On March 31, 2005, the general partners of our first merchant banking fund (which we refer to as Greenhill Capital Partners I or "GCP I") terminated the commitment period for GCP I. As a result, the annual management fee payable by the limited partners in GCP I was reduced to 1% of the invested capital from between 1.25% to 1.5% of capital commitments (total invested capital was approximately $253 million as of June 30, 2005). Such management fee is payable only by the outside investors not employed by or affiliated with us.

The Firm also announced the final closing in June 2005 of Greenhill Capital Partners II, L.P. ("GCP II"), our second merchant banking fund. GCP II received total commitments from investors of $875 million, including an $88 million capital commitment from the Firm. In addition to the Firm's capital commitment, managing directors and other professionals of the Firm committed $136 million of personal capital to GCP II. Commitments will be drawn down from time to time to make investments over a period of up to five years.

Like GCP I, GCP II expects to focus primarily on mid-market investments in the energy, telecommunications and financial services sectors—industries in which Greenhill has significant experience and expertise. Within these sectors, GCP II intends to continue to pursue primarily a value-based, contrarian investment strategy.

GCP II's managing general partner, which is controlled by Greenhill, makes investment decisions for the fund and is entitled to receive from GCP II an override of 20% of the profits earned by GCP II over a specified threshold on the capital committed by outside investors to GCP II ($651 million as of June 2005) and an override of 10% of the profits earned by GCP II over a specified threshold on the capital committed by Greenhill's managing directors, senior advisors and certain other employees to GCP II ($132 million as of the initial closing of GCP II). Greenhill recognizes as revenue 100% of the profit override earned by the managing general partner of GCP II on investments made by GCP II. Approximately one-half of such profit override is allocated, at Greenhill's discretion, as compensation to managing directors and other employees of Greenhill involved in the management of GCP II. All limited partners in GCP II (including those who are managing directors or other employees of Greenhill) have agreed to pay during the commitment period an annual management fee to the managing general partner of GCP II equal to 1.5% of the capital committed by such limited partners. The commitment period will terminate on March 31, 2010 unless terminated earlier by the general partner. Upon termination of the commitment period, the annual management fee will be reduced to 1% of the invested capital. No management fee or profit override is payable in respect of the capital committed by Greenhill.

The investment gains or losses in our investment portfolio may fluctuate significantly over time due to factors beyond our control, such as individual portfolio company performance, equity market valuations and merger and acquisition opportunities. Revenue recognized from gains recorded in the first three months of 2005 and 2004 are not necessarily indicative of revenue that may be realized in future periods.

Operating Expenses

We classify operating expenses as compensation and benefits expense and non-compensation expenses.

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. Our pro forma compensation and benefits expense reflects a 45% ratio of such expenses to revenues, which is consistent with the expense ratio the Company used as a public company in 2004. As a corporation, we now include all payments for services rendered by our managing directors in compensation and benefits expense.

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

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Operating Expenses

				Three Months Ended June 30,								Six Months Ended June 30,
				2005				2004				2005				2004
				(in millions, unaudited)
Actual Compensation & Benefits Expense				$	11.7			$	13.5			$	31.7			$	22.8
% of Revenues					40	%			39	%			43	%			35	%
Pro Forma Compensation & Benefits Expense(a)					11.7				15.7				31.7				29.0
% of Revenues					40	%			45	%			43	%			45	%
Non-Compensation Expense:
Other Operating Expenses					7.1				5.0				13.2				9.2
Depreciation & Amortization					0.7				0.8				1.3				1.5
Total Non-Compensation Expense					7.8				5.8				14.5				10.7
% of Revenues					26	%			17	%			20	%			17	%
Total Actual Operating Expense					19.5				19.3				46.2				33.5
% of Revenues					66	%			55	%			63	%			52	%
Total Pro Forma Operating Expense (a)					19.5				21.5				46.2				39.7
% of Revenues					66	%			62	%			63	%			62	%

(a)	We have operated as a public company since our initial public offering in May 2004, and the amounts for the three months and six months ended June 30, 2005 reflect actual expenses; the amounts for the three months and six months ended June 30, 2004 reflect pro forma expenses.

Compensation and Benefits

Our Compensation and Benefits Expense in the second quarter of 2005 was $11.7 million, which reflects a 40% ratio of compensation to revenues. This amount compares to a pro forma Compensation and Benefits Expense of $15.7 million in the second quarter of 2004, which reflected a 45% ratio of compensation to revenues. The decrease of $4.0 million or 25% is due to the lower level of revenues in the second quarter of 2005 compared to the second quarter of 2004 and a decision to reduce the compensation ratio in a low revenue period. For the six months ended June 30, 2005, our Compensation and Benefits Expense was $31.7 million, which compares against $29.0 million of pro forma Compensation and Benefits Expense for the six months ended June 30, 2004. The increase of $2.7 million or 9% is due to the higher level of revenues in the first six months of 2005 compared to the comparable period in 2004 partially offset by the decision to reduce the compensation ratio in the second quarter of 2005. For the six months ended June 30, 2005, the ratio of compensation to revenues was 43%, compared to a 45% ratio of pro forma compensation to revenues for the comparable period in 2004.

For the three months and six months ended June 30, 2004, actual Compensation and Benefits Expense was $13.5 million and $22.8 million, respectively.

Non-Compensation Expense

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

Our non-compensation expenses were $7.8 million in the second quarter of 2005, which compared to $5.8 million in the second quarter of 2004, representing an increase of 34%. The increase is related principally to greater travel expenses ($0.6 million) and information services ($0.3 million) as a result of additional personnel and business development activity, a third-party fee related to the fundraising for GCP II ($1.0 million) and an increase in occupancy costs for additional office space in New York and Dallas ($0.2 million), offset in part by lower depreciation expense ($0.1 million).

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For the first six months of 2005, our non-compensation expenses were $14.5 million, which compared to $10.7 million in the first six months of 2004, representing an increase of 36%. The increase is related principally to the write-off of uncollectible accounts ($1.0 million), the third-party fee related to the fundraising for GCP II, greater travel expenses ($0.7 million) and information services ($0.4 million) as a result of additional personnel and business development activity, and increases in expenses associated with operating as a public entity ($0.7 million), offset in part by lower depreciation expense ($0.3 million).

Non-compensation expenses as a percentage of revenue in the three months and six months ended June 30, 2005 were 26% and 20%, respectively. This compares to 17% for both the three months and six months ended June 30, 2004, respectively. The increase in these expenses as a percentage of revenue is principally related to lower revenues in the second quarter of 2005, as well as nonrecurring charges for the write-off of uncollectible accounts, the third party placement fee for the new merchant banking fund, additional personnel and business development costs, and the costs of operating as a public company.

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

The Provision for Taxes in the second quarter of 2005 was $3.6 million, which reflects a 36% effective tax rate. This compares to a pro forma Provision for Taxes in the second quarter of 2004 of $5.6 million based on an assumed 42% effective tax rate for the full period. The decrease of $2.0 million or 36% is due to both a lower level of income and a lower effective tax rate in the second quarter of 2005 as compared to the same period in the prior year. The lower effective rate in the second quarter of 2005 resulted principally from the realization in 2005 of a higher proportion of investment income, which benefits from relatively lower state tax rates than U.S. advisory income.

For the six months ended June 30, 2005, our Provision for Income Taxes was $10.0 million, which reflects a 37% effective tax rate. This compares to a pro forma Provision for Taxes of $10.4 million based on an effective tax rate of 42% for the full period. The decrease of $0.4 million or 4% is due to a lower effective tax rate in the six months ended June 30, 2005 as compared to the same period in the prior year. The decrease in the effective rate for the six months ended June 30, 2005 resulted from a higher proportion of foreign sourced advisory earnings and investment income, which benefit from relatively lower tax rates than U.S. advisory income.

Prior to our initial public offering, Greenhill was a limited liability company and was 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. As of completion of our initial public offering in May 2004, we are subject to federal, foreign and state corporate income taxes.

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 quarter may not be indicative of the effective tax rate in future periods.

Liquidity and Capital Resources

As a result of our initial public offering in May 2004, we received proceeds of approximately $89 million, net of the underwriters' discount and offering expenses. Prior to the initial public offering, we had debt of $16.0 million as a result of borrowings under our revolving credit facility. Proceeds from our initial public offering were used to repay this debt and the remaining proceeds were invested in

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short term, highly-rated securities. Since the initial public offering, we have funded $22.1 million ($18.1 million net of refunded capital calls) in commitments to merchant banking funds. We expect that the remaining proceeds from our initial public offering will be used for general corporate purposes, including the funding of our remaining $95.7 million in commitments to merchant banking funds. Until the remaining proceeds of our initial public offering are used for these purposes, we expect to continue to invest them in highly-rated short-term debt securities and money market funds.

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.

In May 2005, certain of our managing directors completed the sale of 4.6 million shares of our common stock in an underwritten offering. The Firm did not receive any proceeds from or incur any out of pocket expenses in connection with this offering.

In June of 2005, the Firm committed $5.0 million to Barrow Street Capital III, LLC ("Barrow Street III"), of which $4.8 million remains unfunded at June 30, 2005. The remaining commitment to Barrow Street III will be funded as required through April 11, 2009.

As of June 30, 2005, we had total commitments (not reflected on our balance sheet) relating to future principal investments in merchant banking funds (including Barrow Street III) of $95.7 million. These commitments are expected to be drawn on from time to time over a period of up to five years.

In July 2005, the Firm's Board of Directors authorized the repurchase of common stock in open market transactions up to $25.0 million.

During the six months ended June 30, 2005, the Firm repurchased in open market transactions 99,368 shares of its common stock at an average price of $32.56. The Firm is authorized to repurchase an additional $25.0 million of common stock in open market transactions. Additionally, the Firm is deemed to have repurchased 35,022 shares of its common stock at $35.35 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 August 2005, the Firm will purchase 800,000 shares of common stock from a departing employee at a 33% discount to a market price pursuant to an existing agreement. This repurchase is in addition to repurchases that may be made pursuant to the authorization referred to in the preceding paragraph.

Cash Flows

In the first six months of 2005, our cash and cash equivalents increased by $33.6 million from December 31, 2004. We generated $43.5 million in investing activities, including $52.4 million from the net sale of securities and $6.0 million from distributions from our investments, partially offset by $14.1 million in new investments in merchant banking funds. We generated $2.2 million from operating activities, including $11.5 from net income after giving effect to the non-cash items, partially offset by a net decrease in working capital of $9.2 million (principally from the payment of bonus compensation). We used $10.1 million for financing activities, including $6.4 million for the payment of dividends and $4.5 million for the purchase of treasury stock.

In the first six months of 2004, our cash and cash equivalents increased by $59.0 million from December 31, 2003. We generated $5.6 million from operating activities and $56.9 million from financing activities, including $89.6 million in proceeds from our initial public offering partially offset by distributions of $31.2 million to our members. We used $3.3 million in investing activities.

Contractual Obligations

On February 16, 2005, GCP I transferred all of the shares of common stock of Global Signal, Inc. owned by it to a new, wholly-owned subsidiary, GCP SPV1, LLC (the "Borrower"). The Borrower entered into a credit agreement, dated February 16, 2005, with Morgan Stanley Mortgage Capital,

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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 of the 8,422,194 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 GCP I. Proceeds from the loan were used to fund distributions to GCP I's limited partners, which include executive officers of Greenhill. The credit agreement matures in August 2006 and bears a floating rate of interest based upon Libor or, at our option, a prime rate.

In May 2005, the Company entered into a sublease agreement for additional office space in New York City. The Company will incur $1.1 million per year in lease payments through August 30, 2010.

Market Risk

Due to the nature of our business and the manner in which we conduct our operations, in particular our limitation of investment to short term cash investments, we believe we do not face any material interest rate risk, foreign currency exchange rate risk, equity price risk or other market risk. We have principal investments in Greenhill Capital Partners and may make investments in other merchant banking funds, and we face exposure to changes in the estimated fair value of the companies in which these funds invest, which historically has been volatile. For example, a significant portion of the increase in the unrealized investment gains during 2004 and the first six months of 2005 was attributable to an increase in the fair value of an investment by GCPI and GCPII in a publicly traded security. However, we do not believe that normal changes in public equity markets will have a material effect on our results of operations. 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 39% of our revenues for the six months ended June 30, 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 have invested the remaining proceeds of our initial public offering in short duration, highly rated 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.

Critical Accounting Policies and Estimates

The condensed 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 investment valuations, compensation accruals and other matters that affect the condensed consolidated financial statements and related footnote disclosures. 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.

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.

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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 Greenhill Capital Partners are recorded at estimated fair value. Investments are initially carried at cost as an approximation of fair value. The carrying value of such investments is reevaluated, and if necessary, adjusted at each period end. Public investments are valued using quoted market prices discounted for any restrictions on sale. Privately held investments are carried at estimated fair value as determined by the general partner (our affiliate) after giving consideration to the cost of the security, the pricing of other private placements of 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.

We recognize merchant banking profit overrides when certain financial returns are achieved over the life of the fund. Overrides are calculated as a percentage of the profits over a specified threshold earned by such funds on investments managed on behalf of outside investors. 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 overrides are recognized as revenue only after material contingencies have been resolved.

Restricted Stock Units

In accordance with the fair value method prescribed by FASB Statement No, 123(R), "Share-Based Payment", which is a revison of FASB Statement No. 123, "Accounting for Stock-Based Compensation", restricted stock units with future service requirements are recorded as compensation expense generally over a five-year service period following 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 our accounting for restricted stock units in its financial statements.

Provision for Taxes

After the initial public offering, the firm accounts for taxes in accordance with Financial Accounting Standards Board ("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 3.    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 2 — "Market Risk" above for a discussion of market risks.

Item 4.    Controls and Procedures

As required by Rule 13a-15(b) of the Securities Exchange Act of 1934 (the "Exchange Act"), the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer,

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has evaluated the effectiveness of its disclosure controls and procedures as of the end of the period covered by this quarterly report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) were effective as of the end of the period covered by this quarterly report. As required by Rule 13a-15(d) under the Exchange Act, the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, has evaluated the Company's internal control over financial reporting to determine whether any changes occurred during the quarter covered by this quarterly report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation, there has been no such change during the quarter covered by this quarterly report.

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Part II — Other Information

Item 1.    Legal Proceedings

None.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

Use of Proceeds: On May 11, 2004, we issued 5,000,000 shares of our Common Stock in a registered public offering pursuant to a Registration Statement on Form S-1, which was declared effective by the Securities and Exchange Commission on May 5, 2004 (Commission file number 333-113526). On May 12, 2004, our underwriters exercised their option to acquire an additional 750,000 shares of our Common Stock and we issued that additional number of shares of Common Stock on May 14, 2004. The offering has terminated, and all securities registered pursuant to our Registration Statement have been sold. The managing underwriter for the offering was Goldman, Sachs & Co. An aggregate of 5,750,000 shares of Common Stock were registered pursuant to the Registration Statement at an aggregate estimated offering price of $92,000,000 (based upon the estimated maximum price of $16.00 per share that was estimated by us in accordance with Rule 457(a) of the Securities Act of 1933, as amended, prior to the pricing of the initial public offering). A total of 5,750,000 shares of Common Stock were sold at an aggregate actual offering price of $100,625,000 (based upon the price of $17.50 per share at which the shares actually sold). The amount of expenses incurred by us in connection with the issuance and distribution of the Common Stock (including underwriting discounts and commission, expenses paid to the underwriters and certain other expenses) and related transactions was approximately $11 million. The net offering proceeds to us from the offering after subtracting these expenses was approximately $89 million. We used $16 million of the offering proceeds to repay debt outstanding under our senior credit facility and $18.1 million of the offering proceeds to fund commitments to merchant banking funds. The remainder of the offering proceeds have been invested in highly rated debt securities and money market funds and will be used by us to fund our commitments to merchant banking funds (described in greater detail in Part I, "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidation and Capital Resources" of this Report on Form 10-Q).

Share Repurchases in the Second Quarter of 2005:

Period				Total Number of Shares Repurchased3				Average Price Paid Per Share				Total Number of Shares Purchase as Part of Publicly Announced Plan or Programs				Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs4
April 1 – April 30					9,130			$	33.07				9,130			$	7,570,171
May 1 – May 31					32,050				31.75				32,050				6,552,687
June 1 – June 30					—				—				—				—

Item 3.    Defaults Upon Senior Securities

None.

3	Excludes 35,022 shares the Company is deemed to have repurchased at $35.35 from employees in conjunction with the payment of tax liabilities in respect of stock delivered to employees in settlement of restricted stock units.

4	These shares were purchased pursuant to the authorization granted by our Board of Directors to purchase up to $10,000,000 in shares of our common stock, as announced on October 21, 2004.

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Item 4.    Submission of Matters to a Vote of Security Holders

At the 2005 annual meeting of stockholders of the Company held on May 18, 2005, the Company's stockholders elected seven directors each for a one-year term. The tabulation of votes with respect to each nominee for office was as follows:

Nominee				For				Withheld
Robert F. Greenhill					26,911,894				338,632
Scott L. Bok					26,890,799				359,727
Simon A. Borrows					26,841,669				408,857
John C. Danforth					27,159,944				90,582
Steven F. Goldstone					27,159,944				90,582
Stephen L. Key					27,160,446				90,080
Isabel V. Sawhill					27,110,312				140,214

The Audit Committee's designation of Ernst & Young LLP as the independent registered public accounting firm for the Company for the fiscal year ending December 31, 2005, was ratified by the stockholders by a vote of 27,224,080 for and 25,210 against. There were 1,236 abstentions.

Item 5.    Other Information

None.

Item 6.    Exhibits

Exhibits:								Page
10.27				Form of Agreement for Sublease by and between Wilmer, Cutler, Pickering, Hale & Dorr LLP and Greenhill & Co., Inc.					32
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					47
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					48
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					49
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					50

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: August 3, 2005

GREENHILL & CO., INC.

By:

/s/ ROBERT F. GREENHILL

Name:

Robert F. Greenhill

Title:

Chairman and Chief Executive Officer

By:

/s/ JOHN D. LIU

Name:

John D. Liu

Title:

Chief Financial Officer

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