also incur legal and accounting expenses in
                connection with our SEC filing requirements and expenses of directors’ and
                officers’ insurance.




26




**Description
      of Certain Line Items**




Following
      is a description of the components of certain line items from our consolidated
      financial statements:




·
            *Operating
                Revenue*.
                Aston generates advisory fees based on a fixed percentage of the
                daily
                weighted average assets under management for each fund and receives
                these
                fees on a monthly basis. For many funds, Aston provides an expense
                cap
                which guarantees to investors that the total expenses of a fund will
                not
                exceed a fixed percentage of the total assets under management. For
                small
                funds, the fixed expenses for fund accounting, client reporting,
                printing
                and other expenses, when combined with the investment advisory fees
                and
                administrative fees, cause a fund’s total expenses to exceed the expense
                cap. In such cases, Aston reimburses the funds for the excess fixed
                expenses or waives a portion of the investment advisory fee, so as
                to keep
                the total expenses of the fund at or below the expense cap. Aston’s
                advisory fees include investment advisory fees from all of the funds,
                net
                of all fee waivers and expense reimbursements. Additionally, Aston
                generates administration fees for providing administration services.
                Such
                services include marketing and customer relations, bookkeeping and
                internal accounting functions, and legal, regulatory and board of
                trustees
                support. Finally, Aston earns monthly fees from AAAMHI in return
                for
                providing administration services to six money market funds which
                continue
                to be advised by AAAMHI.




·
            *Distribution
                and Sub-advisory Costs*.
                Aston has contracted on a non-exclusive basis with approximately
                400
                different institutions to sell its mutual funds, in exchange for
                a
                distribution fee, to retail and institutional investors. These
                distribution fees are generally equal to a fixed percentage of the
                assets
                invested by the retail or institutional investor. In addition, Aston
                employs third-party investment managers, or sub-advisers, to perform
                the
                security research and investment selection processes for each of
                its
                mutual funds. Under this arrangement, Aston pays the third-party
                investment manager a sub-advisory fee, generally equal to 50% of
                the
                advisory fees for the mutual fund, net of fee waivers, expense
                reimbursements, and applicable distribution fees paid under the
                distribution agreements discussed above. Total distribution and
                sub-advisory fees represent the largest component of expenses for
                Aston.
                Since these fees are generally based on total assets under management,
                they increase or decrease proportionately with total assets under
                management.




·
            *Compensation
                and Related Expenses*.
                As of December 31, 2007, Aston employed 37 full-time employees. The
                compensation and related expenses of Aston include the base salaries,
                incentive compensation, health insurance, retirement benefits and
                other
                costs related to the employees. These expenses increase and decrease
                with
                the addition or termination of employees. Highbury currently has
                no
                employees and provides no compensation to its officers or directors.




·
            *Impairment
                of Intangibles.*We
                recorded an impairment charge to the identifiable intangible related
                to Aston's advisory contract with the Aston Funds of $4,110,000 in
                the
                fourth quarter of 2007 as a result of net asset outflows from the
                Aston
                Funds and recent negative market performance. Highbury also determined
                that the identifiable intangible continued to meet the criteria for
                indefinite life.




·
            *Other
                Operating Expenses*.
                The most significant components of other operating expenses include
                professional fees, insurance, occupancy, marketing and advertising,
                voice
                and data communication and travel and entertainment expenses.




**Critical
      Accounting Policies**




The
      Company’s discussion and analysis of its financial condition and results of
      operations for the purposes of this document are based upon its consolidated
      financial statements, which have been prepared in accordance with accounting
      principles generally accepted in the United States of America, or GAAP. The
      preparation of these financial statements requires management to make estimates
      and assumptions that affect the reported amounts of assets, liabilities,
      revenues, expenses and related disclosures. Actual results could differ from
      those estimates.




The
      Company’s significant accounting policies are presented in Note 1 to its audited
      consolidated financial statements included elsewhere herein, and the following
      summaries should be read in conjunction with the consolidated financial
      statements and the related notes. While all accounting policies affect the
      consolidated financial statements, certain policies may be viewed as critical.
      Critical accounting policies are those that are both most important to the
      portrayal of the consolidated financial statements and results of operations
      and
      that require management’s most subjective or complex judgments and estimates. We
      believe the policies that fall within this category are the policies related
      to
      principles of consolidation, investments, goodwill and intangible assets,
      valuation, compensation and related expenses and income taxes.




27




*Principles
      of Consolidation.* The
      consolidated financial statements include the accounts of Highbury and Aston,
      in
      which Highbury has a controlling financial interest. Generally, an entity is
      considered to have a controlling financial interest when it owns a majority
      of
      the voting interest in an entity. Highbury is the manager member of Aston and
      owns 65% of Aston. Highbury has a contractual arrangement with Aston whereby
      a
      percentage of revenue is allocable to fund Aston’s operating expenses (referred
      to as the operating allocation), while the remaining portion of revenue
      (referred to as the owners’ allocation) is allocable to Highbury and the other
      members, with a priority to Highbury. The portion of the income of Aston
      allocated to owners other than Highbury is included in minority interest in
      the
      Consolidated Statements of Operations. Minority interest on the Consolidated
      Balance Sheets includes capital and undistributed income owned by the management
      members of Aston. All material intercompany balances and transactions have
      been
      eliminated in consolidation.




*Investments.* In
      2007,
      the Company elected to adopt early the provisions of Statement of Financial
      Accounting Standards (“SFAS”) No. 157 “Fair Value Measurements” (“SFAS 157”) and
      SFAS No. 159 “The Fair Value Option for Financial Assets and Financial
      Liabilities” (“SFAS 159”). The Company carries its investments in government
      securities, primarily 6-month Treasury bills and its investments in certain
      mutual funds managed by Aston at fair value based on quoted market prices.
      The
      Company reflects interest paid and accrued on Treasury bills in interest income
      and changes in fair value of mutual funds in Investment income.




*Goodwill
      and Intangible Assets* .
      The
      purchase price and the capitalized transaction costs incurred in connection
      with
      the acquisition of the acquired business are allocated based on the fair value
      of the assets acquired, which is primarily the acquired mutual fund advisory
      contract. In determining the allocation of the purchase price to the acquired
      mutual fund advisory contract, we have analyzed the present value of the
      acquired business’ existing mutual fund advisory contracts based on a number of
      factors including: the acquired business’ historical and potential future
      operating performance; the historical and potential future rates of new business
      from new and existing clients and attrition among existing clients; the
      stability and longevity of existing advisory and sub-advisory relationships;
      the
      acquired business’ recent, as well as long-term, investment performance; the
      characteristics of the acquired business’ products and investment styles; the
      stability and depth of the management team; and the acquired business’ history
      and perceived franchise or brand value. During 2007, the Company revised its
      original purchase price allocation by allocating an additional $2,627,000 to
      indefinite-lived indentifiable intangibles with a corresponding reduction to
      goodwill.




We
      have
      determined that the acquired mutual fund advisory contract meets the indefinite
      life criteria outlined in Statement of Financial Accounting Standards No. 142,
      “Goodwill and Other Intangible Assets” (“SFAS 142”), because we expect both the
      contract and the cash flows generated by the contract to continue indefinitely
      due to the likelihood of continued renewal at little or no cost. Accordingly,
      we
      do not amortize this intangible asset, but instead review this asset at least
      annually for impairment. If the carrying amount of this intangible asset exceeds
      the fair value, an impairment loss is recorded in an amount equal to that
      excess. Additionally, each reporting period, we assess whether events or
      circumstances have occurred which indicate that the indefinite life criteria
      are
      no longer met. If the indefinite life criteria are no longer met, we will
      amortize the intangible asset over its remaining useful life.




The
      excess of purchase price for the acquisition of the acquired business over
      the
      fair value of net assets acquired, including the acquired mutual fund advisory
      contract, is reported as goodwill. Goodwill is not amortized, but is instead
      reviewed for impairment. Highbury assesses goodwill for impairment at least
      annually, or more frequently whenever events or circumstances occur indicating
      that the recorded goodwill may be impaired. If the carrying amount of goodwill
      exceeds the fair value, an impairment loss would be recorded in an amount equal
      to that excess.




In
      allocating the purchase price of the acquisition and testing our assets for
      impairment, we make estimates and assumptions to determine the value of our
      acquired client relationships. In these valuations, we make assumptions of
      the
      growth rates and useful lives of existing and prospective client accounts.
      Additionally, we make assumptions of, among other factors, projected future
      earnings and cash flow, valuation multiples, tax benefits and discount rates.
      The impacts of many of these assumptions are material to our financial condition
      and operating performance and, at times, are subjective. If we used different
      assumptions, the carrying values of our intangible assets and goodwill and
      the
      related amortization could be stated differently and our impairment conclusions
      could be modified.




28




We
      recorded an impairment charge to the identifiable intangible related to Aston's
      advisory contract with the Aston Funds of $4,110,000 in the fourth quarter
      of
      2007 as a result of net asset outflows from the Aston Funds and recent negative
      market performance. Highbury also determined that the identifiable intangible
      continued to meet the criteria for indefinite life.




*Revenue
      Recognition**.*Highbury
      derives its operating revenues from Aston, its majority-owned subsidiary.
      Highbury also earns interest income on its cash balances. Aston earns investment
      advisory and administrative fees for services provided to the Aston Funds,
      six
      money market funds advised by AAAMHI and a limited number of separately managed
      accounts. These fees are primarily based on predetermined percentages of the
      market value of the assets under management and are billed in arrears of the
      period in which they are earned. These fees are recognized over the period
      in
      which services are performed unless facts and circumstances would indicate
      that
      collectibility of the fees is not reasonably assured. Expense reimbursements
      to
      certain of the Aston Funds in accordance with agreements are reported as an
      offset to investment advisory fees. Substantially all of Aston’s revenues are
      derived from the Aston Funds for which Aston is the investment advisor.
      Management has determined that no allowance for doubtful accounts is necessary
      due to all fees being collected within one month from the date of
      invoice.




*Income
      Taxes* .
      Deferred tax assets and liabilities are primarily the result of timing
      differences between the carrying value of assets and liabilities and the
      deductibility of operating expenses for financial reporting and income tax
      purposes. Deferred tax assets and liabilities are primarily the result of tax
      deductions for the Company’s intangible assets. We amortize acquired intangible
      assets over a 15-year period for tax purposes only, reducing their tax basis
      below their carrying value for financial statement purposes and generating
      deferred taxes each reporting period. We amortized $2,428,427 related to
      goodwill and intangible assets in 2007 for income tax purposes. Additionally,
      at
      November 30, 2006, when Highbury ceased to be a corporation in the development
      stage, we had total deferred expenses of $440,342 that will be amortized for
      tax
      purposes over a 15-year period. These expenses were currently expensed for
      financial statement purposes during Highbury’s development stage but were not
      deductible for tax purposes. Highbury amortized $29,356 of this deferred expense
      in 2007.




The
      discussion and analysis of the acquired business’ financial condition and
      results of operations for the purposes of this document are based upon its
      consolidated financial statements, which have been prepared in accordance with
      GAAP. The acquired business’ significant accounting policies are presented in
      Note 2 to its audited combined financial statements included elsewhere herein,
      and the following summaries should be read in conjunction with the financial
      statements and the related notes included in this Form 10-K. The acquired
      business’ management believes the policies that fall within this category are
      the policies related to principles of combination and goodwill and intangible
      assets.




*Principles
      of Combination* .
      The
      accompanying combined statements of operations, cash flows and owner’s equity
      for the acquired business for the years ended December 31, 2003, 2004, and
      2005
      and for the 11 months ended November 30, 2006 have been prepared on a carve-out
      basis. The combined financial statements have been prepared from AAAMHI’s
      historical accounting records on a carve-out basis to include the historical
      financial position, results of operations and cash flows applicable to the
      acquired business. The combined financial statements have been prepared as
      if
      the business had been a stand-alone operation, though they are not necessarily
      representative of results had the acquired business operated as a stand-alone
      operation. Revenues, expenses, assets and liabilities were derived from amounts
      associated with the acquired business in the AAAMHI financial records. The
      financial results include allocations based on methodologies that management
      believes are reasonable of corporate expenses from AAAMHI and allocations of
      other corporate expenses from AAAMHI’s parent company that may be different from
      comparable expenses that would have been incurred if the acquired business
      operated as a stand-alone business. Specifically, ABN AMRO Services Company,
      Inc., a wholly-owned subsidiary of ABN AMRO North America Holding Company,
      or
      AANAHC, provided the acquired business with certain IT, infrastructure and
      e-mail services. LaSalle Bank Corporation, also a wholly-owned subsidiary of
      AANAHC, provided the acquired business with payroll, benefits, general ledger
      maintenance, internal audit and accounts payable services. These services were
      charged based upon utilized quantities (typically number of employees, number
      of
      transactions processed, or hours worked). AAAMHI provided the acquired business
      with executive management, finance, human resources and personal trade
      compliance services. These services were charged based upon employee count
      or
      management time incurred. AAAMHI’s parent and its parent companies provided
      other executive management, technology, sales support, finance, compliance
      and
      human resources support services. These services were charged out on a formula
      basis that considers assets under management, number of employees and
      non-interest expense. The cost of these services is included under the caption
      “Related-party expense allocations” in the accompanying combined statements of
      operations. Certain cash receipts and cash payments related to the acquired
      business were handled through AAAMHI and affiliate cash accounts which are
      not
      included in the carve-out financial statements. “Net transfers from AAAMHI” in
      the combined statements of changes in owner’s equity reflects these cash
      transactions.




29




**Recently
      Issued Pronouncements**




The
      FASB
      has issued interpretation No. 48, “Accounting for Uncertainty in Income Taxes—An
      Interpretation of FASB Statement No. 109” (“FIN 48”), regarding accounting for,
      and disclosure of, uncertain tax positions. FIN 48 clarifies the accounting
      for
      uncertainty in income taxes recognized in an enterprise’s financial statements
      in accordance with FASB Statement No. 109, “Accounting for Income Taxes.” FIN 48
      prescribes a recognition threshold and measurement attribute for the financial
      statement recognition and measurement of a tax position taken or expected to
      be
      taken in a tax return. FIN 48 also provides guidance on derecognition,
      classification, interest and penalties, accounting in interim periods,
      disclosure, and transition. FIN 48 is effective for fiscal years beginning
      after
      December 15, 2006. The adoption of FIN 48 had no impact on the Company’s results
      of operations and financial position.




In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS
      157”). SFAS 157 is effective in the first quarter of 2008 and establishes a
      framework for measuring fair value.




In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits
      entities to choose to measure many financial instruments and certain other
      items
      at fair value. The objective of the statement is to improve financial reporting
      by providing entities with the opportunity to mitigate volatility in reported
      earnings caused by measuring related assets and liabilities differently without
      having to apply complex hedge accounting provisions. The provisions of SFAS
      159
      are effective for fiscal years beginning after November 15, 2008. The early
      adoption of SFAS 157 and SFAS 159 has not had a material impact on the Company’s
      results of operations and financial position.




In
      December 2007, the Financial Accounting Standards Board (“FASB”) issued
      Statement of Financial Accounting Standards (“SFAS”) No. 141 (revised 2007),
      Business Combinations (“SFAS 141R”), which replaces SFAS No. 141. The statement
      retains the purchase method of accounting for acquisitions, but requires a
      number of changes, including changes in the way assets and liabilities are
      recognized in the purchase accounting. It also changes the recognition of assets
      acquired and liabilities assumed arising from contingencies and requires the
      expensing of acquisition-related costs as incurred. SFAS 141R is effective
      for
      us beginning January 1, 2009 and will apply prospectively to business
      combinations completed on or after that date.




In
      December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
      Consolidated Financial Statements, an amendment of ARB 51 (“SFAS 160”), which
      changes the accounting and reporting for minority interests. Minority interests
      will be recharacterized as noncontrolling interests and will be reported as
      a
      component of equity separate from the parent’s equity, and purchases or sales of
      equity interests that do not result in a change in control will be accounted
      for
      as equity transactions. In addition, net income attributable to the
      noncontrolling interest will be included in consolidated net income on the
      face
      of the income statement and, upon a loss of control, the interest sold, as
      well
      as any interest retained, will be recorded at fair value with any gain or loss
      recognized in earnings. SFAS 160 is effective for us beginning January 1, 2009
      and will apply prospectively, except for the presentation and disclosure
      requirements, which will apply retrospectively. We are currently assessing
      the
      potential impact that adoption of SFAS 160 would have on our consolidated
      financial statements.




Management
      does not believe that any other recently issued, but not yet effective,
      accounting standards if adopted in their current form would have a material
      effect on the accompanying consolidated financial statements.




**Basis
      of Presentation**




Since
      the
      business combination was consummated on November 30, 2006, the combined
      financial statements for prior periods (other than Highbury’s financial
      statements) relate to the U.S. mutual fund business of AAAMHI, which we refer
      to
      as the acquired business. These financial statements are presented on a
      carve-out basis. We believe that the combined financial statements for the
      acquired business are not comparable to the financial statements for the Company
      for periods following the business combination.




Prior
      to
      the completion of the business combination, the acquired business was a division
      of AAAMHI and was not a separate legal entity. Historically, the acquired
      business utilized two independent sub-advisers and five advisers affiliated
      with
      AAAMHI. Because the Aston Funds were introduced over a period of 13 years and
      are managed by five different affiliates of AAAMHI, the historical fee sharing
      agreements between the acquired business and each investment adviser with
      respect to each Aston Fund varied among the funds and over time. In addition,
      since the acquired business and the investment advisers were part of a commonly
      controlled corporate entity, the historical fee sharing arrangements were not
      reflective of market terms but rather internal allocations that also
      varied.




30




Subsequent
      to the completion of the business combination, the investment adviser affiliates
      of AAAMHI continue to perform the same investment management services for the
      Aston Funds as they had previously provided but in the role of sub-advisers.
      However, as a result of the new sub-advisory agreements, they receive a smaller
      share of the net advisory fees after payments of third-party distribution fees
      than they received historically. These new sub-advisory agreements were
      determined based on arm’s length negotiation between the sub-advisers affiliated
      with AAAMHI and us and reflected market terms at the date of the agreements.




In
      addition, certain amounts included in the acquired business’ financial
      statements were allocated from AAAMHI or other related entities. We believe
      that
      these allocations are reasonable, but not necessarily indicative of costs that
      would have been incurred by the acquired business had it operated as a stand
      alone business for the same periods.




In
      the
“Results of Operations” section to follow, we discuss the actual consolidated
      financial results for the Company for 2007 and the actual consolidated financial
      results for the Company for 2006, which include the operations of the acquired
      business from December 1, 2006 through December 31, 2006. In addition we discuss
      the 2006 combined results for the Company and the acquired business compared
      to
      the actual consolidated financial results for the Company for 2007 and the
      results for the acquired business for 2005, as presented in our selected
      financial data in Item 6. For the reasons cited in Note 5 to Item 6, the revenue
      and expenses of the acquired business as it operates within the Company are
      not
      consistent with the revenue and expenses of the acquired business on a
      historical basis. As such, it may be difficult to draw conclusions from a
      comparison of operating results from before and after the business combination.




**Results
      of Operations**




*Year
      ended December 31, 2007 for the Company compared to year ended December 31,
      2006
      for the Company*




For
      the
      year ended December 31, 2007, the Company generated net income of $852,892,
      as
      compared to a net loss of $12,463,206 for the year ended December 31, 2006.
      The
      net loss in 2006 resulted primarily from a one-time, non-cash compensation
      charge of $20,784,615 related to the grant of Aston membership interests to
      the
      Aston management members. The Company generated total operating revenue of
      $42,063,995 in 2007, as compared to $3,828,100 in 2006. The 2006 results,
      however, include only one month of operations subsequent to the closing of
      our
      acquisition of the acquired business on November 30, 2006.




The
      following table summarizes the total fees, weighted average assets under
      management and the weighted average fee basis for the three months ended
      December 31, 2007.


For
                    the three months ended December 31, 2007Total
                    Fees
                
                Weighted
                    Average Assets Under Management ($M)
                
                Weighted
                    Average Fee Basis (Annualized)Net
                    advisory fees
                
                $
                9,000,405
                
                $
                5,173
                (1)
                
                0.70%Net
                    administrative fees(2)
                
                
                538,378
                
                
                8,052
                (3)
                
                0.03%Money
                    market service fees
                
                
                139,714
                
                
                3,025
                
                
                0.02%
                (4)$
                9,678,497
                
                
                5,173
                (5)
                
                0.75%
                (5)


(1)
            Includes
                long-term mutual fund and separate account assets under
                management.(2)
            Administrative
                fees are presented net of sub-administration fees paid to a third
                party to
                be consistent with the methodology used in calculating the revenue
                sharing
                arrangement with Aston.(3)
            Aston
                provides administrative services to the Aston Funds, as well as six
                money
                market mutual funds managed by affiliates of AAAMHI.(4)
            Aston
                receives a money market service fee from AAAMHI equal to $550,000
                per
                annum plus 0.0001% of the weighted average assets under management
                in the
                six money market mutual funds in excess of $3 billion. The fee is
                accrued
                and paid monthly.




31




(5)
            For
                an estimate of the overall weighted average fee basis, we use the
                total
                fees from all sources and the weighted average assets under management
                for
                which we provide investment advisory services (Note 1
                above).




The
      Company incurred $36,559,940 of total operating costs for the year ended
      December 31, 2007, as compared to $24,069,116 for the year ended December 31,
      2006. Our 2007 operating costs include $ 19,857,033
      of total distribution and sub-advisory expenses, including $16,124,192 payable
      to the sub-advisers (approximately 43% of the net advisory fees for the period)
      and $3,732,841 payable pursuant to third-party distribution agreements
      (approximately 10% of the net advisory fees for the period). In 2006, Aston
      incurred total distribution and sub-advisory expenses of $1,796,910, including
      $1,467,496 payable to the sub-advisers (approximately 44% of the net advisory
      fees for the period) and $329,414 payable pursuant to third-party distribution
      agreements (approximately 10% of the net advisory fees for the period). The
      Company incurred $6,643,587 of compensation and related expense in 2007 which
      was entirely attributable to Aston’s operations. In 2006, the Company incurred
      $21,109,331 of compensation and related expense which consisted primarily of
      a
      one-time, non-cash compensation charge of $20,784,615 related to the grant
      of
      Aston membership interests to the management members. We recorded an
      impairment charge to the identifiable intangible related to Aston's advisory
      contract with the Aston Funds of $4,110,000 in the fourth quarter of 2007 as
      a
      result of net asset outflows from the Aston Funds and recent negative market
      performance. We also incurred $222,114 of depreciation and amortization expense
      in 2007. There were no comparable charges for depreciation and amortization
      or
      impairment in 2006.




The
      Company incurred other operating expenses of $5,727,206 in 2007 as compared
      to
      $1,162,875 in 2006. These expenses include the operating expenses of Aston
      and
      Highbury for the period and consist primarily of legal, accounting, insurance,
      occupancy and administrative fees. Highbury’s direct operating expenses for
      these two years were as follows:




2006
            
            2007Professional
                fees
            
            $
            320,195
            
            $
            1,461,040Insurance
            
            
            89,970
            
            
            243,759Administrative
                fees
            
            
            83,952
            
            
            95,000Travel
                and entertainment
            
            
            70,701
            
            
            145,607Other
                expenses
            
            
            182,243
            
            
            168,884$
            747,061
            
            $
            2,114,290




Other
      income consists of interest income (earnings on cash and cash equivalent
      balances) and investment income (realized and unrealized gains and losses on
      investments in U.S. treasury bills and Aston mutual funds). In 2007, Highbury
      earned interest income of $458,105 and incurred investment losses of $121,300.
      For the year ended December 31, 2006, Highbury earned interest income of
      $1,744,907 on cash balances. Prior to the consummation of the acquisition on
      November 30, 2006 for which Highbury paid cash, Highbury’s cash balances were
      significantly higher than during 2007.




The
      Company recorded net income of $5,840,860 before provisions for minority
      interest and income taxes for the year ended December 31, 2007, as compared
      to a
      net loss of $18,496,109 for the year ended December 31, 2006. Highbury recorded
      minority interest expense attributable to the Aston management members’ interest
      in Aston of $4,489,176 and ($6,647,715) in 2007 and 2006, respectively. As
      discussed above, the loss in 2006 resulted primarily from the one-time non-cash
      compensation charge recorded in connection with the grant of Aston membership
      interests to the management members. We have determined that there is no
      equivalent expense, either currently or in the future, to be recognized for
      income tax purposes. The following table outlines Highbury’s income tax
      expenses.




Year
                Ended
              December
                31, 2006
            
            Year
                Ended
              December
                31, 2007Current
            
            $
            702,088
            
            $
            1,363,725Deferred
                - intangible related
            
            
            74,989
            
            
            (648,507
            )Deferred
                - other
            
            
            (162,265
            )
            
            (216,426
            )Total
            
            $
            614,812
            
            $
            498,792





The
      sources of the Company’s deferred tax asset (liability) are as
      follows:





Year
                Ended
              December
                31, 2006
            
            Year
                Ended
              December
                31, 2007(Amortization)
                impairment of intangibles
            
            $
            (74,989
            )
            $
            568,340Expenses
                deferred for income tax purposes
            
            
            162,265
            
            
            383,869Total
            
            $
            87,276
            
            $
            952,209




32




For
      further discussion of the Company’s income taxes, please refer to Note 12 of the
      consolidated financial statements included herewith.




*Year
      ended December 31, 2007 for the Company compared to year ended December 31,
      2006
      combined results*




The
      combined results for the year ended December 31, 2006 represent the sum of
      the
      operating results for the acquired business for the 11 months ended November
      30,
      2006 and for the Company for the year then ended. The Company’s consolidated
      results for this period include the operations of the acquired business for
      the
      period from December 1, 2006 through December 31, 2006. The results are compared
      to the results of operations for the acquired business in 2007.




In
      2007,
      mutual fund assets under management declined nearly $500 million (8.8%) from
      just under $5.5 billion at the end of 2006 to approximately $5.0 billion as
      of
      December 31, 2007. During this period Aston experienced net client redemptions
      of approximately $421 million combined with a decline in market values of
      approximately $58 million. The net client redemptions in 2007 were lower than
      in
      2006 when Aston experienced net client redemptions of approximately $1.1
      billion. A significant proportion of Aston’s assets under management are managed
      in a large cap growth style. We believe the general underperformance of the
      large cap growth investment style relative to the market has been a factor
      in
      the recent high level of client redemptions. Furthermore, we believe investors
      are concerned about the high level of volatility in equity markets.




As
      a
      result of lower average asset levels, net advisory fees declined in 2007 to
      $37.1 million from $40.5 million in 2006. Administrative fees increased from
      $1.8 million in 2006 to $4.4 million in 2007 primarily as a result of the
      additional services provided to the money market mutual funds and a change
      in
      the presentation of the administration fees. Following the business combination,
      Aston provides administration, marketing and compliance services to six money
      market mutual funds advised by AAAMHI. While the acquired business performed
      these functions historically, the revenue from such activities is not reflected
      in the carve out financial statements because, at the time the transaction
      was
      negotiated and the carve out financial statements were prepared, it was not
      contemplated that Aston would provide these services to the money market mutual
      funds after the business combination. Additionally, the acquired business
      accrued revenue from administration fees net of certain sub-administration
      fees
      paid to a third-party provider. The Company has determined it is appropriate
      to
      record the revenues on a gross basis and include the associated
      sub-administration expenses within other operating costs. The administration
      fees earned by the Company in 2007, net of all sub-administration fees paid,
      were $2.2 million. This represents an increase of approximately $0.4 million,
      on
      a comparable basis, over the fees earned in 2006. This increase is primarily
      attributable to the additional administrative services provided to the money
      market mutual funds. The increase in administrative fees resulting from the
      administration, marketing and compliance services offset the effect of the
      decline in total assets under management on total administrative fees. In 2007,
      total revenues decreased by $0.2 million to $42.1 million from $42.3 million
      in
      2006.




Distribution
      and advisory costs declined by $10.7 million, or 35.2%, to $19.9 million in
      2007
      from $30.6 million in 2006. This decline is attributable, in part, to the
      decline in mutual fund assets under management during 2007, as these expenses
      are directly related to the value of assets under management. The new
      sub-advisory agreements into which Aston entered at the closing of the business
      combination provide for substantially lower payments to the sub-advisers
      affiliated with AAAMHI than the historical fee-sharing agreements. Since the
      results for 2006 include only one month of operations under the new sub-advisory
      agreements, the effect of this change is substantial in 2007.




Combined
      compensation expense was $25.1 million in 2006, primarily attributable to the
      $20.8 million charge incurred in connection with the grant of a 35% membership
      interest in Aston to the management members. Excluding this expense, total
      compensation in 2006 was $4.3 million compared to $6.6 million in 2007. This
      increase is primarily attributable to the excess operating allocation paid
      to
      Aston’s employees in 2007.




Highbury
      recorded an impairment charge to the identifiable intangible related to Aston's
      advisory contract with the Aston Funds of $4,110,000 in the fourth quarter
      of
      2007 as a result of net asset outflows from the Aston Funds and recent negative
      market performance. There was no similar charge incurred in 2006.




33




Other
      operating expenses rose to $5.9 million in 2007 from $4.7 million in 2006.
      This
      increase is attributable to an increase in Highbury’s 2007 operating expenses of
      approximately $1.4 million relative to 2006, offset by a reduction in Aston’s
      operating expenses.




Highbury
      reported operating income of $5.5 million in 2007, as compared to an operating
      loss of $18.1 million in 2006. The difference is due primarily to the $20.8
      million compensation charge recorded in 2006. Furthermore, the substantial
      decline in distribution and advisory costs, which more than offset the decline
      in operating revenue, improved the operating results.




Because
      of the different capital structures and ownership structures of the acquired
      business before and after the business combination, comparisons of the
      differences in interest income, minority interest and income taxes are not
      meaningful.




*Year
      ended December 31, 2006 for the Company compared to year ended December 31,
      2005
      for the Company*




For
      the
      year ended December 31, 2006, the Company had a net loss of $12,463,206 which
      resulted primarily from a one-time, non-cash compensation charge of $20,784,615
      related to the grant of Aston membership interests to the Aston management
      members. Following the consummation of the acquisition on November 30, 2006,
      Aston earned total revenue of $3,828,100 in the month of December. The
      following table summarizes the total fees, weighted average assets under
      management and the weighted average fee basis for the month of December
      2006.


For
                      the month ended December 31, 2006Total
                      Fees
                  
                  
                  Weighted
                      Average Assets Under Management ($M)
                  
                  
                  Weighted
                      Average Fee Basis (Annualized)Net
                      advisory fees
                  
                  $
                  3,337,351
                  
                  $
                  5,645
                  (1)
                  
                  0.70
                  %Net
                      administrative fees(2)
                  
                  
                  222,341
                  
                  
                  9,930
                  (3)
                  
                  0.03
                  %Money
                      market service fees
                  
                  
                  57,863
                  
                  
                  4,444
                  
                  
                  0.02
                  %(4)$
                  3,617,555
                  
                  
                  5,645
                  (5)
                  
                  0.77
                  %(5)


(1)
            Includes
                long-term mutual fund and separate account assets under
                management.(2)
            Administrative
                fees are presented net of sub-administration fees paid to a third
                party to
                be consistent with the methodology used in calculating the revenue
                sharing
                arrangement with Aston.(3)
            Aston
                provides administrative services to the Aston Funds, as well as six
                money
                market mutual funds managed by affiliates of AAAMHI.(4)
            Aston
                receives a money market service fee from AAAMHI equal to $550,000
                per
                annum plus 0.0001% of the weighted average assets under management
                in the
                six money market mutual funds in excess of $3 billion. The fee is
                accrued
                and paid monthly.(5)
            For
                an estimate of the overall weighted average fee basis, we use the
                total
                fees from all sources and the weighted average assets under management
                for
                which we provide investment advisory services (Note 1
                above).




The
      Company incurred $24,069,116 of total operating costs for the year ended
      December 31, 2006. This total consisted primarily of the one-time, non-cash
      compensation charge of $20,784,615 related to the grant of Aston membership
      interests to the management members. In the month of December, Aston incurred
      total distribution and sub-advisory expenses of $1,796,910, including $1,467,496
      payable to the sub-advisers (approximately 44% of the net advisory fees for
      the
      period) and $329,414 payable pursuant to third-party distribution agreements
      (approximately 10% of the net advisory fees for the period). Excluding the
      one-time compensation charge, Aston incurred employee compensation and related
      expenses of $324,716 in 2006. Highbury has no employees and did not pay
      compensation of any kind to its directors or officers in 2006. Highbury also
      incurred $1,162,875 of other operating expenses in 2006. These expenses include
      the operating expenses of Aston and Highbury for the period and consist
      primarily of legal, accounting, insurance, occupancy and administrative fees.
      Highbury’s direct operating expenses for the year were as follows:




Professional
                fees
            
            $
            320,195Insurance
            
            
            89,970Administrative
                fees
            
            
            83,952Travel
                and entertainment
            
            
            70,701Other
                expenses
            
            
            182,243$
            747,061




34




Non-operating
      income consists primarily of earnings on cash and cash equivalent balances.
      For
      the year ended December 31, 2006, Highbury earned interest income on cash
      balances held outside the trust account of $14,470 and investment income on
      the
      balance held in the trust account of $1,730,437. Prior to the consummation
      of
      the acquisition on November 30, 2006, Highbury did not generate any operating
      revenues. Highbury did not earn income of any kind in 2005.




The
      Company recorded a net loss of $18,496,109 before provisions for minority
      interest and income taxes for the year ended December 31, 2006. As a result
      of
      the Aston management members’ interest in Aston, the Company recorded a minority
      interest benefit of $6,647,715 for the year. As discussed above, this loss
      resulted primarily from the one-time non-cash compensation charge recorded
      in
      connection with the grant of Aston membership interests to the management
      members. We have determined that there is no equivalent expense, either
      currently or in the future, to be recognized for income tax purposes. The
      following table outlines Highbury’s income tax expenses.




July
                13, 2005 (inception) to December 31, 2005
            
            Year
                Ended
              December
                31, 2006Current
            
            $
            —
            
            $
            702,088Deferred
                - intangible related
            
            
            —
            
            
            74,989Deferred
                - other
            
            
            —
            
            
            (162,265
            )Total
            
            $
            —
            
            $
            614,812





The
      sources of the Company’s deferred taxes are as follows:





July
                13, 2005 (inception) to December 31, 2005
            
            Year
                Ended
              December
                31, 2006(Amortization)
                impairment of intangibles
            
            $
            —
            
            $
            (74,989
            )Expenses
                deferred for income tax purposes
            
            
            —
            
            
            162,265Total
            
            $
            —
            
            $
            87,276





For
      further discussion of the Company’s income taxes, please refer to Note 12 of the
      consolidated financial statements included herewith.




For
      the
      period from July 13, 2005, the date of Highbury’s inception, to December 31,
      2005, Highbury had a net loss of $2,452. Total expenses for this period were
      $2,452, consisting of $456 in formation costs and $1,996 in franchise tax
      expenses. Additionally, we incurred deferred offering costs of approximately
      $483,492 in 2005. During this period, Highbury’s activities were limited to
      organizational activities. We had no revenue in 2005.




The
      Company had a net loss of $12,463,206 for the year ended December 31, 2006
      compared to a net loss of $2,452 for the period from July 13, 2005 (inception)
      to December 31, 2005.




*Year
      ended December 31, 2006 combined results compared to year ended December 31,
      2005 for the acquired business*




The
      combined results for the year ended December 31, 2006 represent the sum of
      the
      operating results for the acquired business for the 11 months ended November
      30,
      2006 and for the Company for the year then ended. The Company’s consolidated
      results for this period include the operations of the acquired business for
      the
      period from December 1, 2006 through December 31, 2006. The results are compared
      to the results of operations for the acquired business in 2005.




In
      2006,
      mutual fund assets under management declined nearly $900 million (13.8%) from
      just over $6.3 billion at the end of 2005 to approximately $5.5 billion. During
      this period the acquired business experienced net client redemptions of
      approximately $1.1 billion balanced by approximately $200 million of positive
      market appreciation. Positive market appreciation means that the total net
      asset
      value of a fund, when excluding the effects of net client contributions,
      increased over a given period as a result of changes in the market value of
      securities held by the fund. After approximately $1.0 billion of net client
      redemptions in 2005, the high level of redemptions continued in 2006. For the
      year, the broader equity markets posted solid gains with the S&P 500
      advancing 15.8% though the Russell Large Cap Growth Index rose only 9.2%. In
      2004, for comparison, the S&P 500 advanced 10.9% and the Russell Large Cap
      Growth Index grew 6.7%. A majority of the acquired business’ assets under
      management are managed in a large cap growth style. We believe the general
      underperformance of the large cap growth investment style relative to the market
      has been a factor in the recent high level of client redemptions. Furthermore,
      we believe investors continued to be concerned about relative investment
      performance in several of the acquired business’ large cap growth
      funds.




35






As
      a
      result of lower average asset levels, net advisory fees declined in 2006 to
      $40.5 million from $47.4 million in 2005. The weighted average fee basis
      remained approximately constant at 0.72% in 2005 and 2006. Administrative fees
      increased from $1.5 million in 2005 to $1.8 million in 2006. Following the
      business combination, Aston provides administration, marketing and compliance
      services to six money market mutual funds advised by AAAMHI. While the acquired
      business performed these functions historically, the revenue from such
      activities is not reflected in the carve out financial statements because,
      at
      the time the transaction was negotiated and the carve out financial statements
      were prepared, it was not contemplated that Aston would provide these services
      to the money market mutual funds after the business combination. The increase
      in
      administrative fees resulting from the administration, marketing and compliance
      services offset the effect of the decline in total assets under management
      on
      total administrative fees. For the year, total revenues decreased by $6.6
      million, or 13.5%, to $42.3 million from $48.9 million in 2005.




Distribution
      and advisory costs declined by $9.8 million, or 24.2%, to $30.6 million in
      2006
      from $40.4 million in 2005. This decline is primarily attributable to the 13.8%
      decline in mutual fund assets under management during 2006, as these expenses
      are directly related to the value of assets under management. The new
      sub-advisory agreements into which Aston entered at the closing of the business
      combination provide for substantially lower payments to the sub-advisers
      affiliated with AAAMHI than the historical fee-sharing agreements. Since the
      results for 2006 include only one month of operations under the new sub-advisory
      agreements, the effect of this change is not substantial in 2006. However,
      we
      expect these new agreements to substantially decrease the sub-advisory costs
      from pre-acquisition levels.




Combined
      compensation expense was $25.1 million in 2006, primarily attributable to the
      $20.8 million charge incurred in connection with the grant of a 35% membership
      interest in Aston to the management members. Excluding this expense, total
      compensation in 2006 was $4.3 million compared to $5.2 million in 2005. This
      decline is primarily attributable to a reduction in sales commissions paid
      in
      2006 relative to 2005 as a result of lower net asset flows and to the
      termination of three employees at the beginning of 2006.




In
      2005,
      the acquired business recorded a goodwill impairment of $13.3 million and an
      intangible asset impairment of $10.4 million. The facts and circumstances
      leading to the impairment charges to goodwill and intangible assets relate
      to
      AAAMHI’s assessment of declines in net assets in the target funds resulting from
      net share redemptions and unfavorable investment performance trends in 2005.
      The
      fair value of the acquired business used to determine the impairment of goodwill
      was determined with reference to the expected proceeds to be received upon
      the
      sale of the acquired business to Highbury. The fair value of the intangible
      asset related to the investment management contracts used to determine the
      amount of impairment of the intangible asset was determined based on a
      discounted cash flow analysis of the acquired contracts. No impairment of
      goodwill or intangibles was determined to be required for periods prior to
      2005.




The
      acquired business adopted the provisions of SFAS No. 142, “Goodwill and Other
      Intangible Assets”. Intangible assets, comprising the estimated value of
      investment management contracts, and goodwill, included in the combined
      financial statements of the acquired business relate to the acquisition of
      certain AAAMHI affiliates including the acquired business in 2001. These amounts
      reflect management’s best estimate of a reasonable allocation to the acquired
      business of such amounts included in the financial records of AAAMHI. The
      provisions of SFAS No. 142 require that goodwill and other intangible assets
      with indefinite lives no longer be amortized, but instead be tested at least
      annually for impairment and require reporting units to be identified for the
      purpose of assessing potential future impairments of goodwill. The acquired
      business’ acquired intangible management contract asset relates to the provision
      of investment advisory services to the target funds in exchange for fees that
      are based on a percentage of the average daily net assets of the funds. This
      management contract was acquired in 2001 as part of the acquisition of certain
      AAAMHI affiliates. The management contract is subject to annual renewal by
      the
      mutual funds’ board of trustees which is expected to continue indefinitely since
      this has been the experience for the target funds as well as for the mutual
      fund
      industry as a whole. Accordingly, the acquired business’ acquired intangible
      assets related to the target funds are considered to be of an indefinite life
      as
      there is no foreseeable limit on the contract period. We conduct annual testing
      of goodwill and intangible assets for impairment in the fourth quarter, unless
      events warrant more frequent testing.




36




Other
      operating expenses rose to $4.7 million in 2006 from $3.3 million in 2005.
      Approximately half of this increase is attributable to Highbury’s 2006 operating
      expenses of approximately $0.7 million. There were no corresponding expenses
      incurred in 2005.




The
      operating loss declined to $18.1 million in 2006 from a loss of $23.8 million
      in
      2005. The $20.8 million compensation charge is approximately $2.9 million less
      than the aggregate impairment charges incurred in 2005. This difference accounts
      for more than half of the difference in the losses between these years.
      Furthermore, the substantial decline in distribution and advisory costs, which
      more than offset the decline in operating revenue, improved the operating
      results.




Because
      of the different capital structures and ownership structures of the acquired
      business before and after the business combination, comparisons of the
      differences in interest income, minority interest and income taxes are not
      meaningful.




***Supplemental
      Non-GAAP Performance Measure***




As
      supplemental information, we provide a non-GAAP performance measure that we
      refer to as Cash Net Income. This measure is provided in addition to, but not
      as
      a substitute for, GAAP Net Income. Cash Net Income means the sum of (a) net
      income determined in accordance with GAAP, plus (b) amortization of intangible
      assets, plus (c) deferred taxes related to intangible assets, plus (d) affiliate
      depreciation, plus (e) other non-cash expenses. We consider Cash Net Income
      an
      important measure of our financial performance, as we believe it best represents
      operating performance before non-cash expenses relating to the acquisition
      of
      our interest in Aston. Cash Net Income is not a measure of financial performance
      under GAAP and, as calculated by us, may not be consistent with computations
      of
      Cash Net Income by other companies. Cash Net Income is used by our management
      and board of directors as a principal performance benchmark.




Since
      our
      acquired assets do not generally depreciate or require replacement by us, and
      since they generate deferred tax expenses that are unlikely to reverse, we
      add
      back these non-cash expenses to Net Income to measure operating performance.
      We
      will add back amortization attributable to acquired client relationships because
      this expense does not correspond to the changes in value of these assets, which
      do not diminish predictably over time. The portion of deferred taxes generally
      attributable to intangible assets (including goodwill) that we do not amortize
      but which generates tax deductions is added back, because these accruals would
      be used only in the event of a future sale of Aston or an impairment charge,
      which we consider unlikely. We will add back the portion of consolidated
      depreciation expense incurred by Aston because under Aston’s operating agreement
      we are not required to replenish these depreciating assets. We also add back
      expenses that we incur for financial reporting purposes for which there is
      no
      corresponding cash expense because such expenses cause our Net Income to be
      understated relative to our ability to generate cash flow to service debt,
      if
      any, finance accretive acquisitions, and repurchase securities, if
      appropriate.




**Year
                Ended**
              **December
                31, 2006**
            
            **Year
                Ended**
              **December
                31, 2007**Net
                income (loss)
            
            $
            (12,463,206
            )
            $
            852,892Impairment
                of intangibles
            
            
            —
            
            
            4,110,000Intangible-related
                deferred taxes
            
            
            74,989
            
            
            (648,507
            )Affiliate
                depreciation
            
            
            —
            
            
            222,114Other
                non-cash expenseCompensation
                charge for 35% interest in Aston
            
            
            20,784,615
            
            
            —Adjustment
                for minority interest
            
            
            (7,274,615
            )
            
            —Cash
                Net Income
            
            $
            1,121,783
            
            $
            4,536,499





**Agreements
      with Berkshire Capital**




Highbury
      occupies office space provided by Berkshire Capital Securities LLC, or Berkshire
      Capital, pursuant to an office services agreement. Messrs. Cameron, Foote and
      Forth, our executive officers, are affiliated with Berkshire Capital. On October
      31, 2007, we entered into an office services agreement with Berkshire Capital
      Securities LLC which replaces the office services agreement entered into between
      us and Berkshire Capital dated December 21, 2005 and amended on November 30,
      2006. The office services agreement provides for a monthly fixed fee of $10,000,
      as compared to a monthly fixed fee of $7,500 under the prior agreement, for
      office and secretarial services including use and access to our office in
      Denver, Colorado and those other office facilities of Berkshire Capital as
      we
      may reasonably require. In addition, certain employees of Berkshire Capital
      will
      provide us with financial reporting support on a daily basis. The term of the
      agreement is indefinite. The agreement is terminable by either party upon six
      months’ prior notice. The consolidated statements of operations for the years
      ended December 31, 2007 and 2006 include $95,000 and $83,952, respectively,
      related to this agreement.




37




We
      have
      engaged Berkshire Capital to act as our non-exclusive financial advisor in
      connection with possible future acquisitions. In such capacity, Berkshire
      Capital will assist us in structuring, negotiating and completing acquisitions
      of targets identified by us and acknowledged by both us and Berkshire Capital
      as
      being subject to Berkshire Capital’s engagement. If we enter into an agreement
      to acquire such a target company during the term of Berkshire Capital’s
      engagement or within two years thereafter, and such acquisition is completed,
      then we will pay Berkshire Capital a success fee at closing equal to the greater
      of (a) the sum of 3.0% of the first $15 million of the aggregate consideration
      in such transaction and 1.0% of the aggregate consideration in such transaction
      in excess of $15 million, and (b) $600,000. Upon the execution of a definitive
      agreement with respect to an acquisition, we will pay Berkshire Capital $200,000
      which will be credited against the success fee. We will also reimburse Berkshire
      Capital for its reasonable expenses in performing its services under the
      engagement letter and will indemnify Berkshire Capital for liabilities it incurs
      in performing such services, unless such liabilities are attributable to
      Berkshire Capital’s gross negligence or willful misconduct. As of
      December 31, 2007, we had made no payments pursuant to this engagement. We
      engaged Berkshire Capital in the first quarter of 2007 and, accordingly, as
      of
      December 31, 2006, we had not incurred any expenses related to this
      agreement.




**Impact
      of Inflation**




Our
      revenue is directly linked to the total assets under management within the
      27
      mutual funds and the separate accounts managed by Aston. Our total assets under
      management increase or decrease on a daily basis as a result of fluctuations
      in
      the financial markets and net asset flows from investors. While long-term
      returns in the financial markets have historically exceeded the rate of
      inflation, this may not be the case going forward. Our operating expenses are
      likely to be directly affected by inflation. Furthermore, we earn interest
      income on our cash balances. While the current interest rates available to
      us
      exceed the rate of inflation, this may not be the case going forward. In such
      cases, the impact of inflation will erode our purchasing power.




**Liquidity
      and Capital Resources**




Since
      its
      inception, Highbury has funded its business activities almost exclusively
      through cash flows from financing, including the debt and equity provided by
      the
      initial shareholders and the funds raised in our initial public offering. Going
      forward, Highbury expects to fund its business activities with a combination
      of
      operating income, the interest income earned on its cash and cash equivalent
      balances and the investment income earned on its investments and to fund future
      acquisitions with retained net income or the issuance of debt or equity. As
      of
      December 31, 2007 and 2006, Highbury had no borrowings outstanding. In the
      future, however, we will closely review our ratio of debt to Adjusted EBITDA
      (our “leverage ratio”) as an important gauge of our ability to service debt,
      make new investments and access capital. The leverage covenant of our credit
      facility currently limits our borrowings under the credit facility to 2.0 times
      Adjusted EBITDA and our total leverage ratio to 5.0 times Adjusted EBITDA.
      We
      believe this level is prudent for our business, although substantially higher
      levels of senior and subordinated debt in relation to Adjusted EBITDA may also
      be prudent to fund future acquisitions.




Current
      market conditions may make it more difficult for us to complete an acquisition
      through the use of debt financing because of the reduced availability of debt
      at
      appropriate terms. If we issue debt to finance an acquisition, a decrease in
      our
      assets under management caused by negative market conditions could have an
      adverse effect on the distributions we receive from Aston and potential future
      affiliates and limit our ability to repay our borrowings. In addition, our
      ability to make accretive acquisitions through the issuance of additional equity
      is dependent upon the relationship between the market value of our outstanding
      common stock and the pricing of any transaction. If the price of our common
      stock remains at or near its current level, it may be more difficult for us
      to
      issue additional equity to finance an acquisition. The inability to complete
      accretive acquisitions may negatively impact our growth, results of operations
      or financial condition.




Historically,
      the acquired business funded its business activities almost exclusively with
      operating cash flow. We expect Aston will also fund its business activities
      almost exclusively with operating cash flow. Highbury may occasionally provide
      capital to Aston to help finance the development of new products or execute
      accretive acquisitions. Because Aston, like most investment management
      businesses, does not require a high level of capital expenditures, such as
      for
      purchases of inventory, property, plant or equipment, liquidity is less of
      a
      concern than for a company that sells physical assets. Historically, the amount
      of cash and cash equivalents held on the balance sheet of the acquired business
      was primarily influenced by the policies of its parent, AAAMHI. Prior to the
      acquisition, AAAMHI owned 100% of the acquired business, and it continues to
      own
      several other affiliates which also have low capital requirements. As such,
      cash
      balances often accumulated in the affiliates until AAAMHI decided to transfer
      them. These periodic cash transfers caused the value of cash and equivalents
      held by the business to fluctuate widely and without correlation to the
      underlying operations of the acquired business.




38




As
      of
      December 31, 2007, the Company had $7,276,545 of cash and cash equivalents,
      $4,635,507 of investments and $3,502,142 of accounts receivable as compared
      to
      $6,248,705 of cash and cash equivalents, $0 of investments and $3,646,422 of
      accounts receivable as of December 31, 2006. The accounts receivable are
      primarily related to the investment advisory fees, administrative fees and
      money
      market service fees earned by Aston in December. Aston receives payment of
      its
      revenues generally within the first week of the month following the month in
      which they are earned. At December 31, 2007, the Company had accounts payable
      of
      $4,549,216, primarily attributable to the revenue sharing payments owed to
      Aston’s distribution partners and the investment sub-advisers, as compared to
      accounts payable of $2,269,470 at December 31, 2006. These payments are
      generally paid shortly after the receipt of the revenue discussed above. Because
      Aston is able to finance its day-to-day operations with operating cash flow,
      it
      does not need to retain a significant amount of cash on its balance sheet.
      Going
      forward, we expect Aston will distribute all of its excess cash on a monthly
      basis to its owners, so we do not expect large cash balances to accrue within
      Aston. Highbury will retain its cash and cash equivalents and investments,
      and
      we expect these balances will increase over time until used to pay operating
      expenses, fund acquisitions, service debt, if any, or repurchase our securities,
      if appropriate.




Management
      believes our existing liquid assets, together with the expected continuing
      cash
      flow from operations, our borrowing capacity under the current credit facility
      and our ability to issue debt or equity securities will be sufficient to meet
      our present and reasonably foreseeable operating cash needs and future
      commitments. In particular, we expect to finance future acquisitions through
      operating cash flows and the issuance of debt or equity securities.




*Cash
      Flow from Operating Activities* .
      Cash
      flow from operations generally represents net income plus non-cash charges
      for
      deferred taxes, depreciation and impairment as well as the changes in our
      consolidated working capital. In 2007, Highbury received $11,376,820 of net
      cash
      flow from its operating activities as compared to a use of $12,229 of net cash
      flow in 2006. We recorded a non-cash impairment charge to the identifiable
      intangible related to Aston's advisory contract with the Aston Funds of
      $4,110,000 in the fourth quarter of 2007 as a result of net asset outflows
      from
      the Aston Funds and recent negative market performance. In 2006, our net loss
      of **** $12,463,206
      primarily resulted from the non-cash compensation charge we incurred in
      connection with the grant of a 35% interest in Aston to the Aston management
      members. In the reconciliation to cash flow, we added back this charge which
      was
      $20,784,615. We established a minority interest, equal to 35% of the non-cash
      compensation charge, in 2006 related to this grant of interests in Aston. In
      2007, accounts payable increased by $2,279,746 as compared to a 2006 increase
      of
      $2,190,576. This is primarily a result of an increase in the distributions
      payable to the Aston management team and an increase in distribution costs
      owed
      relative to the prior year. Because we completed our acquisition on November
      30,
      2006, the balance sheet as of December 31, 2006 includes only one month worth
      of
      payables, whereas the consolidated balance sheet as of December 31, 2007
      includes payables accrued over a longer period. ****




*Cash
      Flow from Investing Activities* .
      Net
      cash flow from investing activities will result primarily from investments
      in
      new affiliates, U.S treasury securities and Aston mutual funds. In 2007,
      Highbury invested a total of $9,932,233 in U.S. treasury securities and Aston
      mutual funds. A portion of the investments subsequently matured or were sold,
      generating proceeds to Highbury of $5,296,274. We also paid $19,464 for costs
      indirectly related to our initial acquisition and spent $117,480 on purchases
      of
      property and equipment. In 2006, Highbury used net cash flow of $36,882,869
      to
      purchase the acquired business from AAAMHI. We also spent $40,634 for leasehold
      improvements related to Aston’s new location in 2006.




*Cash
      Flow from Financing Activities* .
      Net
      cash flow from financing activities will result primarily from the issuance
      of
      equity or debt and the repayment of any obligations which may arise thereunder,
      the repurchase of our outstanding securities and minority interest distributions
      paid to Aston’s management members. In 2007, we entered into Unit Purchase
      Option Repurchase Agreements with the underwriters of our initial public
      offering pursuant to which we repurchased the underwriters’ unit purchase option
      for aggregate cash payments of $1,300,000. The unit purchase option was
      cancelled upon its repurchase. We also paid distributions of $4,276,077 to
      Aston’s management members related to their minority interest in Aston. In 2006,
      Highbury received net cash flow of $43,147,535 from financing activities as
      a
      result of our initial public offering and private placement in January.
      Historically, cash flows from financing activities for the acquired business
      were primarily influenced by the policies of its parent, AAAMHI. Prior to the
      acquisition, AAAMHI owned 100% of the acquired business and continues to own
      several other affiliates which also have low capital requirements. As such,
      cash
      balances often accumulated in the affiliates until AAAMHI decided to transfer
      them. These periodic cash transfers between AAAMHI and the acquired business,
      which resulted in cash flows from financing activities, fluctuated widely and
      without correlation to the underlying operations of the acquired business.




39




***Credit
      Facility***




We
      have
      available a credit agreement with City National Bank expiring on October 31,
      2008, which provides for a revolving line of credit of up to $12.0 million.
      The
      credit agreement provides for a maximum total leverage ratio (including debt
      from all sources) of 5.0 times Adjusted EBITDA, although borrowings under the
      credit agreement are limited to 2.0 times Adjusted EBITDA, and incorporates
      a
      minimum fixed charge coverage ratio of 1.25x and
      a
      minimum net worth of $20 million .
      The
      credit facility will be used for working capital, general corporate purposes
      and
      repurchases of our outstanding securities, if appropriate.




Borrowings
      under our credit facility will bear interest, at our option, at either the
      fluctuating prime rate minus one-half of one percent (0.50%) per year or the
      LIBOR interest rate plus one and one-half percent (1.50%) per year. In addition,
      we will be required to pay annually a fee of one quarter of one percent (0.25%)
      on the average daily balance of the unused portion of the credit facility.
      We
      will have to make interest payments monthly for any prime rate borrowings.
      For
      any LIBOR borrowings, interest payments will be made at the end of any LIBOR
      contract or quarterly, whichever is sooner. Any outstanding principal is due
      at
      maturity on October 31, 2008. For so long as certain events of default continue,
      upon notice by City National Bank, the interest rate on any outstanding loans
      will increase by three percent (3%). As of December 31, 2007, we had no
      borrowings outstanding.




Our
      credit facility is secured by all of our assets. Our credit facility contains
      customary negative covenants which, among other things, limit indebtedness,
      asset sales, loans, investments, liens, mergers and acquisitions, sale and
      leaseback transactions and purchases of equity, other than repurchases of our
      outstanding securities. Our credit facility also contains affirmative covenants
      as to, among other things, financial statements, taxes, corporate existence
      and
      legal compliance. As of December 31, 2007, we were in compliance with all of
      the
      covenant requirements under this credit facility.




***Contractual
      Obligations***




A
      summary
      of the Company’s contractual obligations as of December 31, 2007 and future
      periods in which such obligations are expected to be settled in cash is as
      follows:




**Payment
                due by period****Contractual
                Obligations**
            
            **Total**
            
            **Less
                than**
              **1
                year**
            
            **1-3 years**
            
            **3-5 years**
            
            **More
                than**
              **5****years**Long-term
                debt
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —Operating
                leases
            
            
            2,174,324
            
            
            215,474
            
            
            450,536
            
            
            476,654
            
            
            1,031,660Capital
                leases
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Purchase
                Obligations
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Other
                Long-Term Liabilities
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Total
            
            $
            2,174,324
            
            $
            215,474
            
            $
            450,536
            
            $
            476,654
            
            $
            1,031,660





***Supplemental
      Non-GAAP Liquidity Measure***




As
      supplemental information, we provide information regarding Adjusted EBITDA,
      a
      non-GAAP liquidity measure. This measure is provided in addition to, but not
      as
      a substitute for, cash flow from operations. Adjusted EBITDA means the sum
      of
      (a) net income determined in accordance with GAAP, plus (b) amortization of
      intangible assets, plus (c) interest expense, plus (d) depreciation, plus (e)
      other non-cash expenses, plus (f) income tax expense. This definition of
      Adjusted EBITDA is consistent with the definition of EBITDA used in our credit
      facility. Adjusted EBITDA, as calculated by us, may not be consistent with
      computations of Adjusted EBITDA by other companies. As a measure of liquidity,
      we believe that Adjusted EBITDA is useful as an indicator of our ability to
      service debt, make new investments and meet working capital requirements. We
      further believe that many investors use this information when analyzing the
      financial position of companies in the investment management industry.




40




The
      following table provides a reconciliation of net income to Adjusted EBITDA
      for
      fiscal years 2007 and 2006:




Year
                Ended
              December
                31, 2006
            
            Year
                Ended
              December
                31, 2007**Net
                Income**
            
            $
            (12,463,206
            )
            $
            852,892Income
                tax expense
            
            
            614,812
            
            
            498,792Interest
                expense
            
            
            —
            
            
            —Impairment
                of intangibles
            
            
            —
            
            
            4,110,000Depreciation
                and other amortization
            
            
            —
            
            
            222,114Other
                non-cash expensesCompensation
                charge for 35% interest in Aston
            
            
            20,784,615
            
            
            —Adjustment
                for minority interest
            
            
            (7,274,615
            )
            
            —**Adjusted
                EBITDA**
            
            $
            1,661,606
            
            $
            5,683,798


The
      following table provides a reconciliation of cash flow from operations to
      Adjusted EBITDA for fiscal years 2007 and 2006:




Year
                Ended
              December
                31, 2006
            
            Year
                Ended
              December
                31, 2007**Cash
                Flow from Operations**
            
            $
            (12,229
            )
            $
            11,376,820Interest
                expense
            
            
            —
            
            
            —Current
                income tax provision
            
            
            702,088
            
            
            1,363,725Changes
                in assets and liabilities and other adjustments to reconcile Net
                Income to
                net Cash Flow from Operations
            
            
            1,598,648
            
            
            (6,843,648
            )Changes
                in minority interest
            
            
            (626,901
            )
            
            (213,099
            )**Adjusted
                EBITDA**
            
            $
            1,661,606
            
            $
            5,683,798





**Quantitative
      and Qualitative Disclosures About Market Risk**




The
      investment management business is, by its nature, subject to numerous and
      substantial risks, including volatile trading markets and fluctuations in the
      volume of market activity. Our revenue, which is based on a percentage of our
      assets under management, is largely dependent on the total value and composition
      of our assets under management. Consequently, our net income and revenues are
      likely to be subject to wide fluctuations, reflecting the effect of many
      factors, including: general economic conditions; securities market conditions;
      the level and volatility of interest rates and equity prices; competitive
      conditions; liquidity of global markets; international and regional political
      conditions; regulatory and legislative developments; monetary and fiscal policy;
      investor sentiment; availability and cost of capital; technological changes
      and
      events; outcome of legal proceedings; changes in currency values; inflation;
      credit ratings; and the size, volume and timing of transactions. These and
      other
      factors could affect the stability and liquidity of securities and future
      markets, and the ability of Highbury, Aston and other financial services firms
      and counterparties to satisfy their obligations.




Highbury
      is also exposed to market risk as it relates to changes in interest rates
      applicable to borrowings under Highbury’s line of credit and investment of
      Highbury’s cash balances. Because Highbury had no outstanding debt under its
      line of credit as of December 31, 2007, it does not view this interest rate
      risk
      as a material risk. Certain of Highbury’s outstanding cash balances are invested
      in 100% U.S. treasury money market mutual funds. We do not have significant
      exposure to changing interest rates on invested cash at December 31, 2007.
      As a
      result, the interest rate market risk implicit in these investments at December
      31, 2007, if any, is low.




41




**Off-Balance
      Sheet Arrangements**




Options
      and warrants issued in conjunction with our initial public offering are equity
      linked derivatives and accordingly represent off-balance sheet arrangements.
      The
      options and warrants meet the scope exception in paragraph 11(a) of SFAS No.
      133
      and are accordingly not accounted for as derivatives for purposes of SFAS No.
      133, but instead are accounted for as equity. See Notes 2 and 10 to the
      consolidated financial statements for a discussion of the options and
      warrants.




**ITEM
      7A.**  **QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**




For
      quantitative and qualitative disclosures about how we are affected by market
      risk, see “Management’s Discussion and Analysis of Financial Condition and
      Results of Operations - Quantitative and Qualitative Disclosures About Market
      Risk” in Item 7.




**ITEM
      8.**  **FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA**




This
      information appears following Item 15 of this Report and is incorporated herein
      by reference.




**ITEM
      9.**  **CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE**




None.




**ITEM
      9A**  **CONTROLS AND PROCEDURES**




**Disclosure
      Controls and Procedures**




We
      carried out an evaluation, under the supervision and with the participation
      of
      our management, including our chief executive officer and our principal
      financial officer, of the effectiveness of our disclosure controls and
      procedures as of December 31, 2007. Based on that evaluation, our chief
      executive officer and our principal financial officer concluded that our
      disclosure controls and procedures are effective as of the end of the period
      covered by this report to ensure that information required to be disclosed
      by us
      in reports that we file or submit under the Exchange Act, as amended, is
      recorded, processed, summarized and reported within the time periods specified
      in SEC rules and forms.




**Internal
      Control Over Financial Reporting**




The
      management of Highbury and its subsidiaries is responsible for establishing
      and
      maintaining adequate internal control over financial reporting as defined in
      Rule 13(a) - 15(f) under the Securities Exchange Act of 1934. The Company’s
      internal control over financial reporting is a process designed under the
      supervision of the Company’s principal executive officer and principal financial
      officer, and effected by the Company’s Board of Directors, management and other
      personnel, to provide reasonable assurance regarding the reliability of
      financial reporting and the preparation of the Company’s financial statements
      for external purposes in accordance with accounting principles generally
      accepted in the United States of America.




Our
      internal control over financial reporting includes policies and procedures
      that
      (1) pertain to the maintenance of records that, in reasonable detail, accurately
      and fairly reflect the transactions and dispositions of the assets of the
      Company; (2) provide reasonable assurance that transactions are recorded as
      necessary to permit preparation of financial statements in accordance with
      accounting principles generally accepted in the United States of America, and
      that receipts and expenditures of the Company are being made only in accordance
      with authorizations of management and directors of the Company; and (3) provide
      reasonable assurance regarding prevention or timely detection of unauthorized
      acquisition, use, or disposition of the Company’s assets that could have a
      material effect on the financial statements.




As
      of
      December 31, 2007, management, including the Company’s principal executive
      officer and principal financial officer, assessed the effectiveness of the
      Company’s internal control over financial reporting based on the criteria
      established in Internal Control - Integrated Framework issued by the Committee
      of Sponsoring Organizations of the Treadway Commission (COSO). Based on this
      assessment, management has determined that the Company’s internal control over
      financial reporting as of December 31, 2007 is effective. Because of the
      inherent limitations of internal control over financial reporting, including
      the
      possibility of collusion or improper management override of controls, material
      misstatements due to error or fraud may not be prevented or detected on a timely
      basis. Also, projections of any evaluation of the effectiveness of the internal
      control over financial reporting to future periods are subject to the risk
      that
      the controls may become inadequate because of changes in conditions, or that
      the
      degree of compliance with the policies or procedures may
      deteriorate.




42




This
      report does not include an attestation report of the Company’s registered public
      accounting firm regarding internal control over financial reporting.
      Management’s report was not subject to attestation by the Company’s registered
      public accounting firm pursuant to temporary rules of the Securities and
      Exchange Commission that permit the Company to provide only management’s report
      in this annual report.




During
      the fiscal quarter ended December 31, 2007, there has been no change in our
      internal control over financial reporting that has materially affected, or
      is
      reasonably likely to materially affect, our internal control over financial
      reporting.




**ITEM
      9B.**  **OTHER
      INFORMATION**




None.




**PART
      III**




**ITEM
      10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE**




**Directors
      and Executive Officers**




Highbury’s
      current directors and executive officers are as follows:




**Name**
            
            **Age**
            
            **Position**R.
                Bruce Cameron
            
            51
            
            Chairman
                of the BoardRichard
                S. Foote
            
            44
            
            President,
                Chief Executive Officer and DirectorR.
                Bradley Forth
            
            28
            
            Executive
                Vice President, Chief Financial Officer and SecretaryAidan
                J. Riordan
            
            35
            
            Director




***R.
      Bruce Cameron, CFA*** has been
      our chairman of the board since our inception. Mr. Cameron has been the
      president and chief executive officer of Berkshire Capital Securities LLC,
      or
      Berkshire Capital, a New York-based investment banking firm, since its formation
      in May 2004. Mr. Cameron co-founded Berkshire Capital Corporation, the
      predecessor firm to Berkshire Capital, in 1983 as the first independent
      investment bank covering the financial services industry, with a focus on
      investment management and capital markets firms. Mr. Cameron and his partners
      have advised on approximately 221 mergers and acquisitions of financial services
      companies, including high net worth managers, institutional investment managers,
      mutual fund managers, real estate managers, brokerage firms, investment banks
      and capital markets firms with aggregate client assets under management of
      nearly $417 billion and aggregate transaction value in excess of $9.7 billion.
      Mr. Cameron is the managing member of Broad Hollow LLC, an entity formed for
      the
      purpose of facilitating the investments in us made by our founding shareholders,
      which owns 776,250 shares of our common stock and 75,000 of our units. Prior
      to
      forming Berkshire Capital Corporation, Mr. Cameron was an associate director
      of
      Paine Webber Group Inc.’s Strategic Planning Group from 1981 through 1983. Mr.
      Cameron began his career at Prudential Insurance Company from 1978 through
      1980,
      working first in the Comptroller’s Department and then in the Planning &
Coordination Group. Mr. Cameron was graduated from Trinity College, where he
      received a B.A. in Economics, and from Harvard Business School, where he
      received an M.B.A. Mr. Cameron also attended the London School of Economics.
      Mr.
      Cameron is a CFA charterholder and is on the membership committee of the New
      York Society of Security Analysts. Mr. Cameron is a director of Capital Counsel
      LLC in New York City, a high net worth investment management firm he advised
      when it was established. Mr. Cameron is a Fellow of the Life Management
      Institute. He is also a past trustee of the Securities Industry
      Institute.




***Richard
      S. Foote, CFA*** has been
      our president and chief executive officer and a member of our board of directors
      since our inception. Mr. Foote has been a managing director of Berkshire Capital
      since its formation in May 2004 and a managing director, principal and vice
      president of Berkshire Capital Corporation, the predecessor firm to Berkshire
      Capital, since 1994. Since 1994, Mr. Foote has advised on 29 completed mergers
      and acquisitions of financial services companies, including high net worth
      managers, institutional investment managers, mutual fund managers, real estate
      managers, brokerage firms, investment banks and capital markets firms with
      aggregate client assets under management of approximately $128 billion and
      aggregate transaction value of approximately $2.2 billion. Mr. Foote is a
      director of Berkshire Capital and serves on its compensation committee,
      commitment committee and technology committee. From 1991 through 1994, Mr.
      Foote
      was a co-founder and partner of Knightsbridge Capital Partners, a partnership
      engaged in investment banking and merchant banking activities. From 1985 to
      1991, Mr. Foote was a vice president, an associate, and an analyst in the
      investment banking division of PaineWebber Incorporated, primarily working
      on
      mergers, acquisitions and the issuance of equity and debt securities. Mr. Foote
      was graduated from Harvard College, cum laude, in 1985 with an A.B. in
      Economics. Mr. Foote is a CFA charterholder and a member of the CFA Institute,
      the New York Society of Security Analysts, the Pension Real Estate Association
      and the National Council of Real Estate Investment Fiduciaries.




43




***R.
      Bradley Forth, CFA*** has been
      our executive vice president, chief financial officer and secretary since our
      inception. Mr. Forth has been a vice president and an associate at Berkshire
      Capital since its formation in May 2004 and an associate and an analyst at
      Berkshire Capital Corporation, the predecessor firm to Berkshire Capital since
      2001. Mr. Forth has advised on 18 mergers and acquisitions of financial services
      companies with aggregate transaction value of approximately $1.3 billion. He
      was
      graduated from Duke University in 2001 with a B.S. in Economics and a B.A.
      in
      Chemistry. Mr. Forth is a CFA charterholder and a member of the CFA Institute
      and the New York Society of Security Analysts.




***Aidan
      J. Riordan*** has been
      a member of our board of directors since May 2007. Mr. Riordan is a Partner
      at
      Calvert Street Capital Partners, Inc. (“CSCP”), a Baltimore-based private equity
      investment firm focused on middle-market manufacturing and service companies.
      Previously, he was an Associate with Castle Harlan, Inc., a New York-based
      middle-market private equity partnership from 2000 to 2003. Mr. Riordan also
      served as an Associate for Berkshire Capital Corporation, the predecessor firm
      to Berkshire Capital, from 1994 to 1998. He holds a Bachelor of Arts degree
      in
      Economics from the University of Pennsylvania and a Masters in Business
      Administration degree in Finance from Columbia Business School. Mr. Riordan
      currently serves on the boards of directors for two CSCP portfolio companies:
      Universal Millennium, a printing and graphics services company, and ADAPCO,
      a
      distributor of specialty chemicals and equipment.




**Number
      and Terms of Directors**




Highbury’s
      board of directors was increased to four directors and is divided into three
      classes with only one class of directors being elected in each year and each
      class serving a three-year term. The term of office of the first class of
      directors, consisting of Russell L. Appel, expired at our first annual meeting
      of stockholders held on November 27, 2006. Mr. Appel was re-elected for a
      three-year term but resigned on November 21, 2007. The term of office of
      the second class of directors, consisting of R. Bruce Cameron and Aidan J.
      Riordan, expired at the second annual meeting held on October 29, 2007.
      Messrs. Cameron and Riordan were re-elected for three-year terms. The term
      of
      office of the third class of directors, consisting of Richard S. Foote, will
      expire at the third annual meeting.




**Section
      16(a) Beneficial Ownership Reporting Compliance**




Section
      16(a) of the Exchange Act requires Highbury’s officers and directors, and
      persons who own more than ten percent of Highbury’s common stock, to file
      reports of ownership and changes in ownership on Forms 3, 4 and 5 with the
      SEC.
      Such persons are required by the SEC regulations to furnish us with copies
      of
      all Forms 3, 4 and 5 that they file. Based on our review of the Forms 3, 4
      and
      5, filed by such persons, we believe that all Section 16(a) filing requirements
      applicable to Highbury’s officers, directors and greater than ten percent
      beneficial owners were complied with during the fiscal year ended December
      31,
      2007, with the following exceptions. The Form 3 filed by Aidan Riordan, one
      of
      our directors, on August 17, 2007 was filed after the applicable filing period.
      The Form 4 filed by Aidan Riordan on August 17, 2007 incorrectly stated the
      number of shares acquired and beneficially owned by Mr. Riordan. An amended
      Form
      4 was filed with the SEC on March 25, 2008. Based on the Form 4 filed by Jack
      Silver, a beneficial owner of more than 10% of Highbury’s outstanding common
      stock, on October 26, 2007 there are three transactions included on the Form
      4
      that were not reported within the applicable time period. The transactions
      reported on the Form 3 filed September 17, 2007 and the Form 4 filed February
      12, 2008 by Potomac Capital Management LLC appear to have been reported after
      the expiration of the applicable filing period. The Form 3 filed by Nisswa
      Master Fund Ltd., a beneficial owner of more than 10% of Highbury’s outstanding
      common stock, on February 26, 2008, may have been filed after the expiration
      of
      the applicable filing period.




44




**Code
      of Business Conduct and Ethics**




Our
      board
      of directors has adopted a Code of Business Conduct and Ethics for our officers
      and directors. The text of this Code of Business Conduct and Ethics may be
      found
      on our website at http://www.highburyfinancial.com. Amendments to and waivers
      from the Code of Business Conduct and Ethics that require disclosure under
      applicable SEC rules will be posted on our website.




**Committees
      of the Board of Directors**




*Audit
      Committee* .
      Highbury has not established an audit committee. Highbury’s entire board of
      directors currently carries out the functions customarily undertaken by the
      Audit Committee. Highbury’s board of directors has determined that R. Bruce
      Cameron and Richard S. Foote each qualify as an “audit committee financial
      expert” as that term is defined under Item 407(d)(5)(ii) of Regulation S-K of
      the Securities and Exchange Act of 1934, as amended. However, since Messrs.
      Cameron and Foote are officers of Highbury, neither is “independent” as that
      term is defined under Nasdaq’s listing requirements.




*Compensation
      Committee* .
      Highbury’s entire board of directors currently carries out the functions
      customarily undertaken by the Compensation Committee. The performance of such
      functions has been unnecessary because no executive officer or director of
      Highbury has ever received any compensation for services rendered since
      Highbury’s inception on July 13, 2005. Highbury’s policy regarding executive
      officer and director compensation is subject to change at the discretion of
      the
      board of directors.




*Nominating
      Committee* .
      Highbury’s entire board of directors currently carries out the functions
      customarily undertaken by the Nominating Committee. Our board of directors
      does
      not have a formal policy for selection of nominees. The members of our board
      of
      directors make recommendations on the basis of our best interests.




**ITEM
      11.**  **EXECUTIVE
      COMPENSATION**




**Executive
      and Director Compensation**




No
      executive officer or director of Highbury has ever received any compensation
      for
      services rendered since Highbury’s inception on July 13, 2005, including during
      the fiscal year ended December 31, 2007. Our executive officers and directors
      have been reimbursed for out-of-pocket expenses incurred in connection with
      activities on our behalf such as identifying potential target businesses and
      performing due diligence on suitable business combinations. Berkshire Capital
      received $7,500 per month for office space and general and administrative
      services commencing on January 25, 2006 and $10,000 per month commencing on
      November 1, 2007 under a revised agreement which replaced the prior
      agreement with Berkshire Capital. Each of Messrs. Cameron, Foote and Forth
      is an
      employee and equity owner of Berkshire Capital. This arrangement is solely
      for
      our benefit and is not intended to provide any of our executive officers
      compensation in lieu of a salary. We have engaged Berkshire Capital to act
      as
      our non-exclusive financial advisor in connection with possible future
      acquisitions. See “Certain Relationships And Related Transactions, And Director
      Independence -- Financial Advisor Engagement” under Item 13.




**Compensation
      Committee Interlocks and Insider Participation**




Highbury’s
      entire board of directors currently carries out the functions customarily
      undertaken by the Compensation Committee. Two members of Highbury’s board of
      directors, Messrs. Cameron and Foote, were executive officers of Highbury during
      the fiscal year ended December 31, 2007. In addition, Messrs. Cameron and Foote
      are executive officers of, and serve on the compensation committee of Berkshire
      Capital. For a description of certain transactions between us and Messrs.
      Cameron and Foote, see “Certain Relationships And Related Transactions, And
      Director Independence -- Share Issuances to Initial Stockholders” under Item 13.
      For a description of certain transactions between us and Berkshire Capital,
      which will benefit Messrs. Cameron and Foote to the extent of their interest
      in
      Berkshire Capital, see “Certain Relationships and Related Transactions, And
      Director Independence - Office Services Agreement” and “- Financial Advisor
      Engagement” under Item 13. During the fiscal year ended December 31, 2007, none
      of Highbury’s officers or employees participated in deliberations of Highbury’s
      board of directors concerning executive officer compensation, and no such
      deliberations occurred.




45




**COMPENSATION
      COMMITTEE REPORT**




Because
      none of the Company’s named executive officers received any compensation from
      the Company for the fiscal year ended December 31, 2007, the Company has not
      included a Compensation Discussion and Analysis, as described in Regulation
      S-K
      Item 402(b), in its Annual Report on Form 10-K for such period. Accordingly,
      the
      board of directors has neither reviewed and discussed such a Compensation
      Discussion and Analysis with management nor made any recommendation regarding
      the inclusion of such a Compensation Discussion and Analysis in the Company’s
      Annual Report on Form 10-K, a Proxy Statement on Schedule 14A or an Information
      Statement on Schedule 14C.




Respectfully
      submitted by:




R.
      Bruce
      Cameron




Richard
      S. Foote




Aidan
      J.
      Riordan




*
      *
      *




*The
      foregoing Compensation Committee Report shall not be deemed to be “soliciting
      material” or “filed” or incorporated by reference in any previous or future
      documents filed by the Company with the SEC under the Securities Act or the
      Exchange Act, except to the extent that the Company specifically incorporates
      the Report by reference in any such document.*




**ITEM
      12.**  **SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
      MATTERS**




The
      following table sets forth information as of March 18, 2008 in respect of
      beneficial ownership of Highbury’s common stock by each director, by each named
      executive officer and by all directors and executive officers of Highbury as
      a
      group, and each person known by us, as a result of such person’s public filings
      with the SEC and the information contained therein, to be the beneficial owner
      of more than 5% of Highbury’s outstanding shares of common stock. The
      percentages of common stock beneficially owned are based on 9,126,628 shares
      of
      common stock outstanding as of March 18, 2008 adjusted for each holders’
exercisable warrants, if any.




Unless
      otherwise indicated, we believe that all persons named in the table have sole
      voting and investment power with respect to all shares of common stock
      beneficially owned by them.


46


**Name
                and address of beneficial owner(1)**
            
            **Amount
                and Nature of Beneficial Ownership**
            
            **Approximate**
              **Percentage
                of**
              **Outstanding
                Common**
              **Stock**R.
                Bruce Cameron(2)
            
            
            1,223,751
            
            
            13.1
            %Broad
                Hollow LLC(3)
            
            
            1,001,250
            
            
            10.8
            %Richard
                S. Foote(4)
            
            
            667,500
            
            
            7.2
            %R.
                Bradley Forth(5)
            
            
            111,249
            
            
            1.2
            %Aidan
                J. Riordan(6)
            
            
            3,450
            
            
            <0.1
            %Wellington
                Management Company, LLP(7)
            
            
            3,592,248
            
            
            32.0
            %Jack
                Silver(8)
            
            
            2,804,200
            
            
            23.5
            %Potomac
                Capital Management LLC(9)
            
            
            1,237,628
            
            
            12.8
            %Woodbourne
                Partners, L.P.(10)
            
            
            1,192,000
            
            
            13.1
            %Nisswa
                Master Fund Ltd.(11)
            
            
            1,189,400
            
            
            11.5
            %


Second
                Curve Capital, LLC(12)
            
            
            1,000,000
            
            
            10.3
            %Context
                Capital Management, LLC(13)
            
            
            673,000
            
            
            7.4
            %Royce
                & Associates, LLC(14)
            
            
            652,450
            
            
            7.0
            %Talon
                Opportunity Partners, L.P.(15)
            
            
            594,000
            
            
            6.5
            %North
                Star Investment Management Corp.(16)
            
            
            482,425
            
            
            5.3
            %All
                executive officers and directors as a group (four
                individuals)(2)(4)(5)
            
            
            2,005,950
            
            
            21.3
            %




(1)
            Unless
                otherwise noted, the business address of each stockholder listed
                in this
                table is c/o Berkshire Capital Securities LLC, 535 Madison Avenue,
                19th
                Floor, New York, New York 10022.




(2)
            Includes
                851,250 shares owned of record by Broad Hollow LLC and 150,000 shares
                issuable upon exercise of warrants held by Broad Hollow LLC that are
                now exercisable that are attributed to Mr. Cameron, according to
                Section
                13(d) of the Exchange Act, due to his position as the managing member
                of
                Broad Hollow LLC, and 33,334 shares issuable upon exercise of warrants
                held by Mr. Cameron that are now exercisable.


(3)
              Includes
                  150,000 shares issuable upon exercise of warrants that are now
                  exercisable.


(4)
            Includes
                100,000 shares issuable upon exercise of warrants that are now
                exercisable.




(5)
            The
                business address of Mr. Forth is c/o Berkshire Capital Securities
                LLC, 999
                Eighteenth Street, Suite 3000, Denver, CO 80202. Includes 16,666
                shares
                issuable upon exercise of warrants that are now exercisable. These
                share
                numbers include 21,563 shares held by Mr. Forth, which are subject
                to a
                call in favor of Broad Hollow LLC, if Mr. Forth’s employment by Berkshire
                Capital is terminated for certain reasons before the second anniversary
                of
                our initial business combination.




(6)
            The
                business address of Mr. Riordan is c/o Highbury Financial Inc., 999
                Eighteenth Street, Suite 3000, Denver, Colorado
                80202.




(7)
            As
                reported in the Schedule 13G/A filed with the SEC on February 14,
                2008 by
                Wellington Management Company, LLP. The business address of Wellington
                Management Company, LLP is 75 State Street, Boston, MA 02109. Wellington
                Management, in its capacity as investment adviser, may be deemed
                to
                beneficially own 3,592,248 shares of common stock which are held
                of record
                by clients of Wellington Management. This number includes 2,103,300
                warrants, which are now exercisable. The Schedule 13G does not disclose
                the natural persons that would be deemed the control persons of Wellington
                Management Company, LLP. Based on a Form ADV filed by Wellington
                Management Company, LLP, with the SEC on March 4, 2008 the control
                persons
                of Wellington Management Company, LLP are Laurie Gabriel, Saul Pannell,
                John Ryan, Perry Traquina, Cynthia Clarke, Selwyn Notelovitz, James
                Hoffman, Karl Bandtel, Jean Hynes, Edward Steinborn, Lucius Hill
                and
                Phillip Perelmuter.




(8)
            As
                reported in the Form 4, filed on December 26, 2007, and Schedule 13D/A,
                filed December 27, 2007, with the SEC by Jack Silver. The business
                address
                of Mr. Silver is c/o SIAR Capital LLC, 660 Madison Avenue, New York,
                New
                York 10021. The 2,804,200 shares beneficially owned by Mr. Silver
                includes
                2,804,200 shares of common stock issuable upon exercise of warrants
                of
                which (a) 2,404,200 are held by Sherleigh Associates Profit Sharing
                Plan,
                a trust of which Jack Silver is the trustee and (b) 400,000 are held
                by
                Sherleigh Associates Defined Benefit Plan, a trust of which Mr. Silver
                is
                the trustee and that are now
                exercisable.




47




(9)
            As
                reported in the Schedule 13G/A and Form 4 filed with the SEC on February
                12, 2008 by Potomac Capital Management LLC, Potomac Capital Management
                Inc., Potomac Capital Partners LP and Paul J. Solit. The business
                address
                of Potomac Capital Management LLC is 825 Third Avenue, 33rd Floor,
                New
                York, New York 10022. Potomac Capital Management LLC has shared voting
                and
                dispositive power over 1,085,284 shares which includes 365,156 shares
                issuable upon exercise of warrants that are now exercisable. Potomac
                Capital Management Inc. has shared voting and dispositive power over
                1,237,628 shares which includes 517,500 shares issuable upon exercise
                of
                warrants that are now exercisable. Potomac Capital Management LP
                has sole
                voting and dispositive power over 639,502 shares which includes 215,168
                shares issuable upon exercise of warrants that are now exercisable.
                Mr.
                Solit has sole voting and dispositive power over 2,000 shares and
                shared
                voting and dispositive power over 1,237,628 shares which includes
                517,500
                shares issuable upon exercise of warrants that are now
                exercisable.




(10)
            As
                reported in a Schedule 13G/A filed with the SEC on February 14, 2008
                by
                Woodbourne Partners L.P., Clayton Management Company and John D.
                Weil. The
                business address of Woodbourne Partners, L.P. is 200 North Broadway,
                Suite
                825, St. Louis, Missouri 63102. The controlling person of Woodbourne
                Partners, L.P. is Clayton Management Company, its General Partner,
                and Mr.
                John Weil is the President and controlling person of Clayton Management
                Company. Mr. Weil and Clayton Management Company have sole voting
                and
                dispositive power over 1,192,000
                shares.




(11)
            As
                reported in the Schedule 13G/A filed with the SEC on February 12,
                2008 and
                the Form 4 filed with the SEC on February 27, 2008 by Brian Taylor,
                Pine
                River Capital Management L.P., and Nisswa Master Fund Ltd. The business
                address of each of these persons is c/o Pine River Capital Management
                L.P., 601 Carlson Parkway, Suite 330, Minnetonka, MN 55305. Brian
                Taylor
                and Pine River Capital Management L.P. have shared voting power and
                shared
                dispositive power over 1,189,400 warrants; and Nisswa Master Fund
                Ltd. has
                shared voting power and shared dispositive power over 834,900 of
                these
                1,189,400 warrants. These warrants are now
                exercisable.




(12)
            As
                reported in a Schedule 13F filed with the SEC on February 14, 2008
                by
                Second Curve Capital, LLC, Thomas K. Brown and Second Curve Opportunity
                Fund, LP. The business address of each of these persons is 405 Lexington
                Avenue, 52nd Floor, New York, NY 10174. Second Curve Capital, LLC
                and
                Thomas Brown have shared voting power and shared dispositive power
                with
                respect to these shares which include 600,000 shares issuable upon
                exercise of warrants that are now exercisable.




(13)
            As
                reported in the Schedule 13G filed with the SEC on January 11, 2008
                by
                Context Capital Management, LLC, Context Advantage Master Fund, L.P.,
                Context Offshore Advantage Fund, Ltd., Michael S. Rosen and William
                D.
                Fertig. The business address of Context Capital Management, LLC,
                Michael
                S. Rosen and William D. Fertig is 4365 Executive Drive, Suite 850,
                San
                Diego, California 92121. The business address of Context Advantage
                Master
                Fund, L.P. and Context Offshore Advantage Fund, Ltd. is c/o Goldman
                Sachs
                Administration Services, Gardenia Court, Suite 3307, 45 Market Street,
                Camana Bay, P.O. Box 896, KY1-1103, Cayman Islands. Context Capital
                Management, LLC is a registered investment adviser whose clients
                have the
                right to receive or the power to direct the receipt of dividends
                from, or
                the proceeds from the sale of our securities. Mr. Rosen is the
                Co-Chairman, Chief Executive Officer, and Mr. Fertig is the Co-Chairman
                and Chief Investment Officer of, Context Capital Management, LLC.
                Context
                Offshore Advantage Fund, Ltd. is a Cayman Islands corporation of
                which
                Context Capital Management, LLC is the investment adviser. Context
                Advantage Master Fund, L.P. is a Cayman Islands limited partnership,
                of
                which Context Capital Management, LLC is the general partner, that
                serves
                as a master fund through which Context Offshore Advantage Fund, Ltd.
                and
                other investors invest indirectly in securities. No single client
                of
                Context Capital Management, LLC, other than Context Advantage Master
                Fund,
                L.P., holds more than five percent of our common stock. The amount
                shown
                in the table includes 100,000 shares purchased by us subsequent to
                January
                11, 2008 pursuant to a transaction for which we have not identified
                a
                public filing.




(14)
            As
                reported in the Schedule 13F filed with the SEC on February 4, 2008
                by
                Royce & Associates, LLC. The business address of Royce &
                Associates, LLC is 1414 Avenue of the Americas, New York, NY 10019.
                The
                Schedule 13G does not disclose the natural persons that would be
                deemed
                the control persons of Royce & Associates, LLC. Based on a Form ADV
                filed by Royce & Associates, LLC with the SEC on June 28, 2007, the
                control persons of Royce & Associates, LLC are Charles Royce, John
                Diederich, Mark Fetting, Raymond Mason, John Denneen, Legg Mason,
                Inc. and
                Peter Bain. Includes 210,000 shares issuable upon exercise of warrants
                that are now exercisable.




48




(15)
            As
                reported in the Schedule 13G/A filed with the SEC on February 13,
                2008 by
                Talon Opportunity Partners, L.P., Talon Opportunity Managers, L.L.C.
                and
                Talon Asset Management, LLC. The business address of each of these
                entities is One North Franklin, Suite 900, Chicago, Illinois 60606.
                Talon
                Opportunity Partners, L.P., Talon Opportunity Managers, L.L.C., the
                general partner of Talon Opportunity Partners, L.P. and Talon Asset
                Management, LLC, the Manager of Talon Opportunity Managers. L.L.C.,
                have
                shared voting power and shared dispositive power with respect to
                514,000
                shares and 80,000 shares underlying warrants that are now exercisable.
                The
                shares reported herein by Talon Asset Management, LLC are held on
                behalf
                of Talon Opportunity Partners, L.P., as manager of Talon Opportunity
                Managers, L.L.C., the general partner of Talon Opportunity Partners,
                L.P.
                From time to time, Talon Opportunity Partners, L.P. may make distributions
                of partnership income to limited partners, none of which has an interest
                relating to more than 5% of the class. The Schedule 13G does not
                disclose
                the natural persons that would be deemed the control persons of Talon
                Asset Management, LLC. Based on a Form ADV filed by Talon Asset
                Management, LLC with the SEC on March 4, 2008, the control persons
                of
                Talon Asset Management, LLC are Terry Diamond, Alan Wilson, Barbara
                Rumminger, Sophia Erskine, Edwin Ruthman, William Wolf, Bruce Beerbower,
                Talon Asset Management Inc., Diamond JJJD Enterprises, LLC, David
                Kelson,
                Evan Dreyfuss, Janice Coker, Brian Washkoviak, Jamie Schwartz, John
                Diamond and Jennifer Diamond. Includes 80,000 shares issuable upon
                exercise of warrants that are now exercisable.




(16)
            As
                reported in a Schedule 13G filed with the SEC on March 18, 2008 by
                North
                Star Investment Management Corp and Peter G. Contos II. The business
                address of North Star Investment Management Corp. is 20 North Wacker
                Drive, Suite 1416, Chicago, Illinois 60606. North Star Investment
                Management Corp. has sole voting and dispositive power over the
                shares.




**ITEM
      13.**  **CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE**




**Share
      Issuances to Initial Stockholders**




On
      August
      1, 2005, we issued 1,500,000 shares of our common stock to the persons set
      forth
      below for an aggregate of $25,000 in cash, at an average purchase price of
      approximately $0.0167 per share. These shares were allocated as
      follows:




**Name**
            
            **Number
                of Shares**
            
            **Relationship
                to Us**R.
                Bruce Cameron
            
            150,000
            
            Chairman
                of the BoardRichard
                S. Foote
            
            450,000
            
            President,
                Chief Executive Officer and DirectorR.
                Bradley Forth
            
            75,000
            
            Executive
                Vice President, Chief Financial Officer and SecretaryThe
                Hillary Appel Trust
            
            75,000
            
            Stockholder(1)The
                Catey Lauren Appel Trust
            
            75,000
            
            Stockholder(1)Broad
                Hollow LLC
            
            675,000
            
            Stockholder(2)




(1)
      The
      Hillary Appel Trust and The Catey Lauren Appel Trusts are trusts of which the
      wife of Mr. Appel, one of our Directors, is the trustee.




(2)
      Mr.
      Cameron, our Chairman of the Board, is the managing member of Broad Hollow
      LLC.




Subsequent
      to the issuance of the 1,500,000 shares, we authorized a stock dividend of
      0.15
      shares of common stock for each outstanding share of common stock as of January
      13, 2006.




The
      holders of the majority of these shares are entitled to make up to two demands
      that we register these shares and any warrants they may own, pursuant to an
      agreement signed on January 31, 2006. The holders of the majority of these
      shares can elect to exercise these registration rights at any time after the
      date on which their shares of common stock are released from escrow, which
      will
      be January 31, 2009. In addition, these stockholders have certain “piggy-back”
registration rights on registration statements filed subsequent to such date.
      We
      will bear the expenses incurred in connection with the filing of any such
      registration statements. These shares may also be eligible for resale after
      they
      are released from escrow pursuant to Rule 144 under the Securities Act of 1933,
      as amended.




49




All
      of
      the shares of our common stock outstanding prior to the date of the prospectus
      for our initial public offering (January 25, 2006) were placed in escrow with
      Continental Stock Transfer & Trust Company as escrow agent, until the
      earliest of:




·
            three
                years following the date of the closing of our initial public offering
                (January 31, 2006);




·
            our
                liquidation; and




·
            the
                consummation of a liquidation, merger, stock exchange, stock purchase
                or
                other similar transaction which results in all of our stockholders
                having
                the right to exchange their shares of common stock for cash, securities
                or
                other property subsequent to our consummating a business combination
                with
                a target business.




During
      the escrow period, the holders of these shares will not be able to sell or
      transfer their securities except among our initial stockholders (including
      upon
      exercise by Broad Hollow LLC of its call option), to their spouses and children
      or trusts established for their benefit, by virtue of the laws of decent and
      distribution, upon the death of any initial stockholder or pursuant to a
      qualified domestic relations order but will retain all other rights as our
      stockholders, including, without limitation, the right to vote their shares
      of
      common stock and the right to receive cash dividends, if declared. If dividends
      are declared and payable in shares of common stock, such dividends will also
      be
      placed in escrow.




Our
      initial stockholders purchased an aggregate of 166,667 units in the private
      placement. The shares and warrants comprising such units may be sold, assigned
      or transferred by them now that we have consummated the acquisition, subject
      to
      applicable securities laws. The holders of a majority of the units purchased
      in
      the private placement are entitled to make up to two demands that Highbury
      register the shares, warrants and shares underlying the warrants comprising
      such
      units at any time. In addition, the initial stockholders have certain
“piggy-back” registration rights with respect to such securities on registration
      statements filed by Highbury. We will bear the expenses incurred in connection
      with the filing of any of the foregoing registration statements. The 166,667
      shares purchased in the private placement contemporaneously with the initial
      public offering may also be eligible for resale pursuant to Rule 144 under
      the
      Securities Act of 1933, as amended.




**Office
      Services Agreement**




Commencing
      on January 25, 2006, Berkshire Capital made available to us such office space
      and certain general and administrative services as we required from time to
      time. We paid Berkshire Capital $7,500 per month for these services. On November
      30, 2006, we replaced this agreement with an office services agreement with
      Berkshire Capital. The office services agreement provided for a monthly fixed
      fee for office services of $7,500. On October 31, 2007, we entered into a new
      office services agreement with Berkshire Capital which replaced the office
      services agreement entered into between us and Berkshire Capital on November
      30,
      2006. The office services agreement provides for a monthly fixed fee of $10,000
      for office and secretarial services including use and access to our office
      in
      Denver, Colorado and those other office facilities of Berkshire Capital as
      we
      may reasonably require. In addition, certain employees of Berkshire Capital
      will
      provide us with financial reporting support on a daily basis. The term of the
      agreement is indefinite. Either party may terminate the office service agreement
      at any time with six months’ notice to the other party. R. Bruce Cameron, our
      Chairman of the Board, Richard S. Foote, our President, Chief Executive Officer
      and Director, and R. Bradley Forth, our Executive Vice President, Chief
      Financial Officer and Secretary are employees or equity owners of Berkshire
      Capital. As a result of these affiliations, these individuals will benefit
      from
      the transaction to the extent of their interest in Berkshire Capital. However,
      this arrangement is solely for our benefit and is not intended to provide any
      of
      our executive officers compensation in lieu of a salary. We believe, based
      on
      rents and fees for similar services in the Denver, Colorado metropolitan area,
      that the fee charged by Berkshire Capital is at least as favorable as we could
      have obtained from an unaffiliated third party. This agreement was ratified
      in
      accordance with our Related Person Policy described below.




**Financial
      Advisor Engagement**




We
      have
      engaged Berkshire Capital to act as our non-exclusive financial advisor in
      connection with possible acquisitions. In such capacity, Berkshire Capital
      will
      assist us in structuring, negotiating and completing acquisitions of targets
      identified by us and acknowledged by both us and Berkshire Capital as being
      subject to Berkshire Capital’s engagement. If we enter into an agreement to
      acquire such a target company during the term of Berkshire Capital’s engagement
      or within two years thereafter, and such acquisition is completed, then we
      will
      pay Berkshire Capital a success fee at closing equal to the greater of (a)
      the
      sum of 3.0% of the first $15 million of the aggregate consideration in such
      transaction and 1.0% of the aggregate consideration in such transaction in
      excess of $15 million, and (b) $600,000. Upon the execution of a definitive
      agreement with respect to an acquisition, we will pay Berkshire Capital $200,000
      which will be credited against the success fee. We will also reimburse Berkshire
      Capital for its reasonable expenses in performing its services under the
      engagement letter and will indemnify Berkshire Capital for liabilities it incurs
      in performing such services, unless such liabilities are attributable to
      Berkshire Capital’s gross negligence or willful misconduct. Messrs. Cameron,
      Foote and Forth, our executive officers, are affiliated with Berkshire Capital.
      As a result of these affiliations, these individuals will benefit from the
      transaction to the extent of their interest in Berkshire Capital. We believe,
      based on discussions with other investment banks, that the terms of our
      engagement of Berkshire Capital are at least as favorable as we could have
      obtained from an unaffiliated third party. This transaction was approved in
      accordance with our Related Person Policy described below.




50




**Conflicts
      of Interest**




Our
      public stockholders should be aware of the following potential conflicts of
      interest. Our officers and directors are not required to commit their full
      time
      to our affairs and, accordingly, they may have conflicts of interest in
      allocating management time among various business activities. Furthermore,
      Messrs. Cameron, Foote and Forth, our executive officers, are affiliated with
      Berkshire Capital, a registered broker-dealer that provides financial advisory
      services to clients in connection with mergers and acquisitions in the financial
      services industry. Berkshire Capital’s clients may compete with us for
      acquisitions in the financial services industry, and Berkshire Capital may
      have
      a duty to present certain acquisition opportunities to its clients before it
      presents them to us.




**Policies
      and Procedures for Review, Approval or Ratification of Transactions with Related
      Persons**




Our
      board
      of directors has adopted certain written policies and procedures for the review,
      approval and ratification of related person transactions, which we refer to
      as
      our Related Person Policy. Among other things, our Related Person Policy
      provides that any transaction, arrangement or relationship (or any series of
      similar transactions, arrangements or relationships) in which we (including
      any
      of our subsidiaries) were, are or will be a participant and the amount involved
      exceeds $120,000, and in which any related person had, has or will have a direct
      or indirect material interest, must be reported to our board of directors prior
      to the consummation or amendment of the transaction. A related person, as
      defined in our Related Person Policy, means any person who is, or at any time
      since the beginning of our last fiscal year was, a director or executive officer
      of the Company or a nominee to become a director of the Company; any person
      who
      is known to be the beneficial owner of more than 5% of any class of our voting
      securities; any immediate family member of any of the foregoing persons, which
      means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law,
      father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law
      of
      the director, executive officer, nominee or more than 5% beneficial owner,
      and
      any person (other than a tenant or employee) sharing the household of such
      director, executive officer, nominee or more than 5% beneficial owner; and
      any
      firm, corporation or other entity in which any of the foregoing persons is
      employed or is a general partner or principal or in a similar position or in
      which such person has a 5% or greater beneficial ownership interest. Our board
      of directors reviews these related person transactions and considers all of
      the
      relevant facts and circumstances available to the board, including (if
      applicable) but not limited to: the benefits to us; the availability of other
      sources of comparable products or services; the terms of the transaction; and
      the terms available to unrelated third parties or to employees generally. The
      board of directors may approve only those related person transactions that
      are
      in, or are not inconsistent with, the best interests of us and of our
      stockholders, as the board determines in good faith. At the beginning of each
      fiscal year, the board will review any previously approved or ratified related
      person transactions that remain ongoing and have a remaining term of more than
      six months. The Board will consider all of the relevant facts and circumstances
      and will determine if it is in the best interests of us and our stockholders
      to
      continue, modify or terminate these related person transactions.




The
      transactions described in this Item under the caption “--Share Issuances to
      Initial Stockholders” were not approved or ratified in accordance with our
      Related Person Policy, which was not in effect at the time such transactions
      were consummated. Because all of our directors had an interest in such
      transactions, it was not possible to have them approved or ratified by
      disinterested directors.




**Independence
      of Directors**




Highbury
      currently does not have, and is not required to have, a majority of independent
      directors. Should Highbury decide to list on a securities exchange, we will
      be
      required to adhere to the independence requirements of that exchange. We believe
      that only one of our current three directors, Mr. Riordan, would meet the
      independence requirements applicable to companies listed on Nasdaq, including
      those applicable to audit, compensation and nominating committee members. Our
      other two directors, Messrs. Cameron and Foote, would not meet the director
      independence requirements of Nasdaq. Highbury’s entire board of directors,
      including Messrs. Cameron and Foote who are not independent directors, carries
      out the functions customarily undertaken by audit, compensation and nominating
      committees.




51




**ITEM
      14.**  **PRINCIPAL
      ACCOUNTANT FEES AND SERVICES**




The
      firm
      of J.H. Cohn LLP, or Cohn, which we retained on January 24, 2008, currently
      acts
      as our principal accountant. Cohn managed and supervised the audit of our
      financial statements for the 2007 fiscal year and is exclusively responsible
      for
      the opinion rendered in connection with its audit. We have not paid any fees
      to
      Cohn for services that fall under the categories “Audit Related Fees” or “All
      Other Fees,” as such categories are defined in the rules promulgated by the
      SEC.




The
      firm
      of Goldstein Golub Kessler LLP, or GGK, acted as our principal accountant from
      our inception through January 23, 2008, at which time we were notified that
      the
      partners of GGK became partners of McGladrey & Pullen, LLP in a limited
      asset purchase agreement. As reported on a Current Report on Form 8-K filed
      on
      January 28, 2008 with the SEC, on January 23, 2008, we dismissed GGK as our
      principal accountant and declined to appoint McGladrey & Pullen LLP as its
      replacement due to a potential conflict of interest. Through September 30,
      2005
      GGK had a continuing relationship with American Express Tax and Business
      Services Inc., or TBS, from which it leased auditing staff who were full time,
      permanent employees of TBS and through which its partners provide non-audit
      services. Subsequent to September 30, 2005, this relationship ceased and the
      firm established a similar relationship with RSM McGladrey, Inc., or RSM. GGK
      had no full time employees and therefore, none of the audit services performed
      were provided by permanent full-time employees of GGK. GGK managed and
      supervised the audit and audit staff, and was exclusively responsible for the
      opinion rendered in connection with its examination of our financial statements
      for the 2005 and 2006 fiscal years. We did not pay any fees to GGK or RSM for
      services that fall under the categories “Audit Related Fees” or “All Other
      Fees,” as such categories are defined in the rules promulgated by the SEC.




The
      following is a summary of fees paid or to be paid to GGK and RSM for services
      rendered.




**Audit
      Fees**




During
      the fiscal year ended December 31, 2007, we incurred $97,817 in fees from GGK
      for services provided in connection with our Quarterly Reports on Form 10-Q
      for
      the first three quarters of the 2007 fiscal year, filing of registration
      statements, our proxy filing for the annual shareholder meeting and consultation
      regarding accounting for potential acquisition transactions.




During
      the fiscal year ended December 31, 2006, we incurred $221,598 in fees for
      services provided principally in connection with our Annual Report on Form
      10-KSB for the fiscal year ended December 31, 2006, our Quarterly Reports on
      Form 10-QSB for the first three quarters of the 2006 fiscal year, our proxy
      filings in connection with the acquisition consummated on November 30, 2006
      and
      the financial statements included in the Current Report on Form 8-K filed
      following the consummation of the acquisition.




We
      expect
      to incur approximately $115,000 in fees from Cohn for services provided in
      connection with our Annual Report on Form 10-K for the fiscal year ended
      December 31, 2007.




**Tax
      Fees**




In
      2007,
      we paid RSM $28,025 in connection with the preparation of our 2006 tax returns
      and tax consultation. In 2006, we paid RSM $2,500 in connection with the
      preparation of our 2005 tax returns.




**Pre-Approval
      of Fees**




Our
      full
      board of directors is responsible for appointing, setting compensation, and
      overseeing the work of the independent auditor. In recognition of this
      responsibility, the board of directors has established a policy to pre-approve
      all audit and permissible non-audit services provided by the independent
      auditor.




52




**ITEM
      15.**  **EXHIBITS
      AND FINANCIAL STATEMENT SCHEDULES**




1.  **Financial
      Statements:**




Index
      to
      Financial Statements


**Highbury
                  Financial Inc.**Reports
                  of Independent Registered Public Accounting FirmsConsolidated
                  Balance Sheets at December 31, 2007 and December 31, 2006Consolidated
                  Statements of Operations for the years ended December 31, 2007
                  and 2006
                  and for the period from July 13, 2005 (inception) through December
                  31,
                  2005Consolidated
                  Statements of Changes in Stockholders’ Equity for the years ended December
                  31, 2007 and 2006 and for the period from July 13, 2005 (inception)
                  through December 31, 2005Consolidated
                  Statements of Cash Flows for the years ended December 31, 2007
                  and 2006
                  and for the period from July 13, 2005 (inception) through December
                  31,
                  2005Notes
                  to Consolidated Financial Statements**U.S.
                  Mutual Fund Business of ABN AMRO Asset Management Holdings,
                  Inc.**Report
                  of Independent AuditorsCombined
                  Statements of Financial Condition as of December 31, 2005 and
                  2004Combined
                  Statements of Operations for years ended December 31, 2005, 2004
                  and
                  2003Combined
                  Statements of Changes in Owner’s Equity for years ended December 31, 2005,
                  2004 and 2003Combined
                  Statements of Cash Flows for years ended December 31, 2005, 2004
                  and
                  2003Notes
                  to Combined Financial StatementsReport
                  of Independent AuditorsCombined
                  Statement of Financial Condition as of November 30, 2006Combined
                  Statement of Operations for the 11 months ended November 30,
                  2006Combined
                  Statement of Changes in Owner’s Equity for the 11 months ended November
                  30, 2006Combined
                  Statement of Cash Flows for the 11 months ended November 30,
                  2006Notes
                  to Combined Financial Statements




2.  **Financial
      Statement Schedule(s):**




No
      financial statement schedules are filed herewith because (i) such schedules
      are
      not required or (ii) the information required has been presented in the
      aforementioned financial statements.




3.  **Exhibits:**




The
      following Exhibits are filed as part of this report:




**Exhibit
                No.**
            
            **Description**


3.1(1)
            
            Restated
                certificate of incorporation.3.2(2)
            
            By-laws.4.1(2)
            
            Specimen
                Unit Certificate.4.2(2)
            
            Specimen
                Common Stock Certificate.4.3(2)
            
            Specimen
                Warrant Certificate.4.4(2)
            
            Warrant
                Agreement between Continental Stock Transfer & Trust Company and the
                Company.4.5(2)
            
            Unit
                Purchase Option.10.1(2)
            
            Subscription
                Agreement between the Registrant and R. Bruce Cameron.10.2(2)
            
            Subscription
                Agreement between the Registrant and Richard S. Foote.10.3(2)
            
            Subscription
                Agreement between the Registrant and R. Bradley Forth.10.4(2)
            
            Subscription
                Agreement between the Registrant and The Hillary Appel Trust.




53




**Exhibit
                No.**
            
            **Description**


10.5(2)
            
            Subscription
                Agreement between the Registrant and The Catey Lauren Appel Trust.10.6(2)
            
            Subscription
                Agreement between the Registrant and Broad Hollow LLC.10.7(2)
            
            Form
                of Letter Agreement between the Registrant and each of R. Bruce Cameron,
                Richard S. Foote, R. Bradley Forth, The Hillary Appel Trust, The
                Catey
                Lauren Appel Trust, Broad Hollow LLC (the initial stockholders) and
                Russell L. Appel10.8
            
            **[Intentionally
                omitted]**.10.9(2)
            
            Form
                of Stock Escrow Agreement between the Registrant and Continental
                Stock
                Transfer and Trust Company.10.10(2)
            
            Registration
                Rights Agreement between the Registrant and the initial stockholders.10.11(2)
            
            Form
                of Placement Unit Purchase Agreement among the Registrant, ThinkEquity
                Partners LLC, and the initial stockholders.10.12(3)
            
            Asset
                Purchase Agreement, dated as of April 20, 2006, by and among the
                Registrant, ABN AMRO Asset Management Holdings, Inc., ABN AMRO Investment
                Fund Services, Inc., ABN AMRO Asset Management, Inc., Montag &
                Caldwell, Inc., Tamro Capital Partners LLC, Veredus Asset Management
                LLC,
                River Road Asset Management LLC and Aston Asset Management LLC.10.13(3)
            
            Side
                Letter Agreement, dated as of April 20, 2006, by and among Registrant,
                Aston Asset Management LLC and Veredus Asset Management LLC.10.14(3)
            
            Side
                Letter Agreement, dated as of April 20, 2006, by and among Registrant,
                Aston Asset Management LLC and River Road Asset Management LLC.10.15(1)
            
            Side
                Letter Agreement, dated as of November 30, 2006, by and among Registrant,
                Aston Asset Management LLC and Montag & Caldwell, Inc.10.16(3)
            
            Side
                Letter Agreement, dated as of April 20, 2006, by and among Registrant,
                Aston Asset Management LLC and ABN AMRO Asset Management Holdings,
                Inc.10.17(3)
            
            Amended
                and Restated Limited Liability Company Agreement of Aston Asset Management
                LLC, dated as of April 20, 2006.10.18(4)
            
            Credit
                Agreement, dated as of November 9, 2006, between City National Bank
                and
                Registrant.10.19(1)
            
            Office
                Service Agreement, between Registrant and Berkshire Capital, dated
                November 30, 2006.10.20(1)
            
            Promissory
                Note issued by Aston in favor of Registrant, dated November 30, 2006.10.21(2)
            
            Administrative,
                Compliance and Marketing Services Agreement, dated as of September
                1,
                2006, between ABN AMRO Asset Management, Inc., and Aston Asset Management
                LLC.10.22(2)
            
            Form
                of Investment Advisory Agreement, between the Aston Funds and Aston
                Asset
                Management LLC.10.23(5)
            
            Letter
                Agreement, dated February 2, 2007, by and between Registrant and
                Berkshire
                Capital Securities LLC.10.24(6)
            
            First
                Amendment to Credit Agreement, dated as of October 31, 2007, between
                City
                National Bank and Registrant.10.25(6)
            
            Office
                Service Agreement, between Registrant and Berkshire Capital, dated
                October
                31, 2007.10.26(5)
            
            Amendment
                to Unit Purchase Option, dated December 15, 2006, by and between
                Registrant and ThinkEquity Partners LLC.10.27(5)
            
            Amendment
                to Unit Purchase Option, dated December 15, 2006, by and between
                Registrant and EarlyBirdCapital, Inc.10.28(5)
            
            Amended
                and Restated Warrant Clarification Agreement, dated December 15,
                2006, by
                and between Registrant and Continental Stock Transfer and Trust
                Company.21.1(5)
            
            Subsidiaries
                of Registrant




54




**Exhibit
                No.**
            
            **Description**




23.1
              
              Consent
                of J.H. Cohn LLP*23.2
              
              Consent
                of Goldstein
                Golub Kessler LLP*23.3
              
              Consent
                of Ernst
                & Young LLP*


31.1
            
            Certification
                by Principal Executive Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.*31.2
            
            Certification
                by Principal Financial Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.*32
            
            Certification
                of Principal Executive and Financial Officers 18 U.S.C.
                1350.*


* Filed herewith.


(1)
            Incorporated
                by reference from our Current Report on Form 8-K filed with the SEC
                on
                December 6, 2006.


(2)
            Incorporated
                by reference from our Registration Statement on Form S-1 (SEC File
                No.
                333-127272).


(3)
            Incorporated
                by reference from our Current Report on Form 8-K filed with the SEC
                on
                April 21, 2006.


(4)
            Incorporated
                by reference from our Quarterly Report on Form 10-QSB filed with
                the SEC
                on November 14, 2006.


(5)
            Incorporated
                by reference from our Annual Report on Form 10-K filed with the SEC
                on
                March 23, 2007.


(6)
            Incorporated
                by reference from our Current Report on Form 8-K filed with the SEC
                on
                November 5, 2007.




55


**SIGNATURES**




Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, the Registrant has duly caused this Report to be signed on its behalf
      by
      the undersigned, thereunto duly authorized.


**HIGHBURY
              FINANCIAL INC.**By:
            /s/
              Richard S. FooteRichard
                S. Foote
              President
                and Chief Executive Officer


Date:
      March 27 ,
      2008




Pursuant
      to the requirement of the Securities Exchange Act of 1934, this Report has
      been
      signed below by the following persons on behalf of the Registrant and in the
      capacities and on the dates indicated.




**SIGNATURE**
            
            **TITLE**
            
            **DATE**/s/
                R.Bruce Cameron
            
            Chairman
                of the Board
            
            March
                27,
                2008R.
                Bruce Cameron/s/
                Richard S. Foote
            
            President
                and Chief Executive Officer and Director (principal executive
                officer)
            
            March
                27,
                2008Richard
                S. Foote/s/
                R. Bradley Forth
            
            Executive
                Vice President, Chief Financial Officer and Secretary (principal
                financial
                and accounting officer)
            
            March
                27,
                2008Bradley
                Forth/s/
                Aidan J. Riordan
            
            Director
            
            March
                27,
                2008Aidan
                J. Riordan




56




HIGHBURY
      FINANCIAL INC. AND SUBSIDIARY












**Index
      to Financial Statements**







Reports
                of Independent Registered Public Accounting Firms
            F-2Consolidated
                Balance Sheets at December 31, 2007 and 2006
            F-4Consolidated
                Statements of Operations for the years ended December 31, 2007 and
                2006
                and for the period from July 13, 2005 (inception) through December
                31,
                2005
            F-5Consolidated
                Statements of Changes in Stockholders’ Equity for the years ended December
                31, 2007 and 2006 and for the period from July 13, 2005 (inception)
                through December 31, 2005
            F-6Consolidated
                Statements of Cash Flows for the years ended December 31, 2007 and
                2006
                and for the period from July 13, 2005 (inception) through December
                31,
                2005
            F-7Notes
                to Consolidated Financial Statements
            F-8**U.S.
                Mutual Fund Business of ABN AMRO Asset Management Holdings,
                Inc.**Report
                of Independent Registered Public Accounting Firm
            F-25Combined
                Statements of Financial Condition as of December 31, 2005 and
                2004
            F-26Combined
                Statements of Operations for the years ended December 31, 2005, 2004
                and
                2003
            F-27Combined
                Statements of Changes in Owner’s Equity for the years ended December 31,
                2005, 2004 and 2003
            F-28Combined
                Statements of Cash Flows for the years ended December 31, 2005, 2004
                and
                2003
            F-29Notes
                to Combined Financial Statements
            F-30Report
                of Independent Registered Public Accounting Firm
            F-35Combined
                Statement of Financial Condition as of November 30, 2006
            F-36Combined
                Statement of Operations for the 11 months ended November 30,
                2006
            F-37Combined
                Statement of Changes in Owner’s Equity for the 11 months ended November
                30, 2006
            F-38Combined
                Statement of Cash Flows for the 11 months ended November 30,
                2006
            F-39Notes
                to Combined Financial Statements
            F-40






F-1




REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM







To
      the Board of Directors and Stockholders


Highbury
      Financial Inc.




We
      have audited the accompanying consolidated balance sheet of Highbury
      Financial Inc. and Subsidiary as of December 31, 2007, and the related consolidated statements of operations,
      stockholders’ equity, and cash flows for the year then ended. These consolidated
      financial statements are the responsibility of the Company’s management. Our
      responsibility is to express an opinion on these financial statements based
      on
      our audit.





We
      conducted our audit in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. An audit includes examining,
      on a
      test basis, evidence supporting the amounts and disclosures in the financial
      statements. An audit also includes assessing the accounting principles used
      and
      significant estimates made by management, as well as evaluating the overall
      consolidated financial statement presentation. We believe that our audit
      provides a reasonable basis for our opinion.





In
      our opinion, the consolidated financial statements referred to above present
      fairly, in all material respects, the consolidated financial position of Highbury
      Financial Inc. and Subsidiary as of December 31, 2007, and their results of operations and cash flows for
      the
      year then ended, in conformity with accounting principles generally accepted
      in
      the United States of America.








/s/
      J.H. Cohn LLP














**J.
      H. COHN LLP**


New
      York, New York


March
      27, 2008







F-2


REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM







To
      the Board of Directors and Stockholders


Highbury
      Financial Inc.




We
      have audited the accompanying consolidated balance sheet of Highbury
      Financial Inc. and Subsidiary as of December 31, 2006, and the related consolidated statements of operations,
      stockholders’ equity, and cash flows for the year then ended and the period from
      July 13, 2005 (inception) to December 31, 2005. These financial statements
      are
      the responsibility of the Company’s management. Our responsibility is to express
      an opinion on these financial statements based on our audits.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audits to obtain reasonable assurance about whether the
      financial statements are free of material misstatement. An audit includes
      examining, on a test basis, evidence supporting the amounts and disclosures
      in
      the financial statements. An audit also includes assessing the accounting
      principles used and significant estimates made by management, as well as
      evaluating the overall financial statement presentation. We believe that our
      audits provide a reasonable basis for our opinion.





In
      our opinion, the financial statements referred to above present fairly, in
      all
      material respects, the consolidated financial position of Highbury
      Financial Inc. and Subsidiary as of December 31, 2006, and the consolidated results of their operations and
      their cash flows for the year then ended and the period from July 13, 2005
      (inception) to December 31, 2005 in conformity with United States generally
      accepted accounting principles.








/s/
      Goldstein Golub Kessler LLP














**GOLDSTEIN
      GOLUB KESSLER LLP**


New
      York, New York


March
      21, 2007







F-3




HIGHBURY
      FINANCIAL INC. AND SUBSIDIARY


Consolidated
      Balance Sheets







**December
                  31,**2007
              
              2006ASSETS**Current
                  assets**Cash
                  and cash equivalents
              
              $
              7,276,545
              
              $
              6,248,705Investments
              
              
              4,635,507
              
              
              —Accounts
                  receivable
              
              
              3,502,142
              
              
              3,646,422Prepaid
                  expenses
              
              
              270,086
              
              
              221,220Other
                  current assets
              
              
              —
              
              
              13,670**Total
                  current assets**
              
              
              15,684,280
              
              
              10,130,017Other
                  AssetsFixed
                  assets, net
              
              
              991,260
              
              
              573,534Identifiable
                  intangibles
              
              
              25,270,000
              
              
              26,753,000Goodwill
              
              
              7,046,412
              
              
              9,673,412Deferred
                  income taxes
              
              
              952,209
              
              
              87,276Other
                  long-term assets
              
              
              169,464
              
              
              150,000**Total
                  other assets**
              
              
              34,429,345
              
              
              37,237,222**Total
                  assets**
              
              $
              50,113,625
              
              $
              47,367,239LIABILITIES
                  AND STOCKHOLDERS’ EQUITY**Current
                  liabilities**Accounts
                  payable and accrued expenses
              
              $
              4,549,216
              
              $
              2,269,470Income
                  taxes payable
              
              
              97,758
              
              
              242,089**Total
                  current liabilities**
              
              
              4,646,974
              
              
              2,511,559Deferred
                  rent
              
              
              844,980
              
              
              —**Total
                  Liabilities**
              
              
              5,491954
              
              
              2,511,559Minority
                  interest
              
              
              840,000
              
              
              626,901Commitments
                  and contingencies**Stockholders'
                  equity:**Preferred
                    stock, $0.0001 par value, authorized 1,000,000
                  shares;
                    none issued
              
              
              —
              
              
              —Common
                    stock, $0.0001 par value, authorized 50,000,000
                  shares;
                    9,527,000 shares issued and outstanding
              
              
              953
              
              
              953Additional
                  paid-in capital
              
              
              55,393,484
              
              
              56,693,484Accumulated
                  deficit
              
              
              (11,612,766
              )
              
              (12,465,658
              )**Total
                  stockholders’ equity**
              
              
              43,781,671
              
              
              44,228,779**Total
                  liabilities and stockholders’ equity**
              
              $
              50,113,625
              
              $
              47,367,239




See
      Notes to Consolidated Financial
      Statements






F-4




HIGHBURY
      FINANCIAL INC. AND SUBSIDIARY


Consolidated
      Statements of Operations







**For
                the Year Ended Dec. 31,**
            
            
            **Period
                    from****July
                  13, 2005****(inception)
                to****2007**
            
            
            **2006**
            
            
            **December
                31, 2005****Revenue**
            
            $
            42,063,995
            
            $
            3,828,100
            
            $
            —**Operating
                expenses**Distribution
                and sub-advisory costs
            
            
            19,857,033
            
            
            1,796,910
            
            
            —Compensation
                and related expenses
            
            
            6,643,587
            
            
            21,109,331
            
            
            —Depreciation
                and amortization
            
            
            222,114
            
            
            —
            
            
            —Impairment
                of intangibles
            
            
            4,110,000
            
            
            —
            
            
            —Other
                operating expenses
            
            
            5,727,206
            
            
            1,162,875
            
            
            2,452**Total
                operating expenses**
            
            
            36,559,940
            
            
            24,069,116
            
            
            2,452**Operating
                income (loss)**
            
            
            5,504,055
            
            
            (20,241,016
            )
            
            (2,452
            )**Other
                income**Interest
                income
            
            
            458,105
            
            
            1,744,907
            
            
            —Investment
                loss
            
            
            (121,300
            )
            
            —
            
            
            —**Total
                other income**
            
            
            336,805
            
            
            1,744,907
            
            
            —**Income
                (loss) before minority interest**
            
            
            5,840,860
            
            
            (18,496,109
            )
            
            (2,452
            )Minority
                interest in net income (loss) of subsidiary
            
            
            4,489,176
            
            
            (6,647,715
            )
            
            —**Income
                (loss) before provision for income taxes**
            
            
            1,351,684
            
            
            (11,848,394
            )
            
            (2,452
            )Provision
                for income taxes
            
            
            498,792
            
            
            614,812
            
            
            —**Net
                income (loss)**
            
            $
            852,892
            
            $
            (12,463,206
            )
            **$**
            **(2,452**
            **)****Weighted
                average shares outstanding, basic**
            
            
            9,527,000
            
            
            9,045,773
            
            
            1,725,000**Net
                income (loss) per share, basic**
            
            $
            0.09
            
            $
            (1.38
            )
            $
            (0.00
            )**Weighted
                average shares outstanding, diluted**
            
            
            10,752,904
            
            
            9,045,773
            
            
            1,725,000**Net
                income (loss) per share, diluted**
            
            $
            0.08
            
            $
            (1.38
            )
            $
            (0.00
            )




See
      Notes to Consolidated Financial
      Statements







F-5


HIGHBURY
      FINANCIAL INC. AND SUBSIDIARY


Consolidated
      Statements of Changes in Stockholders’ Equity





**Common
                Stock****Shares**
            
            **Amount**
            
            **Additional**
              **Paid-In
                Capital**
            
            **Accumulated**
              **Deficit**
            
            **Total**Sale
                of 1,725,000 shares of common stock to initial stockholders on August
                1,
                2005 at $0.0145
              per
                share
            
            
            1,725,000
            
            $
            173
            
            $
            24,827
            
            $
            —
            
            $
            25,000Net
                loss (for the period from July 13, 2005 (inception) through December
                31,
                2005)
            
            
            —
            
            
            —
            
            
            —
            
            
            (2,452
            )
            
            (2,452
            )**Balance
                at December 31, 2005**
            
            
            1,725,000
            
            
            173
            
            
            24,827
            
            
            (2,452
            )
            
            22,548Sale
                of 166,667 units in a private placement
            
            
            166,667
            
            
            17
            
            
            999,985
            
            
            —
            
            
            1,000,002Sale
                of 7,743,333 units, net of underwriters’ discount and offering
                expenses
            
            
            7,743,333
            
            
            774
            
            
            42,777,533
            
            
            —
            
            
            42,778,307Proceeds
                from issuance of underwriters’ purchase option
            
            
            —
            
            
            —
            
            
            100
            
            
            —
            
            
            100Proceeds
                distributed upon conversion (108,000 shares)
            
            
            (108,000
            )
            
            (11
            )
            
            (618,961
            )
            
            —
            
            
            (618,972
            )Increase
                in capital related to grant of interest in Aston
            
            
            —
            
            
            —
            
            
            13,510,000
            
            
            —
            
            
            13,510,000Net
                loss
            
            
            —
            
            
            —
            
            
            —
            
            
            (12,463,206
            )
            
            (12,463,206
            )**Balance
                at December 31, 2006**
            
            
            9,527,000
            
            
            953
            
            
            56,693,484
            
            
            (12,465,658
            )
            
            44,228,779Repurchase
                of underwriters’ purchase option
            
            
            —
            
            
            —
            
            
            (1,300,000
            )
            
            —
            
            
            (1,300,000
            )Net
                income
            
            
            —
            
            
            —
            
            
            —
            
            
            852,892
            
            
            852,892**Balance
                at December 31, 2007**
            
            
            **9,527,000**
            
            **$**
            **953**
            
            **$**
            **55,393,484**
            
            **$**
            **(11,612,766**
            **)**
            **$**
            **43,781,671**






See
      Notes to Consolidated Financial
      Statements




F-6


HIGHBURY
        FINANCIAL INC. AND SUBSIDIARY
 Consolidated
        Statements of Cash Flows


**Year
                Ended**
              **December
                31,**
              **2007**
            
            **Year
                Ended**
              **December
                31,**
              **2006**
            
            **Period
                from**
              **July
                13, 2005**
              **(inception)
                to**
              **December
                31,**
              **2005****CASH
                FLOWS FROM OPERATING ACTIVITIES**Net
                income (loss)
            
            $
            852,892
            
            $
            (12,463,206
            )
            $
            (2,452
            )Adjustments
                to reconcile net income (loss) tonet
                cash provided by (used in) operating activities:Depreciation
                and amortization
            
            
            222,114
            
            
            —
            
            
            —Deferred
                taxes
            
            
            (864,933
            )
            
            (87,276
            )
            
            —Interest
                income accrued
            
            
            (120,848
            )
            
            —
            
            
            —Investment
                losses
            
            
            121,300
            
            
            —
            
            
            —Expenses
                related to grant of minority interest in Aston
            
            
            —
            
            
            20,784,615
            
            
            —Minority
                interest in net income (loss) of subsidiary
            
            
            4,489,176
            
            
            (6,647,715
            )
            
            —Deferred
                rent
            
            
            322,620
            
            
            —
            
            
            —Impairment
                charge
            
            
            4,110,000
            
            
            —
            
            
            —Changes
                in operating assets and liabilities(Increase)
                decrease in :Accounts
                receivable
            
            
            144,280
            
            
            (3,646,422
            )
            
            —Prepaid
                expenses
            
            
            (48,866
            )
            
            (221,220
            )
            
            —Other
                current assets
            
            
            13,670
            
            
            (13,670
            )
            
            —Other
                long term assets
            
            
            —
            
            
            (150,000
            )
            
            —Increase
                (decrease) in :Accounts
                payable and accrued expenses
            
            
            2,279,746
            
            
            2,190,576
            
            
            2,452Income
                taxes payable
            
            
            (144,331
            )
            
            242,089
            
            
            —Net
                cash provided by (used in) operating activities
            
            
            11,376,820
            
            
            (12,229
            )
            
            —**CASH
                FLOWS FROM INVESTING ACTIVITIES**Purchases
                of investments
            
            
            (9,932,233
            )
            
            —
            
            
            —Proceeds
                from sales of investments
            
            
            5,296,274
            
            
            —
            
            
            —Payment
                for acquisition
            
            
            —
            
            
            (38,600,000
            )
            
            —Receipt
                of cash for working capital in acquisition
            
            
            —
            
            
            3,500,000
            
            
            —Payment
                of costs of the acquisition
            
            
            (19,464
            )
            
            (1,782,869
            )
            
            —Purchase
                of property and equipment
            
            
            (117,480
            )
            
            (40,634
            )
            
            —Net
                cash used in investing activities
            
            
            (4,772,903
            )
            
            (36,923,503
            )
            
            —**CASH
                FLOWS FROM FINANCING ACTIVITIES:**Repurchase
                of underwriters’ purchase option
            
            
            (1,300,000
            )
            
            —
            
            
            —Distributions
                paid to minority interest holders
            
            
            (4,276,077
            )
            
            —
            
            
            —Proceeds
                from sale of shares of common stock
            
            
            —
            
            
            47,460,000
            
            
            25,000Proceeds
                from issuance of option
            
            
            —
            
            
            100
            
            
            —Proceeds
                from notes payable, stockholders
            
            
            —
            
            
            —
            
            
            70,000Payments
                of notes payable, stockholders
            
            
            —
            
            
            (70,000
            )
            
            —Payment
                of costs of public offering
            
            
            —
            
            
            (2,944,987
            )
            
            (58,098
            )Payment
                of deferred underwriting fees
            
            
            —
            
            
            (678,606
            )
            
            —Payment
                to shareholder electing conversion
            
            
            —
            
            
            (618,972
            )
            
            —Net
                cash provided by (used in) financing activities
            
            
            (5,576,077
            )
            
            43,147,535
            
            
            36,902**Net
                increase in cash and cash equivalents**
            
            
            1,027,840
            
            
            6,211,803
            
            
            36,902**Cash
                and cash equivalents - beginning of year**
            
            
            6,248,705
            
            
            36,902
            
            
            —**Cash
                and cash equivalents - end of year**
            
            $
            7,276,545
            
            $
            6,248,705
            
            $
            36,902**Supplemental
                schedule of non-cash financing and investing
                activities:**




Accrual
                of costs of public offering
            
            $
            —
            
            $
            —
            
            $
            425,394Accrual
                of acquisition costs
            
            
            —
            
            
            76,443
            
            
            —Leasehold
                improvements paid by landlord
            
            
            522,360
            
            
            —
            
            
            —**Supplemental
                disclosure of cash flow information:**Cash
                paid for income taxes
            
            $
            1,508,055
            
            $
            462,146
            
            $
            —








See
      Notes to Consolidated Financial Statements


F-7


HIGHBURY
      FINANCIAL INC. AND SUBSIDIARY


**Notes
      to Consolidated Financial Statements**





1.
            Business
                and Summary of Significant Accounting
                Policies





*Organization
      and Nature of Operations*





Highbury
      Financial Inc. (“Highbury” “We” or the “Company”) is an investment management
      holding company providing permanent capital solutions to mid-sized investment
      management firms. We pursue acquisition opportunities and seek to establish
      accretive partnerships with high quality investment management firms. Highbury’s
      strategy is to provide permanent equity capital to fund buyouts from corporate
      parents, buyouts of founding or departing partners, growth initiatives, or
      exit
      strategies for private equity funds. This strategy includes leaving material
      equity interests with management teams to align the interests of management
      and
      our shareholders and, in general, does not include integrating future
      acquisitions, although we may execute add-on acquisitions for our current or
      future affiliates. We seek to augment and diversify our sources of revenue
      by
      asset class, investment style, distribution channel, client type and management
      team.





The
      financial statements include the accounts of Highbury and its majority-owned
      subsidiary, Aston Asset Management LLC (“Aston”). We were incorporated in
      Delaware on July 13, 2005. On November 30, 2006, Highbury and Aston completed
      the acquisition of the U.S. mutual fund business of ABN AMRO Asset Management
      Holdings, Inc. (“AAAMHI”) from AAAMHI and certain of its affiliates. See Note 3
      for additional information. Until November 30, 2006, Highbury was a corporation
      in the development stage. Upon the completion of the acquisition, the Company
      ceased to be a development stage corporation.





Aston’s
      total assets under management were $5.1 billion and $5.7 billion as of December
      31, 2007 and 2006, respectively. Aston provides investment advisory services
      to
      the Aston Funds, a Delaware business trust which includes a family of 27 and
      19
      no-load, open-end mutual funds with approximately $5.0 billion and $5.5 billion
      in client assets as of December 31, 2007 and 2006, respectively. Aston’s mutual
      fund platform is built upon providing advisory, sales, marketing, compliance
      and
      operating resources to mutual funds using sub-advisers that produce
      institutional quality investment products. Aston also has a separate account
      management platform with approximately $145 million and $199 million of assets
      under management as of December 31, 2007 and 2006, respectively.





The
      financial statements are prepared in accordance with accounting principles
      generally accepted in the United States (“U.S. GAAP”).





*Principles
      of Consolidation*





The
      consolidated financial statements include the accounts of Highbury and Aston,
      in
      which the Company has a controlling financial interest. Generally, an entity
      is
      considered to have a controlling financial interest when it owns a majority
      of
      the voting interest in an entity. Highbury owns 65% of Aston and is its manager
      member. Highbury has a contractual arrangement with Aston whereby a percentage
      of revenue is allocable to fund Aston’s operating expenses, including
      compensation, while the remaining portion of revenue is allocable to the Company
      and the other members, with a priority to Highbury. The portion of the income
      of
      Aston allocated to owners other than Highbury (eight individuals collectively
      referred to herein as the “Management Members”) is included in minority interest
      in the consolidated statements of operations. Minority interest in the
      consolidated balance sheets includes capital and undistributed income owned
      by
      the Management Members of Aston. All material intercompany balances and
      transactions have been eliminated in consolidation.




F-8


*Use
      of Estimates*





The
      consolidated financial statements are prepared in accordance with accounting
      principles generally accepted in the United States of America, which require
      management to make assumptions and estimates that affect the amounts reported
      in
      the financial statements and accompanying notes, including identifiable
      intangible assets and goodwill, liabilities for losses and contingencies and
      income taxes. Management believes that the estimates used are reasonable,
      although actual amounts could differ from the estimates and the differences
      could have a material impact on the consolidated financial
      statements.





*Cash
      and Cash Equivalents*





The
      Company considers all highly liquid investments, including money market mutual
      funds, with original maturities of three months or less to be cash equivalents.
      Certain cash accounts are maintained at large financial institutions and, at
      times, may exceed federally insured limits.





*Investments*





In
      2007, the Company elected to adopt early the provisions of Statement of
      Financial Accounting Standards (“SFAS”) No. 157 “Fair Value Measurements” (“SFAS
      157”) and SFAS No. 159 “The Fair Value Option for Financial Assets and Financial
      Liabilities” (“SFAS 159”). The Company carries its investments in government
      securities, primarily 6-month Treasury bills and its investments in certain
      mutual funds managed by Aston, invested as initial seed capital, at fair value
      based on quoted market prices. The Company reflected interest paid and accrued
      on Treasury bills in interest income and changes in fair value of mutual funds,
      $7,264 realized and $(128,564) unrealized for 2007, in Investment income.





At
      December 31, 2007, investments consist of the following:




U.
                  S. Treasury bills
              
              $
              3,064,071Aston
                  mutual funds
              
              
              1,571,436$
              4,635,507


*Restricted
      Cash*





Under
      the terms of the letter of credit provided to the lessor in connection with
      Aston’s lease agreement, the Company is required to maintain $150,000 on deposit
      with the bank, which is included in other long-term assets.





*Fixed
      Assets*





Fixed
      assets are recorded at cost and depreciated using the straight-line method
      over
      their estimated useful lives. The estimated useful lives of office equipment
      and
      furniture and fixtures generally range from three to eleven years. Computer
      software developed or obtained for internal use is amortized using the
      straight-line method over the estimated useful life of the software, generally
      three years or less. The costs of improvements that extend the life of a fixed
      asset are capitalized, while the cost of repairs and maintenance are expensed
      as
      incurred. Leasehold improvements are amortized over the shorter of their
      expected useful lives or the remaining term of the lease for which they are
      incurred.





Under
      the terms of Highbury’s credit facility (Note 8), these fixed assets are pledged
      as collateral for borrowings under the credit facility.






F-9


*Acquired
      Client Relationships, Goodwill and Impairment Charge*





The
      purchase price and the capitalized transaction costs incurred in connection
      with
      the acquisition have been allocated based on the fair value of the assets
      acquired, which is primarily the acquired mutual fund advisory contract. In
      determining the allocation of the purchase price to the acquired mutual fund
      advisory contract, Highbury
      has analyzed the present value of the acquired business’ mutual fund advisory
      contract based on a number of factors including: the acquired business’
historical and potential future operating performance; the historical and
      potential future rates of new business from new and existing clients and
      attrition among existing clients; the stability and longevity of existing
      advisory and sub-advisory relationships; the acquired business’ recent, as well
      as long-term, investment performance; the characteristics of the acquired
      business’ products and investment styles; the stability and depth of the
      management team; and the acquired business’ history and perceived franchise or
      brand value.





The
      Company has determined that the acquired mutual fund advisory contract meets
      the
      indefinite life criteria outlined in SFAS No. 142, “Goodwill and Other
      Intangible Assets” (“SFAS 142”), because the Company expects both the contract
      and the cash flows generated by the contract to continue indefinitely due to
      the
      likelihood of continued renewal at little or no cost. However, the mutual funds’
trustees or directors may terminate the mutual fund advisory contract at any
      time upon written notice for any reason. The Company does not amortize this
      intangible asset, but instead assesses, each reporting period, whether events
      or
      circumstances have occurred which indicate that the indefinite life criteria
      are
      no longer met. If the Company determines the indefinite life criteria are no
      longer met, the Company will amortize the asset over its remaining useful life.
      The Company reviews this asset for impairment at least annually, or more
      frequently whenever events or circumstances occur indicating that the recorded
      intangible asset may be impaired. If Highbury concludes that the carrying value
      of the asset exceeds its fair value, an impairment loss will be recorded in
      an
      amount equal to any such excess.





The
      excess of purchase price for the acquisition over the fair value of net assets
      acquired, including the acquired mutual fund advisory contract, is reported
      as
      goodwill. Goodwill is not amortized, but is instead reviewed for impairment.
      The
      Company assesses goodwill for impairment at least annually, or more frequently
      whenever events or circumstances occur indicating that the recorded goodwill
      may
      be impaired. If the carrying amount of goodwill exceeds the fair value, an
      impairment loss would be recorded in an amount equal to that
      excess.





The
      Company recorded an impairment charge of $4,110,000 in the fourth quarter of
      2007 as a
      result
      of net asset outflows from the Aston Funds and recent negative market
      performance.





*Income
      Taxes*





Income
      taxes are accounted for under the asset and liability method in accordance
      with
      SFAS No. 109 “Accounting for Income Taxes” (“SFAS 109”). Deferred income taxes
      reflect the expected future tax consequences of temporary differences between
      the bases of assets and liabilities for financial reporting and income tax
      purposes. A valuation allowance may be established when necessary to reduce
      deferred tax assets to the amount expected to be realized.





*Minority
      Interest*





Highbury
      owns 65% of Aston and is its manager member. Highbury has a contractual
      arrangement with Aston whereby a percentage of revenue is allocable to fund
      Aston’s operating expenses, including compensation (the Operating Allocation),
      while the remaining portion of revenue (the Owners’ Allocation) is allocable to
      the Company and the other members, with a priority to Highbury. The portion
      of
      the income or loss of Aston allocated to owners other than Highbury is included
      in minority interest in the Consolidated Statements of Operations. Minority
      interest in the Consolidated Balance Sheets includes capital and undistributed
      income owned by the Management Members.





*Revenue
      Recognition*





The
      Company, through Aston, earns investment advisory and administrative fees for
      services provided to the Aston Funds, six money market funds advised by AAAMHI,
      and a limited number of separately managed accounts. These fees are primarily
      based on predetermined percentages of the market value of the assets under
      management and are billed in arrears of the period in which they are earned.
      These fees are recognized over the period in which services are performed unless
      facts and circumstances would indicate that collectibility of the fees is not
      reasonably assured. Expense reimbursements to certain of the Aston Funds in
      accordance with the advisory
      agreements are reported as an offset to investment advisory fees and accounts
      receivable. Substantially all of Aston’s revenues are derived from the Aston
      Funds for which Aston is the investment advisor. Management has determined
      that
      no allowance for doubtful accounts is necessary due to all fees being collected
      within one month from the date of invoice.




F-10


*Deferred
      Rent*





The
      Company recognizes rent on a straight line basis over the life of the lease
      and
      records the difference between the amount charged to expense, and the rent
      paid
      as deferred rent.





*Fair
      Value of Financial Instruments*





The
      carrying amounts of cash and equivalents, accounts receivable and accounts
      payable approximates fair value because of the short-term nature of these
      instruments.





*Share-Based
      Compensation*





In
      December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
      123R, “Share-Based Payment”, (“SFAS 123R” or the “Statement”). This Statement is
      a revision of SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS
      123”), and supersedes Accounting Principles Board Opinion No. 25, “Accounting
      for Stock Issued to Employees” (“APB 25”) and its related implementation
      guidance. On January 1, 2006, the Company adopted the provisions of SFAS 123R
      using the modified prospective method. The Statement requires entities to
      recognize compensation expense for awards of stock options and other share-based
      payments. SFAS 123R also requires the benefits of tax deductions in excess
      of
      recognized compensation expense to be reported as financing cash
      flows.





*Segment
      Information*





SFAS
      No. 131, “Disclosures about Segments of an Enterprise and Related Information,”
establishes disclosure requirements relating to operating segments in annual
      and
      interim financial statements. Management has determined that the Company
      operates in one business segment, namely as an investment adviser managing
      mutual funds and separate accounts.





*Advertising*





Advertising
      costs are expensed as incurred and amounted to $519,535 and $90,000 for the
      years ended December 31, 2007 and 2006, respectively, and $0 for the period
      from
      July 13, 2005 (inception) through December 31, 2005.





*Recent
      Accounting Pronouncements*





The
      FASB has issued interpretation No. 48, “Accounting for Uncertainty in Income
      Taxes—An Interpretation of FASB Statement No. 109” (“FIN 48”), regarding
      accounting for, and disclosure of, uncertain tax positions. FIN 48 clarifies
      the
      accounting for uncertainty in income taxes recognized in an enterprise’s
      financial statements in accordance with FASB Statement No. 109, “Accounting for
      Income Taxes.” FIN 48 prescribes a recognition threshold and measurement
      attribute for the financial statement recognition and measurement of a tax
      position taken or expected to be taken in a tax return. FIN 48 also provides
      guidance on derecognition, classification, interest and penalties, accounting
      in
      interim periods, disclosure, and transition. FIN 48 is effective for fiscal
      years beginning after December 15, 2006. The adoption of FIN 48 had no impact
      on
      the Company’s results of operations and financial position.





In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS
      157”). SFAS 157 is effective in the first quarter of 2008 and establishes a
      framework for measuring fair value.





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits
      entities to choose to measure many financial instruments and certain
      other items at fair value. The objective of the statement is to improve
      financial reporting by providing entities with the opportunity to mitigate
      volatility in reported earnings caused by measuring related assets and
      liabilities differently without having to apply complex hedge accounting
      provisions. The provisions of SFAS 159 are effective for fiscal years beginning
      after November 15, 2008. The early adoption of SFAS 157 and SFAS 159 has not
      had
      a material impact on the Company’s results of operations and financial position.


F-11


In
      December 2007, the FASB issued SFAS No. 141 (revised 2007), *Business
      Combinations* (“SFAS 141R”), which replaces SFAS 141. The statement retains the purchase
      method of accounting for acquisitions, but requires a number of changes,
      including changes in the way assets and liabilities are recognized in the
      purchase accounting. It also changes the recognition of assets acquired and
      liabilities assumed arising from contingencies and requires the expensing of
      acquisition-related costs as incurred. SFAS 141R is effective for us beginning
      January 1, 2009 and will apply prospectively to business combinations
      completed on or after that date.




In
      December 2007, the FASB issued SFAS No. 160, *Noncontrolling
      Interests in Consolidated Financial Statements, an amendment of ARB
      51* (“SFAS 160”), which changes the accounting and reporting for minority interests.
      Minority interests will be recharacterized as noncontrolling interests and
      will
      be reported as a component of equity separate from the parent’s equity, and
      purchases or sales of equity interests that do not result in a change in control
      will be accounted for as equity transactions. In addition, net income
      attributable to the noncontrolling interest will be included in consolidated
      net
      income on the face of the income statement and, upon a loss of control, the
      interest sold, as well as any interest retained, will be recorded at fair value
      with any gain or loss recognized in earnings. SFAS 160 is effective for us
      beginning January 1, 2009 and will apply prospectively. We are currently
      assessing the potential impact that adoption of SFAS 160 would have on our
      financial statements.





Management
      does not believe that any other recently issued, but not yet effective,
      accounting standards if currently adopted would have a material effect on the
      accompanying consolidated financial statements.








2.
            Initial
                Public Offering





The
      registration statement for the Company’s initial public offering (“Offering”)
      was declared effective January 25, 2006. The Company consummated the Offering,
      including full exercise of the over-allotment option, on January 31, 2006 and
      February 3, 2006, respectively. Simultaneously with the Offering, all of the
      Company’s stockholders prior to the Offering (the “Initial Stockholders”),
      including all of the officers and directors of the Company, purchased an
      aggregate of 166,667 units from the Company in a private placement (the “Private
      Placement”).





The
      Company sold 7,910,000 units (“Units”) in the Private Placement and the
      Offering, which included the 1,010,000 Units subject to the underwriters’
over-allotment option. Each Unit consists of one share of the Company’s common
      stock, $0.0001 par value (“Common Stock”), and two redeemable common stock
      purchase warrants (“Warrants”). Each Warrant entitles the holder to purchase
      from the Company one share of Common Stock at an exercise price of $5.00
      commencing January 25, 2007 and expiring four years from the effective date
      of
      the Offering (January 25, 2010). The Warrants will be redeemable, at the
      Company’s option, at a price of $0.01 per Warrant upon 30 days’ notice after the
      Warrants become exercisable, only in the event that the last sale price of
      the
      Common Stock is at least $8.50 per share for any 20 trading days within a 30
      trading-day period ending on the third day prior to the date on which notice
      of
      redemption is given. Separate trading of the Common Stock and Warrants
      underlying the Company’s Units was permitted on February 21, 2006 and commenced
      on March 1, 2006.




Under
      the terms of the Warrants, the Company is required to use its best efforts
      to
      maintain the effectiveness of the registration statement covering the shares
      of
      Common Stock underlying the Warrants. However, the Company is not obligated
      to
      deliver securities, and there are no contractual penalties for failure to
      deliver securities, if a registration statement is not effective at the time
      of
      exercise. Additionally, in the event that a registration statement is not
      effective at the time of exercise, the holder of such Warrant shall not be
      entitled to exercise such Warrant. The Company entered into an Amended and
      Restated Clarification Agreement on December 15, 2006, which clarifies that
      in
      no event (whether in the case of a registration statement not being effective
      or otherwise) is the Company required to net cash settle the Warrants.
      Consequently, the Warrants will expire unexercised and unredeemed if there
      is
      not an effective registration statement covering the shares of Common Stock
      issuable upon exercise of the Warrants.





F-12


In
      connection with the Offering, the Company issued an option, for $100, to the
      underwriters to purchase 336,667 Units at an exercise price of $7.50 per Unit.
      The option became exercisable beginning on January 25, 2007 and was to expire
      on
      January 25, 2010. The Company accounted for the fair value of the option,
      inclusive of the receipt of the $100 cash payment, as an expense of the public
      offering resulting in a charge directly to stockholders’ equity. The Company
      estimated that the fair value of this option was approximately $423,000 ($1.26
      per Unit) using a Black-Scholes option pricing model. The fair value of the
      option granted to the underwriters was estimated as of the date of grant using
      the following assumptions: (1) expected volatility of 29.0%, (2) risk-free
      interest rate of 4.34% and (3) expected life of four years. The option was
      exercisable for cash or on a “cashless” basis, at the holder’s option, such that
      the holder could use the appreciated value of the option (the difference between
      the exercise prices of the option and the underlying Warrants and the market
      price of the units and underlying securities) to exercise the option without
      the
      payment of any cash. In addition, the Warrants underlying such Units were
      exercisable at $6.25 per share. In July
      2007, the Company entered into Unit Purchase Option Repurchase Agreements with
      the underwriters of the Offering pursuant to which the Company repurchased
      the
      option from the underwriters for aggregate cash payments of $1,300,000. The
      unit
      purchase option was cancelled upon its repurchase.





The
      Company received proceeds from the Private Placement of $1,000,002 and from
      the
      Offering, net of the underwriters’ discount and commissions and offering
      expenses, of $42,783,580. An amount of $42,616,234 of the net proceeds of the
      Offering and the Private Placement and $673,333 of compensation for the
      underwriters of the Offering, which was deferred until the consummation of
      a
      business combination (net of approximately $0.11 for each share of common stock
      converted in connection with the business combination as described below) but
      which would be forfeited if a business combination was not consummated, was
      placed in an interest-bearing trust account (“Trust Account”) until the earlier
      of (i) the consummation of a business combination or (ii) liquidation of the
      Company. Under the agreement governing the Trust Account, funds were only
      invested in United States “government securities” within the meaning of Section
      2(a)(16) of the Investment Company Act of 1940 with a maturity of 180 days
      or
      less. The remaining net proceeds (not held in the Trust Account) have been
      used
      to pay for business, legal and accounting due diligence on prospective
      acquisitions and general and administrative expenses of the
      Company.





The
      Initial Stockholders agreed to vote their 1,725,000 founding shares of common
      stock (Note 10), as well as the 166,667 shares of common stock included in
      the
      units they purchased in the Private Placement, in accordance with the vote
      of
      the majority in interest of all other stockholders of the Company (“Public
      Stockholders”) with respect to any business combination. After the consummation
      of the acquisition of U.S. mutual fund business of AAAMHI, these voting
      safeguards were no longer applicable.





With
      respect to the business combination which was approved and consummated, any
      Public Stockholder who voted against the business combination had the right
      to
      demand that the Company convert his shares. The per share conversion price
      was
      equal to the amount in the Trust Account, net of taxes payable, calculated
      as of
      two business days prior to the consummation of the business combination, divided
      by the number of shares of common stock held by Public Stockholders at the
      consummation of the Offering. Such Public Stockholders were entitled to receive
      their per-share interest, net of taxes payable, in the Trust Account computed
      excluding the shares held by Initial Stockholders.





On
      April 20, 2006, Highbury and Aston (the “Highbury Entities”), entered into an
      Asset Purchase Agreement (“Asset Purchase Agreement”) with AAAMHI, ABN AMRO
      Investment Fund Services, Inc. (“AAIFS”), ABN AMRO Asset Management, Inc.,
      (“AAAMI”), Montag & Caldwell, Inc., (“Montag”), Tamro Capital Partners LLC,
      (“TAMRO”), Veredus Asset Management LLC, (“Veredus”), and River Road Asset
      Management, LLC, (“River Road” and together with AAAMHI, AAIFS, AAAMI, Montag,
      TAMRO and Veredus individually referred to as a “Seller” and collectively as
“Sellers”) to acquire substantially all of the Sellers’ business of providing
      investment advisory, administration, distribution and related services to the
      U.S. mutual funds (the “Target Funds”) specified in the Asset Purchase
      Agreement. After entering into the Asset Purchase Agreement, Highbury submitted
      the acquisition for stockholder approval.




F-13


The
      stockholders approved the acquisition at the Company’s annual meeting of
      stockholders on November 27, 2006, and the acquisition was subsequently
      consummated on November 30, 2006. The Company used $40,459,312 of the proceeds
      of the Offering and the Private Placement to consummate the acquisition with
      the
      Sellers. In connection with the consummation of the acquisition, the Company
      converted 108,000 shares to cash for one Public Stockholder at a cost of
      $618,972, or $5.73 per share. These shares were subsequently retired by the
      Company. On November 30, 2006, the Company paid the underwriters $678,606,
      inclusive of the deferred interest, net of taxes payable, and less approximately
      $11,670 for the shares of common stock which were converted. The Company
      recorded the deferred underwriting fees payable to the underwriters as an
      expense of the public offering resulting in a charge directly to stockholders’
equity. **** See
      Note 3 for more information about the acquisition.








3.
            Acquisition





*Limited
      Liability Company Agreement*





Highbury
      formed Aston Asset Management LLC on April 19, 2006 and became the sole member
      of Aston. In connection with Highbury and Aston entering into the asset purchase
      agreement, the limited liability company agreement of Aston was amended and
      the
      Management Members were admitted as members of Aston. Highbury owns 65% of
      the
      membership interests of Aston, and the Management Members own 35% of the
      membership interests of Aston.





Pursuant
      to the limited liability company agreement, 72% of the revenue (the “Operating
      Allocation”) of Aston is used to pay operating expenses of Aston. The remaining
      28% of the revenues (the “Owners’ Allocation”) of Aston are allocated to the
      owners of Aston. The Owners’ Allocation is allocated among the members of Aston
      according to their relative ownership interests. Currently, 18.2% of total
      revenue is allocated to Highbury and 9.8% of total revenue is allocated to
      the
      Management Members. In the event that Aston’s operating expenses are less than
      72% of Aston’s revenue, the additional income is allocated to the Management
      Members.  From time to time, certain non-cash expenses may be allocated in
      a different manner by mutual agreement of Highbury and the Management
      Members.





Highbury’s
      contractual share of revenues has priority over the distributions to the
      Management Members in the event Aston’s actual operating expenses exceed the
      Operating Allocation. As a result, excess expenses first reduce the portion
      of
      the Owners’ Allocation allocated to the Management Members until the Management
      Members’ allocation is eliminated, and then Highbury’s allocation is reduced.
      Any reduction in the distribution of revenues to be paid to Highbury is required
      to be paid to Highbury out of any future excess Operating Allocation and the
      portion of future Owners’ Allocation allocated to the Management Members with
      interest.




*Summary
      of the Acquisition*





On
      April 20, 2006, Highbury and Aston (“Highbury Entities”) entered into the Asset
      Purchase Agreement with the Sellers to acquire substantially all of the Sellers’
business of providing investment advisory, administration, distribution and
      related services to the Target Funds. Upon the consummation of the acquisition
      on November 30, 2006, the Highbury Entities acquired 100% of the assets
      necessary to operate the acquired business. Highbury owns a 65% interest in
      Aston, and eight employees of Aston own the balance of the membership interests.
      The Highbury Entities did not acquire any research and development assets in
      the
      acquisition. The results of the acquired business are included in Highbury’s
      consolidated statement of operations from December 1, 2006.





Upon
      the consummation of the acquisition, substantially all of the management and
      staff of the acquired business were hired by Aston. A senior officer of AAAMHI
      and three other individuals also joined Aston in connection with the
      acquisition. In connection with the consummation of the acquisition, Aston
      entered into agreements with each of the Sellers that previously managed the
      Target Funds pursuant to which each such Seller now acts as a sub-advisor to
      the
      applicable Target Fund. In connection with the consummation of the acquisition,
      Aston re-branded the Target Funds as the Aston Funds. Pursuant to the Asset
      Purchase Agreement, the
      Sellers have agreed not to terminate these agreements prior to November 30,
      2011.






F-14


*Purchase
      Price Allocation*





The
      Highbury Entities purchased the acquired business from the Sellers for a cash
      payment of $38,600,000 at the closing. Highbury did not issue any equity
      interests to the Sellers in connection with the transaction. The purchase price
      and the other costs of the acquisition of the acquired business are allocated
      based on the fair value of net assets acquired. In addition to the purchase
      price, Highbury incurred $1,859,312 of costs directly attributable to the
      transaction. As such, the total cost of the acquisition was as
      follows:





Costs
                of the acquisition:Purchase
                price
            
            $
            38,600,000Transaction
                costs
            
            
            1,859,312Total
                costs
            
            $
            40,459,312




The
      Company prepared an allocation of the costs of the acquisition in 2006. 
During 2007, the Company determined that $2,627,000 more should be allocated
      to
      the indefinite-lived identifiable intangibles, and $2,627,000 less should be
      allocated to goodwill. The original and revised allocations of the fair values
      of the assets acquired in the acquisition are as follows:





Allocation
                of assets received in the acquisition:
            
            Original
                Allocation
            
            Revised
              AllocationIdentifiable
                intangibles (mutual fund advisory contract)
            
            $
            26,753,000
            
            $
            29,380,000Goodwill
            
            
            9,673,412
            
            
            7,046,412Working
                capital (cash)
            
            
            3,500,000
            
            
            3,500,000Receivable
                from Sellers
            
            
            301,989
            
            
            301,989Fixed
                assets
            
            
            230,911
            
            
            230,911Total
                costs
            
            $
            40,459,312
            
            $
            40,459,312





The
      purchase price (i) excludes up to $3.8 million that will be payable if the
      annualized investment advisory fee revenue generated under investment advisory
      contracts for the six months prior to the second anniversary of the closing
      of
      the acquisition exceeds $41.8 million and (ii) includes up to $3.8 million
      that
      will be refundable if the annualized investment advisory fee revenue generated
      under investment advisory contracts for the six months prior to the second
      anniversary of the closing of the acquisition is less than $34.2 million. This
      increase or decrease in consideration will be recorded when the contingency
      is
      determinable and additional consideration is receivable or refundable. Highbury
      will record any additional consideration issued as an additional cost of the
      acquired entity and such amount will increase the allocation to goodwill. If
      Highbury receives a refund of amounts paid, the amount refunded will be recorded
      as a decrease in the cost of the acquired entity and such amount will decrease
      the allocation to goodwill.





*Acquired
      Assets*





The
      assets acquired in the acquisition were accounted for under the purchase method
      of accounting and recorded at their fair values at the dates of acquisition.
      The
      excess of the purchase price over the estimated fair values of the net assets
      acquired was recorded as increases in identifiable intangibles and goodwill.
      The
      results of operations of the acquired business have been included in the
      consolidated financial statements beginning as of December 1, 2006.





The
      Company has determined that the acquired mutual fund advisory contract meets
      the
      indefinite life criteria outlined in SFAS No. 142 because the Company expects
      both the contract and the cash flows generated by the contract to continue
      indefinitely due to the likelihood of continued renewal at little or no cost.
      Accordingly, the Company does not amortize this intangible asset, but instead
      assesses, each reporting period, whether events or circumstances have occurred
      which indicate that the indefinite life criteria are no longer met. If the
      Company determines the indefinite life criteria are no longer met, the Company
      will amortize the asset over its remaining useful life. The Company reviews
      this
      asset for impairment at least annually, or more frequently whenever events
      or circumstances occur indicating that the recorded intangible asset may be
      impaired. If Highbury concludes that the carrying value of the asset exceeds
      its
      fair value, an impairment loss will be recorded in an amount equal to any such
      excess.




F-15




The
      excess of purchase price for the acquisition over the fair value of net assets
      acquired, including the acquired mutual fund advisory contract, is reported
      as
      goodwill. Goodwill is not amortized, but is instead reviewed for impairment.
      The
      Company assesses goodwill for impairment at least annually, or more frequently
      whenever events or circumstances occur indicating that the recorded goodwill
      may
      be impaired. If the carrying amount of goodwill exceeds the fair value, an
      impairment loss would be recorded in an amount equal to that
      excess.





The
      balance of the fixed assets acquired are depreciated on a straight-line basis
      over their useful lives.





For
      income tax purposes, Highbury expects to amortize $36,426,412 of goodwill and
      intangibles over a 15-year period. If Highbury is obligated to pay a contingent
      payment to the Sellers, such amount will increase the allocation to goodwill
      and
      will be amortized over a 15-year period for income tax purposes. If Highbury
      receives a refund of amounts paid, the amount refunded will be recorded as
      a
      decrease in the cost of the acquired entity, will decrease the allocation to
      goodwill and will reduce the balance to be amortized over the remainder of
      the
      15-year period for income tax purposes.





*Pro
      Forma Financial Results*





Unaudited
      pro forma financial results are set forth below, giving consideration to the
      acquisition, as if the acquisition had occurred as of the beginning of 2006
      and
      as of the beginning of 2005.





**Year
                Ended December 31,****2006**
            
            **2005**Revenue
            
            $
            42,304,982
            
            $
            48,927,074Net
                loss
            
            
            (11,707,229
            )
            
            (20,654,285
            )Loss
                per share - basic and diluted
            
            
            (1.23
            )
            
            (2.17
            )





In
      2005, the acquired business recorded a goodwill impairment of $13.3 million
      and
      an intangible asset impairment of $10.4 million. These impairment charges are
      expected to be non-recurring in nature. The facts and circumstances leading
      to
      the impairment charges to goodwill and intangible assets relate to AAAMHI’s
      assessment of declines in net assets in the Target Funds resulting from net
      share redemptions and unfavorable investment performance trends in 2005. The
      fair value of the acquired business used to determine the impairment of goodwill
      was determined with reference to the expected proceeds to be received upon
      the
      sale of the acquired business to Highbury. The fair value of the intangible
      asset related to the investment management contracts used to determine the
      amount of impairment of the intangible asset was determined based on a
      discounted cash flow analysis of the acquired contracts. No impairment of
      goodwill or intangibles was determined to be required for periods prior to
      2005.
      In 2006, Aston recorded a one-time, non-cash compensation expense of $20.8
      million in connection with the grant of a 35% membership interest in Aston
      to
      the Management Members.








4.
            Fixed
                Assets and Lease Commitments





Fixed
      assets consisted of the following:





At
                December 31,2007
            
            2006Leasehold
                improvements
            
            $
            601,666
            
            $
            33,752Furniture
                and fixtures
            
            
            373,164
            
            
            357,900Computer
                equipment
            
            
            140,599
            
            
            123,011Office
                equipment
            
            
            97,945
            
            
            58,8711,213,374
            
            
            573,534Accumulated
                depreciation and amortization
            
            
            (222,114
            )
            
            -Net
                fixed assets
            
            $
            991,260
            
            $
            573,534






F-16


Depreciation
      expense was $222,114 and $0 in 2007 and 2006, respectively. Highbury did not
      incur any rent expense in 2005. Rent expense in 2007 and 2006, which totaled
      $369,973 and $32,713 respectively, was solely related to Aston’s operations.
      Aston currently leases office space for its primary office in Chicago and for
      two satellite offices in New Jersey and California under various leasing
      arrangements. The lease for the office in New Jersey will expire in May 2008.
      The lease for the office in California is on a month-to-month basis. At December
      31, 2007, the Company’s aggregate future minimum payments for the Chicago lease,
      which carries an eleven year term ending January 2017, are payable as
      follows:







**Required
                MinimumPayments**
            
            
            **Annual
                Lease**
              **Expense**Year
                ending December 31,2008
            
            $
            215,474
            
            $
            219,1742009
            
            
            222,003
            
            
            219,1742010
            
            
            228,533
            
            
            219,1742011
            
            
            235,062
            
            
            219,1742012
            
            
            241,592
            
            
            219,174Thereafter
            
            
            1,031,660
            
            
            889,302Total
            
            $
            2,174,324
            
            $
            1,985,172





In
      addition to the base rent, Aston is required to pay its pro rata share of the
      real estate taxes and operating expenses of its building. The figures in the
      table above reflect the base annual rent payments and the base annual rent
      expense on a straight-line basis in accordance with SFAS 13. Under the
      terms of Aston’s lease, Aston is entitled to an abatement of the base rent and
      real estate taxes and operating expenses for a period of 11 months at the
      beginning of the lease term. This abatement period ended in December
      2007. Management has estimated that the abatement relating to real estate
      taxes and operating expenses is approximately $190,000. In addition, the lessor
      has contributed $522,360 to the construction costs in connection with the
      build-out of the office space. This construction allowance and the
      aforementioned abatement of the real estate taxes and operating expenses has
      been recorded as deferred rent and amortized as a reduction to rent expense
      over
      the term of the lease in accordance with SFAS 13. The amortization of these
      deferred rent amounts are not included in the annual rent expense schedule
      above. Also, Aston has an option to extend the lease under the same terms and
      conditions for a single additional five-year period.




F-17






5.
            Benefit
                Plans





In
      2006, Aston established a qualified defined contribution retirement plan
      covering substantially all of its full-time employees. Under the plan, Aston
      is
      able to make discretionary contributions for the benefit of qualified plan
      participants up to IRS limits. The expense related to Aston’s plan for the years
      ended 2007 and 2006 was $319,979 and $1,200, respectively.







6.
            Accounts
                Payable and Accrued Expenses





Accounts
      payable and accrued expenses consisted of the following:




At
                December 31,2007
            
            
            2006Payable
                to sub-advisors
            
            $
            1,173,769
            
            $
            1,556,961Payable
                to brokers
            
            
            455,987
            
            
            239,949Payable
                to minority interest
            
            
            965,500
            
            
            —Accrued
                compensation payable
            
            
            1,072,280
            
            
            —Accrued
                professional fees
            
            
            473,507
            
            
            —Other
                payables
            
            
            408,173
            
            
            472,560$
            4,549,216
            
            $
            2,269,470







7.
            Notes
                Payable, Stockholders





In
      August 2005, the Company sold unsecured promissory notes in the aggregate amount
      of $70,000 to all of its Initial Stockholders. The notes were
      non-interest-bearing and were repaid immediately following the consummation
      of
      the Offering from the net proceeds of the Offering.








8.
            Credit
                Facility





Highbury
      has available a credit agreement with City National Bank expiring on October
      31,
      2008. The credit facility provides for a revolving line of credit of up to
      $12,000,000 which will be used for working capital, general corporate purposes
      and repurchases of the Company’s outstanding securities, if
      appropriate.





The
      Company’s borrowing under the credit facility bears interest, at Highbury’s
      option, at either the fluctuating prime rate minus 0.50% or LIBOR plus 1.50%.
      In
      addition, Highbury will pay annually a fee of 0.25% on the average daily balance
      of the unused portion of the credit facility. The Company will have to make
      interest payments monthly for any prime rate borrowings. For any LIBOR
      borrowings, interest payments will be made at the end of any LIBOR contract
      or
      quarterly, whichever is sooner.





The
      credit facility is secured by all of the Company’s assets and contains customary
      and appropriate affirmative and negative covenants for financings of its type
      (subject to customary exceptions). The financial covenants include a maximum
      total leverage ratio (including debt from all sources) of 5.0x Adjusted EBITDA,
      although borrowings under the credit agreement are limited to 2.0x Adjusted
      EBITDA, and incorporate a minimum fixed charge coverage ratio of 1.25x and
      a
      minimum net worth of $20 million. Other covenants will, among other things,
      limit our ability to incur liens or other encumbrances, make certain
      investments, dispose of assets, enter into mergers or acquisitions and incur
      indebtedness.





There
      were no borrowings outstanding under this facility at any point in 2007 or
      2006,
      including at December 31, 2007 or 2006. Highbury has maintained compliance
      with
      the applicable covenants of this facility.


F-18





9.
            Commitments
                and Contingencies





a.  The
      Asset Purchase Agreement provides for a contingent adjustment payment payable
      in
      cash shortly after the second anniversary of the closing of the acquisition.
      In
      the event the annualized investment advisory fee revenue generated under
      investment advisory contracts between Aston and the Target Funds or any other
      funds advised by Aston and sub-advised by the Sellers for the six months prior
      to the second anniversary of the date of the closing of the acquisition, or
      the
      Target Revenue:





·
            exceeds
                $41.8 million, Aston and Highbury will collectively pay to AAAMHI
                the
                difference between the Target Revenue and $41.8 million, up to a
                total
                aggregate payment of $3.8 million; or·
            is
                less than $34.2 million, AAAMHI will pay to Aston and Highbury the
                difference between the $34.2 million and the Target Revenue, up to
                a total
                aggregate payment of $3.8 million.





The
      future annualized revenue will be determined based on the definition of
“Approved Target Funds” which includes the existing funds and new funds or
      classes of funds which are advised by Aston and sub-advised by the Sellers.
      As a
      result, in the event that Highbury were to acquire other mutual fund investment
      managers and the trustees of those mutual funds were to retain sub-advisers
      affiliated with the Sellers, such revenues would be included in the calculation
      of the future annualized revenue. For the six-month period ended December 31,
      2007 the annualized investment advisory fee revenue generated under investment
      advisory contracts between Aston and the Target Funds was $34.8 million. As
      such, Highbury has not accrued any liability for this contingency.





b.  The
      Company presently occupies office space provided by Berkshire Capital
      Securities, LLC, an affiliate of several of our Initial Stockholders. Such
      affiliate has agreed that it will make such office space, as well as certain
      office and secretarial services, available to the Company, as may be required
      by
      the Company from time to time. The Company had agreed to pay such affiliate
      $7,500 per month for such services commencing on January 26, 2006. The Company
      agreed to increase this payment to $10,000 per month effective November 1,
      2007.
      The statements of operations for the years ended December 31, 2007 and 2006
      include $95,000 and $83,952 related to this agreement. The agreement is
      terminable by either party upon six months’ prior notice.




c.  The
      Initial Stockholders are entitled to registration rights with respect to the
      shares of common stock and warrants of the Company owned by them. The holders
      of
      the majority of the founding shares are entitled to make up to two demands
      that
      the Company register these shares and any other warrants or shares of the
      Company owned by them (excluding the shares purchased in the Private Placement)
      at any time commencing on the date the founding shares are released from escrow.
      In addition, the Initial Stockholders have certain “piggy-back” registration
      rights with respect to such securities on registration statements filed
      subsequent to the date the founding shares are released from escrow. The holders
      of a majority of the units purchased in the Private Placement are entitled
      to
      make up to two demands that the Company register the shares, warrants and shares
      underlying the warrants comprising such units at any time. In addition, the
      Initial Stockholders have certain “piggy-back” registration rights with respect
      to such securities on registration statements filed by the Company. The Company
      will bear the expenses incurred in connection with the filing of any of the
      foregoing registration statements. The shares purchased in the Private Placement
      may also be eligible for resale pursuant to Rule 144 under the Securities Act
      of
      1933, as amended.





The
      founding shares have been placed in escrow until the earliest of: (1) January
      25, 2009; (2) the Company’s liquidation; and (3) the consummation of a
      liquidation, merger or stock exchange, stock purchase or other similar
      transaction which results in all of the Company’s stockholders having the right
      to exchange their shares of common stock for cash, securities or other property.
      During the escrow period, the Initial Stockholders may not sell or transfer
      their founding shares except among the Initial Stockholders, to their spouses
      and children or trusts established for their benefit, by virtue of the laws
      of
      descent and distribution upon the death of any Initial Stockholder or pursuant
      to a qualified domestic relations order, but the Initial Stockholders retain
      all
      other rights as stockholders, including, without limitation, the right to vote
      their shares and receive cash dividends, if declared.





d.  Highbury
      and Aston are subject to claims, legal proceedings and other contingencies
      in
      the ordinary course
      of their business activities. Each of these matters is subject to various
      uncertainties, and it is possible that some of these matters may be resolved
      in
      a manner unfavorable to the Company or Aston. Highbury and Aston establish
      accruals for matters for which the outcome is probable and can be reasonably
      estimated. Management is not aware of any claims, legal proceedings and other
      contingencies that could result in a loss to Highbury or Aston. As such, no
      contingencies have been accrued.




F-19






10.
            Stockholders’
                Equity





*Preferred
      Stock*





The
      Company is authorized to issue up to 1,000,000 shares of preferred stock, par
      value $0.0001 per share, with such designations, voting and other rights and
      preferences as may be determined from time to time by the Board of Directors.
      As
      of December 31, 2007, no shares of preferred stock have been
      issued.





*Common
      Stock*





The
      Company is authorized to issue up to 50,000,000 shares of common stock, par
      value $0.0001 per share. The Company’s Initial Stockholders purchased 1,500,000
      common shares for $25,000 on August 1, 2005. On January 13, 2006, the Board
      of
      Directors authorized a stock dividend of 0.15 shares of common stock for each
      share of common stock outstanding, bringing the initial outstanding shares
      to
      1,725,000. All references in the accompanying consolidated financial statements
      to the number of shares of stock outstanding have been retroactively restated
      to
      reflect the stock dividend. The Company sold 7,910,000 Units in the Private
      Placement and the Offering, which included all of the 1,010,000 Units subject
      to
      the underwriters’ over-allotment option. Included in these Units were one share
      of common stock and two warrants to purchase shares of common stock. In
      connection with the consummation of the acquisition, the Company repurchased
      108,000 shares from one Public Stockholder. As of December 31, 2007 and 2006,
      9,527,000 shares of common stock, par value $0.0001 per share, were issued
      and
      outstanding.




*Common
      Stock Commitments*





At
      December 31, 2007 and 2006, 15,820,000 shares of common stock, excluding the
      underwriters’ unit purchase option discussed below, were reserved for issuance
      upon exercise of redeemable Warrants. All of the Warrants have an exercise
      price
      of $5.00 and will expire on January 25, 2010.





At
      December 31, 2006, 1,010,001 shares of common stock were reserved for issuance
      upon exercise of the underwriters’ unit purchase option. Upon exercise of the
      underwriters’ unit purchase option, the underwriters were to receive 336,667
      Units, each of which would have included one share of common stock and two
      warrants to purchase shares of common stock. In
      July
      2007, the Company repurchased the option from the underwriters for $1,300,000
      and the unit purchase option was cancelled upon its repurchase.




F-20






11.
            Economic
                Dependency





Relationships
      with a limited number of clients account for a significant majority of
      Highbury’s revenue. Aston’s client, the Aston Funds, a Delaware business trust,
      which accounts for approximately 97% of our assets under management, is
      comprised of 27 mutual funds that are currently managed by Aston. Because all
      these funds have the same trustees, it is possible that the contracts with
      them
      could be terminated simultaneously. Of these 27 funds, the Aston/Montag &
Caldwell Growth Fund and the Aston/Optimum Mid Cap Fund contribute approximately
      36% and 18% of the revenues of Aston, respectively. Additionally, a s
      of
      December 31, 2007, approximately 20% of our assets under management and 23%
      of
      our revenues are generated by customers sourced through a firm which was
      previously affiliated with the sellers but was subsequently sold to an
      unaffiliated third party. These various client concentrations leave Highbury vulnerable to any adverse
      change in the financial condition of any of its major clients. The loss of
      any
      of these relationships may have a material adverse impact on the Company’s
      revenue.





12.
            Income
                Taxes





The
      provisions for income taxes for the period from July 13, 2005 (inception)
      through December 31, 2005 and for the years ended December 31, 2006 and 2007
      consist of the following:





**July
                13, 2005****Year
                Ended**
            
            **Year
                Ended**
            
            **(inception)
                to****December
                31,**
            
            **December
                31,**
            
            **December
                31,****2007**
            
            **2006**
            
            **2005**CurrentFederal
            
            $
            1,161,142
            
            $
            614,365
            
            $
            (148
            )State
            
            
            202,583
            
            
            87,723
            
            
            (21
            )Valuation
                allowance
            
            
            —
            
            
            —
            
            
            169DeferredFederal
            
            
            (766,248
            )
            
            (75,575
            )
            
            (647
            )State
            
            
            (98,685
            )
            
            (10,792
            )
            
            (93
            )Valuation
                allowance
            
            
            —
            
            
            (909
            )
            
            740$
            498,792
            
            $
            614,812
            
            $
            —





The
      total provision for income taxes differs from that amount which would be
      computed by applying the U.S. Federal income tax rate to income before provision
      for income taxes from July 13, 2005 (inception) through December 31, 2005 and
      for the years ended December 31, 2006 and 2007 as follows:





**Year
                Ended**
              **December
                31,**
              **2007**
            
            **Year
                Ended**
              **December
                31,**
              **2006**
            
            **July
                13, 2005 (inception)****to**
              **December
                31,**
              **2005**Statutory
                federal income tax rate
            
            
            34
            %
            
            (34
            )%
            
            (34
            )%State
                tax net of federal benefit
            
            
            4
            %
            
            (3
            )%
            
            —Permanent
                difference related to grant of 35% interest in Aston
            
            
            —
            
            
            42
            %
            
            —Other
                permanent differences
            
            
            (1
            )%
            
            —
            
            
            —Increase
                in valuation allowance
            
            
            —
            
            
            —
            
            
            34
            %Effective
                income tax rate
            
            
            37
            %
            
            5
            %
            
            0
            %






F-21




The
      sources of the net deferred tax assets are as follows:




**December
                31, 2007**
            
            **December
                31, 2006**Expenses
                deferred for income tax purposes
            
            $
            383,869
            
            $
            162,265(Amortization)
                impairment of intangibles
            
            
            568,340
            
            
            (74,989
            )Net
                deferred income tax assets
            
            $
            952,209
            
            $
            87,276






13.
            Earnings
                (Loss) Per Share





The
      calculation of basic earnings (loss) per share is computed by dividing income
      (loss) available to common stockholders by the weighted average number of shares
      of the Company’s common stock outstanding during the period. Diluted earnings
      per share gives effect to all dilutive potential common shares outstanding
      during the period. The following is a reconciliation of the numerator and
      denominator used in the calculation of earnings (loss) per share available
      to
      common stockholders:




**Year
                Ended December 31,****2007**
            
            **2006**
            
            **2005**Numerator:Net
                income (loss)
            
            $
            852,892
            
            $
            (12,463,206
            )
            $
            (2,452
            )Denominator:Average
                shares outstanding - basic
            
            
            9,527,000
            
            
            9,045,773
            
            
            1,725,000Effect
                of dilutive instruments:
              Warrants
            
            
            1,225,904
            
            
            -
            
            
            -Average
                shares outstanding - diluted
            
            
            10,752,904
            
            
            9,045,773
            
            
            1,725,000





As
      of December 31, 2006, the Company’s dilutive instruments outstanding include
      15,820,000 Warrants which became exercisable after January 25, 2007 and 336,667
      Units included in the underwriters’ purchase option. As of December 31, 2007 the
      Company’s dilutive instruments outstanding include only the 15,820,000 Warrants.
      There are no effects of dilutive instruments included in the 2005 calculation
      because the Warrants were not issued and outstanding until after the Offering
      in
      January 2006. There are no effects of dilutive instruments included in the
      2006
      calculation because the Company had a net loss, primarily resulting from the
      compensation charge related to the grant of a minority interest in Aston, and
      the effect of the Warrants would be anti-dilutive. If the Company had generated
      net income in 2006, the dilutive effect of the Warrants would have increased
      average shares outstanding - diluted by 193,260 to 9,239,033. The dilutive
      effect of the Warrants is calculated using the treasury stock method and the
      average share price during the period. The Warrants are described in more detail
      in Note 2.




14.
            Related
                Person Transactions





Highbury’s
      Board of Directors has adopted certain policies and procedures for the review,
      approval and ratification of related person transactions, which the Company
      refers to as the Related Person Policy. Among other things, the Related Person
      Policy provides that any transaction, arrangement or relationship (or any series
      of similar transactions, arrangements or relationships) in which Highbury
      (including any of its subsidiaries) was, is or will be a participant and the
      amount involved exceeds $120,000, and in which any related person had, has
      or
      will have a direct or indirect material interest, must be reported to the
      Company’s Board of Directors prior to the consummation or amendment of the
      transaction. A related person, as defined in the Related Person Policy, means
      any person who is, or at any time since the beginning of the Company’s last
      fiscal year was, a director or executive officer of the Company or a nominee
      to
      become a director of the Company; any person who is known to be the beneficial
      owner of more than 5% of any class of Highbury’s voting securities; any
      immediate family member of any of the foregoing persons, which means any child,
      stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law,
      son-in-law, daughter-in-law, brother-in-law, or sister in-law
      of the director, executive officer, nominee or more than 5% beneficial owner,
      and any person (other than a tenant or employee) sharing the household of such
      director, executive officer, nominee or more than 5% beneficial owner; and
      any
      firm, corporation or other entity in which any of the foregoing persons is
      employed or is a general partner or principal or in a similar position or in
      which such person has a 5% or greater beneficial ownership interest. The
      Company’s Board of Directors reviews these related person transactions and
      considers all of the relevant facts and circumstances available to the Board,
      including (if applicable) but not limited to: the benefits to Highbury; the
      availability of other sources of comparable products or services; the terms
      of
      the transaction; and the terms available to unrelated third parties or to
      employees generally. The Board of Directors may approve only those related
      person transactions that are in, or are not inconsistent with, the best
      interests of the Company and its stockholders, as the Board determines in good
      faith. At the beginning of each fiscal year, the Board will review any
      previously approved or ratified related person transactions that remain ongoing
      and have a remaining term of more than six months. The Board will consider
      all
      of the relevant facts and circumstances and will determine if it is in the
      best
      interests of Highbury and its stockholders to continue, modify or terminate
      these related person transactions.





F-22


As
      of December 31, 2006, Highbury had extended $840,000 through four promissory
      notes to Aston to fund Aston’s initial formation and operating expenses.
      Pursuant to Aston’s mutual fund advisory contracts with the Aston Funds, Aston
      receives its revenue at the beginning of each month for the services provided
      in
      the prior month. As such, Aston incurred operating expenses for the month of
      December 2006 before it received its first revenue from the Aston Funds. The
      promissory notes accrue interest per annum at a rate equal to the prime lending
      rate then in effect as reported by JPMorgan Chase on the unpaid principal amount
      outstanding from time to time. As of December 31, 2006, there was approximately
      $5,366 in accrued interest on the promissory notes. The principal, and accrued
      interest thereon, of the notes is subject to mandatory prepayment from all
      monies allocated as Owners’ Allocation that is payable to the Management Members
      and all monies allocated as Operating Allocation prior to any distributions
      by
      Aston to the Management Members. These notes and the interest income related
      to
      the notes have been eliminated in the consolidation of Highbury’s financial
      results. These notes were repaid in 2007 and no subsequent loans were
      made.





Aston
      is the investment advisor to the Aston Funds, a Delaware business trust. Aston’s
      Chief Executive Officer, is the Chairman of the Board of Trustees of the Aston
      Funds. Aston’s President, is the President and Chief Executive Officer of the
      Aston Funds. Aston’s Chief Financial Officer and Chief Compliance Officer, is
      the Senior Vice President, Secretary, Treasurer, Chief Financial Officer, Chief
      Operating Officer and Chief Compliance Officer of the Aston Funds. As a result
      of these relationships, the Aston Funds may be considered related parties as
      such are defined in SFAS No. 57, “Related Party Disclosures” (“SFAS 157”). In
      2007, Aston earned advisory fees of $35,977,121 and administrative fees of
      $4,389,987 from the Aston Funds. These fees, in total, accounted for
      approximately 96% of Aston’s total revenue in 2007. In 2006, Aston earned
      advisory fees of $3,337,351 and administrative fees of $432,886 from the Aston
      Funds. These fees, in total, accounted for approximately 98% of Aston’s total
      revenue in 2006. As of December 31, 2007 and 2006, the Company’s balance sheet
      includes accounts receivable of $3,093,885 and $3,559,692, respectively,
      associated with these fees, as Aston is generally paid in the first week of
      the
      month following the month in which fees were earned. There were no similar
      fees
      or receivables recorded in connection with this relationship in
      2005.





Highbury
      has engaged Berkshire Capital Securities LLC (“Berkshire Capital”) to act as a
      non-exclusive financial advisor in connection with possible future acquisitions.
      In such capacity, Berkshire Capital will assist the Company in structuring,
      negotiating and completing acquisitions of targets identified by Highbury and
      acknowledged by both Highbury and Berkshire Capital as being subject to
      Berkshire Capital’s engagement. If the Company enters into an agreement to
      acquire such a target company during the term of Berkshire Capital’s engagement
      or within two years thereafter, and such acquisition is completed, then the
      Company will pay Berkshire Capital a success fee at closing equal to the greater
      of (a) the sum of 3.0% of the first $15 million of the aggregate consideration
      in such transaction and 1.0% of the aggregate consideration in such transaction
      in excess of $15 million, and (b) $600,000. Upon the execution of a definitive
      agreement with respect to an acquisition, Highbury will pay Berkshire Capital
      $200,000 which will be credited against the success fee. Highbury will also
      reimburse Berkshire Capital for its reasonable expenses in performing its
      services under the engagement letter and will indemnify Berkshire Capital for
      liabilities it incurs in performing such services, unless such liabilities
      are
      attributable to Berkshire Capital’s gross negligence or willful misconduct. The
      Company engaged Berkshire Capital in the first quarter of 2007.




The
      Company presently occupies office space provided by Berkshire Capital. Berkshire
      Capital has agreed that it will make such office space, as well as certain
      office and secretarial services, available to the Company, as may be required
      by
      the Company from time to time. The Company had agreed to pay Berkshire Capital
      $7,500 per month for such facilities and services commencing on January 26,
      2006. The Company agreed to increase this payment to $10,000 per month effective
      November 1, 2007. The statements of operations for the years ended December
      31,
      2007 and December 31, 2006 include $95,000 and $83,952 related to this
      agreement, respectively. The agreement is terminable by either party upon six
      months’ prior notice.







15.
            Subsequent
                Events





Subsequent
      to the most recent balance sheet date of December 31, 2007, the Company
      repurchased 1,836,292 warrants for $1,823,046 and 400,372 shares for
      $1,735,611.




F-23






16.
            Selected
                Quarterly Financial Data
                (Unaudited)





The
      following is a summary of the quarterly results of operations of the Company
      for
      the years ended December 31, 2007 and 2006.





2007
            
            2007
            
            2007
            
            2007First
              Quarter
            
            Second
              Quarter
            
            Third
              Quarter
            
            Fourth
              QuarterRevenue
            
            $
            11,055,186
            
            $
            10,616,247
            
            $
            10,157,568
            
            $
            10,234,994Operating
                income (loss)
            
            
            3,055,334
            
            
            2,393,500
            
            
            2,278,342
            
            
            (2,223,121
            )Income
                (loss) before income taxes
            
            
            1,548,831
            
            
            1,569,655
            
            
            1,465,306
            
            
            (3,232,108
            )Net
                income (loss)
            
            
            974,899
            
            
            927,377
            
            
            892,699
            
            
            (1,942,083
            )Earnings
                per share - basic (a)
            
            
            0.10
            
            
            0.10
            
            
            0.09
            
            
            (0.20
            )Earnings
                per share - diluted (a)
            
            
            0.09
            
            
            0.07
            
            
            0.09
            
            
            (0.20
            )






2006
            
            2006
            
            2006
            
            2006First
              Quarter
            
            Second
              Quarter
            
            Third
              Quarter
            
            Fourth
              QuarterRevenue
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            3,828,100Operating loss
            
            
            (90,153
            )
            
            (170,521
            )
            
            (147,469
            )
            
            (19,832,873
            )Income
                (loss) before income taxes
            
            
            154,350
            
            
            306,897
            
            
            319,353
            
            
            (12,628,994
            )Net
                income (loss)
            
            
            97,155
            
            
            194,082
            
            
            201,013
            
            
            (12,955,456
            )Earnings
                per share - basic (a)
            
            
            0.01
            
            
            0.02
            
            
            0.02
            
            
            (1.35
            )Earnings
                per share - diluted (a)
            
            
            0.01
            
            
            0.02
            
            
            0.02
            
            
            (1.35
            )






(a)
            The
                sum of the quarters may not equal the full year per share amounts
                due to
                the effect of the weighted average number of shares outstanding during
                the
                fiscal years as compared to the
                quarters.





During
      the first eleven months of 2006, Highbury had no operations other than its
      acquisition activities, and its only source of income was interest and
      investment income earned on cash balances. Upon the consummation of the
      acquisition on November 30, 2006, Aston began generating operating revenue.
      In
      connection with the grant of a 35% interest in Aston to the Management Members,
      Aston recorded a one-time, non-cash compensation expense of approximately $20.8
      million in the fourth quarter of 2006. Highbury recorded an impairment charge
      related to Aston's advisory contract with the Aston Funds of $4,110,000 in
      the
      fourth quarter of 2007 as a result of net asset outflows from the Aston Funds
      and recent negative market performance.




F-24


Report
      Of Independent Auditors










The
      Board of Directors


ABN
      AMRO Asset Management Holdings, Inc.




We
      have audited the accompanying combined statements of financial condition of
      the
      U.S. Mutual Fund Business of ABN AMRO Asset Management Holdings, Inc. (the
      Business) as of December 31, 2005 and 2004, and the related combined statements
      of operations, changes in owner’s equity and cash flows for each of the three
      years in the period ended December 31, 2005. These financial statements are
      the
      responsibility of the Business’ management. Our responsibility is to express an
      opinion on these financial statements based on our audits.





We
      conducted our audits in accordance with auditing standards generally accepted
      in
      the United States. Those standards require that we plan and perform the audit
      to
      obtain reasonable assurance about whether the financial statements are free
      of
      material misstatement. We were not engaged to perform an audit of the Business’
internal control over financial reporting. Our audit included consideration
      of
      internal control over financial reporting as a basis for designing audit
      procedures that are appropriate in the circumstances, but not for the purpose
      of
      expressing an opinion on the effectiveness of the Business’ internal control
      over financial reporting. Accordingly, we express no such opinion. An audit
      also
      includes examining, on a test basis, evidence supporting the amounts and
      disclosures in the financial statements, assessing the accounting principles
      used and significant estimates made by management, and evaluating the overall
      financial statement presentation. We believe that our audits provide a
      reasonable basis for our opinion.





In
      our opinion, the combined financial statements referred to above present fairly,
      in all material respects, the financial position of the U.S. Mutual Fund
      Business of ABN AMRO Asset Management Holdings, Inc. at December 31, 2005 and
      2004, and the combined results of its operations, changes in its owner’s equity
      and its cash flows for each of the three years in the period ended December
      31,
      2005, in conformity with accounting principles generally accepted in the United
      States.





/s/
        Ernst & Young LLP





**Ernst &
      Young LLP**


Chicago,
      Illinois


May
      25, 2006


F-25


U.S.
      Mutual Fund Business Of


ABN
      AMRO Asset Management Holdings, Inc.


**Combined Statements
      of Financial Condition**





**Year
                Ended
                December 31,****2005**
            
            **2004****Assets**Cash
                and cash equivalents
            
            **$**
            **5,239,747**
            
            $
            3,158,266Advisory
                and administrative fees receivable
            
            
            **4,074,486**
            
            
            4,193,370Goodwill
            
            
            **10,518,750**
            
            
            23,862,800Other
                intangible assets
            
            
            **22,045,000**
            
            
            32,470,533Other
                assets
            
            
            **1,635**
            
            
            3,159Total
                assets
            
            **$**
            **41,879,618**
            
            $
            63,688,128**Liabilities
                and owner’s equity**Accounts
                payable—affiliates
            
            **$**
            **2,266,559**
            
            $
            2,844,195Accrued
                compensation and benefits
            
            
            **648,625**
            
            
            943,836Other
                accrued liabilities
            
            
            **954,318**
            
            
            478,959Total
                liabilities
            
            
            **3,869,502**
            
            
            4,266,990Owner’s
                equity
            
            
            **38,010,116**
            
            
            59,421,138Total
                liabilities and owner’s equity
            
            **$**
            **41,879,618**
            
            $
            63,688,128







F-26


U.S.
      Mutual Fund Business Of


ABN
      AMRO Asset Management Holdings, Inc.


Combined Statements
      ofOperations





**Years
                Ended
                December 31,****2005**
            
            **2004**
            
            **2003****Revenues**Advisory
                fees, net
            
            **$**
            **47,380,780**
            
            $
            47,808,972
            
            $
            38,499,123Administration
                fees
            
            
            **1,546,294**
            
            
            1,438,991
            
            
            1,178,412Total
                revenues
            
            
            **48,927,074**
            
            
            49,247,963
            
            
            39,677,535**Operating
                expenses**Distribution
                and advisory costs:Affiliates
            
            
            **29,313,775**
            
            
            34,426,160
            
            
            29,637,704Other
            
            
            **11,091,977**
            
            
            6,492,457
            
            
            3,893,365Total
                distribution and advisory costs
            
            
            **40,405,752**
            
            
            40,918,617
            
            
            33,531,069Compensation
                and related expenses
            
            
            **5,194,449**
            
            
            4,416,624
            
            
            3,920,966Related-party
                expense allocations
            
            
            **2,493,741**
            
            
            1,888,156
            
            
            1,225,238Goodwill
                impairment
            
            
            **13,344,050**
            
            
            —
            
            
            —Intangible
                asset impairment
            
            
            **10,425,533**
            
            
            —
            
            
            —Other
            
            
            **824,522**
            
            
            510,540
            
            
            400,599Total
                operating expenses
            
            
            **72,688,047**
            
            
            47,733,937
            
            
            39,077,872Operating
                income (loss)
            
            
            **(23,760,973**
            **)**
            
            1,514,026
            
            
            599,663Interest
                income
            
            
            **133,524**
            
            
            31,140
            
            
            20,432Net
                income (loss) before taxes
            
            
            **(23,627,449**
            **)**
            
            1,545,166
            
            
            620,095Income
                tax provision (benefit)
            
            
            —
            
            
            —
            
            
            —Net
                income (loss)
            
            **$**
            **(23,627,449**
            **)**
            $
            1,545,166
            
            $
            620,095








F-27




U.S.
      Mutual Fund Business Of


ABN
      AMRO Asset Management Holdings, Inc.


**Combined
      Statements of Changes in Owner’s Equity**







**Years
                Ended December 31, 2005,
                2004, and 2003**Owner’s
                equity at January 1, 2003
            
            $
            56,681,718Net
                income
            
            
            620,095Net
                transfers from AAAMHI
            
            
            1,407,219Owner’s
                equity at December 31, 2003
            
            
            58,709,032Net
                income
            
            
            1,545,166Dividends
                to parent
            
            
            (2,500,000
            )Net
                transfers from AAAMHI
            
            
            1,666,940Owner’s
                equity at December 31, 2004
            
            
            **59,421,138**Net
                loss
            
            
            **(23,627,449**
            **)**Net
                transfers from AAAMHI
            
            
            **2,216,427**Owner’s
                equity at December 31, 2005
            
            **$**
            **38,010,116**









F-28


U.S.
      Mutual Fund Business Of


ABN
      AMRO Asset Management Holdings, Inc.


Combined Statements
      ofCash
      Flows







**Years
                Ended
                December 31,****2005**
            
            **2004**
            
            **2003****Operating
                activities**Net
                income (loss)
            
            **$**
            **(23,627,449**
            **)**
            $
            1,545,166
            
            $
            620,095Adjustments
                to reconcile net income (loss) to net cash flow provided by (used
                in)
                operating activities:Goodwill
                impairment
            
            
            **13,344,050**
            
            
            —
            
            
            —Intangible
                asset impairment
            
            
            **10,425,533**
            
            
            —
            
            
            —Changes
                in assets and liabilities:(Increase)
                decrease in advisory and administrative fees receivable
            
            
            **118,884**
            
            
            (314,046
            )
            
            (486,119
            )(Increase)
                decrease in other assets
            
            
            **1,524**
            
            
            2,797
            
            
            3,657Increase
                (decrease) in accounts payable—affiliates
            
            
            **(577,636**
            **)**
            
            56,767
            
            
            582,552Increase
                (decrease) in accrued compensations and benefits
            
            
            **(295,211**
            **)**
            
            165,019
            
            
            10,526Increase
                (decrease) in other accrued liabilities
            
            
            **475,359**
            
            
            (35,007
            )
            
            (450,697
            )Net
                cash flow provided by (used in) operating activities
            
            
            **(134,946**
            **)**
            
            1,420,696
            
            
            280,014**Financing
                activities**Dividends
                paid
            
            
            —
            
            
            (2,500,000
            )
            
            —Transfers
                from AAAMHI, net
            
            
            **2,216,427**
            
            
            1,666,940
            
            
            1,407,219Net
                cash provided by (used in) financing activities
            
            
            **2,216,427**
            
            
            (833,060
            )
            
            1,407,219Net
                increase in cash and cash equivalents
            
            
            **2,081,481**
            
            
            587,636
            
            
            1,687,233Cash
                and cash equivalents at beginning of year
            
            
            **3,158,266**
            
            
            2,570,630
            
            
            883,397Cash
                and cash equivalents at end of year
            
            **$**
            **5,239,747**
            
            $
            3,158,266
            
            $
            2,570,630








F-29


U.S.
      Mutual Fund Business Of


ABN
      AMRO Asset Management Holdings, Inc.


**Notes
      to Combined Financial Statements**





1.
            Basis
                of Presentation




The
      accompanying combined financial statements include the U.S. Mutual Fund Business
      of ABN AMRO Asset Management Holdings, Inc. (AAAMHI) (the Business). The
      principal operations of the Business relate to investment advisory,
      administrative and distribution services provided to certain registered
      investment companies comprising ABN AMRO Funds (the Funds) and a small number
      of
      managed accounts of AAAMHI. The Business is included in the consolidated
      financial statements of AAAMHI, a wholly owned subsidiary of ABN AMRO Asset
      Management Holding N.V. (AAAMHNV), which is a wholly owned subsidiary of ABN
      AMRO Bank N.V. (ABN AMRO). Pursuant to an Asset Purchase Agreement (the
      Agreement), dated as of April 20, 2006, AAAMHI and its wholly owned subsidiaries
      and certain other affiliated entities (ABN AMRO Investment Fund Services, Inc.,
      ABN AMRO Asset Management Inc. (AAAM), Montag & Caldwell, Inc. (Montag),
      TAMRO Capital Partners LLC (TAMRO), Veredus Asset Management LLC (Veredus),
      and
      River Road Asset Management, LLC (River Road)) agreed to sell the Business
      to
      Highbury Financial Inc. (Highbury) for an aggregate cash purchase price of
      $38.6
      million. Upon completion of the sale transaction, certain members of the
      Business’ management and staff will join Highbury. Additionally, a newly formed
      subsidiary of Highbury, Aston Asset Management LLC, will become adviser to
      the
      Funds, which will be re-named the Aston Funds. AAAMHI and certain affiliates
      who
      are currently the advisers to the Funds will continue to provide advisory
      services to the Funds after completion of the sale but in a sub-advisory
      capacity. A senior officer of AAAMHI and two other individuals not involved
      in
      the Business have also agreed to join Highbury in connection with the
      acquisition of the Business.





The
      combined financial statements have been prepared from AAAMHI’s historical
      accounting records on a carve-out basis to include the historical financial
      position, results of operations, and cash flows applicable to the Business.
      The
      combined financial statements exclude all continuing operations of AAAMHI and
      its affiliated entities listed in the preceding paragraph that will be retained
      by the sellers. The combined financial statements have been prepared as if
      the
      Business had been a stand-alone operation, though they are not necessarily
      representative of results had the Business operated as a stand-alone operation,
      and it is not practicable to estimate what those expenses would have been on
      a
      stand-alone basis. Revenues, expenses, assets, and liabilities were derived
      from
      amounts associated with the Business in the AAAMHI financial records. The
      financial results include allocations based on methodologies management believes
      are reasonable of corporate expenses from AAAMHI and other U.S. affiliates
      and
      allocations of other corporate expenses from AAAMHI’s parent company that may be
      different from comparable expenses that would have been incurred if the Business
      operated as a stand-alone business. Specifically, ABN AMRO Services Company,
      Inc., a wholly-owned subsidiary of AANAHC (see note 7), provides the Business
      with certain IT, infrastructure and e-mail services. LaSalle Bank Corporation,
      also a wholly-owned subsidiary of AANAHC, provides the Business with payroll,
      benefits, general ledger maintenance, internal audit and accounts payable
      services. These services are charged based upon utilized quantities (typically
      number of employees, number of transactions processed, hours worked). AAAMHI
      provides the Business with executive management, finance, human resources and
      personal trade compliance services. These services are charged based upon
      employee count or management time incurred. AAAMHI’s parent and its parent
      companies provide other executive management, technology, sales support,
      finance, compliance and human resources support services. These services are
      charged out on a formula basis that considers Assets Under Management, number
      of
      employees and non-interest expense. The cost of these services is included
      under
      the caption “Related-party expense allocations” in the accompanying combined
      statements of operations. Certain cash receipts and cash payments related to
      the
      Business were handled through AAAMHI and affiliate cash accounts, which are
      not
      included in the carve-out financial statements. These amounts have been
      accounted for as net capital contributions to the Business and are reflected
      as
“Net transfers from AAAMHI” in the combined statements of changes in owner’s
      equity and the combined statements of cash flows reflects these cash
      transactions.


F-30


Preparation
      of the combined financial statements in conformity with accounting principles
      generally accepted in the
      United States (GAAP) requires management to make estimates and assumptions
      that
      affect the reported financial statement amounts and accompanying notes.
      Management believes that the estimates utilized in preparing its financial
      statements are reasonable and prudent. Actual results could differ from those
      estimates.








2.
            Summary
                of Significant Accounting Policies




*Principles
      of Combination*




The
      accompanying combined statements of financial condition, operations, cash flows,
      and owner’s equity of the Business for the years ended December 31, 2005, 2004,
      and 2003 have been prepared on a carve-out basis (see Note 1).




*Cash
      and Cash Equivalents*




Cash
      and cash equivalents represent cash in banks and investments in money market
      mutual funds.




*Goodwill
      and Intangible Assets*




The
      Business has adopted the provisions of SFAS No. 142, *Goodwill and Other Intangible Assets* (FAS 142). Intangible assets, comprising the estimated value of investment
      management contracts, and goodwill, included in the combined financial
      statements of the Business relate to the acquisition of certain AAAMHI
      affiliates including the Business. These amounts reflect management’s best
      estimate of a reasonable allocation to the Business of such amounts included
      in
      the financial records of AAAMHI. The provisions of SFAS No. 142 require that
      goodwill and other intangible assets with indefinite lives no longer be
      amortized, but instead be tested at least annually for impairment and require
      reporting units to be identified for the purpose of assessing potential future
      impairments of goodwill. The Business’ acquired intangible management contract
      asset relate to the provision of investment advisory services to the Funds
      in
      exchange for fees that are based on a percentage of the average daily net assets
      of the funds. These management contracts were acquired in 2001 as part of the
      acquisition of certain AAAMHI affiliates. The management contracts are subject
      to annual renewal by the Funds’ board of trustees which is expected to continue
      indefinitely since this has been the experience for the Funds as well as for
      the
      mutual fund industry as a whole. Accordingly, the Business’ acquired intangible
      assets related to the Funds are considered to be of an indefinite life as there
      is no foreseeable limit on the contract period. The Business conducts its annual
      testing of goodwill and intangible assets for impairment annually in the fourth
      quarter unless events warrant more frequent testing.




*Revenue
      Recognition*




The
      Business derives its revenues from investment advisory and administrative
      services provided to the Funds and a limited number of managed accounts of
      AAAMHI. Based on the terms of the advisory and administrative agreements in
      place that set out fees to be earned as a stated percentage of assets under
      management, advisory and administrative fees are recognized in revenue in the
      period such services are performed unless facts and circumstances would indicate
      that collectability of the fees are not reasonably assured. Expense
      reimbursements to certain of the Funds in accordance with agreements are
      reported as an offset to investment advisory fees. Such reimbursements totaled
      $2,106,263, $2,126,553, and $2,337,713 in 2005, 2004, and 2003,
      respectively.






F-31


*Distribution
      and Advisory Costs*




Included
      in distribution and advisory costs in the accompanying financial statements
      are
      fees paid to AAAMHI and its affiliates and other nonaffiliated entities pursuant
      to contracts related to the management and distribution of the Funds and managed
      account assets. Such costs are recorded in the period incurred.




The
      Funds pay five affiliates of AAAMHI (Montag, AAAM, TAMRO, Veredus and River
      Road) investment advisory fees pursuant to management contracts with these
      entities under which the affiliates provide investment advisory services to
      the
      Funds. AAAM also pays two third-party investment management firms, MFS
      Institutional Advisors, Inc. and Optimum Investment Advisors, LLC, investment
      sub-advisory fees pursuant to management contracts with these entities under
      which these independent firms provide investment sub-advisory services to two
      of
      the Funds. The Business, generally through ABN AMRO Distribution Services (USA)
      Inc. (the Distributor), has entered into nearly 400 selling/service agreements
      through which independent third parties sell the Business’ Funds and/or provide
      other services to their clients in exchange for certain payments. Unless paid
      by
      the Distributor pursuant to the Funds’ Rule 12b-1 Plan, these payments, as well
      as certain sales and marketing costs, are included within distribution and
      advisory costs.




*Income
      Taxes*




The
      Business is a component of AAAMHI and as such was a component of the
      consolidated income tax return of AAAMHI or an affiliate of AAAMHI for the
      years
      presented in these financial statements. However, for the purpose of the
      preparation of these financial statements, the Business is considered a
      stand-alone entity, and any required provision for federal and state income
      taxes has been determined accordingly. The provision for federal and state
      income taxes is comprised of two components, current and deferred income taxes.
      Deferred tax assets and liabilities are determined based on temporary
      differences between the financial and tax-reporting bases of assets and
      liabilities and are measured using currently enacted rates and laws. Deferred
      tax assets are recognized subject to management’s judgment that realization is
      more likely than not.





*Fair
      Value of Financial Instruments*




The
      carrying value of financial assets and liabilities included in the accompanying
      combined statements of financial condition approximate fair values due to their
      short-term nature.




3.
            Goodwill
                and Intangible Assets




Goodwill
      and intangible assets at December 31, 2005 and 2004, included in the
      accompanying combined statements of financial condition are shown net of
      accumulated amortization of $1,553,200 and $2,113,467 recorded prior to 2002
      and
      the adoption of FAS 142. Impairment charges of approximately $10.4 million
      of
      intangible assets and $13.3 million of goodwill were recorded by the Business
      in
      2005 in accordance with FAS 142.




The
      facts and circumstances leading to the impairment charges to goodwill and
      intangible assets relate to management’s assessment of declines in net assets in
      the Funds resulting from net share redemptions and unfavorable investment
      performance trends. The fair value of the Business used to determine the
      impairment of goodwill was determined with reference to the expected proceeds
      to
      be received upon the sale of the Business. The fair value of the intangible
      asset related to the investment management contracts used to determine the
      amount of impairment of the intangible asset, was determined based on a
      discounted cash flow analysis of the acquired contracts. No impairment of
      goodwill or intangibles was determined to be required for periods prior to
      2005.


F-32





4.
            Distribution
                and Advisory Costs




Distribution
      and advisory costs in the accompanying combined statement of operations consist
      of the following:




**Years
                Ended December 31****2005**
            
            **2004**
            
            **2003**Advisory
                costs:AAAMHI
                affiliates
            
            **$**
            **28,666,296**
            
            $
            29,602,273
            
            $
            24,955,320Third
                party sub-advisers
            
            
            **2,541,836**
            
            
            1,819,916
            
            
            1,312,058Total
                advisory costs
            
            
            **31,208,132**
            
            
            31,422,189
            
            
            26,267,378Distribution
                costs:AAAMHI
                affiliates
            
            
            **647,479**
            
            
            4,823,887
            
            
            4,682,384Nonaffiliates
            
            
            **8,550,141**
            
            
            4,672,541
            
            
            2,581,307Total
                distribution costs
            
            
            **9,197,620**
            
            
            9,496,428
            
            
            7,263,691Total
                distribution and advisory costs
            
            **$**
            **40,405,752**
            
            $
            40,918,617
            
            $
            33,531,069




5.
            Income
                Taxes




A
      reconciliation of the differences between the total income tax provision
      (benefit) and the amounts computed at the statutory federal tax rate of 35%
      for
      the years ended December 31, 2005, 2004, and 2003 is as follows:






**Years
                Ended December 31****2005**
            
            
            **2004**
            
            
            **2003**Income
                tax provision (benefit) at statutory federal income tax
                rate
            
            **$**
            **(8,269,608**
            **)**
            $
            540,808
            
            $
            217,033Increase
                (decrease) in taxes resulting from:State
                income taxes, net of federal benefit
            
            
            **(1,181,372**
            **)**
            
            77,258
            
            
            31,005Valuation
                allowance adjustment
            
            
            **9,450,980**
            
            
            (618,066
            )
            
            (248,038
            )Provision
                for income taxes
            
            **$**
            —
            
            $
            —
            
            $
            —





The
      current and deferred portion of the total provision for income taxes above
      was
      $0 for each of the respective years.




The
      components of the net deferred tax balances as of December 31, 2005 and 2004
      are
      as follows:







**2005**
            
            **2004**Deferred
                tax assets:Net
                operating loss carry forwards
            
            **$**
            **6,560,728**
            
            $
            5,020,085Goodwill
                and intangibles
            
            
            **3,107,833**
            
            
            —Other
            
            
            **36,654**
            
            
            34,150Less
                valuation allowance
            
            
            **(9,705,215**
            **)**
            
            (254,235
            )Deferred
                tax asset, net of valuation allowance
            
            
            **—**
            
            
            4,800,000Deferred
                tax liabilities:Goodwill
                and intangibles
            
            
            —
            
            
            4,800,000Net
                deferred taxes
            
            **$**
            —
            
            $
            —




The
      need for a valuation allowance to reduce federal and state deferred tax assets
      and net operating losses has been determined as if the Business was a
      stand-alone entity. As such, management believes it is more likely than not
      that, these items will not be realized.




6.
            Benefit
                Plans






F-33




*Pension
      Plans*




ABN
      AMRO Bank sponsors a noncontributory, defined-benefit pension plan covering
      substantially all U.S. salaried employees. Assets held by the plan consist
      primarily of shares of registered investment companies and pooled trust funds.
      The allocated expense of the Business totaled $158,252, $184,799, and $125,552
      for the years ended December 31, 2005, 2004, and 2003,
      respectively.




*Profit-Sharing
      and Savings Plan*




ABN
      AMRO Bank sponsors a profit-sharing and savings plan under Section 401(k) of
      the
      Internal Revenue Code, covering substantially all U.S. salaried employees.
      Under
      the plan, employee contributions are partially matched by the respective ABN
      AMRO Bank subsidiary. In addition, the respective ABN AMRO Bank subsidiary
      may
      allocate a portion of its net profits to employees’ accounts in the plan. The
      allocated expense of the Business totaled $135,344, $186,598, and $221,785
      for
      the years ended December 31, 2005, 2004, and 2003, respectively.




*Group
      Welfare Plan*




ABN
      AMRO Bank provides welfare and life insurance benefits to substantially all
      U.S.
      salaried employees and their dependents. The amount charged to expense includes
      welfare benefits paid to participants, net of participant contributions, and
      administrative costs. Life insurance premiums paid to insurance companies are
      recognized as an expense when paid. The allocated expense of the Business
      totaled $201,441, $233,458, and $207,356 for the years ended December 31, 2005,
      2004, and 2003.




7.
            Related-Party
                Transactions




ABN
      AMRO is a Dutch bank with operations around the world. With respect to its
      asset
      management business in the United States, ABN AMRO has two primary wholly-owned
      subsidiaries, ABN AMRO North America Holding Company (AANAHC) and AAAMHNV.
      AAAMHNV owns 100% of AAAMHI, and the assets of the Business are owned in their
      entirety by AAAMHI. In the ordinary course of business, the Business utilizes
      investment advisory services provided by several affiliated entities. Five
      subsidiaries of AAAMHI, including Montag (100% owned), AAAM (100% owned), TAMRO
      (100% owned), Veredus (50% owned) and River Road (45% owned), currently serve
      as
      investment advisors to the Funds. The Funds pay the investment advisors an
      advisory fee, net of any fee waivers and expense reimbursements, and the
      advisors pay the Business a fixed percentage of the net advisory fees for
      administrative and distribution services. The payments made to affiliated
      entities, which provide advisory and distribution services to certain mutual
      funds and separate account assets of AAAMHI are included under the caption
      “Distribution and advisory costs” in the accompanying combined statements of
      operations (See Note 4).





The
      Business also utilizes operational and support services provided by several
      affiliated entities. ABN AMRO Services Company, Inc., a wholly-owned subsidiary
      of AANAHC, provides the Business with certain IT, infrastructure and e-mail
      services. LaSalle Bank Corporation, also a wholly-owned subsidiary of AANAHC,
      provides the Business with payroll, benefits, general ledger maintenance,
      internal audit and accounts payable services. AAAMHI provides the Business
      with
      executive management, finance, human resources and personal trade compliance
      services. The cost of these services is included under the caption
“Related-party expense allocations” in the accompanying combined statements of
      operations. Payables to affiliates related to distribution, advisory or other
      services provided to the Business are included in “Accounts payable—affiliates”
in the accompanying combined statements of financial condition.






F-34




Report
      of Independent Auditors














The
      Board of Directors


ABN
      AMRO Asset Management Holdings, Inc.





We
      have audited the accompanying combined statement of financial condition of
      the
      U.S. Mutual Fund Business of ABN AMRO Asset Management Holdings, Inc. (the
      Business) as of November 30, 2006, and the related combined statements of
      operations, changes in owner’s equity and cash flows for the eleven month period
      ended November 30, 2006. These financial statements are the responsibility
      of
      the Business’ management. Our responsibility is to express an opinion on these
      financial statements based on our audit.





We
      conducted our audit in accordance with auditing standards generally accepted
      in
      the United States. Those standards require that we plan and perform the audit
      to
      obtain reasonable assurance about whether the financial statements are free
      of
      material misstatement. We were not engaged to perform an audit of the Business’
internal control over financial reporting. Our audit included consideration
      of
      internal control over financial reporting as a basis for designing audit
      procedures that are appropriate in the circumstances, but not for the purpose
      of
      expressing an opinion on the effectiveness of the Business’ internal control
      over financial reporting. Accordingly, we express no such opinion. An audit
      also
      includes examining, on a test basis, evidence supporting the amounts and
      disclosures in the financial statements, assessing the accounting principles
      used and significant estimates made by management, and evaluating the overall
      financial statement presentation. We believe that our audit provides a
      reasonable basis for our opinion.





In
      our opinion, the combined financial statements referred to above present fairly,
      in all material respects, the financial position of the U.S. Mutual Fund
      Business of ABN AMRO Asset Management Holdings, Inc. at November 30, 2006,
      and
      the combined results of its operations, changes in its owner’s equity, and its
      cash flows for the eleven month period ended November 30, 2006, in conformity
      with U.S. generally accepted accounting principles.








/s/
      Ernst & Young LLP





Ernst
      & Young LLP


Chicago,
      Illinois


March
      20, 2007




F-35




U.S.
      Mutual Fund Business Of


ABN
      AMRO Asset Management Holdings, Inc.


Combined
                    Statement of Financial Condition
                  November
                      30,
                      2006


**Assets**Cash
                and cash equivalents
            
            **$**
            **7,966,323**Advisory
                and administrative fees receivable
            
            
            **3,480,736**Goodwill
            
            
            **10,518,750**Other
                intangible assets
            
            
            **22,045,000**Other
                assets
            
            
            **1,635**Total
                assets
            
            **$**
            **44,012,444****Liabilities
                and owner’s equity**Accounts
                payable – affiliates
            
            **$**
            **1,695,851**Accrued
                compensation and benefits
            
            
            **260,655**Other
                accrued liabilities
            
            
            **1,641,214**Total
                liabilities
            
            
            **3,597,720**Owner’s
                equity
            
            
            **40,414,724**Total
                liabilities and owner’s equity
            
            **$**
            **44,012,444**






F-36


U.S.
      Mutual Fund Business Of


ABN
      AMRO Asset Management Holdings, Inc.


Combined
                    Statement of Operations
                  November
                      30,
                      2006




Eleven
                Months Ended November 30,
                2006**Revenues**Advisory
                fees, net of expense reimbursements
            
            **$**
            **37,195,210**Administration
                fees
            
            
            **1,281,672**Total
                revenues
            
            
            **38,476,882****Operating
                expenses**Distribution
                and advisory costs:Affiliates
            
            
            **21,058,676**Other
            
            
            **7,771,555**Total
                distribution and advisory costs
            
            
            **28,830,231**Compensation
                and related expenses
            
            
            **3,999,963**Related
                party expense allocations
            
            
            **2,405,079**Other
                operating expenses
            
            
            **1,147,768**Total
                operating expenses
            
            
            **36,383,041**Operating
                income
            
            
            **2,093,841**Interest
                income
            
            
            **314,695**Net
                income before taxes
            
            
            **2,408,536**Income
                tax provision
            
            
            **—**Net
                income
            
            **$**
            **2,408,536**







F-37




U.S.
      Mutual Fund Business Of


ABN
      AMRO Asset Management Holdings, Inc.


Combined
                      Statement of Changes in Owner’s Equity
                    November
                        30,
                        2006






Eleven
                Months Ended November 30,
                2006Owner’s
                equity at January 1, 2006
            
            **$**
            **38,010,116**Net
                income
            
            
            **2,408,536**Net
                transfers to AAAMHI
            
            
            **(3,928**
            **)**Owner’s
                equity at November 30, 2006
            
            **$**
            **40,414,724**









F-38


U.S.
      Mutual Fund Business Of


ABN
      AMRO Asset Management Holdings, Inc.


Combined
                      Statement of Cash
                      Flows




Eleven
                Months Ended November 30,
                2006**Operating
                activities**Net
                income
            
            **$**
            **2,408,536**Adjustments
                to reconcile net income to net cash
              provided
                by operating activities:Changes
                in assets and liabilities:Decrease
                in advisory and administrative fees receivable
            
            
            **593,750**Decrease
                in accounts payable - affiliates
            
            
            **(570,708**
            **)**Decrease
                in accrued compensation and benefits
            
            
            **(387,970**
            **)**Increase
                in other accrued liabilities
            
            
            **686,896**Net
                cash provided by operating activities
            
            
            **2,730,504****Financing
                activities**Transfers
                to AAAMHI, net
            
            
            **(3,928**
            **)**Net
                cash used in financing activities
            
            
            **(3,928**
            **)**Net
                increase in cash and cash equivalents
            
            
            **2,726,576**Cash
                and cash equivalents at January 1, 2006
            
            
            **5,239,747**Cash
                and cash equivalents at November 30, 2006
            
            **$**
            **7,966,323**










F-39




U.S.
      Mutual Fund Business Of


ABN
      AMRO Asset Management Holdings, Inc.


Notes
                      to Combined Financial
                      Statements                                                                                                                                                                     &
amp;
                      amp;
                      #160;


1.
            Basis
                of Presentation





The
      accompanying combined financial statements include the U.S. Mutual Fund Business
      of ABN AMRO Asset Management Holdings, Inc. (AAAMHI) (the Business). Prior
      to
      its sale on November 30, 2006, the principal operations of the Business related
      to investment advisory, administrative and distribution services provided to
      certain registered investment companies comprising ABN AMRO Funds (the Funds)
      and a small number of managed accounts of AAAMHI. The Business was included
      in
      the consolidated financial statements of AAAMHI, a wholly owned subsidiary
      of
      ABN AMRO Asset Management Holding N.V. (AAAMHNV), a Dutch corporation, which
      is
      a wholly owned subsidiary of ABN AMRO Bank N.V. (ABN AMRO). Pursuant to an
      Asset
      Purchase Agreement (the Agreement), dated as of April 20, 2006, AAAMHI and
      its
      wholly-owned subsidiaries and certain other affiliated entities (ABN AMRO
      Investment Fund Services, Inc., ABN AMRO Asset Management, Inc. (AAAM), Montag
      & Caldwell, Inc. (Montag), TAMRO Capital Partners LLC (TAMRO), Veredus Asset
      Management LLC (Veredus) and River Road Asset Management, LLC (River Road))
      agreed to sell the Business to Highbury Financial Inc. (Highbury) for an
      aggregate cash purchase price of $38.6 million, subject to a contingent
      adjustment payment on the second anniversary of the closing by either AAAMHI
      or
      Highbury of up to $3.8 million based on the achievement of various revenue
      targets. Additionally, a newly formed subsidiary of Highbury, Aston Asset
      Management LLC (Aston), became investment adviser to the Funds, which were
      renamed the Aston Funds. Upon completion of the sale transaction on November
      30,
      2006, certain members of the Business’ management and staff joined Aston. AAAMHI
      and certain affiliates who were the investment advisers to the Funds prior
      to
      November 30, 2006 will continue to provide advisory services to the Funds but
      in
      a sub-advisory capacity. A senior officer of AAAMHI and three other individuals
      not involved in the Business also joined Aston in connection with the
      acquisition of the Business.




The
      combined financial statements have been prepared from AAAMHI’s historical
      accounting records on a carve-out basis to include the historical financial
      position, results of operations, and cash flows applicable to the Business.
      The
      combined financial statements exclude all continuing operations of AAAMHI and
      its affiliated entities listed in the preceding paragraph that were retained
      by
      the sellers. The combined financial statements have been prepared as if the
      Business had been a stand-alone operation, though they are not necessarily
      representative of results had the Business operated as a stand-alone operation,
      and it is not practicable to estimate what those expenses would have been on
      a
      stand-alone basis. Revenues, expenses, assets, and liabilities were derived
      from
      amounts associated with the Business in the AAAMHI financial records. The
      financial results include allocations based on methodologies that management
      believes are reasonable of corporate expenses from AAAMHI and allocations of
      other corporate expenses from AAAMHI’s parent company that may be different from
      comparable expenses that would have been incurred if the Business operated
      as a
      stand-alone business. Specifically, prior to November 30, 2006, ABN AMRO
      Services Company, Inc., a wholly-owned subsidiary of AANAHC (see Note 7),
      provided the Business with certain IT, infrastructure and e-mail services.
      LaSalle Bank Corporation, also a wholly-owned subsidiary of AANAHC, provided
      the
      Business with payroll, benefits, general ledger maintenance, internal audit
      and
      accounts payable services. These services were charged based upon utilized
      quantities (typically number of employees, number of transactions processed,
      hours worked). AAAMHI provided the Business with executive management, finance,
      human resources and personal trade compliance services. These services were
      charged based upon employee headcount or management time incurred. AAAMHI’s
      parent and its parent companies provided other executive management, technology,
      sales support, finance, compliance and human resources support services. These
      services were charged out on a formula basis that considers assets under
      management, number of employees and non-interest expense. The cost of these
      services was included under the caption “Related-party expense allocations” in
      the accompanying combined statement of operations. Certain cash receipts and
      cash payments related to the Business were handled through AAAMHI and affiliate
      cash accounts, which are not included in the carve-out financial statements.
      These amounts have been accounted for as net capital contributions or
      distributions to or from the Business and are reflected as “Net transfers to
      AAAMHI” in the combined statement of changes in owner’s equity and the combined
      statement of cash flows reflects these cash transactions.




F-40


Preparation
      of the combined financial statements in conformity with U.S. generally accepted
      accounting principles generally accepted in the United States (GAAP) requires
      management to make estimates and assumptions that affect the reported financial
      statement amounts and accompanying notes. Management believes that the estimates
      utilized in preparing its financial statements are reasonable and prudent.
      Actual results could differ from those estimates.








**2.**
            **Summary
                of Significant Accounting
                Policies**




*Principles
      of Combination*




The
      accompanying combined statements of financial condition, operations, cash flows
      and owner’s equity of the Business for the eleven months ended November 30, 2006
      have been prepared on a carve-out basis (see Note 1).




*Cash
      and Cash Equivalents*




Cash
      and cash equivalents represent cash in banks and investments in money market
      mutual funds.




*Goodwill
      and Intangible Assets*




The
      Business adopted the provisions of the Statement of Financial Accounting
      Standards No. 142, “Goodwill and Other Intangible Assets” (SFAS No. 142).
      Intangible assets, comprising the estimated value of investment management
      contracts, and goodwill, included in the combined financial statements of the
      Business relate to the acquisition of certain AAAMHI affiliates including the
      Business. These amounts reflect management’s best estimate of a reasonable
      allocation to the Business of such amounts included in the financial records
      of
      AAAMHI. The provisions of SFAS No. 142 require that goodwill and other
      intangible assets with indefinite lives no longer be amortized, but instead
      be
      tested at least annually for impairment and require reporting units to be
      identified for the purpose of assessing potential future impairments of
      goodwill. The Business’ acquired intangible management contract asset relates to
      the provision of investment advisory services to the Funds in exchange for
      fees
      that are based on a percentage of the average daily net assets of the Funds.
      These management contracts were acquired in 2001 as part of the acquisition
      of
      certain AAAMHI affiliates. The management contracts are subject to annual
      renewal by the Funds’ board of trustees, which is expected to continue
      indefinitely since this has been the experience for the Funds as well as for
      the
      mutual fund industry as a whole. Accordingly, the Business’ acquired intangible
      assets related to the Funds are considered to be of an indefinite life as there
      is no foreseeable limit on the contract period. The Business conducts its annual
      testing of goodwill and intangible assets for impairment annually in the fourth
      quarter, unless events warrant more frequent testing.




*Revenue
      Recognition*




The
      Business derived its revenues from investment advisory and administrative
      services provided to the Funds and a limited number of managed accounts of
      AAAMHI. Based on the terms of the advisory and administrative agreements in
      place that set out fees to be earned as a stated percentage of assets under
      management, advisory and administrative fees are recognized in revenue in the
      period such services are performed unless facts and circumstances would indicate
      that collectability of the fees are not reasonably assured. Contractual expense
      reimbursements to certain of the Funds in accordance with agreements are
      reported as an offset to investment advisory fees. Such reimbursements totaled
      $2,077,326 for the eleven months ended November 30, 2006.





*Distribution
      and Advisory Costs*




Included
      in distribution and advisory costs in the accompanying financial statements
      are
      fees paid to AAAMHI and its affiliates and other non-affiliated entities
      pursuant to contracts related to the management and distribution of the Funds
      and managed account assets. Such costs are recorded in the period
      incurred.




F-41


The
      Funds paid five affiliates of AAAMHI (Montag, AAAM, TAMRO, Veredus and River
      Road) investment advisory fees pursuant to management contracts with these
      entities under which the affiliates provide investment advisory services to
      the
      Funds. AAAM also paid two third-party investment management firms, MFS
      Institutional Advisors, Inc. and Optimum Investment Advisors, LLC, investment
      sub-advisory fees pursuant to management contracts with these entities under
      which these independent firms provide investment sub-advisory services to two
      of
      the Funds. The Business, generally through ABN AMRO Distribution Services (USA)
      Inc. (the Distributor), entered into nearly 400 selling/service agreements
      through which independent third parties sell the Business’ Funds and/or provide
      other services to their clients in exchange for certain payments. Unless paid
      by
      the Distributor pursuant to the Funds’ Rule 12b-1 Plan, these payments, as well
      as certain sales and marketing costs, are included within distribution and
      advisory costs.




*Income
      Taxes*




The
      Business was a component of AAAMHI, and as such was a component of the
      consolidated income tax return of AAAMHI for the period presented in these
      financial statements. However, for the purpose of the preparation of these
      financial statements, the Business is considered a stand-alone entity and any
      required provision for federal and state income taxes has been determined
      accordingly. The provision for federal and state income taxes is comprised
      of
      two components, current and deferred income taxes. Deferred tax assets and
      liabilities are determined based on temporary differences between the financial
      and tax reporting bases of assets and liabilities and are measured using
      currently enacted rates and laws. Deferred tax assets are recognized subject
      to
      management’s judgment that realization is more likely than not.





*Fair
      Value of Financial Instruments*




The
      carrying value of financial assets and liabilities included in the accompanying
      combined statement of financial condition approximates fair values due to their
      short-term nature.







**3.**
            **Goodwill
                and Intangible Assets**




Goodwill
      and intangible assets at November 30, 2006 included in the accompanying combined
      statement of financial condition are shown net of accumulated amortization
      of
      $1,553,200 and $2,113,467, respectively, recorded prior to 2002 and the adoption
      of SFAS No. 142. Impairment charges of approximately $13.3 million of goodwill
      and $10.4 million of intangible assets were recorded by the Business in 2005
      in
      accordance with SFAS No. 142. There were no such impairment charges recorded
      during the eleven month period ended November 30, 2006.




The
      facts and circumstances leading to the impairment charges to goodwill and
      intangible assets relate to management’s assessment of declines in net assets in
      the Funds resulting from net share redemptions and unfavorable investment
      performance trends. The fair value of the Business used to determine the
      impairment of goodwill was determined with reference to the expected proceeds
      to
      be received upon the sale of the Business. The fair value of the intangible
      asset related to the investment management contracts used to determine the
      amount of impairment of the intangible asset, was determined based on a
      discounted cash flow analysis of the acquired contracts.




F-42




4.
            Distribution
                and Advisory Costs




Distribution
      and advisory costs in the accompanying combined statement of operations consist
      of the following:




Advisory
                costs:AAAMHI
                affiliates
            
            **$**
            **20,371,611**Third
                party sub-advisers
            
            
            **2,608,157**Total
                advisory costs
            
            
            **22,979,768**Distribution
                costs:AAAMHI
                affiliates
            
            
            **687,066**Non-affiliates
            
            
            **5,163,397**Total
                distribution costs
            
            
            **5,580,463**Total
                distribution and advisory costs
            
            **$**
            **28,830,231**






5.
            Income
                Taxes




A
      reconciliation of the differences between the total income tax provision and
      the
      amounts computed at the statutory federal tax rate of 35% for the eleven month
      period ended November 30, 2006, is as follows:




Income
                tax provision at statutory federal income tax rate
            
            **$**
            **842,988**Increase
                (decrease) in taxes resulting from:State
                income taxes, net of federal benefit
            
            
            **120,427**Valuation
                allowance adjustment
            
            
            **(963,415**
            **)**Income
                tax provision
            
            **$**
            **—**





The
      current and deferred portion of the total provision for income taxes was $0
      for
      the period.




The
      components of the net deferred tax balances as of November 30, 2006, are as
      follows:




Deferred
                tax assets:Net
                operating loss carryforwards
            
            **$**
            **7,100,634**Goodwill
            
            
            **2,005,300**Less
                valuation allowance
            
            
            **(8,741,801**
            **)**Net
                tax asset, net of valuation allowance
            
            
            **364,133**Deferred
                tax liabilities:Intangibles
            
            
            **364,133**Net
                deferred taxes
            
            **$**
            **—**





The
      need for a valuation allowance to reduce federal and state deferred tax assets
      and net operating losses has been determined as if the Business was a
      stand-alone entity. As such, management believes it is more likely than not
      that
      these items will not be realized.


F-43




6.
            Benefit
                Plans




*Pension
      Plans*




ABN
      AMRO Bank sponsors a non-contributory defined benefit pension plan covering
      substantially all U.S. salaried employees. Assets held by the plan consist
      primarily of shares of registered investment companies and pooled trust funds.
      The allocated expense of the Business totaled $68,788 for the eleven months
      ended November 30, 2006.





*Profit
      Sharing and Savings Plan*




ABN
      AMRO Bank sponsors a profit sharing and savings plan under Section 401(k) of
      the
      Internal Revenue Code, covering substantially all U.S. salaried employees.
      Under
      the plan, employee contributions are partially matched by the respective ABN
      AMRO Bank subsidiary. In addition, the respective ABN AMRO Bank subsidiary
      may
      allocate a portion of its net profits to employees’ accounts in the plan. The
      allocated expense of the Business totaled $106,488 for the eleven months ended
      November 30, 2006.




*Group
      Welfare Plan*




ABN
      AMRO Bank provides welfare and life insurance benefits to substantially all
      U.S.
      salaried employees and their dependents. The amount charged to expense includes
      welfare benefits paid to participants, net of participant contributions, and
      administrative costs. Life insurance premiums paid to insurance companies are
      recognized as an expense when paid. The allocated expense of the Business
      totaled $171,729 for the eleven months ended November 30, 2006.







7.
            Related
                Party Transactions




ABN
      AMRO is a Dutch bank with operations around the world. With respect to its
      asset
      management business in the United States, ABN AMRO has two primary wholly-owned
      subsidiaries, ABN AMRO North America Holding Company (AANAHC), a U.S.
      corporation, and AAAMHNV. AAAMHNV owns 100% of AAAMHI, and the assets of the
      Business are owned in their entirety by AAAMHI.




In
      the ordinary course of business, the Business utilized investment advisory
      services provided by several affiliated entities. Five subsidiaries of AAAMHI,
      including Montag (100% owned), AAAM (100% owned), TAMRO (100% owned), Veredus
      (50% owned) and River Road (45% owned), served as investment advisors to the
      Funds. The payments made to affiliated entities, which provide advisory and
      distribution services to certain mutual funds and separate account assets of
      AAAMHI are included under the caption “Distribution and advisory costs” in the
      accompanying combined statement of operations (See Note 4).




The
      Business also utilized operational and support services provided by several
      affiliated entities. ABN AMRO Services Company, Inc., a wholly-owned subsidiary
      of AANAHC, provided the Business with certain IT, infrastructure and e-mail
      services. LaSalle Bank Corporation, also a wholly-owned subsidiary of AANAHC,
      provided the Business with payroll, benefits, general ledger maintenance,
      internal audit and accounts payable services. AAAMHI provided the Business
      with
      executive management, finance, human resources and personal trade compliance
      services. The cost of these services is included under the caption
“Related-party expense allocations” in the accompanying combined statement of
      operations. Payables to affiliates related to distribution, advisory or other
      services provided to the Business are included in “Accounts payable -
      affiliates” in the accompanying combined statement of financial
      condition.


F-44