The following discussion should be read in conjunction with Evercore Partners Inc.'s unaudited condensed consolidated financial statements and the related notes included elsewhere in this Form 10-Q.

Forward-Looking Statements

This report contains or incorporates by reference forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act, which reflect our current views with respect to, among other things, our operations and financial performance. In some cases, you can identify these forward-looking statements by the use of words such as "outlook", "believes", "expects", "potential", "continues", "may", "should", "seeks", "approximately", "predicts", "intends", "plans", "estimates", "anticipates" or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties.

Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. All statements other than statements of historical fact are forward-looking statements and are based on various underlying assumptions and expectations and are subject to known and unknown risks, uncertainties and assumptions, and may include projections of our future financial performance based on our growth strategies and anticipated trends in Evercore's business. We believe these factors include, but are not limited to, those described under "Risk Factors" discussed in the Annual Report on Form 10-K for the year ended December 31, 2008 and subsequent quarterly reports on Form 10-Q. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included or incorporated by reference in this report. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

We operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for our management to predict all risks and uncertainties, nor can management assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Key Financial Measures

Revenue

Total revenues reflect revenues from our Advisory and Investment Management business segments that includes transaction-related client reimbursements plus other revenue. Net revenues reflect total revenues less interest expense related to repurchase agreements, Senior Notes and other borrowings.

Advisory. Our Advisory business earns fees from our clients for providing advice on mergers, acquisitions, restructurings, leveraged buy-outs, recapitalizations and other corporate transactions. The amount and timing of the fees paid vary by the type of engagement. In general, fees are paid at the time we sign an engagement letter, during the course of the engagement or when an engagement is completed. The majority of our advisory revenue comes from fees that are dependent on the successful completion of a transaction. A transaction can fail to be completed for many reasons, including failure to agree upon final terms with the counterparty, to secure necessary board or shareholder approvals, to secure necessary financing or to achieve necessary regulatory approvals.

Revenue trends in our Advisory business generally are correlated to the volume of M&A activity and restructurings. However, deviations from this trend can occur in any given year or quarter for a number of reasons. For example, changes in our market share or the ability of our clients to close certain large transactions can cause our revenue results to diverge from the level of overall M&A or restructuring activity.

We operate in a highly-competitive environment where there are no long-term contracted sources of revenue and each revenue-generating engagement is separately awarded and negotiated. Our list of clients, including our list of clients with whom there is a currently active revenue-generating engagement, changes continually. We gain new clients through our business development initiatives, through recruiting additional senior investment banking professionals who bring with them client relationships and through referrals from executives, directors, attorneys and other parties with whom we have relationships. We may also lose clients as a result of the sale or merger of a client, a change in a client's senior management, competition from other investment banks and other causes.

Investment Management. Our Investment Management business includes operations related to the management of the private equity funds, Institutional Asset Management, Wealth Management and other business activities. Revenue sources primarily include management fees, fees earned from portfolio companies, fiduciary and consulting fees, performance fees (including carried interest) and gains (or losses) on our investments.

Management fees from private equity operations are generally a percentage of committed capital or invested capital at rates agreed with the investment funds we manage or with the individual client. Management fees from EAM, EWM and PCB generally represent a percentage of assets under management. Fiduciary and consulting fees are a function of the size and complexity of each engagement and are individually negotiated. Performance fees are earned when specified benchmarks are exceeded. In certain circumstances, such fees are subject to "claw-back" provisions. Portfolio Company fees include monitoring, director and transaction fees associated with services provided to the portfolio companies of the private equity funds we manage. Gains and losses include both realized and unrealized gains and losses on principal investments, including those arising from our equity interest in investment partnerships.

Transaction-Related Client Reimbursements. In both our Advisory and Investment Management segments we make various transaction-related expenditures, such as travel and professional fees, on behalf of our clients. Pursuant to the engagement letters with our clients or the contracts with the limited partners in the private equity funds we manage, these expenditures may be reimbursable. We define these expenses as transaction-related expenses and record such expenditures as incurred and record revenue when it is determined that clients have an obligation to reimburse us for such transaction-related expenses. Client expense reimbursements are recorded as revenue on the Unaudited Condensed Consolidated Statements of Operations on the later of the date an engagement letter is executed or the date we pay or accrue the expense.

Net Interest Revenue. Net interest revenue is derived from investing customer funds in financing transactions by PCB. These transactions are principally repurchases and resales of Mexican government securities. Revenue and expenses associated with these transactions are recognized over the term of the repurchase or resale transaction. Net interest revenue also includes interest expense associated with the Senior Notes, as well as income earned on marketable securities and cash deposited with financial institutions.

Operating Expenses

Employee Compensation and Benefits Expense. We include all payments for services rendered by our employees, including our Senior Managing Directors, in employee compensation and benefits expense.

We maintain compensation programs, including base salary, cash and equity bonus awards and benefits programs and manages compensation to estimates of competitive levels based on market conditions. Our level of compensation for the current period reflects our plan to maintain competitive compensation levels to retain key personnel during market down cycles, as well as the impact of Senior Managing Directors hired after the IPO on 2009 compensation expense, including grants of equity awards valued at current and prior stock prices.

Increasing the number of high-caliber Senior Managing Directors is critical to our growth efforts. Typically newly hired Senior Managing Directors don't start until the middle of a calendar year, and these hires generally do not begin to generate significant revenue in the year they are hired.

Our annual compensation program includes stock-based compensation awards as a component of the annual bonus awards for certain employees, including certain Senior Managing Directors. These equity awards are subject to annual vesting requirements over a four-year period beginning at the date of grant, which generally occurs in the first quarter of each year; accordingly, the expense is being amortized over the vesting period.

Non-Compensation Expenses. The balance of our operating expenses includes costs for occupancy and equipment rental, professional fees, travel and related expenses, communications and information services, depreciation and amortization and other operating expenses. We refer to all of these expenses as non-compensation expenses.

Other Expenses

Other Expenses include Special Charges in conjunction with the U.S. Private Equity restructuring and other ongoing strategic cost management initiatives, Acquisition and Transition Costs incurred in connection with the consummation of our acquisition of SFS and the formation of ETC and amortization of intangibles associated with acquisitions.

Provision for Income Taxes

We account for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes, which requires the recognition of tax benefits or expenses on temporary differences between the financial reporting and tax bases of our assets and liabilities.

Noncontrolling Interest

We record significant noncontrolling interest relating to the ownership interests of our current and former Senior Managing Directors and their estate planning vehicles in Evercore LP, as well as the portions of PCB, EWM, EAM and ETC not owned by Evercore. As described in Note 1 to our unaudited condensed consolidated financial statements herein, Evercore Partners Inc. is the sole general partner of Evercore LP. Accordingly, although Evercore Partners Inc. has a minority economic interest in Evercore LP, it has a majority voting interest and controls the management of Evercore LP. As a result, Evercore Partners Inc. consolidates Evercore LP and records a noncontrolling interest for the economic interest in Evercore LP held by the limited partners.

Results of Operations

Following is a discussion of our results of operations for the three and six months ended June 30, 2009 and 2008. For a more detailed discussion of the factors that affected the revenue and operating expenses of our Advisory and Investment Management business segments in these periods, see the discussion in "Business Segments" below.

Operating Expenses include: a) employee compensation and benefits expenses that are incurred directly in support of the segments and b) non-compensation expenses, which include expenses for premises and occupancy, professional fees, travel and entertainment, communications and information services, equipment and indirect support costs (including compensation and other operating expenses related thereto) for administrative services. Such administrative services include, but are not limited to, accounting, tax, legal, facilities management and senior management activities. Other Expenses include a charge associated with deferred consideration pursuant to the Braveheart Sale and Purchase Agreement in 2008, amortization of intangibles as well as Special Charges and Acquisition and Transition Costs.

The global financial markets have experienced nearly unprecedented disruption and volatility during 2008 and therefore difficult market conditions persisted throughout most of 2008 and have continued into 2009. Contraction in worldwide credit markets due in part to sub-prime lending issues, volatile currency and commodity markets, major write-downs within the financial sector and volatile oil prices have raised significant uncertainty about the state of the U.S. and global economies. These economic and market conditions have negatively affected our financial performance in both our Advisory and Investment Management businesses, particularly in the second half of 2008, and have adversely affected, and may continue to adversely affect, our financial performance in 2009.

We operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties, nor can we assess the impact of all potentially applicable factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

                                           For the Three Months Ended                       For the Six Months Ended
                                                    June 30,                                        June 30,
                                              2009               2008      Variance           2009              2008      Variance
                                                               (dollars in thousands, except per share data)
REVENUES
Advisory Revenue                         $       70,067        $  57,731         21 %     $    119,125        $  98,423         21 %
Investment Management Revenue                     2,160            1,790         21 %            2,729            4,364        (37 )%
Other Revenue                                     5,025            7,709        (35 )%          13,615           14,923         (9 )%

TOTAL REVENUES                                   77,252           67,230         15 %          135,469          117,710         15 %
Interest Expense                                  6,209            7,112        (13 )%          14,700           13,104         12 %

NET REVENUES                                     71,043           60,118         18 %          120,769          104,606         15 %

EXPENSES
Operating Expenses                               66,863           50,464         32 %          114,376           88,499         29 %
Other Expenses                                   17,117            1,785         NM             17,875           10,840         65 %

TOTAL EXPENSES                                   83,980           52,249         61 %          132,251           99,339         33 %


INCOME (LOSS) BEFORE INCOME TAXES               (12,937 )          7,869         NM            (11,482 )          5,267         NM
Provision for Income Taxes                        1,373            2,461        (44 )%           2,431            2,167         12 %

NET INCOME (LOSS)                               (14,310 )          5,408         NM            (13,913 )          3,100         NM
Net Income (Loss) Attributable to
Noncontrolling Interest                          (8,267 )          3,352         NM             (8,061 )          2,009         NM

NET INCOME (LOSS) ATTRIBUTABLE TO
EVERCORE PARTNERS INC.                   $       (6,043 )      $   2,056         NM       $     (5,852 )      $   1,091         NM


DILUTED NET INCOME (LOSS) PER SHARE      $        (0.43 )      $    0.16         NM       $      (0.42 )      $    0.08         NM

As of June 30, 2009, Evercore's total headcount was 405 employees compared with 288 as of June 30, 2008. Evercore's increase in headcount is illustrated as follows:

                                                           As of June 30,
                                                             2009
                                            Evercore   Evercore   Evercore
                                              U.S.      Mexico     Europe    Total   2008
Senior Managing Directors:
Advisory                                          24          6          9      39     30
Investment Management                              5          1         -        6      8
Corporate                                          3         -          -        3      3
Other Partners                                    19         -          -       19     -
Other Professionals and Support Staff (1)        201        111         26     338    247

Total                                            252        118         35     405    288

(1) Excludes 13 and 15 interns as of June 30, 2009 and 2008, respectively.

Three Months Ended June 30, 2009 versus June 30, 2008

Net revenue was $71.0 million for the three months ended June 30, 2009; an increase of $10.9 million, or 18%, versus net revenue of $60.1 million for the three months ended June 30, 2008. Net revenues reflect interest expense on our Senior Notes for the three months ended June 30, 2009.

Total Operating Expenses were $66.9 million for the three months ended June 30, 2009 as compared to $50.5 million for the three months ended June 30, 2008, a 32% increase. Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $51.9 million for the three months ended June 30, 2009, an increase of $13.4 million, or 35%, versus expense of $38.5 million for the same period in 2008. The increase is primarily due to higher amounts of discretionary compensation accrued, reflecting higher revenues, as well as sign-on costs incurred in conjunction with the appointment of the President and Chief Executive Officer and compensation costs resulting from the consolidation of new businesses. Non-compensation expenses as a component of Operating Expenses were $15.0 million for the three months ended June 30, 2009, an increase of $3.0 million, or 25% over non-compensation operating expenses of $12.0 million for the three months ended June 30, 2008. Non-compensation expenses increased compared to the three months ended June 30, 2008 primarily as a result of increased Professional Fees and other costs primarily driven by the acquisitions of a controlling interest in ETC, EAM and EWM.

Total Other Expenses of $17.1 million for the three months ended June 30, 2009 relate to Special Charges of $16.1 million in conjunction with the U.S. Private Equity restructuring and other ongoing strategic cost management initiatives, Acquisition and Transition Costs of $0.4 million incurred in connection with the consummation of our acquisition of SFS and formation of ETC and amortization of intangibles of $0.6 million. Total Other Expenses of $1.8 million in the three months ended June 30, 2008 related to Special Charges of $1.3 million in connection with employee severance and other costs related to the closing of the Los Angeles office and $0.5 million of charges related to the amortization of intangibles.

The provision for income taxes for the three months ended June 30, 2009 was $1.4 million, which reflected an effective tax rate of (10.6)%. This provision was impacted by a non-deductible charge for the cancellation of certain equity awards for employees who continue to be employed by us, as well as certain discrete adjustments and non-deductable equity-based share grants resulting from a decline in our share price from the date of grant to the date of vesting, which were permanent in nature. The provision for income taxes for the three months ended June 30, 2008 was $2.5 million, which reflected an effective tax rate of 31.3%.

Noncontrolling interest was ($8.3) million for the three months ended June 30, 2009 compared to $3.4 million for the three months ended June 30, 2008, reflecting the allocation of a net loss for 2009.

Six Months Ended June 30, 2009 versus June 30, 2008

Net revenue was $120.8 million for the six months ended June 30, 2009; an increase of $16.2 million, or 15%, versus net revenue of $104.6 million for the six months ended June 30, 2008. Net revenues reflect interest expense on our Senior Notes for the six months ended June 30, 2009.

Total Operating Expenses were $114.4 million for the six months ended June 30, 2009 as compared to $88.5 million for the six months ended June 30, 2008, an 29% increase. Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $87.7 million for the six months ended June 30, 2009, an increase of $23.4 million, or 36%, versus expense of $64.3

million for the same period in 2008. The increase is primarily due to the accrual of higher amounts of discretionary compensation, reflecting higher revenues, as well as sign-on costs incurred in conjunction with the appointment of the President and Chief Executive Officer and compensation costs resulting from the consolidation of new businesses. Non-compensation expenses as a component of Operating Expenses were $26.7 million for the six months ended June 30, 2009, an increase of $2.5 million, or 10% over non-compensation operating expenses of $24.2 million for the six months ended June 30, 2008. Non-compensation operating expenses increased compared to the six months ended June 30, 2008 primarily as a result of increased Professional Fees and other costs primarily driven by the acquisition of a controlling interest in ETC, EAM and EWM.

Total Other Expenses of $17.9 million for the six months ended June 30, 2009 relate to Special Charges of $16.1 million in conjunction with the U.S. Private Equity restructuring and other ongoing strategic cost management initiatives, Acquisition and Transition Costs of $0.7 million incurred in connection with the consummation of our acquisition of SFS and the formation of ETC and amortization of intangibles of $1.0 million. Total Other Expenses of $10.8 million in the six months ended June 30, 2008 related to Special Charges of $2.4 million in connection with the write-off of certain capitalized costs associated with Evercore Capital Partners III L.P. ("ECP III") and employee severance and other costs related to the closing of the Los Angeles office, $7.5 million of deferred consideration pursuant to the Braveheart Sale and Purchase Agreement and amortization of intangibles associated with the acquisitions of Protego and Braveheart of $1.0 million.

The provision for income taxes for the six months ended June 30, 2009 was $2.4 million, which reflected an effective tax rate of (21.2)%. This provision was impacted by a non-deductible charge for the cancellation of certain equity awards for employees who continue to be employed by us, as well as certain discrete adjustments and non-deductable equity-based share grants resulting from a decline in our share price from the date of grant to the date of vesting, which were permanent in nature. The provision for income taxes for the six months ended June 30, 2008 was $2.2 million, which reflected an effective tax rate of 41.2%.

Noncontrolling interest was ($8.1) million for the six months ended June 30, 2009 compared to $2.0 million for the six months ended June 30, 2008, reflecting the allocation of a net loss for 2009.

Business Segments

The following data presents revenue, expenses and contributions by business segment. Each segment's Operating Expenses include: (1) compensation and benefits expense incurred directly in support of the businesses of the segment,
(2) non-compensation expenses, which include directly incurred expenses for premises and occupancy, professional fees, travel and entertainment, communications and information services and equipment and (3) an allocation of indirect support costs (including compensation and other operating expenses related thereto) for administrative services. These administrative services include certain finance, tax, legal, compliance, facilities management and senior management activities. Such support costs are allocated to the relevant segments based on various statistics, principally headcount and square footage. Other Expenses include a charge associated with deferred consideration pursuant to the Braveheart Sale and Purchase Agreement in 2008, amortization of intangibles as well as Special Charges and Acquisition and Transition Costs.

Advisory

The following table summarizes the operating results of the Advisory segment.



                                            For the Three Months Ended                                        For the Six Months Ended
                                                     June 30,                                                         June 30,
                                           2009                      2008         Variance                 2009                         2008        Variance
                                                                                     (dollars in thousands)
ADVISORY REVENUES
Advisory Revenue (1)                 $         70,067            $     57,731           21 %         $        119,125                $   98,423           21 %
Other Revenue, net (2)                           (754 )                   727           NM                       (152 )                   1,509           NM

NET ADVISORY REVENUES                          69,313                  58,458           19 %                  118,973                    99,932           19 %

ADVISORY EXPENSES
Operating Expenses                             49,778                  43,573           14 %                   87,290                    74,668           17 %
Other Expenses                                  4,421                     475           NM                      4,889                     8,403          (42 )%

TOTAL ADVISORY EXPENSES                        54,199                  44,048           23 %                   92,179                    83,071           11 %

ADVISORY CONTRIBUTION                $         15,114            $     14,410            5 %         $         26,794                $   16,861           59 %

(1) Includes reimbursable expenses of $1.6 million and $1.2 million for the three months ended June 30, 2009 and 2008, respectively, and $2.6 million and $1.5 million for the six months ended June 30, 2009 and 2008, respectively.
(2) Includes interest expense on the Senior Notes of $0.7 million for the three and six months ended June 30, 2009.

For the three and six months ended June 30, 2009, the level of Global M&A activity was lower than for the three and six months ended June 30, 2008, as evidenced by the following industry statistics regarding the volume of transactions:

                                                       Three Months Ended        Six Months Ended
                                                            June 30,                 June 30,
                                                       2009         2008         2009        2008
Industry Statistics ($ in billions) *
Value of North American M&A Deals Announced          $     201    $     454    $    386    $    616
Value of North American M&A Deals Completed          $      66    $     224    $    301    $    476
Value of Global M&A Deals Announced                  $     527    $     890    $    996    $  1,555
. . .