UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2008

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from                      to                     

GLG PARTNERS, INC.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		20-5009693 (I.R.S. Employer Identification No.)

399 Park Avenue, 38th Floor
New York, New York 10022
(Address of principal executive offices) (Zip code)

(212) 224-7200
(Registrant’s telephone number, including area code)

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 period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ No o

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 the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer   o (Do not check if a smaller reporting company)		Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o   No þ

As of October 10, 2008, there were 245,347,716 shares of the registrant’s common stock outstanding.

 

 

FORWARD-LOOKING STATEMENTS

     In addition to historical information, this Quarterly Report on Form 10-Q contains statements relating to our future results (including certain projections and business trends) that are “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and are subject to the “safe harbor” created by such sections. Our actual results may differ materially from those projected as a result of certain risks and uncertainties. Our forward-looking statements include, but are not limited to, statements regarding our expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipates” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.

The forward-looking statements contained in this Quarterly Report on Form 10-Q are based on our current expectations and beliefs concerning future developments and their potential effects on us and speak only as of the date of such statement. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under Item 1A, “Risk Factors” in our Annual Report on Form 10-K/A for the year ended December 31, 2007 and the following:

	§		the volatility in the financial markets;
	§		our financial performance;
	§		market conditions for the funds we manage, which we refer to as the GLG Funds;
	§		performance of GLG Funds, the related performance fees and the associated impacts on revenues, net income, cash flows and fund inflows and outflows;
	§		the cost of retaining our key investment and other personnel or the loss of such key personnel;
	§		risks associated with the expansion of our business in size and geographically;
	§		operational risk, including counterparty risk;
	§		litigation and regulatory enforcement risks, including the diversion of management time and attention and the additional costs and demands on our resources; and
	§		risks associated with the use of leverage, investment in derivatives, availability of credit, interest rates and currency fluctuations,

as well as other risks and uncertainties, including those set forth herein and those detailed from time to time in our other Securities and Exchange Commission filings. These forward-looking statements are made only as of the date hereof, and we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as otherwise required by law.

GLG PARTNERS, INC.
INDEX

		PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited):
Condensed Consolidated Balance Sheets – September 30, 2008 and December 31, 2007			2
Condensed Consolidated and Combined Statements of Operations – Three and Nine Months Ended September 30, 2008 and September 30, 2007			3
Condensed Consolidated Statements of Stockholders’ Deficit – Nine Months Ended September 30, 2008			4
Condensed Consolidated and Combined Statements of Cash Flows – Nine Months Ended September 30, 2008 and September 30, 2007			5
Notes to Condensed Consolidated and Combined Financial Statements			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			16
Item 3. Quantitative and Qualitative Disclosures About Market Risk			42
Item 4. Controls and Procedures			44
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			45
Item 1A. Risk Factors			45
Item 2. Unregistered Sale of Equity Securities and Use of Proceeds			49
Item 6. Exhibits			50
Signature			51
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-31.3: CERTIFICATION
EX-32.1: CERTIFICATION
EX-32.2: CERTIFICATION
EX-32.3: CERTIFICATION

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

GLG PARTNERS, INC. AND SUBSIDIARIES

		As of				As of
		September 30,				December 31,
		2008				2007
ASSETS
Current Assets
Cash and cash equivalents		$	387,687			$	429,422
Restricted cash			24,363				24,066
Fees receivable			41,429				389,777
Prepaid expenses and other assets			41,005				35,685
Total Current Assets			494,484				878,950
Non-Current Assets
Investments at fair value			82,558				96,108
Goodwill			587				—
Property and equipment			14,151				9,079
Total Non-Current Assets			97,296				105,187
Total Assets		$	591,780			$	984,137
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Rebates and sub-administration fees payable		$	25,408			$	25,543
Accrued compensation, benefits and profit share			185,244				467,887
Income taxes payable			20,829				37,464
Distributions payable			60,017				78,093
Accounts payable and other accruals			43,778				33,288
Other liabilities			30,580				16,092
Total Current Liabilities			365,856				658,367
Non-Current Liabilities
Loan payable			570,000				570,000
Minority interest			—				1,911
Total Non-Current Liabilities			570,000				571,911
Total Liabilities		$	935,856			$	1,230,278
Stockholders’ Deficit
Stockholders’ Deficit
Common stock, $.0001 par value; 1,000,000,000 authorized, 245,794,397 issued and outstanding (Dec. 31, 2007: 244,730,988 issued and outstanding), including 25,382,500 (Dec. 31, 2007: 25,382,500) shares of Treasury stock held by a subsidiary		$	25			$	24
Series A voting preferred stock, $.0001 par value; 150,000,000 authorized, 58,904,993 issued and outstanding (Dec. 31, 2007: 58,904,993 issued and outstanding)			6				6
Additional paid in capital			1,111,159				575,589
Treasury stock			(347,740	)			(347,740	)
Accumulated other comprehensive income			(8,559	)			3,477
Accumulated deficit			(1,098,967	)			(477,497	)
Total Stockholders’ Deficit			(344,076	)			(246,141	)
Total Liabilities and Stockholders’ Deficit		$	591,780			$	984,137

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

GLG PARTNERS, INC. AND SUBSIDIARIES

		Three months ended								Nine months ended
		September 30,								September 30,
		2008				2007				2008				2007
Net revenues and other income
Management fees, net		$	80,307			$	78,558			$	269,663			$	198,892
Performance fees, net			6,833				803				89,762				343,835
Administration fees, net			17,751				16,306				60,448				42,986
Other (loss)/income			(2,796	)			6,905				2,412				7,875
Total net revenues and other income			102,095				102,572				422,285				593,588
Expenses
Employee compensation and benefits			(206,433	)			(28,959	)			(674,945	)			(110,526	)
Limited partner profit share			(20,954	)			(17,000	)			(102,185	)			(207,500	)
Compensation, benefits and profit share			(227,387	)			(45,959	)			(777,130	)			(318,026	)
General, administrative and other			(30,283	)			(25,891	)			(90,816	)			(79,634	)
Total expenses			(257,670	)			(71,850	)			(867,946	)			(397,660	)
(Loss)/income from operations			(155,575	)			30,722				(445,661	)			195,928
Interest income			2,043				3,252				6,685				5,302
Interest expense			(6,028	)			(204	)			(18,795	)			(608	)
(Loss)/income before income taxes			(159,560	)			33,770				(457,771	)			200,622
Income taxes			(3,160	)			(4,735	)			(12,656	)			(33,020	)
(Loss)/income before minority interests			(162,720	)			29,035				(470,427	)			167,602
Minority interests:
Share of income			—				(73	)			—				(479	)
Exchangeable Shares dividend (note 8)			(1,472	)			—				(4,418	)			—
Cumulative dividends			(2,896	)			—				(12,194	)			—
Net (loss)/income attributable to common stockholders		$	(167,088	)		$	28,962			$	(487,039	)		$	167,123
Net (loss)/income per share — basic		$	(0.79	)		$	0.21			$	(2.30	)		$	1.23
Weighted average common stock outstanding — basic (in thousands)			211,417				135,712				211,357				135,712
Net (loss)/income per share — diluted		$	(0.79	)		$	0.15			$	(2.30	)		$	0.86
Weighted average common stock outstanding — diluted (in thousands)			211,417				194,617				211,357				194,617
Dividends per share		$	0.025				—			$	0.075				—

The accompanying notes are an integral part of these unaudited condensed consolidated and combined financial statements.

GLG PARTNERS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED

																		Accumulated
														Additional				Other								Total
		Preferred				Common				Treasury				Paid-In				Comprehensive				Accumulated				Stockholders’
		Stock				Stock				Stock				Capital				Income/(Loss)				Deficit				Deficit
Balance as of January 1, 2008		$	6			$	24			$	(347,740	)		$	575,589			$	3,477			$	(477,497	)		$	(246,141	)
Comprehensive income:
Net loss attributable to common stockholders			—				—				—				—				—				(487,039	)			(487,039	)
Unrealized losses on available for sale equity investments			—				—				—				—				(13,472	)			—				(13,472	)
Fair value movements on cash flow hedges			—				—				—				—				1,695				—				1,695
Foreign currency translation (zero tax applicable)			—				—				—				—				(259	)			—				(259	)
Total comprehensive loss																											(499,075	)
Recapitalization			—				—				—				(308	)			—				—				(308	)
Share-based compensation			—				—				—				574,355				—				—				574,355
Warrant exercises			—				1				—				2,567				—				—				2,568
Warrants repurchased			—				—				—				(37,582	)			—				—				(37,582	)
Capital contributions			—				—				—				525				—				—				525
Shares repurchased			—				—				—				(3,987	)			—				—				(3,987	)
Dividends declared			—				—				—				—				—				(16,077	)			(16,077	)
Distributions to former GLG owners			—				—				—				—				—				(118,354	)			(118,354	)
Balance as of September 30, 2008		$	6			$	25			$	(347,740	)		$	1,111,159			$	(8,559	)		$	(1,098,967	)		$	(344,076	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

GLG PARTNERS, INC. AND SUBSIDIARIES

		Nine months ended September 30,
		2008				2007
Cash Flows From Operating Activities
Net (loss)/income attributable to common stockholders		$	(487,039	)		$	167,123
Adjustments to reconcile net (loss)/income attributable to common stockholders to net cash provided by operating activities:
Minority interests			—				479
Depreciation			2,019				1,522
Foreign exchange gains on investments			78				39
Share based compensation			574,355				—
Cash flows due to change in:
Fees receivable			348,348				211,276
Prepaid expenses and other assets			(3,625	)			(6,703	)
Rebates and sub-administration fees payable			(135	)			327
Accrued compensation, benefits and profit share			(282,643	)			(47,551	)
Income taxes payable			(16,635	)			(6,056	)
Distributions payable			(23,501	)			62,001
Accounts payable and other accruals			10,492				(4,963	)
Other liabilities			14,488				(1,446	)
Net cash provided by operating activities			136,202				376,046
Cash Flows From Investing Activities
Investment in subsidiary			(2,500	)			—
Transfer to restricted cash			(297	)			—
Purchase of property and equipment			(7,091	)			(4,367	)
Net cash used in investing activities			(9,888	)			(4,367	)
Cash Flows From Financing Activities
Warrant exercises			2,568				—
Warrant repurchases			(37,582	)			—
Share repurchases			(3,987	)			—
Capital contributions			525				487
Dividends paid			(10,652	)			—
Acquisition related transaction costs			(308	)			—
Distributions to former GLG owners			(118,354	)			(254,331	)
Net cash used in financing activities			(167,790	)			(253,844	)
Net decrease in cash and cash equivalents			(41,476	)			(117,835	)
Effect of foreign currency translation on cash			(259	)			749
Cash and cash equivalents at beginning of period			429,422				273,148
Cash and cash equivalents at end of period		$	387,687			$	391,732

The accompanying notes are an integral part of these unaudited condensed consolidated and combined financial statements.

GLG PARTNERS, INC. AND SUBSIDIARIES

1. ORGANIZATION AND BASIS OF PRESENTATION

GLG Partners, Inc. (the “Company”) was incorporated in the state of Delaware on June 8, 2006 under the name Freedom Acquisition Holdings, Inc (“Freedom”). The Company was formed to acquire an operating business through a merger, capital stock exchange, asset acquisition, stock purchase or other similar business combination. On November 2, 2007 the Company completed the acquisition (the “Acquisition”) of GLG Partners LP and its affiliated entities (collectively, “GLG”).

The Company is a leading alternative asset manager based in London which offers its clients a broad range of investment products and account management services. Its primary business is to provide investment management advisory services for various investment funds and companies (the “GLG Funds”). The Company derives revenue primarily from management fees and administration fees charged to the GLG Funds and accounts it manages based on the value of assets in these funds and accounts, and performance fees charged to the GLG Funds and accounts it manages based on the performance of these funds and accounts.

As the Acquisition is considered a reverse acquisition and recapitalization for accounting purposes, the combined historical financial statements of GLG became the Company’s historical financial statements. Accordingly, the Acquisition has been treated as the equivalent of GLG issuing stock for the net assets of the Company, accompanied by a recapitalization of GLG. The net assets of the Company, primarily cash, have been stated at their carrying value, and accordingly no goodwill or other intangible assets were recorded.

The unaudited condensed consolidated and combined financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with US generally accepted accounting principles (“US GAAP”) have been condensed or omitted pursuant to the SEC’s rules and regulations.

These unaudited condensed consolidated and combined financial statements should be read in conjunction with the consolidated and combined financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2007.

The unaudited condensed consolidated and combined financial statements are presented in US Dollars ($) and prepared under US GAAP. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the financial position, results of operations and cash flows of the Company have been included. The condensed consolidated and combined financial statements include the accounts of the Company and its subsidiaries. All intercompany balances and transactions have been eliminated.

The Company operates in one business segment, the management of global funds and accounts.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of combination and consolidation

Upon consummation of the Acquisition, the GLG entities became subsidiaries of the Company and from that date the financial statements have been prepared on a consolidated basis and consolidate those entities over which the legal parent, the Company, has control over significant operating, financial or investing decisions. Prior to the Acquisition and for all comparative periods, the combined financial statements presented are those of the accounting acquirer, GLG. The combined financial statements of GLG combine those entities in which the principals of GLG, Noam Gottesman, Pierre Lagrange and Emmanuel Roman (the “Principals”), and the trustees of their respective trusts (the “Trustees”) had control over significant operating, financial or investing decisions. Equity balances have been retroactively restated to conform to the capital structure of the legal acquirer, the Company.

The Company consolidates certain entities it controls through a majority voting interest or otherwise in which the Company is presumed to have control pursuant to Financial Accounting Standards Board (“FASB”) Emerging Issues Task Force (“EITF”) Issue No. 04-5, Determining Whether a General Partner, or the General Partners as a

GLG PARTNERS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS (Continued)
(US Dollars in thousands, except share and per share amounts)

Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights (“EITF 04-5”). All intercompany transactions and balances have been eliminated.

Minority Interests in Consolidated Subsidiaries

Minority interests are recorded in respect of the following interests in the following GLG entities:

GLG Holdings Inc. and GLG Inc.

On January 24, 2008 GLG Holdings Inc. was acquired by the Company for $2,500 in cash and GLG Holdings Inc. and GLG Inc. became wholly owned subsidiaries of the Company. Prior to January 24, 2008, GLG Holdings Inc. was independently owned.

Prior to this acquisition, the Company consolidated GLG Holdings Inc. and GLG Inc. pursuant to the requirements of FASB Interpretation No. 46, Consolidation of Variable Interest Entities, since they were variable interest entities and the Company was the Primary Beneficiary. GLG Holdings Inc. is the holding company (and acts solely as a holding company) for GLG Inc., a dedicated research and administrative services provider based in New York. GLG Inc. provides dedicated research and administrative services to GLG Partners LP with respect to GLG’s U.S. focused investment strategies. The consolidated and combined assets of GLG Holdings Inc. and GLG Inc. were $11,774 as at December 31, 2007.

GLG Holdings Inc. funded the acquisition of GLG Inc. with promissory notes now held by GLG Partners Services LP. GLG Inc. issued additional promissory notes now held by GLG Partners Services LP to fund its operations. The promissory notes issued by GLG Holdings Inc. are secured by the pledge of 100% of the issued and outstanding share capital of GLG Inc. in favor of GLG Partner Services LP pursuant to a pledge agreement. Creditors of GLG Holdings Inc. and GLG Inc. do not have any recourse against other GLG entities.

Minority interest in respect of these entities at December 31, 2007 relates to their entire equity and retained earnings, in which GLG does not hold any economic interest.

FA Sub 2 Limited Exchangeable Shares

Upon consummation of the Acquisition, Noam Gottesman and the trustee of the Gottesman GLG Trust received, in exchange for their interests in GLG entities, in total 58,904,993 exchangeable Class B ordinary shares of FA Sub 2 Limited (the “Exchangeable Shares”) and 58,904,993 shares of our Series A voting preferred stock (the “Series A preferred stock”), in addition to their proportionate share of the cash consideration.

The Exchangeable Shares are exchangeable at the holders’ option for an equal number of shares of the Company’s common stock at any time for zero consideration. Upon exchange of the Exchangeable Shares, an equivalent number of shares of the Company’s Series A preferred stock will be concurrently redeemed. The shares of Series A preferred stock are entitled to one vote per share and to vote with the common stockholders as a single class but have no economic rights. The Exchangeable Shares carry dividend but no voting rights except with respect to certain limited matters which will require the majority vote or written consent of the holders. The combined ownership of the Exchangeable Shares and the Series A preferred stock provides the holders with voting rights equivalent to those of the Company’s common stockholders.

The dividend rights of the Exchangeable Shares are such that the holders will receive an equivalent dividend to dividends paid to the common stockholders (“Exchangeable Shares dividend”). The Exchangeable Shares dividend is presented as an expense within minority interest in the condensed consolidated and combined statements of operations. In addition, the holders of the Exchangeable Shares will receive a cumulative dividend based on the Company’s estimate of the net taxable income of FA Sub 2 Limited allocable to such holders multiplied by an assumed tax rate of 43.783%. The cumulative dividend rights of the holders of the Exchangeable Shares are in excess of those of the Company’s common stockholders, and these rights are presented as an expense within minority interest in the condensed consolidated and combined statements of operations.

GLG PARTNERS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS (Continued)
(US Dollars in thousands, except share and per share amounts)

At the FA Sub 2 Limited level, the Exchangeable Shares have the same liquidation and income rights as other ordinary shareholders of FA Sub 2 Limited, and consequently the minority interest is calculated as the Exchangeable Shareholder’s proportionate share of net assets.

Revenue Recognition

Management fees are calculated as a percentage of net assets under management based upon the contractual terms of investment advisory and related agreements and recognized as earned as the related services are performed. These fees are generally payable monthly in arrears.

Performance fees are calculated as a percentage of investment gains (which includes both realized and unrealized gains) less management and administration fees, subject in certain cases to performance hurdles, over a measurement period, generally six months. The Company has elected to adopt the preferred method of recording performance fee income, Method 1 of EITF Topic D-96, Accounting for Management Fees Based on a Formula (“Method 1”). Under Method 1, the Company does not recognize performance fee revenues until the end of the measurement period when the amounts are crystallized.

The majority of the investment funds and accounts managed by the Company have contractual measurement periods that end on each of June 30 and December 31. As a result, the performance fee revenues for the first and third fiscal quarters do not reflect revenues from uncrystallized performance fees during these three-month periods and will be reflected instead at the end of the fiscal quarter in which such fees crystallize.

In certain cases, the Company may rebate a portion of its gross management and performance fees in order to compensate third-party institutional distributors for marketing its products and, in a limited number of cases, in order to incentivize clients to invest in funds managed by the Company. Such arrangements are generally priced at a portion of the Company’s management and performance fees paid by the fund. The Company accounts for rebates in accordance with EITF Issue No. 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent (“EITF 99-19”), and has recorded its revenues net of rebates. In addition, most funds managed by the Company have share classes with distribution fees that are paid to third party institutional distributors.

Administration fees are calculated on a similar basis as management fees and are recognized as the related services are performed. From its gross administration fees, the Company pays sub-administration fees to third-party administrators and custodians. In accordance with EITF 99-19, administration fees are recognized net of sub-administration fees.

Rebates and sub-administration fees on the balance sheet represent amounts payable under the rebate and sub-administration fee arrangements described above.

Where a single-manager alternative strategy fund or internal Fund of Hedge Funds (“FoHF”) managed by the Company invests in an underlying single-manager alternative strategy fund managed by the Company, the “investing fund” is the top-level GLG Fund into which a client invests and the “investee fund” is the underlying GLG Fund into which the investing fund allocates funds for investment. When one of the single-manager alternative strategy funds or internal FoHFs managed by the Company invests in an underlying single-manager alternative strategy fund managed by the Company:

	•		management fees are charged at the investee fund level, except in the case of (1) an investment by the GLG Emerging Markets Fund in the GLG Emerging Markets (Special Assets) Fund where management fees are charged only at the investing fund level and (2) the GLG Multi Strategy Fund where fees are charged at both the investee and investing fund levels;
	•		performance fees are charged at the investee fund level, except in the case of (1) an investment by the GLG Emerging Markets Fund in the GLG Emerging Markets (Special Assets) Fund where performance fees are charged only at the investing fund level and (2) the GLG Global Aggressive Fund where fees are charged at

GLG PARTNERS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS (Continued)
(US Dollars in thousands, except share and per share amounts)

			both the investee and investing fund levels, to the extent, if any, that the performance fee charged at the investing fund is greater than the performance fee charged at the investee fund level; and
	•		administration fees are charged at both the investing and investee fund levels.

Due to the impact of foreign currency exposures on management and performance fees, the Company has elected to utilize cash flow hedge accounting to hedge a portion of its anticipated foreign currency denominated revenue. The effective portion of the hedge is recorded as a component of other comprehensive income and is released into management or performance fee income, respectively, when the hedged revenues impact the income statement. The ineffective portion of the hedge is recorded each period as derivative gain or loss in other income or other expense, respectively. See “—Derivatives and Hedging” for a further discussion of the Company’s foreign exchange hedging activities.

Employee Compensation and Benefits

The components of employee compensation and benefits are:

	•		Base compensation — contractual compensation paid to employees in the form of base salary, which is expensed as incurred.
	•		Variable compensation — payments that arise from the contractual entitlements of personnel to a fixed percentage of certain variable fee revenues attributable to such personnel with respect to GLG Funds and managed accounts. Variable compensation expense is recognized at the same time as the underlying fee revenue is crystallized, which may be monthly or semi-annually (on June 30 and December 31), depending on the fee revenue source.
	•		Discretionary compensation — payments that are determined by the Company’s management in its sole discretion and are generally linked to performance. In determining such payments, the Company’s management considers, among other factors, the ratio of total discretionary compensation to total revenues; however, this ratio may vary between periods and, in particular, significant discretionary bonuses may still be paid in a period of low performance for retention and incentivization purposes. This discretionary compensation is paid to employees in the form of a discretionary cash bonus. Discretionary compensation is generally declared and paid following the end of each calendar year. However, the notional discretionary compensation charge is adjusted monthly based on the year-to-date profitability and revenues recognized on a year-to-date basis. As the majority of funds crystallize their performance fees at June 30 and December 31, the majority of discretionary compensation expense crystallizes at year end and is typically paid in January following the year end.

Limited Partner Profit Share

The key personnel who are participants in the limited partner profit share arrangement provide services to the Company through two limited liability partnerships, Laurel Heights LLP and Lavender Heights LLP (the “LLPs”), which are limited partners in GLG Partners LP and GLG Partners Services LP, respectively. The amount of profits (or limited partner profit share) attributable to each of the LLPs is determined at the Company’s discretion based upon the profitability of the Company’s business and the Company’s view of the contribution to revenues and profitability from the services provided by each limited partnership during that period. These profit shares are recorded as operating expense matching the period in which the related revenues are recognized and associated services are provided. A portion of the partnership distribution is advanced monthly as a draw against final determination of profit share. Once the final profit allocation is determined, typically in January following each year end, it will be paid to the LLPs, as limited partners, less any amounts paid as advance drawings during the year. In addition, as shares of restricted stock awarded under the Company’s 2007 Restricted Stock Plan (the “Restricted Stock Plan”) or 2007 Long-Term Incentive Plan (the “LTIP”) to members of the LLPs vest or as the Company pays cash dividends on the unvested shares of restricted stock awarded under these plans to members of the LLPs, the limited partnerships allocate additional profits to the LLPs sufficient for the LLP to acquire from the Company the shares that are vesting or to pay the relevant dividend. These additional profit shares are recorded as operating

GLG PARTNERS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS (Continued)
(US Dollars in thousands, except share and per share amounts)

expense in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 123(R), Share-Based Payment (“SFAS No. 123(R)”). Other limited partners of GLG Partners Services LP who receive profit allocations include two investment professionals, who are not members of Lavender Heights LLP, but whose profit distributions from GLG Partners Services LP are determined in the same manner as the allocation of profit shares to individual members of the LLP and included in the limited partner profit share measure, as described below.

Profit allocations made to the LLPs by GLG Partners LP and GLG Partners Services LP make up substantially all of the LLPs’ net profits for each period. Members are entitled to a base limited partner profit share priority drawing, which is a fixed amount and paid as a partnership draw. Certain members are also entitled to a variable limited partner profit share priority drawing based on a fixed percentage of certain variable fee revenues attributable to such personnel with respect to GLG Funds and managed accounts, which are paid as a partnership draw. After year end, the managing members of the LLPs will declare discretionary allocations to the key personnel who participate in the limited partner profit share arrangement and who are LLP members from the remaining balance of the LLPs’ net profits, after taking into account the base and variable limited partnership profit share priority drawings, based on their view of those individuals’ contribution to the generation of these profits. These three components make up the limited partner profit share. This process will typically take into account the nature of the services provided to the Company by each key personnel, his or her seniority and the performance of the individual during the period. Profit allocations, net of any amounts paid during the year as priority partnership drawings, will typically be paid to the members in January following each year end.

Derivatives and Hedging

The Company is exposed to foreign exchange risks relating to performance and management fees denominated in foreign currencies. Forward foreign exchange contracts on various foreign currencies are entered into to manage those risks. These contracts are designated as cash flow hedges under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, with changes in fair value attributable to changes in the relevant spot rates recorded in other comprehensive income and reclassified into earnings in the same period or periods during which the hedged forecasted transaction affects earnings. Changes in the fair value of the hedge attributable to the spot-forward differential are recorded directly in the income statement.

For those derivatives that are designated as hedges and for which hedge accounting is desired, the hedging relationship is formally designated and documented at its inception. The document identifies the risk management objective and strategy for undertaking the hedge, the hedging instrument, the hedged item or transaction, the nature of risk being hedged and how effectiveness will be measured throughout its duration. Such hedges are expected at inception to be highly effective in offsetting changes in cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the reporting period for which they were designated.

The Company has hedged €35,000,000 of monthly management fee receivables from June to November 2008 with a final settlement date of December 10, 2008.

Recent Accounting Pronouncements

On March 19, 2008 the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities an amendment of FASB Statement No. 133 (“SFAS No. 161”). SFAS No. 161 changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. The Company has elected to adopt SFAS No. 161 early effective as of January 1, 2008. Adoption of SFAS No. 161 has not had a material impact on the Company’s results of operations and financial condition.

SFAS No. 157, Fair Value Measurements (“SFAS No. 157”), which became effective for the Company on January 1, 2008, established a framework for measuring fair value, while expanding fair value measurement disclosures.

GLG PARTNERS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS (Continued)
(US Dollars in thousands, except share and per share amounts)

SFAS No. 157 established a fair value hierarchy that distinguishes between independent observable inputs and unobservable inputs based on the best information available. SFAS No. 157 expands disclosures about the use of fair value to measure assets and liabilities, the effect of these measurements on earnings for the period, and the inputs used to measure fair value. In February 2008, the FASB issued FASB Staff Position (“FSP”) FAS 157-1 to exclude SFAS No. 13, Accounting for Leases, and its related interpretive accounting pronouncements that address leasing transactions, from the scope of SFAS No. 157. In February 2008, the FASB also issued FSP FAS 157-2 to allow entities the option to defer the effective date of SFAS No. 157 for non-financial assets and liabilities, except for those items recognized or disclosed at fair value on an annual or more frequently recurring basis, until January 1, 2009. The Company will apply the fair value measurement provisions of SFAS No. 157 to its non-financial assets and liabilities effective January 1, 2009. The January 1, 2008 adoption of the other provisions of SFAS No. 157 had no impact on retained earnings and is not expected to have a material impact on the Company’s results of operations and financial condition.  On October 10, 2008, the FASB issued FSP FAS 157-3, “Determining Fair Value in a Market That Is Not Active” (“FSP FAS 157-3”), which is effective upon issuance, to help constituents measure fair value in markets that are not active. The adoption of FSP FAS 157-3 did not have a material impact on the Company’s results of operations or financial condition.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51 (“SFAS No. 160”). SFAS No. 160 states that the accounting and reporting for minority interests will be recharacterized as noncontrolling interests and classified as a component of equity. SFAS No. 160 applies to all entities that prepare consolidated financial statements, except not-for-profit organizations, but will affect only those entities that have an outstanding noncontrolling interest in one or more subsidiaries or that deconsolidate a subsidiary. SFAS No. 160 is effective prospectively, except for certain retrospective disclosure requirements, for fiscal years beginning after December 15, 2008. This statement will be effective for the Company beginning in fiscal 2009. As described above, the primary impact of the statement will be the reclassification of minority interests from liabilities to stockholders’ equity and their re-labeling as “noncontrolling interests”. In addition, presently under ARB No. 51, noncontrolling interests only share in losses to the extent that they have available equity to absorb losses. Under SFAS No. 160, the noncontrolling interests will fully share in losses as well as profits.

In September 2008, the FASB issued FSP FAS 133-1 and FIN 45-4, “Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161” (“FSP FAS 133-1 and FIN 45-4”). FSP FAS 133-1 and FIN 45-4 is intended to improve disclosures about credit derivatives by requiring more information about the potential adverse effects of changes in credit risk on the financial position, financial performance, and cash flows of the sellers of credit derivatives. The Company is currently evaluating the impact of adopting FSP FAS 133-1 and FIN 45-4 but the adoption is not expected to have a material impact on the Company’s results of operations or financial condition.

In June 2008, the FASB issued FSP EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (“FSP EITF 03-6-1”). FSP EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share under the two-class method as described in SFAS No. 128, “Earnings per Share.” Under the guidance in FSP EITF 03-6-1, unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. FSP EITF 03-6-1 is effective for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. All prior-period earnings per share data presented shall be adjusted retrospectively. Early application is not permitted. The adoption of FSP EITF 03-6-1 is not expected to have a material impact on the Company’s results of operations or financial condition.

GLG PARTNERS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS (Continued)
(US Dollars in thousands, except share and per share amounts)

Net Income per share of Common Stock

The Company calculates net income per share of common stock in accordance with SFAS No. 128, Earnings Per Share. Basic and diluted net income per common stock was determined by dividing net income applicable to common stockholders by the weighted-average number of shares of common stock outstanding during the period.

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2008				2007				2008				2007
Net (loss)/income applicable to common stockholders		$	(167,088	)		$	28,962			$	(487,039	)		$	167,123
Weighted-average common stock outstanding (in thousands) – basic			211,417				135,712				211,357				135,712
Net (loss)/income per share applicable to common stockholders – basic		$	(0.79	)		$	0.21			$	(2.30	)		$	1.23
Weighted-average common stock outstanding (in thousands) – diluted			211,417				194,617				211,357				194,617
Net (loss)/income per share applicable to common stockholders – diluted		$	(0.79	)		$	0.15			$	(2.30	)		$	0.86
Reconciliation of weighted-average common stock outstanding – basic to weighted-average common stock outstanding – diluted:
Weighted-average common stock outstanding – basic (in thousands)			211,417				135,712				211,357				135,712
FA Sub 2 Limited Exchangeable Shares			—				58,905				—				58,905
Weighted-average common stock outstanding – diluted (in thousands)			211,417				194,617				211,357				194,617

The following common stock equivalents have been excluded from the computation of weighted-average stock outstanding as of September 30, 2008 and 2007 as they would have been anti-dilutive (in thousands):

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2008				2007				2008				2007
Common stock held in Treasury			25,382				25,382				25,382				25,382
FA Sub 2 Limited Exchangeable Shares			58,905				—				58,905				—
Common stock awarded in connection with share-based compensation arrangements			8,882				6,397				8,882				6,397
Public stockholders’ warrants			32,985				—				32,985				—
Co-investment warrants			5,000				—				5,000				—
Sponsors’ warrants			4,500				—				4,500				—
			135,654				31,779				135,654				31,779

In addition, 12,000 founders’ warrants have not been included in the computation of weighted-average stock outstanding as of September 30, 2008 and 2007, because they are only exercisable in the event that the last sale price of the Company’s common stock equals or exceeds $14.25 per share for any 20 trading days within a 30-trading day period, and to do so would have been anti-dilutive.

3. COMMITMENTS AND CONTINGENCIES

Regulatory Proceedings

The Company, in the ordinary course of business, responds to a variety of regulatory inquiries. The Company and its subsidiaries are involved in the following regulatory investigations among others:

On January 25, 2008, the Autorité des Marchés Financiers (“AMF”) notified the Company of proceedings relating to GLG’s trading in the shares of Infogrames Entertainment (“Infogrames”) on February 8 and 9, 2006, prior to the issuance by Infogrames on February 9, 2006 of a press release announcing poor financial results. The AMF’s decision to initiate an investigation into GLG’s trades in Infogrames was based on a November 19, 2007 report prepared by the AMF’s Department of Market Investigation and Supervision (the “Infogrames Report”). According to the Infogrames Report, the trades challenged by the AMF generated an unrealized capital gain for GLG as of the

GLG PARTNERS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS (Continued)
(US Dollars in thousands, except share and per share amounts)

opening on February 10, 2006 of €179,000. The AMF investigation relates solely to the conduct of a former employee; however, the Company was named as the respondent. If sustained, the charge against the Company could give rise to an administrative fine under French securities laws. The Company filed its response to the Infogrames Report on May 23, 2008.

The Company has provided for the above within accounts payable and other accruals within Current Liabilities.

Indemnifications

In the normal course of business, the Company enters into operating contracts that contain a variety of representations and warranties and that provide general indemnifications. The Company’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Company that have not yet occurred. However, based on experience, the Company expects the risk of material loss to be remote.

4. INCOME TAXES

The Company calculates its effective tax rate on profit before tax and certain non-tax deductible compensation expense. For the first nine months of 2008, $588,500 of the Company’s compensation expense related to acquisition-related share based compensation, $541,400 of which is not tax deductible, compared to $0 for the first nine months of 2007. The Company’s profit before tax and before this expense was $83,600 and $200,600 for the first nine months of 2008 and 2007, respectively. The Company’s effective tax rate based on this measure was 15.1% and 16.5% for the first nine months of 2008 and 2007, respectively. This is lower than the U.S. Federal rate of tax of 35.0% as the Company’s profits are predominantly earned in the United Kingdom and the Cayman Islands which apply lower rates of tax.

5. FAIR VALUES OF FINANCIAL INSTRUMENTS

SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS No. 157 establishes a fair value hierarchy that prioritizes the use of inputs used in valuation methodologies into the following three levels:

	—		Level 1: Inputs to the valuation methodology are quoted prices, unadjusted, for identical assets or liabilities in active markets. A quoted price in an active market provides the most reliable evidence of fair value and shall be used to measure fair value whenever available.
	—		Level 2: Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets; inputs to the valuation methodology include quoted prices for identical or similar assets or liabilities in markets that are not active; or inputs to the valuation methodology that are derived principally from or can be corroborated by observable market data by correlation or other means.
	—		Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. Level 3 assets and liabilities include financial instruments whose value is determined using discounted cash flow methodologies, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

Investments at fair value include available for sale investments in listed GLG Funds. These investments are valued at the final Net Asset Value (“NAV”) as published by the relevant exchange. Other assets include the fair value of foreign exchange derivatives, which are valued at quoted forward prices from foreign exchange counterparties and discounted to present value using prevailing risk free rates for the Company’s functional currency.

In accordance with the fair value hierarchy described above, the following table shows the fair value of our financial assets and liabilities that are required to be measured at fair value as of September 30, 2008, which are classified as “Non-current assets”:

GLG PARTNERS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS (Continued)
(US Dollars in thousands, except share and per share amounts)

Fair Value Measurements

Quoted Prices

Significant

in Active

Other

Significant

Markets for

Observable

Unobservable

Identical Assets

Inputs

Inputs

Description

Balance

(Level 1)

(Level 2)

(Level 3)

Assets

Available for sale investments

$

82,558

—

$

82,558

—

Other assets (financial derivatives)

$

4,401

—

$

4,401

—

6. SHARE BASED COMPENSATION

The Company has assumed from April 1, 2008 a forfeiture rate of 10% per annum for restricted stock awards under the Restricted Stock Plan and the LTIP and share awards under the equity participation plan and from July 1, 2008 a forfeiture rate of 10% per annum for cash awards under the equity participation plan. Shares subject to the agreement among the principals and trustees continue to carry a zero forfeiture rate estimate. The impact of the change in forfeiture assumptions was not material for the nine months ended September 30, 2008.

During the quarter ended September 30, 2008, 406,908 shares were forfeited, of which 314,908 shares remain as treasury stock held by two subsidiary limited partnerships (and are included in the Company’s total common share count as issued and outstanding) and 92,000 shares were returned to the Company and cancelled.

7. DERIVATIVE FINANCIAL INSTRUMENTS

For the quarter ended September 30, 2008, the fair value of financial instruments has been recorded as follows:

		Three months ended
		September 30, 2008
Balance Sheet
Fair Value of Derivative Financial Instruments – designated in a cash flow hedge relationship at end of period (included in Other Assets)		$	4,401
Fair Value of Derivative Financial Instruments – designated in a cash flow hedge relationship at beginning of period (included in Other Liabilities)			(1,210	)
Change in Fair Value of Derivative Financial Instruments		$	5,611
Fair values are allocated as follows:
Statement of Changes in Equity:
Gain recorded in other comprehensive income in period — cash flow hedges		$	3,732
Loss reclassified from other comprehensive income to income			(1,293	)
Total gain carried forward in Other Comprehensive Income			2,439
Statement of Operations:
Increase in Management Fees			1,241
Increase in Other income (ineffective portion of hedge and excluded from effectiveness assessment)			1,931
Total impact on Statement of Operations			3,172
Total impact on Comprehensive Income		$	5,611

GLG PARTNERS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS (Continued)
(US Dollars in thousands, except share and per share amounts)

8. SHAREHOLDERS EQUITY

     The following transactions occurred in the common stock of the Company:

		Number of shares
Common stock outstanding at December 31, 2007			244,730,988
Warrants exercised			2,147,939
Shares repurchased			(344,355	)
Stock awarded under LTIP arrangements			1,164,325
Stock forfeited and cancelled under share-based compensation arrangements			(359,000	)
Cancellation and replacement of stock previously issued under share-based compensation arrangements with equivalent restricted stock obligations			(1,545,500	)
Common stock outstanding at September 30, 2008			245,794,397

On February 25, 2008 a dividend of $0.025 per share of common stock was declared payable on April 21, 2008 to holders of record on April 10, 2008. Total dividends of $6,244 were recognized for the three months ended March 31, 2008.

On June 16, 2008 a dividend of $0.025 per share of common stock was declared payable on July 21, 2008 to holders of record on July 10, 2008. Dividends of $5,568 have been provided for the three months ended June 30, 2008 (totaling $11,812 for the six months ended June 30, 2008) after charging dividends on shares expected to be forfeited to operating expense.

On September 26, 2008 a dividend of $0.025 per share of common stock was declared payable on October 21, 2008 to holders of record on October 10, 2008. Total dividends of $4,265 were recognized for the three months ended September 30, 2008 after transfer of $1,494 to compensation for dividends paid on shares forfeited, anticipated to forfeit or awarded to non-employees.

Exchangeable Shares dividends of $0.025 per share in the aggregate amount of $1,472.7 were also declared, payable on each of April 21, 2008, July 21, 2008 and October 21, 2008, to holders of the FA Sub 2 Limited Exchangeable Shares, who are entitled to dividends based on the number of shares of common stock of the Company into which the Exchangeable Shares are exchangeable (58,904,993). These Exchangeable Shares dividends are recorded as an expense within minority interest in the statements of operations.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     The following discussion should be read in conjunction with our condensed consolidated and combined financial statements and the related notes (referred to as the “consolidated and combined financial statements”) included in Part I, Item 1 of this Quarterly Report on Form 10-Q, and our audited consolidated and combined financial statements and related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K/A for the year ended December 31, 2007. The information in this section contains forward-looking statements. Our actual results may differ significantly from the results suggested by these forward-looking statements and our historical results as a result of certain risks and uncertainties which are described in Risk Factors included in Part II, Item 1A of this Quarterly Report on Form 10-Q.

General

Our Business

     We are a leading alternative asset manager offering our clients a diverse range of investment products. Our primary business is to provide investment management advisory services for various investment funds and companies (the “GLG Funds”). We currently derive our revenues from management fees and administration fees based on the value of the assets in the GLG Funds and accounts we manage, and performance fees based on the performance of the GLG Funds and accounts managed by us. Substantially all of our assets under management, or AUM, are attributable to third-party investors, and the funds and accounts managed by us are not consolidated into our financial statements. As of September 30, 2008, our net AUM (net of assets invested in other funds managed by us) was approximately $17.3 billion, down from approximately $23.7 billion as of June 30, 2008. As of September 30, 2008 our gross AUM (including assets invested in other funds managed by us) was approximately $21.2 billion, down from approximately $27.9 billion as of June 30, 2008.

     On November 2, 2007, we completed the acquisition (the “Acquisition”) of GLG Partners Limited, GLG Holdings Limited, Mount Granite Limited, Albacrest Corporation, Liberty Peak Ltd., GLG Partners Services Limited, Mount Garnet Limited, Betapoint Corporation, Knox Pines Ltd., GLG Partners Asset Management Limited and GLG Partners (Cayman) Limited (each, an “Acquired Company” and collectively, the “Acquired Companies”) pursuant to a Purchase Agreement dated as of June 22, 2007 (the “Purchase Agreement”) among us, our wholly owned subsidiaries, FA Sub 1 Limited, FA Sub 2 Limited and FA Sub 3 Limited, Jared Bluestein, as the buyers’ representative, Noam Gottesman, as the sellers’ representative, and the equity holders of the Acquired Companies (the “GLG Shareowners”).

     Effective upon the consummation of the Acquisition, (1) each Acquired Company became a subsidiary of ours, (2) the business and assets of the Acquired Companies and certain affiliated entities became our only operations and (3) we changed our name to GLG Partners, Inc.

     In exchange for their equity interests in the Acquired Companies, the GLG Shareowners received:

	•		$976,107,300 in cash;
	•		$23,892,700 in promissory notes in lieu of all of the cash consideration payable to electing GLG Shareowners;
	•		230,000,000 shares of our common stock, par value $0.0001 per share which consists of:

•

138,095,007 shares of our common stock, including 10,000,000 shares of our common stock issued for the benefit of our employees, service providers and certain key personnel under our 2007 Restricted Stock Plan (the “Restricted Stock Plan”);

•

33,000,000 shares of our common stock payable by us upon exercise of certain put or call rights with respect to 33,000,000 ordinary shares issued by FA Sub 1 Limited to certain

GLG Shareowners. Each of the ordinary shares issued by FA Sub 1 Limited to these GLG Shareowners has been put by the holder to us in exchange for one share of our common stock; and

•

58,904,993 shares of our common stock to be issued upon the exchange of 58,904,993 Exchangeable Shares (the “Exchangeable Shares”) issued by FA Sub 2 Limited to certain GLG Shareowners. Each Exchangeable Share is exchangeable at any time at the election of the holder for one share of our common stock; and

•

58,904,993 shares of our Series A preferred stock, par value $0.0001 per share issued with the corresponding Exchangeable Shares which carry only voting rights and nominal economic rights and which will automatically be redeemed on a share-for-share basis as Exchangeable Shares are exchanged for shares of our Common Stock.

     The aggregate of $1.0 billion in cash and promissory notes necessary to pay the cash portion of the purchase price to the GLG Shareowners was financed through a combination of (1) approximately $571.1 million of proceeds raised in our initial public offering and the co-investment by our sponsors, Berggruen Holdings North America Ltd. and Marlin Equities II, LLC, immediately prior to the consummation of the Acquisition and (2) bank debt financing of $530.0 million of the $570.0 million available under the new credit facilities. The remaining capacity under the credit facilities has been drawn down for working capital and general corporate purposes.

     The Acquisition is accounted for as a reverse acquisition. The combined group composed of the Acquired Companies has been treated as the acquiring entity and the continuing reporting entity for accounting purposes. Upon completion of the Acquisition, our assets and liabilities were recorded at historical cost and added to those of the Acquired Companies. Because we had no active business operations prior to consummation of the Acquisition, the Acquisition was accounted for as a recapitalization of the Acquired Companies.

     In this Management’s Discussion and Analysis of Financial Condition and Results of Operations, references to “GLG” are to the combined business of the Acquired Companies and certain affiliated entities prior to November 2, 2007, and references to “we”, “us, “our” and “the Company” are to the business of GLG Partners, Inc. and its subsidiaries from and after November 2, 2007.

Factors Affecting Our Business

     Our business and results of operations are impacted by the following factors:

	•		Assets under management. Our revenues from management and administration fees are directly linked to AUM. As a result, our future performance will depend on, among other things, our ability both to retain AUM and to grow AUM from existing and new products.
	•		Fund performance. Our revenues from performance fees are linked to the performance of the GLG Funds and accounts we manage. Performance also affects AUM because it influences investors’ decisions to invest assets in, or withdraw assets from, the GLG Funds and accounts managed by us.
	•		Currency exchange rates. The GLG Funds typically offer share classes denominated in foreign currencies and as a result, earn fees in those currencies based on AUM denominated in those currencies. Consequently, our fee revenues are affected by exchange rate movements.
	•		Personnel, systems, controls and infrastructure. We depend on our ability to attract, retain and motivate leading investment and other professionals. Our business requires significant investment in our fund management platform, including infrastructure and back-office personnel. We have in the past paid, and expect to continue in the future to pay, these professionals significant compensation and a share of our profits.
	•		Fee rates. Our management and administration fee revenues are linked to the fee rates we charge the GLG Funds and accounts we manage as a percentage of their AUM. Our performance fees are linked to

the rates we charge the GLG Funds and accounts we manage as a percentage of their performance-driven asset growth, subject to “high water marks”, whereby performance fees are earned by us only to the extent that the net asset value of a GLG Fund at the end of a measurement period exceeds the highest net asset value on a preceding measurement period end for which we earned performance fees, and further subject, in some cases, to performance hurdles.

     In addition, our business and results of operations may be affected by a number of external market factors. These include global asset allocation trends, regulatory developments and overall macroeconomic activity. Due to these and other factors, our operating results may reflect significant volatility from period to period.

     We operate in only one business segment, the management of global investment funds and accounts.

Critical Accounting Policies

     For the period prior to November 2, 2007, our accounts are presented based upon the combined financial statements of the GLG entities, which have been prepared in accordance with generally accepted accounting principles in the United States, or GAAP, and in accordance with the criteria presented below.

     For the period from and after November 2, 2007, our accounts are presented based on the consolidated financial statements of GLG Partners, Inc. and its consolidated subsidiaries prepared in accordance with GAAP.

     The preparation of financial statements in accordance with GAAP requires the use of estimates and assumptions that could affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues, expenses and other income. Actual results could differ materially from these estimates. The following is a summary of our critical accounting policies that are most affected by judgments, estimates and assumptions.

Combination and Consolidation Criteria

     For the period prior to November 2, 2007, we have prepared combined financial statements of the accounting acquirer, GLG. The combined financial statements of GLG combine those entities in which Noam Gottesman, Pierre Lagrange and Emmanuel Roman (the “Principals”) and the trustees of their respective trusts (the “Trustees”) had control over significant operating, financial or investing decisions. Upon consummation of the Acquisition, the GLG entities became wholly owned subsidiaries of the Company and from that date the financial statements have been prepared on a consolidated basis and consolidate those entities over which the legal parent, the Company, has control over significant operating, financial or investing decisions.

     The analysis as to whether to combine or consolidate an entity is subject to a significant amount of judgment. Some of the criteria considered are the determination as to the degree of control over an entity by its various equity holders, the design of the entity, how closely related the entity is to each of its equity holders and the relationship of the equity holders to each other.

     We have determined that we do not own a substantive, controlling interest in any of the investment funds we manage and that they are not variable interest entities in which we are the primary beneficiary. As a result, none of the GLG Funds are required to be consolidated into our financial statements. For all GLG Funds, a simple majority of the investors has the ability to remove us from our position as fund manager. The majority of the directors of the boards of the GLG Funds are independent directors.

Revenue Recognition

Performance Fees

     Performance fee rates are calculated as a percentage of investment gains less management and administration fees, subject to “high water marks” and, in the case of most long-only funds, four external funds of funds, or FoHF, and three single-manager alternative strategy funds, to performance hurdles, over a measurement period, generally six months. We have elected to adopt the preferred method of recording performance fee income,

Method 1 of Emerging Issues Task Force (“EITF”) Topic D-96, “Accounting for Management Fees Based on a Formula” (“Method 1”). Under Method 1, we do not recognize performance fee revenues until the end of the measurement period when the amounts are contractually payable, or “crystallized”.

     The majority of the GLG Funds and accounts managed by us have contractual measurement periods that end on each of June 30 and December 31. As a result, the performance fee revenues for our first fiscal quarter and third fiscal quarter results do not reflect revenues from uncrystallized performance fees during these three-month periods. These revenues will be reflected instead at the end of the fiscal quarter in which such fees crystallize.

Compensation and Limited Partner Profit Share

     Compensation expense related to performance fees is accrued during the period for which the related performance fee revenue is recognized and is adjusted monthly based on year-to-date profitability and revenues recognized on a year-to-date basis.

     We also have a limited partner profit share arrangement which remunerates certain individuals through distributions of profits from two of our subsidiaries, GLG Partners LP and GLG Partners Services LP, paid either to two limited liability partnerships in which those individuals are members or directly to a limited number of individuals who are limited partners of the GLG Partners Services LP. Through these partnership interests and under the terms of services agreements between the subsidiaries and the limited liability partnerships, these individuals are entitled to priority draws and an additional discretionary share of the profits earned by the subsidiaries. These partnership draws and profit share distributions are referred to as “limited partner profit share” and are discussed further under “— Expenses —Compensation, Benefits and Limited Partner Profit Share” below. Charges related to the limited partner profit share arrangement are recognized as operating expenses as the related revenues are recognized and associated services provided.

Equity-Based Compensation

     Prior to December 31, 2006, GLG had not granted any equity-based awards. In March 2007, GLG established the equity participation plan to provide key individuals limited partnership interests in two limited partnerships, Sage Summit LP and Lavender Heights Capital LP, with the right to receive a percentage of the proceeds derived from an initial public offering relating to the Acquired Companies or a third-party sale of the Acquired Companies. Upon consummation of the Acquisition, Sage Summit LP and Lavender Heights Capital LP received collectively 15% of the total consideration of cash and our capital stock payable to the GLG Shareowners in the Acquisition. In accordance with GAAP, the issued and outstanding shares of our capital stock paid to Sage Summit LP and Lavender Heights Capital LP in the Acquisition are considered as treasury shares for accounting purposes and are included in our total common share count as issued and outstanding. The equity participation plan was initially subdivided into an “A Sub-Plan” and a “B Sub-Plan”. These limited partnerships distributed to A Sub-Plan limited partners an aggregate of 25% of such amounts upon consummation of the Acquisition, and the remaining 75% will be distributed to the A Sub-Plan limited partners in three equal installments upon vesting over a three-year period on the first, second and third anniversaries of the consummation of the Acquisition, subject to the ability of the general partners of the limited partnerships, whose respective boards of directors consist of the Trustees, to accelerate vesting. B Sub-Plan member entitlements vest in equal installments on the first, second, third and fourth anniversaries of the consummation of the Acquisition subject to the ability of the general partners of the limited partnerships, whose respective boards of directors consist of the Trustees, to accelerate vesting. The unvested portion of such amounts will be subject to forfeiture back to Sage Summit LP and Lavender Heights Capital LP (and not GLG), in the event of termination of the individual as a limited partner prior to each vesting date, unless such termination is without cause after there has been a change in control of our company or due to death or disability. To the extent awards granted under the equity participation plan are forfeited, these amounts may be reallocated by Sage Summit LP and Lavender Heights Capital LP to their then existing or future limited partners (i.e., participants in the plan). Because forfeited awards are returned to the limited partnerships, and not GLG, the forfeited shares remain issued and outstanding and the cash and shares held by the limited partnerships may be reallocated without further dilution to our shareholders. The equity portion of this plan is being accounted for in accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123(R), “Share-Based Payment” (“SFAS 123(R)”), and EITF Issue No. 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services”, which require that

such equity instruments are recorded at their fair value on the measurement date, which date is typically upon the inception of the services that will be performed, remeasured at subsequent dates to the extent the awards are unvested, and amortized into expense over the vesting period utilizing the accelerated method.

     Ten million shares of our common stock, which were part of the purchase price in respect of the Acquisition, were reserved for allocation under the Restricted Stock Plan. Of these shares, 9,877,000 shares were allocated to our employees, service providers and certain key personnel. 911,000 shares of this reserve were unallocated as of September 30, 2008 following forfeitures (net of new allocations) of 788,000 since the Acquisition. These awards are subject to vesting, typically over four years, which may be accelerated. We also adopted the 2007 Long-Term Incentive Plan, or LTIP, which provides for the grants of incentive and non-qualified stock options, stock appreciation rights, common stock, restricted stock, restricted stock units, performance units and performance shares to employees, service providers, non-employee directors and certain key personnel who hold direct or indirect limited partnership interests in certain GLG entities. The Company is authorized to issue up to 40 million shares under the LTIP. Shares of restricted stock awarded under the Restricted Stock Plan and the LTIP are issued and outstanding shares, except in the case of awards under these plans to personnel who are members of the limited partner profit share arrangement in which case shares are issued and become outstanding only as the awards vest. Unvested awards under the LTIP and Restricted Stock Plan which are forfeited, to the extent shares are issued, are returned to us and cancelled.

     In addition, the Principals and the Trustees have entered into an agreement among principals and trustees which will provide that, in the event a Principal voluntarily terminates his employment with us for any reason prior to the fifth anniversary of the closing of the Acquisition, a portion of the equity interests held by that Principal and his related Trustee as of the closing of the Acquisition will be forfeited to the Principals who are still employed by us and their related Trustees.

     All of these arrangements are accounted for in accordance with SFAS 123(R) (or EITF 96-18 in respect of awards to non-employees under the Restricted Stock Plan and LTIP) and will be amortized into expense over the applicable vesting period using the accelerated method. As a result, following the completion of the Acquisition, compensation and benefits reflect the amortization of significant non-cash equity-based compensation expenses associated with the vesting of these equity-based awards, which under GAAP acts to reduce our net income and may result in net losses. The agreement provides for vesting of 17.5% on the consummation of the Acquisition, and 16.5% on each of the first through fifth anniversaries of the Acquisition.

     SFAS 123(R) requires a company to estimate the cost of share-based payment awards based on estimated fair values. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service period. For awards with performance conditions, we will make an evaluation at the grant date and future periods as to the likelihood of the performance targets being met. Compensation expense is adjusted in future periods for subsequent changes in the expected outcome of the performance conditions until the vesting date. SFAS 123(R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

     At the initial grant date of our equity awards on November 2, 2007, management made the following assumptions with respect to forfeiture rates:

	•		The size of the awards to employees, service providers and key personnel under the equity participation plan and LTIP was considered to be a substantial retention incentive;
	•		Incentives for the awards to employees, service providers and key personnel under the equity participation plan and LTIP were considered sufficiently large that a zero percent forfeiture rate was estimated, subject to review as actual forfeitures occur;
	•		Disincentives for forfeiture related to the agreement among principals and trustees were considered to be so punitive that the probability of forfeiture was estimated as zero; and

•

For awards under the Restricted Stock Plan, we used different forfeiture rates for individual employees, service providers and key personnel.

     During the second quarter of 2008, we reviewed these assumptions and found that retention rates (based on the limited post-Acquisition experience) were similar across various groupings of employees, service providers and key personnel, other than for the Principals and Trustees. Our expectation is that the equity awards will continue to have a significant impact on retention. Historical turnover by shares awarded is consistent with the turnover statistics by headcount, excluding the impact of one individual with a significant share award which we consider not to be representative of our population.

       Consequently in the second quarter of 2008 we revised our forfeiture assumptions with respect to forfeitures among our stock awards under the Restricted Stock Plan, equity participation plan and LTIP to an assumed rate of 10% per annum. The forfeiture assumption for the agreement among the principals and trustees remains at zero. In the third quarter of 2008 we also changed our forfeiture assumption with respect to forfeitures of the cash component of the equity participation plan to align with the equity component to an assumed rate of 10% per annum.

Income Tax

     Historically, the only GLG entity earning significant profits subject to company-level income taxes was GLG Holdings Limited, which was subject to U.K. corporate income tax. Most of the balance of the profit was earned by pass-through or other entities that did not incur significant company-level income taxes.

     Following the Acquisition, profits repatriated back to the United States (e.g., in the form of dividends) are subject to U.S. taxation. As it is our intention to continue to pay dividends on our shares of common stock, we expect to repatriate some of our profits in this manner and we expect to experience U.S. taxation on those repatriated profits. In connection with the Acquisition, we recognized for U.S. income tax purposes the value of goodwill and certain other intangibles which we are amortizing and deducting for U.S. income tax purposes over a 15-year period. Depending on the amount of profits repatriated, this tax amortization deduction will effectively reduce U.S. tax expense on repatriated profits. Allocation of income among business activities and entities is subject to detailed and complex rules applied to facts and circumstances that generally are not readily determinable at the date financial statements are prepared. Accordingly, estimates are made of income allocations in computing financial statement effective tax rates that may differ from actual allocations determined when tax returns are prepared or after examination by tax authorities.

     We account for taxes using the asset and liability method in accordance with SFAS No. 109, “Accounting for Income Taxes”, under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. A valuation allowance is established when we believe it is more likely than not that a deferred tax asset will not be realized.

Net Revenues

     All fee revenues are presented in this Quarterly Report on Form 10-Q net of any applicable rebates or sub-administration fees.

     Where a single-manager alternative strategy fund or internal FoHF managed by us invests in an underlying single-manager alternative strategy fund managed by us, the “investing fund” is the top-level GLG Fund into which a client invests and the “investee fund” is the underlying GLG Fund into which the investing fund invests. For example, the GLG European Long-Short Fund invests in the GLG Utilities Fund. In that case, the GLG European Long-Short Fund is the investing fund and the GLG Utilities Fund is the investee fund.

Management Fees

     Our gross management fee rates are set as a percentage of fund AUM. Management fee rates vary depending on the product, as set forth in the table below (subject to fee treatment of fund-in-fund reinvestments as described below):

Product		General range of gross fee rates (% of AUM)
Single-manager alternative strategy funds		1.50% — 2.50%*
Long-only funds		0.75% — 2.25%
Internal FoHF		0.25% — 1.00% (at the investing fund level)
External FoHF		1.50% — 1.95%

     Management fees are generally paid monthly, one month in arrears.

     Most GLG Funds managed by us have share classes with distribution fees that are paid to third-party institutional distributors with no net economic impact to us. In certain cases, we may rebate a portion of our gross management fees in order to compensate third-party institutional distributors for marketing our products and, in a limited number of historical cases, in order to incentivize clients to invest in funds managed by us.

     Due to the changing mix of our AUM related to the impact of redemptions from higher yielding alternative strategy funds during the quarter ended September 30, 2008 and continuing in the subsequent quarter, the inflow in October 2008 of a material institutional managed account which earns a wholesale level management fee, and the side pocketing of certain private placement investments in some of the funds that we manage into special asset vehicles, we expect that our combined management fee yield will decline to lower levels in future quarters.

Performance Fees

     Our gross performance fee rates are set as a percentage of fund performance, calculated as investment gains (both realized and unrealized), less management and administration fees, subject to “high water marks” and, in the case of most long-only funds, four external FoHFs and three single manager alternative strategy funds, to performance hurdles. As a result, even when a GLG Fund has positive performance, we may not earn a performance fee due to negative fund performance in prior measurement periods and in some cases due to a failure to reach a hurdle rate. High water marks and performance hurdles, however, are determined on a fund-by-fund basis and performance fees are not netted across funds, other than in the case of the GLG Emerging Markets (Special Assets) Fund. The GLG Emerging Markets (Special Assets) Fund does not earn a performance fee until an investors high water mark across both the GLG Emerging Markets (Special Assets) Fund and its parent fund (the GLG Emerging Markets Fund) is exceeded. Accordingly, any funds above high water marks and applicable performance hurdles at the end of the relevant measurement period will contribute to performance fee revenue. As of September 30, 2008, all of our long-only funds and a vast majority of our single-manager alternative strategy funds subject to high water marks were below their respective high water marks. Accordingly, even if our funds that are below high water marks have positive performance during the last quarter of 2008 or in subsequent performance periods, our ability to earn performance fees during those periods will be adversely impacted due to the number of funds subject to high water marks and the amounts to be recovered.

     Performance fee rates vary depending on the product, as set forth in the table below (subject to fee treatment of fund-in-fund investments as described below):

Product		General range of gross fee rates (% of investment gains)
Single-manager alternative strategy funds		20% — 30%*
Long-only funds		20% (may be subject to performance hurdle)
Internal FoHF		0% — 20% (at the investing fund level)
External FoHF		5% — 10% (may be subject to performance hurdle)

     We have adopted Method 1 for recognizing performance fee revenues and under Method 1 do not recognize performance fee revenues until the end of the measurement period when the amounts are crystallized, which for the majority of the investment funds and accounts managed by us is on June 30 and December 31.

     Due to the impact of foreign currency exposures on management and performance fees, we have elected to utilize cash flow hedge accounting to hedge a portion of our anticipated foreign currency denominated revenue. The effective portion of the hedge is recorded as a component of other comprehensive income and is released into management or performance fee income, respectively, when the hedged revenues impact the income statement. The ineffective portion of the hedge is recorded each period as derivative gain or loss in other income or other expense, respectively. See “Quantitative and Qualitative Disclosures About Market Risk – Exchange Rate Risk” in Part I, Item 3 of this Quarterly Report for a further discussion of our foreign exchange exposure and hedging activities.

Administration Fees

     Our gross administration fee rates are set as a percentage of fund AUM. Administration fee rates vary depending on the product. From our gross administration fees, we pay sub-administration fees to third-party administrators and custodians, with the residual fees recognized as our net administration fee. Administration fees are generally paid monthly, one month in arrears.

     When one of the single-manager alternative strategy funds or internal FoHFs managed by us invests in an underlying single-manager alternative strategy fund managed by us, administration fees are charged at both the investing and investee fund levels.

Fees on Managed Accounts

     Managed account fee structures are negotiated on an account-by-account basis and may be more complex than for the GLG Funds. Across the managed account portfolio, fee rates vary according to the underlying mandate and, excluding one material managed account, in the aggregate are generally within the performance and management fee ranges charged with respect to comparable fund products. In October 2008, a new material managed account funded which provides for a management fee at institutional rates and a performance fee based on exceeding certain benchmarks even in a scenario with negative performance.

Expenses

Compensation, Benefits and Limited Partner Profit Share

     To attract, retain and motivate the highest quality investment and other professionals, we provide significant remuneration through salary, discretionary bonuses, profit sharing and other benefits.

     The largest component of expenses is limited partner profit share and employee compensation and other benefits payable to our investment and other professionals. This includes significant fixed annual salary, limited partner profit share and other compensation based on individual, team and company performance and profitability.

     Beginning in mid-2006, GLG entered into partnership with a number of our key personnel in recognition of their importance in creating and maintaining the long-term value of our business. These individuals ceased to be employees and either became holders of direct or indirect limited partnership interests in one of two of our subsidiaries GLG Partners LP and GLG Partners Services LP, or formed two limited liability partnerships, Laurel Heights LLP and Lavender Heights Capital LLP, through which they provided services to the GLG entities. Through these partnership interests, these key individuals are entitled to partnership draws as priority distributions, which are recognized in the period in which they are payable. There is an additional limited partner profit share distribution, which is recognized in the period in which the related revenues are recognized and associated services provided. This additional distribution represents a substantial majority of the limited partner profit share for the year and is typically paid at the beginning of the following year. Key personnel that are participants in the limited partner profit share arrangement do not receive any salaries or discretionary bonuses from us, except for the salary paid by GLG Partners, Inc. to our Chief Operating Officer.

     Under GAAP, limited partner profit share is treated as an operating expense in the period the limited partner provides services.

     Following the Acquisition, and as required by SFAS 123(R), our GAAP employee compensation expense reflects share-based and other compensation recognized in respect of (a) the equity participation plan, the 10,000,000 shares allocated for the benefit of employees, service providers and certain key personnel under the Restricted Stock Plan, and the agreement among the principals and trustees (collectively, the “Acquisition-related compensation expense”) and (b) dividends paid on unvested shares that are ultimately not expected to vest.

     Under GAAP, there is a charge to compensation expense for Acquisition-related compensation expense based on certain service conditions. However, management believes that this charge does not reflect our ongoing core business operations and compensation expense and excludes such amounts for purposes of assessing our ongoing core business performance. As a result of our view in respect of Acquisition-related compensation expense, we present the measure “non-GAAP compensation, benefits and profit share”, or non-GAAP CBP (which we had, prior to the first fiscal quarter of 2008, referred to as non-GAAP limited partner profit share, compensation and benefits, or non-GAAP PSCB), which is a non-GAAP financial measure which reflects GAAP compensation, benefits and profit share adjusted to exclude Acquisition-related compensation expense described below under “— Acquisition-Related Compensation Expense”, to show the total ongoing cost of the services provided to us by both participants in the limited partner profit share arrangement and employees in relation to services rendered during the periods under consideration.

     The components of compensation, benefits and profit share are:

	•		Base compensation — contractual compensation paid to employees in the form of base salary, which is expensed as incurred.
	•		Variable compensation — payments that arise from the contractual entitlements of personnel to a fixed percentage of certain variable fee revenues attributable to such personnel with respect to GLG Funds and managed accounts. Variable compensation expense is recognized at the same time as the underlying fee revenue is crystallized, which may be monthly or semi-annually (on June 30 and December 31), depending on the fee revenue source.
	•		Discretionary compensation — payments that are determined by the Company’s management in its sole discretion and are generally linked to performance. In determining such payments, the Company’s management considers, among other factors, the ratio of total discretionary compensation to total revenues; however, this ratio may vary between periods and, in particular, significant discretionary bonuses may still be paid in a period of low performance for retention and incentivization purposes. This discretionary compensation is paid to employees in the form of a discretionary cash bonus. Discretionary compensation is generally declared and paid following the end of each calendar year.

However, the notional discretionary compensation charge is adjusted monthly based on the year-to-date profitability and revenues recognized on a year-to-date basis. As the majority of the GLG Funds crystallize their performance fees at June 30 and December 31, the majority of discretionary compensation expense crystallizes at year end and is typically paid in January following the year end.

•

Limited partner profit share — distributions of limited partner profit share under the limited partner profit share arrangement described below.

     The key personnel who are participants in the limited partner profit share arrangement provide services to us through two limited liability partnerships, Laurel Heights LLP and Lavender Heights LLP (the “LLPs”), which are limited partners in GLG Partners LP and GLG Partners Services LP, respectively. The amount of profits (or limited partner profit share) attributable to each of the LLPs is determined at our discretion based upon the profitability of our business and our view of the contribution to revenues and profitability from the services provided by each limited partnership during that period. These profit shares are recorded as operating expense matching the period in which the related revenues are recognized and associated services provided. A portion of the partnership distribution is advanced monthly as a draw against final determination of profit share. Once the final profit allocation is determined, typically in January following each year end, it will be paid to the LLPs, as limited partners, less any amounts paid as advance drawings during the year. See “— Allocation of Profit Shares to Individual Members of LLPs” below for a further discussion of the allocations. In addition, as shares of restricted stock awarded under our Restricted Stock Plan or LTIP to members of the LLPs vest or as we pay cash dividends on the unvested shares of restricted stock awarded under these plans to members of the LLPs, we allocate additional profits to the LLPs sufficient for the LLP to acquire from us the shares that are vesting or to pay the relevant dividend. These additional profit shares are recorded as operating expense in accordance with SFAS 123(R). Other limited partners of GLG Partners Services LP who receive profit allocations include two investment professionals who are not members of Lavender Heights LLP, but whose profit distributions from GLG Partners Services LP are determined in the same manner as the allocation of profit shares to individual members of the LLP described below and included in the limited partner profit measure, as described below.

Allocation of Profit Shares to Individual Members of LLPs

     Profit allocations made to the LLPs by GLG Partners LP and GLG Partners Services LP make up substantially all of the LLPs’ net profits for each period. Members are entitled to a base limited partner profit share priority drawing, which is a fixed amount and paid as a priority partnership draw. Certain members are also entitled to a variable limited partner profit share priority drawing based on a fixed percentage of certain variable fee revenues attributable to such personnel with respect to GLG Funds and managed accounts, which are paid as a partnership draw. After year end, the managing members of the LLPs will declare discretionary allocations to the key personnel who participate in the limited partner profit share arrangement and who are LLP members from the remaining balance of the LLPs’ net profits, after taking into account the base and variable limited partnership profit share priority drawings, based on their view of those individuals’ contribution to the generation of these profits. This process will typically take into account the nature of the services provided to us by each key personnel, his or her seniority and the performance of the individual during the period. These profit shares are recorded as operating expenses matching the period in which the related revenues are recognized and associated services provided. Profit allocations, net of any amounts paid during the year as priority partnership drawings, will typically be paid to the members in January following each year end.

     As our investment performance improves, our compensation costs and performance-related limited partner profit share distributions are expected generally to rise correspondingly. In addition, equity-based compensation costs may vary significantly from period to period depending on the market price of our common stock, among other things. In order to retain our investment professionals during periods of poor performance, we may have to pay our investment professionals significant amounts, even if we earn low or no performance fees. In these circumstances these payments may represent a larger proportion of our revenues than historically.

Acquisition-Related Compensation Expense

     Following the Acquisition, and as required by SFAS 123(R), our GAAP compensation, benefits and profit share expense reflects share-based and other compensation recognized with respect to (a) the 15% of the total

consideration of cash and capital stock received collectively by Sage Summit LP and Lavender Heights Capital LP in association with the Acquisition (including with respect to the cash portion of the awards under the equity participation plan in the aggregate amounts of $72 million, $36 million and $5 million for the three 12-month periods beginning with the consummation of the Acquisition), the 10,000,000 shares allocated for the benefit of employees, service providers and certain key personnel under the Restricted Stock Plan, and the agreement among the principals and trustees and (b) dividends paid on unvested shares that are ultimately not expected to vest.

     Under GAAP, there is a charge to compensation expense for Acquisition-related compensation expense based on certain service conditions. However, management believes that this charge does not reflect our ongoing core business operations and compensation expense and excludes such amounts for purposes of assessing our ongoing core business performance. In the case of the Acquisition-related compensation expense associated with Sage Summit LP and Lavender Heights Capital LP, because awards forfeited by participants in the equity participation plan who are no longer limited partners are returned to Sage Summit LP and Lavender Heights Capital LP, and not GLG, and the cash and stock held by the limited partnerships may be reallocated to then existing or future participants in the plan without further dilution to our shareholders and because the amount of consideration received by the entities in the Acquisition was awarded based on the contributions of the participants in the equity participation plan prior to the Acquisition and the amount reduced the number of shares which would otherwise have been paid to the GLG Shareowners in the Acquisition, management measures ongoing business performance by excluding these amounts. In the case of the Acquisition-related compensation expense associated with the Restricted Stock Plan, because the amount allocated to the Restricted Stock Plan was designed to recognize employees, service providers and key personnel for their contribution to GLG prior to the Acquisition and because the shares allocated to the Restricted Stock Plan reduced the number of shares which would otherwise have been paid to GLG’s shareholders in the Acquisition, management measures ongoing business performance by excluding these amounts. In the case of the Acquisition-related compensation expense associated with the agreement among principals and trustees, because, notwithstanding the service requirement in SFAS 123(R), neither the vesting nor forfeiture provisions of that agreement would be accretive or dilutive to our present or future shareholders, management measures ongoing business performance by excluding these amounts.

     As a result of our view on the Acquisition-related compensation expense, we present the measure non-GAAP CBP, which is a non-GAAP financial measure used to calculate adjusted net income, as described below under “— Assessing Business Performance”, and which deducts Acquisition-related compensation expense from GAAP compensation, benefits and profit share expense, to show the total ongoing cost of the services provided to us by both participants in the limited partner profit share arrangement and employees in relation to services rendered during the periods under consideration.

General and Administrative

     Our non-personnel cost base represents the expenditure required to provide an effective investment infrastructure and marketing operation. Key elements of the cost base are, among other things, professional services fees, temporary and contract employees, travel, information technology and communications, business development, marketing, occupancy, facilities and insurance.

Assessing Business Performance

     As discussed above under “— Expenses — Compensation, Benefits and Limited Partner Profit Share”, we assess our personnel-related expenses based on the measure non-GAAP CBP. Non-GAAP CBP reflects GAAP compensation, benefits and profit share expense, adjusted to exclude the Acquisition-related compensation expense described above under “— Expenses — Compensation, Benefits and Limited Partner Profit Share” and “— Expenses —Acquisition-Related Compensation Expense”.

     In addition, we assess the underlying performance of our business based on the measure “adjusted net income”, which adjusts GAAP net (loss)/income before minority interest for Acquisition-related compensation expense and deducts the tax effect of Acquisition-related compensation expense and cumulative dividends accrued for the holders of FA Sub 2 Limited Exchangeable Shares. See “— Results of Operations — Adjusted Net Income” for this reconciliation for the periods presented.

     Non-GAAP CBP is not a measure of financial performance under GAAP and should not be considered as an alternative to GAAP compensation, benefits and profit share expense. Further, adjusted net income is not a measure of financial performance under GAAP and should not be considered as an alternative to GAAP net income as an indicator of our operating performance or any other measures of performance derived in accordance with GAAP. The non-GAAP financial measures we present may be different from non-GAAP financial measures used by other companies.

     We are providing these non-GAAP financial measures to enable investors, securities analysts and other interested parties to perform additional financial analysis of our personnel-related costs and our earnings from operations and because we believe that they will be helpful to investors in understanding all components of the personnel-related costs of our business. We believe that the non-GAAP financial measures also enhance comparisons of our core results of operations with historical periods. In particular, we believe that the non-GAAP adjusted net income measure better represents profits available for distribution to stockholders than does GAAP net income primarily because of the adjustment described above. In addition, we use these non-GAAP financial measures in our evaluation of our core results of operations and trends between fiscal periods and believe these measures are an important component of our internal performance measurement process. We also prepare forecasts for future periods on a basis consistent with these non-GAAP financial measures.

     Under our revolving credit and term loan facilities, we are required to maintain compliance with certain financial covenants based on adjusted earnings before interest expense, provision for income taxes, depreciation and amortization, or adjusted EBITDA, which is calculated based on the non-GAAP adjusted net income measure, further adjusted to add back interest expense, provision for income taxes, depreciation and amortization. Non-GAAP adjusted net income has certain limitations in that it may overcompensate for certain costs and expenditures related to our business.

     In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51” (“SFAS 160”). SFAS 160 states that accounting and reporting for minority interests will be recharacterized as noncontrolling interests and classified as a component of equity. SFAS 160 applies to all entities that prepare consolidated financial statements, except not-for-profit organizations, but will affect only those entities that have an outstanding noncontrolling interest in one or more subsidiaries or that deconsolidate a subsidiary. SFAS 160 is effective prospectively, except for certain retrospective disclosure requirements, for fiscal years beginning after December 15, 2008. This statement will be effective for the Company beginning in fiscal 2009. As described above, the primary impact of the statement will be the reclassification of minority interests from liabilities to stockholders’ equity and their re-labeling as “non-controlling interests”. In addition, presently under ARB No. 51, non-controlling interests only share in losses to the extent that they have available equity to absorb losses. Under SFAS 160, the non-controlling interests will fully share in losses as well as profits.

Assets Under Management

September 30, 2008 Compared to June 30, 2008, December 31, 2007 and September 30, 2007

Change in AUM between September 30, 2008, June 30, 2008, December 31, 2007 and September 30, 2007
(U.S. Dollars in millions)

		As of Sept				As of June				3-Month				As of Dec				9-Month				As of Sept				12-Month
		30, 2008				30, 2008				Change				31, 2007				Change				30, 2007				Change
Alternative strategy		$	13,692			$	17,772				(4,080	)		$	18,833				(5,140	)		$	14,713				(1,020	)
Long-only			3,079				4,684				(1,605	)			4,774				(1,695	)			4,561				(1,482	)
Internal FoHF			1,690				2,191				(501	)			2,318				(628	)			1,651				39
External FoHF			587				691				(104	)			598				(12	)			598				(12	)
Gross fund-based AUM			19,048				25,337				(6,289	)			26,523				(7,475	)			21,524				(2,475	)
Managed accounts			1,843				2,110				(267	)			2,357				(514	)			1,905				(62	)
Cash and other holdings			261				448				(187	)			206				55				164				97
Gross AUM			21,152				27,895				(6,743	)			29,086				(7,933	)			23,593				(2,440	)
Less: alternative strategy investments in GLG Funds			(2,161	)			(2,125	)			(35	)			(2,090	)			(71	)			(1,419	)			(742	)
Less: long-only investments in GLG Funds (1)			(5	)			(5	)			—				—				(5	)			—				(5	)
Less: internal FoHF investments in GLG Funds			(1,674	)			(2,047	)			373				(2,331	)			657				(1,653	)			(21	)
Less: external FoHF investments in GLG Funds			(32	)			(50	)			18				(53	)			21				(55	)			23
Net AUM		$	17,280			$	23,668				(6,388	)		$	24,612				(7,331	)		$	20,466				(3,186	)
Quarterly average gross AUM		$	24,524			$	28,516							$	26,339							$	22,557
Quarterly average net AUM			20,474				24,157								22,539								19,526
Opening net AUM		$	23,668			$	24,646							$	20,466							$	18,585
Inflows (net of redemptions)			(2,182	)			(629	)							2,927								1,633
Performance (gains net of losses and fees)			(3,139	)			(269	)							986								(297	)
Currency translation impact (non USD AUM expressed in USD)			(1,068	)			(80	)							233								545
Closing net AUM		$	17,280			$	23,668							$	24,612							$	20,466

     During the three months ended September 30, 2008, our gross AUM decreased by $6.7 billion to $21.2 billion and net AUM decreased by $6.4 billion to $17.3 billion. The decline in net AUM was attributable to the following factors:

	•		Negative performance during the three months ended September 30, 2008, resulting in performance losses (net of gains) of $3.1 billion (which included an estimated $95.0 million in aggregate direct exposure of certain GLG Funds to the appointment of administrators for Lehman Brothers International (Europe));
	•		Strengthening of the U.S. dollar against other currencies in which our funds and managed accounts are denominated, resulting in a negative foreign exchange impact of $1.1 billion during the three months ended September 30, 2008;
	•		Net outflows of $2.2 billion (which included $1.3 billion of redemptions from the GLG Emerging Markets Fund and other emerging markets funds previously anticipated due to the announced departure of the portfolio manager of those funds); and
	•		Overall pause in the industry given the current market conditions.

     The ratio between net and gross AUM declined slightly between June 30, 2008 and September 30, 2008, reflecting generally stable and consistent relative levels of fund-in-fund investments, with respect to both investments by our FoHF products in certain funds managed by us and investments by certain single-manager alternative strategy funds managed by us in other single-manager alternative strategy funds managed by us.

     On April 22, 2008, we announced the departure of the portfolio manager of the GLG Emerging Markets Fund and three other emerging markets funds effective October 2008. As a result of this departure, approximately $4.0 billion (including approximately $2.4 billion after September 30, 2008) has been redeemed from these GLG Funds as of November 7, 2008.

     On September 15, 2008, Lehman Brothers Holdings Inc. (“Lehman Brothers”) filed for Chapter 11 bankruptcy in the United States and administrators were appointed for Lehman Brothers International (Europe) (“LBIE”), Lehman Brothers’ prime brokerage unit in the United Kingdom. We currently estimate that the combined direct exposure of the GLG Funds to the administration proceedings of LBIE and the insolvency proceedings of other entities in the Lehman Brothers group amounts to approximately $95.0 million, or less than 1% of our total net AUM. Our assessment of this exposure is based upon a number of assumptions, including that:

	•		amounts which LBIE was required to treat as client money and not use in the course of its business were and are, in fact, so held and will be released upon repayment of all the affected GLG Fund’s debt to LBIE (and are therefore excluded from the estimated exposure amounts);
	•		the information we have received to date from the administrators of LBIE in relation to rehypothecation of assets is accurate;
	•		unsettled transactions at the time LBIE entered into administration proceedings will be determined on the basis of a cash settlement of those trades, in accordance with contractual agreements between the affected GLG Fund and LBIE, or cancelled;
	•		the cash settlement amounts for terminated over-the-counter derivatives and other transactions will be as determined by us; and
	•		there are no other factors, which if known to us, would lead us to conclude that the business of LBIE was conducted otherwise than in accordance with the contractual documentation.

     Based on legal and professional advice recently obtained, we believe these assumptions are reasonable. However, until we are able to fully reconcile our information and assumptions with the administrators of LBIE, these estimates could change or the assumptions may prove to be incorrect.

     During the nine months ended September 30, 2008, our gross AUM decreased by $7.9 billion to $21.2 billion and net AUM decreased by $7.3 billion to $17.3 billion. The decline in net AUM was attributable to the following factors:

	•		Negative performance during the nine months ended September 30, 2008, resulting in performance losses (net of gains) of $5.0 billion (which included an estimated $95.0 million in aggregate direct exposure of certain GLG Funds to the appointment of administrators for LBIE);
	•		Strengthening of the U.S. dollar against other currencies in which our funds and managed accounts are denominated, resulting in a negative foreign exchange impact of $0.3 billion during the nine months ended September 30, 2008;
	•		Net outflows of $2.0 billion (which included $1.6 billion of redemptions from the GLG Emerging Markets Fund and other emerging markets funds previously anticipated due to the announced departure of the portfolio manager of those funds); and
	•		Overall pause in the industry given the current market conditions.

     The ratio between net and gross AUM decreased slightly between December 31, 2007 and September 30, 2008, reflecting generally stable and consistent relative levels of fund-in-fund investments, with respect to both investments by our FoHF products in certain funds managed by us and investments by certain single-manager alternative strategy funds managed by us in other single-manager alternative strategy funds managed by us.

     During the twelve months ended September 30, 2008, our gross AUM decreased by $2.4 billion to $21.2 billion and net AUM decreased by $3.2 billion to $17.3 billion. The decline in net AUM was attributable to the following factors:

	•		Negative performance during the twelve months ended September 30, 2008, resulting in performance losses (net of gains) of $4.0 billion (which included an estimated $95.0 million in aggregate direct exposure of certain GLG Funds to the appointment of administrators for LBIE);
	•		Strengthening of the U.S. dollar against other currencies in which our funds and managed accounts are denominated, resulting in a negative foreign exchange impact of $0.1 billion during the twelve months ended September 30, 2008;
	•		Net inflows of $0.1 billion (which included $1.6 billion of redemptions from the GLG Emerging Markets Fund and other emerging markets funds previously anticipated due to the announced departure of the portfolio manager of those funds); and
	•		Overall pause in the industry given the current market conditions.

     The ratio between net and gross AUM decreased 6% between September 30, 2007 and September 30, 2008, reflecting relatively slightly higher levels of fund-in-fund investments, with respect to both investments by our FoHF products in certain funds managed by us and investments by certain single-manager alternative strategy funds managed by us in other single-manager alternative strategy funds managed by us.

     During October 2008, the boards of directors of five of the GLG Funds managed by us have taken actions including restructuring redemptions, suspending redemptions and/or side pocketing certain investments in special asset vehicles. The estimated impact of these actions is that approximately $1.3 billion of gross AUM that may have been redeemed during the quarter ending December 31, 2008 will be redeemed in later periods.

Results of Operations

Condensed Combined and Consolidated GAAP Statement of Operations Information
(U.S. Dollars in thousands)

		Three Months Ended September 30,								Nine Months Ended September 30,
		2008				2007				2008				2007
Net revenues and other income
Management fees, net		$	80,307			$	78,558			$	269,663			$	198,892
Performance fees, net			6,833				803				89,762				343,835
Administration fees, net			17,751				16,306				60,448				42,986
Other income			(2,796	)			6,905				2,412				7,875
Total net revenues and other income			102,095				102,572				422,285				593,588
Expenses
Employee compensation and benefits			(206,433	)			(28,959	)			(674,945	)			(110,526	)
Limited partner profit share			(20,954	)			(17,000	)			(102,185	)			(207,500	)
Compensation, benefits and profit share			(227,387	)			(45,959	)			(777,130	)			(318,026	)
General, administrative and other			(30,283	)			(25,891	)			(90,816	)			(79,634	)
Total expenses			(257,670	)			(71,850	)			(867,946	)			(397,660	)
(Loss) / income from operations			(155,575	)			30,722				(445,661	)			195,928
Net interest (expense) / income			(3,985	)			3,048				(12,110	)			4,694
(Loss) / income before income taxes			(159,560	)			33,770				(457,771	)			200,622
Income taxes			(3,160	)			(4,735	)			(12,656	)			(33,020	)
(Loss) / income before minority interests			(162,720	)			29,035				(470,427	)			167,602
Minority interests:
Share of income							(73	)							(479	)
Exchangeable Shares dividends			(1,472	)			—				(4,418	)			—
Cumulative dividends on Exchangeable Shares			(2,896	)			—				(12,194	)			—
Net (loss) / income attributable to common stockholders		$	(167,088	)		$	28,962			$	(487,039	)		$	167,123

Net Revenues and Other Income

Three Months Ended September 30, 2008 Compared to Three Months Ended September 30, 2007

Change in GAAP Net Revenues and Other Income between
Three Months Ended September 30, 2008 and Three Months Ended September 30, 2007
(U.S. Dollars in thousands)

		Three Months Ended September 30,
		2008				2007				Change
Net revenues and other income
Management fees, net		$	80,307			$	78,558			$	1,749
Performance fees, net			6,833				803				6,030
Administration fees, net			17,751				16,306				1,445
Other income			(2,796	)			6,905				(9,701	)
Total net revenues and other income		$	102,095			$	102,572			$	(477	)
Key ratios*
Management fees / average net AUM, annualized			1.57	%			1.61	%
Administration fees / average net AUM, annualized			0.35	%			0.33	%

     Total net revenues and other income decreased by $0.5 million, or 0.5%, to $102.1 million. This decrease was driven by a net loss of other income related to the negative impact of the strengthening of the U.S. dollar versus the Euro and British Pound, offset by growth in all categories of fee revenue.

     For management and administration fee revenues, we use annualized net fee yield as a measure of our fees generated for every dollar of our net AUM. The net management and administration fee yield is equal to the annualized management fees and administration fees, respectively, divided by quarterly average net AUM for the applicable period.

     Net management fees increased by $1.7 million, or 2.2%, to $80.3 million. This growth was a result of the following factors:

	•		a 4.9% higher quarterly average net AUM balance between the periods which, at constant net management fee yield, resulted in an increase in management fees of $3.8 million; and
	•		a decrease in the annualized net management fee yield from 1.61% to 1.57%, reflecting lower management fees per unit of AUM, which, when applied to the increased net AUM base, resulted in a decrease in management fees of $2.1 million.

     Net performance fees increased by $6.0 million, or 750.9%, to $6.8 million primarily due to the crystallization of performance fees in the third quarter on certain managed accounts. The majority of GLG Funds and accounts managed by GLG did not crystallize performance fees during the three-month periods presented and as a result, management believes performance fee revenue amounts are not indicative of the performance of GLG’s business during the periods presented.

     Net administration fees increased by $1.4 million, or 8.9%, to $17.8 million. This growth was driven by two main factors:

•

a 4.9% higher quarterly average net AUM balance between the periods which, at constant administration fee yield, resulted in an increase in administration fees of $0.8 million, or 54.8% of the total increase in administration fees; and

•

an increase in the annualized net administration fee yield from 0.33% to 0.35% which, when applied to the increased net AUM base, resulted in an increase in administration fees of $0.7 million, or 45.2% of the total increase in administration fees.

     Other income decreased by $9.7 million, or 140.5%, resulting in a loss of $2.8 million. This decrease was primarily due to our holding non-U.S. dollar cash balances which depreciated in value as a result of the strengthening U.S. dollar and giving rise to certain foreign exchange losses reflected in “Other income”.

Nine Months Ended September 30, 2008 Compared to Nine Months Ended September 30, 2007

Change in GAAP Net Revenues and Other Income between
Nine Months Ended September 30, 2008 and Nine Months Ended September 30, 2007
(U.S. Dollars in thousands)

		Nine Months Ended September 30,
		2008				2007				Change
Net revenues and other income
Management fees, net		$	269,663			$	198,892			$	70,771
Performance fees, net			89,762				343,835				(254,073	)
Administration fees, net			60,448				42,986				17,462
Other income			2,412				7,875				(5,463	)
Total net revenues and other income		$	422,285			$	593,588			$	(171,303	)
Key ratios
Total net revenues and other income / average net AUM, annualized			2.50	%			4.50	%
Management fees / average net AUM, annualized			1.59	%			1.51	%
Administration fees / average net AUM, annualized			0.36	%			0.33	%

     Total net revenues and other income decreased by $171.3 million, or 28.9%, to $422.3 million. This decrease was primarily driven by a decline in performance fees partially offset by growth in the remaining categories of fee revenue – management fees and administration fees.

     For management and administration fee revenues, we use net fee yield as a measure of our fees generated for every dollar of our net AUM. The annualized net management and administration fee yield is equal to the annualized management fees and administration fees, respectively, divided by quarterly average net AUM for the applicable period.

     Net management fees increased by $70.8 million, or 35.6%, to $269.7 million. This growth was driven by two main factors:

	•		a 28.3% higher quarterly average net AUM balance between the periods which, at constant net management fee yield, resulted in an increase in management fees of $56.4 million, or 79.6% of the total increase in management fees; and
	•		an increase in the annualized net management fee yield from 1.51% to 1.59%, reflecting higher management fees per unit of AUM, which, when applied to the increased net AUM base, resulted in an increase in management fees of $14.4 million, or 20.4% of the total increase in management fees.

     The higher annualized net management fee yield was attributable primarily to investors participating in GLG Funds and managed accounts with higher management fee rates.

     Net performance fees decreased by $254.1 million, or 73.9%, to $89.8 million. This decline was driven by:

	•		a lower percentage of the GLG Funds generating significant positive performance; and
	•		a higher percentage of the GLG Funds unable to meet their respective high water marks since performance fees last crystallized, even if they generated positive performance during the nine month period.

     Net administration fees increased by $17.5 million, or 40.6%, to $60.4 million. This growth was driven by two main factors:

	•		a 28.3% higher quarterly average net AUM balance between the periods which, at constant administration fee yield, resulted in an increase in administration fees of $12.2 million, or 69.8% of the total increase in administration fees; and
	•		an increase in the annualized net administration fee yield from 0.33% to 0.36% which, when applied to the increased net AUM base, resulted in an increase in administration fees of $5.3 million, or 30.2% of the total increase in administration fees. The higher annualized net administration fee yield was attributable primarily to investors participating in GLG Funds and managed accounts with higher net administration fee rates.

     Other income decreased by $5.5 million, or 69.4%, to $2.4 million. This decrease was primarily due to our holding non-U.S. dollar cash balances which depreciated in value against the U.S. dollar giving rise to certain foreign exchange losses reflected in “Other income”.

Expenses

Three Months Ended September 30, 2008 Compared to Three Months Ended September 30, 2007

Change in GAAP Expenses between Three Months Ended September 30, 2008 and
Three Months Ended September 30, 2007
(U.S. Dollars in thousands)

		Three Months Ended September 30,
		2008				2007				Change
Expenses
Employee compensation and benefits		$	(206,433	)		$	(28,959	)		$	(177,474	)
Limited partner profit share			(20,954	)			(17,000	)			(3,954	)
Compensation, benefits and profit share			(227,387	)			(45,959	)			(181,428	)
General, administrative and other			(30,283	)			(25,891	)			(4,392	)
Total expenses		$	(257,670	)		$	(71,850	)		$	(185,820	)
Key ratios
Compensation, benefits and profit share / total GAAP net revenues and other income			222.7	%			44.8	%			177.9	%
General, administrative and other / total GAAP net revenue and other income			29.7	%			25.2	%			4.5	%
Total expenses / total GAAP net revenue and other income			252.4	%			70.0	%			182.4	%