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

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		Smaller reporting company o
				(Do not check if a smaller reporting company)

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 November 6, 2009, there were 250,384,657 shares of the registrant’s common stock outstanding.

 

 

FORWARD-LOOKING STATEMENTS

     In addition to historical information, this Quarterly Report on Form 10-Q contains statements relating to our future results (including certain projections and business trends) that are “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are subject to the “safe harbor” created by such 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 we manage, which we refer to as the GLG Funds;
	•		performance of GLG Funds, the related performance fees and the associated impacts on revenues, net income, cash flows and fund inflows and outflows;
	•		the 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; and
	•		risks associated with the use of leverage, investment in derivatives, availability of credit, interest rates and currency fluctuations,

as well as other risks and uncertainties, including those set forth herein and those detailed from time to time in our other Securities and Exchange Commission (“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 a website at www.glgpartners.com and routinely post important information on our website for investors. Effective on or after February 1, 2010, 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 (unaudited):
Unaudited Condensed Consolidated Balance Sheets — September 30, 2009 and December 31, 2008			1
Unaudited Condensed Consolidated Statements of Operations —Three and Nine Months Ended September 30, 2009 and September 30, 2008			2
Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Deficit — Nine Months Ended September 30, 2009			3
Unaudited Condensed Consolidated Statements of Cash Flows — Nine Months Ended September 30, 2009 and September 30, 2008			4
Notes to the Unaudited Condensed Consolidated Financial Statements			5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			21
Item 3. Quantitative and Qualitative Disclosures About Market Risk			53
Item 4. Controls and Procedures			55
PART II. OTHER INFORMATION			56
Item 1. Legal Proceedings			56
Item 1A. Risk Factors			56
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			81
Item 6. Exhibits			83
Signature			84
EX-10.1
EX-10.2
EX-10.3
EX-10.4
EX-31.1
EX-31.2
EX-31.3
EX-32.1
EX-32.2
EX-32.3

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(US Dollars in thousands, except per share amounts)

		September 30,				December 31,
		2009				2008
ASSETS
Current Assets
Cash and cash equivalents		$	274,431			$	316,195
Restricted cash			13,395				13,315
Fees receivable			39,224				42,106
Prepaid expenses and other assets			60,987				32,751
Total Current Assets			388,037				404,367
Non-Current Assets
Investments at fair value			21,834				65,484
Goodwill			587				587
Intangible assets (net of amortization of $1,834 and $0, respectively)			34,739				—
Property and equipment (net of accumulated depreciation and amortization of $14,544 and $11,505 respectively)			12,562				14,076
Other non-current assets			8,821				3,868
Total Non-Current Assets			78,543				84,015
Total Assets		$	466,580			$	488,382
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities
Rebates and sub-administration fees payable		$	22,864			$	26,234
Accrued compensation, benefits and profit share			65,801				148,531
Income taxes payable			17,353				15,633
Distributions payable			9,679				7,592
Accounts payable and other accruals			67,973				47,176
Revolving credit facility			12,281				40,000
Other liabilities			23,759				50,765
Total Current Liabilities			219,710				335,931
Non-Current Liabilities
Loan payable (including unamortized gain on modification of $22,287 and $0, respectively)			295,506				530,000
Convertible notes			228,500				—
Total Non-Current Liabilities			524,006				530,000
Total Liabilities			743,716				865,931
Stockholders’ Deficit:
Common stock, $.0001 par value per share; 1,000,000,000 authorized, 2009: 249,625,633 issued and outstanding (2008: 245,784,390 issued and outstanding)			24				24
Series A voting preferred stock, $.0001 par value per share; 150,000,000 authorized, 2009: 58,904,993 issued and outstanding (2008: 58,904,993 issued and outstanding)			6				6
Additional paid in capital			1,423,300				1,176,054
Treasury stock, 2009: 17,433,220 shares of common stock (2008: 21,418,568)			(238,834	)			(293,434	)
Accumulated other comprehensive income			7,413				(17,141	)
Accumulated deficit			(1,486,711	)			(1,243,058	)
Total Controlling Stockholders’ Deficit			(294,802	)			(377,549	)
Non-controlling interest			17,666				—
Total Stockholders’ Deficit			(277,136	)			(377,549	)
Total Liabilities and Stockholders’ Deficit		$	466,580			$	488,382

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

UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(US Dollars in thousands, except per share amounts)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2009				2008				2009				2008
Net revenues and other income
Management fees, net		$	39,543			$	80,307			$	110,001			$	269,663
Performance fees, net			1,945				6,833				50,704				89,762
Administration, service, and distribution fees, net			6,407				17,751				17,817				60,448
Other			326				(2,796	)			7,555				2,412
Total net revenues and other income			48,221				102,095				186,077				422,285
Expenses
Compensation, benefits and profit share			(136,631	)			(227,387	)			(455,217	)			(777,130	)
General, administrative and other			(23,709	)			(30,283	)			(71,452	)			(90,816	)
Amortization of intangible assets			(1,001	)			—				(1,834	)			—
Third party distribution, administration and service fees			(935	)			—				(1,600	)			—
Total expenses			(162,276	)			(257,670	)			(530,103	)			(867,946	)
Loss from operations			(114,055	)			(155,575	)			(344,026	)			(445,661	)
Realized gain / (loss) on available-for-sale investments			1,029				—				(20,188	)			—
Gain on debt extinguishment			—				—				84,821				—
Gain on business combination — negative goodwill			—				—				21,122				—
Interest income			196				2,043				845				6,685
Interest expense			(3,051	)			(6,028	)			(9,618	)			(18,795	)
Loss before income taxes			(115,881	)			(159,560	)			(267,044	)			(457,771	)
Income tax benefit/(expense)			1,300				(3,160	)			(1,252	)			(12,656	)
Net loss			(114,581	)			(162,720	)			(268,296	)			(470,427	)
Less non-controlling interests:
Share of loss			15,634				—				35,861				—
Cumulative dividends on exchangeable shares			(71	)			(2,896	)			(11,218	)			(12,194	)
Exchangeable shares dividend			—				(1,472	)			—				(4,418	)
Net loss attributable to common stockholders		$	(99,018	)		$	(167,088	)		$	(243,653	)		$	(487,039	)
Net loss per share — basic and diluted		$	(0.45	)		$	(0.79	)		$	(1.12	)		$	(2.30	)
Weighted average common stock outstanding — basic and diluted (in thousands)			220,614				211,417				218,078				211,357

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

UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(US Dollars in thousands)

																		Accumulated Other
										Additional								Comprehensive												Total
										Paid in				Preferred				Income/(Deficit)				Accumulated				Non-controlling				shareholders
		Treasury Stock				Common Stock				Capital				Stock				**				Income/(Deficit)				Interest				Equity/(Deficit)
Balance as of December 31, 2008		$	(293,434	)		$	24			$	1,176,054			$	6			$	(17,141	)		$	(1,241,758	)		$	—			$	(376,249	)
Effect of adoption of FAS 141(R) (primarily codified into FASB ASC Topic 805) (note 2)																							(1,300	)							(1,300	)
Balance as of December 31, 2008 restated		$	(293,434	)		$	24			$	1,176,054			$	6			$	(17,141	)		$	(1,243,058	)		$	—			$	(377,549	)
Comprehensive loss
Net loss																							(243,653	)			(35,861	)			(279,514	)
Unrealized gains on cash flow hedges (nil tax applicable)																			513								123				636
Unrealized gain on available-for-sale investments (nil tax applicable)																			1,475												1,475
Transfer to realized loss on available-for-sale investments on disposal (nil tax applicable)																			9,368												9,368
Transfer to realized loss on available-for-sale investments on other than temporary impairment (nil tax applicable)																			10,872												10,872
Foreign currency translation (nil tax applicable)																			2,326								556				2,882
Total comprehensive loss																			24,554				(243,653	)			(35,182	)			(254,281	)
Share based compensation (net of non-controlling interest)			54,600								250,131																52,833				357,564
Capital contributions											(91	)															15				(76	)
Issue of new shares											64,220																				64,220
Shares repurchased											(67,014	)																			(67,014	)
Balance as of September 30, 2009		$	(238,834	)		$	24			$	1,423,300			$	6			$	7,413			$	(1,486,711	)		$	17,666			$	(277,136	)

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

UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(US Dollars in thousands)

		Nine Months Ended
		September 30,
		2009				2008
Cash Flows From Operating Activities
Net loss		$	(268,296	)		$	(470,427	)
Adjustments to reconcile net loss to net cash (used in)/provided by operating activities:
Gain on business combination — negative goodwill			(21,122	)			—
Gain on debt extinguishment			(84,821	)			—
Depreciation and amortization			4,535				2,019
Share based compensation			357,564				574,355
Cumulative dividend			(11,218	)			(12,194	)
Foreign exchange movements on foreign currency bank accounts			(4,294	)			10,786
Realized loss on available-for-sale investments			20,188				—
Cash flows (net of assets and liabilities acquired in SGAM UK acquisition) due to changes in:
Fees receivable			10,130				348,348
Prepaid expenses and other assets			(21,393	)			(3,625	)
Rebates and sub-administration fees payable			(5,090	)			(135	)
Accrued compensation, benefits and profit share			(21,948	)			(282,643	)
Income taxes payable			1,804				(16,635	)
Distributions payable			2,087				(27,919	)
Accounts payable and other accruals			(2,724	)			10,492
Other liabilities			(33,151	)			14,488
Net cash (used in)/ provided by operating activities			(77,749	)			146,910
Cash Flows From Investing Activities
Redemption of available-for-sale securities			51,943				—
Purchase of trading securities			(4,589	)			—
Purchase of subsidiary			—				(2,500	)
Cash acquired (net of purchase consideration) of subsidiary			7,337				—
Transfer to restricted cash			(80	)			(297	)
Purchase of property and equipment			(1,256	)			(7,091	)
Net cash provided by/(used in) investing activities			53,355				(9,888	)
Cash Flows From Financing Activities
Issue of convertible notes			228,500				—
Loan repayment			(170,700	)			—
Debt issue costs			(12,495	)			—
Warrant exercises			—				2,568
Warrant repurchases			—				(37,582	)
Share repurchases			(67,014	)			(3,987	)
Capital contributions			(76	)			525
Dividends paid			—				(10,652	)
Acquisition-related transaction costs			—				(308	)
Distribution to principals and trustees			—				(118,354	)
Net cash used in financing activities			(21,785	)			(167,790	)
Net decrease in cash and cash equivalents			(46,179	)			(30,768	)
Effect of foreign currency translation on cash			4,415				(10,967	)
Cash and cash equivalents at beginning of period			316,195				429,422
Cash and cash equivalents at end of period		$	274,431			$	387,687

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

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(US Dollars in thousands, except per share amounts)

1. ORGANIZATION AND BASIS OF PRESENTATION

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

     The Company is a U.S.-listed asset management company offering its clients a diverse range of alternative and traditional investment products and account management services. The Company’s primary business is to provide investment management advisory services for various investment funds and companies (the “GLG Funds”) and accounts it manages. The Company’s revenues are primarily derived from management fees and administration fees charged to the GLG Funds and accounts it manages based on the value of assets in and performance of those funds and accounts. 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, 2008.

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

     The Company operates in one business segment, the management of global funds and accounts. The Company uses a multi-strategy approach, offering a range of funds across, among other things, equity, credit, macro, convertible and emerging markets 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 combined or consolidated by the Company.

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Included below are excerpts of GLG Partners Inc’s significant accounting policies, including those that have been revised in 2009. For a complete listing of GLG Partners Inc’s significant accounting policies, please refer to GLG Partners Inc’s Annual Report on Form 10-K for the year ended December 31, 2008.

Principals of 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. All intercompany transactions and balances have been eliminated.

     The Company has determined that majority of the 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 the GLG Funds. The Company earns substantially all of its revenue from the GLG Funds and managed accounts. In addition, the Acquisition related cash compensation has been invested in two GLG Funds, and the Company’s results are exposed to changes in the fair value of these funds as disclosed in Note 4.

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 nine months ended September 30, 2009 was $11,218.

     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 prospectively from January 1, 2009. Prior to this date, the non-controlling interest only shared in losses to the extent that they have available equity to absorb losses.

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

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.

     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 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) an investment by the GLG Emerging Markets Fund in the GLG Emerging Markets (Special Assets) Fund where management fees are charged only at the investing fund level, (2) the GLG Multi Strategy Fund where management fees are charged at both the investee and investing fund levels and (3) 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 (1) an investment by the GLG Emerging Markets Fund in the GLG Emerging Markets (Special Assets) Fund where performance fees are charged only at the investing fund level and (2) the GLG Global Aggressive Fund where 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.

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

     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.

Third Party Distribution, Administration and Service Fees

     Included in third party distribution, administration and service fees are sub-transfer agency fees that are paid to third parties for processing client share purchases and redemptions, call center support and client reporting.

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 income statement.

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

     The Company has hedged £12,000,000 of monthly operating expenditure from October to December 2009 with a final settlement date of January 15, 2010.

Change in Accounting Policy

     On January 1, 2009, the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805, Business Combinations, (formerly Statement of Financial Accounting Standards (“SFAS”) No. 141R, Business Combinations (“SFAS 141R”)), became applicable. The Company had previously recognized transaction costs relating to the acquisition of Société Générale Asset Management UK (“SGAM UK”) as a prepaid expense and other asset as at December 31, 2008. Under the new provisions, the Company is required to expense transaction costs relating to an acquisition in the period to which the cost relates.

     The change in the accounting policy has the following effect on the financial statements:

		December 31, 2008				December 31, 2008
		Adjusted(1)				As filed				Change
Balance sheet
Assets:
Prepaid expenses and other assets		$	32,751			$	34,051			$	(1,300	)
Stockholders’ Deficit:
Accumulated deficit		$	(1,243,058	)		$	(1,241,758	)		$	1,300
Statement of Operations
Consolidated net loss		$	(630,997	)		$	(629,697	)		$	1,300

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

Recent Accounting Pronouncements

SFAS 141(R)/Topic 805 - In December 2007, the FASB issued SFAS No 141(R), Business Combinations (“FAS 141(R)”), which was primarily codified in Topic 805 in the ASC. The standard replaces SFAS No. 141 and establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree. SFAS 141(R) also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141(R) applied prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. As at December 31, 2008 the Company had capitalized $1,300 for acquisition costs arising from in-progress acquisitions. On transition to SFAS 141(R) in the period ended September 30, 2009, these costs have been retrospectively taken to the statement of operations.

FSP FAS 107-1 and APB 28-1/Topic 825- FASB Final Staff Position No. FAS 107-1 and APB 28-1 (“FSP FAS-107-1 and APB-28-1”), which were primarily codified into Topic 825 Financial Instruments in the ASC. This standard amends SFAS No. 107, Disclosures about Fair Value of Financial Instruments , to require disclosures about fair value of financial instruments for interim reporting periods as well as in annual financial statements. FSP FAS-107-1 and APB-28-1 also amend APB Opinion No. 28, Interim Financial Reporting to require those disclosures in summarized financial information at interim reporting periods. FSP FAS-107-1 and APB-28-1 was issued in April 2009 and is effective prospectively for interim reporting periods ending after June 15, 2009. The application of FSP FAS-107-1 and APB-28-1 has expanded the Company’s disclosures regarding the use of fair value in interim periods.

SFAS 165/Topic 855 - Effective June 30, 2009, the Company adopted SFAS No. 165, Subsequent Events, (“SFAS 165”), which was primarily codified in Topic 855 Subsequent Events in the ASC. This standard is based upon the same principles that exist within the auditing standards and formally establishes accounting standards for disclosing those events occurring after the balance sheet date but before financial statements are issued or available to be issued. SFAS 165 requires public entities to evaluate subsequent events through the date that financial statements are issued, while all other entities should evaluate subsequent events through the date that financial statements are available to be issued. SFAS 165 categorizes subsequent events into recognized subsequent events (or historically Type I events) and non-recognized subsequent events (or historically Type II events). SFAS 165 also enhances disclosure requirements for subsequent events. SFAS 165 was effective upon issuance. The adoption of SFAS 165 did not have a material impact on the Company’s financial position or results of operations.

SFAS 167 - In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R) (“SFAS 167”), which has not yet been codified in the ASC. SFAS 167, which amends FIN 46(R), prescribes a qualitative model for identifying whether a company has a controlling financial interest in a variable interest entity (VIE) and eliminates the quantitative model prescribed by FIN 46(R). The new model identifies two primary characteristics of a controlling financial interest: (1) provides a company with the power to direct significant activities of the VIE, and (2) obligates a company to absorb losses of and/or provides rights to receive benefits from the VIE. SFAS 167 requires a company to reassess on an ongoing basis whether it holds a controlling financial interest in a VIE. A company that holds a controlling financial interest is deemed to be the primary beneficiary of the VIE and is required to consolidate the VIE. This statement is effective for fiscal years beginning after November 15, 2009. As such, the Company plans to adopt SFAS 167 effective January 1, 2010. The Company is currently evaluating the impact of adopting this standard, which

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

may result in the consolidation of a number of GLG Funds, but is not expected to have a material impact on the net income available to the Company’s common stockholders.

SFAS 168/Topic 105 - In June 2009, the FASB issued SFAS No. 168, The “FASB Accounting Standards Codification” and the Hierarchy of Generally Accepted Accounting Principles (“SFAS 168”), which was primarily codified into Topic 105 Generally Accepted Accounting Standards. SFAS 168 establishes the “FASB Accounting Standards Codification” (The “Codification”), which was officially launched on July 1, 2009, and became the primary source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under the authority of Federal securities laws are also sources of authoritative GAAP for SEC registrants. The subsequent issuances of new standards will be in the form of Accounting Standards Updates that will be included in the Codification. SFAS 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. As the Codification is neither expected nor intended to change GAAP, the adoption of SFAS 168 did not have a material impact on the Company’s consolidated financial statements.

3. BUSINESS COMBINATION

     On April 3, 2009, the Company completed the acquisition of 100% of SGAM UK’s long-only asset management business for £4,500,000 ($6,450) in cash. The asset purchase was accounted for as an acquisition of a business. The following table summarizes the fair values of the assets and liabilities acquired at closing.

The purchase price allocations were:

Intangible asset — customer-related management contracts (10 year life)1		$	33,338
Cash			13,787
Investments			2,016
Fixed assets			164
Deferred tax liability			(9,334	)
Other net liabilities			(12,399	)
Fair Value of Net Assets acquired		$	27,572

     The excess of the fair value of net assets acquired over consideration price was recognized in the six months ended June 30, 2009 statement of operations as a separate line item. The Company has considered the recognition of the gain as a “bargain purchase” as being reflective of industry conditions at the time of the negotiation of the acquisition and the business strategy of the seller. The Company expects to achieve synergies in respect of ongoing operating costs and expansion of its distribution channels.

     Intangible assets have been recognized in respect of acquired management contracts. To arrive at a fair value, management determined that the highest and best use of the management contracts was to value them as part of a going concern business. This valuation method presumes the continued utilization of the assets as a component of the business in connection with all other assets. This concept is known as “value in use.” This value is not intended to represent the amount that might be realized from piecemeal disposition of the assets or from some other use of the assets.

     In connection with post-acquisition restructuring, the Company has recorded approximately $3,300 in employment termination costs. The costs were substantially incurred in the second quarter of 2009.

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

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:

		September 30, 2009												December 31, 2008
		Level 1				Level 2				Level 3				Level 1				Level 2				Level 3
Foreign exchange derivatives (presented in other assets)		$	—			$	970			$	—			$	—			$	42			$	—
Trading investments			—				—				4,589				—				—				—
Available-for-sale investments			—				—				17,245				—				—				65,484
Foreign exchange derivatives (presented in other liabilities)			—				(242	)			—				—				—				—
		$	—			$	728			$	21,834			$	—			$	42			$	65,484

Foreign exchange derivatives

     Other assets and other liabilities 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.

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

Investments

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

	•	GLG Multi-Strategy Coupon Fund		Available-for-sale
	•	GLG Global Opportunity (Special Assets) Fund		Available-for-sale
	•	GLG Treasury Fund		Available-for-sale
	•	GLG European Opportunity (Lehman Recovery)		Trading
	•	GLG Technology (Lehman Recovery)		Trading

     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.

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

Fair Value Measurements

Quoted Prices in

Active Markets for

Significant Other

Significant

Identical Assets

Observable Inputs

Unobservable Inputs

(Level 1)

(Level 2)

(Level 3)

Movements in Level 3 assets for the nine-month period were as follows:

Investments in GLG Funds

Opening Balance January 1, 2009

$

65,484

Change in fair value recorded in other income

(6

)

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

219

Change in unrealized losses recorded in other comprehensive income

1,475

Investments acquired in business combination

2,016

Purchase of investments

4,589

Redemption proceeds

(51,943

)

Closing Balance September 30, 2009

$

21,834

Total unrealized gains in investments

$

920

     During the quarter ended March 31, 2009, the Company redeemed a portion of its investment in the GLG Global Opportunity Fund, realizing a loss on disposal of $10,345. At March 31, 2009 the Company had impairments of $6,025 in the GLG Global Opportunity Fund (through its successor, the GLG Global Opportunity (Special Assets) Fund) and $4,847 in the GLG Multi-Strategy Fund. Due to a change arising in that quarter in management’s ability and intent to hold the equity investments for a sufficient period to recover the impairment, $10,872 was realized as an other than temporary impairment to the statement of operations. Both the realized loss on disposal and other than temporary impairment charge of $10,872 have been recorded in the statement of operations as a realized loss on available-for-sale investments of $21,217 in the three months ended March 31, 2009.

     During the quarter ended September 30, 2009, the Company redeemed $5,322 of its investment in the GLG Global Opportunity (Special Assets) Fund and $12,581 of its investments in the GLG Multi-Strategy Fund, realizing a

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

total gain on disposal of $977. The Company also transferred its remaining underlying assets in the GLG Multi-Strategy Fund to the GLG Multi-Strategy Coupon Fund.

     In August and September 2009, the Company purchased investments totaling $4,589 in the GLG European Opportunity (Lehman Recovery) and the GLG Technology (Lehman Recovery) Funds which are being accounted for at fair value.

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

Loan payable

     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 $282,000 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.

5. CONCENTRATION OF CREDIT RISK

     The Company’s receivables relate to investment management, administration and performance fees receivable from GLG Funds and managed accounts. These fees are due upon determination by the administrator, and the fees are in preference to other creditors in the event of liquidation. Consequently, the Company does not have any material concentrations of credit risk.

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.

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

     For the three months and nine months ended September 30, 2009, the fair value of financial instruments has been recorded as follows:

		Three months ended				Nine months ended
		September 30, 2009				September 30, 2009
Total Fair Value of Derivative Financial Instruments (included in Other Assets)		$	970			$	970
Total Fair Value of Derivative Financial Instruments (included in Other Liabilities)			(242	)			(242	)
Total Fair Value of Derivative Financial Instruments at September 30, 2009
(all designated in a cash flow hedge)		$	728			$	728
Less: Fair value of Derivative Financial Instruments at start of period			(2,856	)			(42	)
Movement in Fair Value of Derivative Financial Instruments during the period		$	(2,128	)		$	686
Changes in Fair Values are allocated as follows:
Statement of Changes in Equity:
(Loss) / gain recorded in other comprehensive income in period — cash flow hedges		$	(948	)		$	2,937
Gain reclassified from other comprehensive income to income			(805	)			(2,301	)
Total (loss)/gain in Other Comprehensive Income		$	(1,753	)		$	636
Statement of Operations:
Decrease in General, Administrative & Other expenses — effective portion of hedge reclassified from other comprehensive income		$	817			$	1,612
Decrease in Compensation, benefits and profit share — effective portion of hedge reclassified from other comprehensive income			673				1,423
Decrease in Management Fees — effective portion of hedge reclassified from other comprehensive income			(686	)			(734	)
Decrease in Other income (ineffective portion of hedge and excluded from effectiveness assessment)			(1,179	)			(2,251	)
Total impact on Statement of Operations		$	(375	)		$	50
Total impact on Comprehensive Income		$	(2,128	)		$	686

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

7. DEBT

		Average interest				September 30,				December 31,
		rate				2009				2008
Revolving credit facility			2.29%			$	12,281			$	40,000
Term loans			2.29%				295,506				530,000
Convertible Note			5.00%				228,500				—
Total Debt						$	536,287			$	570,000

Restructuring of debt

     On May 15, 2009, the Company restructured its syndicated term loan and revolving loan facilities, with $284,500 ($27,720 of the revolving credit facility and $256,780 of the term loan) being repurchased by a consolidated subsidiary at 60% of par value.

     The discount of $113,800 arising from the restructuring, together with the unamortized costs from the original Acquisition financing of $4,778 and the direct finance costs relating to the refinancing of $5,967 were allocated to each syndicate lender. The loan and revolving credit facility for each lender was evaluated under ASC Topic 470-50, Modifications and Extinguishments, as to whether the loan or facility had been extinguished, reduced or remained unchanged.

     The outcome of the evaluation of the revolving credit facility and term loan was that $84,821 of the discount on repurchase was recognized in the statement of operations as a gain on extinguishment, $26,467 was added to the amortized cost of the continuing term loan, to be amortized against interest expense over the remaining period of the loan under the effective yield basis ($22,287 remaining at September 30, 2009), and $6,910 remaining costs were deferred and will be amortized over the term of the debt.

Amendment of the credit agreement

     In connection with the debt restructuring, the terms of the existing credit agreement were amended. The amendments included the cancellation of the financial covenants (minimum AUM and average ratio), the spread payable over LIBOR was amended to 250 basis points from the previous matrix (based on a trailing twelve month leverage ratio) and the principal repayment provisions were accelerated based on excess cash flow as defined in the amended credit agreement.

Issuance of Convertible Notes

     On May 15, 2009 in connection with the restructuring of the credit agreement, the Company issued $214,000 principal amount of convertible notes, due 2014, in a private offering to qualified institutional buyers under SEC Rule 144A. On June 8, 2009 a further $14,500 principal amount of convertible notes were issued in respect of an over-allotment option. The convertible notes were issued at par and carry an interest rate of 5.00% per annum. Interest is payable semi-annually in arrears on May 15 and November 15 of each year, beginning November 15, 2009.

     Subject to restrictions on ownership of common stock, holders may convert their notes into shares of common stock at any time on or prior to the business day immediately preceding the maturity date of the notes. The initial conversion rate for the notes is 268.8172 shares of common stock per $1 initial principal amount of notes (which represents an initial conversion price of approximately $3.72 per share).

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

     Upon conversion of a note, a holder will not receive any cash payment of interest and the conversion rate will not be adjusted for accrued or unpaid interest. Delivery of common stock is deemed to satisfy all obligations with respect to notes tendered for conversion. Notes can only be converted in denominations of $1 and multiples thereof. Cash will be paid in lieu of any fractional shares only.

     Conversion rate adjustments will be made if there is an event which dilutes the value of common stock (e.g., Share split, issuing common stock as a dividend or share combination). The conversion rate will be increased if there is a designated event which is a change of control or in connection with the conversion of notes at a time when the Company is in default of its obligations to file, have declared effective or maintain the effectiveness of a shelf registration statement for the resale of the notes.

     If at any time after the third anniversary of the original issuance date of the notes the volume-weighted average price of the Company’s common stock exceeds 150% of the conversion price on at least 20 of the 30 consecutive trading days, the conversion rights may be withdrawn upon notice given between 30 and 60 days prior to the withdrawal.

     The holders of notes have the option to require the Company to repurchase the notes if there is a designated event. A designated event is if the Company’s common stock ceases to be listed on the securities exchange or there is a change of control involving the Company.

     In the event of a written request from holders of notes representing at least 10% of the then outstanding principal amount of the notes, the Company will use commercially reasonable efforts to file a shelf registration statement relating to resales of the notes and shares of common stock issuable on conversion of the notes.

     The notes are subordinated in right of payment to the prior payment of senior indebtedness, currently consisting of the revolving credit facility and the term loan discussed above.

     The Company incurred $6,524 of direct costs in connection with the issuance of the notes. These have been deferred and will be recognized over the term of the notes as an adjustment to interest expense.

8. INCOME TAXES

     The Company calculates its effective tax rate on profit before tax and certain non-tax deductible expenses and non-taxable income. For the three months ended September 30, 2009, $110,115 of the Company’s compensation expense related to acquisition-related share based compensation, $102,974 of which is not tax deductible, compared to $188,005 for the three months ended September 30, 2008, $180,833 of which was non tax deductible. For the third quarter of 2009, the Company also recognized amortization of intangibles of $1,001 which is non-tax deductible and a realized gain on available-for-sale investments of $1,029 which is non-taxable. The Company’s (loss) /profit before tax and before these expenses was $(12,935) and $21,273 for the three months ended September 30, 2009 and 2008, respectively. The Company’s effective tax rate based on this measure was 10.1% and 14.9% for the three months ended September 30, 2009 and 2008, respectively. These rates differ from the U.S. Federal rate of tax of 35% as the Company’s profits are predominantly earned outside the United States where lower rates of tax apply.

     For the first nine months of 2009, $365,703 of the Company’s compensation expense related to acquisition-related share based compensation, $339,540 of which is not tax deductible, compared to $588,508 for the nine months ended September 30, 2008, $541,398 of which was non-tax deductible. For the first nine months of 2009, the Company also recognized amortization of intangibles of $1,834 and a realized loss on available-for-sale investments of $20,188, which are both non-tax deductible and negative goodwill arising on business combination of $21,122 which is non-taxable. The Company’s profit before tax and before these expenses was $73,395 and $83,628 for the nine months ended September 30, 2009 and 2008, respectively. The Company’s effective tax rate based on this measure was 1.7% and 15.1% for the nine months ended September 30, 2009 and 2008, respectively. These rates differ from the U.S. Federal rate of tax of 35% as the Company’s profits are predominantly earned outside the United States where lower rates of tax apply.

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

9. STOCKHOLDERS’ DEFICIT

     The following transactions occurred in the common stock of the Company during the first nine months of 2009:

		Number of Shares
Common stock outstanding at December 31, 2008			245,784,390
Shares issued as compensation			28,290,535
Shares repurchased			(28,991,258	)
Shares issued under share plan awards			5,195,216
Stock forfeited and cancelled under share-based compensation arrangements			(653,250	)
Common Stock outstanding at September 30, 2009			249,625,633

     No dividends have been declared in 2009. On October 26, 2008 a dividend of $0.025 per share of common stock was declared payable on October 21, 2008 to holders of record on October 10, 2008. A dividend of $0.025 per share was also declared payable on October 21, 2008 to holders of the FA Sub 2 Limited Exchangeable Shares.

10. 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 nine months ended September 30, 2009 and 2008 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 for the post-Acquisition period. 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								Nine Months Ended
		September 30,								September 30,
		2009				2008				2009				2008
Net loss applicable to common stockholders		$	(99,018	)		$	(167,088	)		$	(243,653	)		$	(487,039	)
Weighted-average common stock outstanding (in thousands) — basic and diluted			220,614				211,417				218,078				211,357
Net loss per share applicable to common stockholders — basic and diluted		$	(0.45	)		$	(0.79	)		$	(1.12	)		$	(2.30	)

The following common stock equivalents have been excluded from the computation of the weighted-average stock outstanding used for computing diluted earnings per share as of September 30, 2009 and 2008 as they would have been anti-dilutive (in thousands):

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

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2009				2008				2009				2008
Common stock held in Treasury			18,509				25,382				20,438				25,382
FA Sub 2 Limited Exchangeable Shares			58,905				58,905				58,905				58,905
Convertible Notes			61,425				—				30,707				—
Common stock awarded in connection with share-based compensation arrangements			10,493				8,882				10,493				8,882
Public warrants			32,985				32,985				32,985				32,985
Co-investment warrants			5,000				5,000				5,000				5,000
Sponsors’ warrants			4,500				4,500				4,500				4,500
			191,817				135,654				163,028				135,654

     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.

11. COMPREHENSIVE INCOME

		Three months ending September 30,
		2009												2008
						Attributed to
		Attributed to				non-								Attributed to
		controlling				controlling				Total				controlling
Net Loss		$	(99,018	)		$	(15,634	)		$	(114,652	)		$	(167,088	)
Gains on cash flow hedges released to statement of operations			(650	)			(155	)			(805	)			—
Unrealized gains on cash flow hedges			(765	)			(183	)			(948	)			(9,527	)
Change in unrealized gains on available-for-sale investments			807				—				807				(127	)
Release of unrealized gain on available-for-sale investments to statement of operations			(977	)			—				(977	)			—
Foreign currency translation			1,713				410				2,123				2,490
Total comprehensive loss		$	(98,890	)		$	(15,562	)		$	(114,452	)		$	(174,252	)

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

		Nine months ending September 30,
		2009												2008
						Attributed to
		Attributed to				non-								Attributed to
		controlling				controlling				Total				controlling
Net Loss		$	(243,653	)		$	(35,861	)		$	(279,514	)		$	(487,039	)
Gains on cash flow hedges released to statement of operations			(1,857	)			(444	)			(2,301	)			—
Unrealized gains on cash flow hedges			2,370				567				2,937				(13,472	)
Change in unrealized gains on available-for-sale investments			1,475				—				1,475				1,695
Release of unrealized loss on available-for-sale investments to statement of operations			20,240				—				20,240				—
Foreign currency translation			2,326				556				2,882				(259	)
Total comprehensive loss		$	(219,099	)		$	(35,182	)		$	(254,281	)		$	(499,075	)

12. PROFORMA STATEMENT OF OPERATIONS — IMPACT OF ADOPTION OF SFAS 160 (ASC Topic 810-10-65)

     As required under the transitional provisions of ASC Topic 810-10-65, Transition Related to FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51, the following pro forma statement of operations is presented to show the Company’s results of operations for the three months ended September 30, 2009 and 2008 and the nine months ended September 30, 2009 and 2008 under the rules relating to non-controlling interests before the adoption of the standard.

		Three months ended								Nine months ended
		September 30,								September 30,
		2009				2008				2009				2008
Net revenues and other income
Management fees, net		$	39,543			$	80,307			$	110,001			$	269,663
Performance fees, net			1,945				6,833				50,704				89,762
Administration, service, and distribution fees, net			6,407				17,751				17,817				60,448
Other			326				(2,796	)			7,555				2,412
Total net revenues and other income			48,221				102,095				186,077				422,285
Expenses
Compensation, benefits and profit share			(136,631	)			(227,387	)			(455,217	)			(777,130	)
General, administrative and other			(23,709	)			(30,283	)			(71,452	)			(90,816	)
Amortization of intangible assets			(1,001	)			—				(1,834	)			—
Third party distribution, administration and service fees			(935	)			—				(1,600	)			—
Total expenses			(162,276	)			(257,670	)			(530,103	)			(867,946	)
Loss from operations			(114,055	)			(155,575	)			(344,026	)			(445,661	)
Realized gain / (loss) on available-for-sale investments			1,029				—				(20,188	)			—
Gain on debt extinguishment			—				—				84,821				—
Gain on business combination — negative goodwill			—				—				21,122				—
Interest income			196				2,043				845				6,685
Interest expense			(3,051	)			(6,028	)			(9,618	)			(18,795	)
Loss before income taxes			(115,881	)			(159,560	)			(267,044	)			(457,771	)
Income taxes			1,300				(3,160	)			(1,252	)			(12,656	)
Net loss			(114,581	)			(162,720	)			(268,296	)			(470,427	)
Less non-controlling interests:
Cumulative dividends on exchangeable shares			(71	)			(2,896	)			(11,218	)			(12,194	)
Exchangeable shares dividend			—				(1,472	)			—				(4,418	)
Net loss attributable to common stockholders		$	(114,652	)		$	(167,088	)		$	(279,514	)		$	(487,039	)
Net loss per share — basic and diluted		$	(0.53	)		$	(0.79	)			(1.29	)		$	(2.30	)
Weighted average common stock outstanding — basic and diluted (in thousands)			220,614				211,417				218,078				211,357

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

13. COMMITMENTS AND CONTINGENCIES

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

     On January 25, 2008, the Autorité des Marchés Financiers (“AMF”) notified the Company of proceedings relating to its trading in the shares of Infogrames Entertainment (“Infogrames”) on February 8 and 9, 2006, prior to the issuance by Infogrames on February 9, 2006 of a press release announcing poor financial results. The AMF’s decision to initiate an investigation into the Company’s trades in Infogrames was based on a November 19, 2007 report prepared by the AMF’s Department of Market Investigation and Supervision (the “Infogrames Report”). According to the Infogrames Report, the trades challenged by the AMF generated an unrealized capital gain for the Company as of the opening on February 10, 2006 of €179,000. The AMF investigation relates solely to the conduct of a former employee; however, the Company was named as the respondent. If sustained, the charge against the Company could give rise to an administrative fine under French securities laws. The Company filed its response to the Infogrames Report on May 23, 2008. On September 24, 2009, the Rapporteur issued a written report, concluding that the Company did not engage in any wrongdoing and recommending that the AMF dismiss the case against the Company. A hearing before the Commission des Sanctions of the AMF is scheduled for November 12, 2009.

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

Indemnifications

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

14. SUBSEQUENT EVENTS

There were no subsequent events through to management’s assessment on November 9, 2009, which is the date these financial statements were issued.

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, 2008. 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 U.S.-listed asset management company offering our clients a diverse range of alternative and traditional investment products and account management 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 currently 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 September 30, 2009, our net AUM (net of assets invested in other GLG Funds) were approximately $21.6 billion, as compared to approximately $19.1 billion as of June 30, 2009 and $17.3 billion as of September 30, 2008. As of September 30, 2009, our gross AUM (including assets invested in other GLG Funds) were approximately $24.0 billion, as compared to approximately $21.6 billion as of June 30, 2009 and $21.2 billion as of September 30, 2008.

     On December 19, 2008, we entered into (i) an agreement with Société Générale Asset Management to acquire Société Générale Asset Management UK (“SGAM UK”), Société Générale’s UK long-only asset management business, for £4.5 million (approximately $6.5 million) in cash and (ii) a sub-advisory agreement with SGAM UK related to approximately $3.0 billion of AUM. On April 3, 2009, we completed the acquisition of SGAM UK’s operations, which had approximately $7.0 billion of AUM as of that date, and its investment and support staff, based primarily in London, and the sub-advisory agreement terminated.

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

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

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

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

	•		138,095,007 shares of our common stock, including 10,000,000 shares of our common stock issued for the benefit of our employees, service providers and certain key personnel under our 2007 Restricted Stock Plan (the “Restricted Stock Plan”);
	•		33,000,000 shares of our common stock payable by us upon exercise of certain put or call rights with respect to 33,000,000 ordinary shares issued by FA Sub 1 Limited to certain GLG Shareowners. Each of the ordinary shares issued by FA Sub 1 Limited to these GLG Shareowners has been put by the holder to us in exchange for one share of our common stock; and
	•		58,904,993 shares of our common stock to be issued upon the exchange of 58,904,993 Exchangeable Shares (the “Exchangeable Shares”) issued by FA Sub 2 Limited to certain GLG Shareowners. Each Exchangeable Share is exchangeable at any time at the election of the holder for one share of our common stock; and

•

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

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

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

     In this Management’s Discussion and Analysis of Financial Condition and Results of Operations, references to “GLG” should be taken to refer to the combined business of the GLG Entities prior to November 2, 2007, and references to “we”, “us, “our” and “the Company” shall be taken to 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, the mix of our AUM between different products and associated fee rates and to grow AUM from existing and new products.
	•		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

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

     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, 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.

     We consolidate certain entities we control through a majority voting interest or otherwise in which we are presumed to have control. All intercompany transactions and balances have been eliminated.

     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, 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 custodian 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 custodian. 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*
Single-manager alternative strategy funds		5-60 days
Long-only funds		1-5 days
Internal FoF		1-30 days
External FoF		45-90 days

Revenue Recognition

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 funds, four external FoFs, seven single-manager alternative strategy funds, four 130/30 funds, and certain managed accounts.

     We do not recognize performance fee revenues until the end of the measurement period when the amounts are contractually payable, or “crystallized”.

     The majority of the GLG Funds and accounts managed by us have contractual measurement periods that end on each of June 30 and December 31. As a result, the performance fee revenues for our first fiscal quarter and third fiscal

quarter results 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. These partnership draws and profit share distributions are referred to as “limited partner profit shares” and are discussed further under “— Expenses — Compensation, Benefits and Partner Profit Share” below. Charges related to the limited partner profit share arrangement are recognized as operating expenses as the related revenues are recognized and associated services provided.

Equity-Based Compensation

     Prior to December 31, 2006, GLG had not granted any equity-based awards. In March 2007, GLG established the equity participation plan to provide 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 in equal installments on the first, second, third and fourth anniversaries of the consummation of the Acquisition subject to the ability of the general partners of the limited partnerships, whose respective boards of directors consist of the Trustees, to accelerate vesting. The unvested portion of such amounts will be subject to forfeiture back to Sage Summit LP and Lavender Heights Capital LP (and not to us) 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 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 September 30, 2009, 2,198,000 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 canceled, 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 September 30, 2009, there were a total of 43,293,245 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 canceled.

     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 will be amortized into expense over the applicable vesting period using the accelerated method. As a result, following the completion of the Acquisition, compensation and benefits reflect the amortization of significant non-cash equity-based compensation expenses associated with the vesting of these equity-based awards, which under GAAP acts to reduce our net income and may result in net losses.

     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.

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

	•		The size of the awards to employees, service providers and key personnel under the equity participation plan and 2007 LTIP was considered to be a substantial retention incentive;
	•		Incentives for the awards to employees, service providers and key personnel under the equity participation plan and 2007 LTIP were considered sufficiently large that a zero percent forfeiture rate was estimated, subject to review as actual forfeitures occur;
	•		Disincentives for forfeiture related to the agreement among principals and trustees were considered to be so punitive that the probability of forfeiture was estimated as zero; and
	•		For awards under the Restricted Stock Plan, we used different forfeiture rates for individual employees, service providers and key personnel.

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

Income Tax

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

Management Fees

     Our gross management fee rates 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 September 30, 2009
Single-manager alternative strategy funds*		1.50% — 2.50%**
Long-only funds		0.30% — 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.

     The mix of our AUM has changed significantly from September 30, 2008 through September 30, 2009. The effect of this changing mix from our higher fee yielding single-manager alternative strategy products into lower fee yielding long-only and managed account products has had the effect of reducing our management fee yields when measured as a percentage of our overall AUM. This trend continued during 2009 due to the acquisition of SGAM UK which consisted of long-only funds and managed accounts which have lower management fee yields than our single-manager alternative strategy products. The management fee yield in future periods will be dependent on specific inflows, outflows and other related factors.

Performance Fees

     Our gross performance fees 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 funds, four external FoFs, seven single-manager alternative strategy funds, four 130/30 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. The 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 September 30, 2009, approximately two-thirds of the AUM in our long-only funds and less than half of the AUM in our single-manager alternative strategy funds subject to high-water marks were below their respective high-water marks. Fund performance through September 30, 2009 has generally reduced the additional performance necessary to reachieve the high-water marks for many GLG Funds, however, for some funds significant 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
Product		Investment Gains) As of September 30, 2009
Single-manager alternative strategy funds		10% — 30%*
Long-only funds		0% — 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 I, Item 3 of this Quarterly Report for a further discussion of our foreign exchange and hedging activities.

Administration Fees

     Our gross administration fee rates 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 and custodians, with the residual fees recognized as our net administration fee. Administration fees are generally paid monthly, one month in arrears.

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

Fees on Managed Accounts

     Managed account fee structures are negotiated on an account-by-account basis and may be more complex than for the GLG Funds. Across the managed account portfolio, fee rates vary according to the underlying mandate and, excluding one material managed account, in the aggregate are generally within the performance (subject, in some cases, to a performance hurdle) and management fee ranges charged with respect to comparable fund products. In October 2008, we received a new material managed account mandate which provided for a management fee at institutional rates and a performance fee based on exceeding certain benchmarks even in a scenario with negative performance. We signed a sub-advisory agreement with SGAM UK in December 2008 which earned a management fee at an institutional rate. This agreement terminated on April 3, 2009 upon completion of the acquisition of SGAM UK.

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 132 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.

     Following the Acquisition, our GAAP employee compensation expense reflects share-based and other compensation recognized in respect of (a) the equity participation plan, the 10,000,000 shares allocated for the benefit of employees, service providers and certain key personnel under the Restricted Stock Plan, and the agreement among the principals and trustees (collectively, the “Acquisition-related compensation expense”) and (b) share-based compensation recognized in respect of the 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. Variable compensation expense is recognized at the same time as the underlying fee revenue is crystallized, which may be monthly, quarterly, annually or semi-annually (on June 30 and December 31), depending on the fee revenue 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 as appropriate 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.
	•		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 compensation awarded to employees and limited partners 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 and February following each year end, it is paid to the LLPs, as limited partners, less any amounts paid as advance drawings during the year. See “— Allocation of Profit Shares to Individual Members of LLPs” below for a further discussion of the allocations. In addition, as shares of restricted stock awarded under our Restricted Stock Plan or LTIP to members of the LLPs vest or as we pay cash dividends on the unvested shares of restricted stock awarded under these plans to members of the LLPs, we allocate additional profits to the LLPs sufficient for the LLP to acquire from us the shares that are vesting or to pay

the relevant dividend. These additional profit shares are recorded as operating expense. 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. These profit shares are recorded as operating expenses matching the period in which the related revenues are recognized and associated services provided. Profit allocations, net of any amounts paid during the year as priority partnership drawings, will typically be paid to the members in January 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.

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, $45 million, and $5 million for the three 12-month periods beginning with the consummation of the Acquisition), the 10,000,000 shares allocated for the benefit of employees, service providers and certain key personnel under the Restricted Stock Plan, and the agreement among the principals and trustees and (b) dividends paid on unvested shares that are ultimately not expected to vest.

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 GAAP net (loss)/income before non-controlling interest for Acquisition-related compensation expense, realized gain/(loss) on available-for-sale investments, gain on business combination — negative goodwill, amortization of intangible assets, the related tax effects of the foregoing and cumulative dividends accrued for the holders of FA Sub 2 Limited Exchangeable Shares. See “— Results of Operations — Adjusted Net Income” for this reconciliation for the periods presented. We have added realized loss on available-for-sale investments, gain on business combination — negative goodwill, amortization of intangible assets, the related tax effects of the foregoing to our definition of non-GAAP adjusted net income. 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, 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.

     Under the agreement governing our revolving credit and term loan facilities, we were required to maintain compliance with certain financial covenants based on adjusted earnings before interest expense, provision for income taxes, depreciation and amortization, or adjusted EBITDA, which is calculated based on the non-GAAP adjusted net income measure, further adjusted to add back interest expense, provision for income taxes, depreciation and amortization. Our amended revolving credit and term loan agreements eliminated the related financial covenants.

     In December 2007, the FASB issued SFAS No. 160, which was primarily codified into Topic 810, Consolidations, in the ASC. SFAS 160 states that accounting and reporting for minority interests will be recharacterized as non-controlling interests and classified as a component of equity. SFAS 160 applies to all entities that prepare consolidated financial statements, except not-for-profit organizations, but will affect only those entities that have an outstanding non-controlling interest in one or more subsidiaries or that deconsolidate a subsidiary. SFAS 160 is effective prospectively, except for certain presentation disclosure requirements, for fiscal years beginning after December 15, 2008. As described above, the primary impact of the statement was the reclassification of minority interests from liabilities to stockholders’ equity and their re-labeling as “non-controlling interests”. In addition, under ARB No. 51, non-controlling interests only shared in losses to the extent that they had available equity to absorb losses. Under SFAS 160 the non-controlling interests prospectively fully share in losses as well as profits, even if there is no contractual obligation to fund losses.

Assets Under Management

     The mix of our AUM has changed significantly from September 30, 2008 through September 30, 2009. The effect of this changing mix from our higher fee yielding single-manager alternative strategy products into lower fee yielding long-only and managed account products has had the effect of reducing our management fee yields when measured as a percentage of our overall AUM. This trend continued during 2009 due to the acquisition of SGAM UK

which consisted of long-only funds and managed accounts that have lower management fee yields than our single-manager alternative strategy products. The management fee yield in future periods will be dependent on specific inflows, outflows and other related factors.

Assets Under Management

Change in AUM between September 30, 2009, June 30, 2009, December 31, 2008 and September 30, 2008
(U.S. Dollars in millions)

		As of Sept.				As of Jun.				3-Month				As of Dec.				9-Month				As of Sept.				12-Month
		30, 2009				30, 2009				Change				31, 2008				Change				30, 2008				Change
Alternative strategies (1)		$	10,924			$	10,441			$	483			$	12,518			$	(1,594	)		$	16,740			$	(5,816	)
Long-only strategies (2)			13,069				11,131				1,938				4,026				9,043				4,412				8,657
Gross AUM			23,993				21,572				2,421				16,544				7,449				21,152				2,841
Less: alternative strategy investments in GLG Funds			(1,266	)			(1,456	)			190				(1,503	)			237				(3,867	)			2,601
Less: long only strategy investments in GFLG Funds			(1,099	)			(1,022	)			(77	)			(2	)			(1,097	)			(5	)			(1,094	)
Net AUM		$	21,628			$	19,094			$	2,534			$	15,039			$	6,589			$	17,280			$	4,348
Quarterly average gross AUM		$	22,782			$	18,495							$	18,848							$	24,524
Quarterly average net AUM(3)			20,361				18,840								16,160								20,474
Opening net AUM		$	19,094			$	14,031							$	17,280							$	23,668
Inflows			3,338				5,634								5,970								1,904
Outflows			(3,122	)			(3,408	)							(5,199	)							(4,086	)
Inflows (net of redemptions)(4)			216				2,226								771								(2,182	)
Performance (gains net of losses and fees)			1,883				1,797								(2,649	)							(3,139	)
Currency translation impact			435				1,040								(363	)							(1,068	)
Closing net AUM		$	21,628			$	19,094							$	15,039							$	17,280