Expenses

Employee Compensation and Benefits

For the fourth quarter of 2011, adjusted employee compensation and benefits expenses were $20.6 million, an increase of 16% from $17.7 million for the third quarter of 2011. The increase was due primarily to a year-to-date reduction of incentive compensation accruals in the third quarter of 2011 reflecting the impact of organizational changes, partly offset by lower salaries and benefits expenses in the fourth quarter of 2011 reflecting a decline in headcount.

GAAP employee compensation and benefits expenses for the fourth quarter of 2011 were $23.0 million, down 19% from $28.4 million for the third quarter of 2011, due primarily to the Compensation Charge recorded in the third quarter of 2011, partly offset by the reasons noted above.

Shareholder Servicing and Marketing Expenses

Shareholder servicing and marketing expenses for the fourth quarter of 2011 were $3.9 million, a decrease of 17% from $4.7 million for the third quarter of 2011, due primarily to lower platform costs, reflecting a decrease in average assets under management in proprietary funds.

General and Administrative Expenses

General and administrative expenses were $9.5 million for the fourth quarter of 2011, unchanged from the third quarter of 2011.

Income Taxes

For the fourth quarter of 2011, the adjusted effective tax rate was 44.3%, 2.9 percentage points higher than the 41.4% adjusted effective tax rate for the third quarter of 2011 due primarily to true-ups related to 2010 tax expense recorded in the fourth quarter of 2011.

The GAAP effective tax rate was 45.0% for the fourth quarter of 2011, 19.9 percentage points lower than the 64.9% GAAP effective tax rate for the third quarter of 2011. The decrease was due primarily to the write-off of a deferred tax asset in the third quarter of 2011 related to the vesting of RSUs granted at the time of the IPO, at a price below their grant date fair value, and the inability to record a tax benefit in the third quarter of 2011 on non-operating losses attributable to the non-controlling interests’ economic ownership in the Consolidated Investment Products.

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