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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2006
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 0-23637
 Global Preferred Holdings, Inc.
 (Exact Name of Registrant as Specified in its Charter)
 DELAWARE
    
    58-2179041(State or other Jurisdiction of
    
    (I.R.S. EmployerIncorporation or Organization)
    
    Identification Number)
 C/O MORRIS, MANNING AND MARTIN LLP
3343 PEACHTREE ROAD, SUITE 1600
ATLANTA, GEORGIA 30326
(770) 248-3311  (Address, Including Zip Code and Telephone Number, Including Area Code, of Registrants Principal Executive Offices)
 
 þ o
  o o þ
 o þ




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TABLE OF CONTENTS
 PART I  FINANCIAL INFORMATION
    
    
    3ITEM 1.
    
    FINANCIAL STATEMENTS
    
    
    3Condensed Statement of Net Assets in Liquidation
    
    
    3Condensed Statement of Changes in Net Assets in Liquidation
    
    
    4Condensed Consolidated Statement of Income (Going Concern Basis)
    
    
    5Condensed Consolidated Statement of Cash Flows (Going Concern Basis)
    
    
    6Notes to Condensed Financial Statements
    
    
    7ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
    
    
    12ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    16ITEM 4.
    
    CONTROLS AND PROCEDURES
    
    
    16PART II  OTHER INFORMATION
    
    
    17ITEM 1.
    
    LEGAL PROCEEDINGS
    
    
    17ITEM 1A.
    
    RISK FACTORS
    
    
    17ITEM 2.
    
    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    17ITEM 3.
    
    DEFAULTS UPON SENIOR SECURITIES
    
    
    17ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    17ITEM 5.
    
    OTHER INFORMATION
    
    
    17ITEM 6.
    
    EXHIBITS
    
    
    17EX-31.1 SECTION 302 CERTIFICATION OF THE PEO & PFOEX-32.1 SECTION 906 CERTIFICATION OF THE PEO & PFO
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PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 GLOBAL PREFERRED HOLDINGS, INC.
 
 Condensed Statement of Net Assets in Liquidation
 (Unaudited)
 December 31,
    
    
    March 31,2005
    
    
    2006Estimated Net Realizable Values of Assets:Cash and cash equivalents
    
    $
    1,830,747
    
    
    $
    1,197,513Fixed maturity securities
    
    
    2,423,584
    
    
    
    2,416,546Equity securities
    
    
    14,868
    
    
    
    Miscellaneous receivables
    
    
    2,495
    
    
    
    1,000Current income tax recoverable
    
    
    4,510
    
    
    
    4,510Fixed assets
    
    
    2,780
    
    
    
    2,250Estimated future investment income
    
    
    211,485
    
    
    
    212,006Total estimated assets
    
    
    4,490,469
    
    
    
    3,833,825Estimated Settlement Amount of Liabilities:Accrued expenses and accounts payable
    
    
    77,134
    
    
    
    75,640Dividends payable
    
    
    15,079
    
    
    
    Estimated future operating costs and
settlement reserves during liquidation
period
    
    
    4,398,256
    
    
    
    3,758,185Total estimated liabilities
    
    
    4,490,469
    
    
    
    3,833,825Commitments and contingencies (Note 6)Net assets in liquidation
    
    $
    
    
    
    $
    
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GLOBAL PREFERRED HOLDINGS, INC.
 
 Condensed Statement of Changes in Net Assets in Liquidation
 (Unaudited)
 Three Months EndedMarch 31, 2006Estimated net assets in liquidation as of December 31, 2005
    
    $
    Change in estimate of:Future operating costs and settlement
reserves during liquidation period
    
    
    1,479Fair value of invested assets
    
    
    (24,549
    )Future investment income
    
    
    23,600Fixed assets
    
    
    (530
    )Net change in net assets in liquidation
    
    
    Net assets in liquidation at March 31, 2006
    
    $
    
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##### Table of Contents



GLOBAL PREFERRED HOLDINGS, INC.
 
 Condensed Consolidated Statement of Income (Going Concern Basis)
 (Unaudited)
 Three Months EndedMarch 31, 2005Revenues:Premiums
    
    $
    4,195,143Reinsured policy revenues
    
    
    2,949,090Net investment income
    
    
    260,020Net realized gain on investments
    
    
    35,119Net unrealized gain on trading investments
    
    
    13,420Other income
    
    
    2,500Total revenues
    
    
    7,455,292Benefits and expenses:Benefits, claims and settlement expenses
    
    
    1,941,309Change in future policy benefits
    
    
    127,441Reinsurance expense allowances, net
    
    
    1,881,211Amortization of deferred acquisition costs
    
    
    1,251,847Operating expenses
    
    
    938,564Total benefits and expenses
    
    
    6,140,372Income before income tax
    
    
    1,314,920Income tax expense
    
    
    (346,511
    )Net income available to common stockholders
    
    $
    968,409Basic earnings per share
    
    $
    0.23Diluted earnings per share
    
    $
    0.23Weighted-average common shares outstanding
    
    
    4,141,684Total weighted-average common and common equivalent
shares outstanding
    
    
    4,192,442
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GLOBAL PREFERRED HOLDINGS, INC.
 
 Condensed Consolidated Statement of Cash Flows (Going Concern Basis)
 (Unaudited)
 Three Months EndedMarch 31, 2005Cash flows from operating activities:Net income
    
    $
    968,409Adjustments to reconcile net income to net cash provided by operating activities:Amortization and depreciation
    
    
    1,291,045Net realized gain on investments
    
    
    (35,119
    )Net unrealized gain on trading investments
    
    
    (13,420
    )Deferred tax benefit
    
    
    (120,808
    )Capitalization of deferred acquisition costs, net
    
    
    (142,184
    )Expense of stock option compensation
    
    
    466Change in:Investment income due and accrued
    
    
    (16,324
    )Accounts receivable
    
    
    11,282Reinsurance balances receivable
    
    
    (465,948
    )Prepaid expenses
    
    
    87,356Future policy benefits
    
    
    200,739Accrued expenses and accounts payable
    
    
    141,594Current income tax payable
    
    
    77,799Net cash provided by operating activities
    
    
    1,984,887Cash flows from investing activities:Proceeds from principal payments on mortgage-backed securities available-for-sale
    
    
    131,676Proceeds from sale of fixed maturity securities available for sale
    
    
    532,540Purchase of fixed assets
    
    
    (3,628
    )Change in reinsured policy loans
    
    
    (116,500
    )Net cash provided by investing activities
    
    
    544,088Net increase in cash and cash equivalents
    
    
    2,528,975Cash and cash equivalents at beginning of period
    
    
    12,463,601Cash and cash equivalents at end of period
    
    $
    14,992,576Supplemental disclosure of cash flow information:Interest paid
    
    $
    Income taxes paid
    
    $
    389,520
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GLOBAL PREFERRED HOLDINGS, INC.
 
 Notes to Condensed Financial Statements
 March 31, 2006
(Unaudited)
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
    
    Cash and cash equivalents are stated at fair value. At times, cash balances held in
financial institutions may be in excess of federally insured amounts. Cash balances held
in money market funds are not insured. Cash equivalents consist of United States treasury
bills with maturities of ninety days or less at date of purchase.
    
    Fixed maturity securities consist of United States treasury notes and represent
estimated net sales proceeds less the costs of disposal.
    
    Miscellaneous receivables represent receivables due to Global Preferred by employees and
third-party service providers.
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
    
    Current income tax recoverable represents an overpayment of 2005 estimated taxes paid in
2005.
    
    Fixed assets are assets being utilized by Global Preferred such as furniture and office
equipment stated at net realizable value.
    
    Estimated future investment income was projected by management based upon prevailing
interest rates, anticipated investment portfolio composition and future expected cash flows
based upon the estimated timeframe to complete the liquidation.
  
    
    Accrued expenses and accounts payable include all current amounts due that remain unpaid
for recurring administrative costs and for refunds of payments made to us in error by
third-party service providers.
    
    Estimated future operating costs and settlement reserves during liquidation were
recorded on May 26, 2005 when Global Preferred adopted the liquidation basis of accounting
and include all estimated future amounts that remain unpaid for liquidation activities.
  Estimated
    
    
    
    
    
    
    
    
    
    
    Estimatedas of
    
    
    
    
    
    
    Costs
    
    
    as ofDecember 31,
    
    
    Change in
    
    
    Incurred
    
    
    March 31,(Dollars in Thousands)
    
    2005
    
    
    Estimate
    
    
    and Paid
    
    
    2006Employee compensation and
benefits, including
severance payments
    
    $
    1,390.7
    
    
    $
    (17.1
    )
    
    $
    528.1
    
    
    $
    845.5Legal, audit and other
professional fees
    
    
    592.6
    
    
    
    55.3
    
    
    
    107.1
    
    
    
    540.8Settlement reserves and
other estimated costs of
liquidation
    
    
    2,415.0
    
    
    
    (39.7
    )
    
    
    3.4
    
    
    
    2,371.9Total estimated future
operating costs and
settlement reserves
    
    $
    4,398.3
    
    
    $
    (1.5
    )
    
    $
    638.6
    
    
    $
    3,758.2
    (Dollars in Thousands)
    
    Fair ValueFixed maturity securities:U.S. government agency obligations
    
    $
    2,416.5Equity securities
    
    
    Total fixed maturity and equity securities
    
    $
    2,416.5
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(Dollars in Thousands)Total estimated assets as of March 31, 2006 as per accompanying
statement of net assets in liquidation
    
    $
    3,833.8Less expenses paid, or estimated to be paid, subsequent to March
31, 2006 and prior to transfer of assets:Severance benefits and other employee costs
    
    
    (786.4
    )Professional fees and other operating expenses
    
    
    (130.9
    )Less estimated future investment income to be received after
transfer of assets
    
    
    (164.8
    )Less other assets received, or to be received or realized, after
transfer of assets
    
    
    (9.0
    )Estimated assets to be transferred to GPH Liquidating Trust
    
    $
    2,742.7
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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A)
addresses the financial condition of Global Preferred Holdings, Inc. (Global Preferred) as of
March 31, 2006 compared with December 31, 2005. Due to the conversion of Global Preferreds
financial accounting to liquidation basis accounting beginning on
May 26, 2005, and the
fundamentally different nature of Global Preferreds operations following that date, a comparison
of the results of operations for the three month period ended March 31, 2006 to the three month
period ended March 31, 2005 would not be meaningful. This discussion should be read in conjunction
with the unaudited condensed financial statements and accompanying notes included elsewhere in this
report and with the MD&A and Global Preferreds financial statements and notes thereto included in
Global Preferreds 2005 Annual Report on Form 10-K, as amended.
 Overview
   Plan of Liquidation
    Liquidation Basis of Accounting
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As of
    
    
    As of(Dollars in Thousands)
    
    December 31, 2005
    
    
    March 31, 2006Employee compensation and benefits, including severance
    
    $
    1,390.7
    
    
    $
    845.5Legal, audit and other professional services
    
    
    592.6
    
    
    
    540.8Settlement reserves and other estimated costs of liquidation
    
    
    2,415.0
    
    
    
    2,371.9Total
    
    $
    4,398.3
    
    
    $
    3,758.2
  Status of Liquidation
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Recent Developments
    Business Operations Prior to Asset Sale
  Critical Accounting Policies and Estimates
  Results of Operations
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Liquidity and Capital Resources
     Contractual Obligations and Commitments
  (Dollars in Thousands)
    
    Total
    
    
    2006Severance payments and benefits
    
    $
    751.0
    
    
    $
    751.0
 Forward-Looking Statements
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
    
    The timing of any distributions of the remaining assets and the
impact of distributions on the adequacy of reserves available to
pay costs and expenses during liquidation;
    
    Estimates of our cash requirements and costs of liquidation;
    
    Estimates of our asset values, including future investment income;
    
    Estimates of our settlement reserve during liquidation;
    
    The assertion of unforeseen claims against us;
    
    The passage of federal or state legislation subjecting our
business to additional supervision or regulation, including
additional tax regulation, in the United States or other
jurisdictions in which we operate; and
    
    Changes in economic conditions, including interest rate and equity
market conditions, which could affect our investment portfolio.
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
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PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
   
 ITEM 1A. RISK FACTORS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
 31.1
    
    Certification by Caryl P. Shepherd, Chief Accounting Officer, Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification by Caryl P. Shepherd, Chief Accounting Officer, Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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SIGNATURES
 th
 GLOBAL PREFERRED HOLDINGS, INC.By:
    /s/   CARYL P. SHEPHERDCaryl P. ShepherdChief Accounting Officer, Vice President and Treasurer 18