Letter to our Clients, Stockholders and Staff

2012 was another year of strong performance relative to our four primary objectives: increasing our market share of advisory fees paid globally, achieving the highest profit margin among our peer group, continuing a strong dividend policy and maintaining a flat or declining share count. Our advisory revenue for the year was down only 4% despite global completed transaction activity declining by 15%. Based on advisory revenue reported by our large bank competitors, it is clear that we again increased our market share of the global fee pool in 2012. By keeping non-compensation costs flat and maintaining a disciplined compensation ratio, we achieved a pre-tax profit margin of 25%. And we not only continued our strong dividend policy but repurchased nearly 1.9 million shares during the year, despite maintaining a balance sheet with no net debt. We were rewarded for our efforts with a 48% gain for our shareholders, including both share price appreciation and dividend payments. Since our IPO in 2004 we have outperformed the index of comparable companies by a 7 times margin.

OUR UNIQUE BUSINESS MODEL
It is not an overstatement to call us unique among investment banks. First, advising clients is our only business. We have no products to sell and no inherent conflicts of interest. For our large bank competitors, client advisory work represents a small fraction of their business, and even other so-called “independent” investment banks are active in investing, research, underwriting and other businesses that can create conflicts with clients. Second, we offer advice on a very wide range of matters. Mergers and acquisitions remains our largest area of activity, but each year we earn an increasing share of our revenue from advising on other issues, like financing, restructuring and capital raising, as well as from various projects for governments around the world. Many of our most interesting assignments of 2012 are described elsewhere in this report. Third, we have teams of senior bankers in the most important transaction markets around the world. We believe strongly that one integrated global team is far more effective at advising clients on cross-border transactions than any set of alliances or joint ventures with other firms could ever be. Today we have 5 offices in the United States, 3 in Europe (including one in Stockholm opened this year), 2 in Australia and 1 each in Canada and Japan. Other offices in new markets will follow, as we continue to attract leading bankers around the world.  Finally, we have continued to deepen our industry sector expertise, both through recruiting and through transaction experience.

FURTHER GROWTH POTENTIAL
Whether from a client or shareholder perspective, the most important question in considering Greenhill is whether we can continue to attract and retain the best people in our business on a global basis. There are many reasons why we are confident that will be the case. First, our people can take pride in their work. They are trusted advisors to their clients, as opposed to salesmen trying to sell multiple products. Second, ours is a very collegial culture, with everyone united by the common goal of winning and retaining clients by providing insightful advice and successfully executing transactions. Third, ours is a stable business. There are no regulatory threats to the business we have built. Equally important in terms of stability, we have avoided the repetitive overexpansion and then contraction cycle that is evidenced again today by massive layoffs and restructuring at our larger competitors. Finally, ours has been a growing business for 17 years, and it remains so today. In fact, we continued to add talented people even in the depths of the financial crisis.

In closing, we are grateful to our clients, employees and stockholders for making 2012 another year of progress in building our Firm. We look forward to 2013.

Robert F. Greenhill       
Founder and Chairman

Scott L. Bok
Chief Executive Officer
 

Annual Meeting
Thursday, April 11, 2013 
at 11:00 a.m. ET
at the InterContinental New York Barclay
111 East 48th Street
New York, New York 10017