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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 September 30, 2008
 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: 001-33217
 GLG PARTNERS, INC.
  Delaware
(State or other jurisdiction of 
incorporation or organization)
    
    20-5009693
(I.R.S. Employer Identification No.)
 399 Park Avenue, 38th Floor
New York, New York 10022
 (212) 224-7200
 þ o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller Reporting Company o
 o þ




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##### Table of Contents



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




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##### 



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




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 GLG PARTNERS, INC. AND SUBSIDIARIES
 
 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
 (US dollars in thousands, except share and per share amounts)
 As of
    
    
    As ofSeptember 30,
    
    
    December 31,2008
    
    
    2007ASSETSCurrent AssetsCash and cash equivalents
    
    $
    387,687
    
    
    $
    429,422Restricted cash
    
    
    24,363
    
    
    
    24,066Fees receivable
    
    
    41,429
    
    
    
    389,777Prepaid expenses and other assets
    
    
    41,005
    
    
    
    35,685Total Current Assets
    
    
    494,484
    
    
    
    878,950Non-Current AssetsInvestments at fair value
    
    
    82,558
    
    
    
    96,108Goodwill
    
    
    587
    
    
    
    Property and equipment
    
    
    14,151
    
    
    
    9,079Total Non-Current Assets
    
    
    97,296
    
    
    
    105,187Total Assets
    
    $
    591,780
    
    
    $
    984,137LIABILITIES AND STOCKHOLDERS EQUITYCurrent LiabilitiesRebates and sub-administration fees payable
    
    $
    25,408
    
    
    $
    25,543Accrued compensation, benefits and profit share
    
    
    185,244
    
    
    
    467,887Income taxes payable
    
    
    20,829
    
    
    
    37,464Distributions payable
    
    
    60,017
    
    
    
    78,093Accounts payable and other accruals
    
    
    43,778
    
    
    
    33,288Other liabilities
    
    
    30,580
    
    
    
    16,092Total Current Liabilities
    
    
    365,856
    
    
    
    658,367Non-Current LiabilitiesLoan payable
    
    
    570,000
    
    
    
    570,000Minority interest
    
    
    
    
    
    
    1,911Total Non-Current Liabilities
    
    
    570,000
    
    
    
    571,911Total Liabilities
    
    $
    935,856
    
    
    $
    1,230,278Stockholders DeficitStockholders DeficitCommon stock, $.0001 par value; 1,000,000,000
authorized, 245,794,397 issued and
outstanding (Dec. 31, 2007: 244,730,988 issued
and outstanding), including 25,382,500 (Dec.
31, 2007: 25,382,500) shares of Treasury stock
held by a subsidiary
    
    $
    25
    
    
    $
    24Series A voting preferred stock, $.0001 par
value; 150,000,000 authorized, 58,904,993
issued and outstanding (Dec. 31, 2007: 58,904,993
issued and outstanding)
    
    
    6
    
    
    
    6Additional paid in capital
    
    
    1,111,159
    
    
    
    575,589Treasury stock
    
    
    (347,740
    )
    
    
    (347,740
    )Accumulated other comprehensive income
    
    
    (8,559
    )
    
    
    3,477Accumulated deficit
    
    
    (1,098,967
    )
    
    
    (477,497
    )Total Stockholders Deficit
    
    
    (344,076
    )
    
    
    (246,141
    )Total Liabilities and Stockholders Deficit
    
    $
    591,780
    
    
    $
    984,137
  2




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##### Table of Contents



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




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GLG PARTNERS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED
 
 STATEMENTS OF STOCKHOLDERS DEFICIT
 (US dollars in thousands)
 AccumulatedAdditional
    
    
    Other
    
    
    
    
    
    
    TotalPreferred
    
    
    Common
    
    
    Treasury
    
    
    Paid-In
    
    
    Comprehensive
    
    
    Accumulated
    
    
    StockholdersStock
    
    
    Stock
    
    
    Stock
    
    
    Capital
    
    
    Income/(Loss)
    
    
    Deficit
    
    
    DeficitBalance as of January 1, 2008
    
    $
    6
    
    
    $
    24
    
    
    $
    (347,740
    )
    
    $
    575,589
    
    
    $
    3,477
    
    
    $
    (477,497
    )
    
    $
    (246,141
    )Comprehensive income:Net loss attributable to
common stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (487,039
    )
    
    
    (487,039
    )Unrealized losses on available
for sale equity investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,472
    )
    
    
    
    
    
    
    (13,472
    )Fair value movements on cash
flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,695
    
    
    
    
    
    
    
    1,695Foreign currency translation
(zero tax applicable)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (259
    )
    
    
    
    
    
    
    (259
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (499,075
    )Recapitalization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (308
    )
    
    
    
    
    
    
    
    
    
    
    (308
    )Share-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    574,355
    
    
    
    
    
    
    
    
    
    
    
    574,355Warrant exercises
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    2,567
    
    
    
    
    
    
    
    
    
    
    
    2,568Warrants repurchased
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37,582
    )
    
    
    
    
    
    
    
    
    
    
    (37,582
    )Capital contributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    525
    
    
    
    
    
    
    
    
    
    
    
    525Shares repurchased
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,987
    )
    
    
    
    
    
    
    
    
    
    
    (3,987
    )Dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,077
    )
    
    
    (16,077
    )Distributions to former GLG owners
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (118,354
    )
    
    
    (118,354
    )Balance as of September 30, 2008
    
    $
    6
    
    
    $
    25
    
    
    $
    (347,740
    )
    
    $
    1,111,159
    
    
    $
    (8,559
    )
    
    $
    (1,098,967
    )
    
    $
    (344,076
    )
  4




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##### Table of Contents



GLG PARTNERS, INC. AND SUBSIDIARIES
 UNAUDITED CONDENSED CONSOLIDATED AND COMBINED
 
 STATEMENTS OF CASH FLOWS
 (US dollars in thousands)
 Nine months ended September 30,2008
    
    
    2007Cash Flows From Operating ActivitiesNet (loss)/income attributable to common stockholders
    
    $
    (487,039
    )
    
    $
    167,123Adjustments to reconcile net (loss)/income attributable to common
stockholders to net cash provided by operating activities:Minority interests
    
    
    
    
    
    
    479Depreciation
    
    
    2,019
    
    
    
    1,522Foreign exchange gains on investments
    
    
    78
    
    
    
    39Share based compensation
    
    
    574,355
    
    
    
    Cash flows due to change in:Fees receivable
    
    
    348,348
    
    
    
    211,276Prepaid expenses and other assets
    
    
    (3,625
    )
    
    
    (6,703
    )Rebates and sub-administration fees payable
    
    
    (135
    )
    
    
    327Accrued compensation, benefits and profit share
    
    
    (282,643
    )
    
    
    (47,551
    )Income taxes payable
    
    
    (16,635
    )
    
    
    (6,056
    )Distributions payable
    
    
    (23,501
    )
    
    
    62,001Accounts payable and other accruals
    
    
    10,492
    
    
    
    (4,963
    )Other liabilities
    
    
    14,488
    
    
    
    (1,446
    )Net cash provided by operating activities
    
    
    136,202
    
    
    
    376,046Cash Flows From Investing ActivitiesInvestment in subsidiary
    
    
    (2,500
    )
    
    
    Transfer to restricted cash
    
    
    (297
    )
    
    
    Purchase of property and equipment
    
    
    (7,091
    )
    
    
    (4,367
    )Net cash used in investing activities
    
    
    (9,888
    )
    
    
    (4,367
    )Cash Flows From Financing ActivitiesWarrant exercises
    
    
    2,568
    
    
    
    Warrant repurchases
    
    
    (37,582
    )
    
    
    Share repurchases
    
    
    (3,987
    )
    
    
    Capital contributions
    
    
    525
    
    
    
    487Dividends paid
    
    
    (10,652
    )
    
    
    Acquisition related transaction costs
    
    
    (308
    )
    
    
    Distributions to former GLG owners
    
    
    (118,354
    )
    
    
    (254,331
    )Net cash used in financing activities
    
    
    (167,790
    )
    
    
    (253,844
    )Net decrease in cash and cash equivalents
    
    
    (41,476
    )
    
    
    (117,835
    )Effect of foreign currency translation on cash
    
    
    (259
    )
    
    
    749Cash and cash equivalents at beginning of period
    
    
    429,422
    
    
    
    273,148Cash and cash equivalents at end of period
    
    $
    387,687
    
    
    $
    391,732
  5




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##### Table of Contents



GLG PARTNERS, INC. AND SUBSIDIARIES
 
 NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED AND COMBINED
 FINANCIAL STATEMENTS
 (US Dollars in thousands, except share and per share amounts)
 1.
ORGANIZATION AND BASIS OF PRESENTATION
        2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Principles of combination and consolidation
  Determining Whether a
General Partner, or the General Partners as a
 6




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GLG PARTNERS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS (Continued)
(US Dollars in thousands, except share and per share amounts)
 Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain
Rights
 Minority Interests in Consolidated Subsidiaries
  GLG Holdings Inc. and GLG Inc.
  Consolidation of Variable Interest Entities
   FA Sub 2 Limited Exchangeable Shares
    7




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GLG PARTNERS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS (Continued)
(US Dollars in thousands, except share and per share amounts)
  Revenue Recognition
  Accounting for Management Fees Based on a Formula
  Reporting Revenue Gross as a Principal versus Net as an Agent
    
    
    management fees are charged at the investee fund level, except in the case of (1) an
investment by the GLG Emerging Markets Fund in the GLG Emerging Markets (Special Assets)
Fund where management fees are charged only at the investing fund level and (2) the GLG
Multi Strategy Fund where fees are charged at both the investee and investing fund levels;
    
    performance fees are charged at the investee fund level, except in the case of (1) an
investment by the GLG Emerging Markets Fund in the GLG Emerging Markets (Special Assets)
Fund where performance fees are charged only at the investing fund level and (2) the GLG
Global Aggressive Fund where fees are charged at
 8




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GLG PARTNERS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS (Continued)
(US Dollars in thousands, except share and per share amounts)
 both the investee and investing fund levels, to the extent, if any, that the performance fee
charged at the investing fund is greater than the performance fee charged at the investee
fund level; and
    
    administration fees are charged at both the investing and investee fund levels.
  Employee Compensation and Benefits
  
    
    Base compensation  contractual compensation paid to employees in the form of base
salary, which is expensed as incurred.
    
    Variable compensation  payments that arise from the contractual entitlements of
personnel to a fixed percentage of certain variable fee revenues attributable to such
personnel with respect to GLG Funds and managed accounts. Variable compensation expense is
recognized at the same time as the underlying fee revenue is crystallized, which may be
monthly or semi-annually (on June 30 and December 31), depending on the fee revenue source.
    
    Discretionary compensation  payments that are determined by the Companys management in
its sole discretion and are generally linked to performance. In determining such payments,
the Companys management considers, among other factors, the ratio of total discretionary
compensation to total revenues; however, this ratio may vary between periods and, in
particular, significant discretionary bonuses may still be paid in a period of low
performance for retention and incentivization purposes. This discretionary compensation is
paid to employees in the form of a discretionary cash bonus. Discretionary compensation is
generally declared and paid following the end of each calendar year. However, the notional
discretionary compensation charge is adjusted monthly based on the year-to-date
profitability and revenues recognized on a year-to-date basis. As the majority of funds
crystallize their performance fees at June 30 and December 31, the majority of
discretionary compensation expense crystallizes at year end and is typically paid in
January following the year end.
 Limited Partner Profit Share
  9




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GLG PARTNERS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS (Continued)
(US Dollars in thousands, except share and per share amounts)
 Share-Based Payment
  Derivatives and Hedging
 Accounting for Derivative Instruments and Hedging Activities
  
 Recent Accounting Pronouncements
 Disclosures about Derivative Instruments and
Hedging Activities an amendment of FASB Statement No. 133
 Fair Value Measurements
 10




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GLG PARTNERS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS (Continued)
(US Dollars in thousands, except share and per share amounts)
 Accounting for
Leases Determining Fair Value in a Market That Is Not Active
 Noncontrolling Interests in Consolidated Financial
Statements  an amendment of ARB No. 51
   11




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GLG PARTNERS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS (Continued)
(US Dollars in thousands, except share and per share amounts)
 Net Income per share of Common Stock
 Earnings Per Share
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net (loss)/income applicable to common stockholders
    
    $
    (167,088
    )
    
    $
    28,962
    
    
    $
    (487,039
    )
    
    $
    167,123Weighted-average common stock outstanding (in thousands)  basic
    
    
    211,417
    
    
    
    135,712
    
    
    
    211,357
    
    
    
    135,712Net (loss)/income per share applicable to common stockholders  basic
    
    $
    (0.79
    )
    
    $
    0.21
    
    
    $
    (2.30
    )
    
    $
    1.23Weighted-average common stock outstanding (in thousands)  diluted
    
    
    211,417
    
    
    
    194,617
    
    
    
    211,357
    
    
    
    194,617Net (loss)/income per share applicable to common stockholders  diluted
    
    $
    (0.79
    )
    
    $
    0.15
    
    
    $
    (2.30
    )
    
    $
    0.86Reconciliation of weighted-average common stock outstanding  basic to
weighted-average common stock outstanding  diluted:Weighted-average common stock outstanding  basic (in thousands)
    
    
    211,417
    
    
    
    135,712
    
    
    
    211,357
    
    
    
    135,712FA Sub 2 Limited Exchangeable Shares
    
    
    
    
    
    
    58,905
    
    
    
    
    
    
    
    58,905Weighted-average common stock outstanding  diluted (in thousands)
    
    
    211,417
    
    
    
    194,617
    
    
    
    211,357
    
    
    
    194,617
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2008
    
    2007
    
    2008
    
    2007Common stock held in Treasury
    
    
    25,382
    
    
    
    25,382
    
    
    
    25,382
    
    
    
    25,382FA Sub 2 Limited Exchangeable Shares
    
    
    58,905
    
    
    
    
    
    
    
    58,905
    
    
    
    Common stock awarded in connection
with share-based compensation
arrangements
    
    
    8,882
    
    
    
    6,397
    
    
    
    8,882
    
    
    
    6,397Public stockholders warrants
    
    
    32,985
    
    
    
    
    
    
    
    32,985
    
    
    
    Co-investment warrants
    
    
    5,000
    
    
    
    
    
    
    
    5,000
    
    
    
    Sponsors warrants
    
    
    4,500
    
    
    
    
    
    
    
    4,500
    
    
    
    135,654
    
    
    
    31,779
    
    
    
    135,654
    
    
    
    31,779
  3. COMMITMENTS AND CONTINGENCIES
 Regulatory Proceedings
   12




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##### Table of Contents



GLG PARTNERS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS (Continued)
(US Dollars in thousands, except share and per share amounts)
 
  Indemnifications
  4. INCOME TAXES
  5. FAIR VALUES OF FINANCIAL INSTRUMENTS
  
    
    Level 1: Inputs to the valuation methodology are quoted prices, unadjusted, for
identical assets or liabilities in active markets. A quoted price in an active market
provides the most reliable evidence of fair value and shall be used to measure fair value
whenever available.
    
    Level 2: Inputs to the valuation methodology include quoted prices for similar assets
or liabilities in active markets; inputs to the valuation methodology include quoted prices
for identical or similar assets or liabilities in markets that are not active; or inputs to
the valuation methodology that are derived principally from or can be corroborated by
observable market data by correlation or other means.
    
    Level 3: Inputs to the valuation methodology are unobservable and significant to the
fair value measurement. Level 3 assets and liabilities include financial instruments whose
value is determined using discounted cash flow methodologies, as well as instruments for
which the determination of fair value requires significant management judgment or
estimation.
   13




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GLG PARTNERS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS (Continued)
(US Dollars in thousands, except share and per share amounts)
 Fair Value MeasurementsQuoted Prices
    
    
    Significantin Active
    
    
    Other
    
    
    SignificantMarkets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    InputsDescription
    
    Balance
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)AssetsAvailable for sale investments
    
    $
    82,558
    
    
    
    
    
    
    $
    82,558
    
    
    
    Other assets (financial derivatives)
    
    $
    4,401
    
    
    
    
    
    
    $
    4,401
    
    
    
    
 6. SHARE BASED COMPENSATION
   7. DERIVATIVE FINANCIAL INSTRUMENTS
  Three months endedSeptember 30, 2008Balance SheetFair Value of Derivative Financial Instruments  designated in a cash
flow hedge relationship at end of period (included in Other Assets)
    
    $
    4,401Fair Value of Derivative Financial Instruments  designated in a cash
flow hedge relationship at beginning of period (included in Other
Liabilities)
    
    
    (1,210
    )Change in Fair Value of Derivative Financial Instruments
    
    $
    5,611Fair values are allocated as follows:Statement of Changes in Equity:Gain recorded in other comprehensive income in period   cash flow hedges
    
    $
    3,732Loss reclassified from other comprehensive income to income
    
    
    (1,293
    )Total gain carried forward in Other Comprehensive Income
    
    
    2,439Statement of Operations:Increase in Management Fees
    
    
    1,241Increase in Other income (ineffective portion of hedge and excluded
from effectiveness assessment)
    
    
    1,931Total impact on Statement of Operations
    
    
    3,172Total impact on Comprehensive Income
    
    $
    5,611
 14




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GLG PARTNERS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS (Continued)
(US Dollars in thousands, except share and per share amounts)
 8. SHAREHOLDERS EQUITY
  Number of sharesCommon stock outstanding at December 31, 2007
    
    
    244,730,988Warrants exercised
    
    
    2,147,939Shares repurchased
    
    
    (344,355
    )Stock awarded under LTIP arrangements
    
    
    1,164,325Stock forfeited and cancelled under share-based compensation arrangements
    
    
    (359,000
    )Cancellation and replacement of stock previously issued under
share-based compensation arrangements with equivalent restricted stock
obligations
    
    
    (1,545,500
    )Common stock outstanding at September 30, 2008
    
    
    245,794,397
     15




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  General
 Our Business
     
    
    $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
 16




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##### Table of Contents



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.
    Factors Affecting Our Business
  
    
    Assets under management.Our revenues from management and administration fees are
directly linked to AUM. As a result, our future performance will depend on, among other
things, our ability both to retain AUM and to grow AUM from existing and new products.
    
    Fund performance.Our revenues from performance fees are linked to the performance
of the GLG Funds and accounts we manage. Performance also affects AUM because it
influences investors decisions to invest assets in, or withdraw assets from, the GLG
Funds and accounts managed by us.
    
    Currency exchange rates.The GLG Funds typically offer share classes denominated in
foreign currencies and as a result, earn fees in those currencies based on AUM
denominated in those currencies. Consequently, our fee revenues are affected by
exchange rate movements.
    
    Personnel, systems, controls and infrastructure.We depend on our ability to
attract, retain and motivate leading investment and other professionals. Our business
requires significant investment in our fund management platform, including
infrastructure and back-office personnel. We have in the past paid, and expect to
continue in the future to pay, these professionals significant compensation and a share
of our profits.
    
    Fee rates.Our management and administration fee revenues are linked to the fee
rates we charge the GLG Funds and accounts we manage as a percentage of their AUM. Our
performance fees are linked to
 17




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##### Table of Contents



the rates we charge the GLG Funds and accounts we manage as a percentage of their
performance-driven asset growth, subject to high water marks, whereby performance fees
are earned by us only to the extent that the net asset value of a GLG Fund at the end of
a measurement period exceeds the highest net asset value on a preceding measurement
period end for which we earned performance fees, and further subject, in some cases, to
performance hurdles.
   Critical Accounting Policies
    Combination and Consolidation Criteria
    Revenue Recognition
 Performance Fees
  18




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##### Table of Contents



Compensation and Limited Partner Profit Share
   Equity-Based Compensation
 i.e.
 19




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##### Table of Contents




    
    The size of the awards to employees, service providers and key personnel under
the equity participation plan and LTIP was considered to be a substantial retention
incentive;
    
    Incentives for the awards to employees, service providers and key personnel
under the equity participation plan and LTIP were considered sufficiently large
that a zero percent forfeiture rate was estimated, subject to review as actual
forfeitures occur;
    
    Disincentives for forfeiture related to the agreement among principals and
trustees were considered to be so punitive that the probability of forfeiture was
estimated as zero; and
 20




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##### Table of Contents




    
    For awards under the Restricted Stock Plan, we used different forfeiture rates
for individual employees, service providers and key personnel.
   Income Tax
  e.g
  Net Revenues
   21




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##### Table of Contents



Management Fees
  Product
    
    General range of gross fee rates (% of AUM)Single-manager alternative strategy funds
    
    1.50%  2.50%*Long-only funds
    
    0.75%  2.25%Internal FoHF
    
    0.25%  1.00% (at the investing fund level)External FoHF
    
    1.50%  1.95%
 
 *
    
    When one of the single-manager alternative strategy funds or internal FoHFs managed by us
invests in an underlying single-manager alternative strategy fund managed by us, 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 fees are
charged only at the investing fund level and (2) the GLG Multi Strategy Fund where fees are
charged at both the investee and investing fund levels.    Performance Fees
  22




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##### Table of Contents



Product
    
    General range of gross fee rates (% of investment gains)Single-manager alternative strategy funds
    
    20%  30%*Long-only funds
    
    20% (may be subject to performance hurdle)Internal FoHF
    
    0%  20% (at the investing fund level)External FoHF
    
    5%  10% (may be subject to performance hurdle)
 
 *
    
    When one of the single-manager alternative strategy funds or internal FoHFs
managed by us invests in an underlying single-manager alternative strategy fund
managed by us, performance fees are charged at the investee fund level, except in
the case of 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. In addition, performance fees are charged at both the
investee and investing fund levels on the GLG Global Aggressive Fund, 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.   Administration Fees
   Fees on Managed Accounts
  Expenses
 Compensation, Benefits and Limited Partner Profit Share
  23




---



##### Table of Contents




    
    Base compensation contractual compensation paid to employees in the form of base
salary, which is expensed as incurred.
    
    Variable compensation payments that arise from the contractual entitlements of
personnel to a fixed percentage of certain variable fee revenues attributable to such
personnel with respect to GLG Funds and managed accounts. Variable compensation expense
is recognized at the same time as the underlying fee revenue is crystallized, which may
be monthly or semi-annually (on June 30 and December 31), depending on the fee revenue
source.
    
    Discretionary compensation payments that are determined by the Companys
management in its sole discretion and are generally linked to performance. In
determining such payments, the Companys management considers, among other factors, the
ratio of total discretionary compensation to total revenues; however, this ratio may
vary between periods and, in particular, significant discretionary bonuses may still be
paid in a period of low performance for retention and incentivization purposes. This
discretionary compensation is paid to employees in the form of a discretionary cash
bonus. Discretionary compensation is generally declared and paid following the end of
each calendar year.
 24




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##### Table of Contents



However, the notional discretionary compensation charge is adjusted monthly based on the
year-to-date profitability and revenues recognized on a year-to-date basis. As the
majority of the GLG Funds crystallize their performance fees at June 30 and December 31,
the majority of discretionary compensation expense crystallizes at year end and is
typically paid in January following the year end.
 
    
    Limited partner profit share distributions of limited partner profit share under
the limited partner profit share arrangement described below.
  Allocation of Profit Shares to Individual Members of LLPs
   Acquisition-Related Compensation Expense
  25




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##### Table of Contents



General and Administrative
  Assessing Business Performance
   26




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27




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##### Table of Contents



Assets Under Management
 September 30, 2008 Compared to June 30, 2008, December 31, 2007 and September 30, 2007
 Change in AUM between September 30, 2008, June 30, 2008, December 31, 2007 and September 30, 2007
(U.S. Dollars in millions)
 As of Sept
    
    
    As of June
    
    
    3-Month
    
    
    As of Dec
    
    
    9-Month
    
    
    As of Sept
    
    
    12-Month30, 2008
    
    
    30, 2008
    
    
    Change
    
    
    31, 2007
    
    
    Change
    
    
    30, 2007
    
    
    ChangeAlternative strategy
    
    $
    13,692
    
    
    $
    17,772
    
    
    
    (4,080
    )
    
    $
    18,833
    
    
    
    (5,140
    )
    
    $
    14,713
    
    
    
    (1,020
    )Long-only
    
    
    3,079
    
    
    
    4,684
    
    
    
    (1,605
    )
    
    
    4,774
    
    
    
    (1,695
    )
    
    
    4,561
    
    
    
    (1,482
    )Internal FoHF
    
    
    1,690
    
    
    
    2,191
    
    
    
    (501
    )
    
    
    2,318
    
    
    
    (628
    )
    
    
    1,651
    
    
    
    39External FoHF
    
    
    587
    
    
    
    691
    
    
    
    (104
    )
    
    
    598
    
    
    
    (12
    )
    
    
    598
    
    
    
    (12
    )Gross fund-based AUM
    
    
    19,048
    
    
    
    25,337
    
    
    
    (6,289
    )
    
    
    26,523
    
    
    
    (7,475
    )
    
    
    21,524
    
    
    
    (2,475
    )Managed accounts
    
    
    1,843
    
    
    
    2,110
    
    
    
    (267
    )
    
    
    2,357
    
    
    
    (514
    )
    
    
    1,905
    
    
    
    (62
    )Cash and other holdings
    
    
    261
    
    
    
    448
    
    
    
    (187
    )
    
    
    206
    
    
    
    55
    
    
    
    164
    
    
    
    97Gross AUM
    
    
    21,152
    
    
    
    27,895
    
    
    
    (6,743
    )
    
    
    29,086
    
    
    
    (7,933
    )
    
    
    23,593
    
    
    
    (2,440
    )Less: alternative strategy
investments in GLG Funds
    
    
    (2,161
    )
    
    
    (2,125
    )
    
    
    (35
    )
    
    
    (2,090
    )
    
    
    (71
    )
    
    
    (1,419
    )
    
    
    (742
    )Less: long-only
investments in GLG Funds
(1)
    
    
    (5
    )
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    (5
    )Less: internal FoHF
investments in GLG Funds
    
    
    (1,674
    )
    
    
    (2,047
    )
    
    
    373
    
    
    
    (2,331
    )
    
    
    657
    
    
    
    (1,653
    )
    
    
    (21
    )Less: external FoHF
investments in GLG Funds
    
    
    (32
    )
    
    
    (50
    )
    
    
    18
    
    
    
    (53
    )
    
    
    21
    
    
    
    (55
    )
    
    
    23Net AUM
    
    $
    17,280
    
    
    $
    23,668
    
    
    
    (6,388
    )
    
    $
    24,612
    
    
    
    (7,331
    )
    
    $
    20,466
    
    
    
    (3,186
    )Quarterly average gross AUM
    
    $
    24,524
    
    
    $
    28,516
    
    
    
    
    
    
    $
    26,339
    
    
    
    
    
    
    $
    22,557Quarterly average net AUM
    
    
    20,474
    
    
    
    24,157
    
    
    
    
    
    
    
    22,539
    
    
    
    
    
    
    
    19,526Opening net AUM
    
    $
    23,668
    
    
    $
    24,646
    
    
    
    
    
    
    $
    20,466
    
    
    
    
    
    
    $
    18,585Inflows (net of redemptions)
    
    
    (2,182
    )
    
    
    (629
    )
    
    
    
    
    
    
    2,927
    
    
    
    
    
    
    
    1,633Performance (gains net of
losses and fees)
    
    
    (3,139
    )
    
    
    (269
    )
    
    
    
    
    
    
    986
    
    
    
    
    
    
    
    (297
    )Currency translation impact
(non USD AUM expressed in
USD)
    
    
    (1,068
    )
    
    
    (80
    )
    
    
    
    
    
    
    233
    
    
    
    
    
    
    
    545Closing net AUM
    
    $
    17,280
    
    
    $
    23,668
    
    
    
    
    
    
    $
    24,612
    
    
    
    
    
    
    $
    20,466
 
 (1)
    
    Previously included in alternative strategy investments in GLG Funds.  
    
    Negative performance during the three months ended September 30, 2008, resulting in
performance losses (net of gains) of $3.1 billion (which included an estimated $95.0
million in aggregate direct exposure of certain GLG Funds to the appointment of
administrators for Lehman Brothers International (Europe));
    
    Strengthening of the U.S. dollar against other currencies in which our funds and
managed accounts are denominated, resulting in a negative foreign exchange impact of
$1.1 billion during the three months ended September 30, 2008;
    
    Net outflows of $2.2 billion (which included $1.3 billion of redemptions from the
GLG Emerging Markets Fund and other emerging markets funds previously anticipated due
to the announced departure of the portfolio manager of those funds); and
    
    Overall pause in the industry given the current market conditions.
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##### Table of Contents




    
    amounts which LBIE was required to treat as client money and not use in the course
of its business were and are, in fact, so held and will be released upon repayment of
all the affected GLG Funds debt to LBIE (and are therefore excluded from the
estimated exposure amounts);
    
    the information we have received to date from the administrators of LBIE in
relation to rehypothecation of assets is accurate;
    
    unsettled transactions at the time LBIE entered into administration proceedings
will be determined on the basis of a cash settlement of those trades, in accordance
with contractual agreements between the affected GLG Fund and LBIE, or cancelled;
    
    the cash settlement amounts for terminated over-the-counter derivatives and other
transactions will be as determined by us; and
    
    there are no other factors, which if known to us, would lead us to conclude that
the business of LBIE was conducted otherwise than in accordance with the contractual
documentation.
   
    
    Negative performance during the nine months ended September 30, 2008, resulting in
performance losses (net of gains) of $5.0 billion (which included an estimated $95.0
million in aggregate direct exposure of certain GLG Funds to the appointment of
administrators for LBIE);
    
    Strengthening of the U.S. dollar against other currencies in which our funds and
managed accounts are denominated, resulting in a negative foreign exchange impact of
$0.3 billion during the nine months ended September 30, 2008;
    
    Net outflows of $2.0 billion (which included $1.6 billion of redemptions from the
GLG Emerging Markets Fund and other emerging markets funds previously anticipated due
to the announced departure of the portfolio manager of those funds); and
    
    Overall pause in the industry given the current market conditions.
 29




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##### Table of Contents



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




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Results of Operations
 Condensed Combined and Consolidated GAAP Statement of Operations Information
(U.S. Dollars in thousands)
 Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net revenues and other incomeManagement fees, net
    
    $
    80,307
    
    
    $
    78,558
    
    
    $
    269,663
    
    
    $
    198,892Performance fees, net
    
    
    6,833
    
    
    
    803
    
    
    
    89,762
    
    
    
    343,835Administration fees, net
    
    
    17,751
    
    
    
    16,306
    
    
    
    60,448
    
    
    
    42,986Other income
    
    
    (2,796
    )
    
    
    6,905
    
    
    
    2,412
    
    
    
    7,875Total net revenues and other income
    
    
    102,095
    
    
    
    102,572
    
    
    
    422,285
    
    
    
    593,588ExpensesEmployee compensation and benefits
    
    
    (206,433
    )
    
    
    (28,959
    )
    
    
    (674,945
    )
    
    
    (110,526
    )Limited partner profit share
    
    
    (20,954
    )
    
    
    (17,000
    )
    
    
    (102,185
    )
    
    
    (207,500
    )Compensation, benefits and profit share
    
    
    (227,387
    )
    
    
    (45,959
    )
    
    
    (777,130
    )
    
    
    (318,026
    )General, administrative and other
    
    
    (30,283
    )
    
    
    (25,891
    )
    
    
    (90,816
    )
    
    
    (79,634
    )Total expenses
    
    
    (257,670
    )
    
    
    (71,850
    )
    
    
    (867,946
    )
    
    
    (397,660
    )(Loss) / income from operations
    
    
    (155,575
    )
    
    
    30,722
    
    
    
    (445,661
    )
    
    
    195,928Net interest (expense) / income
    
    
    (3,985
    )
    
    
    3,048
    
    
    
    (12,110
    )
    
    
    4,694(Loss) / income before income taxes
    
    
    (159,560
    )
    
    
    33,770
    
    
    
    (457,771
    )
    
    
    200,622Income taxes
    
    
    (3,160
    )
    
    
    (4,735
    )
    
    
    (12,656
    )
    
    
    (33,020
    )(Loss) / income before minority interests
    
    
    (162,720
    )
    
    
    29,035
    
    
    
    (470,427
    )
    
    
    167,602Minority interests:Share of income
    
    
    
    
    
    
    (73
    )
    
    
    
    
    
    
    (479
    )Exchangeable Shares dividends
    
    
    (1,472
    )
    
    
    
    
    
    
    (4,418
    )
    
    
    Cumulative dividends on Exchangeable
Shares
    
    
    (2,896
    )
    
    
    
    
    
    
    (12,194
    )
    
    
    Net (loss) / income attributable to common
stockholders
    
    $
    (167,088
    )
    
    $
    28,962
    
    
    $
    (487,039
    )
    
    $
    167,123
 31




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Net Revenues and Other Income
 Three Months Ended September 30, 2008 Compared to Three Months Ended September 30, 2007
 Change in GAAP Net Revenues and Other Income between
Three Months Ended September 30, 2008 and Three Months Ended September 30, 2007
(U.S. Dollars in thousands)
 Three Months Ended September 30,2008
    
    
    2007
    
    
    ChangeNet revenues and other incomeManagement fees, net
    
    $
    80,307
    
    
    $
    78,558
    
    
    $
    1,749Performance fees, net
    
    
    6,833
    
    
    
    803
    
    
    
    6,030Administration fees, net
    
    
    17,751
    
    
    
    16,306
    
    
    
    1,445Other income
    
    
    (2,796
    )
    
    
    6,905
    
    
    
    (9,701
    )Total net revenues and other income
    
    $
    102,095
    
    
    $
    102,572
    
    
    $
    (477
    )Key ratios*Management fees / average net AUM, annualized
    
    
    1.57
    %
    
    
    1.61
    %Administration fees / average net AUM, annualized
    
    
    0.35
    %
    
    
    0.33
    %
 
 *
    
    The ratio of total revenues and other income to average net AUM for the three month
periods on an annualized basis are not meaningful because the majority of our performance
fees crystallize in the second and fourth quarter.    
    
    a 4.9% higher quarterly average net AUM balance between the periods which, at
constant net management fee yield, resulted in an increase in management fees of $3.8
million; and
    
    a decrease in the annualized net management fee yield from 1.61% to 1.57%,
reflecting lower management fees per unit of AUM, which, when applied to the
increased net AUM base, resulted in a decrease in management fees of $2.1 million.
   
    
    a 4.9% higher quarterly average net AUM balance between the periods which, at
constant administration fee yield, resulted in an increase in administration fees of
$0.8 million, or 54.8% of the total increase in administration fees; and
 32




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##### Table of Contents




    
    an increase in the annualized net administration fee yield from 0.33% to 0.35%
which, when applied to the increased net AUM base, resulted in an increase in
administration fees of $0.7 million, or 45.2% of the total increase in administration
fees.
  Nine Months Ended September 30, 2008 Compared to Nine Months Ended September 30, 2007
 Change in GAAP Net Revenues and Other Income between
Nine Months Ended September 30, 2008 and Nine Months Ended September 30, 2007
(U.S. Dollars in thousands)
 Nine Months Ended September 30,2008
    
    
    2007
    
    
    ChangeNet revenues and other incomeManagement fees, net
    
    $
    269,663
    
    
    $
    198,892
    
    
    $
    70,771Performance fees, net
    
    
    89,762
    
    
    
    343,835
    
    
    
    (254,073
    )Administration fees, net
    
    
    60,448
    
    
    
    42,986
    
    
    
    17,462Other income
    
    
    2,412
    
    
    
    7,875
    
    
    
    (5,463
    )Total net revenues and other income
    
    $
    422,285
    
    
    $
    593,588
    
    
    $
    (171,303
    )Key ratiosTotal net revenues and other income / average
net AUM,
annualized
    
    
    2.50
    %
    
    
    4.50
    %Management fees / average net AUM, annualized
    
    
    1.59
    %
    
    
    1.51
    %Administration fees / average net AUM, annualized
    
    
    0.36
    %
    
    
    0.33
    %
    
    
    a 28.3% higher quarterly average net AUM balance between the periods which, at
constant net management fee yield, resulted in an increase in management fees of $56.4
million, or 79.6% of the total increase in management fees; and
    
    an increase in the annualized net management fee yield from 1.51% to 1.59%,
reflecting higher management fees per unit of AUM, which, when applied to the
increased net AUM base, resulted in an increase in management fees of $14.4 million,
or 20.4% of the total increase in management fees.
  33




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##### Table of Contents




    
    a lower percentage of the GLG Funds generating significant positive performance;
and
    
    a higher percentage of the GLG Funds unable to meet their respective high water
marks since performance fees last crystallized, even if they generated positive
performance during the nine month period.
  
    
    a 28.3% higher quarterly average net AUM balance between the periods which, at
constant administration fee yield, resulted in an increase in administration fees of
$12.2 million, or 69.8% of the total increase in administration fees; and
    
    an increase in the annualized net administration fee yield from 0.33% to 0.36%
which, when applied to the increased net AUM base, resulted in an increase in
administration fees of $5.3 million, or 30.2% of the total increase in administration
fees. The higher annualized net administration fee yield was attributable primarily to
investors participating in GLG Funds and managed accounts with higher net
administration fee rates.
  Expenses
 Three Months Ended September 30, 2008 Compared to Three Months Ended September 30, 2007
 Change in GAAP Expenses between Three Months Ended September 30, 2008 and
Three Months Ended September 30, 2007
(U.S. Dollars in thousands)
 Three Months Ended September 30,2008
    
    
    2007
    
    
    ChangeExpensesEmployee compensation and benefits
    
    $
    (206,433
    )
    
    $
    (28,959
    )
    
    $
    (177,474
    )Limited partner profit share
    
    
    (20,954
    )
    
    
    (17,000
    )
    
    
    (3,954
    )Compensation, benefits and profit share
    
    
    (227,387
    )
    
    
    (45,959
    )
    
    
    (181,428
    )General, administrative and other
    
    
    (30,283
    )
    
    
    (25,891
    )
    
    
    (4,392
    )Total expenses
    
    $
    (257,670
    )
    
    $
    (71,850
    )
    
    $
    (185,820
    )Key ratiosCompensation, benefits and profit share / total
GAAP net revenues and other income
    
    
    222.7
    %
    
    
    44.8
    %
    
    
    177.9
    %General, administrative and other / total GAAP net
revenue and other income
    
    
    29.7
    %
    
    
    25.2
    %
    
    
    4.5
    %Total expenses / total GAAP net revenue and other income
    
    
    252.4
    %
    
    
    70.0
    %
    
    
    182.4
    %
  34




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-
  Nine Months Ended September 30, 2008 Compared to Nine Months Ended September 30, 2007
 Change in GAAP Expenses between Nine Months Ended September 30, 2008 and
Nine Months Ended September 30, 2007
(U.S. Dollars in thousands)
 Nine Months Ended September 30,2008
    
    
    2007
    
    
    ChangeExpensesEmployee compensation and benefits
    
    $
    (674,945
    )
    
    $
    (110,526
    )
    
    $
    (564,419
    )Limited partner profit share
    
    
    (102,185
    )
    
    
    (207,500
    )
    
    
    105,315Compensation, benefits and profit share
    
    
    (777,130
    )
    
    
    (318,026
    )
    
    
    (459,104
    )General, administrative and other
    
    
    (90,816
    )
    
    
    (79,634
    )
    
    
    (11,182
    )Total expenses
    
    $
    (867,946
    )
    
    $
    (397,660
    )
    
    $
    (470,286
    )Key ratiosCompensation, benefits and profit share / total
GAAP net revenues and other income
    
    
    184.0
    %
    
    
    53.6
    %
    
    
    130.5
    %General, administrative and other / total GAAP net
revenue and other income
    
    
    21.5
    %
    
    
    13.4
    %
    
    
    8.1
    %Total expenses / total GAAP net revenue and other income
    
    
    205.5
    %
    
    
    67.0
    %
    
    
    138.5
    %
 -
  35




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Non-GAAP Expense Measures
  Change in Non-GAAP Expenses between Three Months Ended September 30, 2008 and September 30, 2007
(U.S. Dollars in thousands)
 Three Months Ended September 30,2008
    
    
    2007
    
    
    ChangeNon-GAAP expensesGAAP compensation, benefits and profit share
    
    $
    (227,387
    )
    
    $
    (45,959
    )
    
    $
    (181,428
    )Add back: Acquisition-related compensation expense
    
    
    188,005
    
    
    
    
    
    
    
    188,005Non-GAAP CBP
    
    
    (39,382
    )
    
    
    (45,959
    )
    
    
    6,577GAAP general, administrative and other
    
    
    (30,283
    )
    
    
    (25,891
    )
    
    
    (4,392
    )Non-GAAP total expenses
    
    $
    (69,665
    )
    
    $
    (71,850
    )
    
    $
    2,185Key ratios (based on non-GAAP measures)Non-GAAP CBP / total GAAP net revenues and other income
    
    
    38.6
    %
    
    
    44.8
    %
    
    
    (6.2
    )%General, administrative and other / total GAAP net
revenues and other income
    
    
    29.7
    %
    
    
    25.2
    %
    
    
    4.5
    %Non-GAAP total expenses / total GAAP net revenues and
other income
    
    
    68.3
    %
    
    
    70.0
    %
    
    
    (1.7
    )%
  Change in Non-GAAP Expenses between Nine Months Ended September 30, 2008 and September 30, 2007
(U.S. Dollars in thousands)
 Nine Months Ended September 30,2008
    
    
    2007
    
    
    ChangeNon-GAAP expensesGAAP compensation, benefits and profit share
    
    $
    (777,130
    )
    
    $
    (318,026
    )
    
    $
    (459,104
    )Add back: Acquisition-related compensation expense
    
    
    588,508
    
    
    
    
    
    
    
    588,508Non-GAAP CBP
    
    
    (188,622
    )
    
    
    (318,026
    )
    
    
    129,404GAAP general, administrative and other
    
    
    (90,816
    )
    
    
    (79,634
    )
    
    
    (11,182
    )Non-GAAP total expenses
    
    $
    (279,438
    )
    
    $
    (397,660
    )
    
    $
    118,222Key ratios (based on non-GAAP measures)Non-GAAP CBP / total GAAP net revenues and other income
    
    
    44.7
    %
    
    
    53.6
    %
    
    
    (8.9
    )%General, administrative and other / total GAAP net
revenues and other income
    
    
    21.5
    %
    
    
    13.4
    %
    
    
    8.1
    %Non-GAAP total expenses / total GAAP net revenues and
other income
    
    
    66.2
    %
    
    
    67.0
    %
    
    
    (0.8
    )%
  36




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Net Interest Income
 Three Months Ended September 30, 2008 Compared to Three Months Ended September 30, 2007
 Change in Net Interest Income / (Expense) between
Three Months Ended September 30, 2008 and Three Months Ended September 30, 2007
(U.S. Dollars in thousands)
 Three Months Ended September 30,2008
    
    
    2007
    
    
    ChangeInterest income
    
    $
    2,043
    
    
    $
    3,252
    
    
    $
    (1,209
    )Interest expense
    
    
    (6,028
    )
    
    
    (204
    )
    
    
    (5,824
    )Net interest income / (expense)
    
    $
    (3,985
    )
    
    $
    3,048
    
    
    $
    (7,033
    )
  Nine Months Ended September 30, 2008 Compared to Nine Months Ended September 30, 2007
 Change in Net Interest Income / (Expense) between
Nine Months Ended September 30, 2008 and Nine Months Ended September 30, 2007
(U.S. Dollars in thousands)
 Nine Months Ended September 30,2008
    
    
    2007
    
    
    ChangeInterest income
    
    $
    6,685
    
    
    $
    5,302
    
    
    $
    1,383Interest expense
    
    
    (18,795
    )
    
    
    (608
    )
    
    
    (18,187
    )Net interest income / (expense)
    
    $
    (12,110
    )
    
    $
    4,694
    
    
    $
    (16,804
    )
  Income Tax
  37




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Minority Interests
  
    
    cumulative dividends to holders of Exchangeable Shares reflecting our estimate of
the net taxable income of FA Sub 2 Limited allocable to such holders multiplied by an
assumed tax rate; and
    
    dividends to holders of the Exchangeable Shares reflecting a dividend equivalent to
dividends paid to common stockholders.
  Adjusted Net Income
  Three Months Ended September 30, 2008 Compared to Three Months Ended September 30, 2007
 Change in Non-GAAP Adjusted Net Income between Three Months Ended September 30, 2008 and
Three Months Ended September 30, 2007
(U.S. Dollars in thousands)
 Three Months Ended September 30,2008
    
    
    2007
    
    
    ChangeDerivation of non-GAAP adjusted net incomeGAAP net (loss)/income before minority interest
    
    $
    (162,720
    )
    
    $
    29,035
    
    
    $
    (191,755
    )Add: Acquisition-related compensation expense
    
    
    188,005
    
    
    
    
    
    
    
    188,005Deduct: tax effect of Acquisition-related
compensation expense
    
    
    (553
    )
    
    
    
    
    
    
    (553
    )Deduct: cumulative dividends
    
    
    (2,896
    )
    
    
    
    
    
    
    (2,896
    )Non-GAAP adjusted net income
    
    $
    21,836
    
    
    $
    29,035
    
    
    $
    (7,199
    )
  38




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Nine Months Ended September 30, 2008 Compared to Nine Months Ended September 30, 2007
 Change in Non-GAAP Adjusted Net Income between Nine Months Ended September 30, 2008 and
Nine Months Ended September 30, 2007
(U.S. Dollars in thousands)
 Nine Months Ended September 30,2008
    
    
    2007
    
    
    ChangeDerivation of non-GAAP adjusted net incomeGAAP net (loss)/income before minority interest
    
    $
    (470,427
    )
    
    $
    167,602
    
    
    $
    (638,029
    )Add: Acquisition-related compensation expense
    
    
    588,508
    
    
    
    
    
    
    
    588,508Deduct: tax effect of Acquisition-related
compensation expense
    
    
    (6,010
    )
    
    
    
    
    
    
    (6,010
    )Deduct: cumulative dividends
    
    
    (12,194
    )
    
    
    
    
    
    
    (12,194
    )Non-GAAP adjusted net income
    
    $
    99,877
    
    
    $
    167,602
    
    
    $
    (67,725
    )
  Liquidity and Capital Resources
     39




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Operating Activities
  Investing Activities
   Financing Activities
  40




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Off-Balance Sheet Arrangements
  41




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Item 3. Quantitative and Qualitative Disclosures About Market Risk
     Impact on Management Fees
  Impact on Performance Fees
  Impact on Administration Fees
  42




---



##### Table of Contents



Market Risk
  Exchange Rate Risk
    Interest Rate Risk
  43




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##### Table of Contents



Item 4. Controls and Procedures
     44




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##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
   
 Item 1A. Risk Factors
  Recent market disruptions and volatility have had and may continue to have a material adverse
effect on the GLG Funds and accounts we manage.
    45




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##### Table of Contents



The GLG Funds and accounts we manage are subject to risks in using prime brokers, custodians,
administrators and other agents.
   
    
    amounts which LBIE was required to treat as client money and not use in the course
of its business were and are, in fact, so held and will be released upon repayment of
all the affected GLG Funds debt to LBIE (and are therefore excluded from the estimated
exposure amounts);
    
    the information we have received to date from the administrators of LBIE in relation
to rehypothecation of assets is accurate;
    
    unsettled transactions at the time LBIE entered into administration proceedings will
be determined on the basis of a cash settlement of those trades, in accordance with the
contractual agreements between the affected GLG Funds and LBIE, or cancelled;
    
    the cash settlement amounts for terminated over-the-counter derivatives and other
transactions will be as determined by us; and
    
    there are no other factors, which if known to us, would lead us to conclude that the
business of LBIE was conducted otherwise than in accordance with the contractual
documentation.
  
    
    potential reputational risk in the competitive alternative asset management
industry;
    
    investors in the GLG Funds may suffer additional losses, which could prompt further
withdrawals from the GLG Funds; and
    
    the additional exposure may require us to restructure the affected GLG Funds.
 46




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##### Table of Contents



The GLG Funds and accounts we manage are subject to counterparty risk with regard to
over-the-counter instruments and other swap or hedging transactions. The actual or perceived
weakness of counterparties could increase the exposure of the GLG Funds and managed accounts to
these counterparty and credit risks, and concerns of counterparties about the financial strength of
the GLG Funds and managed accounts may impact their willingness to enter into transactions with the
GLG Funds and managed accounts.
     47




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##### Table of Contents



Our business has been affected by the recent unprecedented conditions in the U.S. and global
financial markets. Record volatility, lack of liquidity and the resultant flight to high quality,
low risk assets resulted in a substantial decline in value for virtually every asset class
globally. The unique combination of these factors adversely affects our ability to consistently
generate non-volatile investment performance, and to retain and attract new AUM, which negatively
impacts our business, results of operations and financial condition.
  
    
    The investment performance of the GLG Funds and managed accounts may be negatively
impacted. Negative fund performance reduces AUM, which decreases the management fees
and performance fees we earn. Lower revenues may result in lower adjusted net income
and, therefore, reduced amounts available for dividends on our shares of common stock.
    
    Performance fees, which historically have comprised a substantial portion of our
annual revenues, are largely contingent on the GLG Funds and managed accounts
generating positive annual investment performance. With one exception, to the extent
any of the GLG Funds and managed accounts generate negative investment performance and
fall below the applicable high water mark, we would not earn performance fees for that
GLG Funds or managed account the until the high water mark is reachieved.
    
    Investors worldwide have reduced or eliminated their investments in many asset
classes as confidence in the global financial system has eroded. These actions have
resulted in increased withdrawals for the asset management industry worldwide,
including hedge funds. Withdrawal rates may stay elevated globally while market
conditions remain unsettled. The GLG Funds and managed accounts are not immune to this
trend and significant, additional withdrawals from the GLG Funds and managed accounts
that are not specifically related to investment performance may occur, which would
reduce our AUM. Additionally, our ability to attract new capital to existing GLG Funds
or developing investment platforms may be limited during this period.
    
    Consolidation in the hedge fund industry may accelerate, as many hedge funds
experience substantial declines in investment performance, increased withdrawals, or
counterparty exposures which impair their businesses. Some of these funds have reduced
their fees in an attempt to avoid additional withdrawals. We may need to consider
similar actions to remain competitive, which could reduce our revenues.
    
    Our industry has been and may continue to be subject to increased regulation and
public scrutiny. Such additional regulation could increase our compliance costs or
limit our ability to pursue investment opportunities. Recent rulemaking by the U.S.
Securities and Exchange Commission and other regulatory authorities outside the United
States has imposed trading and reporting requirements on short selling, which could
adversely affect trading opportunities, including hedging opportunities, for the GLG
Funds and managed accounts.
    
    Defaults by, or even rumors or questions about, the solvency of counterparties with
which we execute transactions on behalf of the GLG Funds and managed accounts may
increase operational risks or transaction costs, which may result in lower investment
performance by the GLG Funds and managed accounts.
 48




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##### Table of Contents




    
    Our access to certain financial intermediaries, such as prime brokers or trading
counterparties, may be reduced or eliminated as a result of ongoing consolidation in
the financial services industry. This may reduce our ability to diversify the exposures
of the GLG Funds and managed accounts to these intermediaries which may increase
operational risks or transaction costs, which may result in lower investment
performance by the GLG Funds and managed accounts.
    
    We pay a substantial portion of our compensation expense in the form of annual
bonuses and limited partner profit share, which are variable and discretionary.
Typically, the performance fees we earn fund a significant amount of the cash bonuses
and limited partner profit share that we pay. In periods where we earn little or no
performance fees, our ability to pay cash bonuses and limited partner profit share will
be reduced. This may affect our ability to retain and attract investment professionals
and other key personnel.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 Share and Warrant Repurchases
   49




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Item 6. Exhibits
 Exhibit No.
    
    Description31.1
    
    Certification of Periodic Report by the Co-Chief
Executive Officer Pursuant to Rule 13a-15(e) or 15d-15(e)
of the Exchange Act.31.2
    
    Certification of Periodic Report by the Co-Chief
Executive Officer Pursuant to Rule 13a-15(e) or 15d-15(e)
of the Exchange Act.31.3
    
    Certification of Periodic Report by the Chief Financial
Officer Pursuant to Rule 13a-15(e) or 15d-15(e) of the
Exchange Act.32.1
    
    Certification of Periodic Report by the Co-Chief
Executive Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.32.2
    
    Certification of Periodic Report by the Co-Chief
Executive Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.32.3
    
    Certification of Periodic Report by the Chief Financial
Officer Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, 18 U.S.C. Section 1350.
 50




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##### Table of Contents



SIGNATURE
  GLG PARTNERS, INC.
(Registrant)Date: November 10, 2008
    By
    /s/ Noam GottesmanName:
    Noam GottesmanTitle:
    Chairman of the Board and Co-Chief
Executive Officer 51




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description31.1
    
    Certification of Periodic Report by the Co-Chief Executive
Officer Pursuant to Rule 13a-15(e) or 15d-15(e) of the
Exchange Act.31.2
    
    Certification of Periodic Report by the Co-Chief Executive
Officer Pursuant to Rule 13a-15(e) or 15d-15(e) of the
Exchange Act.31.3
    
    Certification of Periodic Report by the Chief Financial
Officer Pursuant to Rule 13a-15(e) or 15d-15(e) of the
Exchange Act.32.1
    
    Certification of Periodic Report by the Co-Chief Executive
Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, 18 U.S.C. Section 1350.32.2
    
    Certification of Periodic Report by the Co-Chief Executive
Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, 18 U.S.C. Section 1350.32.3
    
    Certification of Periodic Report by the Chief Financial
Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, 18 U.S.C. Section 1350.
 52