to the funds’ privately held investments to reflect the lack of liquidity and other transfer restrictions. Investments in publicly traded securities are valued using quoted market prices discounted for any legal or contractual restrictions on sale. Because of the inherent uncertainty of valuations as well as the discounts applied, the estimated fair values of investment in privately held companies may differ significantly from the values that would have been used had a ready market for the securities existed. The values at which our investments are carried on our books are adjusted to fair value at the end of each quarter and the volatility in general economic conditions, stock markets and commodity prices may result in significant changes in the fair value of the investments. Significant changes in the fair value of our investments may have a material effect, positive or negative, on our revenues and thus the results of operations.

As the general partner of our merchant banking funds, we make investment decisions for the funds and are entitled to receive from the funds an override of the profits of the funds. In aggregate, we and our employees are entitled to a profit override percentage of 20% of the profits earned by unaffiliated investors in GCP I and generally for all investors except the firm in GCP II. We are deemed to have the majority of the economic interest in the managing general partner of GCP I and the general partner of GCP II in accordance with FASB Interpretation No. 46 (‘‘FIN 46-R’’), ‘‘Consolidation of Variable Interest Entities’’, (effective for investments made beginning early 2004). Under FIN 46-R we include as consolidated revenue all realized and unrealized profit overrides earned by the general partner of GCP. From an economic perspective, profit overrides in respect of such investments are allocated 50% to the firm and 50% to employees of the firm. The economic share of the profit overrides allocated to the employees of the firm is recorded as compensation expense. For investments made prior to 2004, we did not have a majority of the economic interest and only that portion of the profit override allocable directly to us, which ranges from 1.0% - 2.2%, is included in our consolidated revenue.

Because we include in our revenues all of the profit overrides earned from investments made on or after January 1, 2004, we expect that as the investments mature and depending upon market conditions, that the amount of our profit overrides could increase. The amount of profit overrides we recognize as revenue will depend upon the underlying fair value of the portfolio company and is subject to the volatility referred to above.

2005 versus 2004.    In the year ended December 31, 2005, the firm earned $79.1 million in Merchant Banking Fund Management & Other Revenue compared to $21.0 million in the year ended December 31, 2004, an increase of 277%. These increases are primarily due to higher asset management fees resulting from greater assets under management, higher dividend income and distributions of earnings from portfolio companies, higher realized and unrealized principal investment gains in the GCP portfolio, an increase in the recognized amounts of profit overrides associated with gains in the GCP portfolio and an increase in interest income. GCP gains and losses relating to investments made in 2004 or later have a larger impact on firm revenue because of the firm’s increased investment in, and increased participation in profit overrides relating to, GCP starting in early 2004. The firm had one investment that contributed more than 10% to total revenues in 2005 and none in 2004.Included in Merchant Banking Fund Management & Other Revenue for the year ended December 31, 2005 is $1.8 million related to the portion of the interests in the general partners of GCP which are held directly by employees of the firm, which is also deducted as minority interest.

2004 versus 2003.    For the year ended December 31, 2004, the firm earned $21.0 million in Merchant Banking Fund Management & Other Revenue compared to $5.4 million in the year ended December 31, 2003, an increase of 289%. In 2004, these revenues were principally comprised of asset management fees earned from Greenhill Capital Partners of $4.5 million, unrealized investment gains and profit overrides earned on investments made in Greenhill Capital Partners of $11.3 million and $4.1 million, respectively, other unrealized investment income of $0.3 million and interest income of $0.8 million. In comparison, in 2003, the Merchant Banking Fund Management & Other Revenue revenues were principally comprised of asset management fees of $5.0 million and interest income of $0.4 million. The principal driver of growth in Merchant Banking Fund Management & Other Revenue revenues in 2004 were unrealized investment gains and profit overrides on investments made in Greenhill Capital Partners.

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Operating Expenses

Our Total Operating Expenses for the year ended December 31, 2005 were $131.2 million, which compares to Pro Forma Total Operating Expenses of $94.6 million for 2004. The increase of $36.6 million, or 39%, relates primarily to compensation expense which is paid as a percentage of revenue and is described in more detail below. The pre-tax income margin for the year ended December 31, 2005 was 40% compared to 38% for 2004 on a pro forma basis.

We classify operating expenses as compensation and benefits expense and non-compensation expenses. Management does not separately evaluate operating expenses by financial advisory and merchant banking activities.

The principal component of our operating expenses is compensation and benefits expense. Because we were a limited liability company prior to our initial public offering in May 2004, payments for services rendered by our managing directors prior to our initial public offering were generally accounted for as distributions of members’ capital or minority interest expense rather than as compensation expense. As a result, our pre-initial public offering compensation and benefits expense did not reflect a large portion of payments for services rendered by our managing directors and therefore understates our operating costs as a public company. As a corporation, we now include all payments for services rendered by our managing directors in compensation and benefits expense.

Operating expenses apart from compensation have been modest in proportion to revenues, as a result of the relatively small number of staff and related costs (including travel, office space, communications, information services, depreciation and professional services) that Greenhill bears. A portion of certain costs are reimbursed by clients under the terms of client engagements. In addition, Barrow Street Capital reimburses us for certain occupancy related costs, health care premiums and other costs incurred by us.

The following table sets forth information relating to our actual and pro forma operating expenses, which are reported net of reimbursements of certain expenses by our clients and merchant banking portfolio companies:

				Year Ended December 31,
				2005				2004				2003
				(in millions, except employee data)
Number of Employees at Year End					151				127				107
Actual Compensation and Benefits Expense				$	102.4			$	61.4			$	27.1
% of Revenues					46	%			40	%			21	%
Pro Forma Compensation and Benefits Expense(a)					102.4				67.7				57.0
% of Revenues					46	%			45	%			45	%
Non-Compensation Expense:
Other Operating Expenses					26.3				23.4				15.5
Depreciation and Amortization					2.5				3.5				3.4
Total Non-Compensation Expense					28.8				26.9				18.9
% of Revenues					13	%			18	%			15	%
Total Actual Operating Expense					131.2				88.3				46.0
% of Revenues					59	%			58	%			36	%
Total Pro Forma Operating Expense(a)					131.2				94.6				75.9
% of Revenues					59	%			62	%			60	%
Minority Interest in Net Income of Affiliate					1.8				6.5				32.2
Total Actual Income Before Tax					88.2				57.0				48.4
Actual Pre-tax Income Margin					40	%			38	%			38	%
Total Pro Forma Income Before Tax(a)					88.2				57.3				50.7
Pro Forma Pre-tax Income Margin(a)					40	%			38	%			40	%

(a)

Amounts for the year ended December 31, 2005 reflect actual expenses for the entire period. Amounts for the year ended December 31, 2004 reflect actual expenses for the period subsequent to our initial public offering in May 2004 and pro forma expenses for the period prior to our initial public offering. Amounts for the year ended December 31, 2003 reflect pro forma expenses. See Note 16 of the Consolidated Financial Statements for information on the pro forma adjustments.

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Compensation and Benefits

The principal component of our operating expenses is compensation and benefits expense. It is our policy that our total compensation and benefits, including that payable to our managing directors and senior advisors, will not exceed 50% of total revenues each year (although we retain the ability to change this policy in the future). Because we were a limited liability company prior to our initial public offering, payments for services rendered by our managing directors generally were accounted for as distributions of members’ capital or minority interest expense rather than as compensation expense. As a result, our pre-initial public offering compensation and benefits expense did not reflect a large portion of payments for services rendered by our managing directors and understates the expected operating costs to be incurred as a public company. As a corporation, we include all payments for services rendered by our managing directors in compensation and benefits expense. One factor in determining the compensation expense ratio in 2005 and 2004 was the accounting impact of the introduction into our compensation packages of equity-related compensation in the form of restricted stock units.

As a public company, the compensation we pay to our employees consists of base salary and benefits, cash bonus awards and the award of restricted stock units. Base salary and benefits are paid ratably throughout the year. Cash bonuses, which are accrued each period, are discretionary and dependent upon on number of factors, including the performance of the firm. Discretionary cash bonus payments are paid annually in February following year end. Awards of restricted stock units are also discretionary and amortized to compensation expense (based upon the value of the award at the time of grant) during the service period over which the award vests, which is generally five years. As we expense these awards, the restricted stock units recognized are recorded within stockholders’ equity. In January 2006, our employees were granted 427,873 restricted stock units in conjunction with the 2005 compensation.

2005 versus 2004.    Our Total Compensation and Benefits expense for the year ended December 31, 2005 was $102.4 million, which reflects a 46% compensation ratio for the year. This compares against $67.7 million of Pro Forma Total Compensation and Benefits expense, which reflects a 45% compensation ratio for the year ended December 31, 2004. This represents an increase of 51% in Total Compensation and Benefits Expense, and is principally related to the increase in revenues for the year and the increase in the compensation ratio resulting from the amortization charge for awards of restricted stock units. As restricted stock unit awards vest over future years, it is expected that the compensation ratio will gradually increase.

Our actual compensation and benefits expense for the year ended December 31, 2004 was $61.4 million.

2004 versus 2003.    Our Pro Forma Total Compensation and Benefits expense for the year ended December 31, 2004 was $67.7 million, which reflects a 45% compensation ratio for the year. This compares against $57.0 million of Pro Forma Total Compensation and Benefits expense, which reflects a 45% compensation ratio for the year ended December 31, 2003. This represents an increase of 19% in Total Compensation and Benefits expense, and is related to the increase in revenues for the period.

Our actual compensation and benefits expense for the years ended December 31, 2004 and December 31, 2003 was $61.4 million and $27.1 million, respectively.

Non-Compensation Expense

Our non-compensation expense includes the costs for occupancy and rental, communications, information services, professional fees, recruiting, travel and entertainment, insurance, depreciation and other operating expenses. Reimbursable client expenses are netted against non-compensation expenses.

As a public company, our costs for such items as insurance and professional fees, principally accounting and legal advice have increased. We also expect that our non-compensation costs will increase as we grow our business and make strategic investments. For 2006, our occupancy expenses and depreciation expenses will increase for new office space in New York, London and Dallas.

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2005 versus 2004.    For the year ended December 31, 2005, our non-compensation expenses were $28.8 million, which compared to $26.9 million for the year ended December 31, 2004, representing an increase of 7%. The increase is related principally to a third-party fee related to the fundraising for Greenhill Capital Partners II ($1.0 million), greater travel ($0.5 million) and information services ($0.6 million) as a result of additional personnel and business development activity, increase in occupancy costs ($0.9 million), the net write-off of uncollectible accounts ($1.0 million) and increases in professional fees primarily associated with operating as a public company ($1.0 million), offset in part by lower depreciation expense ($1.0 million) primarily due to full depreciation of the airplane in 2004 and the absence of a one-time transaction-specific consultancy expense reflected in 2004 expenses ($2.6 million).

Non-compensation expense as a percentage of revenue in the year ended December 31, 2005 was 13%. This compares to 18% for the year ended December 31, 2004. The decrease in these expenses as a percentage of revenue in 2005 as compared to 2004 reflects a small increase in actual non-compensation costs spread over greater revenue.

2004 versus 2003.    For the year ended December 31, 2004, our non-compensation expenses were $26.9 million, which compared to $18.9 million for the year ended December 31, 2003, representing an increase of 42%. The increase in these expenses as a percentage of revenue was principally related to the expansion of our office space ($1.3 million), increases in recruiting efforts ($0.8 million), the costs of being a public company ($1.2 million), an increase in net travel expense ($0.9 million) and a transaction-specific consultancy expense ($2.6 million) in conjunction with a client engagement. In addition, non-U.S. operating costs increased approximately $0.7 million due to the decline in the relative value of the U.S. dollar compared to the comparable period in 2003.

Non-compensation expense as a percentage of revenue in the year ended December 31, 2004 was 18%. This compares to 15% for the year ended December 31, 2003. The increase in these expenses as a percentage of revenue in the year ended December 31, 2004 primarily related to an increase in the aforementioned costs.

The firm’s non-compensation expense as a percentage of revenue can vary as a result of a variety of factors, including fluctuation in quarterly revenue amounts, the amount of recruiting and business development activity, the amount of reimbursement of engagement-related expenses by clients, currency movements and other factors. Accordingly, the non-compensation expense as a percentage of revenue in any particular quarter may not be indicative of the non-compensation expense as a percentage of revenue in future periods.

Provision for Income Taxes

As a result of the completion of our initial public offering in May 2004, we are subject to federal, foreign and state corporate income taxes. Prior to our initial public offering, Greenhill was a limited liability company and was generally not subject to U.S. federal or state income taxes and its U.K. controlled affiliate Greenhill & Co. International LLP, as a limited liability partnership, was generally not subject to U.K. income taxes. However, Greenhill was subject to local taxes on its U.S. earnings. In addition, certain of Greenhill’s non-U.S. subsidiaries have been subject to income taxes in their local jurisdictions.

2005 versus 2004.    For the year ended December 31, 2005, our Provision for Taxes was $32.6 million, at an effective tax rate of 37%. For the year ended December 31, 2004, the Pro Forma Provision for Taxes of $22.9 million reflected an assumed tax rate of 40%. The Pro Forma Provision for Taxes for the year ended December 31, 2004 includes assumed federal, foreign, state and local income taxes as if we were a C Corporation for the period January 1, 2004 to the date of the public offering at an assumed effective rate of 42% combined with the actual tax provision for the period after the public offering. The decrease in the effective tax rate in 2005 as compared to 2004 reflects the benefit of a higher proportion of investment income and U.K.-based advisory income, which generally are taxed at lower rates than U.S.-based advisory income.

Our actual effective tax rate for 2004 was 33% (reflecting our status as a C corporation for the period between our public offering and December 31, 2004). Actual tax expense for the year ended December 31, 2004 was $18.7 million.

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2004 versus 2003.    For the year ended December 31, 2004, our Pro Forma Provision for Taxes was $22.9 million, or a rate of 40%. The Pro Forma Provision for Taxes for the year ended December 31, 2004 includes assumed federal, foreign, state and local income taxes as if we were a C Corporation for the period January 1, 2004 to the date of the public offering at an assumed effective rate of 42% combined with the actual tax provision for the period after the public offering. For the year ended December 31, 2003, the Pro Forma Provision for Taxes of $21.3 million reflected an assumed tax rate of 42%. The decrease in the pro forma effective tax rate in 2004 resulted principally from an increase in investment earnings, which are taxed at lower rates. Our actual effective tax rate for 2004 was 33% (reflecting our status as a C corporation for the period between our public offering and December 31, 2004). Actual tax expense for the year ended December 31, 2004 and 2003 was $18.7 million and $3.0 million, respectively.

The effective tax rate can fluctuate as a result of variations in the relative amounts of advisory and merchant banking income earned in the tax jurisdictions in which the firm operates and invests. Accordingly, the effective tax rate in any particular period may not be indicative of the effective tax rate in future periods.

Geographic Data

For a summary of the total revenues, income before minority interest and tax, net income and total assets of Greenhill by geographic region, see Note 14 to the consolidated financial statements.

Liquidity and Capital Resources

Our liquidity position is monitored by our Management Committee, which generally meets monthly. The Management Committee monitors cash, other significant working capital assets and liabilities, debt, principal investment commitments and other matters relating to liquidity requirements. As cash accumulates it is invested in short term liquid investments.

We generate cash from both our operating activities in the form of advisory fees and our merchant banking investments in the form of distributions of investment proceeds and profit overrides. We use our cash primarily for operating purposes, compensation of our employees, payment of income taxes, investments in merchant banking funds, payment of dividends, repurchase of shares of our stock and leasehold improvements.

Our cash balances generally accumulate from our operating activities during the year. In general, we collect our accounts receivable within 60 days except for certain restructuring transactions where collections may take longer due to court-ordered holdbacks. Our liabilities typically consist of accounts payable, which are generally paid monthly, accrued compensation, which includes accrued bonuses that are paid in the first quarter of the following year to the large majority of our employees, and taxes payable. In the first quarter of 2006, cash bonuses of $41.7 million relating to 2005 compensation were paid to our employees. In addition, we expect to pay approximately $14.7 million in early 2006 related to income taxes owed for the year ended December 31, 2005.

A large portion of our liabilities are associated with unrealized earnings (i.e., recorded on our books but for which cash proceeds have not yet been received) from our merchant banking investments. At December 31, 2005 approximately $17.7 million of our bonus accrual related to profit overrides for unrealized gains of GCP and $23.6 million related to deferred tax liabilities that are deferred until the gains from the GCP investments are realized. These amounts may increase or decrease depending on the change in the fair value of the GCP funds and are payable, subject to claw back, at the time the funds realize cash proceeds.

Since our initial public offering we have used a portion of our cash reserves to repurchase shares of our common stock and make investments in our merchant banking funds. Our commitments to our merchant banking funds may require us to fund capital calls on short notice. On the other hand, distributions from our merchant banking funds are generally made shortly after proceeds are received by the funds. We are unable to predict the timing or magnitude of share repurchase opportunities, capital call requirements or distribution of investment proceeds.

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Our merchant banking funds typically invest in privately held companies. The ability of our merchant banking funds to sell or dispose of the securities they own depends on a number of factors beyond the control of the funds, including general economic and sector conditions, stock market conditions, the availability of financing to potential buyers of such securities, among others. As a result we consider our investments illiquid for the short term.

Because it is not tax efficient, our foreign earnings are generally not available to fund our U.S. working capital needs, including share purchases, dividend payments or merchant banking investments. However, in December 2005 we elected to repatriate $14.0 million of foreign earnings under a domestic reinvestment plan pursuant to Section 965 of the Internal Revenue Code. These funds were repatriated to take advantage of a one-time tax reduction that was available under the American Jobs Creation Act of 2004.

To increase our financial flexibility, on January 31, 2006, we obtained from a U.S. commercial bank an unsecured $20.0 million revolving loan facility to provide for working capital needs, facilitate the funding of merchant banking investments and other general corporate purposes.  Interest on borrowings is based on LIBOR plus 1.85%.  The revolving bank loan facility matures on August 1, 2007. 

As of December 31, 2005, we had total commitments (not reflected on our balance sheet) relating to future principal investments in GCP and other merchant banking activities of $83.4 million (excluding $1.4 million repaid to the Company related to interim financings and expenses which may be recalled). These commitments are expected to be drawn on from time to time and be substantially invested over a period of up to five years from the relevant commitment dates. See Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contractual Obligations.

During 2005, the firm repurchased 606,472 shares of its common stock in open market purchases at an average price of $45.05 per share. In August 2005, the firm purchased 800,000 of our common shares at a price of $26.22 per share from a former employee pursuant to a previously announced agreement. In addition, in December 2005, we agreed to repurchase 244,028 shares of our common stock from a former employee at a discount to market price.  We completed these repurchases early in 2006.

In January 2006, the Board of Directors of Greenhill & Co., Inc. authorized the repurchase an additional $40.0 million of common stock in open market transactions.

We believe that the cash generated from operations and funds available from the revolving bank loan facility will be sufficient to meet our expected operating needs, commitments to our merchant banking activities, build-out costs of new office space, tax obligations, share repurchases and common dividends. In the event that our needs for liquidity should increase as we expand our business, we may consider a range of financing alternatives to meet any such needs.

Cash Flows

2005.    Cash and cash equivalents increased by $22.4 million in 2005. We generated $61.3 million from operating activities, including $14.4 million from net income after giving effect to the non-cash items and by a net increase in working capital of $46.9 million (principally from the accrual of compensation expense, accounts payable and accrued expenses and taxes payable). We generated $37.2 million from investing activities, including $52.4 million from the net sale of securities and $14.3 million from distributions from our merchant banking investments, partially offset by $27.7 million in new investments in merchant banking funds. We used $71.7 million for financing activities, including $13.7 million for the payment of dividends and $58.8 million for the repurchase of our common stock.

2004.    Cash increased $34.2 million in 2004. Cash of $42.9 million was provided by operating activities, including $31.4 million from net income after giving effect to non-cash items and a net change in working capital of $21.2 million (principally from an increase in accrued compensation payable) offset by the payout of the prior year’s minority interest in the net assets of our U.K. affiliate of $9.7 million. We used cash generated from operations principally to fund distributions to members

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of earnings prior to the initial public offering of $31.2 million, dividend payments of $4.9 million, and $4.4 million in purchases of property and equipment, primarily for the build-out of additional office space in New York. Proceeds from our initial public offering of $89.3 million were used to fund an investment of $11.6 million in Greenhill Capital Partners, net of a distribution received from Greenhill Capital Partners of $7.9 million, repay net borrowings under the credit facility of $1.5 million, repurchase $0.2 million of our common stock, invest $52.4 million in highly-rated short-term auction rate securities and invest the remaining increase in cash in highly-rated short-term debt securities.

2003.    Cash increased to $26.6 million in 2003. Cash of $69.2 million was provided by operating activities, including $45.4 million from net income, $14.1 million from a decrease in accounts receivables and $2.4 million from an increase in minority interest in the net assets of our U.K. affiliate. Cash of $7.2 million was used for investing activities, primarily for the purchase from outside investors of a portion of Greenhill Capital Partners’ limited partner interest and technology-related expenditures. Financing activities used $54.2 million of cash, reflecting distributions to members offset by a small increase in short-term borrowings.

Contractual Obligations

The following table sets forth information relating to our contractual obligations as of December 31, 2005:

				Payment Due by Period
Contractual Obligations				Total				Less than 1 year				1-3 years				3-5 years				More than 5 years
				(in thousands)
Operating Lease Obligations				$	27,995			$	6,013			$	11,382			$	8,812			$	1,788
Merchant Banking Commitments(a)					83,375				21,477				30,949				30,949				—
Total				$	111,370			$	27,490			$	42,331			$	39,761			$	1,788

(a)

We may be required to substantially fund our merchant banking commitments at any time through 2010, depending on the timing and level of investments by Greenhill Capital Partners, although we do not expect these commitments to be drawn in full. Since the merchant banking commitments can be drawn at any time over the life of the commitment period, the amounts above are shown as if spread ratably over the life of the primary commitment period. Excludes $1.4 million repaid to the Company related to interim financings and expenses which may be recalled.

In addition, in December 2005, we agreed to repurchase 244,028 shares of our common stock from a former employee.  We completed these repurchases early in 2006 at a total cost of $11.5 million.

In 2005, a subsidiary of GCP I entered into a credit agreement with Morgan Stanley Mortgage Capital, Inc., as administrative agent, and pursuant to which they have borrowed $70 million, secured by 8,383,234 shares of Global Signal Inc. common stock owned by it. Under the terms of a separate recourse agreement, the lenders will have recourse to Greenhill Capital Partners, LLC in the event of fraud or intentional or grossly negligent misrepresentations by the borrower or the institution of insolvency proceedings by or against the borrower, Greenhill Capital Partners LLC or the general partners of GCP I. Proceeds from the loans were used to fund distributions to GCP I’s limited partners, which include executive officers of Greenhill and the firm. The credit agreement matures in August 2006.

On January 31, 2006, the firm obtained from a U.S. commercial bank an unsecured $20.0 million revolving loan facility to provide for working capital needs, facilitate the funding of short-term investments and other general corporate purposes. Interest on borrowings is based on one month LIBOR plus 1.875%. The revolving bank loan facility matures on August 1, 2007, but may be extended by a written agreement of lender and borrower.

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Market Risk

We limit our investments to (1) short-term cash investments, which we believe do not face any material interest rate risk, equity price risk or other market risk and (2) principal investments in Greenhill Capital Partners and other merchant banking funds.

We have invested our cash in short duration, highly rates fixed income investments including highly rated short-term debt securities and money market funds. Changes in interest rates and other economic and market conditions could affect these investments adversely; however, we do not believe that any such changes will have a material effect on our results of operations. Our short-term cash investments are primarily denominated in US dollars, UK sterling and Euros, and we face modest foreign currency risk in our cash balances held in non-US dollar denominated accounts. To the extent that the cash balances in local currency exceed our short term obligations, we may hedge our foreign currency exposure.

With regard to our principal investments (including our portion of any profit overrides earned on such investments), we face exposure to changes in the estimated fair value of the companies in which our merchant banking funds invest, which historically has been volatile. Significant changes in the public equity markets may have a material effect on our results of operations. We have analyzed our potential exposure to general equity market risk by performing sensitivity analyses on our principal investments. Significant volatility in the general equity markets would impact our operations primarily because of changes in the fair value of our merchant banking investments that are publicly traded securities or are privately held securities owned for more than one year. Our analysis showed that if we assume that at December 31, 2005, the market prices of all public securities, and therefore, the general equity market, were 10% lower, the impact on our operations would be a decrease in revenues of $9.3 million. We do not believe there would be any other material impact. We meet on a quarterly basis to determine the fair value of the investments held in our merchant banking portfolio and to discuss the risks associated with those investments. The Investment Committee manages the risks associated with the merchant banking portfolio by closely monitoring and managing the types of investments made as well as the monetization and realization of existing investments.

In addition, the reported amounts of our revenues may be affected by movements in the rate of exchange between the euro and pound sterling (in which 32% of our revenues for the year ended December 31, 2005 were denominated) and the dollar, in which our financial statements are denominated. We do not currently hedge against movements in these exchange rates. We analyzed our potential exposure to a decline in exchange rates by performing a sensitivity analysis on our net income. We do not believe we face any material risk in this respect.

Critical Accounting Policies and Estimates

The consolidated financial statements included in this report are prepared in conformity with accounting principles generally accepted in the United States, which require management to make estimates and assumptions regarding future events that affect the amounts reported in our financial statements and their footnotes, including investment valuations, compensation accruals and other matters. Management believes that the estimates used in preparing its consolidated financial statements are reasonable and prudent. Actual results could differ materially from those estimates. We believe that the following discussion addresses Greenhill’s most critical accounting policies, which are those that are most important to the presentation of our financial condition and results of operations and require management’s most difficult, subjective and complex judgments.

Basis of Financial Information

The firm’s consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States, which require management to make estimates and assumptions regarding future events that affect the amounts reported in our financial statements and related footnotes, including investment valuations, compensation accruals and other matters. We believe that the estimates used in preparing our consolidated financial statements are reasonable and prudent. Actual results could differ materially from those estimates.

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The consolidated financial statements of the firm include all consolidated accounts and Greenhill & Co., Inc. (formerly Holdings) and all other entities in which we have a controlling interest, including Greenhill & Co. International LLP, after eliminations of all significant inter-company accounts and transactions. We adopted the revised Financial Accounting Standards Board (‘‘FASB’’) Interpretation No. 46 (‘‘FIN 46-R’’), ‘‘Consolidation of Variable Interest Entities’’, in the first quarter of 2004. FIN 46-R defines variable interests and specifies the circumstances under which the consolidation of entities will be required. The adoption of FIN 46-R did not have a material impact on our financial position or results of operations. In accordance with FIN 46-R the firm consolidates the general partner of our merchant banking funds in which we have a majority of the economic interest. The firm does not consolidate the merchant banking funds since the firm, through its general partner and limited partner interests, does not have a majority of the economic interest in such funds and under EITF No. 04-5, ‘‘Accounting for an Investment in a Limited Partnership When the Investor Is the Sole General Partner and the Limited Partners Have Certain Rights,’’ is subject to removal by a simple majority of unaffiliated third-party investors.

Revenue Recognition

Financial Advisory Fees

We recognize advisory fee revenue when the services related to the underlying transactions are completed in accordance with the terms of the respective engagement letters. Retainer fees are generally recognized as advisory fee income over the period the services are rendered.

Our clients reimburse certain out-of-pocket expenses incurred by us in the conduct of advisory engagements. Expenses are reported net of such client reimbursements.

Merchant Banking Fund Management Revenues

Merchant Banking Fund Management revenue consists of (i) management fees on our merchant banking activities, (ii) gains (or losses) on investments in our merchant banking funds and other principal investment activities and (iii) merchant banking profit overrides.

Fund management fees are recognized over the period of related service.

We recognize revenue on investments in merchant banking funds based on our allocable share of realized and unrealized gains (or losses) reported by such funds on a quarterly basis. Investments held by merchant banking funds are recorded at estimated fair value. Investments in privately held companies are initially carried at cost as an approximation of fair value and generally adjusted after being held by the fund for one year to the estimated fair value as determined by the general partner of the fund after giving consideration to the cost of the security, the pricing of other sales of securities by the portfolio company, the price of securities of other companies comparable to the portfolio company, purchase multiples paid in other comparable third-party transactions, the original purchase price multiple, market conditions, liquidity, operating results and other financial data. Discounts are generally applied to the funds’ privately held investments to reflect the lack of liquidity and other transfer restrictions. Investments in publicly traded securities are valued using quoted market prices discounted for any legal or contractual restrictions on sale. Because of the inherent uncertainty of valuations as well as the discounts applied, the estimated fair values of investment in privately held companies may differ significantly from the values that would have been used had a ready market for the securities existed. The values at which our investments are carried on our books are adjusted to fair value at the end of each quarter and the volatility in general economic conditions, stock markets and commodity prices may result in significant changes in the fair value of the investments.

We recognize merchant banking profit overrides when certain financial returns are achieved over the life of the fund. Profit overrides are calculated as a percentage of the profits over a specified threshold earned by such funds on investments managed on behalf of unaffiliated investors of GCP I and all principally investors except the firm of GCP II and are subject to clawback. Future losses in the value of the fund’s investments may require amounts previously recognized as profit overrides to be reversed to the fund in future periods. Accordingly, merchant banking profit overrides are recognized as revenue only after material contingencies have been resolved.

34

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Restricted Stock Units

In accordance with the fair value method prescribed by FASB Statement No. 123(R), ‘‘Share-Based Payment’’, which is a revision of FASB Statement No. 123, ‘‘Accounting for Stock-Based Compensation’’, restricted stock units with future service requirements are recorded as compensation expense and generally is amortized over a five-year service period following the date of grant. Compensation expense is determined at the date of grant. As the firm expenses the awards, the restricted stock units recognized are recorded within stockholders’ equity. The firm records dividend equivalents in stockholders’ equity on outstanding restricted stock units that are expected to vest. The firm adopted Statement 123(R) as of January 1, 2005, and it did not have a material effect on the accounting for restricted stock units in its consolidated financial statements.

Provision for Taxes

After the initial public offering, the firm accounts for taxes in accordance with FASB Statement No. 109, ‘‘Accounting for Income Taxes’’, which requires the recognition of tax benefits or expenses on the temporary differences between the financial reporting and tax bases of its assets and liabilities.

Prior to the initial public offering, the firm was primarily subject to local unincorporated business tax on business conducted in New York City, and income tax on current income realized by certain foreign subsidiaries. After the initial public offering, the company is subject to U.S. federal, foreign, state and local taxes as a C corporation at the applicable tax rates.

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk

We do not believe we face any material interest rate risk, foreign currency exchange risk, equity price risk or other market risk. See ‘‘Item 7. Market Risk’’ above for a discussion of market risks.

Item 8.    Financial Statements and Supplementary Data

The financial statements required by this item are listed in Item 15, ‘‘Exhibits and Financial Statement Schedules’’.

Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A.    Controls and Procedures

Based upon their evaluation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15 as of the end of the year covered by this 2005 Form 10-K, the firm’s Chief Executive Officer and Chief Financial Officer have concluded that such controls and procedures are effective. There were no significant changes in the firm’s internal controls or in other factors that could significantly affect such internal controls subsequent to the date of their evaluation.

Management’s report on the firm’s internal controls over financial reports (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act), and the related report of our independent public accounting firm, are included on pages F-2 – F-4 of this report.

In addition, on June 15, 2005 our Chief Executive Officer certified to the New York Stock Exchange (‘‘NYSE’’) that he was not aware of any violation by the firm of the NYSE’s corporate governance listing standards. We have field as an exhibit to this Form 10-K the certifications of our Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934 (as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002).

Item 9B.    Other Information

None.

35

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PART III

Item 10.    Directors and Executive Officers of the Registrant

Information regarding members of the Board of Directors will be presented in Greenhill’s definitive proxy statement for its 2006 annual meeting of stockholders, which will be held on April 19, 2006, and is incorporated herein by reference. Information regarding our executive officers is included in Part I of this Form 10-K under the caption ‘‘Executive Officers.’’

Item 11.    Executive Compensation

Information regarding executive compensation will be presented in Greenhill’s definitive proxy statement for its 2006 annual meeting of stockholders, which will be held on April 19, 2006, and is incorporated herein by reference.

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information regarding security ownership of certain beneficial owners and management and related stockholder matters will be presented in Greenhill’s definitive proxy statement for its 2006 annual meeting of stockholders, which will be held on April 19, 2006, and is incorporated herein by reference.

Item 13.    Certain Relationships and Related Transactions

Information regarding certain relationships and related party transactions will be presented in Greenhill’s definitive proxy statement for its 2006 annual meeting of stockholders, which will be held on April 19, 2006, and is incorporated herein by reference.

Item 14.    Principal Accountant Fees and Services

Information regarding principal accountant fees and services will be presented in Greenhill’s definitive proxy statement for its 2006 annual meeting of stockholders, which will be held on April 19, 2006, and is incorporated herein by reference.

36

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PART IV

Item 15.    Exhibits and Financial Statement Schedules

(a)

1.    Financial Statements

INDEX TO FINANCIAL STATEMENTS

Consolidated Financial Statements of Greenhill & Co. Inc. and Subsidiaries

Management’s Report on Internal Control over Financial Reporting				F-2
Report of Independent Registered Public Accounting Firm				F-3
Consolidated Statements of Financial Condition				F-5
Consolidated Statements of Income				F-6
Consolidated Statements of Changes in Members’ Equity and Stockholders’ Equity				F-7
Consolidated Statements of Cash Flows				F-8
Notes to Consolidated Financial Statements				F-9

F-1

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Management’s Report on Internal Control over Financial Reporting

Management of Greenhill & Co., Inc. and subsidiaries (the ‘‘Company’’), is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s principal executive and principal financial officers to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external reporting purposes in accordance with generally accepted accounting principles in the United States of America.

As of December 31, 2005, management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting based on the framework established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based upon this assessment, management has determined that the Company’s internal control over financial reporting as of December 31, 2005 was effective.

The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

The Company’s independent auditors have issued their auditors’ report appearing on page F-4 on management’s assessment of the Company’s internal control over financial reporting.

F-2

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Report of Independent Registered Public Accounting Firm

The	Board of Directors and Shareholders of Greenhill & Co., Inc.

We have audited the accompanying consolidated statements of financial condition of Greenhill & Co., Inc. and subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of income, changes in members’ equity and stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2005. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Greenhill & Co., Inc. and subsidiaries at December 31, 2005 and 2004, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Greenhill & Co., Inc.'s internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 10, 2006 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

New York, New York
February 10, 2006

F-3

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Report of Independent Registered Public Accounting Firm

The	Board of Directors and Shareholders of Greenhill & Co., Inc.

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control over Financial Reporting, that Greenhill & Co., Inc. maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Greenhill & Co., Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Greenhill & Co., Inc. maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, Greenhill & Co., Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statements of financial condition as of December 31, 2005 and 2004, and the related consolidated statements of income, changes in members’ equity and stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2005 of Greenhill & Co., Inc. and our report dated February 10, 2006, expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

New York, New York
February 10, 2006

F-4

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Greenhill & Co., Inc. and Subsidiaries
(formerly Greenhill & Co. Holdings, LLC and Subsidiaries)
Consolidated Statements of Financial Condition
As of December 31,

				2005				2004
Assets
Cash and cash equivalents				$	83,240,865			$	60,806,951
Securities					—				52,416,670
Financial advisory fees receivable, net of allowance for doubtful accounts of $1.1 million and $0.8 million at December 31, 2005 and 2004, respectively					27,336,205				25,185,937
Other receivables					933,468				1,062,926
Property and equipment, net					8,638,632				9,290,877
Investments					104,135,337				25,881,674
Due from affiliates					260,537				135,163
Other assets					10,396,077				2,235,905
Total assets				$	234,941,121			$	177,016,103
Liabilities and Stockholders’ Equity
Compensation payable				$	61,219,698			$	31,788,116
Accounts payable and accrued expenses					15,984,768				6,594,997
Taxes payable					38,346,740				9,444,666
Due to affiliates					1,445,044				1,445,044
Total liabilities					116,996,250				49,272,823
Minority interest in net assets of affiliate					3,229,537				504,177
Common stock, par value $0.01 per share, 100,000,000 shares authorized, 30,880,024 and 30,750,000 shares issued and outstanding as of December 31, 2005 and 2004, respectively					308,800				307,500
Restricted stock units					8,931,618				3,396,714
Additional paid-in capital					109,961,120				106,743,051
Retained earnings					57,595,530				15,781,529
Accumulated other comprehensive (loss) income					(3,025,186	)			1,222,235
Treasury stock, at cost, par value $0.01 per share; 1,650,496 and 9,346 shares as of December 31, 2005 and 2004, respectively					(59,056,548	)			(211,926	)
Stockholders’ equity					114,715,334				127,239,103
Total liabilities, minority interest and stockholders’ equity				$	234,941,121			$	177,016,103

See accompanying notes to consolidated financial statements.

F-5

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Greenhill & Co., Inc. and Subsidiaries
(formerly Greenhill & Co. Holdings, LLC and Subsidiaries)
Consolidated Statements of Income
Years Ended December 31,

				2005				2004				2003
Revenues
Financial advisory fees				$	142,043,898			$	130,906,471			$	121,334,310
Merchant banking revenue					76,213,838				20,188,544				4,949,617
Interest income					2,894,730				758,281				395,299
Total revenues					221,152,466				151,853,296				126,679,226
Expenses
Employee compensation and benefits					102,441,141				61,446,527				27,093,784
Occupancy and equipment rental					6,473,436				5,615,802				4,424,616
Depreciation and amortization					2,495,336				3,467,745				3,419,394
Information services					3,538,765				2,920,466				2,609,188
Professional fees					4,165,585				4,527,719				2,119,590
Travel related expenses					4,620,324				4,085,453				3,122,068
Other operating expenses					7,417,554				6,281,394				3,229,963
Total expenses					131,152,141				88,345,106				46,018,603
Income before tax and minority interest					90,000,325				63,508,190				80,660,623
Minority interest in net income of affiliate					1,831,888				6,487,050				32,223,453
Income before tax					88,168,437				57,021,140				48,437,170
Provision for taxes					32,636,153				18,705,313				3,036,677
Net income				$	55,532,284			$	38,315,827			$	45,400,493
Average common shares outstanding:
Basic					30,631,573				28,780,383				n/a
Diluted					30,671,552				28,788,798				n/a
Earnings per share:
Basic				$	1.81			$	1.33				n/a
Diluted				$	1.81			$	1.33				n/a
Pro forma average shares outstanding (see Note 16):
Basic					30,631,573				28,780,383				25,000,000
Diluted					30,671,552				28,788,798				25,000,000
Pro forma earnings per share (see Note 16):
Basic				$	1.81			$	1.19			$	1.18
Diluted				$	1.81			$	1.19			$	1.18

See accompanying notes to consolidated financial statements.

F-6

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Greenhill & Co., Inc. and Subsidiaries
(formerly Greenhill & Co. Holdings, LLC and Subsidiaries)
Consolidated Statements of Changes in Members’ Equity and Stockholders’ Equity
Years Ended December 31,

				2005				2004				2003
Members’ equity, beginning of the year				$	—			$	32,257,252			$	41,672,688
Contributed capital					—				27,500				—
Comprehensive income:
Net income prior to the Reorganization					—				13,430,671				45,400,493
Other comprehensive income:
Foreign currency translation adjustment					—				(225,490	)			854,142
Comprehensive income					—				13,205,181				46,254,635
Distributions					—				(31,223,511	)			(55,670,071	)
Exchange of members’ interests for shares of common stock					—				(17,784,148	)			—
Transfer to other comprehensive income					—				(564,013	)			—
Transfer to retained earnings					—				4,081,739				—
Members’ equity, end of the year					—				—				32,257,252
Common stock, par value $0.01
Common stock, beginning of the year					307,500				—				—
Exchange of partnership interests for shares of common stock					—				250,000				—
Common stock issued					1,300				57,500				—
Common stock, end of the year					308,800				307,500				—
Restricted stock units
Restricted stock units, beginning of the year					3,396,714				—				—
Restricted stock units recognized					9,023,251				3,396,714
Restricted stock units delivered					(3,488,347	)			—				—
Restricted stock units, end of the year					8,931,618				3,396,714				—
Additional paid-in capital
Additional paid-in capital, beginning of the year					106,743,051				—				—
Exchange of partnership interests for shares of common stock					—				17,534,148				—
Common stock issued					2,344,158				89,208,903				—
Tax benefit from the delivery of restricted stock units					873,911				—				—
Additional paid-in capital, end of the year					109,961,120				106,743,051				—
Retained earnings
Retained earnings, beginning of the year					15,781,529				—				—
Transfer from members’ equity					—				(4,081,739	)			—
Dividends					(13,718,283	)			(5,021,888	)			—
Net income subsequent to the Reorganization					55,532,284				24,885,156				—
Retained earnings, end of the year					57,595,530				15,781,529				—
Other comprehensive (loss) income
Other comprehensive income, beginning of the year					1,222,235				—				—
Transfer from members’ equity					—				564,013				—
Currency translation adjustment					(4,247,421	)			658,222				—
Other comprehensive (loss) income, end of the year					(3,025,186	)			1,222,235				—
Treasury Stock, at cost, par value $0.01 per share
Treasury stock, beginning of the year					(211,926	)			—				—
Repurchased					(58,844,622	)			(211,926	)			—
Treasury stock, end of the year					(59,056,548	)			(211,926	)			—
Total members’ equity and stockholders’ equity				$	114,715,334			$	127,239,103			$	32,257,252

See accompanying notes to consolidated financial statements.

F-7

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Greenhill & Co., Inc. and Subsidiaries
(formerly Greenhill & Co. Holdings, LLC and Subsidiaries)
Consolidated Statements Cash Flows
Years Ended December 31,

				2005				2004				2003
Operating activities:
Net income				$	55,532,284			$	38,315,827			$	45,400,493
Adjustments to reconcile net income to net cash provided by operating activities:
Non-cash items included in net income:
Depreciation and amortization					2,495,336				3,467,745				3,419,394
Unrealized (gains) losses on investments					(64,821,299	)			(15,668,245	)			780
Restricted stock units recognized and common stock issued					9,059,521				3,396,714				—
Deferred taxes					12,090,539				1,917,175				—
Changes in operating assets and liabilities:
Financial advisory fees receivable					(2,150,268	)			(8,787,948	)			14,105,088
Due from affiliates					(125,374	)			190,608				550,369
Taxes receivable					—				438,483				1,523,497
Other receivables and assets					222,381				943,413				(548,583	)
Compensation payable					29,431,582				19,889,479				1,577,670
Accounts payable and accrued expenses					10,254,441				3,323,067				377,763
Minority interest in net assets of affiliates					2,725,360				(9,668,270	)			2,414,018
Due to affiliates					—				1,445,044				—
Taxes payable					8,531,773				3,682,591				390,368
Cash settlement of restricted stock units					(1,988,870	)			—				—
Net cash provided by operating activities					61,257,406				42,885,683				69,210,857
Investing activities:
Purchases of investments					(27,694,967	)			(11,583,004	)			(6,711,610	)
Distributions from investments					14,262,603				7,912,500				482,483
Purchases of securities					(235,281,476	)			(105,040,631	)			—
Sale or maturity of securities					287,698,146				52,623,961				—
Purchases of property and equipment					(1,738,975	)			(4,373,874	)			(924,117	)
Net cash provided by (used in) investing activities					37,245,331				(60,461,048	)			(7,153,244	)
Financing activities:
Proceeds of revolving bank debt					—				14,500,000				1,500,000
Repayment of revolving bank debt					—				(16,000,000	)			—
Capital contributions					—				27,500				—
Dividends paid					(13,718,283	)			(4,919,252	)			—
Capital distributions					—				(31,223,511	)			(55,670,071	)
Net tax benefit from the delivery of restricted stock units					873,911
Proceeds from the issuance of common stock					(54,959	)			89,266,403				—
Purchase of treasury stock					(58,844,622	)			(211,926	)			—
Cash provided by (used in) financing activities					(71,743,953	)			51,439,214				(54,170,071	)
Effect of exchange rate changes on cash and cash equivalents					(4,324,870	)			344,459				772,028
Net increase in cash and cash equivalents					22,433,914				34,208,308				8,659,570
Cash and cash equivalents, beginning of year					60,806,951				26,598,643				17,939,073
Cash and cash equivalents, end of year				$	83,240,865			$	60,806,951			$	26,598,643
Supplemental disclosure of cash flow information:
Cash paid for interest				$	—			$	172,422			$	—
Cash paid for taxes, net of refunds				$	11,137,926			$	12,804,875			$	1,238,770

See accompanying notes to consolidated financial statements.

F-8

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Greenhill & Co., Inc. and Subsidiaries
(formerly Greenhill & Co. Holdings, LLC and Subsidiaries)
Notes to Consolidated Financial Statements

Note 1 – Organization

Greenhill & Co., Inc., a Delaware corporation, merged with Greenhill & Co. Holdings, LLC (‘‘Holdings’’), a New York limited liability company, on May 11, 2004 (the ‘‘Reorganization Date’’) immediately prior to its initial public offering (the merger and the other related transactions effected by Holdings and its affiliates in anticipation of the initial public offering are referred to collectively as the ‘‘Reorganization’’). In the offering, Greenhill & Co., Inc. issued 5,750,000 shares of common stock and received net proceeds of $89 million. Greenhill & Co., Inc. (formerly Holdings), together with its subsidiaries (collectively, the ‘‘Company’’), is an independent investment banking firm. The Company has clients located throughout the world, with offices located in New York, London, Frankfurt and Dallas.

The Company’s activities as an investment banking firm constitute a single business segment, with two principal sources of revenue:

	•	Financial advisory, which includes advice on mergers, acquisitions, restructurings and similar corporate finance matters; and

	•	Merchant banking, which includes the management of outside capital invested in the Company’s merchant banking funds, Greenhill Capital Partners (‘‘GCP I’’) and Greenhill Capital Partners II (‘‘GCP II’’), (collectively ‘‘GCP’’), and the Company’s principal investments in GCP and other merchant banking funds.

The Company’s U.S. and international wholly-owned subsidiaries include Greenhill & Co., LLC (‘‘G&Co’’), Greenhill Capital Partners, LLC (‘‘GCPLLC’’) (formerly Greenhill Fund Management Co., LLC), Greenhill Aviation Co., LLC (‘‘GAC’’) and Greenhill & Co. Europe Limited (‘‘GCE’’).

G&Co is a registered broker-dealer under the Securities Exchange Act of 1934, as amended, and is registered with the National Association of Securities Dealers, Inc. G&Co is engaged in the investment banking business principally in North America.

GCE is a U.K. based holding company. GCE controls Greenhill & Co. International LLP (‘‘GCI’’), through its controlling membership interest. GCI is engaged in investment banking activities, principally in Europe, and is subject to regulation by the U.K. Financial Services Authority (‘‘FSA’’).

GCPLLC is a registered investment adviser under the Investment Advisers Act of 1940. GCPLLC provides investment advisory services to GCP, our private equity funds that invest in a diversified portfolio of private equity and equity related investments. The majority of the investors in GCP are third parties. However, the Company and its employees have also made investments in GCP.

GAC owns and operates an aircraft, which is used for the exclusive benefit of the Company’s employees and their immediate family members.

Note 2 – Summary of Significant Accounting Policies

Basis of Financial Information

These consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States, which require management to make estimates and assumptions regarding future events that affect the amounts reported in our financial statements and these footnotes, including investment valuations, compensation accruals and other matters. Management believes that the estimates used in preparing its consolidated financial statements are reasonable and prudent. Actual results could differ materially from those estimates.

The consolidated financial statements of the Company include all consolidated accounts and Greenhill & Co., Inc. (formerly Holdings) and all other entities in which the Company has a

F-9

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controlling interest, including GCI, after eliminations of all significant inter-company accounts and transactions. Company adopted the revised FASB Interpretation No. 46 (‘‘FIN 46-R’’), ‘‘Consolidation of Variable Interest Entities’’, in the first quarter of 2004. FIN 46-R defines variable interests and specifies the circumstances under which the consolidation of entities will be required. The adoption of FIN 46-R did not have a material impact on the Company’s financial position or results of operations. In accordance with FIN 46-R the Company consolidates the general partners of its merchant banking funds in which it has a majority of the economic interest. The Company does not consolidate the merchant banking funds since the Company, through its general partner and limited partner interests, does not have a majority of the economic interest in such funds and under EITF No. 04-5, ‘‘Accounting for an Investment in a Limited Partnership When the Investor Is the Sole General Partner and the Limited Partners Have Certain Rights,’’ is subject to removal by a simple majority of unaffiliated third-party investors.

Minority Interest

The portion of the consolidated interests in the general partners of our merchant banking funds which are held directly by employees of the Company are represented as minority interest in the accompanying consolidated financial statements.

The interests in GCI held directly by the U.K. managing directors, prior to the Reorganization, were represented as minority interests in the accompanying consolidated financial statements.

Revenue Recognition

Financial Advisory Fees

The Company recognizes advisory fee revenue when the services related to the underlying transactions are completed in accordance with the terms of its engagement letters. Retainer fees are recognized as advisory fee income over the period in which the related service is rendered.

The Company’s clients reimburse certain expenses incurred by the Company in the conduct of financial advisory engagements. Expenses are reported net of such client reimbursements. Client reimbursements totaled $5.2 million, $3.0 million and $2.6 million for the years ended December 31, 2005, 2004 and 2003, respectively.

Merchant Banking Revenues

Merchant banking revenue consists of (i) management fees on the Company’s merchant banking activities, (ii) gains (or losses) on investments in the Company’s investment in merchant banking funds and other principal investment activities, and (iii) merchant banking profit overrides.

Management fees earned from the Company’s merchant banking activities are recognized over the period of related service.

The Company recognizes revenue on investments in its merchant banking funds based on its allocable share of realized and unrealized gains (or losses) reported by such investments.

The Company recognizes merchant banking profit overrides when certain financial returns are achieved over the life of the fund. Profit overrides are calculated as a percentage of the profits over a specified threshold earned by each fund on investments managed on behalf of unaffiliated investors for GCP I and principally all investors except the Company of GCP II and are subject to clawback. Future losses (if any) in the value of the fund’s investments may require amounts previously recognized as profit overrides to be adjusted downward. Accordingly, merchant banking profit overrides are recognized as revenue only after material contingencies have been resolved. See ‘‘Note 3 – Investments’’ for further discussion of the GCP revenues recognized.

Investments

The Company’s investments in merchant banking funds are recorded at estimated fair value based upon the Company’s proportionate share of the changes in the fair value of the underlying merchant banking fund’s net assets. Investments primarily include investments in GCP.

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Financial Advisory Fees Receivables

Receivables are stated net of an allowance for doubtful accounts. The estimate for the allowance for doubtful accounts is derived by the Company by utilizing past client transaction history and an assessment of the client’s creditworthiness. The Company recorded bad debt expense of approximately $1.4 million, $0.4 million and $0.0 million for the years ended December 31, 2005, 2004 and 2003, respectively.

Members’ Equity

Prior to the Reorganization, the Company operated as a limited liability company, and payments made to its Members were distributions of members’ equity rather than compensation expense. The Senior Executive Profit Sharing Agreement (‘‘SEPA’’) dated as of January 1, 2002, as amended as of January 1, 2004, specified the manner of allocation of global operating income and provided for distributions to the Members (including the limited liability partnership interests owned by the U.K. managing directors represented as minority interests). The governance of the Company was set forth in the Operating Agreement of Greenhill & Co. Holdings, LLC dated as of January 1, 2002. Both the SEPA and the Operating Agreement terminated on the Reorganization Date.

Through the SEPA and other operating agreements, the U.S. and U.K. members operated under common governance and economic participation. However, these consolidated financial statements present the entity’s legal form, and as such, the interests held by the U.K. Members directly in GCI were recorded as minority interest for the periods prior to the Reorganization.

Distributions related to the global operating income earned prior to the Reorganization were principally made on or before the Reorganization Date. See ‘‘Note 7 – Members’ and Stockholders’ Equity’’ for further discussion of the distributions to Members.

Restricted Stock Units

In accordance with the fair value method prescribed by FASB Statement No, 123(R), ‘‘Share-Based Payment’’, which is a revision of FASB Statement No. 123, ‘‘Accounting for Stock-Based Compensation’’, restricted stock units with future service requirements are recorded as compensation expense and generally is amortized over a five-year service period following the date of grant. Compensation expense is determined at the date of grant. As the Company expenses the awards, the restricted stock units recognized are recorded within stockholders’ equity. The Company records dividend equivalents in stockholders’ equity on outstanding restricted stock units that are expected to vest. The Company adopted FASB Statement 123(R) as of January 1, 2005, and it did not have a material effect on the Company's accounting for awards of restricted stock units in its financial statements.

Earnings per Share

The Company calculates earnings per share (‘‘EPS’’) in accordance with FASB Statement No. 128, ‘‘Earnings per Share.’’ Basic EPS is calculated by dividing net income by the weighted average number of common shares outstanding for the period. Diluted EPS includes the determinants of basic EPS plus the dilutive effect of the common stock deliverable pursuant to restricted stock units for which future service is required as a condition to the delivery of the underlying common stock.

Common shares outstanding comprises (i) the 25,000,000 shares issued in connection with the Reorganization as if such issuance had occurred on January 1, 2004, (ii) the 5,750,000 shares issued in conjunction with the initial public offering and (iii) the restricted stock units for which no future service is required as a condition to the delivery of the underlying common stock, less the treasury stock purchased by the Company.

Property and Equipment

Property and equipment is stated at cost less accumulated depreciation and amortization. For assets acquired on or after January 1, 2005, depreciation is computed by the straight-line method over

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the life of the assets. For assets acquired prior to January 1, 2005, depreciation is computed principally by an accelerated method over the life of the assets. Amortization of leasehold improvements is computed by the straight-line method over the lesser of the life of the asset or the term of the lease. The change in depreciation method in 2005 does not have a material impact on the Company’s results of operations.

Provision for Taxes

After the Reorganization, the Company accounts for taxes in accordance with FASB No. 109, ‘‘Accounting for Income Taxes’’, which requires the recognition of tax benefits or expenses on the temporary differences between the financial reporting and tax bases of its assets and liabilities. The Company’s deferred tax assets and liabilities are presented as a component of other assets and taxes payable, respectively, on the consolidated statements of financial condition.

Prior to the Reorganization, the Company was primarily subject to local unincorporated business tax on business conducted in New York City, and income tax on current income realized by certain foreign subsidiaries. After the Reorganization, the Company is subject to U.S. federal, foreign, state and local taxes as a C corporation at the applicable tax rates.

Foreign Currency Translation

Foreign currency assets and liabilities have been translated at rates of exchange prevailing at the end of the periods presented. Income and expenses transacted in foreign currency have been translated at average monthly exchange rates during the period. Translation gains and losses are included in the foreign currency translation adjustment included as a component of other comprehensive income in the consolidated statement of changes in members’ equity and stockholders’ equity.

Cash Equivalents

The Company considers all highly liquid investments with a maturity date of three months or less, when purchased, to be cash equivalents. At December 31, 2005 and 2004, the carrying value of the Company’s financial instruments approximated fair value.

Securities

Securities represents auction rate securities held by the Company which are treated as available for sale securities under FASB Statement No. 115, ‘‘Accounting for Certain Investments in Debt and Equity Securities’’. Auction rate securities have legal maturities in excess of 20 years when issued, but have periodic interest rate resets. The Company has a highly diversified portfolio of AAA rated variable rate securities which generally provide liquidity at par every seven, twenty-eight or thirty-five days. At December 31, 2005, the Company did not hold any municipal auction rate securities. At December 31, 2004, the carrying value approximated fair value and the coupon rates ranged from 1.72% to 1.96%.

Accounting Developments

In June 2005, the EITF reached consensus on Issue No. 04-5, ‘‘Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights,’’ which requires general partners (or managing members in the case of limited liability companies) to consolidate their partnerships or to provide limited partners with rights to remove the general partner or to terminate the partnership. The Company, as the general partner of merchant banking partnerships, is required to adopt the provisions of EITF 04-5(i) immediately for partnerships formed or modified after June 29, 2005 and (ii) in the first quarter of fiscal 2007 for partnerships formed on or before June 29, 2005 that have not been modified. The Company provides the unaffiliated limited partners in these funds with simple majority rights to remove the general partner or rights to terminate the partnerships and, therefore, does not expect that EITF 04-5 will have a material effect on the firm's financial condition, results of operations or cash flows.

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Note 3 – Investments

Affiliated Merchant Banking Investments

The Company invests in merchant banking funds for which it also acts as the general partner. In addition to recording its direct investments in the funds, the Company consolidates each general partner in which it has a majority of the economic interest.

The Company recognizes revenue on investments in merchant banking funds based on its allocable share of realized and unrealized gains (or losses) reported by such funds on a quarterly basis. Investments held by merchant banking funds are recorded at estimated fair value. Investments in privately held companies are initially carried at cost as an approximation of fair value and generally adjusted after being held by the fund for one year to the estimated fair value as determined by the general partner of the fund after giving consideration to the cost of the security, the pricing of other sales of securities by the portfolio company, the price of securities of other companies comparable to the portfolio company, purchase multiples paid in other comparable third-party transactions, the original purchase price multiple, market conditions, liquidity, operating results and other financial data. Discounts are generally applied to the funds’ privately held investments to reflect the lack of liquidity and other transfer restrictions. Investments in publicly traded securities are valued using quoted market prices discounted for any legal or contractual restrictions on sale. Because of the inherent uncertainty of valuations as well as the discounts applied, the estimated fair values of investment in privately held companies may differ significantly from the values that would have been used had a ready market for the securities existed. The values at which the investments are carried are adjusted to fair value at the end of each quarter and volatility in general economic conditions, stock markets and commodity prices may result in significant changes in the fair value of the investments and consequently also that portion of the revenues attributable to the Company’s merchant banking investments

The Company’s management fee income consists of fees paid by its merchant banking funds and other transaction fees paid by the portfolio companies. Management fees were derived from GCP I during the years ended December 31, 2005, 2004 and 2003 and from GCP II during the year ended December 31, 2005.

Investment gains from the merchant banking activities are comprised of investment income, realized and unrealized gains from the Company’s investment in GCP, and the consolidated earnings of the general partner in which it has a majority economic interest, offset by allocated expenses of the funds. That portion of the earnings of the general partner which are held by employees and former employees of the Company is recorded as minority interest.

The Company makes investment decisions for GCP and is entitled to receive from the general partners an override of the profits realized from the funds. The Company includes in consolidated merchant banking revenue all realized and unrealized profit overrides it earns from GCP. This includes profit overrides of the managing general partner of GCP I with respect to all investments it made after January 1, 2004 and the profit overrides of the general partner of GCP II for all investments. From an economic perspective, profit overrides in respect of the investments made after January 1, 2004 are allocated 50% to the Company and 50% to employees of the Company. In addition, the Company also includes in merchant banking revenue its portion and certain employees’ portion of the profit overrides of GCP I with respect to investments made prior to January 1, 2004. The economic share of the profit overrides allocated to the employees of the Company is recorded as compensation expense.

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The Company’s merchant banking revenue, by source, are as follows:

				Years Ended December 31,
				2005				2004				2003
				(in thousands)
Management fees				$	11,393			$	4,521			$	4,950
Net realized and unrealized gains (losses) on investments					32,043				11,305				(1	)
Merchant banking profit overrides					32,300				4,100				—
Other unrealized investment income					478				263				—
Merchant banking revenue				$	76,214			$	20,189			$	4,949

The carrying value of the Company’s investments are as follows:

				As of December 31,
				2005				2004
				(in thousands)
Investment in GCP I				$	85,293			$	25,039
Investment in GCP II					17,272				—
Other investments					1,570				843
Investments				$	104,135			$	25,882

At December 31, 2005 and 2004, included in investment in GCP I is $2.9 million and $0.5 million, respectively, related to the interests in the managing general partner of GCP I held directly by various employees of the Company. At December 31, 2005, included in investment in GCP II is $0.3 million related to the interests in the general partner of GCP II held directly by various employees of the Company. At December 31, 2005 and 2004, approximately $17.7 million and $2.5 million, respectively, of the Company’s compensation payable related to profit overrides for unrealized gains of GCP. This amount may increase or decrease depending on the change in the fair value of the GCP funds portfolio and is payable, subject to claw back, at the time the funds realize cash proceeds.

At December 31, 2005, the Company had unfunded commitments to GCP I of $6.0 million (excluding $1.4 million repaid to the Company related to interim financings and expenses which may be recalled). The remaining commitments to GCP I will be funded as required through March 2007 for follow-on investments. At December 31, 2005, the Company had unfunded commitments to GCP II of $72.6 million which may be funded through March 2010.

In 2005, a consolidated subsidiary of GCP I borrowed $70 million from a financial institution pursuant to a credit agreement secured by certain of the shares of common stock in a portfolio company owned by it and backed, under limited circumstances, by a recourse agreement issued by GCPLLC.

Other Investments

In June 2005, the Company committed $5.0 million to Barrow Street Capital III, LLC (‘‘Barrow Street III’’), of which $4.8 million remains unfunded at December 31, 2005. The remaining commitment to Barrow Street III will be funded as required through April 2009. Included above in other investments at December 31, 2005, is $0.2 million related to the investment in Barrow Street III.

In April 2004, the Company sold its interest in Barrow Street Capital LLC (‘‘Barrow Street’’) , a real estate investment management company (see Note 4), to the controlling parties of Barrow Street for the carrying value of $0.4 million. Prior to April 2004, the Company had a 50% member interest in Barrow Street. Barrow Street was formed to act as the managing member, investment advisor and general partner in various real estate ventures. The Company did not have control of Barrow Street, as the Company did not have a majority voting or economic interest. The Company had veto rights over most significant management and investment decisions with respect to Barrow Street, although the Company could not force a management change. In March 2004, the Company received a distribution of $0.2 million from Barrow Street. For the year ended December 31, 2003, merchant banking revenue included gains related to the Company’s investment in Barrow Street of $0.4 million.

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There were no merchant banking revenues from Barrow Street or Barrow Street III for the years ended December 31, 2005 and 2004.

In 2004, GCP LLC was granted stock options as a transaction fee from a GCP I portfolio company. The options were exercised for common stock, and the fair value of the common stock of $1.3 million and $0.8 million is included in other investments above at December 31, 2005 and 2004, respectively.

Note 4 – Related Parties

At December 31, 2005 and 2004, the Company had receivables of $0.3 million and $0.1 million, respectively, due from GCP relating to expense reimbursements, which are included in due from affiliates.

Barrow Street subleases office space from the Company and reimburses the Company for the use of other facilities and participation in the Company’s health care plans. Included in expenses for the years ended December 31, 2005, 2004 and 2003, are reimbursements of $0.4 million, $0.3 million and $0.3 million, respectively, by Barrow Street.

In addition, during 2005, 2004 and 2003, the Company paid $19,955, $30,994 and $10,176, respectively, for the use of an aircraft owned by an executive of the Company. Included in occupancy and equipment rental expense for the years ended December 31, 2005, 2004 and 2003 are rent reimbursements $46,800, $46,800 and $23,400, respectively, for airplane and office space sublet by a firm owned by an executive of the Company.

In 2005, the Company accelerated the vesting of the restricted stock units granted to the controlling parties of Barrow Street, and settled these restricted stock units for cash of $2.0 million. Included in compensation and benefits for the years ended December 31, 2005 and 2004, is $1.4 million and $0.6 million, respectively, related to the vesting of restricted stock units granted to the controlling parties of Barrow Street as part of the Company’s initial public offering.

Due to affiliates at December 31, 2005 and 2004 represents undistributed earnings to the U.K. members of GCI from the period prior to the Reorganization. The balance due to the U.K. members at the Reorganization Date of $1.4 million was recorded in minority interest as a distribution. Included in accounts payable and accrued expenses at December 31, 2005 and 2004, respectively, is $0.1 million and $41,867 in interest payable on the undistributed earnings to the U.K. members of GCI.

Note 5 – Property and Equipment

Property and Equipment consist of the following:

				As of December 31,
				2005				2004
				(in thousands)
Aircraft				$	16,440			$	16,328
Equipment					5,856				5,048
Furniture and fixtures					3,301				3,054
Leasehold improvements					10,598				10,042
					36,195				34,472
Less accumulated depreciation and amortization					(27,556	)			(25,181	)
				$	8,639			$	9,291

Note 6 – Revolving Bank Loan Facility

On January 31, 2006, the Company obtained from a U.S. commercial bank an unsecured $20.0 million revolving loan facility to provide for working capital needs, facilitate the funding of short-term investments and other general corporate purposes. Interest on borrowings is based on one

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month LIBOR plus 1.875% and interest is payable monthly. The revolving bank loan facility matures on August 1, 2007, but may be extended by a written agreement of lender and borrower. In addition, at lease once during the period from January 31, 2006 through August 1, 2007, the Company must repay all loans borrowed under the facility, and it may not borrow again under the facility for a 30-day period following repayment, or demonstrate sufficient liquidity to accomplish the out of debt requirement without the necessity of repaying the outstanding borrowing.

In 2005 the availability of an unsecured $16.0 million revolving loan facility expired. That facility, which was obtained in December 2003, was available to provide for working capital needs and other general corporate purposes and was utilized in 2004. Amounts borrowed under that facility were repaid in May 2004 with a portion of the proceeds from the Company’s initial public offering. There were no borrowings outstanding at December 31, 2004. For the year ended December 31, 2004, there was $0.2 million of interest expense on the borrowings. At December 31, 2004 a loan fee for the revolving bank loan facility of $26,667 is included in other assets. The loan fee was amortized ratably over the life of the facility.

Note 7 – Members’ and Stockholders’ Equity

On the Reorganization Date, the Company converted from a limited liability company to a corporation and completed its initial public offering. In that offering, the Company sold 5,750,000 shares of common stock, and received net proceeds of $89 million. In addition, the Company exchanged the limited liability company interests for 25,000,000 shares of common stock.

Dividends declared per common share were $0.44 in 2005 and $0.16 in 2004. Dividend equivalents of $0.4 million and $0.1 million were recorded in 2005 and 2004, respectively, on the restricted stock units that are expected to vest. Additionally, in January 2006, the Board of Directors of the Company declared a quarterly dividend of $0.16 per share. The dividend will be payable on March 15, 2006 to the common stockholders of record on February 22, 2006.

During 2005, the Company repurchased 606,472 shares of its common stock in open market purchases at an average price of $45.05 per share. In August 2005, the Company purchased 800,000 shares at a price of $26.22 per share from a former employee pursuant to a previously announced agreement. In addition, in December 2005, the Company agreed to repurchase 195,222 shares at a price of $46.80 per share from another former employee, which is included in accounts payable and accrued expenses at December 31, 2005. That purchase was completed in early 2006. The Company also agreed to purchase an additional 48,806 shares of common stock from the same former employee at a discount from the market price. The transaction was completed in February 2006 at a price per share of $48.75. Additionally, the Company is deemed to have repurchased 39,456 shares of its common stock at $35.78 per share in conjunction with the payment of tax liabilities in respect of stock delivered to our employees in settlement of restricted stock units. In January 2006, the Board of Directors of the Company authorized the repurchase of an additional $40.0 million of common stock in open market transactions.

During 2004, the Company repurchased 9,346 shares of its common stock at an average price of $22.68.

Prior to the Reorganization Date, the members of Holdings were not employees of the Company. Holdings, prior to the Reorganization Date, distributed current profits, net of amounts retained for working capital, investments and other corporate purposes, to its members on a regular basis. Since the Reorganization, amounts paid to the former members of Holdings and the U.K. managing directors are recorded as compensation expense.

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Note 8 – Earnings Per Share

The computations of basic and diluted EPS are set forth below:

				For the Years Ended December 31,
				2005				2004
				(in thousands, except per share amounts
Numerator for basic and diluted EPS – net income available to common stockholders				$	55,532			$	38,316
Denominator for basic EPS – weighted average number of common shares					30,632				28,780
Effect of dilutive securities
Restricted stock units					40				9
Denominator for diluted EPS – weighted average number of common shares and dilutive potential common shares				$	30,672			$	28,789
Earnings per share:
Basic				$	1.81			$	1.33
Diluted				$	1.81			$	1.33

Prior to the Reorganization, the Company was a limited liability company. As a limited liability company it did not have stockholders, and accordingly, no earnings per share information can be provided.

Note 9 – Retirement Plan

In the U.S., the Company sponsors a qualified defined contribution plan (the ‘‘Retirement Plan’’) covering all eligible employees of G&Co and GCP. Employees must be 21 years old to be eligible to participate. The Retirement Plan provides for both employee contributions in accordance with Section 401(k) of the Internal Revenue Code, and employer discretionary profit sharing contributions, subject to statutory limits. Participants may contribute up to 50% of eligible compensation, as defined. The Company provides matching contributions up to $1,000 per employee. The Company incurred costs of $0.5 million, $0.4 million and $0.3 million for contributions to the Retirement Plan for the years ended December 31, 2005, 2004 and 2003, respectively. At December 31, 2005 and 2004, compensation payable included $0.4 million and $0.4 million, respectively, related to contributions due to the Retirement Plan.

GCI also operates a defined contribution pension fund for its employees. The assets of the pension fund are held separately in an independently administered fund. GCI incurred costs of approximately $0.5 million, $0.4 million and $0.4 million for the years ended December 31, 2005, 2004 and 2003, respectively.

Note 10 – Restricted Stock Units

The Company has adopted an equity incentive plan to motivate its employees and allow them to participate in the ownership of its stock. Under the Company’s plan restricted stock units, which represent a right to a future payment equal to one share of common stock, may be awarded to employees, directors and certain other non-employees as selected by the Compensation Committee. Awards granted under the plan generally vest ratably over a period of five years beginning on the first anniversary of the grant date or in full on the fifth anniversary of the grant date. To the extent the restricted stock units are outstanding at the time a dividend is paid on the common stock, a dividend equivalent amount is accrued and periodically paid to the holders of the restricted stock units.

In 2004, the Company issued restricted stock units to employees under the equity incentive plan, primarily in connection with its annual bonus awards, compensation agreements for new hires and at the time of its initial public offering. Of the total restricted stock units outstanding as of

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December 31, 2005 and 2004, respectively, 1,022,010 and 651,188 units were unvested and require future service as a condition for the delivery of the underlying shares of common stock, and 1,699 and 7,639 units, respectively, were vested and do not require future service. In 2005 and 2004, the Company recognized compensation expense, net of forfeitures, of $9.3 million and $3.6 million, respectively, related to the restricted stock units, including $1.4 million and $0.6 million, respectively, related to the vesting of restricted stock units granted to the controlling parties of Barrow Street as part of the Company’s initial public offering.

At December 31, 2005 and 2004, respectively, accounts payable and accrued expenses included $0.0 million and $0.1 million for unpaid dividend equivalents on the restricted stock units.

The activity related to the restricted stock units is set forth below:

				Restricted Stock Units Outstanding
				2005				2004
Outstanding, January 1,					658,827				—
Granted(1)					647,343				722,876
Delivered					(125,367	)			—
Settled for cash					(64,240	)			—
Forfeited					(92,854	)			(64,049	)
Outstanding, December 31,					1,023,709				658,827

(1)	Excludes 427,873 restricted stock units granted to employees subsequent to December 31, 2005 as part of year-end compensation.

Note 11 – Commitments and Contingencies

The Company has entered into certain leases for office space under non-cancelable operating lease agreements that expire on various dates through 2013. The Company has also entered into various operating leases, which are used to obtain office equipment. Under an operating lease for office space, a third party owes the Company a portion of the monthly lease payment. Over the remaining life of this lease, the third party owes the Company approximately $1.5 million. This receivable is secured with a letter of credit issued on behalf of the third party in the amount of $1 million.

As of December 31, 2005, the approximate aggregate minimum future rental payments required were as follows:

2006				$	6,013,000
2007					5,782,000
2008					5,600,000
2009					5,476,000
2010					3,336,000
Thereafter					1,788,000
Total				$	27,995,000

Net rent expense for the years ended December 31, 2005, 2004 and 2003 was approximately $5.0 million, $4.4 million and $3.4 million, respectively.

Diversified U.S. financial institutions issued three unsecured letters of credit on behalf of the Company in the amounts totaling of $4.2 million and $3.7 million at December 31, 2005 and 2004, respectively, for the benefit of a lessor. At December 31, 2005 and 2004, no amounts had been drawn under any of the letters of credit.

At December 31, 2005, the Company had unfunded commitments to future investments in GCP and other merchant banking activities of $83.4 million. Of the remaining unfunded commitments,

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$6.0 million (excluding $1.4 million repaid to the Company related to interim financings and expenses which may be recalled) will be funded as required through March 2007 and $77.4 million will be funded as required through March 2010.

In February 2003, the Company was retained to perform services on behalf of Loral Space & Communications, Inc. (‘‘Loral’’). Loral subsequently sought protection under Chapter 11 of the U.S. Bankruptcy Code (‘‘Chapter 11’’). The fees paid by Loral to Greenhill were approved periodically, on an interim basis, by the court in which Loral's Chapter 11 cases were pending. Loral's plan of reorganization was confirmed in late 2005. In early 2006, representatives of certain Loral securityholders objected to Greenhill's fees. These objections are currently pending in the Bankruptcy Court for the Southern District of New York; Greenhill intends to contest them vigorously. However, if the objections are sustained by the bankruptcy court, Greenhill may be required to repay a portion of its fees. The Company does not believe for the Loral matter will have a material adverse effect on its results of operations.

In the normal course of its business, the Company indemnifies and guarantees certain managing directors, directors, officers and certain other person against specified potential losses in connection with the time they were members or partners of Greenhill & Co. Holdings, LLC or its affiliates. The Company is unable to develop an estimate of the maximum payout under these guarantees and indemnifications. However, management believes that it is unlikely the Company will have to make any material payments under these arrangements, and no liabilities related to these guarantees and indemnifications have been recognized in the consolidated statements of financial condition.

Note 12 – Income Taxes

As a C corporation, the Company is subject to federal, foreign, state and local corporate income taxes. Prior to the Reorganization, the Company operated as a limited liability company, taxable as a partnership and was not subject to U.S. federal or state income taxes, and GCI, as a limited liability partnership, was generally not subject to U.K. income taxes. However, the Company was subject to local taxes on its U.S. earnings. In addition, certain non-U.S. subsidiaries of the Company were subject to income taxes in their local jurisdictions.

The components of the provision for income taxes reflected on the consolidated statements of earnings are set forth below:

				Years Ended December 31,
				2005				2004				2003
				(in thousands)
Current taxes:
U.S. federal					6,189				5,942				—
State and local					1,920				4,817				1,445
Non-U.S.					12,437				6,029				1,592
Total current tax expense					20,546				16,788				3,037
Deferred taxes:
U.S. federal					12,112				3,142				—
State and local					105				(569	)			—
Non-U.S.					(127	)			(656	)			—
Total deferred tax expense					12,090				1,917				—
Total tax expense				$	32,636			$	18,705			$	3,037

In general, the Company plans to reinvest 50% of the earnings of foreign affiliates in those operations and, accordingly, U.S. taxes are only provided on the amounts of earnings in excess of planned investment. In accordance with the Company’s previously mentioned intention and a domestic investment plan pursuant to Section 965 of the Internal Revenue Code, the Company elected to repatriate $14.0 million of foreign earnings in 2005, which resulted in an increase in tax expense of $0.1 million.

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Deferred income taxes reflect the net tax effects of temporary differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when such differences are expected to reverse. Significant components of the Company’s net deferred tax assets and liabilities, which are included in other assets and taxes payable on the Consolidated Statements of Financial Condition, are set forth below:

				As of December 31,
				2005				2004
				(in thousands)
Deferred tax assets:
Compensation and benefits				$	8,764			$	1,690
Depreciation and amortization					879				515
Other financial accruals					841				—
Total deferred tax assets					10,484				2,205
Deferred tax liabilities:
Unrealized gain on investments					23,689				4,122
Total deferred tax liabilities					23,689				4,122
Net deferred tax liability				$	13,205			$	1,917

Based on the Company’s historical taxable income and its expectation for the future, management expects that the deferred tax asset will be realized as offsets to deferred tax liabilities and as offsets to the tax consequences of future taxable income.

A reconciliation of the statutory U.S. federal income tax rate of 35% to the Company’s effective income tax rate is set forth below:

				Year Ended December 31,
				2005				2004				2003
U.S. statutory tax rate					35.0	%			35.0	%			35.0	%
Increase related to state and local taxes, net of U.S. income tax					1.5				4.5				1.8
Rate before one-time events					36.5				39.5				36.8
Rate benefit for period as a limited liability company					—				(9.1	)			(32.5	)
Foreign taxes					0.4				2.4				2.0
Recognition of deferred tax liability upon the change in tax status					—				0.5				—
Other					0.1				(0.5	)			—
Effective income tax rate					37.0	%			32.8	%			6.3	%

The Company’s 2004 effective tax rate includes a rate benefit attributable to the fact that the Company generally was not subject to corporate taxes on its earnings prior to the Reorganization. For the year ended December 31, 2003, the Company’s provision for taxes related to local income taxes.

Note 13 – Regulatory Requirements

Certain subsidiaries of the Company are subject to various regulatory requirements in the United States and United Kingdom, which specify, among other requirements, minimum net capital requirements for registered broker-dealers.

G&Co is subject to the Securities and Exchange Commission’s Uniform Net Capital requirements under Rule 15c3-1 (the ‘‘Rule’’), which specifies, among other requirements, minimum net capital requirements for registered broker-dealers. The Rule requires G&Co to maintain a minimum net capital of the greater of $5,000 or 1/15of aggregate indebtedness, as defined in the Rule. As of December 31, 2005 and 2004, G&Co’s net capital was $3.5 million and $20.1 million, respectively, which exceeded its requirement by $1.6 million and $18.6 million, respectively. G&Co’s aggregate indebtedness to net capital ratio was 7.94 to 1 and 1.13 to 1 at December 31, 2005 and 2004,

F-20

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respectively. Certain advances, distributions and other capital withdrawals of G&Co are subject to certain notifications and restrictive provisions of the Rule.

GCI is subject to capital requirements of the FSA. As of December 31, 2005 and 2004, GCI was in compliance with its local capital adequacy requirements.

In addition, GCP LLC is a registered investments advisor and is subject to oversight by the Securities and Exchange Commission.

Note 14 – Business Information

The Company’s activities as an investment banking firm constitute a single business segment, with two principal sources of revenue:

	•	Financial advisory, which includes advice on mergers, acquisitions, restructuring and similar corporate finance matters; and

	•	Merchant banking, which includes the management of outside capital invested in GCP and the Company’s principal investments in such fund.

The Company has principally earned its revenues from advisory fees earned from clients in large part upon the successful completion of the client’s transaction or restructuring. Financial advisory revenues represented approximately 64%, 86% and 96%, of the Company’s total revenues for the years ended December 31, 2005, 2004 and 2003, respectively.

The Company had separate financial advisory clients in 2004 and 2003 which comprised 10% and 17% of total revenues, respectively. No financial advisory clients exceeded 10% of total revenues in 2005. The Company’s revenues attributable to these clients related to an engagement similar in nature to all of the Company’s other advisory engagements. In addition, the Company had one investment in merchant banking that contributed more than 10% to total revenues in 2005 and none in 2004 and 2003.

The Company’s financial advisory and merchant banking activities are closely aligned and have similar economic characteristics. Generally, the Company’s professionals and employees are treated as a common pool of available resources and the related compensation and other Company costs are not directly attributable to either particular revenue source. In reporting to management, the Company distinguishes the sources of its investment banking revenues between financial advisory and merchant banking. However, management does not evaluate other financial data or operating results such as operating expenses, profit and loss or assets by its financial advisory and merchant banking activities.

Since the financial markets are global in nature, the Company generally manages its business based on the operating results of the enterprise taken as whole, not by geographic region. The Company’s investment banking activities are conducted out of its offices in New York, London, Frankfurt and Dallas. For reporting purposes, the geographic regions are the locations in which the Company retains its employees, the United States and Europe.

F-21

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The following table presents information about the Company by geographic region, after elimination of all significant inter-company accounts and transactions:

				As of or for the Years Ended December 31,
				2005				2004				2003
				(in thousands)
Total revenues
United States				$	142,478			$	95,332			$	76,484
Europe					78,674				56,521				50,195
Total				$	221,152			$	151,853			$	126,679
Income before minority interest and tax
United States				$	55,967			$	38,894			$	43,054
Europe					34,033				24,614				37,607
Total				$	90,000			$	63,508			$	80,661
Total assets
United States				$	175,006			$	134,025			$	33,892
Europe					59,935				42,991				26,746
Total				$	234,941			$	177,016			$	60,638

Note 15 – Subsequent Events

In February 2006, Noble Energy Production Inc. entered into an agreement to purchase United States Exploration, Inc. (‘‘UXP’’) (in which GCP I invested in 2004) for $411 million in cash (subject to certain adjustments and deductions).  Closing of the transaction, which is planned to occur before March 31, 2006, is contingent on the completion of certain events and the satisfaction of other contractual conditions. GCP I currently holds a significant interest in UXP.  If the transaction closes as planned, the Company would recognize in the first quarter of 2006 profit overrides on the realized gain recognized by GCP I as well as investment gains from its allocable share of its investment in GCP I.

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Note 16 – Pro Forma Financial Information (unaudited)

The following are condensed pro forma consolidated statements of income for the years ended December 31, 2005, 2004 and 2003:

								2005				2004				2003
				(a)				actual				pro forma				pro forma
								(in thousands)
Total revenues								$	221,152			$	151,853			$	126,679
Compensation and benefits				(b)					102,441				67,680				57,006
Other expenses									28,711				26,898				18,924
Total expenses									131,152				94,578				75,930
Income before tax and minority interest									90,000				57,275				50,749
Minority interest in net income of affiliates				(c)					1,832				—				—
Income before tax									88,168				57,275				50,749
Tax expense				(d)					32,636				22,948				21,314
Net income								$	55,532			$	34,327			$	29,435
Average common shares outstanding:				(e)
Basic									30,632				28,780				25,000
Diluted									30,672				28,789				25,000
Earnings per share:
Basic								$	1.81			$	1.19			$	1.18
Diluted								$	1.81			$	1.19			$	1.18

(a)

Prior to the initial public offering the Company was a limited liability company and its historical earnings did not fully reflect the compensation expense the Company pays its managing directors or taxes that it pays as a public corporation. Additionally, a portion of the Company’s earnings attributable to its European operations was recorded as minority interest. The Company believes that the pro forma results, which increase compensation expense and tax expense to amounts it expects it would have paid as a corporation and eliminate the minority interest of its European operations, more accurately depict its results as a public company. During the year ended December 31, 2005, the Company operated as a public company for the entire year, and the amounts presented above reflect actual results of operations for that year. The amounts for the year ended December 31, 2004 include the pro forma results of operations as if the Company operated as a public company during the period January 1, 2004 to the date of its public offering combined with the actual results of operations for the period after the public offering. The amounts for the year ended December 31, 2003 reflect pro forma results of operations as if the initial public offering had occurred as of January 1 of that year.

(b)	Because the Company had been a limited liability company prior to the initial public offering, payments for services rendered by its managing directors generally had been accounted for as distributions of members’ capital rather than as compensation expense. As a corporation, the Company includes all payments for services rendered by managing directors in compensation and benefits expense.

		Compensation and benefits expense, reflecting the Company’s conversion to corporate form, consists of cash compensation and non-cash compensation related to the restricted stock units awarded to employees at the time of the Company’s initial public offering consummated on May 11, 2004, as well as any additional restricted stock units awarded in the future. It is the Company’s policy that total compensation and benefits, including that payable to the managing directors, will not exceed 50% of total revenues each year (although the Company retains the ability to change this policy in the future). Adjustments to increase compensation expense for the year ended December 31, 2004 and 2003 of $6.2 million and $29.9 million, respectively, have been

F-23

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		made to record total compensation and benefits expense at 45% of total revenues, consistent with the percentage of compensation paid in 2004 for the period after the initial public offering.

(c)	For the year ended December 31, 2004 and 2003, historical income before tax has been increased by $6.5 million and $32.2 million, respectively, to reflect the elimination on a pro forma basis of minority interests held by the European managing directors in GCI.

(d)

As a limited liability company, the Company was generally not subject to income taxes except in foreign and local jurisdictions. The pro forma provision for income taxes for the year ended December 31, 2004 includes an adjustment of $4.2 million for assumed federal, foreign, state and local income taxes as if the Company were a C Corporation for the period January 1, 2004 to the date of the public offering at an assumed effective rate of 42% combined with the actual tax provision for the period after the public offering. For the year ended December 31, 2003, and adjustment of $18.3 million was made to adjust the Company’s effective tax rate to 42%, reflecting assumed federal, foreign, state and local income taxes as if it were a corporation on January 1, 2003.

(e)

For 2004 the actual and pro forma numbers of common shares outstanding give effect to (i) 25,000,000 shares issued in connection with the reorganization of the Company in conjunction with the initial public offering as if it occurred on January 1, 2004, (ii) the weighted average of the 5,750,000 shares and the common stock equivalents issued in conjunction with and subsequent to the initial public offering and (iii) the 9,346 shares of treasury stock purchased by the Company. For 2003 the pro forma number of common shares outstanding gives effect to the shares issued in connection with the reorganization of the Company as if it occurred on January 1 of that year.

Supplemental Financial Information

Quarterly Results (unaudited)

The following represents the Company’s unaudited quarterly results for the years ended December 31, 2005 and 2004. These quarterly results were prepared in accordance with U.S. generally accepted accounting principles and reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the results.

				Three Months Ended
				March 31, 2005				June 30, 2005				Sept. 30, 2005				Dec. 31, 2005
				(in millions, expect per share data)
Total revenues				$	43.9			$	29.5			$	66.0			$	81.7
Operating expenses					26.6				19.5				37.5				47.5
Income before tax and minority interest					17.3				10.0				28.5				34.2
Minority interest in net income of affiliates					0.1				0.1				0.7				0.9
Provision for taxes					6.4				3.6				10.0				12.6
Net income				$	10.8			$	6.3			$	17.8			$	20.7
Earnings per share
Basic				$	0.35			$	0.20			$	0.58			$	0.69
Diluted					0.35				0.20				0.58				0.69
Dividends declared per common share				$	0.10			$	0.10			$	0.12			$	0.12

F-24

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				Three Months Ended
				March 31, 2004				June 30, 2004				Sept. 30, 2004				Dec. 31, 2004
				(in millions, expect per share data)
Total revenues				$	29.6			$	34.8			$	36.5			$	50.9
Operating expenses					14.2				19.3				23.2				31.6
Income before tax and minority interest					15.4				15.5				13.3				19.3
Minority interest in net income of affiliates					4.4				2.1				—				—
Provision for taxes					0.5				5.6				5.1				7.5
Net income				$	10.5			$	7.8			$	8.2			$	11.8
Earnings per share
Basic				$	0.42			$	0.27			$	0.27			$	0.38
Diluted					0.42				0.27				0.27				0.38
Dividends declared per common share				$	—			$	—			$	0.08			$	0.08

2.    Financial Statement Schedules

Combined Financial Statements of Greenhill Capital Partners, L.P., Greenhill Capital Partners (Cayman), L.P., Greenhill Capital Partners (Executives), L.P. and Greenhill Capital, L.P.

Report of Independent Registered Public Accounting Firm				S-4
Combined Statements of Assets, Liabilities and Partners’ Capital				S-5
Combined Statements of Operations				S-6
Combined Statements of Changes in Partners’ Capital				S-7
Combined Statements of Cash Flows				S-8
Combined Schedules of Investments				S-9
Notes to Combined Financial Statements				S-12

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3.    Exhibits

EXHIBIT INDEX

Exhibit Number				Description
1.1				Form of Underwriting Agreement.
2.1				Reorganization Agreement and Plan of Merger of Greenhill & Co. Holdings, LLC (incorporated by reference to Exhibit 2.1 to the Registrant’s registration statement on to Form S-1/A (No. 333-113526) filed on April 30, 2004).
3.1				Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Registrant’s registration statement on to Form S 1/A (No. 333-113526) filed on May 5, 2004).
3.2				Amended and Restated By-Laws (incorporated by reference to Exhibit 3.2 to the Registrant’s registration statement on to Form S-1/A (No. 333-113526) filed on May 5, 2004).
4.1				Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registrant’s registration statement on to Form S-1/A (No. 333113526) filed on April 30, 2004).
10.1				Form of Greenhill & Co, Inc. Transfer Rights Agreement (incorporated by reference to Exhibit 10.1 to the Registrant’s registration statement on to Form S-1/A (No. 333-113526) filed on April 30, 2004).
10.2				Form of Greenhill & Co., Inc. Employment, Non-Competition and Pledge Agreement (incorporated by reference to Exhibit 10.2 to the Registrant’s registration statement on to Form S-1/A (No. 333-113526) filed on April 20, 2004).
10.4				Form of U.K. Non-Competition and Pledge Agreement (incorporated by reference to Exhibit 10.4 to the Registrant’s registration statement on to Form S-1/A (No. 333-113526) filed on April 20, 2004).
10.5				Equity Incentive Plan (incorporated by reference to Exhibit 10.5 to the Registrant’s registration statement on to Form S-1/A (No. 333-113526) filed on April 20, 2004).
10.6				Form of Indemnification Agreement (incorporated by reference to Exhibit 10.6 to the Registrant’s registration statement on to Form S-1/A (No. 333113526) filed on April 30, 2004).
10.7				Tax Indemnification Agreement (incorporated by reference to Exhibit 10.7 to the Registrant’s registration statement on to Form S-1/A (No. 333-113526) filed on April 20, 2004).
10.8				Loan Agreement (Line of Credit) dated as of December 31, 2003 between First Republic Bank and Greenhill & Co. Holdings, LLC (incorporated by reference to Exhibit 10.8 to the Registrant’s registration statement on to Form S-1/A (No. 333-113526) filed on April 20, 2004).
10.9				Security Agreement dated as of December 31, 2003 between Greenhill Fund Management Co., LLC and First Republic Bank (incorporated by reference to Exhibit 10.9 to the Registrant’s registration statement on to Form S-1/A (No. 333-113526) filed on April 20, 2004).

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Exhibit Number				Description
10.10				Agreement for Lease dated February 18, 2000 between TST 300 Park, L.P. and Greenhill & Co., LLC (incorporated by reference to Exhibit 10.10 to the Registrant’s registration statement on to Form S-1/A (No. 333-113526) filed on April 30, 2004).
10.11				First Amendment of Lease dated June 15, 2000 between TST 300 Park, L.P. and Greenhill & Co., LLC (incorporated by reference to Exhibit 10.11 to the Registrant’s registration statement on to Form S-1/A (No. 333-113526) filed on April 30, 2004).
10.12				Agreement for Lease dated April 21, 2000 between TST 300 Park, L.P. and McCarter & English, LLP (incorporated by reference to Exhibit 10.12 to the Registrant’s registration statement on to Form S-1/A (No. 333-113526) filed on April 30, 2004).
10.13				Assignment and Assumption of Lease dated October 3, 2003 between McCarter & English, LLP and Greenhill & Co., LLC (incorporated by reference to Exhibit 10.13 to the Registrant’s registration statement on to Form S-1/A (No. 333-113526) filed on April 30, 2004).
10.14				Sublease Agreement dated January 1, 2004 between Greenhill Aviation Co., LLC and Riversville Aircraft Corporation(incorporated by reference to Exhibit 10.14 to the Registrant’s registration statement on to Form S-1/A (No. 333-113526) filed on April 30, 2004).
10.15				Agreement of Limited Partnership of GCP, L.P. dated as of June 29, 2000 (incorporated by reference to Exhibit 10.15 to the Registrant’s registration statement on to Form S-1/A (No. 333-113526) filed on April 30, 2004).
10.16				GCP, LLC Limited Liability Company Agreement dated as of June 27, 2000 (incorporated by reference to Exhibit 10.16 to the Registrant’s registration statement on to Form S-1/A (No. 333-113526) filed on April 30, 2004).
10.17				Amended and Restated Agreement of Limited Partnership of Greenhill Capital, L.P., dated as of June 30,2000 (incorporated by reference to Exhibit 10.17 to the Registrant’s registration statement on to Form S-1/A (No. 333-113526) filed on April 30, 2004).
10.18				Amendment to the Amended and Restated Agreement of Limited Partnership of Greenhill Capital, L.P. dated as of May 31, 2004 (incorporated by reference to Exhibit 10.18 to the Registrant’s registration statement on to Form S-1/A (No. 333-113526) filed on April 30, 2004).
10.19				Amended and Restated Agreement of Limited Partnership of GCP Managing Partner, L.P. dated as of May 31, 2004 (incorporated by reference to Exhibit 10.19 to the Registrant’s registration statement on to Form S-1/A (No. 333-113526) filed on April 30, 2004).
10.20				Form of Assignment and Subscription Agreement dated as of January 1, 2004 (incorporated by reference to Exhibit 10.20 to the Registrant’s registration statement on to Form S-1/A (No. 333-113526) filed on April 30, 2004).
10.21				Form of Greenhill & Co., Inc Equity Incentive Plan Restricted Stock Unit Award Notification – Five Year Ratable Vesting (incorporated by reference to Exhibit 10.21 to the Registrant’s Quarterly Report on Form 10-Q for the period ended September 30, 2004).
10.22				Form of Greenhill & Co., Inc Equity Incentive Plan Restricted Stock Unit Award Notification – Five Year Cliff Vesting (incorporated by reference to Exhibit 10.22 to the Registrant’s Quarterly Report on Form 10-Q for the period ended September 30, 2004).

F-27

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Exhibit Number				Description
10.23				Form of Greenhill & Co., Inc. Equity Incentive Plan Restricted Stock Unit Award Notification – Five Year Ratable Vesting (incorporated by reference to Exhibit 10.23 to the Registrant’s registration statement on Form S-1/A (No. 333-112526) filed on April 30, 2004).
10.24				Form of Greenhill & Co., Inc. Equity Incentive Plan Restricted Stock Unit Award Notification – Five Year Cliff Vesting (incorporated by reference to Exhibit 10.24 to the Registrant’s registration statement on Form S-1/A (No. 333-112526) filed on April 30, 2004).
10.25				Amended and Restated Agreement of Limited Partnership of Greenhill Capital Partners (Employees) II, L.P. dated as of March 31, 2005 (incorporated by reference to Exhibit 99.2 of the Registrant’s report on Form 8-K filed on April 5, 2005).
10.26				Amended and Restated Agreement of Limited Partnership of GCP Managing Partner II, L.P. dated as of March 31, 2005 (incorporated by reference to Exhibit 99.3 of the Registrant’s report on Form 8-K filed on April 5, 2005).
10.27				Form of Agreement for Sublease by and between Wilmer, Cutler, Pickering, Hale & Dorr LLP and Greenhill & Co., Inc. (incorporated by reference to Exhibit 10.27 to the Registrant’s Quarterly Report on Form 10-Q for the period ended June 30, 2005)
10.28				Form of Greenhill & Co. Equity Incentive Plan Restricted Stock Award Notification – Five Year Ratable Vesting (incorporated by reference to Exhibit 10.28 to the Registrant’s Quarterly Report on Form 10-Q for the period ended September 30, 2005)
10.29				Form of Senior Advisor Employment and Non-Competition Agreement (incorporated by reference to Exhibit 10.29 to the Registrant’s Quarterly Report on Form 10-Q for the period ended September 30, 2005)
10.30*				Form of Agreement for the Sale of the 7th Floor, Lansdowne House, Berkeley Square, London, among Pillar Property Group Limited, Greenhill & Co. International LLP, Greenhill & Co., Inc. and Union Property Holdings (London) Limited
10.31*				Loan Agreement dated as of January 31, 2006 by and between First Republic Bank and Greenhill & Co., Inc.
21.1*				List of Subsidiaries of the Registrant
23.1*				Consent of Ernst & Young LLP
31.1*				Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes- Oxley Act of 2002
31.2*				Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes- Oxley Act of 2002
32.1*				Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*				Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

*	Filed herewith.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: March 1, 2006

GREENHILL & CO., INC.
By:				/s/ ROBERT F. GREENHILL
				Robert F. Greenhill
				Chairman and Chief Executive Officer

S-1

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Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.

Signature		Capacity		Date
/s/ ROBERT F. GREENHILL		Chairman, Chief Executive Officer and Director (Principal Executive Officer)		March 1, 2006
Robert F. Greenhill
/s/ JOHN D. LIU		Chief Financial Officer (Principal Financial Officer)		March 1, 2006
John D. Liu
/s/ HAROLD J. RODRIGUEZ, JR.		Managing Director – Finance, Regulation & Operations (Principal Accounting Officer)		March 1, 2006
Harold J. Rodriguez, Jr.
/s/ SCOTT L. BOK		Director		March 1, 2006
Scott L. Bok
/s/ SIMON A. BORROWS		Director		March 1, 2006
Simon A. Borrows
/s/ JOHN C. DANFORTH		Director		March 1, 2006
John C. Danforth
/s/ STEVEN F. GOLDSTONE		Director		March 1, 2006
Steven F. Goldstone
/s/ STEPHEN L. KEY		Director		March 1, 2006
Stephen L. Key
/s/ ISABEL V. SAWHILL		Director		March 1, 2006
Isabel V. Sawhill

S-2

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Item 15C.    Financial Statement Schedules

Combined Financial Statements of Greenhill Capital Partners, L.P., Greenhill Capital Partners (Cayman), L.P., Greenhill Capital Partners (Executives), L.P. and Greenhill Capital, L.P.

S-3

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Report of Independent Registered Public Accounting Firm

To the Partners of Greenhill Capital Partners Private Equity Fund I:

We have audited the accompanying combined statements of assets, liabilities and partners’ capital of Greenhill Capital Partners Private Equity Fund I (comprised of Greenhill Capital Partners, L.P., Greenhill Capital Partners (Cayman), L.P., Greenhill Capital Partners (Executives), L.P. and Greenhill Capital, L.P.) (the ‘‘Partnerships’’), including the combined schedules of investments, as of December 31, 2005 and 2004, and the related combined statements of operations, changes in partners’ capital and cash flows for each of the three years in the period ended December 31, 2005. These combined financial statements are the responsibility of the Partnerships’ General Partner. Our responsibility is to express an opinion on these combined financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Partnerships’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnerships’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by the General Partner, as well as evaluating the overall combined financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of Greenhill Capital Partners Private Equity Fund I at December 31, 2005 and 2004, and the results of its operations, changes in its partners’ capital and its cash flows for each of the three years in the period ended December 31, 2005, in conformity with accounting principles generally accepted in the United States.

ERNST & YOUNG LLP

New York, New York
February 10, 2006

S-4

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Greenhill Capital Partners Private Equity Fund I
Combined Statements of Assets, Liabilities and Partners’ Capital

As of December 31,

				2005				2004
Assets
Investments, at estimated fair value as determined by the General Partner (cost of $197,834,023 in 2005 and $182,545,502 in 2004, respectively)				$	860,973,628			$	552,947,539
Cash and cash equivalents					41,023,626				2,700,701
Restricted cash					4,692,320				—
Dividend receivable					350,201				1,607
Other assets					4,135,279				431,785
Total assets				$	911,175,054			$	556,081,632
Liabilities and Partners’ Capital
Note payable				$	70,000,000			$	—
Revolving loan					—				12,600,000
Due to affiliates					155,841				237,153
Accrued expenses and other liabilities					2,079,642				170,211
Total liabilities					72,235,483				13,007,364
Partners’ capital:
Limited partners					723,411,868				481,771,103
General partners					115,527,703				61,303,165
Total partners’ capital					838,939,571				543,074,268
Total liabilities and partners’ capital				$	911,175,054			$	556,081,632

The accompanying notes are an integral part of the combined financial statements.

S-5

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Greenhill Capital Partners Private Equity Fund I
Combined Statements of Operations

Years Ended December 31,

				2005				2004				2003
Investment Income
Dividend income				$	32,390,910			$	5,634,437			$	250,164
Interest income					847,834				301,412				586,559
					33,238,744				5,935,849				836,723
Expenses
Management fee					2,339,258				3,709,209				4,472,695
Interest expense					5,013,557				16,053				—
Other expenses					1,628,789				1,212,227				304,273
					8,981,604				4,937,489				4,776,968
Net investment income					24,257,140				998,360				(3,940,245	)
Net Realized and Unrealized Gain on Investments
Net realized gains on investments					160,856,440				9,486,347				(11,763,278	)
Net change in unrealized gains on investments					296,243,104				368,329,873				16,855,634
					457,099,544				377,816,220				5,092,356
Net income				$	481,356,684			$	378,814,580			$	1,152,111

The accompanying notes are an integral part of the combined financial statements.

S-6

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Greenhill Capital Partners Private Equity Fund I
Combined Statements of Changes in Partners’ Capital

Years Ended December 31,

				Limited Partners				General Partners				Total
Partners’ capital, January 1, 2003				$	136,445,540			$	1,506,595			$	137,952,135
Contributed capital					100,639,467				1,034,880				101,674,347
Distributions					(19,018,126	)			(195,471	)			(19,213,597	)
Net income					1,091,374				60,737				1,152,111
Partners’ capital, December 31, 2003					219,158,255				2,406,741				221,564,996
Contributed capital					51,455,545				530,391				51,985,936
Distributions					(108,179,153	)			(1,112,091	)			(109,291,244	)
Net income					319,336,456				59,478,124				378,814,580
Partners’ capital, December 31, 2004					481,771,103				61,303,165				543,074,268
Contributed capital					84,334,964				869,655				85,204,619
Distributions					(243,742,906	)			(26,953,094	)			(270,696,000	)
Net income					401,048,707				80,307,977				481,356,684
Partners’ capital, December 31, 2005				$	723,411,868			$	115,527,703			$	838,939,571

The accompanying notes are an integral part of the combined financial statements.

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Greenhill Capital Partners Private Equity Fund I
Combined Statements of Cash Flows

Years Ended December 31,

				2005				2004				2003
Operating activities:
Net income				$	481,356,684			$	378,814,580			$	1,152,111
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Net realized and unrealized gain on investments					(457,099,544	)			(377,816,220	)			(5,092,356	)
Changes in operating assets and liabilities:
Purchase of investments					(67,817,827	)			(64,763,919	)			(77,342,029	)
Proceeds from sale of investments					175,811,852				5,062,846				4,484,804
Distributions from investments					37,573,989				73,940,973				9,100,717
Dividend receivable					(348,594	)			1,607				63,206
Other assets					(198,053	)			2,494,128				(2,819,020	)
Accrued expenses and other liabilities					1,909,431				166,183				(78,307	)
Due to affiliates					(81,312	)			153,521				(118,093	)
Net cash provided by (used in) operating activities					171,106,626				18,053,699				(70,648,967	)
Financing activities:
Proceeds from note payable					70,000,000				—				—
Borrowings from revolving loan					27,752,208				12,600,000				—
Repayment of revolving loan					(40,352,208	)			—				—
Contributions from partners					85,204,619				51,985,936				101,674,347
Distributions to partners					(270,696,000	)			(109,291,244	)			(19,213,597	)
Net cash provided by (used in) financing activities					(128,091,381	)			(44,705,308	)			82,460,750
Net change in cash and cash equivalents					43,015,245				(26,651,609	)			11,811,783
Cash and cash equivalents, beginning of year					2,700,701				29,352,310				17,540,527
Cash and cash equivalents, end of year(1)				$	45,715,946			$	2,700,701			$	29,352,310
Supplemental disclosure of cash flow information:
Cash paid for interest				$	4,396,649			$	—			$	—

(1)	Includes restricted cash of $4,692,320.

The accompanying notes are an integral part of the combined financial statements.

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Greenhill Capital Partners Private Equity Fund I
Combined Schedules of Investments

As of December 31,

				2005												2004
Industry/Security Description				Cost				Estimated Fair Value				% of Partners’ Capital				Cost				Estimated Fair Value				% of Partners’ Capital
Energy
Energy Transfer Equity, L.P.
3.9% general partner interest				$	—			$	52,337,354							$	—			$	—
715,138 equity units					—				—								—				33,868,916
4.1% general partner interest					—				—								—				16,362,758
					—				52,337,354				6.2	%			—				50,231,674				9.3	%
Triana Energy Holdings, LLC
55,998 equity units – Class A					—				—				0.0	%			8,064,818				25,363,800				4.7	%
Everlast Energy, LLP
487,500 shares of common units					—				—				0.0	%			—				21,690,663				4.0	%
Hercules Offshore, Inc.(1)
5,505,419 shares of common stock					15,729,773				140,768,058								—				—
19,661 membership interest					—				—								19,661,000				19,661,000
					15,729,773				140,768,058				16.8	%			19,661,000				19,661,000				3.6	%
United States Exploration, Inc.
195,000 equity units – Class A					19,657,302				35,189,788				4.2	%			19,657,302				19,657,302				3.6	%
Exco Holdings, Inc.(2)
2,344,482 shares in 2005, 6,766,667 shares in 2004 of common stock					5,175,000				12,309,390								10,350,000				17,105,355
					5,175,000				12,309,390				1.5	%			10,350,000				17,105,355				3.2	%
MxEnergy, Inc.
11,097 shares of common stock					305,167				305,167								—				—
234,082 Series A convertible preferred stock					5,000,000				5,000,000								5,000,000				5,000,000
					5,305,167				5,305,167				0.6	%			5,000,000				5,000,000				0.9	%
LMP Exploration Holdings, L.P.
62.3% capital sharing percentage interest					16,830,081				16,830,081				2.0	%			4,986,747				4,986,747				0.9	%
LMP Exploration Holdings GP, LLC
63.0% capital sharing percentage interest					170,000				170,000				0.0	%			50,371				50,371				0.0	%
Peregrine Oil & Gas, LP
35.1% capital sharing percentage interest					6,774,300				6,774,300				0.8	%			751,140				751,140				0.1	%
Peregrine GP. LLC
35.8% capital sharing percentage interest					68,427				68,427				0.0	%			7,587				7,587				0.0	%
Double D Energy, Ltd.
22,881 shares of Class A preferred units					364,191				540,818				0.1	%			523,341				523,341				0.1	%
Total Energy					70,074,241				270,293,383				32.2	%			69,052,306				165,028,980				30.4	%

(1)	Publicly traded investments.

(2)	2004 share amounts reflect actual shares outstanding prior to conversion.

The accompanying notes are an integral part of the combined financial statements.

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Greenhill Capital Partners Private Equity Fund I
Combined Schedules of Investments

As of December 31,

				2005												2004
Industry/Security Description				Cost				Estimated Fair Value				% of Partners’ Capital				Cost				Estimated Fair Value				% of Partners’ Capital
Financial Services
Heartland Payment Systems, Inc.(1)
6,332,084 shares of common stock					18,958,521				109,928,739								—				—
4,911,280 shares of preferred stock					—				—								25,844,815				72,405,728
					18,958,521				109,928,739				13.1	%			25,844,815				72,405,728				13.3	%
Republic Insurance Group(1)(2)
39,252 shares of preferred stock					—				—								39,252,000				41,467,031
2,819,639 shares in 2005, 298,471 shares in 2004 of common stock					16,492,805				39,283,211								—				30,284,287
					16,492,805				39,283,211				4.7	%			39,252,000				71,751,318				13.2	%
Peach Holdings LLC
787,500 Series A convertible preferred units					14,023,793				18,112,500				2.1	%			14,023,793				14,023,793				2.6	%
Tammac Holdings Corporation
15,000,000 Series A shares					15,000,000				15,000,000								—				—
Bridge Loan (8% through March 31, 2006; 12% thereafter until maturity date of March 31, 2007)					4,285,714				4,285,714								—				—
					19,285,714				19,285,714				2.3	%			—				—				0.0	%
Total Financial Services					68,760,833				186,610,164				22.2	%			79,120,608				158,180,839				29.1	%
Telecommunications
Global Signal Inc.(1)(3)
Interest Rate Agreement(4)					180,000				337,960								—				—
9,598,664 shares in 2005, 8,422,194 in 2004 of common stock (including options to purchase 128,800 shares of common stock, exercisable through June 8, 2014 at $18.00 per share)					34,580,170				396,642,998								4,584,297				221,517,173
					34,760,170				396,980,958				47.3	%			4,584,297				221,517,173				40.8	%
Berliner Communications, Inc.
Promissory note, 0%, due September 30, 2006					362,976				362,976								658,639				658,639
7,566,312 shares of common stock (including warrants to purchase 400,000 shares of common stock, exercisable through December 8, 2008 at $0.10 per share)					7,350,337				—								7,350,337				—
					7,713,313				362,976				0.1	%			8,008,976				658,639				0.1	%

(1)	Publicly traded investments.

(2)	2004 share amounts reflect actual shares outstanding prior to conversion.

(3)	A majority of the Partnerships’ shares (8,422,194) are held in a segregated account, of which substantially all (8,383,234) are held as collateral for loan outstanding (See Note 7).

(4)	$70 million notional amount, maturity date August 31, 2006, for one month LIBOR capped at 4% (See Note 7).

The accompanying notes are an integral part of the combined financial statements.

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Greenhill Capital Partners Private Equity Fund I
Combined Schedules of Investments

As of December 31,

				2005												2004
Industry/Security Description				Cost				Estimated Fair Value				% of Partners’ Capital				Cost				Estimated Fair Value				% of Partners’ Capital
Telecommunications cont.
eTel Group Limited
307,692 Euro Zero Coupon Unsecured Loan Note					929,300				—								929,300				—
3,726,988 shares of common stock					9,792,790				—								9,792,790				—
					10,722,090				—				0.0	%			10,722,090				—				0.0	%
Total Telecommunications					53,195,573				397,343,934				47.4	%			23,315,363				222,175,812				40.9	%
Business Services
MedAssets, Inc.
555,556 shares of preferred stock – Series D					5,000,004				5,000,004								5,000,004				5,000,004
214,004 shares of common stock					2,140				2,140								2,140				2,140
					5,002,144				5,002,144				0.6	%			5,002,144				5,002,144				0.9	%
Axiom Legal Systems, Inc.
1,644,099 shares in 2005, 2,083,333 shares in 2004 of preferred stock – Series A					801,232				1,724,003								1,015,288				507,644
2,898,550 shares of preferred stock – Series A Prime					—				—								2,021,040				1,010,520
					801,232				1,724,003				0.2	%			3,036,328				1,518,164				0.3	%
Perficient Inc.(1)
(formerly Meritage Technologies, Inc.)
197,525 shares of common stock					—				—				0.0	%			3,018,753				1,041,600				0.2	%
Total Business Services					5,803,376				6,726,147				0.8	%			11,057,225				7,561,908				1.4	%
Total Investments				$	197,834,023			$	860,973,628				102.6	%		$	182,545,502			$	552,947,539				101.8	%

(1)	Publicly traded investments.

The accompanying notes are an integral part of the combined financial statements.

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Greenhill Capital Partners Private Equity Fund I
Notes to the Combined Financial Statements

Note 1 – Organization and Basis of Presentation

Greenhill Capital Partners, L.P. (the ‘‘Delaware Fund’’) was formed as a Delaware limited partnership on May 2, 2000 and commenced operations on June 30, 2000. The primary business objective of the partnership is to achieve superior medium- to long-term capital growth principally through a diversified portfolio of private equity and equity related investments.

The combined financial statements include the accounts of the Delaware Fund, Greenhill Capital Partners (Cayman), L.P. (the ‘‘Off-Shore Fund’’), Greenhill Capital Partners (Executives), L.P. (the ‘‘Executive Fund), and Greenhill Capital, L.P. (the ‘‘Employee Fund’’). The Delaware Fund, the Off-Shore Fund, the Executive Fund and the Employee Fund are collectively referred to as ‘‘Greenhill Capital Partners Private Equity Fund I’’ or the ‘‘Partnerships’’ and have ownership interests representing 61.5%, 9.3%, 9.7% and 19.5% respectively, of the combined net assets shown on the combined financial statements at December 31, 2005. The combined financial statements also include the accounts of GCP SPV1, LLC a wholly owned and consolidated subsidiary of the Partnerships (See Note 7).

The managing general partner of the Partnerships is GCP Managing Partner, L.P. GCP Managing Partner, L.P. is responsible for managing the Partnerships’ investments, subject to the approval of GCP, L.P., the other general partner of the Partnerships, with respect to investments made prior to December 31, 2003. GCP Managing Partner, L.P. and GCP, L.P. are subject to removal by a simple majority of unaffiliated third-party investors of the Partnerships. GCP Managing Partner, L.P. and GCP, L.P. are collectively known as the ‘‘General Partner.’’

The Off-Shore Fund, the Executive Fund and the Employee Fund were organized as limited partnerships with substantially the same terms as the Delaware Fund and are also under the common management of the General Partner. The Partnerships will generally purchase an interest in each portfolio company on a pro rata basis and on equivalent economic terms.

The Partnerships will terminate on June 30, 2010, unless extended at the option of the General Partner for one year, and thereafter with Advisory Committee approval for an additional one-year period.

The combined financial statements are prepared in conformity with accounting principles generally accepted in the United States and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the combined financial statements and the reported amounts of revenues and expenses during the reporting period. Investments are stated at estimated fair value, and any unrealized appreciation or depreciation is included in combined statement of operations. Actual results could differ from those estimates.

Note 2 – Summary of Significant Accounting Policies

Cash and Cash Equivalents

Cash and cash equivalents consist of cash, money market funds and liquid debt instruments such as commercial paper with maturities of three months or less from the date of purchase. Cash and cash equivalents are stated at cost, which approximates fair value. The Partnerships’ practice is to invest cash with financial institutions and lenders that have acceptable credit ratings and to limit the amount of credit exposure to any one financial institution or lender. All highly liquid investments with a maturity of less than ninety days at the time of purchase are considered to be cash equivalents.

Investment Income

Investment income is comprised of interest and dividend income. Interest income on cash and cash equivalents is recognized when earned. Interest income on debt securities of portfolio companies is recognized on the accrual basis, unless collectibility is uncertain. Dividends on publicly traded

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securities are recorded on the ex-dividend date. Distributions that represent returns of capital are recorded as a reduction of the cost of the security.

Income Taxes

Since the Partnerships are not subject to income taxes, there is no provision for income taxes in the combined financial statements. The partners include their allocable share of partnership income and loss in their respective tax returns.

Investment Valuations

Investments consist primarily of preferred and common equity interests and partnership interests in publicly and non-publicly traded companies. Investments held by the Partnerships are recorded at estimated fair value as determined by the General Partner. Investments in privately held companies are initially carried at cost as an approximation of fair value and generally adjusted after being held by the Partnerships for one year to the estimated fair value as determined by the General Partner after giving consideration to the cost of the security, the pricing of other sales of securities by the portfolio company, the price of securities of other companies comparable to the portfolio company, purchase multiples paid in other comparable third-party transactions, the original purchase price multiple, market conditions, liquidity, operating results and other financial data. Discounts are generally applied to the Partnerships’ privately held investments to reflect the lack of liquidity and other transfer restrictions. Investments in publicly traded securities are valued using quoted market prices discounted for any legal or contractual restrictions on sale. Because of the inherent uncertainty of valuations as well as the discounts applied, the estimated fair values of investment in privately held companies may differ significantly from the values that would have been used had a ready market for the securities existed. The values at which the investments are carried are adjusted to fair value at the end of each quarter and volatility in general economic conditions, stock markets and commodity prices may result in significant changes in the fair value of the investments. Unrealized appreciation or depreciation resulting from changes in fair value of investments is included in the combined statement of operations.

Use of Estimates

The combined financial statements include estimates and assumptions made by the General Partner that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Note 3 – Investments

Purchases

During 2005, the Partnerships made investments of $19.3 million in Tammac Holdings Corporation (‘‘Tammac’’), and follow-on investments of $30.0 million in Global Signal Inc. (‘‘GSL’’), $12.1 million in LMP Exploration Holdings, L.P. and LMP Exploration Holdings GP, LLC (collectively ‘‘LMP’’), $6.1 million in Peregrine Oil & Gas, LP and Peregrine Oil & Gas GP, LLC (collectively ‘‘Peregrine’’), and $0.3 million in MxEnergy, Inc.

During 2004, the Partnerships made investments of $19.7 million in United States Exploration, Inc. (‘‘UXP’’), $19.7 million in Hercules Offshore, LLC (‘‘Hercules’’), $14.0 million in Peach Holdings LLC (‘‘Peachtree’’), $5.0 million in MxEnergy, Inc., $5.0 million in LMP, $0.8 million in Peregrine, and follow-on investment of $0.6 million in Heartland Payment Systems, Inc. (‘‘Heartland’’).

During 2003, the Partnerships made investments of $47.5 million in Republic Insurance Group (‘‘Republic’’), $10.4 million in EXCO Holdings, Inc. (‘‘EXCO’’), $9.7 million in Everlast Energy, LLP (‘‘Everlast’’), $8.1 million in Triana Energy Holdings, LLC (‘‘Triana’’), follow-on investment of $1.2 million in Heartland and $0.4 million in Double D Energy, Ltd. (‘‘Double D’’).

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Changes in Unrealized Investment Valuations

During 2005, the Partnerships recorded unrealized gains due to the change in the market value of securities of $145.2 million in GSL, $125.0 million in Hercules, and $44.4 million in Heartland. The Partnerships recorded unrealized gains due to a change in the carrying value of the investment of $15.5 million in UXP, $4.0 million in Peachtree, $2.1 million in Energy Transfer Equity, L.P. (‘‘ETE’’) and $1.0 million in Axiom Legal Systems, Inc. (‘‘Axiom’’). The Partnerships also reversed previously recognized net unrealized gains from various investments of $41.0 million.

During 2004, the Partnerships recorded unrealized gains due to a change in the carrying value of the investment of $216.9 million in GSL, $32.7 million in Heartland, $32.5 million in Republic, $27.2 million in ETE, $21.7 million in Everlast, $17.3 million in Triana, and $6.8 million in EXCO. The Partnerships also reversed previously recognized unrealized losses from various investments of $13.2 million.

During 2003, the Partnerships recorded unrealized gains due to a change in the carrying value of the investment of $23.0 million in ETC and $13.8 million in Heartland. The Partnerships recorded unrealized losses of $12.0 million in Perficient, $10.7 million in eTel Group Limited (‘‘eTel’’) and $7.3 million in Berliner Communications, Inc. (‘‘Berliner’’). The Partnerships also reversed previously recognized net unrealized losses from various investments of $10.0 million.

Sale Proceeds, Realizations and other Distributions

During 2005, the Partnerships received proceeds from the sale of various investments of $37.5 million in Triana ($29.5 million recorded as realized gain and $8.0 million recorded as a return of capital), $27.4 million in Everlast (recorded as realized gain), and $1.4 million in Perficient Inc. (‘‘Perficient’’) ($1.4 million recorded as a return of capital and $1.6 million recorded as realized loss). In addition, Everlast and Triana retained the estimated value of amounts held in escrow of $2.1 million and $1.4 million, respectively, in cash proceeds to cover expenses and unforeseen liabilities, which the Partnerships anticipate recovering once the escrow periods terminate in June 2006. These escrow receivables are reflected in other assets as of December 31, 2005.

During 2005, the Partnerships received proceeds from the partial sale of various investments of $38.5 million in Heartland ($31.6 million recorded as realized gain and $6.9 million recorded as a return of capital), $25.6 million in Hercules ($21.7 million recorded as realized gain and $3.9 million recorded as return of capital), $25.4 million in Republic ($2.6 million recorded as dividend income and $22.8 million recorded as return of capital), $17.6 million in EXCO ($12.4 million recorded as realized gain and $5.2 million recorded as return of capital), and $5.0 million in Axiom ($2.8 million recorded as realized gain and $2.2 recorded as a return of capital).

During 2005, the Partnerships received distributions from investments of $28.4 million from ETE ($25.9 million recorded as realized gain and $2.5 million recorded as dividend income), $15.8 million from GSL (recorded as dividend income), $11.1 million from a recapitalization of Triana (recorded as realized gain), $8.1 million from Republic ($8.1 million recorded as dividend income), $2.5 million from Peachtree (recorded as dividend income), $0.9 million from ETE (recorded as dividend income), $0.3 million from Berliner (recorded as return on capital), $0.2 million from Double D (recorded as return of capital) and $0.2 million from Tammac (recorded as interest income).

During 2004, the Partnerships received distributions from investments of $40.3 million from GSL ($3.9 million recorded as dividend income and $36.4 million recorded as return of capital), $20.0 million from Everlast ($10.2 million recorded as realized gain and $9.8 million recorded as return of capital), $16.7 million from ETE ($5.0 million recorded as realized gain, $1.7 million recorded as dividend income and $10.0 million recorded as return of capital), $3.3 million from Heartland ($2.4 million recorded as realized gain and $0.9 million recorded as return of capital), $0.2 million from Berliner, $4.1 million from the sale of Perficient ($4.9 million recorded as realized loss), and $100 from the sale of Shelflink.com, Inc. (‘‘Shelflink’’) ($3.2 million recorded as a realized loss).

During 2003, the Partnerships received proceeds from the partial sale of various investments of $4.2 million in GSL ($0.8 million recorded as realized gain and $3.4 million recorded as return of

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capital), $0.9 million in Berliner (recorded as realized loss), $0.3 million in Nervewire ($2.9 million recorded as realized loss), $349 from the sale of Cigna CDO ($8.8 million recorded as realized loss) and a distribution of $8.2 million from Republic (recorded as return of capital).

Note 4 – Allocation of Profit and Loss

Each item of income, gain, loss deduction or expenses included in the determination of net income or loss is allocated among each of the partners in a manner consistent with the corresponding method of distribution for each partner.

Note 5 – Distributions

Distributions will be made to each partner in accordance with their respective partnership agreement. In general, a limited partner’s share of current income from dividends and interest (net of expenses) and net proceeds attributable to the disposition of investments by the partnership will be distributed first, 100% to such limited partner until such limited partner has received on a cumulative basis distributions equal to his share of the sum of (i) invested capital in the investment giving rise to the distribution; (ii) aggregate invested capital in all previously realized investments; (iii) aggregate write-downs, if any, for unrealized investments, (iv) management fees and partnership expenses paid prior to such distributions that are allocable to all realized investments in which such limited partner participated, and (v) a priority return of 8% on each of the foregoing compounded annually for the period of the investment. Remaining current income and net proceeds will then be distributed 100% to the General Partner until the General Partner has received as a ‘‘catch up’’ adjustment an amount equal to 20% of the amount distributed to such limited partner as a priority return referred to above and 20% of the amount distributed per this provision. Thereafter, current income and net proceeds will be distributed 80% to such limited partners and 20% to the General Partner (‘‘profit override’’ also referred to as carried interest).

Since inception the Partnerships’ allocation of profit override to the General Partner representing both its unrealized and realized profit override was approximately $131.0 million as of December 31, 2005 and was approximately $55.6 million as of December 31, 2004. As of December 31, 2005, the General Partner has realized $24.3 million in distributions of its allocated profit override. Future losses in the value of the Partnerships’ investments may require a reduction in the allocation of profit override to the General Partner and upon liquidation of the Partnerships, the General Partner would be obligated to contribute to the Partnerships’ the amount, if any, by which cumulative profit override distributions received exceed its cumulative allocable profit override.

Cash distributions of net proceeds from dispositions of investments will be made as soon as practicable after their receipt by the Partnership. Other cash receipts of the Partnership shall be distributed at least annually or more frequently if deemed appropriate by the General Partner.

During 2005, 2004, and 2003 the Partnerships made distributions to its partners of $270.7 million, $109.3 million and $19.2 million, respectively. These distributions were comprised of portfolio company dividends, capital proceeds, realized gains, return of invested capital and other proceeds from refinancings. Included in accrued expenses and other liabilities is $1.4 million related to foreign tax amounts withheld on behalf of certain limited partners.

Note 6 – Capital Commitments

Each partner admitted to one of the Partnerships committed a specific dollar amount (‘‘Capital Commitment’’) to be drawn down according to the terms of the partnership agreement applicable to such partner. Capital contributions by a partner for the purpose of acquiring partnership investments or payment of certain partnership expenses and management fees reduce such partner’s remaining capital commitment.

On March 31, 2005, the General Partner terminated the commitment period for the Partnerships, except for (1) commitments made to invest prior to the termination of the commitment period, (2) an investment in convertible securities in connection with the exercise, exchange or conversion of those

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securities, or (3) follow-on investments made before March 31, 2007, as long as such investment amount does not exceed 15% of the aggregate Capital Commitment or the Available Capital Commitments of the partners.

At December 31, 2005, 2004 and 2003, the Available Capital Commitment was $57.9 million (including $22.7 million related to interim financings and expenses which may be recalled), $130.3 million and $150.9 million, respectively.

As of December 31, 2005, 2004 and 2003 two partners were in default of their capital call obligations including amounts related to interim financings and expenses in the amount of $4.9 million, $3.8 million and $2.8 million, respectively. Such amounts are not reflected in contributed capital in the combined statements of changes in partners’ capital.

Note 7 – Borrowings and Credit Facility

The Partnerships have entered into a $15 million Credit Facility (the ‘‘Facility’’) with a commercial bank (the ‘‘Bank’’), subject to final documentation. The Facility was amended effective December 31, 2005 to reduce the borrowing amount from $30 million. The purpose of this Facility is to provide the Partnership with short-term revolver borrowings to fund portfolio company investments in advance of the receipt by the Partnerships of capital contributions from the partners. The Bank will take a security interest in the Partnerships’ capital call obligations and the Bank could require the General Partner to make a subsequent capital call to meet the debt obligation if necessary. The Facility expires on January 31, 2007. Interest on outstanding borrowings is based on LIBOR plus 145 basis points (reduced from LIBOR plus 165 basis points). Interest expense related to the Facility was $392,788, $16,053, and $0 for the years ended December 31, 2005, 2004 and 2003, respectively. At December 31, 2005, there were no revolver borrowings outstanding.

In February 2005, the Partnerships transferred all of the shares of common stock of GSL owned by it to a new, wholly-owned subsidiary, GCP SPV1, LLC (the ‘‘Borrower’’). The Borrower entered into a credit agreement, dated February 17, 2005, with Morgan Stanley Mortgage Capital, Inc., as administrative agent, and certain other lenders named therein. Under the terms of the credit agreement the Borrower borrowed $70 million, secured by 8,383,234 shares of GSL common stock owned by it. The credit agreement requires the Borrower to maintain $4.0 million in a collateral account at all times while the loan is outstanding. In February 2005, the Partnerships distributed $64.3 million to its partners from the proceeds of the loan. Under the terms of a separate recourse agreement, the lenders will have recourse to Greenhill Capital Partners, LLC (the ‘‘Manager’’) in the event of fraud or intentional or grossly negligent misrepresentations by the Borrower or the institution of insolvency proceedings by or against the Borrower, Manager or the Partnerships. The term of the loan is 18 months bearing interest at the one month LIBOR rate plus 375 basis points; it may become repayable prior to that time on the occurrence of customary events of default or if the price of the GSL stock declines to certain agreed upon levels. Interest expense related to the credit agreement borrowing was $4.6 million. The Borrower entered into an interest rate cap arrangement dated February 17, 2005 (effective March 1, 2005), with Morgan Stanley Mortgage Capital, Inc. Under the arrangement the interest rate for a notional amount of borrowings of $70 million is capped at one month LIBOR of 4.0% (or 7.75% including the applicable spread of 375 basis points). The interest rate cap arrangement matures on August 31, 2006. During 2005, the Borrower did not receive any payments under the interest rate cap arrangement.

The Partnerships weighted average amount of borrowings outstanding under the facility and credit agreement during the year ended December 31, 2005 was approximately $69.1 million, with a related weighted average annualized rate of 5.6%.  

Note 8 – Related Party Transactions

The Manager, an affiliate of the General Partner, committed $30.3 million to the Partnerships of which $6.0 million (excluding $1.4 million related to interim financings and expenses which may be recalled) remains outstanding at December 31, 2005 to fund future investments through March 2007. The

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Manager has an interest of approximately 12% in all investments made on or after February 1, 2004 and approximately 4% in all investments made prior to February 1, 2004. The carrying value of the Manager’s investment in the Partnerships including profit override was $85.3 million and $25.0 million at December 31, 2005 and 2004, respectively.

The Manager provides day-to-day managerial and administrative services to the Partnerships. Under the terms of their respective limited partnership agreements, the Delaware Fund, the Off-Shore Fund and the Executive Fund each pay a management fee for services rendered by the Manager in an amount equal to the aggregate management fees payable by all limited partners. During the commitment period, which was terminated on March 31, 2005, each limited partner (excluding the General Partner and the Employee Fund) paid an amount based upon a specified percentage ranging from 1% to 1.5% per annum of such partner’s capital commitment. Subsequent to March 31, 2005 (termination of the commitment period), the management fee is 1% of such partner’s aggregate Invested Capital, as defined in each limited partnership agreement. The management fee is payable semi-annually in advance. Management fees paid by the Partnerships to the Manager for the years ended December 31, 2005, 2004, and 2003 were $2.3 million, $3.7 million, and $4.5 million, respectively.

The Manager pays expenses on behalf of the Partnerships, for which the Manager is reimbursed on regular intervals. At December 31, 2005 and 2004, the Partnerships owed $28,845 and $0.1 million to the Manager for the reimbursement of such expenses, respectively.

Affiliates of the General Partner may provide investment-banking services to certain portfolio companies from time to time. These fees are not subject to management fee offset.

The Partnerships shall distribute to the General Partner, and the General Partner or its affiliates may retain, all ‘‘break-up fees’’, ‘‘commitment fees’’ and other Transaction Fees, as defined in each limited partnership agreement. Eighty percent of each Partnership’s proportionate share of the amount of any such Transaction Fees received by the General Partner or its affiliates shall be credited ratably to reduce the management fees payable by the limited partners of such Partnerships. Management fee reductions for 2005 and 2004 were $0.2 million and $0.8 million, respectively.

Note 9 – Investment Portfolio

As of December 31, 2005 and 2004 the portfolio of investments by type of security are as follows:

				2005								2004
Type of Security				Estimated Fair Value				% of Partners’ Capital				Estimated Fair Value				% of Partners’ Capital
Preferred Stock				$	29,836,507				3.6	%		$	125,390,927				23.1	%
Common Stock					714,577,663				85.2	%			269,950,555				49.7	%
LP Equity Units and Capital Sharing Interests					111,910,768				13.3	%			156,947,418				28.9	%
Promissory Note and Bridge Loan					4,648,690				0.5	%			658,639				0.1	%
Total				$	860,973,628				102.6	%		$	552,947,539				101.8	%

As of December 31, 2005 and 2004 the portfolio of investments by geographic location are as follows:

				2005								2004
Geographic Location				Estimated Fair Value				% of Partners’ Capital				Estimated Fair Value				% of Partners’ Capital
North America				$	860,973,628				102.6	%		$	552,947,539				101.8	%
Europe					—				0.0	%			—				0.0	%
Total				$	860,973,628				102.6	%		$	552,947,539				101.8	%

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Note 10 – Partners’ Capital

As of December 31, 2003, 2004 and 2005, the capital balance of each Partnership is as follows (in millions):

				Delaware				Off-Shore				Executive				Employee				Total
Committed capital				$	257.7			$	43.0			$	41.3			$	81.2			$	423.2
Partners’ capital, January 1, 2003				$	83.2			$	13.1			$	13.1			$	28.6			$	138.0
Contributed capital					64.3				9.2				10.2				18.0				101.7
Distributions					(11.8	)			(1.7	)			(2.0	)			(3.7	)			(19.2	)
Net Income (loss)					0.4				(0.4	)			(0.0	)			1.1				1.1
Total partners’ capital December 31, 2003					136.1				20.2				21.3				44.0				221.6
Contributed capital					32.2				4.6				4.9				10.3				52.0
Distributions					(66.4	)			(9.1	)			(10.1	)			(23.7	)			(109.3	)
Net Income					233.4				34.6				36.9				73.9				378.8
Total partners’ capital December 31, 2004					335.3				50.3				53.0				104.5				543.1
Contributed capital					52.8				7.5				8.1				16.8				85.2
Distributions					(169.9	)			(23.1	)			(26.5	)			(51.2	)			(270.7	)
Net Income					297.3				43.2				46.6				94.2				481.3
Total partners’ capital December 31, 2005				$	515.5			$	77.9			$	81.2			$	164.3			$	838.9

Note 11 – Market and Other Risk Factors

The Partnerships’ portfolio investments were comprised primarily of companies, which operate in the energy, financial services and telecommunications industries. Multiple market risk factors exist which could cause the Partnerships to lose some or all of their invested capital. These risks include:

General economic risk – the Partnerships’ portfolio investments can be impacted by changes caused by global and domestic market conditions, including energy, financial services and telecommunications industry specific economic conditions.

Changes in the market for public offerings could also have an effect on the Partnership and their ability to realize their investment objectives. In addition, the portfolio is subject to equity price risk and other market risk.

Concentration risk – The Partnerships invested in securities in a limited number of companies, primarily within the energy, financial services and telecommunications business sectors and may not be a balanced or fully diversified portfolio.

Investee risk – Partnership investees may include smaller entrepreneurial companies which may have limited business histories, product or service lines, markets, financial resources and management depth. Such companies also may not have achieved profitable operations or positive cash flows.

Liquidity risk – the Partnerships portfolio of investments includes illiquid, non-publicly traded securities and restricted publicly traded securities. Accordingly, there is the risk that the Partnerships may not be able to realize their investment objectives by sale or other disposition of portfolio investments at prices reflective of the Partnerships’ current carrying value. As a result, the Partnerships may sustain losses with respect to some or all of their investments.

Contractual Obligations – The Partnerships enters into contracts that contain a variety of indemnifications. The Partnerships’ maximum exposure under these arrangements is unknown. However, the Partnerships have not had prior claims or losses pursuant to these contracts and expect the risk of loss to be remote.

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Note 12 – Financial Highlights

The following financial highlights are being presented as required for non-registered investment companies:

				Years ended December 31,
				2005				2004				2003
Ratios to average limited partners’ capital:
Expenses					1.45	%			1.24	%			2.70	%
Profit override allocation					12.22	%			14.03	%			0.00	%
Total expenses and profit override allocation					13.67	%			15.27	%			2.70	%
Net investment income (loss)					3.89	%			0.24	%			(2.23	%)
Ratio of expenses to total committed capital					2.13	%			1.18	%			1.14	%
Ratio of contributed capital to total committed capital					96.17	%			76.04	%			63.71	%

The net internal rate of return, since inception of the Partnerships through December 31, 2002 was (11.37%), (5.78%) through December 31, 2003, 30.13% through December 31, 2004, and 41.22% through December 31, 2005. The net internal rate of return, since inception of the Partnerships, is net of allocations (including profit override) to the General Partner, and was computed based on the actual dates of capital contributions and distributions, and the aggregate net assets at the end of the period of the limited partners’ capital as of each measurement date.

The net investment income ratio, as defined, excludes realized and unrealized gains (losses). The ratio of contributed capital to total committed capital includes the General Partner.

Note 13 – Subsequent Events

On January 6, 2006, the Partnerships made a distribution of proceeds of $35.2 million principally related to the December 2005 sale of Triana (See Note 3), along with dividends and distributions from other various portfolio investments.

On February 8, 2006, ETE completed its initial public offering. In connection with the offering, ETE redeemed a portion of the Partnership’s interests in ETE. In addition, On February 8, 2006 EXCO completed its initial public offering (ticker: XCO). The Partnerships did not sell any shares in the offering and currently holds 2,344,482 shares of EXCO common stock.

In February 2006, Noble Energy Production Inc. entered into an agreement to purchase UXP for $411 million in cash (subject to certain adjustments and deductions). Closing of the transaction, which is currently expected to occur by March 31, 2006, is contingent on the completion of certain events and satisfaction of contractual conditions. The partnerships hold a significant interest in UXP.

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