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

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

Commission File Number: 001-33217

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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o 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 May 4, 2010, there were 251,242,969 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 Exchange Act and are subject to the “safe harbor” created by such section. 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 Part II, Item 1A, “Risk Factors” of this Quarterly Report on Form 10-Q and the following:

	•		the volatility in the financial markets;
	•		our financial performance;
	•		market conditions for the investment funds and managed accounts we manage;
	•		performance of the investment funds and managed accounts we manage, the related performance fees and the associated impacts on revenues, net income, cash flows and fund inflows/outflows;
	•		the impact of net inflows on our mix of assets under management and the associated impacts on revenues;
	•		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;
	•		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 SEC 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.

Available Information

     We maintain an Internet website at www.glgpartners.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, along with our annual report to shareholders and other information related to our company, are available free of charge on this site as soon as reasonably practicable after we electronically file or furnish these reports with the SEC. Our Internet website and the information contained therein or connected thereto are not intended to be incorporated into this Quarterly Report on Form 10-Q. The inclusion of our Internet website address in this report does not include or incorporate by reference into this report any information on our Internet website.

     We routinely post important information on our website for investors. We intend to use our website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD promulgated by the SEC. These disclosures will be included on our website under the heading “Investor Relations — Overview — Recent News”. Accordingly, investors should monitor this portion of our website, in addition to following our press releases, SEC filings and public conference calls and webcasts.

GLG PARTNERS, INC.
INDEX

		PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets — March 31, 2010 (Unaudited) and December 31, 2009		5
Unaudited Condensed Consolidated Statements of Operations — Three Months Ended March 31, 2010 and March 31, 2009		6
Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Deficit — Three Months Ended March 31, 2010		7
Unaudited Condensed Consolidated Statements of Cash Flows — Three Months Ended March 31, 2010 and March 31, 2009		8
Notes to the Unaudited Condensed Consolidated Financial Statements		9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		20
Item 3. Quantitative and Qualitative Disclosures About Market Risk		43
Item 4. Controls and Procedures		45
PART II. OTHER INFORMATION
Item 1. Legal Proceedings		46
Item 1A. Risk Factors		46
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		67
Item 6. Exhibits		68
Signature		69
EX-10.1.1
EX-10.1.2
EX-10.1.3
EX-10.2.1
EX-10.2.2
EX-10.3
EX-31.1
EX-31.2
EX-31.3
EX-32.1
EX-32.2
EX-32.3

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

GLG PARTNERS, INC. AND SUBSIDIARIES

		March 31,				December 31,
		2010				2009
		(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents		$	194,121			$	263,782
Restricted cash			5,748				5,746
Fees receivable			48,243				104,541
Unsettled fund receivables			31,164				8,948
Prepaid expenses and other assets			37,502				36,892
Total Current Assets			316,778				419,909
Non-Current Assets
Investments at fair value			31,508				22,048
Goodwill			587				587
Intangible assets (net of accumulated amortization of $3,652 and $2,768)			31,214				34,153
Property and equipment (net of accumulated depreciation and amortization of $16,620 and $15,485 respectively)			12,961				12,856
Other non-current assets			10,412				11,228
Total Non-Current Assets			86,682				80,872
Total Assets		$	403,460			$	500,781
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities
Rebates and sub-administration fees payable		$	17,219			$	19,717
Accrued compensation, benefits and profit share			34,471				138,686
Income taxes payable			1,045				9,095
Distributions payable			6,783				6,840
Unsettled fund payables			34,505				9,819
Accounts payable and other accruals			38,558				42,187
Revolving credit facility			12,281				12,281
Other liabilities			16,410				13,886
Total Current Liabilities			161,272				252,511
Non-Current Liabilities
Deferred tax liability			9,175				10,448
Term loan payable (including unamortized gain on modification of $17,231 and $19,671, respectively)			290,451				292,891
Convertible notes			228,500				228,500
Total Non-Current Liabilities			528,126				531,839
Total Liabilities			689,398				784,350
Stockholders’ Deficit:
Common stock, $.0001 par value; 1,000,000,000 authorized, 2010: 251,067,887 issued and outstanding (2009: 252,358,619 issued and outstanding)		$	24			$	24
Series A voting preferred stock, $.0001 par value; 150,000,000 authorized, 2010: 58,904,993 issued and outstanding (2009: 58,904,993 issued and outstanding)			6				6
Additional paid in capital			1,511,053				1,450,151
Treasury stock, 14,101,424 shares of common stock (2009: 14,101,424)			(193,189	)			(193,189	)
Accumulated other comprehensive income			5,263				7,250
Accumulated deficit			(1,622,856	)			(1,562,009	)
Total Controlling Stockholders’ Deficit			(299,699	)			(297,767	)
Non-controlling interest			13,761				14,198
Total Stockholders’ Deficit		$	(285,938	)		$	(283,569	)
Total Liabilities and Stockholders’ Deficit		$	403,460			$	500,781

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

GLG PARTNERS, INC. AND SUBSIDIARIES

		Three Months Ended
		March 31,
		2010				2009
Net revenues and other income
Management fees, net		$	42,677			$	34,427
Performance fees, net			2,717				10,817
Administration, service and distribution fees, net			7,344				5,473
Other			982				997
Total net revenues and other income			53,720				51,714
Expenses
Compensation, benefits and profit share			(101,340	)			(146,657	)
General, administrative and other			(26,748	)			(22,317	)
Amortization of intangible assets			(884	)			—
Third party, distribution, administration and service fees			(1,331	)			—
Total expenses			(130,303	)			(168,974	)
Loss from operations			(76,583	)			(117,260	)
Realized gain /(loss) on available-for-sale investments			38				(21,217	)
Fair value movement in trading securities			477				—
Interest income			256				357
Interest expense			(3,302	)			(2,947	)
Loss before income taxes			(79,114	)			(141,067	)
Income tax benefit / (expense)			9,279				(618	)
Net loss			(69,835	)			(141,685	)
Less non-controlling interests:
Share of losses			8,988				22,021
Cumulative dividends on exchangeable shares			—				(595	)
Net loss attributable to common stockholders		$	(60,847	)		$	(120,259	)
Net loss per share — basic		$	(0.27	)		$	(0.55	)
Weighted average common stock outstanding — basic (in thousands)			229,330				216,764
Net loss per share — diluted		$	(0.27	)		$	(0.55	)
Weighted average common stock outstanding — diluted (in thousands)			229,330				216,764

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

GLG PARTNERS, INC. AND SUBSIDIARIES

																		Accumulated
										Additional								Other												Total
		Treasury				Common				Paid in				Preferred				Comprehensive				Accumulated				Non-controlling				shareholders
		Stock				Stock				Capital				Stock				Income/(Deficit)*				Income/(Deficit)				Interest				Equity/(Deficit)
Balance as of December 31, 2009		$	(193,189	)		$	24			$	1,450,151			$	6			$	7,250			$	(1,562,009	)		$	14,198			$	(283,569	)
Comprehensive loss
Net loss																							(60,847	)			(8,988	)			(69,835	)
Unrealized gains on cash flow hedges (nil tax applicable)																			74								18				92
Unrealized loss on available-for-sale equity investments (net of $197 tax )																			(88	)							(21	)			(109	)
Transfer to realized gain on available-for-sale equity investments on disposal (nil tax applicable)																			(31	)							(7	)			(38	)
Foreign currency translation (nil tax applicable)																			(1,942	)							(464	)			(2,406	)
Total comprehensive loss																			(1,987	)			(60,847	)			(9,462	)			(72,296	)
Share based compensation											62,523																9,026				71,549
Capital contributions											6																(1	)			5
Shares repurchased											(1,627	)																			(1,627	)
Balance as of March 31, 2010		$	(193,189	)		$	24			$	1,511,053			$	6			$	5,263			$	(1,622,856	)		$	13,761			$	(285,938	)

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

GLG PARTNERS, INC. AND SUBSIDIARIES

		Three Months Ended March 31,
		2010				2009
Cash Flows From Operating Activities
Net loss		$	(69,835	)		$	(141,685	)
Adjustments to reconcile net loss to net cash used in operating activities:
Fair value movement in trading securities			(477	)			—
Depreciation and amortization			1,770				964
Share based compensation			71,549				116,647
Amortization of gain on debt extinguishment			(2,440	)			—
Foreign exchange remeasurement on bank accounts			4,776				(796	)
Realized loss on available-for-sale investments			—				21,217
Cash flows due to changes in (net of non cash assets of acquired subsidiaries) in:
Fees receivable			56,298				8,459
Prepaid expenses and other assets			206				(3,128	)
Unsettled fund receivables			(22,216	)			—
Rebates and sub-administration fees payable			(2,498	)			(4,199	)
Accrued compensation, benefits and profit share			(104,215	)			(34,209	)
Income taxes payable			(8,050	)			(1,674	)
Distributions payable			(57	)			(3,571	)
Accounts payable and other accruals			(4,902	)			(7,607	)
Unsettled fund payables			24,686				—
Other liabilities			3,250				(23,092	)
Net cash used in operating activities			(52,155	)			(72,674	)
Cash Flows From Investing Activities
Redemption of available-for-sale securities			807				35,748
Purchase of trading securities			(10,789	)			—
Transfer to restricted cash			(2	)			(35	)
Purchase of property and equipment			(991	)			(286	)
Net cash (used in)/provided by investing activities			(10,975	)			35,427
Cash Flows From Financing Activities
Share repurchases			(1,627	)			(64,348	)
Capital contributions			5				(21	)
Net cash used in financing activities			(1,622	)			(64,369	)
Net decrease in cash and cash equivalents			(64,752	)			(101,616	)
Effect of foreign currency translation on cash			(4,909	)			696
Cash and cash equivalents at beginning of period			263,782				316,195
Cash and cash equivalents at end of period		$	194,121			$	215,275

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

GLG PARTNERS INC., AND SUBSIDIARIES

1. ORGANIZATION AND BASIS OF PRESENTATION

     GLG Partners, Inc. (the “Company”) is a global asset management company offering its clients a wide range of performance-oriented investment products and managed account services. The Company’s 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.

     On April 3, 2009, the Company completed the acquisition of 100% of Société Générale Asset Management Group Ltd.’s share capital to acquire Société Générale Asset Management UK (“SGAM UK”), Société Générale’s UK long-only asset management business, for £4.5 million ($6,450) in cash. The results since acquisition are included in the consolidated results of the Company.

     The unaudited condensed consolidated 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 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 for the year ended December 31, 2009.

     The Company operates in one business segment, the management of global funds and accounts. The Company uses a multi-strategy approach, offering investment funds and managed accounts across a diverse range of strategies and products. The Company does not own a substantive controlling interest in any of the GLG Funds it manages and as a result none of the GLG Funds are consolidated by the Company.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Included below are excerpts of the Company’s significant accounting policies, including those that have been revised in 2010. For the Company’s significant accounting policies, please refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

Principles of combination and consolidation

     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 Company consolidates certain entities it controls through a majority voting interest or otherwise in which the Company is presumed to have control.

     The Company has determined that the majority of GLG Funds that it manages are Variable Interest Entities in that the management contract cannot be terminated by a simple majority of unrelated investors. The Company has determined that it is not the Primary Beneficiary and so does not consolidate any of these GLG Funds. The Company earns substantially all of its revenue from the GLG Funds and managed accounts.

GLG PARTNERS INC., AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(US Dollars in thousands, except per share amounts) (cont’d)

Non-controlling Interests in Consolidated Subsidiaries

FA Sub 2 Limited Exchangeable Shares

     Upon consummation of the Acquisition, Noam Gottesman and the Gottesman GLG Trust received, in exchange for their interests in GLG Entities, 58,904,993 exchangeable Class B ordinary shares of FA Sub 2 Limited (the “Exchangeable Shares”) and 58,904,993 shares of the Company’s 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 for an equal number of shares of the Company’s common stock at any time for no cash consideration at the holder’s option. 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 rights but no voting rights except with respect to certain limited matters which will require the majority vote or written consent of the holders of Exchangeable Shares. The combined ownership of the Exchangeable Shares and the Series A preferred stock provides the holders of these shares with voting rights that are equivalent to those of the Company’s common stockholders.

     The holders of the Exchangeable Shares 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 44.38%. 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 non-controlling interest in the condensed consolidated statements of operations. The amount recorded in respect of the cumulative dividends for the three months ended March 31, 2010 and 2009, were $0 and $595, respectively.

     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 non-controlling interest is calculated as the Exchangeable Shareholder’s proportionate share of net assets.

Use of Estimates

     The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the combined and consolidated financial statements and the reported amounts of revenues, expenses and other income during the reporting periods. Actual results could differ materially from those estimates.

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 not recognize performance fee revenues and related compensation until the end of the measurement period when the amounts are contractually payable, or 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 GLG 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 has recorded its revenues net of rebates.

GLG PARTNERS INC., AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(US Dollars in thousands, except per share amounts) (cont’d)

     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. Administration fees are recognized net of sub-administration fees. In addition, most GLG Funds managed by the Company have share classes with distribution fees that are paid to third party institutional distributors.

     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 Funds (“FoF”) 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 FoFs 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) the GLG Multi Strategy Fund where management fees are charged at both the investee and investing fund levels and (2) the GLG Balanced Managed Fund and the GLG Stockmarket Managed Fund where management fees are charged only at the investing fund level;

•

performance fees are charged at the investee fund level, except in the case of the GLG Global Aggressive Fund where performance fees are charged at both the investee and investing fund levels, to the extent, if any, that the performance fee charged at the investing fund level is greater than the performance fee charged at the investee fund level; and

•

administration fees, where applicable, 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” below for a further discussion of the Company’s foreign exchange hedging activities.

Operating Leases

     During the quarter ended March 31, 2010 the Company completed the sublease of a portion on one of its rental properties. As the Company is expected to incur an excess of costs on the subleased space over anticipated revenues, a loss of $4,092 was recognized on execution of the sublease. Sublease income is recorded in other income.

Unsettled Fund Receivables and Payables

     For our Open Ended Investment Collective Funds businesses, the company acts as receiving agent for the collection of subscriptions due from customers and payable to the funds, and for redemption requests receivable from funds and payable to customers. In each case an unsettled fund receivable or payable is recorded.

Derivatives and Hedging

     The Company is exposed to foreign exchange risks relating to performance and management fees denominated in foreign currencies and also to general, administration and other costs 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, 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 consolidated statement of operations.

GLG PARTNERS INC., AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(US Dollars in thousands, except per share amounts) (cont’d)

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. All hedging activities are used for risk management purposes and used to mitigate monthly foreign exchange rate movements in association with fees receivable and operating expenditure.

3. RECENT ACCOUNTING PRONOUNCEMENTS

Consolidation (ASC Topic 810): Amendments for Certain Investment Funds. Reporting entities are required to apply the amended guidance as of the beginning of its first annual reporting period that begins after November 15, 2009, and for interim periods within that first annual reporting period. That effective date coincides with the effective date for the Statement 167 amendments to ASC Topic 810. The amendments to the consolidation requirements of ASC Topic 810 resulting from the issuance of Statement 167 are deferred for a reporting entity’s interest in an entity (1) that has all the attributes of an investment company or (2) for which it is industry practice to apply measurement principles for financial reporting purposes that are consistent with those followed by investment companies. An entity that qualifies for the deferral will continue to be assessed under the overall guidance on the consolidation of variable interest entities in ASC Subtopic 810-10 (before the Statement 167 amendments) or other applicable consolidation guidance, such as the guidance for the consolidation of partnerships in ASC Subtopic 810-20.

     The amendments also clarify that for entities that do not qualify for the deferral, related parties should be considered when evaluating each of the criteria in paragraph 810-10-55-37, as amended by Statement 167, for determining whether a decision maker or service provider fee represents a variable interest. In addition, the requirements for evaluating whether a decision maker’s or service provider’s fee is a variable interest are modified to clarify the Board’s intention that a quantitative calculation should not be the sole basis for this evaluation. The deferral does not apply in situations in which a reporting entity has the explicit or implicit obligation to fund actual losses of an entity that could potentially be significant to the entity. The Company has determined that it meets the deferral criteria and therefore is not required to adopt the provisions of SFAS 167 as of the effective date.

4. FAIR VALUE OF FINANCIAL INSTRUMENTS

     The Company utilizes ASC Topic 820, Fair Value Measurements and Disclosures, in relation to accounting for assets and liabilities carried at fair value. This standard 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. The standard also 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 estimates.

a) Assets and Liabilities measured at fair value on a recurring basis:

     The following table presents fair value measurements for major categories of the Company’s financial assets and liabilities measured at fair value on a recurring basis:

GLG PARTNERS INC., AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(US Dollars in thousands, except per share amounts) (cont’d)

		March 31, 2010												December 31, 2009
		Level 1				Level 2				Level 3				Level 1				Level 2				Level 3
Foreign exchange derivatives (presented in other assets)		$	—			$	142				—			$	—			$	274			$	—
Trading investments			—				11,106				6,319				—				—				6,319
Available-for-sale investments			—				—				14,083				—				—				15,729
		$	—			$	11,248			$	20,402			$	—			$	274			$	22,048

Foreign exchange derivatives

     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.

Investments

     Investments at fair value include available-for-sale and trading securities in the following GLG Funds:

	Fund/Investment Strategy			Status		Liquidity Terms
	•	GLG Multi-Strategy Coupon Fund		Available-for-sale		Not redeemable at option of shareholder. Monthly compulsory redemption of assets recovered.
	•	GLG Global Opportunity (Special Assets) Fund		Available-for-sale		Not redeemable at option of shareholder. Monthly compulsory redemption of assets recovered.
	•	GLG Treasury Plus Fund		Available-for-sale		Daily
	•	GLG European Opportunity (Lehman Recovery) Fund		Trading		Not redeemable at option of shareholder. Quarterly redemption of assets recovered from Lehman Brothers International (Europe) or its affiliates.
	•	GLG Technology (Lehman Recovery) Fund		Trading		Not redeemable at option of shareholder. Quarterly redemption of assets recovered from Lehman Brothers International (Europe) or its affiliates.

     These investments are valued at the final Net Asset Value (“NAV”) as calculated by the GLG Fund’s administrator. As these funds have limited liquidity, the Company has determined its investments in these GLG Funds to be Level 3 assets. These NAVs, and the associated fair values of underlying investments, have been reviewed by the GLG Funds’ Independent Pricing Committee.

     During the quarter ended March 31, 2010, the company invested $10,789 in GLG funds in accordance with the 2009 Deferred Compensation Program. Deferred awards and any related investment earnings or losses will vest to the extent that there are no forfeitures, in two equal installments on March 31, 2011 and 2012 and are accounted for on a straight line basis. As a result of the 2009 Deferred Compensation Arrangement the Company now has investments in the following funds:

	Fund/Investment Strategy			Status		Liquidity Terms
	•	GLG Emerging Markets Fund		Trading		60 days notice
	•	GLG Emerging Markets Credit Opportunity Fund		Trading		30 days prior to dealing day
	•	GLG Atlas Macro Fund		Trading		5 business days notice
	•	GLG Atlas Value and Recovery Fund		Trading		1 calendar year prior to relevant redemption day with optional fund gate

GLG PARTNERS INC., AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(US Dollars in thousands, except per share amounts) (cont’d)

	Fund/Investment Strategy			Status		Liquidity Terms
	•	GLG Market Neutral Fund		Trading		90 calendar days notice
	•	GLG European Distressed Fund		Trading		90 calendar days after lockup period
	•	GLG Global Equity Tactical Fund		Trading		30 calendar days notice
	•	GLG European Opportunity Fund		Trading		5 business days notice
	•	GLG European Long-Short Fund		Trading		30 calendar days notice
	•	GLG Technology Fund		Trading		5 business days notice
	•	GLG Financials Fund		Trading		5 business days notice
	•	GLG Global Mining Fund		Trading		25 business days notice
	•	GLG UK Select Fund		Trading		Daily
	•	GLG Alpha Select (UCITS III) Fund		Trading		5 days prior to dealing day
	•	GLG Pure Alpha (UCITS III) Fund		Trading		5 days prior to dealing day
	•	GLG Emerging Markets (UCITS III) Fund		Trading		5 days prior to dealing day
	•	GLG Performance (Distributing) Fund		Trading		5 business days notice

     These investments are valued at the final NAV as calculated by the GLG Fund’s administrator. The administrators of the GLG Funds utilize the fair value methodology described below in determining the NAV of the respective fund assets. The fair value of financial instruments traded in active markets (such as publicly traded derivatives and trading securities) is based on closing quoted market prices at the balance sheet date. The quoted value of financial assets and liabilities not traded in an active market that are held by the funds is the current “mid” price based on prices from multiple broker quotes and/or prices obtained from recognized financial data service providers. When a fund holds OTC derivatives it uses mid-market prices as a basis for establishing fair values. Futures and options are valued based on closing market prices. Forward and swap contracts are valued based on current observable market inputs and/or prices obtained from recognized financial data service providers.

     For investments that do not have a readily ascertainable market value, such as private placements of equity and debt securities, the most recent transaction price is utilized as the best available information related to the fair value of the investment. Events and developments related to the underlying portfolio companies are continuously monitored and carefully considered to determine if a change to the current carrying value is warranted. For investments where it is determined that the most recent transaction price is not the best indicator of fair value, fair value is determined by using a number of methodologies and procedures, including but not limited to: (1) performing comparisons with prices of comparable or similar securities; (2) obtaining valuation-related information from issuers; (3) discounted cash flow models; (4) related transactions subsequent to the acquisition of the investment; and/or (5) consulting other analytical data and indicators of value. The methodologies and processes used will be based on the specific attributes related to an investment and available market data and comparative information, depending on the most reliable information at the time.

     The Company has determined its investments in these GLG Funds to be Level 2 assets. Movements in deferred compensation investments, and related compensation obligations are as follows:

Trading Securities – Investments in GLG Funds
Investments purchased at cost		$	10,789
Change in fair value recorded in statement of operations			477
Remeasurement of foreign currency denominated investments recorded in other income			(160	)
Investments at fair value		$	11,106
Represented by the following compensation:
Accrued compensation recognized in statement of operations on straight line basis		$	415
Additional compensation recognized in respect of investment earnings			12
Compensation to be recognized over remaining vesting period of 24 months			10,679
		$	11,106

GLG PARTNERS INC., AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(US Dollars in thousands, except per share amounts) (cont’d)

     A reconciliation of the movements in Level 3 assets is presented below:

Fair Value Measurements

Quoted Prices

Significant

in Active

Other

Significant

Markets for

Observable

Unobservable

Identical Assets

Inputs

Inputs

(Level 1)

(Level 2)

(Level 3)

Movements in Level 3 assets for the year were as follows:

Investments in GLG Funds

Opening Balance January 1, 2010

$

22,048

Change in fair value recorded in other comprehensive income — currency translation adjustment

(198

)

Change in unrealized losses recorded in other comprehensive income

85

Distribution in specie for vesting requirements

(726

)

Redemption proceeds

(807

)

Closing Balance March 31, 2010

$

20,402

Total unrealized gains in investments

$

908

     During the three months ended March 31, 2010, the Company redeemed $636 of its investments in the GLG Global Opportunity Special Assets Fund and $171 of its investments in the GLG Multi-strategy Coupon Fund. Also, in the three months ended March 31, 2010, the Company distributed (in specie) $628 of its investments in the GLG Global Opportunity Special Assets Fund and $99 of its investments in the GLG Multi-strategy Coupon Fund to settle vested obligations to members of the equity participation plan (recorded in other liabilities).

     Realized gains on the redemptions from investments in the funds were $38 which have been recorded in the statement of operations as a realized gain on available-for-sale investments for the three months ended March 31, 2010.

b) Fair value measurements of Other financial instruments recorded at other than fair value:

Term loan payable and revolving credit facility

     There are no active or inactive markets for the Company’s term loan or quoted prices for similar liabilities traded as assets in markets that are active. To arrive at a fair value for the loan payable, the Company has adopted a market based approach based on the amount the Company would receive if it were to enter into an identical liability at the reporting date. The Company considers that this is reflected in the par value of the loan.

Convertible notes

     There are no active markets for the Company’s convertible notes. The Company has determined the fair value of the convertible note to be $232,919 by comparing inactive market broker quotes to internal models.

c) Fair value measurements of Other assets and liabilities recorded at other than fair value:

     The carrying value of other financial assets and liabilities approximates fair value.

GLG PARTNERS INC., AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(US Dollars in thousands, except per share amounts) (cont’d)

5. DEBT

     The Company had debt of $531,232 outstanding at March 31, 2010 and $533,672 at December 31, 2009, as follows:

		Weighted Average				March 31,				December 31,
		Interest Rate				2010				2009
Revolving credit facility			2.64%			$	12,281			$	12,281
Terms loans			2.64%				290,451				292,891
Convertible Note			5.00%				228,500				228,500
Total Debt						$	531,232			$	533,672

6. DERIVATIVES AND HEDGING

     The Company is exposed to foreign exchange risks relating to performance and management fees denominated in foreign currencies and also general, administration and other costs 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 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 whether they actually have been highly effective throughout the reporting period for which they were designated.

The Company has hedged £4,000,000 of monthly operating expenditure from April to May 2010 with a final settlement date of June 4, 2010.

     The fair value of financial instruments has been recorded as follows:

		Three months ended				Three months ended
		March 31, 2010				March 31, 2009
Total Fair Value of Derivative Financial Instruments (included in Other Assets)		$	142			$	718
Less: Fair value of Derivative Financial Instruments at start of period			(274	)			(42	)
Movement in Fair Value of Derivative Financial Instruments during the period		$	(132	)		$	676
Changes in Fair Values are allocated as follows:
Statement of Changes in Stockholders’ Deficit:
Gain recorded in other comprehensive loss in period — cash flow hedges		$	134			$	907
Gain reclassified from other comprehensive loss to statement of operations			(42	)			(425	)
Total gain in Other comprehensive loss		$	92			$	482
Statement of Operations:
Decrease in General, Administrative & Other expenses — effective portion of hedge reclassified from other comprehensive income		$	—			$	134
Decrease in Compensation, benefits and profit share — effective portion of hedge reclassified from other comprehensive income			—				97
Increase in Management Fees — effective portion of hedge reclassified from other comprehensive income			42				194
Total effective portion of hedge reclassified from other comprehensive income			42				425
Decrease in Other income (ineffective portion of hedge and excluded from effectiveness assessment)			(266	)			(231	)
Total impact on Statement of Operations		$	(224	)		$	194
Total impact on Comprehensive loss		$	(132	)		$	676

GLG PARTNERS INC., AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(US Dollars in thousands, except per share amounts) (cont’d)

7. STOCKHOLDERS’ DEFICIT

Common Stock

     The Company’s authorized capital stock consists of 1,000,000,000 shares of common stock, par value $0.0001 per share, and 150,000,000 shares of preferred stock, par value $0.0001 per share, of which 58,904,993 shares are designated and issued as Series A voting preferred stock.

     The following transactions occurred in the common stock of the Company during 2010:

		Number of Shares
Common Stock outstanding at December 31, 2009			252,358,619
Shares cancelled and replaced with restricted stock units			(2,861,694	)
Shares repurchased			(525,416	)
Shares issued under share plan awards			2,096,878
Stock forfeited and cancelled under share-based compensation arrangements			(500	)
Common Stock outstanding at March 31, 2010			251,067,887

     No dividends were declared in 2010 or 2009.

8. COMPREHENSIVE INCOME

		Three months ending March 31, 2010
		Attributed to				Attributed to
		controlling				non-controlling				Total
Net Loss		$	(60,847	)		$	(8,988	)		$	(69,835	)
Unrealized gains on cash flow hedges			74				18				92
Transfer to realized gain on available-for-sale equity investments on disposal			(31	)			(7	)			(38	)
Unrealized loss on available-for-sale equity investments			(88	)			(21	)			(109	)
Foreign currency translation			(1,942	)			(464	)			(2,406	)
Total comprehensive loss		$	(62,834	)		$	(9,462	)		$	(72,296	)

		Three months ending March 31, 2009
		Attributed to				Attributed to
		controlling				non-controlling				Total
Net Loss		$	(120,259	)		$	(22,021	)		$	(142,280	)
Unrealized gains on cash flow hedges			389				93				482
Transfer to realized loss on available-for-sale equity investments on disposal			17,124				4,093				21,217
Unrealized loss on available-for-sale equity investments			(341	)			(82	)			(423	)
Foreign currency translation			(91	)			(22	)			(113	)
Total comprehensive loss		$	(103,178	)		$	(17,939	)		$	(121,117	)

GLG PARTNERS INC., AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(US Dollars in thousands, except per share amounts) (cont’d)

9. NET LOSS PER SHARE OF COMMON STOCK

     The Company calculates net income per share of common stock in accordance with ASC Topic 260, Earnings Per Share. The Company calculated diluted earnings per share for all periods using the if-converted method for all participating securities. For the three months ended March 31, 2010 and 2009, the FA Sub 2 Limited Exchangeable Shares were excluded from the calculation of diluted earnings per share as they were anti-dilutive.

     The Company applied the two-class method for determining basic earnings per share. The Exchangeable Shares and the unvested shares issued in connection with share-based compensation, and determined to be participating securities, were excluded from the calculation as their inclusion would be anti-dilutive. In addition, the holders of the Exchangeable Shares participate equally with ordinary shareholders in the liquidation preferences of FA Sub 2 Limited, but have neither a liquidation interest in GLG Partners, Inc. nor any obligation to fund losses in either FA Sub 2 Limited or GLG Partners, Inc. Consequently, the Company believes it is appropriate to exclude the Exchangeable Shares from the calculation of basic earnings per share. Undistributed earnings have not been allocated to the unvested shares as they do not have a contractual obligation to fund the losses of the Company.

		Three Months Ended March 31,
		2010				2009
Net loss applicable to common stockholders		$	(60,847	)		$	(120,259	)
Weighted-average common stock outstanding (in thousands), basic and diluted			229,330				216,764
Net loss per share applicable to common stockholders — basic and diluted		$	(0.27	)		$	(0.55	)

     The following common stock equivalents have been excluded from the computation of weighted-average stock outstanding used for computing diluted earnings per share as of March 31, 2010 and 2009 as they would have been anti-dilutive (in thousands):

		Years Ended March 31,
		2010				2009
Common stock held in Treasury (See Note 7)			14,101				21,419
FA Sub 2 Limited Exchangeable Shares			58,905				58,905
Common stock awarded in connection with share-based compensation arrangements			9,705				9,107
Convertible notes			61,424				—
Sponsors’ Warrants			4,500				4,500
Co-investment Warrants			5,000				5,000
Public Warrants			32,985				32,985
			186,620				131,916

In addition to the above, there were 12,000,003 Founders Warrants that are only exercisable if and when the last sales price of the Company’s common stock exceeds $14.25 per share for any 20 trading days within a 30-trading day period beginning 90 days after November 2, 2007

10. INCOME TAXES

The Company’s tax on loss before income taxes was 11.7% and (0.4%) for the three months ended March 31, 2010 and 2009, respectively. These rates differ from the U.S. Federal rate of tax of 35% due to the impact of non-tax deductible acquisition-related share based compensation of $63,917 (2009: $118,876); the recognition of a gain on available-for-sale equity investments of $38, which is not taxable (2009 loss of $21,217); the release of a provision for unrecognized tax benefits of $7,308 (2009: Nil); and because the Company’s profits are predominantly earned outside the United States, where lower rates of tax apply.

The Company released provisions in respect of unrecognized tax benefits of $7,308 in the quarter (2009: Nil), as the enquiry window for these provisions closed.

GLG PARTNERS INC., AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(US Dollars in thousands, except per share amounts) (cont’d)

11. SUBSEQUENT EVENTS

     There were no reportable events subsequent to March 31, 2010.

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

     You should read the following discussion and analysis in conjunction with our unaudited condensed consolidated financial statements and the related notes included in or incorporated into Part I, Item 1 of this Quarterly Report on Form 10-Q, and our audited combined and consolidated 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 for the year ended December 31, 2009. The information contained 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 referred to in Part II, Item 1A of this Quarterly Report on Form 10-Q.

General

Our Business

     We are a global asset management company offering our clients a wide range of performance-oriented investment products and managed account services. Our primary business is to provide investment management advisory services for various investment funds and companies (the “GLG Funds”) and accounts we manage. We derive our revenues primarily from management fees and administration fees charged to the GLG Funds and accounts we manage based on the value of the assets in these funds and accounts, and performance fees charged to the GLG Funds and accounts we manage based on the performance of these funds and accounts. Substantially all of our assets under management, or AUM, are attributable to third-party investors, and the funds and accounts we manage are not consolidated into our financial statements. As of March 31, 2010, our net AUM (net of assets invested in other GLG Funds) were approximately $23.7 billion, as compared to approximately $22.2 billion as of December 31, 2009 and approximately $14.0 billion as of March 31, 2009. As of March 31, 2010, our gross AUM (including assets invested in other GLG Funds) were approximately $25.8 billion, as compared to approximately $24.4 billion as of December 31, 2009 and approximately $15.4 billion as of March 31, 2009.

     In this Management’s Discussion and Analysis of Financial Condition and Results of Operations, references to “GLG” refer to the combined business of the GLG Partners LP and certain affiliated entities (collectively, the “GLG Entities”) prior to November 2, 2007, and references to “we”, “us, “our” and “the Company” refer 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 to retain AUM and to grow AUM from existing and new products and the mix of our AUM between different products and associated fee rates.

•

Fund and managed account 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 multiple currencies and as a result, earn fees in those currencies based on the 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, even during periods we are not profitable, as well as a share of our profits.

•

Fee rates. Our management and administration, service and distribution 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 an investors shares in a GLG Fund or the net asset value of an account we manage 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/or 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

     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

     Upon consummation of the acquisition of certain GLG Entities by us on November 2, 2007 (the “Acquisition”), the GLG Entities became our wholly owned subsidiaries and from that date the financial statements have been prepared on a consolidated basis and consolidate those entities over which the legal parent, GLG Partners, Inc., 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 Noam Gottesman, Pierre Lagrange, Emmanuel Roman ( “the Principals”) and the respective trustees of trusts established by the Principals, being Leslie J. Schreyer in his capacity as trustee of the Gottesman GLG Trust, G&S Trustees Limited, in its capacity as trustee of the Lagrange GLG Trust and Jeffrey A. Robins, in his capacity as trustee of the Roman GLG Trust (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, GLG Partners, Inc.

     We consolidate certain entities we control through a majority voting interest or otherwise in which we are presumed to have control.

     We have determined that the majority of GLG Funds that we manage are Variable Interest Entities in that the management contract cannot be terminated by a simple majority of unrelated investors. We have determined that we are not the Primary Beneficiary and, accordingly, we do not consolidate any of the GLG Funds. We earn substantially all of our revenue from the GLG Funds and managed accounts. In addition, the Acquisition-related cash compensation has been invested in two GLG Funds, and our results are exposed to changes in the fair value of these funds.

Assets Under Management

     Our assets under management, or AUM, are comprised of cash balances, discretionary managed accounts and fund assets. The net asset value (NAV) of AUM related to discretionary managed accounts is determined by the third party administrator of those accounts. Our related management, administration and performance fees are determined pursuant to the terms of the respective clients’ investment management agreement, which in turn refer to the NAV of those accounts as determined by the administrator. The NAV of fund assets in the GLG Funds is determined by the third party administrator of the GLG Funds. The administrators of the GLG Funds utilize the fair value methodology described below in determining the NAV of the respective fund assets.

     Management, administration and performance fees depend on, among other things, the fair value of AUM. The fair value of financial instruments traded in active markets (such as publicly traded derivatives and trading securities) is based on closing quoted market prices at the balance sheet date. The quoted value of financial assets and liabilities not traded in an active market that are held by the funds is the current “mid” price based on prices from multiple broker quotes and/or prices obtained from recognized financial data service providers. When a fund holds OTC derivatives it uses mid-market prices as a basis for establishing fair values. Futures and options are valued based on closing market prices. Forward and swap contracts are valued based on current observable market inputs and/or prices obtained from recognized financial data service providers.

     For investments that do not have a readily ascertainable market value, such as private placements of equity and debt securities, the most recent transaction price is utilized as the best available information related to the fair value of the investment. Events and developments related to the underlying portfolio companies are continuously monitored and carefully considered to determine if a change to the current carrying value is warranted. For investments where it is determined that the most recent transaction price is not the best indicator of fair value, fair value is determined by using a number of methodologies and procedures, including but not limited to: (1) performing comparisons with prices of comparable or similar securities; (2) obtaining valuation-related information from issuers; (3) discounted cash flow models; (4) related transactions subsequent to the acquisition of the investment; and/or (5) consulting other analytical data and indicators of value. The methodologies and processes used will be based on the specific attributes related to an investment and available market data and comparative information, depending on the most reliable information at the time.

     The prospectus for each GLG Fund sets out the procedure shareholders of the GLG Funds are required to follow in order to redeem their investment, which includes the notice period. Investors are required to provide the relevant GLG Fund with written notice of a redemption request prior to the specified deadline for the requested redemption date (defined as a Dealing Day). The table below sets forth the typical range of notice periods which apply to the GLG Funds. Such redemption request is irrevocable but may, with the approval of any director of the relevant GLG Fund, be cancelled at any point prior to the business day prior to the relevant Dealing Day (defined as the Valuation Day).

Product		General Range of Redemption Request Advance Notice Periods*
Alternative strategies funds		5-60 days
Long-only strategies funds		1-5 days
130/30 strategies funds		1-5 days
Internal FoF		1-30 days
External FoF		45-90 days

Performance Fees

     Performance fee rates are calculated where applicable as a percentage of investment gains less management and administration fees, subject to “high water marks” and in some cases performance hurdles with a measurement period of generally six months. Funds subject to performance hurdles are: most long-only (only to the extent those funds have a performance fee) and 130/30 strategies funds, four external FoFs, six alternative strategies funds, and certain managed accounts.

     We do not recognize performance fee revenues until the 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 generally, 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 as appropriate 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 certain individuals who are limited partners of 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. 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 certain 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 owners of the Acquired Companies in the Acquisition. The equity participation plan is 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% are distributable to the 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 25% each on the first and second anniversaries and 50% on the third anniversary 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 to 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) subject to vesting over specified periods. Because forfeited awards are returned to the limited partnerships, and not to us, the forfeited shares remain issued and outstanding and the cash and shares held by the limited partnerships may be reallocated, with or without vesting requirements, without further dilution to our shareholders. The equity instruments issued under this plan 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 on an accelerated basis.

     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 in November 2007. As of March 31, 2010, 2,212,250 shares under the Restricted Stock Plan were unallocated following forfeitures (net of new allocations). These awards are subject to vesting, typically over four years, which may be accelerated. In 2007, we also adopted the 2007 Long-Term Incentive Plan (the “2007 LTIP”) under which we were authorized to issue up to 40,000,000 shares and which, other than with respect to outstanding awards, was terminated and replaced in its entirety by the 2009 Long-Term Incentive Plan (the “2009 LTIP”), adopted by our board of directors and approved by our shareholders on May 11, 2009. The 2009 LTIP authorizes the delivery of a maximum of 40,000,000 shares, in addition to the approximately 6,100,000 shares that remained available for awards under the 2007 LTIP as of May 11, 2009. In addition, to the extent that any outstanding awards under our 2007 LTIP are cancelled, forfeited or otherwise lapse unexercised pursuant to the terms of that plan, the shares underlying those awards will be available for awards under the 2009 LTIP.

     References herein to the “LTIP” shall in context be to the 2007 LTIP and the 2009 LTIP. As of March 31, 2010, there were a total of 38,630,604 shares available for awards under the LTIP. The LTIP 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. 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 provides 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. 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.

     All of these arrangements are 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.

     GAAP 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. GAAP requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

     Our forfeiture assumptions with respect to forfeitures among our stock awards under the Restricted Stock Plan, equity participation plan and LTIP have been set to an assumed rate of 10% per annum. The forfeiture assumption for the agreement among the principals and trustees was estimated as zero

Income Tax

     We earn profits through a number of subsidiaries located in a number of different jurisdictions, each of which has its own tax system.

     Prior to the Acquisition, 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 in addition to a portion of our income being subject to U.K. taxation, U.S. taxation will be imposed on our profits earned within the United States as well as on our profits earned outside the United States that are repatriated back to the United States in the form of dividends or that are classified as Subpart F income for U.S. income tax purposes (e.g., dividends and interest). We expect to repatriate some of our profits in this manner and 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. This amortization deduction is taken into account in determining how much of the repatriated profits and Subpart F income is subject to U.S. taxation. Depending on the amount of profits earned outside the United States, including the amount of Subpart F income, and the amount of profits repatriated, this tax amortization deduction will effectively reduce U.S. tax expense on repatriated profits and Subpart F income. 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, 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 an alternative strategies fund or internal fund-of-funds (internal FoF) managed by us invests in an underlying alternative strategies 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, if the GLG European Long-Short Fund invests in the GLG Technology Fund, the GLG European Long-Short Fund is the investing fund and the GLG Technology Fund is the investee fund.

Management Fees

     Our gross management fee rates charged to GLG Funds 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):

		General Range of Gross Fee Rates (% of AUM)
Product		As of March 31, 2010
Alternative strategies funds*		1.50% — 2.50%**
Long-only strategies funds		0.30% — 2.25%
130/30 strategies funds		1.25% — 2.25%
Internal FoF***		0.25% — 1.50%** (at the investing fund level)
External FoF****		1.00% — 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.

     Management fee yields in future periods will be dependent on the timing and amount of specific inflows and outflows, foreign currency movements and performance within our product groups noted above as well as managed accounts.

Performance Fees

     Our gross performance fee rates where applicable for GLG Funds 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 and 130/30 funds, four external FoFs, six alternative strategies funds, and certain managed accounts, to

performance hurdles. As a result, even when a GLG Fund has positive fund 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, are determined on a fund by fund and investor by investor basis and performance fees are not netted across funds, other than in the case of the special assets funds related to the GLG Emerging Markets Fund, the GLG European Long-Short Fund and the GLG North American Opportunity Fund. These special assets funds do not earn a performance fee until an investor’s high water mark across both the special assets fund and its original 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 March 31, 2010, we had approximately $9.8 billion, or 74.2% of AUM above water or within 5% of their respective high water marks out of a potential $13.2 billion in performance fee eligible AUM. This represented an increase of $2.3 billion, or 30.7% during the first quarter of 2010. Additionally, approximately $2.8 billion of AUM (excluding special asset vehicles and funds in the process of closing) are more than 10% below their high water marks. This represents an improvement of $1.4 billion, or 33.3% during the first quarter of 2010.

     Fund performance through March 31, 2010 has generally reduced the additional performance necessary to re-achieve the high-water marks for many GLG Funds, however, for some funds high water marks remain. Accordingly, even if our funds that are below high water marks have positive performance 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):

		General Range of Gross Fee Rates (% of Investment Gains)
Product		As of March 31, 2010
Alternative strategies funds		10% — 30%*
Long-only strategies funds		0% — 20% (may be subject to performance hurdle)
130/30 strategies funds		20% (may be subject to performance hurdle)
Internal FoF		0% — 20%* (at the investing fund level)
External FoF		5% — 10% (may be subject to performance hurdle)

     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 II, Item 3, of this Quarterly Report for a further discussion of our foreign exchange and hedging activities.

     We typically do not recognize performance fee revenues until the 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.

     Additionally, various funds have high water marks. Until these funds either generate investment returns that overcome these high water marks, or these funds experience net inflows that carry no high-water marks and/or new funds are launched without high-water marks, performance fees may be limited.

Administration Fees

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

     When one of the alternative strategies funds or internal FoFs managed by us invests in an underlying 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 (subject, in some cases, to a performance hurdle) and management fee ranges charged with respect to comparable fund products.

Expenses

Compensation, Benefits and 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. We have built an experienced and highly-regarded investment management team of 124 investment professionals.

     The largest component of expenses is compensation, benefits and profit share 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 (the “LLPs”), 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.

     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, approximately 250,000 shares awarded to employees and certain key personnel under the 2007 LTIP at the closing of the Acquisition, and the agreement among the principals and trustees (collectively, the “Acquisition-related compensation expense”) and (b) share-based compensation recognized in respect of shares awarded post-Acquisition under the LTIP.

     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 (1) awards forfeited by participants in the equity participation plan who terminated their service with us and who are no longer limited partners are returned to Sage Summit LP and Lavender Heights Capital LP, and not us, (2) 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, (3) the amount of consideration received by the entities in the Acquisition was awarded prior to the Acquisition based on the contributions of the participants in the equity participation plan prior to the Acquisition and (4) the amount reduced the number of shares which would otherwise have been paid to the former 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 the former 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 agreement among principals and trustees, because, notwithstanding the service requirement, 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.

     The components of non-GAAP CBP 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. The liability for variable compensation is a formulaic obligation calculated by reference to and payable following the crystallization of fee revenues at the end of each fee period, which may be monthly, quarterly, annually or semi-annually (on June 30 or December 31) depending on the fee source.
	•		Discretionary compensation — payments that are determined by our management in its sole discretion and are generally linked to performance. In determining such payments, our 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 or share-based compensation. Discretionary compensation is generally declared and paid following the end of each calendar year. However, the estimated 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 and February following the year end. We implemented a deferred compensation program for employees and limited partners in respect of discretionary compensation for 2009. A portion of the discretionary compensation allocated to our investment and other professionals will be deferred in annual installments until the first quarter 2012. Deferred awards given to certain investment professionals and marketers will be invested on their behalf into GLG Funds, aligning portfolio manager and marketers’ incentives with those of

			the investors in such funds and, indirectly, our shareholders. Deferred awards and any related investment earnings or losses will vest to the extent that there are no forfeitures, in two equal installments on March 31, 2011 and 2012 and will be accounted for on a straight line basis. Deferred awards for all other personnel will be issued in the form of our common stock, aligning their incentives with our shareholders. The common stock will also vest over a two year period to the extent that there are no forfeitures, in two equal installments on March 31, 2011 and 2012 and will be accounted for on an accelerated method basis.
	•		Limited partner profit share — distributions of limited partner profit share under the limited partner profit share arrangement described below.
	•		Post-Acquisition LTIP — post-Acquisition share based awards to employees and limited partners who are participants in the limited partner profit share arrangement under the LTIP.

Limited Partner Profit Share

     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, 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 expenses matching the period in which the related revenues are accrued and 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 is paid to the LLPs, as limited partners, less any amounts paid as advance drawings during the year. Other limited partners of GLG Partners Services LP who receive profit allocations include four 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 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. Profit allocations, net of any amounts paid during the year as priority partnership drawings, are typically paid to the members in January and February 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.

     We implemented a deferred compensation program for employees and limited partners in respect of discretionary compensation for 2009. A portion of the discretionary compensation allocated to our investment and other professionals will be deferred in annual installments until the first quarter 2012. Deferred awards given to certain investment professionals and marketers will be invested on their behalf into GLG Funds, aligning portfolio manager and marketers’ incentives with those of the investors in such funds and, indirectly, our shareholders. Deferred awards and any related investment earnings or losses will vest to the extent that there are no forfeitures, in two equal installments on March 31, 2011 and 2012 and will be accounted for on a straight line basis. Deferred awards for all other personnel will be issued in the form of our common stock, aligning their incentives with our shareholders. The common stock will also vest over a two year period to the extent that there are no forfeitures, in two equal installments on March 31, 2011 and 2012 and will be accounted for on an accelerated method basis.

Acquisition-Related Compensation Expense

     Following the Acquisition, 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 connection with the Acquisition (including with respect to the cash portion of the awards under the equity participation plan in the aggregate amounts of $91 million, $48 million and $6 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, approximately 250,000 shares awarded to employees and certain key personnel under the 2007 LTIP at the closing of the Acquisition, and the agreement among the principals and trustees and (b) dividends paid on unvested shares that are ultimately not expected to vest.

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 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 Profit Share” and assess our expenses based on the measure non-GAAP total expenses, which adjusts GAAP total expenses for the same Acquisition-related compensation expense as non-GAAP CBP.

     In addition, we assess the underlying performance of our business based on the measure “non-GAAP adjusted net income”, which adjusts net loss before non-controlling interests for (1) the Acquisition-related compensation expense, (2) the tax benefit related to Acquisition-related compensation that is tax deductible for GAAP purposes, (3) any gains or losses realized from investments in GLG Funds held by equity participation plan participants in connection with the Acquisition, (4) the cumulative dividends payable to the holders of exchangeable shares of its FA Sub 2 Limited subsidiary in respect of its estimate of the net taxable income of FA Sub 2 Limited allocable to such holders multiplied by an assumed tax rate, and (5) amortization of the intangible assets recognized in relation to the acquired management contracts of SGAM UK and its associated tax effect. See “— Results of Operations — Adjusted Net Income” for reconciliation between the periods presented.

     We believe that excluding the impact of the above enhances the comparisons to our core results of operations with historical periods and provides a better measure of our economic income.

     Non-GAAP CBP and non-GAAP total expenses are not measures of financial performance under GAAP and should not be considered as an alternative to GAAP compensation, benefits and profit share expense or GAAP total expense, respectively. Further, non-GAAP 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 economic income than does GAAP net income primarily because of the adjustments 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. Non- GAAP adjusted net income has certain limitations in that it may overcompensate for certain costs and expenditures related to our business.

Assets Under Management

     During 2009 the mix of our AUM changed from a portfolio of predominantly higher fee-yielding alternative strategies products to a portfolio with approximately 50% in long-only strategies and managed account products. The effect of this shift has reduced our management fee yields when measured as a percentage of our overall AUM. The acquisition of SGAM UK, completed in the second quarter of 2009, which consisted of long-only strategies funds and managed accounts that have lower management fee yields than our alternative strategies products has also contributed to our lower management fee yields. We expect that the effect on our management fee yields in future periods will continue to be dependent upon asset mix, specific inflows, outflows and other related factors such as these.

March 31, 2010 Compared to December 31, 2009 and March 31. 2009

Change in AUM between March 31, 2010, December 31, 2009 and March 31, 2009
(U.S. dollars in millions)

		As of Mar.				As of Dec.				3-Month				As of Mar.				12-Month
		31, 2010				31, 2009				Change				31, 2009				Change
Alternative Strategies(1)		$	12,504			$	11,501			$	1,003			$	9,843			$	2,661
Long-only Strategies(2)			13,340				12,864				476				5,576				7,764
Gross AUM		$	25,844			$	24,365			$	1,479			$	15,419			$	10,425
Less: alternative strategy investments in GLG Funds			(1,078	)			(1,088	)		$	10			$	(1,388	)		$	310
Less: long-only strategy investments in GLG Funds			(1,098	)			(1,103	)			5				—				(1,098	)
Net AUM		$	23,668			$	22,175			$	1,494			$	14,031			$	9,637

		As of Mar.				As of Dec.								As of Mar.
		31, 2010				31, 2009								31, 2009
Quarterly Average gross AUM		$	25,104			$	24,179							$	15,982
Quarterly Average net AUM		$	22,921			$	21,901							$	11,519
Opening net AUM		$	22,175			$	21,628							$	15,039
Inflows			3,342				3,419								2,175
Outflows			(2,388	)			(2,697	)							(2,125	)
Inflows (net of redemptions)			954				723								50
Performance (gains net of losses and fees)			1,292				18								(807	)
Currency translation impact (non-USD AUM expressed in USD)			(753	)			(194	)							(251	)
Closing net AUM		$	23,668			$	22,175							$	14,031

     During the three months ended March 31, 2010, our net AUM increased by 6.7% to $23.7 billion and our gross AUM increased by 6.1% to $25.8 billion. The increase in net AUM was attributable to the following:

	•		Positive fund and managed account performance during the first quarter of 2010, resulting in performance gains (net of losses and fees) of $1.3 billion.
	•		Inflows (net of redemptions) of $1.0 billion in AUM during the first quarter of 2010, which were primarily driven by:

	•		Long-only strategy net inflows of $0.2 billion, which was composed of subscriptions of $1.4 billion offset by redemptions of $1.2 billion; and
	•		Alternative strategy net inflows of $0.8 billion, which was composed of subscriptions of $2.0 billion offset by redemptions of $1.2 billion.

•

A strengthening of the U.S. dollar against other currencies in which a portion of our funds and managed accounts are denominated, which resulted in negative foreign exchange impact on AUM of $0.8 billion during the quarter.

     The ratio between net and gross AUM increased during 2009 and continued into 2010, reflecting decreased relative levels of fund-in-fund investments, with respect to investments by our FoF products in certain funds managed by us and investments by certain alternative strategy funds managed by us in other alternative strategy funds managed by us.

     As of March 31, 2010, approximately $0.1 billion of AUM were in GLG Funds for which the related fund boards of directors had suspended redemptions. The funds included: the GLG Credit Fund, the GLG Event Driven Fund, the GLG Global Utilities Fund, the GLG MMI Enhanced II Fund, the GLG EAFE (Institutional) Fund, and the GLG Performance Institutional Fund. We continue to receive full management fees for a majority of these funds.

     In addition, as of March 31, 2010, we managed special assets funds which are principally comprised of private placement and other not readily realizable investments that have been transferred from other GLG funds totaling approximately $0.9 billion. These special assets funds included the GLG Emerging Markets (Special Assets) Fund, GLG European Long-Short (Special Assets) Fund, GLG North American Opportunity (Special Assets) Fund, GLG Global Opportunity (Special Assets) Fund, GLG MMI Diversified Special Assets Fund, GLG European Opportunity (Lehman Recovery) Fund, GLG Technology (Lehman Recovery) Fund, GLG MMI Diversified (Special Assets II) Fund, and the GLG MMI Enhanced (Special Assets) Fund. The purpose of the special assets funds is to permit the orderly sale of these investments. As investments held by the special assets funds are sold, proceeds will be used to redeem investors from those funds. Other than the GLG Emerging Markets (Special Assets) Fund, which has a management fee of 2.0%, all of the above funds have reduced management fees.

     On September 15, 2008, Lehman Brothers Holdings Inc. (the ultimate parent company of the Lehman Brothers group) filed for Chapter 11 bankruptcy in the United States and LBIE, the principal European broker-dealer for the Lehman Brothers group, was placed into administration by order of the English court. Lehman Brothers’ prime brokerage unit in the United Kingdom was one of the business groups forming part of LBIE. Other Lehman Brothers entities have also filed for or commenced insolvency-related proceedings, including Lehman Brothers Inc. (“LBI”), Lehman Brothers’ U.S. broker-dealer.

     Nearly all of the GLG Funds and several of the GLG institutional managed accounts existing at that time utilized LBIE as a prime broker. All of the GLG Funds and managed accounts existing at that time had LBIE, and a small number of GLG Funds and managed accounts had LBI, as a trading counterparty. In addition, all of GLG’s private client managed accounts at that time used LBIE, and a small number of GLG’s private clients additionally used LBI, as a custodian and broker for their accounts. As a consequence of LBIE being in administration, the GLG Funds and, to the best of our knowledge, the managed accounts which used LBIE as a prime broker, have been unable to access their assets, including all securities and cash, deposited with LBIE.

     On December 29, 2009, the administrators of LBIE announced that the conditions to effectiveness of the Claims Resolution Agreement (the “CRA”), a voluntary contractual scheme binding upon LBIE and those clients of LBIE party to it had been satisfied and the CRA became effective on January 21, 2010. All of the relevant GLG Funds became signatories to the CRA. The CRA provides a framework pursuant to which signatories’ trust asset and other claims against LBIE will be resolved resulting in, among other things, the return of trust assets, the determination and discharge of amounts owing to and from LBIE, the implementation of setoff rights and the crystallization of an admitted unsecured claim against LBIE.

     The net direct exposure of each effected GLG Fund to LBIE and the other entities in the Lehman Brothers group is reflected in the net asset value of each fund and carried by the fund at fair value. The fair value of the exposure is determined on the basis of the best information available to us from time to time, including information received from LBIE, that the claims of the GLG Funds which are signatories to the CRA will be determined as provided in the CRA and on the basis of legal and professional advice obtained for the purpose of determining the rights and obligations of each relevant GLG Fund. Fair value is also determined on the basis of certain assumptions which we believe to be reasonable, including with respect to the level of shortfalls in the recovery of trust assets, the level of recovery from LBI, the level of recovery on client money claims and the ultimate recovery on unsecured claims. The fair value of the exposure is reviewed regularly, including the assumptions, with the relevant GLG Fund’s directors, independent fund administrator and independent auditors, as necessary.

     We are unable to estimate the exposure our institutional managed accounts have to LBIE as a prime broker because the clients in these cases maintain the relationships with their third party service providers, such as prime brokers, custodians and administrators, nor do we have access to the terms of their agreements with LBIE or know the extent of exposure these clients may have to LBIE outside their managed account with us.

     As a consequence of the administration of LBIE and the liquidation proceedings under the Securities Investor Protection Act of 1970, as amended, of LBI, our private clients have been unable to access their assets, including all securities and cash, in their respective accounts with LBIE or LBI managed by us. To the extent our private clients’ assets constitute securities held in custody by LBIE or LBI, we believe the clients should recover these securities to the extent these securities do not collateralize amounts owing by our clients to LBIE or LBI. To the extent our private client’s assets constitute cash held by LBIE as client money, we believe the clients should recover in the same proportion as all LBIE clients recover client money, with any shortfall generally resulting in an unsecured claim against the LBIE estate. To the extent private clients are owed amounts under trading contracts with LBIE or LBI, we believe such amounts will constitute unsecured claims against LBIE or LBI, as the case may be. Notwithstanding the foregoing, the position of any individual private client will depend on the facts and circumstances surrounding such private client’s claims, as well as their particular legal rights and obligations pursuant to their agreements with LBIE or LBI.

     The GLG Funds and our managed accounts have, in the aggregate, recognized losses as a result of the foregoing and, the GLG Funds and managed accounts may incur additional losses if our estimates change and/or the assumptions we have made, information we have received, including from LBIE, or outside opinions we have obtained prove incorrect. In any event, the GLG Funds and managed accounts will suffer substantial delay before there is a final resolution of their claims and the ultimate recovery. If our clients, including the GLG Funds, do not fully recover their assets, suffer losses or substantial delays, they might redeem their investments, lose confidence in us and or make claims against us, our affiliates and/or the GLG Funds, any of which could have a material adverse effect on our business, results of operations or financial condition.

Results of Operations

Condensed Consolidated GAAP Statement of Operations Information

		Three Months Ended March 31,
		2010				2009
		(U.S. dollars in thousands)
Net revenues and other income
Management fees, net		$	42,677			$	34,427
Performance fees, net			2,717				10,817
Administration, service and distribution fees, net			7,344				5,473
Other			982				997
Total net revenues and other income		$	53,720			$	51,714
Expenses
Compensation, benefits and profit share			101,340				146,657
General, administrative and other			26,748				22,317
Amortization of intangible assets			884				—
Third party distribution, administration and service fees			1,331				—
Total expenses			130,303				168,974
Loss from operations			(76,583	)			(117,260	)
Realized gain/(loss) on available-for-sale investments			38				(21,217	)
Fair value movement in trading securities			477				—
Net interest (expense)			(3,046	)			(2,590	)
Loss before income taxes			(79,114	)			(141,067	)
Income tax benefit (expense)			9,279				(618	)
Net Loss			(69,835	)			(141,685	)
Less non-controlling interests:
Share of loss			8,988				22,021
Cumulative dividends on exchangeable shares			—				(595	)
Net loss attributable to common stockholders		$	(60,847	)		$	(120,259	)

     Net Revenues and Other Income

     Three Months Ended March 31, 2010 Compared to Three Months Ended March 31, 2009

Change in GAAP Net Revenues and Other Income between
Three Months Ended March 31, 2010 and March 31, 2009

		Three Months Ended March 31,
		2010				2009				Change
		(U.S. dollars in thousands)
Net revenues and other income
Management fees, net		$	42,677			$	34,427			$	8,250
Performance fees, net			2,717				10,817				($8,100	)
Administration service, and distribution fees, net			7,344				5,473				1,871
Other			982				997				(15	)
Total net revenues and other income		$	53,720			$	51,714			$	2,006
Key ratios (annualized):
Total net revenues and other income/average net AUM			0.94	%			1.80	%			(0.86	%)
Management fees/average net AUM			0.74	%			1.20	%			(0.46	%)
Administration, service and distribution fees/average net AUM			0.13	%			0.19	%			(0.06	%)

     Total net revenues and other income increased by $2.0 million, or 3.9%, to $53.7 million for the three months ended March 31, 2010 compared to the three months ended March 31, 2009. This increase was driven primarily by higher management, and administration, service and distribution fee revenue due to the higher average net AUM levels resulting from the Société Générale Asset Management UK (“SGAM UK”) acquisition, and AUM growth and partially offset by a reduction in performance fees.

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

     Net management fees increased by $8.3 million, or 24.0%, to $42.7 million. This increase in net management fees was driven by the increase in AUM through assets obtained in the SGAM UK acquisition as well as organic growth in our AUM. Our overall management fee yield has declined as compared to the same period last year resulting from the changing mix of AUM towards lower fee-yielding products and the impact of the SGAM UK acquisition-related long-only assets.

     Net performance fees decreased by $8.1 million, or 74.9% to $2.7 million. The decrease in fees was driven by:

	•		lower crystallized performance fees in the three months ended March 31, 2010 related to certain managed accounts for which we recognized performance fees in the three month period ended March 31, 2009 and there was no related crystallization event in the first quarter of 2010. We will begin recognizing performance fees on these noted accounts on June 30 and December 31, consistent with our other funds.
	•		the timing of AUM inflows and outflows from the GLG Funds, resulting in crystallized performance fees during the three months ended March 31, 2010.

     Net administration, service and distribution fees increased by $1.9 million, or 34.2% to $7.3 million. This increase was primarily driven by the effect of increased levels of AUM and the SGAM UK acquisition.

     Changes in Other income were primarily due to other fees of approximately $0.8 million derived from the funds acquired in the SGAM UK acquisition as well as foreign exchange gains.

     Expenses

     Three Months Ended March 31, 2010 Compared to Three Months Ended March 31, 2009

Change in GAAP Expenses between
Three Months Ended March 31, 2010 and March 31, 2009

		Three Months Ended March 31,
		2010				2009				Change
		(U.S. dollars in thousands)
Expenses
Compensation, benefits and profit share		$	101,340			$	146,657			$	(45,317	)
General, administrative and other			26,748				22,317				4,431
Amortization of intangible assets			884				—				884
Third party distribution, administration and service fees			1,331				—				1,331
Total expenses		$	130,303			$	168,974			$	(38,671	)
Key ratios (annualized):
Compensation, benefits and profit share/total GAAP net revenues and other income			188.6	%			283.6	%			(95.0	%)
General, administrative and other/total GAAP net revenues and other income			49.8	%			43.2	%			6.6	%
Total expenses/total GAAP net revenues and other income			242.6	%			326.8	%			(84.2	%)

     Our overall GAAP expenses decreased by $38.7 million, or 22.9% to $130.3 million. Compensation, benefits and profit share decreased by $45.3 million, or 30.9% to $101.3 million, primarily as a result of a reduction of $60.3 million in the expenses relating to Acquisition-related share based compensation, offset by a number of factors as mentioned below.

     The decrease in Acquisition-related compensation expense was driven by the vesting in the fourth quarter of 2009, in particular compensation expense relating to the agreement among the principals and trustees, which resulted in a decrease of $38.6 million to $60.4 million in the first quarter of 2010.

     This was offset by increases in compensation, benefits and profit share including the following:

	•		increased compensation costs as a result of the SGAM UK acquisition in the second quarter of 2009 and higher net revenues;
	•		increased level of non-cash share based compensation, benefits and profit share due to share awards granted in 2009 and 2008 as part of rebuilding certain investment management teams; and
	•		recognition of the deferred compensation and limited partner profit share related to the deferred compensation program implemented as discussed in more detail below.

     As a result of the equity awards granted following the Acquisition, we anticipate, based on our share price as at March 31, 2010 and current forfeiture estimates, that a total $10.9 million of post-acquisition share based compensation will be recognized in future periods in respect of non-vested awards, of which $6.3 million will be recognized over the remainder of 2010 and a further $4.3 million will be recognized in 2011 and 2012 as the awards vest.

     During April 2010, further awards of approximately 8.5 million shares have been granted which are expected to vest over the next 1 - 3 years.

     We implemented a deferred compensation program for employees and limited partners in respect of discretionary compensation for 2009. A portion of the discretionary compensation allocated to our investment and other professionals will be deferred in annual installments until the first quarter 2012. Deferred awards given to certain investment professionals and marketers will be invested on their behalf into GLG Funds, aligning portfolio manager and marketers’ incentives with those of the investors in such funds and, indirectly, our shareholders. Deferred awards and any related investment earnings or losses will vest to the extent that there are no forfeitures, in two equal installments on March 31, 2011 and 2012 and will be accounted for on a straight line basis. Deferred awards for all other personnel will be issued in the form of our common stock, aligning their incentives with our shareholders. The common

stock will also vest over a two year period to the extent that there are no forfeitures, in two equal installments on March 31, 2011 and 2012 and will be accounted for on an accelerated method basis. We deferred $12.9 million of compensation under the deferred compensation program for 2009 in respect of discretionary awards, of which $0.5 million was recognized in earnings over the first quarter of 2010.

     General, administrative and other expenses increased by $4.4 million, or 19.9%, primarily as a result of a $4.1 million charge related to a sublease in London and additional expenses from the operations acquired with SGAM UK in the second quarter of 2009.

     In the first quarter of 2010, we also incurred $1.3 million in third party distribution, administration and service fees which reflect fund administration costs as well as cross-selling fees related to the funds acquired as part of the SGAM UK acquisition.

     In the first quarter of 2010, In addition, we had approximately $0.9 million of amortization costs related to the intangible assets as part of the SGAM UK acquisition, for which there was no corresponding expense in the 2009 period.

Non-GAAP Expense Measures

     As discussed above under “— Assessing Business Performance”, we present a non-GAAP compensation, benefits, and profit share measure. The table below reconciles GAAP compensation, benefits and profit share to non-GAAP CBP for the periods presented.

     Three Months Ended March 31, 2010 Compared to Three Months Ended March 31, 2009

Change in Non-GAAP Expenses between
Three Months Ended March 31, 2010 and March 31, 2009

		Three Months Ended March 31,
		2010				2009				Change
		(U.S. dollars in thousands)
Non-GAAP expenses
GAAP compensation, benefits and profit share		$	101,340			$	146,657			$	(45,317	)
Less: Acquisition-related compensation expense			(66,407	)			(126,737	)			60,330
Non-GAAP CBP			34,933				19,920				15,013
Third party distribution, administration and service fees			1,331				—				1,331
GAAP general, administrative and other			26,748				22,317				4,431
Non-GAAP total expenses		$	63,012			$	42,237			$	20,775
Key ratios (based on non-GAAP measures):
Non-GAAP CBP /total GAAP net revenues and other income			65.0	%			38.5	%			26.5	%
General, administrative and other / total GAAP net revenues and other income			49.8	%			43.2	%			6.6	%
Non-GAAP total expenses /total GAAP net revenues and other income			117.3	%			81.7	%			35.6	%

     Non-GAAP total expenses increased by $20.8 million, or 49.2%, to $63.0 million, primarily as a result of a $15.0 million increase in Non-GAAP CBP. The increase in Non-GAAP CBP was primarily driven by the following:

	•		increased compensation costs as a result of the SGAM UK acquisition in the second quarter of 2009 and higher net revenues;
	•		increased level of non-cash share based compensation, benefits and profit share due to share awards granted in 2008 and 2009 as part of rebuilding certain investment management teams; and
	•		recognition of the deferred compensation and limited partner profit share related to the deferred compensation program as discussed under “ — Expenses”

     General, administrative and other expenses increased by $4.4 million, or 19.9%, primarily as a result of a $4.1 million charge related to a sublease in London and additional expenses from the operations acquired with SGAM UK in the second quarter of 2009. This increase was partially offset by our on-going cost reduction initiatives. In the first quarter of 2010, we also incurred $1.3 million in third party distribution, administration and service fees which reflect fund administration costs as well as cross-selling fees related to the funds acquired as part of SGAM UK acquisition, for which there was no corresponding expense in the 2009 period.

     Non-GAAP CBP in the future will continue to be impacted as result of equity awards made in 2009 and the impact of deferral of part of the 2009 compensation that vest over the requisite service periods discussed under “—Expenses”.

     Net Interest Expense

     Three Months Ended March 31, 2010 Compared to Three Months Ended March 31, 2009

Change in Net Interest Expense between
Three Months Ended March 31, 2010 and March 31, 2009

		Three Months Ended March 31,
		2010				2009				Change
		(U.S. dollars in thousands)
Interest income		$	256			$	357				($101	)
Interest expense			(3,302	)			(2,947	)			(355	)
Net interest expense		$	(3,046	)		$	(2,590	)			($456	)

     Interest income decreased by $0.1 million, or 28.6%, to $0.3 million. This decrease was primarily driven by a combination of lower income generating cash balances and a decrease in interest yields on those cash balances.

     Interest expense increased by $0.4 million, or 12.0% to $3.3 million. This increase was primarily driven by an increase in the weighted average interest paid on outstanding debt, partly offset by the amortization of deferred gains on the debt restructure undertaken during the second quarter of 2009.

     Income Taxes

     Three Months Ended March 31, 2010 Compared to Three Months Ended March 31, 2009

     Income tax decreased by $9.9 million to a benefit of $9.3 million, driven by the release of provisions relating to unrecognized tax benefits as the enquiry window for these provisions closed during the quarter and an increase in loss before income taxes excluding the effect of Acquisition-related compensation expense. The Company’s tax on loss before income taxes was 11.7% and (0.4%) for the three months ended March 31, 2010 and 2009, respectively. These rates differ from the U.S. Federal rate of tax of 35% due to the impact of non-tax deductible acquisition-related share based compensation of $63.9 million (2009: $118.9 million); the recognition of a gain on available-for-sale equity investments below $0.1 million, which is not taxable (2009 loss of $21.2 million); the release of a provision for unrecognized tax benefits of $7.3 million (2009: Nil); and because the Company’s profits are predominantly earned outside the United States, where lower rates of tax apply.

Realized loss on available-for-sale securities

     We recognized $21.2 million in losses during the first quarter of 2009 arising from the redemption of investments in GLG Funds to meet vested obligations of the equity participation plan, and recognition of other-than-temporary impairment on the remaining investments. Redemptions in the first quarter of 2010 were immaterial.

Non-controlling Interests

Three Months Ended March 31, 2010 Compared to Three Months Ended March 31, 2009

     Non-controlling interests decreased by $12.4 million from $21.4 million as of March 31, 2009 to $9.0 million as of March 31, 2010. The difference was primarily due to:

	•		$13.0 million share of losses attributable to FA Sub 2 Exchangeable Shareholders.
	•		A $0.6 million reduction in cumulative dividends accruing to holders of FA Sub 2 Exchangeable shares

Adjusted Net Income

     As discussed above under “— Assessing Business Performance”, we present a non-GAAP adjusted net income measure. The table below reconciles net income to adjusted net income for the periods presented.

Three Months Ended March 31, 2010 Compared to Three Months Ended March 31, 2009

Change in Non-GAAP Adjusted Net Income/(Loss) between
Three Months Ended March 31, 2010 and March 31, 2009

		Three Months Ended March 31,
		2010				2009				Change
		(U.S. dollars in thousands)
Derivation of non-GAAP adjusted net loss
GAAP net loss before non-controlling interests		$	(69,835	)		$	(141,685	)		$	71,850
Less: Cumulative dividend			—				(595	)			595
Add: Acquisition-related compensation expense			66,407				126,737				(60,330	)
Less: Tax-effect of Acquisition-related compensation expense			(224	)			(355	)			131
Add: Amortization of intangible assets			884				—				884
Less/Add: Realized (gain)/loss on available-for-sale investments			(38	)			21,217				(21,255	)
Less: Tax-effect of amortization of intangible assets			(248	)			—				(248	)
Non-GAAP adjusted net income/(loss)		$	(3,054	)		$	5,319			$	(8,373	)