**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM
      10-K/A**





**(Amendment
      No. 1)**




(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   ̈ NO x








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










**EXPLANATORY
      NOTE**





The
      purpose of this Amendment No. 1 on Form 10-K/A to our Form 10-K filed with
      the
      Securities and Exchange Commission on March 28, 2008 (the “Original Filing”), is
      to amend the second sentence of the second paragraph under the heading
“ *Year
      ended December 31, 2007 for the Company compared to year ended December 31,
      2006
      combined results”* in the
“Results of Operations” section of Item 7. This amendment reflects the
      recharacterization of reinvested distributions as an “other adjustment” rather
      than an inflow of client assets.





Other
      than the amendment described above, no attempt has been made in this Amendment
      No. 1 on Form 10-K/A to modify or update the disclosures presented in, and
      it
      does not reflect events occurring after the filing of, the Original Filing.
      Therefore, all unamended portions of the Company’s Original Filing remain in
      effect and have not been amended to reflect events and developments since the
      original March 28, 2008 filing date. Accordingly, this Amendment No. 1 on Form
      10-K/A should be read in conjunction with the Original Filing and the Company’s
      other filings.





As
      required by Rule 12b-15 promulgated under the Securities and Exchange Act of
      1934, our Chief Executive Officer and Chief Financial Officer are providing
      Rule
      13a-14(a) certifications in connection with this Amendment No. 1 on Form 10-K/A
      and written statements pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.










**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.




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 RatingTM 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 RatingTM 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.




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.








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.




**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.




*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.




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 whichAston
      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.







**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.




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.(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




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 $965 million which were partially offset by positive market
      appreciation and other adjustments, including distributions of income and gains,
      reinvestments of distributions, and other items, of approximately $486 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.




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




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.




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.




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.







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.




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.




***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.




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.




**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.





**SIGNATURES**




Pursuant
      to the requirements of the 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.**Dated:
                May 1, 2008
            By:
            /s/
                Richard S. FooteRichard
                S. Foote
              President
                and Chief Executive Officer
              (Principal
                Executive Officer)Dated:
                May 1, 2008
            By:
            /s/
                R. Bradley ForthR.
                Bradley Forth
              Executive
                Vice President, Chief Financial Officer and Secretary
              (Principal
                Financial and Accounting Officer)







**EXHIBIT
      INDEX**





**Exhibit**
              **Number**
            
            **Description
                of Document**31.1
            
            Section
                302 Certification by CEO.31.2
            
            Section
                302 Certification by CFO.32
            
            Section
                906 Certification by CEO and CFO.