Federated Investors reported an increase in fourth-quarter earnings but said the results were preliminary because of ongoing settlements with regulators that are likely to hurt profits.

The Pittsburgh-based mutual fund giant saw fourth quarter net income rise 16% to $48 million, or 44 cents a share, compared to $42.8 million, or 38 cents a share, a year ago. For 2004, the company posted net income of $195.3 million, a 4% rise from $188.1 million a year earlier. Preliminary EPS from continuing operations for 2004 rose to $1.77, a 5% jump from $1.68 in 2003.

Federated has been in talks with the Securities and Exchange Commission and the New York Attorney General's Office over allegations of market timing and other improper trading activities ever since regulators started an industry-wide probe in late 2003. Last month, the company announced the possibility of a civil enforcement action against two of its employees by the SEC in connection with trading abuses.

Federated's average assets under management in the fourth quarter were $178.9 billion, down $2.9 billion from $181.8 billion in the third quarter.

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