Our ability in the lastseveral quarters to compensate a large number of new senior recruits withinour historic aggregate compensation parameters has essentially eliminated theup front cost to shareholders that is often associated with such recruitingdrives. This puts us in a position to continue to take advantage of what wesee as a historic opportunity to attract senior talent from our largecompetitors. Indeed, that opportunity has improved even further since thebeginning of the year, and we expect it to remain in place for some time tocome as the financial services industry continues to evolve in response torecent challenges,” Simon A. During the first quarter of 2009 our merchant banking funds (and the Firm)recognized gains from five (5) of our portfolio companies and recorded losseson nine (9) of our portfolio companies.At March 31, 2009, the Firm had principal investments of $104.8 million.Ofthat amount, 17% of our investments related to the energy sector, 27% to thefinancial services sector and 56% to other industry sectors. We heldapproximately 97% of our total principal investments in North Americancompanies, with the remainder in European companies. Our investments incompanies that have become publicly traded after we first invested in themrepresented 25% of our total investments.In terms of new investment activity during the first quarter of 2009, ourfunds invested $9.3 million, 13% of which was Firm capital.In the sameperiod in 2008, our funds invested $13.7 million, 10% of which was Firmcapital.ExpensesOperating ExpensesOur total operating expenses for the first quarter of 2009 were $39.4 million,which compares to $45.4 million of total operating expenses for the firstquarter of 2008.

This represents a decrease in total operating expenses of$6.0 million or 13%, reflecting principally a decrease in compensation expenseand is described in more detail below. The pre-tax income margin was 36% inthe first quarter of 2009 compared to 40% for the first quarter of 2008.The following table sets forth information relating to our operating expenses,which are reported net of reimbursements: For The Three MonthsEnded March 31, 2009 2008 (in millions, unaudited)Employee compensation & benefits expense$28.4$34.7% of revenues46%46%Non-compensation expense 11.0 10.7% of revenues18%14%Total operating expense39.4 45.4% of revenues64%60%Total income before tax22.4 30.0Pre-tax income margin36%40%Compensation and Benefits ExpensesOur employee compensation and benefits expenses in the first quarter of 2009were $28.4 million, which reflects a 46% ratio of compensation to revenues. Provision for Income TaxesThe provision for taxes in the first quarter of 2009 was $8.7 million, whichreflects an effective tax rate of approximately 39%.This compares to aprovision for taxes in the first quarter of 2008 of $10.9 million based on aneffective tax rate of approximately 36% for the period.The decrease in theprovision for taxes is due to the lower pre-tax income in the period partiallyoffset by a higher effective tax rate resulting from a greater proportion ofour pre-tax income being earned in higher tax rate jurisdictions during theperiod.The effective tax rate can fluctuate as a result of variations in the relativeamounts of advisory and merchant banking income earned in the taxjurisdictions in which the Firm operates and invests. Accordingly, theeffective tax rate in any particular quarter may not be indicative of theeffective tax rate in future periods.

Liquidity and Capital ResourcesAs of March 31, 2009, our cash totaled $42.3 million, our investments totaled$104.8 million and we had $49.4 million in debt.We had total commitments (not reflected on our balance sheet) relating tofuture investments in our merchant banking activities, of $47.2 million as ofMarch 31, 2009.These commitments are expected to be drawn on from time totime over a period of up to five years from the relevant commitment dates ofeach fund.DividendThe Board of Directors of Greenhill & Co., Inc. has declared a dividend of$0.45 per share to be paid on June 10, 2009 to common stockholders of recordon May 27, 2009.Greenhill & Co., Inc. is a leading independent investment bank that providesfinancial advice on significant mergers, acquisitions and restructurings;assists private funds in raising capital from investors; and manages merchantbanking funds.It acts for clients located throughout the world from itsoffices in New York, London, Frankfurt, Toronto, Tokyo, Chicago, Dallas, SanFrancisco, and will shortly open an office in Los Angeles.Cautionary Note Regarding Forward-Looking StatementsThe preceding discussion should be read in conjunction with our condensedconsolidated financial statements and the related notes that appear below. Wehave made statements in this discussion that are forward-looking statements.In some cases, you can identify these statements by forward-looking words suchas “may”, “might”, “will”, “should”, “expect”, “plan”, “anticipate”,”believe”, “estimate”, “predict”, “potential” or “continue”, the negative ofthese terms and other comparable terminology.