1408100--3/31/2008--Prospect_Acquisition

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If the net proceeds of our initial public offering not being held in trust are insufficient to allow us to operate until at least November 14, 2009, we may be unable to complete an initial business combination. We may require stockholders who wish to convert their shares in connection with a proposed business combination to comply with specific requirements for conversion that may make it more difficult for them to exercise their conversion rights prior to the deadline for exercising conversion rights. If we do not conduct an adequate due diligence investigation of a target business with which we combine, we may be required to subsequently take write-downs or write-offs, restructuring, and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and our stock price, which could cause you to lose some or all of your investment. A decline in interest rates could limit the amount available to fund our search for a target business or businesses and complete an initial business combination because we will depend on interest earned on the trust account to fund our search, to pay our tax obligations and to complete our initial business combination. If third parties bring claims against us, the proceeds held in trust could be reduced and the per-share liquidation price received by stockholders may be less than approximately $9.88 per share. Our stockholders may be held liable for claims by third parties against us to the extent of distributions received by them. An effective registration statement may not be in place when a warrant holder desires to exercise his, her or its warrants, thus precluding such warrant holder from being able to exercise his, her or its warrants and causing such warrants to expire worthless. A warrant holder will only be able to exercise a warrant if the issuance of common stock upon such exercise has been registered or qualified or is deemed exempt under the securities laws of the state of residence of the holder of the warrants. Because we have not yet selected any target business with which to complete our initial business combination, we are unable to currently ascertain the merits or risks of the business operations. If the private placement is determined not to have been in compliance with applicable law, our sponsors may have the right to rescind their warrant purchases. Their rescission rights, if any, may require us to refund an aggregate of $5,250,000 to our sponsors, thereby reducing the amount in the trust account available to us to consummate our initial business combination, or, in the event we do not complete our initial business combination by November 14, 2009, the amount available to our public stockholders upon our liquidation. Your only opportunity to evaluate and affect the investment decision regarding a potential initial business combination will be limited to voting for or against the initial business combination submitted to our stockholders for approval. We will not be required to obtain an opinion from an independent investment banking firm as to the fair market value of the target business unless our board of directors is unable to independently determine the fair market value or unless we seek to acquire or merge with a registered broker-dealer. We may issue shares of our capital stock or debt securities to complete an initial business combination. Issuance of our capital stock would reduce the equity interest of our stockholders and may cause a change in control of our ownership, while the issuance of debt securities may have a significant impact on our ability to utilize our available cash. Resources could be wasted in researching acquisitions that are not consummated, which could materially adversely affect subsequent attempts to locate and acquire or merge with another business. Our ability to successfully effect an initial business combination and to be successful thereafter is dependent upon the efforts of our key personnel, some of whom may join us following an initial business combination. Our key personnel may negotiate employment or consulting agreements with a target business in connection with a particular business combination. These agreements may provide for them to receive compensation following an initial business combination and as a result, may cause them to have conflicts of interest in determining whether a particular business combination is the most advantageous. Our officers and directors interests in obtaining reimbursement for any out-of-pocket expenses incurred by them may lead to a conflict of interest in determining whether a particular target business is appropriate for an initial business combination and in the public stockholders best interest. Our officers and directors will allocate their time to other businesses thereby causing conflicts of interest in their determination as to how much time to devote to our affairs. This conflict of interest could have a negative impact on our ability to consummate an initial business combination. Certain of our executive officers, directors and sponsors are now, and all of them may in the future become, affiliated with entities engaged in business activities similar to those intended to be conducted by us and accordingly, may have conflicts of interest in allocating their time and determining to which entity a particular business opportunity should be presented. Certain of our directors and entities affiliated with certain of our officers and directors own shares of our common stock issued prior to our initial public offering and some of them own warrants purchased at the time of our initial public offering. These shares and warrants will not participate in liquidation distributions and, therefore, our officers and directors may have a conflict of interest in determining whether a particular target business is appropriate for an initial business combination. The AMEX may delist our securities from quotation on its exchange, which could limit securities holders ability to trade our securities and subject us to additional trading restrictions. We may only be able to complete one business combination with the proceeds of our initial public offering, which will cause us to be solely dependent on a single business that may have a limited number of products or services. The ability of our stockholders to exercise their conversion rights may not allow us to effectuate the most desirable business combination or optimize our capital structure. We may proceed with our initial business combination even if public stockholders owning up to 7,499,999 of the shares sold in our initial public offering exercise their conversion rights. Because of our limited resources and structure, we may not be able to consummate an attractive business combination. We may be unable to obtain additional financing, if required, to complete an initial business combination or to fund the operations and growth of the target business, which could compel us to restructure or abandon a particular business combination. Our initial stockholders, including our officers and directors, control a substantial interest in us and thus may influence certain actions requiring a stockholder vote. Our management s ability to require holders of our warrants to exercise such warrants on a cashless basis will cause holders to receive fewer shares of common stock upon their exercise of the warrants than they would have received had they been able to exercise their warrants for cash. We may redeem warrant holders unexpired warrants prior to their exercise at a time that is disadvantageous to them, thereby making such warrants worthless. Our outstanding warrants may have an adverse effect on the market price of our common stock and make it more difficult to effect an initial business combination. If our initial stockholders or our sponsors or their permitted transferees exercise their registration rights with respect to the founders common stock or sponsors warrants and underlying securities, it may have an adverse effect on the market price of our common stock and the existence of these rights may make it more difficult to effect an initial business combination. If we effect an initial business combination with a company located outside of the United States, we would be subject to a variety of additional risks that may negatively impact our operations. If we effect an initial business combination with a company located outside of the United States, the laws applicable to such company will likely govern all of our material agreements and we may not be able to enforce our legal rights. If we are deemed to be an investment company, we may be required to institute burdensome compliance requirements and our activities may be restricted, which may make it difficult for us to complete an initial business combination. Because we must furnish our stockholders with target business financial statements, we may not be able to complete an initial business combination with some prospective target businesses. Compliance with the Sarbanes-Oxley Act of 2002 will require substantial financial and management resources and may increase the time and costs of completing an acquisition. There may be tax consequences associated with our acquisition, holding and disposition of target companies and assets. Risks Related to the Financial Services Industry The financial services industry faces substantial regulatory and litigation risks and conflicts of interest, and, after the consummation of a business combination with a company in the financial services industry, we may face legal liability and reduced revenues and profitability if our services are not regarded as compliant or for other reasons. After the consummation of our initial business combination, we will face strong competition from financial services firms, many of whom have the ability to offer clients a wider range of products and services than we may be able to offer, which could lead to pricing pressures that could materially adversely affect our revenue and profitability. The financial services industry has inherent risks, which may affect our net income and revenues. Many financial services firms face credit risks that, if not properly managed, could cause revenues and net income to decrease. Members of the United States Congress are reviewing the tax laws applicable to investment partnerships, including the taxation of carried interest, and these laws could be changed in a manner that materially impacts the asset management sector within the broader asset management industry.

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1408100--3/31/2008--Prospect_Acquisition_Corp