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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-K



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(Mark One)



|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------



For the fiscal year ended December 31, 2009



OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------



For the transition period from
 to



333-126751

(Commission File Number)



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LAZARD GROUP LLC

(Exact name of registrant as specified in its charter)



|                                              |  |                                     
|--------------------------------------------- |  | ------------------------------------
|Delaware                                      |  | 51-0278097                          
|(State or Other Jurisdiction of Incorporation |  | (I.R.S. Employer Identification No.)
|or Organization)                              |  |                                     



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30 Rockefeller Plaza

New York, NY 10020

(Address of principal executive offices)



Registrants telephone number: (212) 632-6000



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|                                                                 |  | 
|---------------------------------------------------------------- |  | 
|Securities Registered Pursuant to Section 12(b) of the Act: None
|                                                                
|Securities Registered Pursuant to Section 12(g) of the Act: None



Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act.    Yes  x    No   ̈



Indicate by check mark if the Registrant is not required to
file reports pursuant to Section 13 or 15(d) of the Act.    Yes   ̈    No  x



Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.    Yes  x    No   ̈



Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files).    Yes   ̈    No   ̈



Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K.  x



|                           |  |                             
|-------------------------- |  | ----------------------------
|Large accelerated filer   ̈ |  | Accelerated filer   ̈        
|Non-accelerated filer  x   |  | Smaller reporting company   ̈



Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    Yes   ̈    No  x



As of June 30, 2009, none of the Registrants common membership interests were held by non-affiliates.



As of January 29, 2010, in addition to profit
participation interests, there were 123,686,338 common membership interests and two managing member interests outstanding.



DOCUMENTS INCORPORATED BY REFERENCE



None



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LAZARD GROUP LLC



ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED

DECEMBER 31, 2009



INDEX



|                      |  |                                                                                                              |  |    
|--------------------- |  | ------------------------------------------------------------------------------------------------------------ |  | ---
|Form 10-K Item Number |  | PageNo.                                                                                                     
|                      |  |                                                                                                             
|PART I                |  |                                                                                                              |  |    
|                      |  |                                                                                                             
|Item 1.               |  | Business                                                                                                     |  | 1  
|                      |  |                                                                                                             
|                      |  | Executive Officers of the Registrant                                                                         |  | 14 
|                      |  |                                                                                                             
|Item 1A.              |  | Risk Factors                                                                                                 |  | 15 
|                      |  |                                                                                                             
|Item 1B.              |  | Unresolved Staff Comments                                                                                    |  | 31 
|                      |  |                                                                                                             
|Item 2.               |  | Properties                                                                                                   |  | 31 
|                      |  |                                                                                                             
|Item 3.               |  | Legal Proceedings                                                                                            |  | 32 
|                      |  |                                                                                                             
|Item 4.               |  | [Reserved]                                                                                                   |  | 32 
|                      |  |                                                                                                             
|PART II               |  |                                                                                                              |  |    
|                      |  |                                                                                                             
|Item 5.               |  | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 33 
|                      |  |                                                                                                             
|Item 6.               |  | Selected Financial Data                                                                                      |  | 33 
|                      |  |                                                                                                             
|Item 7.               |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  | 36 
|                      |  |                                                                                                             
|Item 7A.              |  | Quantitative and Qualitative Disclosures About Market Risk                                                   |  | 71 
|                      |  |                                                                                                             
|Item 8.               |  | Financial Statements and Supplementary Data                                                                  |  | 72 
|                      |  |                                                                                                             
|Item 9.               |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                         |  | 134
|                      |  |                                                                                                             
|Item 9A.              |  | Controls and Procedures                                                                                      |  | 134
|                      |  |                                                                                                             
|Item 9B.              |  | Other Information                                                                                            |  | 134
|                      |  |                                                                                                             
|PART III              |  |                                                                                                              |  |    
|                      |  |                                                                                                             
|Item 10.              |  | Directors, Executive Officers and Corporate Governance                                                       |  | 135
|                      |  |                                                                                                             
|Item 11.              |  | Executive Compensation                                                                                       |  | 138
|                      |  |                                                                                                             
|Item 12.              |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               |  | 158
|                      |  |                                                                                                             
|Item 13.              |  | Certain Relationships and Related Transactions, and Director Independence                                    |  | 158
|                      |  |                                                                                                             
|Item 14.              |  | Principal Accountant Fees and Services                                                                       |  | 168
|                      |  |                                                                                                             
|PART IV               |  |                                                                                                              |  |    
|                      |  |                                                                                                             
|Item 15.              |  | Exhibits and Financial Statement Schedules                                                                   |  | 170
|                      |  |                                                                                                             
|                      |  | Index to Financial Statements and Financial Statement Schedule Items 15(a)(1) and 15(a)(2)                   |  | F-1
|                      | 
|SIGNATURES            |  | II-1                                                                                                        



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Part I



When we use the terms Lazard Group,
Lazard, we, us, our, and the Company, we mean Lazard Group LLC, a Delaware limited liability company that is the current holding company for the subsidiaries that conduct our businesses.
Lazard Ltd is a Bermuda exempt company whose shares of Class A common stock are publicly traded on the New York Stock Exchange under the Symbol LAZ. Lazard Ltds subsidiaries include Lazard Group and their respective subsidiaries .
Lazard Ltd has no material assets other than indirect ownership as of December 31, 2009 of approximately 74.5% of the common membership interests in Lazard Group. Lazard Ltd controls Lazard Group through two of its indirect wholly-owned subsidiaries
who are co-managing members of Lazard Group.



Lazard Group has two primary holders of its common membership interests: Lazard Ltd and LAZ-MD Holdings LLC (LAZ-MD Holdings), a holding company that is owned by current and former managing directors of Lazard Group. The
Lazard Group common membership interests held by LAZ-MD Holdings are effectively exchangeable over time on a one-for-one basis with Lazard Ltd for shares of Lazard Ltds Class A common stock. In addition, Lazard Group has granted profit
participation interests in Lazard Group to certain of its managing directors in connection with the recapitalization of Lazard Group at the time of Lazard Ltds equity public offering. The profit participation interests are discretionary
profits interests that are intended to enable Lazard Group to compensate its managing directors in a manner consistent with historical practices.



|Item 1. | Business
|------- | --------



We are one of the worlds preeminent financial advisory and asset management firms and have long specialized in crafting solutions to
the complex financial and strategic challenges of our clients. We serve a diverse set of clients around the world, including corporations, partnerships, institutions, governments and high-net worth individuals. The first Lazard partnership was
established in 1848. Over time we have extended our activities beyond our roots in New York, Paris and London. We currently operate from 40 cities in key business and financial centers across 25 countries throughout Europe, North America, Asia,
Australia, and Central and South America.



The Separation and
Recapitalization



On May 10, 2005,
Lazard Ltd completed the equity public offering (the equity public offering) of its Class A common stock (Class A common stock), the public offering of equity security units (ESUs) of Lazard Ltd, the private
placements under an investment agreement with IXIS Corporate & Investment Bank (IXIS or, following its merger with and into its parent, Natixis) and the private offering of the 7.125% senior notes due 2015 of Lazard
Group, primarily to recapitalize Lazard Group. We refer to these financing transactions and the recapitalization, collectively, as the recapitalization. As part of the recapitalization, Lazard Group used the net proceeds from the
financing transactions primarily to redeem the outstanding Lazard Group membership interests of certain of its historical partners.



On May 10, 2005, Lazard Group also transferred its capital markets business, which consisted of equity, fixed income and convertibles
sales and trading, broking, research and underwriting services, and fund management activities outside of France as well as other specified non-operating assets and liabilities, to LFCM Holdings LLC, a Delaware limited liability company (LFCM
Holdings). We refer to these businesses, assets and liabilities as the separated businesses and these transfers collectively as the separation.



Principal Business Lines



We focus primarily on two business segments - Financial Advisory and Asset Management. We believe that the mix of our activities across
business segments, geographic regions, industries and investment strategies helps to diversify and stabilize our revenue stream.



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Financial Advisory



We offer corporate, partnership, institutional, government and
individual clients across the globe a wide array of financial advisory services regarding mergers and acquisitions (M&A) and other strategic matters, restructurings, capital structure, capital raising and various other corporate
finance matters. We focus on solving our clients most complex problems, providing advice to senior management, boards of directors and business owners of prominent companies and institutions in transactions that typically are of significant
strategic and financial importance to them.



We
continue to build our Financial Advisory business by fostering long-term, senior level relationships with existing and new clients as their independent advisor on strategic transactions. We seek to build and sustain long-term relationships with our
clients rather than focusing on individual transactions, a practice that we believe enhances our access to senior management of major corporations and institutions around the world. We emphasize providing clients with senior level focus during all
phases of transaction execution.



While we strive
to earn repeat business from our clients, we operate in a highly competitive environment in which there are no long-term contracted sources of revenue. Each revenue-generating engagement is separately negotiated and awarded. To develop new client
relationships, and to develop new engagements from historical client relationships, we maintain an active dialogue with a large number of clients and potential clients, as well as with their financial and legal advisors, on an ongoing basis. We have
gained a significant number of new clients each year through our business development initiatives, through recruiting additional senior investment banking professionals who bring with them client relationships and through referrals from directors,
attorneys and other third parties with whom we have relationships. At the same time, we lose clients each year 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.



For the years ended December 31,
2009, 2008 and 2007, the Financial Advisory segment net revenue totaled $987 million, $1,023 million and $1,240 million, respectively, accounting for approximately 65%, 66% and 64%, respectively, of our consolidated net revenue for such years. We
earned advisory revenue from 620 clients, 682 clients and 625 clients for the years ended December 31, 2009, 2008 and 2007, respectively. We earned $1 million or more from 256 clients, 220 clients and 222 clients for the years ended December 31,
2009, 2008 and 2007, respectively. For the years ended December 31, 2009, 2008 and 2007, the ten largest fee paying clients constituted approximately 17%, 20% and 19% of our Financial Advisory segment net revenue, respectively, with no client
individually having constituted more than 10% of segment net revenue during any of these years. For the years ended December 31, 2009, 2008 and 2007, the Financial Advisory segment reported operating income (loss) of $(12) million, $226 million and
$319 million, respectively. Operating income in 2009 included a charge of $49 million representing the portion of the special item (as described in Managements Discussion and Analysis and Note 23 of Notes to Consolidated Financial Statements)
that is applicable to the Financial Advisory segment. At December 31, 2009, 2008 and 2007, the Financial Advisory segment had total assets of $707 million, $739 million, and $812 million, respectively.



We believe that we have been pioneers in offering financial
advisory services on an international basis, with the establishment of our New York, Paris and London offices dating back to the nineteenth century. We maintain major local presences in the U.S., the U.K. and France, including a network of regional
branch offices in the U.S. and France, as well as presences in Argentina, Australia, Belgium, Brazil, Chile, Dubai, Germany, Hong Kong, India, Italy, Japan, the Netherlands, Panama, Peru, Singapore, South Korea, Spain, Sweden, Switzerland, Uruguay
and mainland China.



On August 13, 2007,
we acquired all of the outstanding ownership interests of Goldsmith, Agio, Helms & Lynner, LLC (GAHL), a Minneapolis-based investment bank specializing in financial advisory services to mid-sized private companies. On July 31, 2007,
Lazard Ltd acquired all of the outstanding shares of Carnegie, Wylie & Company (Holdings) PTY LTD (CWC), an Australia-based financial advisory firm, and concurrently



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sold such investment to Lazard Group. Furthermore, on June 19, 2007, we entered into a joint cooperation agreement with Raiffeisen Investment AG (Raiffeisen) for merger and
acquisition advisory services in Russia and the Central and Eastern European (the CEE) region. The cooperation between us and Raiffeisen, one of the CEE regions top M&A advisors, provides domestic, international and
cross-border expertise within Russia and the CEE region. In addition, on January 31, 2008, we acquired a 50% interest in Merchant Bankers Asociados (MBA), an Argentina-based financial advisory services firm with offices across Central
and South America and the parent company of MBA Banco de Inversiones. Finally, in February 2009, we entered into a strategic alliance with a financial advisory firm in Mexico to provide global M&A advisory services for clients, both inside and
outside of Mexico, who are seeking to acquire or sell assets in Mexico or have interests in other financial transactions with companies in Mexico, and to provide restructuring advisory services to clients in Mexico.



In addition to seeking business centered in the locations
referred to above, we historically have focused in particular on advising clients with respect to cross-border transactions. We believe that we are particularly well known for our legacy of offering broad teams of professionals who are indigenous to
their respective regions and who have long-term client relationships, capabilities and know-how in their respective regions, who will coordinate with our professionals with global sector expertise. We also believe that this positioning affords us
insight around the globe into key industry, economic, government and regulatory issues and developments, which we can bring to bear on behalf of our clients.



Services Offered



We advise clients on a wide range of strategic and financial issues. When we advise companies in the potential acquisition of another
company, business or certain assets, our services include evaluating potential acquisition targets, providing valuation analyses, evaluating and proposing financial and strategic alternatives and rendering, if appropriate, fairness opinions. We also
may advise as to the timing, structure, financing and pricing of a proposed acquisition and assist in negotiating and closing the acquisition. In addition, we may assist in executing an acquisition by acting as a dealer-manager in transactions
structured as a tender or exchange offer.



When we
advise clients that are contemplating the sale of certain businesses, assets or their entire company, our services include advising on the appropriate sales process for the situation, valuation issues, assisting in preparing an offering circular or
other appropriate sales materials and rendering, if appropriate, fairness opinions. We also identify and contact selected qualified acquirors and assist in negotiating and closing the proposed sale. As appropriate, we also advise our clients
regarding financial and strategic alternatives to a sale including recapitalizations, spin-offs, carve-outs, split-offs and tracking stocks. Our advice includes recommendations with respect to the structure, timing and pricing of these alternatives.



For companies in financial distress, our services
may include reviewing and analyzing the business, operations, properties, financial condition and prospects of the company, evaluating debt capacity, assisting in the determination of an appropriate capital structure and evaluating and recommending
financial and strategic alternatives, including providing advice on dividend policy. If appropriate, we may provide financial advice and assistance in developing and seeking approval of a restructuring or reorganization plan, which may include a
plan of reorganization under Chapter 11 of the U.S. Bankruptcy Code or other similar court administered processes in non-U.S. jurisdictions. In such cases, we may assist in all aspects of the implementation of such a plan, including advising and
assisting in structuring and effecting the financial aspects of a sale or recapitalization, structuring new securities, exchange offers, other considerations or other inducements to be offered or issued, as well as assisting and participating in
negotiations with affected entities or groups.



When we assist clients in raising private or public market financing, our services include originating and executing private placements of equity, debt and related securities, assisting clients in connection with securing, refinancing or
restructuring bank loans, originating public underwritings of equity, debt and convertible securities and originating and executing private placements of partnership and similar interests in alternative investment funds



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such as leveraged buyout, mezzanine or real estate focused funds. In addition, we may advise on capital structure and assist in long-range capital planning and rating agency relationships.



Pursuant to a business alliance agreement that we
entered into with LFCM Holdings in connection with the separation in May 2005 (the business alliance agreement), LFCM Holdings generally underwrites and distributes U.S. securities offerings originated by our Financial Advisory business
in a manner intended to be similar to our practice prior to the separation, with revenue from such offerings generally continuing to be divided evenly between Lazard Group and LFCM Holdings.



Staffing



We staff our assignments with a team of quality professionals
who have appropriate product and industry expertise. We pride ourselves on, and we believe we differentiate ourselves from our competitors by, being able to offer a relatively high level of attention from senior personnel to our clients and
organizing ourselves in such a way that managing directors who are responsible for securing and maintaining client relationships also actively participate in providing related transaction execution services. Our managing directors have significant
experience, and many of them are able to use this experience to advise on both M&A and restructuring transactions, depending on our clients needs. Many of our managing directors and senior advisors come from diverse backgrounds, such as
senior executive positions at corporations and in government, law and strategic consulting, which we believe enhances our ability to offer sophisticated advice and customized solutions to our clients. As of December 31, 2009, our Financial Advisory
segment had 150 managing directors, 681 other professionals (which includes directors, vice presidents, associates and analysts) and 211 support staff personnel.



Industries Served



We seek to offer our services across most major industry groups, including, in many cases, sub-industry
specialties. Our Mergers and Acquisitions managing directors and professionals are organized to provide advice in the following major industry practice areas:



| |  |  | consumer,
| | - |  | ---------



| |  |  | financial institutions,
| | - |  | -----------------------



| |  |  | financial sponsors,
| | - |  | -------------------



| |  |  | healthcare and life sciences,
| | - |  | -----------------------------



| |  |  | industrial,
| | - |  | -----------



| |  |  | power and energy/infrastructure,
| | - |  | --------------------------------



| |  |  | real estate, and
| | - |  | ----------------



| |  |  | technology, media and telecommunications.
| | - |  | -----------------------------------------



These groups are managed locally in each relevant geographic region and are coordinated globally, which allows us to bring local
industry-specific knowledge to bear on behalf of our clients on a global basis. We believe that this enhances the quality of the advice that we can offer, which improves our ability to market our capabilities to clients.



In addition to our Mergers and Acquisitions and Restructuring
practices, we also maintain specialties in the following distinct practice areas within our Financial Advisory segment:



| |  |  | government advisory,
| | - |  | --------------------



| |  |  | capital structure and debt advisory,
| | - |  | ------------------------------------



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| |  |  | fund raising for alternative investment funds,
| | - |  | ----------------------------------------------



| |  |  | private investment in public equity, or PIPE, and
| | - |  | ---------------------------------------------------



| |  |  | corporate finance.
| | - |  | ------------------



We endeavor to coordinate the activities of the professionals in these areas with our Mergers and Acquisitions industry specialists in order
to offer clients customized teams of cross-functional expertise spanning both industry and practice area expertise.



Strategy



Our focus in our Financial Advisory business is on:



| |  |  | making a significant investment in our intellectual capital with the addition of senior professionals who we believe have strong client relationships
and industry expertise,
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | increasing our contacts with existing clients to further enhance our long-term relationships and our efforts in developing new client relationships,
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | expanding the breadth and depth of our industry expertise and selectively adding new practice areas, such as our capital structure advisory effort to
help corporations and governments in addressing the significant deleveraging that is unfolding in the developed markets,
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | coordinating our industry specialty activities on a global basis and increasing the integration of our industry experts in mergers and acquisitions
with our Restructuring and Capital Markets professionals, and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | broadening our geographic presence by adding new offices, including, since the beginning of 2007, offices in Australia (Melbourne), Switzerland
(Zurich) and United Arab Emirates (Dubai City), as well as new regional offices in the U.S. (Boston, Minneapolis, Charlotte and Washington DC), acquiring a 50% interest in a financial advisory firm with offices in Central and South America
(Argentina, Chile, Panama, Uruguay and Peru) and entering into a joint cooperation agreement in Eastern Europe and Russia, as well as a strategic alliance with a financial advisory firm in Mexico.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In addition to the investments made as part of this strategy, we
believe that the following external market factors may enable our Financial Advisory business to benefit by:



| |  |  | increasing demand for independent, unbiased financial advice,
| | - |  | -------------------------------------------------------------



| |  |  | continued high demand for Restructuring advice due to the significant level of corporate defaults, and
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | a potential increase in cross-border M&A and large capitalization M&A, two of our areas of historical specialization.
| | - |  | ---------------------------------------------------------------------------------------------------------------------



Going forward, our strategic
emphasis in our Financial Advisory business is to leverage the investments we have made in recent years to grow our business and drive our productivity. We continue to seek to opportunistically attract outstanding individuals to our business. We
routinely reassess our strategic position and may in the future seek opportunities to further enhance our competitive position. In this regard, during 2007 and 2008, as described above, we broadened our geographic footprint through acquisitions,
investments and alliances in Australia, Eastern Europe, Russia and Central and South America, and by opening new offices. In addition, as a result of acquiring GAHL in 2007, we launched Lazard Middle Market, which advises primarily
mid-sized private companies.



Relationship with
Natixis



At the time of the equity public
offering in 2005, Lazard Group and Natixis had in place a cooperation arrangement to place and underwrite securities on the French equity primary capital markets under a common brand, currently Lazard-Natixis, and cooperate in their
respective origination, syndication and placement activities. Although originally set to expire during the third quarter of 2008, the arrangement continues to be



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applied in accordance with its general terms pending the outcome of continuing discussions regarding its formal extension. This cooperation covers French listed companies exceeding a market
capitalization of 500 million. The cooperation arrangement also provides for an alliance in real estate advisory work with the objective of establishing a common brand for advisory and financing operations within France. It also adds an
exclusive mutual referral cooperation arrangement, subject to the fiduciary duties of each firm, with the goal of referring clients from Lazard Group to Natixis for services relating to corporate banking, lending, securitizations and derivatives
within France and from Natixis to Lazard Group for M&A advisory services within France.



Asset Management



Our Asset Management business provides investment management and advisory services to institutional clients, financial intermediaries,
private clients and investment vehicles around the world. Our goal in our Asset Management business is to produce superior risk-adjusted investment returns and provide investment solutions customized for our clients. Many of our equity investment
strategies share an investment philosophy that centers on fundamental security selection with a focus on the trade-off between a companys valuation and its financial productivity.



As of December 31, 2009, total assets under management (AUM) were $129.5 billion, of which
approximately 82% was invested in equities, 14% in fixed income, 3% in alternative investments, and 1% in private equity funds. As of the same date, approximately 36% of our AUM was invested in international (i.e., non-U.S. and regional
non-U.S.) investment strategies, 46% was invested in global investment strategies and 18% was invested in U.S. investment strategies, and our top ten clients accounted for 23% of our total AUM. Approximately 89% of our AUM as of that date was
managed on behalf of institutional clients, including corporations, labor unions, public pension funds, insurance companies and banks, and through sub-advisory relationships, mutual fund sponsors, broker-dealers and registered advisors, and
approximately 11% of our AUM as of December 31, 2009 was managed on behalf of individual client relationships, which are principally with family offices and high-net worth individuals.



The charts below illustrate the mix of our AUM as of
December 31, 2009, measured by broad product strategy and by office location.



LOGO



For the years ended
December 31, 2009, 2008 and 2007, Asset Management segment net revenue totaled $602 million, $615 million and $725 million, respectively, accounting for approximately 39%, 39% and 38%, respectively, of our consolidated net revenue for such
years. For the year ended December 31, 2009, Asset Management reported operating income of $97 million, as compared to an operating loss of $63 million and operating income of $185 million for the years ended December 31, 2008 and 2007,
respectively. Operating income in 2009 and 2008 included charges of $8 million and approximately $197 million, respectively, representing the portion of the special items (as described in Managements Discussion and Analysis and Note 23 of
Notes to Consolidated Financial Statements) that are applicable to the Asset Management segment. At December 31, 2009, 2008 and 2007, our Asset Management segment had $703 million, $420 million, and $581 million in total assets, respectively.



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LAM and LFG



Our largest Asset Management subsidiaries are Lazard Asset Management LLC and its subsidiaries
(LAM), with offices in New York, San Francisco, Boston, Chicago, Toronto, Montreal, London, Milan, Frankfurt, Hamburg, Tokyo, Hong Kong, Sydney, Seoul and Bahrain (aggregating approximately $116.5 billion in total AUM as of
December 31, 2009), and Lazard Frères Gestion SAS (LFG), with offices in Paris and Brussels (aggregating approximately $12.2 billion in total AUM as of December 31, 2009). These operations, with 591 employees as of
December 31, 2009, provide our business with both a global presence and a local identity.



Primary distinguishing features of these operations include:



| |  |  | a global footprint with global research, global mandates and global clients,
| | - |  | ----------------------------------------------------------------------------



| |  |  | a broad-based team of approximately 235 investment professionals at December 31, 2009: LAM had approximately 200 investment professionals, including
approximately 80 focused, in-house, investment analysts across all products and platforms, many of whom have substantial industry or sector specific expertise, and LFG had approximately 35 investment professionals, including research analysts,
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a security selection-based investment philosophy applied across products, and
| | - |  | -----------------------------------------------------------------------------



| |  |  | world-wide brand recognition and multi-channel distribution capabilities.
| | - |  | -------------------------------------------------------------------------



Our Investment Philosophy, Process and
Research.    Our investment philosophy is generally based upon a fundamental security selection approach to investing. Across many of our products, we apply three key principles to investment portfolios:



| |  |  | select securities, not markets,
| | - |  | -------------------------------



| |  |  | evaluate the trade-off between returns and valuations, and
| | - |  | ----------------------------------------------------------



| |  |  | manage risk.
| | - |  | ------------



In searching for equity investment opportunities, many of our investment professionals follow an investment process that incorporates several
interconnected components that may include:



| |  |  | analytical framework analysis and screening,
| | - |  | --------------------------------------------



| |  |  | accounting validation,
| | - |  | ----------------------



| |  |  | fundamental analysis,
| | - |  | ---------------------



| |  |  | security selection and portfolio construction, and
| | - |  | --------------------------------------------------



| |  |  | risk management.
| | - |  | ----------------



At LAM, we conduct investment research on a global basis to develop market, industry and company specific insights. Approximately 80
investment analysts, located in our worldwide offices, conduct research and evaluate investment opportunities around the world, and across all products and platforms. The LAM global analysts are organized around six global industry sectors:



| |  |  | consumer goods,
| | - |  | ---------------



| |  |  | financial services,
| | - |  | -------------------



| |  |  | health care,
| | - |  | ------------



| |  |  | industrials,
| | - |  | ------------



| |  |  | power, and
| | - |  | ----------



| |  |  | technology, media and telecommunications.
| | - |  | -----------------------------------------



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Investment Strategies.    Our Asset Management business provides
equity, fixed income, cash management and alternative investment strategies to our clients, paying close attention to our clients varying and expanding investment needs. We offer the following product platform of investment strategies:



|                                 |  |                                                                                                                                                                                                                                                                                        |  |                                                                                                                                                                                                                        |  |                                                                                                                                                                                                                                                                    
|-------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                 |  | Global                                                                                                                                                                                                                                                                                 |  | Regional                                                                                                                                                                                                               |  | Domestic                                                                                                                                                                                                                                                           
|Equities                         |  | Global Large Capitalization Small Capitalization Emerging Markets Thematic Convertibles* Listed Infrastructure Quantitative  EAFE (Non-U.S.) Large Capitalization Small Capitalization Multi-Capitalization Quantitative  Global Ex Global Ex-U.K. Global Ex-Japan Global Ex-Australia |  | Pan-European Large Capitalization Small Capitalization Quantitative  Eurozone Large Capitalization** Small Capitalization**  Continental European Small Cap Multi Cap Eurozone (i.e., Euro Bloc) Euro-Trend (Thematic) |  | U.S. Large
Capitalization** Mid Capitalization Small/Mid Capitalization Multi-Capitalization 
Other U.K. (Large Capitalization) U.K. (Small Capitalization) U.K.
Quantitative Australia France (Large Capitalization)* France (Small Capitalization)* Japan** Korea
|                                 |  |                                                                                                                                                                                                                                                                                        | 
|Fixed Income and Cash Management |  | Global Core
Fixed Income High Yield Short
Duration                                                                                                                                                                                                                                     |  | Pan-European Core Fixed Income High Yield Cash Management* Duration Overlay  Eurozone Fixed Income** Cash Management* Corporate Bonds**                                                                                |  | U.S. Core Fixed
Income High Yield Short
Duration Municipals Cash Management*  Non-U.S. U.K. Fixed Income                                                                                                                                                           
|                                 |  |                                                                                                                                                                                                                                                                                        | 
|Alternative                      |  | Global Fund of Hedge Funds Fund of Closed-End Funds(Long and Long/Short) Convertible Arbitrage/Relative Value                                                                                                                                                                          |  | Regional European Explorer(Long/Short) Emerging Income Japan (Long/Short)                                                                                                                                              |  |                                                                                                                                                                                                                                                                    



All of the above strategies are
offered by LAM, except for those denoted by *, which are offered exclusively by LFG. Investment strategies offered by both LAM and LFG are denoted by **.



In addition to the primary investment strategies listed above, we also provide locally customized investment solutions to our clients. In
many cases, we also offer both diversified and more concentrated versions of our products. These products are generally offered on a separate account basis, as well as through pooled vehicles.



Distribution.    We distribute our
products through a broad array of marketing channels on a global basis. LAMs marketing, sales and client service efforts are organized through a global market delivery and service network, with distribution professionals located in cities
including New York, San Francisco, London, Milan, Frankfurt, Hamburg, Tokyo, Sydney, Hong Kong, Bahrain and Seoul. We have developed a well-established presence in the institutional asset management arena, managing money for corporations, labor
unions and public pension funds around the world. In addition, we manage assets for insurance companies, savings and trust banks, endowments, foundations and charities.



We also have become a leading firm in third-party distribution, managing mutual funds and separately managed accounts for many
of the worlds largest broker-dealers, insurance companies, registered advisors and other financial intermediaries. In the area of wealth management, we cater to family offices and private clients.



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LFG markets and distributes its products through 21 sales professionals based in France who
directly target both individual and institutional investors.



In June 2009, the Company formed a new wealth management subsidiary, Lazard Wealth Management LLC (Lazard Wealth Management). We expect that Lazard Wealth Management, which has not yet
commenced operations, will provide customized investment management and financial planning services to high net worth investors in the U.S. Lazard Wealth Management expects to work with investors to construct, implement and monitor an asset
allocation strategy designed to meet the individual clients investment objectives, integrating tax planning, estate planning, philanthropic interests and legacy planning with investment and risk management services. Prior to the launch of this
business, we registered Lazard Wealth Management as an investment adviser with the United States Securities and Exchange Commission (the SEC). As of December 31, 2009, Lazard Wealth Management had 8 employees.



Strategy



Our strategic plan in our Asset Management business is to focus
on delivering superior investment performance and client service and broadening our product offerings and distribution in selected areas in order to continue to drive improved business results. Over the past several years, in an effort to improve
LAMs operations and expand our business, we have:



| |  |  | focused on enhancing our investment performance,
| | - |  | ------------------------------------------------



| |  |  | improved our investment management platform by adding a number of senior investment professionals (including portfolio managers and analysts),
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | continued to strengthen our marketing and consultant relations capabilities,
| | - |  | ----------------------------------------------------------------------------



| |  |  | expanded our product platform, and
| | - |  | ----------------------------------



| |  |  | continued to expand LAMs geographic reach, including through opening offices in Hong Kong and Bahrain.
| | - |  | -------------------------------------------------------------------------------------------------------



We believe that our Asset Management business has long
maintained an outstanding team of portfolio managers and global research analysts. We intend to maintain and supplement our intellectual capital to achieve our goals. We routinely reassess our strategic position and may in the future seek
acquisitions or other transactions, including the opportunistic hiring of new employees, in order to further enhance our competitive position. We also believe that our specific investment strategies, global reach, unique brand identity and access to
multiple distribution channels may allow us to expand into new investment products, strategies and geographic locations. In addition, we plan to expand our participation in alternative investment activities through investments in new and successor
funds, and are considering expanding the services we offer to high-net worth individuals, through organic growth, acquisitions or otherwise.



Alternative Investments



Lazard has a long history of making investments with its own capital, often alongside capital of qualified institutional and individual
investors. These activities typically are organized in funds that make substantial or controlling investments in private or public companies, generally through privately negotiated transactions and with a view to divestment within two to seven
years. While potentially risky and frequently illiquid, such investments, when successful, can yield investors substantial returns on capital and generate attractive management and performance fees for the sponsor of such funds.



As a part of the separation in 2005, we transferred to LFCM
Holdings all of our alternative investment activities at that time, except for Fonds Partenaires Gestion SA (FPG), our private equity business in France, which, until September 30, 2009, was a subsidiary of our Paris-based banking
affiliate, Lazard Frères Banque SA (LFB). We also transferred to LFCM Holdings certain principal investments by Lazard Group in the funds



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managed by the separated businesses. Effective September 30, 2009, the Company sold FPG to a fund management company forming part of a group that manages investment companies and funds, in
some of which Lazard could earn carried interests. The managing directors and staff conducting this activity were accordingly transferred to the buyer. The sale of FPG did not have a material impact on our financial condition or results of
operations.



LFCM Holdings operates the
alternative investment business (including private equity activities) transferred to it in the separation. Consistent with our intent to support the development of the alternative investment business, including investing capital in funds managed or
formed by Lazard Alternative Investments Holdings LLC (LAI), a subsidiary of LFCM Holdings, and in order to benefit from what we believe to be the potential of this business, we are entitled to receive from LFCM Holdings all or a portion
of the payments from the incentive distributions attributable to these funds (net of compensation payable to investment professionals who manage these funds) pursuant to the business alliance agreement between us and LFCM Holdings. In addition,
pursuant to the business alliance agreement, we retained an option to acquire the North American and European the fund management activities of LAI and have the right to participate in the oversight of LFCM Holdings funds and consent to
certain actions. On December 15, 2009, Lazard Group exercised its option to acquire the European fund management activities of LAI. The remaining option to purchase the North American fund management activities is currently exercisable at any time
prior to May 10, 2014 (see Note 10 of Notes to Consolidated Financial Statements). We will continue to abide by our obligations with respect to transferred funds. From time to time, we have considered exercising the option with respect to the
remaining activities in North America and have had preliminary conversations with LFCM Holdings in that regard.



Since 2005, consistent with our obligations to LFCM Holdings, we have engaged in a number of alternative investments and private equity
activities. During 2008, we formed a strategic partnership with Apollo Management, L.P. (Apollo), an affiliate of Apollo Global Management, LLC, a leading global alternative asset manager, for private equity investments in Europe. In
addition, in February 2009 the business alliance agreement was amended to remove certain restrictions on the Company engaging in private equity businesses in North America and to reduce the price of our option to acquire the fund management
activities of LAI in North America. We continue to explore and discuss opportunities to expand the scope of our alternative investment and private equity activities in Europe, the U.S. and elsewhere. These opportunities could include internal growth
of new funds and direct investments by us, partnerships or strategic relationships, investments with third parties or acquisitions of existing funds or management companies. In that regard, on July 15, 2009, the Company established a private
equity business with The Edgewater Funds (Edgewater), a Chicago-based private equity firm, through the acquisition of Edgewaters management vehicles. The acquisition was structured as a purchase by Lazard of interests in a holding
company that owns interests in the general partner and management company entities of the current Edgewater private equity funds (the Edgewater Acquisition) (see Note 9 of Notes to Consolidated Financial Statements). As of December
31, 2009, Edgewater, with 18 employees, had approximately $600 million of AUM and unfunded fee-earning commitments. Also, consistent with our obligations to LFCM Holdings, we may explore discrete capital markets opportunities. See Notes 10 and
15 of Notes to Consolidated Financial Statements for additional information regarding alternative investments, including recent developments with respect to Corporate Partners II Limited.



On October 2, 2007, Lazard Funding Limited LLC (Lazard
Funding), a wholly-owned subsidiary of Lazard Group, formed a special purpose acquisition company, Sapphire Industrials Corp. (Sapphire), for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock
purchase, reorganization or similar business combination with one or more operating businesses within a 24 month period (collectively referred to as the Initial Business Combination). In connection with the formation of Sapphire, Lazard
Funding purchased approximately 15.1 million founders units (Founders Units) at a total cost of approximately $0.1 million. Each Founders Unit consisted of one share of Sapphire common stock and one warrant to purchase
one share of Sapphire common stock. On January 24, 2008, Sapphire completed an initial public offering (the Sapphire IPO), which, prior to offering costs, raised $800 million through the sale of 80 million units at an offering price of
$10.00 per unit. On January 24, 2008, in connection with the Sapphire IPO, Lazard Funding purchased (i) 5 million units in the Sapphire IPO at a purchase price equal to the public offering price of $10.00 per unit (for an aggregate purchase price of
$50.0 million), and (ii) an aggregate of 12.5 million warrants from Sapphire at a



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price of $1.00 per warrant (for a total purchase price of $12.5 million). Net proceeds from the Sapphire IPO were placed in a trust account by Sapphire (the Trust Account) pending
consummation of the Initial Business Combination.



On January 6, 2010, Sapphire announced that it had not completed the Initial Business Combination and it would dissolve and distribute the funds in the Trust Account to all its public shareholders, to the extent they are holders of shares
issued in the Sapphire IPO, in proportion to their respective equity interests. Pursuant to such dissolution, on January 26, 2010 Sapphire distributed an initial distribution equivalent to approximately $10.06 per share of Sapphire common stock. All
Sapphire warrants expired without value. During the fourth quarter of 2009, the Company wrote-off its $13 million investment in Sapphire warrants, with such write-off being recorded in revenue-other in the accompanying Consolidated
Statement of Operations. See Note 15 of Notes to Consolidated Financial Statements for additional information regarding Sapphire and the Sapphire IPO.



CWC operates our private equity business in Australia, and, as of December 31, 2009, it had 8 employees and approximately $200 million of
private equity AUM.



Employees



We believe that our people are our most important asset, and it
is their reputation, talent, integrity and dedication that underpin our success. As of December 31, 2009, we employed 2,294 people, which included 150 managing directors and 681 other professionals in our Financial Advisory segment and 56
managing directors and 299 other professionals in our Asset Management segment. We strive to maintain a work environment that fosters professionalism, excellence, diversity and cooperation among our employees worldwide. We generally utilize an
evaluation process at the end of each year to measure performance, determine compensation and provide guidance on opportunities for improved performance. Generally, our employees are not subject to any collective bargaining agreements, except that
our employees in certain of our European offices, including France and Italy, are covered by national, industry-wide collective bargaining agreements. We believe that we have good relations with our employees.



Competition



The financial services industry, and all of the businesses in
which we compete, are intensely competitive, and we expect them to remain so. Our competitors are other investment banking and financial advisory firms, broker-dealers, commercial and universal banks, insurance companies, investment
management firms, hedge fund management firms, alternative investment firms and other financial institutions. We compete with some of our competitors globally and with others on a regional, product or niche basis. We compete on the basis of a number
of factors, including quality of people, transaction execution skills, investment track record, quality of client service, individual and institutional client relationships, absence of conflicts, range of products and services, innovation, brand
recognition and business reputation.



While our
competitors vary by country in our Mergers and Acquisitions practice, we believe our primary competitors in securing M&A advisory engagements are Bank of America, Citigroup, Credit Suisse, Deutsche Bank AG, Goldman Sachs & Co., JPMorgan
Chase, Mediobanca, Morgan Stanley, Rothschild and UBS. In our Restructuring practice, our primary competitors are The Blackstone Group, Evercore Partners, Greenhill & Co. and Rothschild.



We believe that our primary global competitors in our Asset
Management business include, in the case of LAM, Alliance Bernstein, AMVESCAP, Brandes Investment Partners, Capital Management & Research, Fidelity, Lord Abbett, Aberdeen and Schroders and, in the case of LFG, Swiss private banks with
offices in France as well as large institutional banks and fund managers. We face competition in private equity both in the pursuit of outside investors for our private equity funds and the acquisition of investments in attractive portfolio
companies. We compete with hundreds of other funds, many of which are subsidiaries of or otherwise affiliated with large financial service providers.



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Competition is also intense in each of our businesses for the attraction and retention of
qualified employees, and we compete on the level and nature of compensation and equity-based incentives for key employees. Our ability to continue to compete effectively in our businesses will depend upon our ability to attract new employees and
retain and motivate our existing employees.



In
recent years there has been substantial consolidation and convergence among companies in the financial services industry. In particular, a number of large commercial banks, insurance companies and other broad-based financial services firms have
established or acquired broker-dealers or have merged with other financial institutions. This trend was amplified in connection with the unprecedented disruption and volatility in the financial markets during the past several years, and, as a
result, a number of financial services companies have merged, been acquired or have fundamentally changed their respective business models, including, in certain cases, becoming commercial banks. Many of these firms have the ability to offer a wider
range of products than we offer, including loans, deposit taking, insurance and brokerage services. Many of these firms also offer more extensive asset management and investment banking services, which may enhance their competitive position. They
also have the ability to support investment banking and securities products with commercial banking, insurance and other financial services revenue in an effort to gain market share, which could result in pricing pressure in our businesses. This
trend toward consolidation and convergence has significantly increased the capital base and geographic reach of our competitors, and, in certain instances, has afforded them access to government funds.



Regulation



Our businesses, as well as the financial services industry generally, are subject to extensive regulation
throughout the world. As a matter of public policy, regulatory bodies are charged with safeguarding the integrity of the securities and other financial markets and with protecting the interests of customers participating in those markets, not with
protecting the interests of our stockholders or creditors. Many of our affiliates that participate in securities markets are subject to comprehensive regulations that include some form of capital structure regulations and customer protection rules.
In the U.S., certain of our subsidiaries are subject to such regulations promulgated by the SEC or Financial Industry Regulatory Authority (FINRA) (formerly the NASD). Standards, requirements and rules implemented throughout the European
Union are broadly comparable in scope and purpose to the regulatory capital and customer protection requirements imposed under the SEC and FINRA rules. European Union directives also permit local regulation in each jurisdiction, including those in
which we operate, to be more restrictive than the requirements of such European Union-wide directives. These sometimes burdensome local requirements can result in certain competitive disadvantages to us.



In the U.S., the SEC is the federal agency responsible for the
administration of the federal securities laws. FINRA is a voluntary, self-regulatory body composed of members, such as our broker-dealer subsidiaries, that have agreed to abide by FINRAs rules and regulations. The SEC, FINRA and non-U.S.
regulatory organizations may examine the activities of, and may expel, fine and otherwise discipline us and our employees. The laws, rules and regulations comprising this framework of regulation and the interpretation and enforcement of existing
laws, rules and regulations are constantly changing, particularly in light of the extraordinary disruption and volatility in the global financial markets experienced in the last year. The effect of any such changes cannot be predicted and may impact
the manner of operation and profitability of our company.



Our principal U.S. broker-dealer subsidiary, Lazard Frères & Co. LLC (LFNY), through which we conduct most of our U.S. Financial Advisory business, is currently registered as a broker-dealer with the SEC and
FINRA, and as a broker-dealer in all 50 U.S. states, the District of Columbia and Puerto Rico. As such, LFNY is subject to regulations governing effectively every aspect of the securities business, including minimum capital requirements,
record-keeping and reporting procedures, relationships with customers, experience and training requirements for certain employees, and business procedures with firms that are not members of certain regulatory bodies. Lazard Asset Management
Securities LLC, a subsidiary of LAM, also is registered as a broker-dealer with the SEC and FINRA and in all 50 U.S. states, the District of Columbia and Puerto Rico.



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Lazard Middle Market LLC, a subsidiary of GAHL, is registered as a broker-dealer with the SEC and FINRA, and as a broker-dealer in various U.S. states and territories.



Certain U.K. subsidiaries of Lazard Group, including Lazard
& Co., Limited, Lazard Fund Managers Limited and Lazard Asset Management Limited, which we refer to in this Annual Report on Form 10-K (this Form 10-K) as the U.K. subsidiaries, are regulated by the Financial Services
Authority. We also have other subsidiaries that are registered as broker-dealers (or have similar non-US registration in various jurisdictions).



Compagnie Financière Lazard Frères SAS (CFLF), our French subsidiary through which non-corporate finance advisory
activities are carried out in France, is subject to regulation by the Commission Bancaire and the Comité des Etablissements de Crédit et des Entreprises dInvestissement for its banking activities conducted through its subsidiary,
LFB. In addition, the investment services activities of the Paris group, exercised through LFB and other subsidiaries of CFLF, primarily LFG (asset management), are subject to regulation and supervision by the Autorité des Marchés
Financiers. Our business is also subject to regulation by non-U.S. governmental and regulatory bodies and self-regulatory authorities in other countries where we operate.



Our U.S. broker-dealer subsidiaries, including LFNY, are subject to the SECs uniform net capital rule, Rule 15c3-1 under
the Securities Exchange Act of 1934, as amended (the Exchange Act), and the net capital rules of FINRA, which may limit our ability to make withdrawals of capital from our broker-dealer subsidiaries. The uniform net capital rule sets the
minimum level of net capital a broker-dealer must maintain and also requires that a portion of its assets be relatively liquid. FINRA may prohibit a member firm from expanding its business or paying cash dividends if it would result in net capital
falling below FINRAs requirements. In addition, our broker-dealer subsidiaries are subject to certain notification requirements related to withdrawals of excess net capital. Our broker-dealer subsidiaries are also subject to regulations,
including the USA PATRIOT Act of 2001, which impose obligations regarding the prevention and detection of money- laundering activities, including the establishment of customer due diligence and other compliance policies and procedures. Failure to
comply with these requirements may result in monetary, regulatory and, in certain cases, criminal penalties.



Certain of our Asset Management subsidiaries are registered as investment advisors with the SEC. As registered investment advisors, each is
subject to the requirements of the Investment Advisers Act and the SECs regulations thereunder. Such requirements relate to, among other things, the relationship between an advisor and its advisory clients, as well as general anti-fraud
prohibitions. LAM serves as an advisor to several mutual funds which are registered under the Investment Company Act. The Investment Company Act regulates, among other things, the relationship between a mutual fund and its investment advisor (and
other service providers) and prohibits or severely restricts principal transactions between an advisor and its advisory clients, imposes record- keeping and reporting requirements, disclosure requirements, limitations on trades where a single broker
acts as the agent for both the buyer and seller (known as agency cross), and limitations on affiliated transactions and joint transactions. Lazard Asset Management Securities LLC, a subsidiary of LAM, serves as the underwriter or
distributor for mutual funds and hedge funds managed by LAM, and as an introducing broker to Lazard Capital Markets LLC for unmanaged accounts of LAMs private clients.



In addition, the Japanese Ministry of Finance and the Financial Supervisory Agency, the Korean Financial
Supervisory Commission, as well as Australian and German banking authorities, among others, regulate various of our operating entities and also have capital standards and other requirements comparable to the rules of the SEC.



Regulators are empowered to conduct administrative proceedings
that can result in censure, fine, the issuance of cease-and-desist orders or the suspension or expulsion or other disciplining of a broker-dealer or its directors, officers or employees.



Lazard Ltd is currently subject to supervision by the SEC as a Supervised Investment Bank Holding Company
(SIBHC). As a SIBHC, Lazard Ltd is subject to group-wide supervision, which requires it to compute allowable capital and risk allowances on a consolidated basis. We believe that Lazard Ltd is the only institution currently



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subject to supervision by the SEC as a SIBHC. We are in discussions with the SEC and other authorities regarding the scope and nature of Lazard Ltds reporting and other obligations under
the SIBHC program.



On December 11, 2009, the U.S.
House of Representatives passed The Wall Street Reform and Consumer Protection Act of 2009 (the 2009 Act). The 2009 Act is currently pending in the U.S. Senate. We are not able to predict what action or changes, if any, will result from
the Senates consideration of the 2009 Act. We currently are in the process of examining the potential impact of the 2009 Act on us and the SIBHC program, but, given the uncertainty of possible changes to the 2009 Act, we are not able to
predict the ultimate effect on us and the SIBHC program.



Over the last several years, global financial markets have experienced extraordinary disruption and volatility. As a result, certain financial institutions around the world have failed and others have been forced to seek acquisition
partners. The U.S. and other governments have taken unprecedented steps to try to stabilize the financial system, including investing in financial institutions. It is possible that the U.S. and other governments may take further actions in response
to this situation, including expanding current or enacting new standards, requirements and rules that may be applicable to us and our subsidiaries. The effect of any such expanded or new standards, requirements and rules is uncertain and could have
adverse consequences to our business and results of operations.



On October 3, 2008, the Emergency Economic Stabilization Act of 2008 was signed into law, pursuant to which the U.S. Secretary of the Treasury established the Troubled Asset Relief Program
(TARP) in order to purchase certain troubled assets from qualifying financial institutions and to make capital investments in such financial institutions. We have neither sought nor received, and have no current intention of seeking, any
funds pursuant to TARP, whether under the Capital Purchase Program, the Targeted Investment Program or otherwise.



Executive Officers of the Registrant



Set forth below are the name, age, present title, principal occupation and certain biographical information for each of our executive
officers as of February 22, 2010, all of whom have been appointed by, and serve at the pleasure of, our board of directors.



Kenneth M. Jacobs, 51



Mr. Jacobs has served as Chairman and Chief Executive Officer of Lazard Ltd and Lazard Group LLC since November 2009. Mr. Jacobs served as a
Managing Director of Lazard since 1991 and had been a deputy chairman of Lazard from January 2002 until November 2009. He has also served as Chief Executive Officer of Lazard North America since 2002. Mr. Jacobs initially joined Lazard in 1988. Mr.
Jacobs is a member of the Board of Trustees of the University of Chicago and the Brookings Institution.



Michael J. Castellano, 63



Mr. Castellano has served as Chief Financial Officer of Lazard Ltd since May 2005. Mr. Castellano has served as a Managing Director and Chief Financial Officer of Lazard Group since August 2001.
Prior to joining Lazard, Mr. Castellano held various senior management positions at Merrill Lynch & Co. from August 1991 to August 2001, including Senior Vice PresidentChief Control Officer for Merrill Lynchs capital
markets businesses, Chairman of Merrill Lynch International Bank and Senior Vice President Corporate Controller. Prior to joining Merrill Lynch & Co., Mr. Castellano was a partner with Deloitte & Touche where he served a
number of investment banking clients over the course of his 24 years with the firm.



Scott D. Hoffman, 47



Mr. Hoffman has served as General Counsel of Lazard Ltd since May 2005. Mr. Hoffman has served as a Managing Director of Lazard Group since January 1999 and General Counsel of Lazard Group
since January 2001. Mr. Hoffman previously served as Vice President and Assistant General Counsel from February 1994 to



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December 1997 and as a Director from January 1998 to December 1998. Prior to joining Lazard, Mr. Hoffman was an attorney at Cravath, Swaine & Moore LLP.



Alexander F. Stern, 43



Mr. Stern has served as Chief Operating Officer of Lazard Ltd
and Lazard Group LLC since November 2008. He has served as a Managing Director since January 2002 and as the Firms Global Head of Strategy since February 2006. Mr. Stern previously served as a Vice President in Lazards Financial
Advisory business from January 1998 to December 2000 and as a Director from January 2001 to December 2001. Mr. Stern initially joined Lazard in 1994 and previously held various positions with Patricof & Co. Ventures and IBM.



Charles G. Ward, III, 57



Mr. Ward has served as President of Lazard Ltd and
Chairman of the Asset Management Group of Lazard Ltd since May 2005. Mr. Ward has served as President and a Managing Director of Lazard Group since February 2002. Prior to joining Lazard, he was variously the Head or Co-Head of Global
Investment Banking and Private Equity of Credit Suisse First Boston, or CSFB, from February 1994 to February 2002. Mr. Ward also served as a member of the Executive Board of CSFB from February 1994 to February 2002 and as President
of CSFB from April 2000 to November 2000. Prior to joining CSFB, Mr. Ward co-founded Wasserstein Perella Group Inc. in February 1988 and served as President of Wasserstein Perella & Co. from January 1990 to February 1994. Prior to
serving at Wasserstein Perella & Co., Mr. Ward was Co-Head of Mergers and Acquisitions and the Media Group at The First Boston Corporation where he worked from July 1979 to February 1988. Mr. Ward served on the board of directors of
Sapphire Industrials Corp. until January 2010.



Where You Can Find Additional Information



Lazard Group files current, annual and quarterly reports and other information required by the Exchange Act, with the SEC. You may read and copy any document the company files at the SECs public reference room located at 100 F Street,
N.E., Washington, D.C. 20549, U.S.A. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. The Companys SEC filings are also available to the public from the SECs internet site at
http://www.sec.gov.Copies of these reports and other information can also be inspected at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005, U.S.A.



Our public internet site is http://www.lazard.com. and
the investor relations section of our public internet site is located at http://www.lazard.com/InvestorRelations/SEC-Filings.aspx.We will make available free of charge, on or through the investor relations section of our internet site, our
annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports filed or furnished pursuant to the Exchange Act as soon as reasonably practicable after we electronically file such material
with, or furnish it to, the SEC. Also posted on our website, and available in print upon request of any shareholder to the Investor Relations Department, are charters for Lazard Ltds Audit Committee, Compensation Committee and
Nominating & Governance Committee. Copies of these charters and Lazard Ltds Corporate Governance Guidelines and Code of Business Conduct and Ethics governing our directors, officers and employees are also posted on our website in the
Corporate Governance section.



|ITEM 1A. | RISK FACTORS
|-------- | ------------



You should carefully consider the following risks and all of the other information set forth in this Form 10-K, including our
consolidated financial statements and related notes. The following risks comprise material risks of which we are aware. If any of the events or developments described below actually occurred, our business, financial condition or results of
operations would likely suffer.



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Risks Relating to the Financial Services Industry and Financial Markets



The U.S. and global capital markets and the economy
generally have experienced significant deterioration and volatility over the past several years, which has had negative repercussions on the global economy and, as a result, could present new challenges for our business.



Commencing in 2007 and continuing through 2009, certain adverse
financial developments have impacted the U.S. and global capital markets. These developments include a general slowing of economic growth both in the U.S. and globally, substantial volatility in equity securities markets, and volatility and
tightening of liquidity in credit markets. In addition, concerns over increasing unemployment levels, declining business and consumer confidence, volatile energy costs, geopolitical issues and a declining real estate market in the U.S. and elsewhere
have contributed to increased volatility and diminished expectations for the economy and the markets going forward. In some cases, the global capital markets have produced downward pressure on stock prices and credit capacity for certain issuers
without regard to those issuers underlying financial strength. If current levels of market disruption and volatility continue or worsen, our business may continue to be adversely affected, which may have a material impact on our business and
results of operations.



Current disruption and
volatility in global financial markets might continue and governments may take further measures to intervene.



Over the last several years, global financial markets have experienced extraordinary disruption and volatility. As a result, certain
financial institutions around the world have failed and others have been forced to seek acquisition partners. The U.S. and other governments have taken unprecedented steps to try to stabilize the financial system, including investing in financial
institutions. The overall effects of these and other legislative and regulatory initiatives on the financial markets is uncertain, and they may not have the intended stabilization effects. Should these or other legislative or regulatory initiatives
fail to stabilize and add liquidity to the financial markets or have other adverse consequences, our business and results of operations could be adversely affected.



The soundness of our clients and other financial institutions could adversely affect us.



We have exposure to many different industries, products and
counterparties, and we routinely execute transactions with counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks, mutual and hedge funds, and other institutional clients. Many of these
transactions expose us to credit risk in the event of default of our counterparty or client. In addition, our credit risk may be exacerbated when the collateral held by us cannot be fully realized or is liquidated at prices not sufficient to recover
the full amount of the loan or derivative exposure due us.



Other Business Risks



Our
ability to retain our managing directors and other key professional employees is critical to the success of our business, including maintaining compensation levels at an appropriate level of costs, and failure to do so may materially adversely
affect our results of operations and financial position.



Our people are our most important resource. We must retain the services of our managing directors and other key professional employees, and strategically recruit and hire new talented employees, to obtain
and successfully execute the advisory and asset management engagements that generate substantially all our revenue.



Lazard Group has experienced several significant events in recent years, including our transformation from a private to a public company. In
general, our industry continues to experience change and exerts competitive pressures for retaining top talent, which makes it more difficult for us to retain professionals. If any of our managing directors and other key professional employees were
to join an existing competitor, form a competing company or otherwise leave us, some of our clients could choose to use the services of that competitor or some other competitor instead of our services. The employment arrangements, non-competition
agreements and retention agreements we have or will enter into with our managing directors and other key professional employees may not prevent our managing directors and other key professional employees from resigning from



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practice or competing against us. In addition, these arrangements and agreements have a limited duration and will expire after a certain period of time. We continue to be subject to intense
competition in the financial services industry regarding the recruitment and retention of key professionals, and have experienced departures from and added to our professional ranks as a result. Changes to our employee compensation arrangements,
such as changes to the composition between cash and deferred compensation, may result in increased compensation and benefits expense in a particular year. Our compensation levels, results of operations and financial position may be significantly
affected by many factors, including general economic and market conditions, our operating and financial performance, staffing levels and competitive pay conditions.



Difficult market conditions can adversely affect our business in many ways, including by reducing the volume
of the transactions involving our Financial Advisory business and reducing the value or performance of the assets we manage in our Asset Management business, which, in each case, could materially reduce our revenue or income and adversely affect our
financial position.



As a financial services
firm, our businesses are materially affected by conditions in the global financial markets and economic conditions throughout the world. The financial environment in the U.S. and globally has been volatile during the last several years and
challenging market conditions have persisted. Unfavorable economic and market conditions can adversely affect our financial performance in both the Financial Advisory and Asset Management businesses, as demonstrated in the past several years.



For example, revenue generated by our Financial
Advisory business is directly related to the volume and value of the transactions in which we are involved. During periods of unfavorable market or economic conditions, the volume and value of M&A transactions may decrease, thereby reducing the
demand for our Financial Advisory services and increasing price competition among financial services companies seeking such engagements. Our results of operations would be adversely affected by any such reduction in the volume or value of M&A
transactions. In addition, our profitability would be adversely affected due to our fixed costs and the possibility that we would be unable to scale back other costs within a timeframe sufficient to offset any decreases in revenue relating to
changes in market and economic conditions. The future market and economic climate may deteriorate because of many factors, including possible increases in interest rates or inflation, terrorism or political uncertainty.



Within our Financial Advisory business, we have typically seen
that, during periods of economic strength and growth, our Mergers and Acquisitions practice historically has been more active and our Restructuring practice has been less active. Conversely, during periods of economic weakness and slowdown, we
typically have seen that our Restructuring practice has been more active and our Mergers and Acquisitions practice has been less active. As a result, our revenue from our Restructuring practice has tended to correlate negatively to our revenue from
our Mergers and Acquisitions practice over the course of business cycles. These trends are cyclical in nature and subject to periodic reversal. However, these trends do not cancel out the impact of economic conditions in our Financial Advisory
business, which may be adversely affected by a downturn in economic conditions leading to decreased Mergers and Acquisitions practice activity, notwithstanding improvements in our Restructuring practice. Moreover, revenue improvements in our Mergers
and Acquisitions practice in strong economic conditions could be offset in whole or in part by any related revenue declines in our Restructuring practice. While we generally have experienced a counter-cyclical relationship between our Mergers and
Acquisitions practice and our Restructuring practice, this relationship may not continue in the future.



Our Asset Management business also would be expected to generate lower revenue in a market or general economic downturn. Under our Asset
Management business arrangements, investment advisory fees we receive typically are based on the market value of AUM. Accordingly, a decline in the prices of securities, such as that which occurred on a global basis in 2008, would be expected
to cause our revenue and income to decline by:



| |  |  | causing the value of our AUM to decrease, which would result in lower investment advisory fees,
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | causing some of our clients to withdraw funds from our Asset Management business due to the uncertainty or volatility in the market, which would also
result in lower investment advisory fees,
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | causing some of our clients or prospective clients to hesitate in allocating assets to our Asset Management business due to the uncertainty or
volatility in the market, which would also result in lower investment advisory fees,
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | causing negative absolute performance returns for some accounts which have performance-based incentive fees, which would result in a reduction of
revenue from such fees, or
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | causing some of our clients to withdraw funds from our Asset Management business in favor of investments they perceive as offering greater opportunity
or lower risk, which also would result in lower investment advisory fees.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



If our Asset Management revenue declines without a commensurate reduction in our expenses, our net income will be reduced. In addition, in the event of a market downturn, our alternative investment and
private equity practice also may be impacted by reduced exit opportunities in which to realize the value of its investments.



A majority of our revenue is derived from Financial Advisory fees, which are not long-term contracted sources of revenue and are subject
to intense competition, and declines in our Financial Advisory engagements could have a material adverse effect on our financial condition and results of operations.



We historically have earned a substantial portion of our revenue from advisory fees paid to us by our Financial Advisory
clients, which fees usually are payable upon the successful completion of a particular transaction or restructuring. For example, for the year ended December 31, 2009, Financial Advisory services accounted for approximately 65% of our
consolidated net revenue. We expect that we will continue to rely on Financial Advisory fees for a substantial portion of our revenue for the foreseeable future, and a decline in our advisory engagements or the market for advisory services would
adversely affect our business, financial condition and results of operations.



In addition, we operate in a highly competitive environment where typically there are no long-term contracted sources of revenue. Each revenue-generating engagement typically is separately awarded and
negotiated. Furthermore, many businesses do not routinely engage in transactions requiring our services and, as a consequence, our fee paying engagements with many clients are not likely to be predictable. We also lose clients each year as a result
of the sale or merger of a client, a change in a clients senior management, competition from other financial advisors and financial institutions, and other causes. As a result, our engagements with clients are constantly changing and our
Financial Advisory fees could decline quickly due to the factors discussed above.



There will not be a consistent pattern in our financial results from period to period, which may make it difficult for us to achieve steady earnings growth on a quarterly basis.



We experience significant fluctuations in quarterly revenue and
profits. These fluctuations generally can be attributed to the fact that we earn a significant portion of our Financial Advisory revenue upon the successful completion of a merger or acquisition transaction or a restructuring, the timing of which is
uncertain and is not subject to our control. In addition, our Asset Management revenue is particularly sensitive to fluctuations in our AUM. Asset Management fees are often based on AUM as of the end of a quarter or month. As a result, a reduction
in assets at the end of a quarter or month (as a result of market depreciation, withdrawals or otherwise) will result in a decrease in management fees. Similarly, timing of flows, contributions and withdrawals are often out of our control and may be
inconsistent from quarter to quarter. As a result of quarterly fluctuations, it may be difficult for us to achieve steady earnings growth on a quarterly basis.



In many cases, we are paid for advisory engagements only upon the successful consummation of the underlying merger or acquisition
transaction or restructuring. As a result, our Financial Advisory business is highly dependent on market conditions and the decisions and actions of our clients, interested third parties and governmental authorities. For example, a client could
delay or terminate an acquisition transaction because of a



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failure to agree upon final terms with the counterparty, failure to obtain necessary regulatory consents or board of directors or stockholder approval, failure to secure necessary financing,
adverse market conditions or because the targets business is experiencing unexpected operating or financial problems. Anticipated bidders for assets of a client during a restructuring transaction may not materialize or our client may not be
able to restructure its operations or indebtedness, for example, due to a failure to reach agreement with its principal creditors. In addition, a bankruptcy court may deny our right to collect a success or completion fee. In
these circumstances, other than in engagements where we receive monthly retainers, we often do not receive any advisory fees other than the reimbursement of certain expenses despite the fact that we devote resources to these transactions.
Accordingly, the failure of one or more transactions to close either as anticipated or at all could materially adversely affect our business, financial condition or results of operations. For more information, see Managements Discussion
and Analysis of Financial Condition and Results of Operations.



If the number of debt defaults, bankruptcies or other factors affecting demand for our Restructuring services declines, or we lose business to certain new entrants to the restructuring advisory
practice who are no longer precluded from offering such services due to changes to the U.S. Bankruptcy Code, our Restructuring practices revenue could suffer.



We provide various restructuring and restructuring-related advice to companies in financial distress or to their creditors or
other stakeholders. Historically, the fees from restructuring related services have been a significant part of our Financial Advisory revenue. A number of factors could affect demand for these advisory services, including improving general economic
conditions, the availability and cost of debt and equity financing and changes to laws, rules and regulations, including deregulation or privatization of particular industries and those that protect creditors.



Section 327 of the U.S. Bankruptcy Code requires that
disinterested persons be employed in a restructuring. The definition of disinterested persons has been modified. As previously in effect, certain of our competitors were disqualified from being employed in restructurings as a
result of their status as an underwriter of securities. This basis for disqualification, however, no longer applies. Historically, we were not often disqualified from obtaining a role in a restructuring because we have not been a significant
underwriter of securities. The change of the disinterested persons definition allows for more financial services firms to compete for restructuring engagements and make recruiting and retaining of professionals more difficult. If our
competitors succeed in being retained in new restructuring engagements or in hiring our restructuring professionals, our Restructuring practice, and thereby our results of operations, could be materially adversely affected.



We could lose clients and suffer a decline in our Asset
Management revenue and earnings if the investments we choose in our Asset Management business perform poorly or if we lose key employees, regardless of overall trends in the prices of securities.



Investment performance affects our AUM relating to existing
clients and is one of the most important factors in retaining clients and competing for new Asset Management business. Poor investment performance could impair our revenue and growth because:



| |  |  | existing clients might withdraw funds from our Asset Management business in favor of better performing products, which would result in lower investment
advisory fees,
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our incentive fees, which provide us with a set percentage of returns on some alternative investment and private equity funds and other accounts, would
decline,
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | third-party financial intermediaries, advisors or consultants may rate our products poorly, which may result in client withdrawals and reduced asset
flows from these third parties or their clients, or
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | firms with which we have strategic alliances may terminate such relationships with us, and future strategic alliances may be unavailable.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------



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If key employees were to leave our Asset Management business, whether to join a competitor
or otherwise, we may suffer a decline in revenue or earnings and suffer an adverse effect on our financial position. Loss of key employees may occur due to perceived opportunity for promotion, increased compensation, work environment or other
individual reasons, some of which may be beyond our control.



Our investment style in our Asset Management business may underperform other investment approaches, which may result in significant client or asset departures, or a reduction in AUM.



Even when securities prices are rising generally, performance
can be affected by investment style. Many of the equity investment strategies in our Asset Management business share a common investment orientation towards fundamental security selection. We believe this style tends to outperform the market in some
market environments and underperform it in others. In particular, a prolonged growth environment may cause certain investment strategies to go out of favor with some clients, advisers, consultants or third-party intermediaries. In combination with
poor performance relative to peers, changes in personnel, extensive periods in particular market environments or other difficulties, this may result in significant client or asset departures or a reduction in AUM.



Because our clients can remove the assets we manage on short
notice, we may experience unexpected declines in revenue and profitability.



Our investment advisory contracts are generally terminable upon very short notice. Institutional and individual clients, and firms with which we have strategic alliances, can terminate their relationship
with us, reduce the aggregate amount of AUM or shift their funds to other types of accounts with different rate structures for a number of reasons, including investment performance, changes in prevailing interest rates and financial market
performance. Poor performance relative to other investment management firms tends to result in decreased investments in our investment products, increased redemptions of our investment products, and the loss of institutional or individual accounts
or strategic alliances. In addition, the ability to terminate relationships may allow clients to renegotiate for lower fees paid for asset management services.



In addition, in the U.S., as required by the Investment Company Act, each of our investment advisory contracts with the mutual funds we
advise or subadvise automatically terminates upon its assignment. Each of our other investment advisory contracts subject to the provisions of the Investment Advisers Act provide, as required by the act, that the contract may not be
assigned without the consent of the customer. A sale of a sufficiently large block of shares of our voting securities or other transactions could be deemed an assignment in certain circumstances. An assignment, actual or
constructive, would trigger these termination provisions and could adversely affect our ability to continue managing client accounts.



Access to clients through intermediaries is important to our Asset Management business, and reductions in referrals from such
intermediaries or poor reviews of our products or our organization by such intermediaries could materially reduce our revenue and impair our ability to attract new clients.



Our ability to market our Asset Management services relies in part on receiving mandates from the client base
of national and regional securities firms, banks, insurance companies, defined contribution plan administrators, investment consultants and other intermediaries. To an increasing extent, our Asset Management business uses referrals from accountants,
lawyers, financial planners and other professional advisors. The inability to have this access could materially adversely affect our Asset Management business. In addition, many of these intermediaries review and evaluate our products and our
organization. Poor reviews or evaluations of either the particular product or of us may result in client withdrawals or an inability to attract new assets through such intermediaries.



Our historical investment activities involve increased levels of investments in relatively high-risk,
illiquid assets, and we may lose some or all of the principal amount that we invest in these activities or fail to realize any profits from these activities for a considerable period of time.



We intend to expand our participation in alternative investment
activities through investments in new and successor funds, and we may exercise our option under the business alliance agreement between Lazard Group



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and LFCM Holdings to acquire the alternative investment business and related principal investments from LFCM Holdings in North America (see Note 10 of Notes to Consolidated Financial Statements
for a description of the CP II MgmtCo Spin-Off, the exercise of the option to acquire the European fund management activities of Lazard Alternative Investments Holdings LLC and related transactions, including the February 2009 amendment to the
business alliance agreement to remove certain restrictions on the Company engaging in private equity businesses in North America). In addition, during July 2009, the Company established a private equity business with Edgewater.



The revenue from this business is derived primarily from
management fees calculated as a percentage of AUM and incentive fees, which are earned if investments are profitable over a specified threshold. Our ability to form new alternative investment funds is subject to a number of uncertainties, including
past performance of our funds, market or economic conditions, competition from other fund managers and the ability to negotiate terms with major investors. In addition, the payments we are entitled to receive from LFCM Holdings under the terms of
the business alliance agreement in respect of our continued involvement with LFCM Holdings are based on the carried interests received in connection with LFCM Holdings-managed funds.



In addition, we have made, and in the future may make, principal investments in public or private companies or
in alternative investments (including private equity funds and special purpose acquisition companies) established by us or by LFCM Holdings and continue to hold principal investments directly or through several funds managed by LFCM Holdings. Making
principal investments is risky, and we may lose some or all of the principal amount of our investments. Certain of these types of investments may be in relatively high-risk, illiquid assets. Because it may take several years before attractive
alternative investment opportunities are identified, some or all of the capital committed by us to these funds is likely to be invested in government securities, other short-term, highly rated debt securities and money market funds that
traditionally have offered investors relatively lower returns. In addition, these investments may be adjusted for accounting purposes to fair value at the end of each quarter, and our allocable share of any such gains or losses will affect our
revenue, even though such fair value fluctuations may have no cash impact, which could increase the volatility of our earnings. It takes a substantial period of time to identify attractive alternative investment opportunities, to raise all the funds
needed to make an investment and then to realize the cash value of an investment through resale. Even if an alternative investment proves to be profitable, it may be several years or longer before any profits can be realized in cash or other
proceeds.



Our results of operations may be
affected by market fluctuations related to positions held in our investment portfolios.



We invest capital in corporate and non-U.S. government debt securities in conjunction with the commercial banking activities of LFB and in equities in order to seed LAM equity and alternative investment
funds, and for general corporate purposes. Such investments are subject to market fluctuations due to changes in the market prices of securities, interest rates or other market factors, such as liquidity. These investments are adjusted for
accounting purposes to fair market value at the end of each quarter regardless of our intended holding period and, to the extent the related gains or losses are not reflected in accumulated other comprehensive income (loss), net of tax
(AOCI), such gains or losses will affect our revenue and therefore may increase the volatility of our earnings, even though such gains or losses may not be realized. Furthermore, any unrealized losses reflected in AOCI that are deemed
other than temporary would be reclassified into earnings.



We face strong competition from financial services firms, many of whom have the ability to offer clients a wider range of products and services than we can offer, which could lead to pricing pressures that could materially adversely
affect our revenue and profitability.



The
financial services industry is intensely competitive, and we expect it to remain so. We compete on the basis of a number of factors, including the quality of our employees, transaction execution, our products and services, innovation, reputation and
price. We have experienced intense fee competition in some of our businesses in recent years, and we believe that we may experience pricing pressures in these and other areas in the future as some of our competitors seek to obtain increased market
share by reducing fees.



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We face increased competition due to a trend toward consolidation. In recent years, there
has been substantial consolidation and convergence among companies in the financial services industry. In particular, a number of large commercial banks, insurance companies and other broad-based financial services firms have established or acquired
broker-dealers or have merged with other financial institutions. This trend was amplified in connection with the unprecedented disruption and volatility in the financial markets during the past several years and, as a result, a number of financial
services companies have merged, been acquired or have fundamentally changed their respective business models. Many of these firms have the ability to offer a wide range of products, from loans, deposit-taking and insurance to brokerage, asset
management and investment banking services, which may enhance their competitive position. They also have the ability to support investment banking, including financial advisory services, with commercial banking, insurance and other financial
services in an effort to gain market share, which could result in pricing pressure in our businesses.



An inability to access the debt and equity capital markets as a result of our debt obligations, credit ratings or other factors could
impair our liquidity, increase our borrowing costs or otherwise adversely affect our competitive position or results of operations.



As of December 31, 2009, Lazard Group and its subsidiaries had approximately $1.3 billion in debt (including capital lease obligations)
outstanding, of which $539 million and $548 million relate to Lazard Group senior notes that mature in 2015 and 2017, respectively. This debt has certain mandated payment obligations, which may constrain our ability to operate our business. In
addition, in the future we may need to incur debt or issue equity in order to fund our working capital requirements or refinance existing indebtedness, as well as to make acquisitions and other investments. The amount of our debt obligations may
impair our ability to raise debt or issue equity for financing purposes. Our access to funds also may be impaired if regulatory authorities take significant action against us, or if we discover that any of our employees had engaged in serious
unauthorized or illegal activity. In addition, our borrowing costs and our access to the debt capital markets depend significantly on our credit ratings. These ratings are assigned by rating agencies, which may reduce or withdraw their ratings or
place us on credit watch with negative implications at any time. See Managements Discussion and Analysis of Financial Condition and Results of Operations.



We may pursue acquisitions or joint ventures that could present unforeseen integration obstacles or costs.



We routinely assess our strategic position
and may in the future seek acquisitions or other transactions to further enhance our competitive position. We have in the past pursued joint ventures and other transactions aimed at expanding the geography and scope of our operations. During 2007,
we acquired all of the outstanding ownership interests of GAHL and CWC, we entered into a joint cooperation agreement with Raiffeisen and we entered into a shareholders agreement to acquire a 50% interest in MBA, with this transaction closing on
January 31, 2008. During 2008, Lazard Group formed a strategic partnership with Apollo for private equity investments in Europe. During 2009, we established a private equity business with Edgewater. We expect to continue to explore acquisitions
and partnership or strategic alliance opportunities that we believe to be attractive.



Acquisitions and joint ventures involve a number of risks and present financial, managerial and operational challenges, including potential disruption of our ongoing business and distraction of
management, difficulty with integrating personnel and financial and other systems, hiring additional management and other critical personnel and increasing the scope, geographic diversity and complexity of our operations. Our clients may react
unfavorably to our acquisition and joint venture strategy, we may not realize any anticipated benefits from acquisitions, we may be exposed to additional liabilities of any acquired business or joint venture, and we may not be able to renew on
similar terms (or at all) previously successful joint ventures or similar arrangements, any of which could materially adversely affect our revenue and results of operations.



Employee misconduct could harm us by impairing our ability to attract and retain clients and subjecting us
to significant legal liability and reputational harm, and this type of misconduct is difficult to detect and deter.



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There have been a number of highly publicized cases involving fraud or other misconduct by
employees in the financial services industry generally, and we run the risk that employee misconduct could occur in our business as well. For example, misconduct by employees could involve the improper use or disclosure of confidential information,
which could result in regulatory sanctions and serious reputational or financial harm. Our Financial Advisory business often requires that we deal with client confidences of great significance to our clients, improper use of which may harm our
clients or our relationships with our clients. Any breach of our clients confidences as a result of employee misconduct may impair our ability to attract and retain Financial Advisory clients and may subject us to liability. Similarly, in our
Asset Management business, we have authority over client assets, and we may, from time to time, have custody of such assets. In addition, we often have discretion to trade client assets on the clients behalf and must do so acting in the best
interests of the client. As a result, we are subject to a number of obligations and standards, and the violation of those obligations or standards may adversely affect our clients and us. It is difficult to deter employee misconduct, and the
precautions we take to detect and prevent this activity may not be effective in all cases.



The financial services industry faces substantial litigation and regulatory risks, and we may face damage to our professional reputation and legal liability if our services are not regarded as
satisfactory or for other reasons.



As a
financial services firm, we depend to a large extent on our relationships with our clients and our reputation for integrity and high-caliber professional services to attract and retain clients. As a result, if a client is not satisfied with our
services, such dissatisfaction may be more damaging to our business than to other types of businesses. Moreover, our role as advisor to our clients on important M&A or restructuring transactions involves complex analysis and the exercise of
professional judgment, including, if appropriate, rendering fairness opinions in connection with mergers and other transactions.



In recent years, the volume of claims and amount of damages claimed in litigation and regulatory proceedings against financial advisors has
been increasing. These risks have increased as a result of the extreme turmoil and volatility that the global financial markets generally, and financial institutions in particular, have experienced over the past several years. Our Financial Advisory
activities may subject us to the risk of significant legal actions by our clients and third parties, including our clients stockholders, under securities or other laws for allegations relating to materially false or misleading statements made
in connection with securities and other transactions and potential liability for the fairness opinions and other advice provided to participants in corporate transactions. In our Asset Management business, we make investment decisions on behalf of
our clients which could result in substantial losses. This also may subject us to the risk of legal actions alleging negligence, misconduct, breach of fiduciary duty or breach of contract. These risks often may be difficult to assess or quantify and
their existence and magnitude often remain unknown for substantial periods of time. Our engagements typically include broad indemnities from our clients and provisions designed to limit our exposure to legal claims relating to our services, but
these provisions may not protect us or may not be adhered to in all cases. We also are subject to claims arising from disputes with employees for alleged discrimination or harassment, among other things. These risks often may be difficult to assess
or quantify, and their existence and magnitude often remain unknown for substantial periods of time. As a result, we may incur significant legal expenses in defending against litigation. Substantial legal liability or significant regulatory action
against us could materially adversely affect our business, financial condition or results of operations or cause significant reputational harm to us, which could seriously harm our business.



Other operational risks may disrupt our businesses, result in
regulatory action against us or limit our growth.



Our business is dependent on communications and information systems, including those of our vendors. Any failure or interruption of these systems, whether caused by fire, other natural disaster, power or telecommunications failure, act of
terrorism or war or otherwise, could materially adversely affect our operating results. Although back-up systems are in place, our back-up procedures and capabilities in the event of a failure or interruption may not be adequate.



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Particularly in our Asset Management business, we rely heavily on our financial, accounting,
trading, compliance and other data processing systems, and those of our third party vendors or service providers who support these functions. We expect that we will need to review whether to continue to upgrade and expand the capabilities of these
systems in the future to avoid disruption of, or constraints on, our operations. However, if any of these systems do not operate properly or are disabled, we could suffer financial loss, a disruption of our businesses, liability to clients,
regulatory intervention or reputational damage. The inability of our systems (or those of our vendors or service providers) to accommodate an increasing volume of transactions also could constrain our ability to expand our businesses.



Extensive regulation of our businesses limits our activities
and results in ongoing exposure to the potential for significant penalties, including fines or limitations on our ability to conduct our businesses.



The financial services industry is subject to extensive regulation. We are subject to regulation by governmental and self-regulatory
organizations in the jurisdictions in which we operate around the world. Many of these regulators, including U.S. and non-U.S. government agencies and self-regulatory organizations, as well as state securities commissions in the U.S., are empowered
to conduct administrative proceedings that can result in censure, fine, the issuance of cease-and-desist orders or the suspension or expulsion of a broker-dealer from registration or membership. The requirements imposed by our regulators are
designed to ensure the integrity of the financial markets and to protect customers and other third parties who deal with us and are not designed to protect our stockholders. Consequently, these regulations often serve to limit our activities,
including through net capital, customer protection and market conduct requirements.



We face the risk of significant intervention by regulatory authorities, including extended investigation and surveillance activity, adoption of costly or restrictive new regulations and judicial or
administrative proceedings that may result in substantial penalties. Among other things, we could be fined or be prohibited from engaging in some of our business activities. In addition, the regulatory environment in which we operate is subject to
modifications and further regulation. New laws or regulations or changes in the enforcement of existing laws or regulations applicable to us and our clients also may adversely affect our business, and our ability to function in this environment will
depend on our ability to constantly monitor and react to these changes.



Over the last several years, global financial markets have experienced extraordinary disruption and volatility. As a result, certain financial institutions around the world have failed and others have
been forced to seek acquisition partners. It is possible that the U.S. and other governments may take further actions in response to this situation, including expanding current or enacting new standards, requirements and rules that may be applicable
to us and our subsidiaries. The effect of any such expanded or new standards, requirements and rules is uncertain and could have adverse consequences to our business and results of operations. For example, on December 11, 2009, the U.S. House of
Representatives passed the 2009 Act. The 2009 Act is currently pending in the U.S. Senate. We are not able to predict what action or changes, if any, will result from the Senates consideration of the 2009 Act. We currently are in the process
of examining the impact of the 2009 Act on us, but, given the uncertainty of possible changes to the 2009 Act, we are not able to predict the ultimate effect on us.



The regulatory environment in which our clients operate may also impact our business. For example, changes in
antitrust laws or the enforcement of antitrust laws could affect the level of M&A activity and changes in state laws may limit investment activities of state pension plans.



For asset management businesses in general, there have been a number of highly publicized cases involving fraud
or other misconduct by employees of asset management firms, as well as industry-wide regulatory inquiries. These cases and inquiries have resulted in increased scrutiny in the industry and may result in new rules and regulations for mutual funds,
hedge funds and their investment managers. This regulatory scrutiny and these rulemaking initiatives may result in an increase in operational and compliance costs or the risk of assessment of significant fines or penalties against our Asset
Management business, and may otherwise limit our ability to engage in certain activities.



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Financial services firms are subject to numerous conflicts of interest or perceived
conflicts. We have adopted various policies, controls and procedures to address or limit actual or perceived conflicts and regularly seek to review and update our policies, controls and procedures. However, these policies and procedures may result
in increased costs, additional operational personnel and increased regulatory risk. Failure to adhere to these policies and procedures may result in regulatory sanctions or client litigation.



Specific regulatory changes also may have a direct impact on the
revenue of our Asset Management business. In addition to regulatory scrutiny and potential fines and sanctions, regulators continue to examine different aspects of the asset management industry. For example, the use of soft dollars,
where a portion of commissions paid to broker-dealers in connection with the execution of trades also pays for research and other services provided to advisors, is periodically reexamined and may in the future be limited or modified. Although a
substantial portion of the research relied on by our Asset Management business in the investment decision-making process is generated internally by our investment analysts, external research, including external research paid for with soft dollars,
is important to the process. This external research generally is used for information gathering or verification purposes, and includes broker-provided research, as well as third-party provided databases and research services. For the year ended
December 31, 2009, our Asset Management business obtained research and other services through third-party soft dollar arrangements, the total cost of which we estimate to be approximately $19 million. If the use of soft dollars is limited, we
may have to bear some of these costs. In addition, new regulations regarding the management of hedge funds and the use of certain investment products may impact our Asset Management business and result in increased costs. For example, many
regulators around the world adopted restrictions or prohibitions on the short selling of certain securities and requirements to report short positions and transactions. In addition, legislators around the world are exploring regulatory changes and
additional oversight of the financial industry generally. The impact of these proposed changes on the Company are uncertain. These regulatory changes and other proposed or potential changes may result in a reduction of revenue associated with our
Asset Management business.



See
BusinessRegulation for a further discussion of the regulatory environment in which we conduct our businesses.



Fluctuations in foreign currency exchange rates could reduce our members equity and net income or negatively impact the portfolios
of our Asset Management clients and may affect the levels of our AUM.



We are exposed to fluctuations in foreign currencies. Our financial statements are denominated in U.S. dollars and, for the year ended December 31, 2009, we received approximately 47% of our
consolidated net revenue in other currencies, predominantly in euros and British pounds. In addition, we pay a significant amount of our expenses in such other currencies. The exchange rates of these currencies versus the U.S. dollar affects the
carrying value of our assets and liabilities as well as our net income. We do not generally hedge such foreign currency exchange rate exposure arising in our subsidiaries outside of the U.S. Fluctuations in foreign currency exchange rates may also
make period to period comparisons of our results of operations difficult.



Foreign currency fluctuations also can impact the portfolios of our Asset Management clients. Client portfolios are invested in securities across the globe, although most portfolios are in a single base
currency. Foreign currency fluctuations can adversely impact investment performance for a clients portfolio. In addition, foreign currency fluctuations may affect the levels of our AUM. As our AUM include significant assets that are
denominated in currencies other than U.S. dollars, an increase in the value of the U.S. dollar relative to non-U.S. currencies may result in a decrease in the dollar value of our AUM, which, in turn, would result in lower U.S. dollar-denominated
revenue in our Asset Management business. While this risk may be limited by foreign currency hedging, some risks cannot be hedged and our hedging activity may not be successful. Poor performance may result in decreased AUM, including as a result of
withdrawal of client assets or a decrease in new assets being raised in the relevant product.



See Note 16 of Notes to Consolidated Financial Statements for additional information regarding the impact on members equity from currency translation adjustments.



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Lazard Group is a holding company and therefore depends on its subsidiaries to make
distributions to Lazard Group to enable it to service its obligations under its indebtedness.



Lazard Group depends on its subsidiaries, which conduct the operations of the businesses, for dividends and other payments to generate the
funds necessary to meet its financial obligations, including payments of principal and interest on its indebtedness. However, none of Lazard Groups subsidiaries is obligated to make funds available to it for servicing such financial
obligations. In addition, legal and contractual restrictions in agreements governing current and future indebtedness, as well as financial conditions, minimum regulatory net capital and similar requirements and operating requirements of Lazard
Groups subsidiaries, currently limit and may, in the future, limit Lazard Groups ability to obtain cash from its subsidiaries. The earnings from, or other available assets of, Lazard Groups subsidiaries may not be sufficient to pay
dividends or make distributions or loans to enable Lazard Group to make payments with respect to its financial obligations when such payments are due. In addition, even if such earnings were sufficient, the agreements governing the current and
future indebtedness of Lazard Groups subsidiaries and regulatory requirements with respect to our broker-dealer and other regulated subsidiaries may not permit such subsidiaries to provide Lazard Group with sufficient dividends, distributions
or loans to fund its financial obligations, when due.



Earnings of Lazard Group allocable to LAZ-MD Holdings are taxed at higher tax rates than earnings allocable to Lazard Ltd, which results in less cash being available to Lazard Group than would otherwise be available to it.



The managing directors of Lazard Group and
other owners of LAZ-MD Holdings generally are taxed at a higher rate on their allocable share of Lazard Groups earnings than that paid by Lazard Ltd. Lazard Group makes tax-related distributions based on the higher of the effective income
and franchise tax rate applicable to Lazard Ltds subsidiaries that hold the Lazard Group common membership interests and the weighted average income tax rate (based on income allocated) applicable to LAZ-MD Holdings members, determined
in accordance with Lazard Groups operating agreement. In the event that tax rates applicable to members of LAZ-MD Holdings increase, the pro rata distributions from Lazard Group to its members, including Lazard Ltds subsidiaries, may
increase correspondingly. Therefore, because distributions by Lazard Group to its members are made on a pro rata basis, tax-related distributions to Lazard Ltds subsidiaries may exceed the taxes Lazard Ltds subsidiaries actually pay
or expect to pay. This results in less cash being available to Lazard Group than would otherwise be available to it, and in cash being held by Lazard Ltds subsidiaries in excess of what they actually pay for taxes or hold for expected future
payments. We understand that Lazard Ltd intends to continue to cause such subsidiaries to lend to Lazard Group a significant portion of such excess cash.



Tax authorities may challenge our tax computations, classifications and our transfer pricing methods, and their application.



In the ordinary course of our business, we
are subject to tax audits in various jurisdictions. Tax authorities may challenge our tax computations, classifications, our transfer pricing methods and their application, and other items. While we believe our tax computations, classifications and
transfer pricing results are correct and properly reflected on our financial statements, the tax authorities may disagree.



Outcome of future U.S. tax legislation is unknown at the present time.



On February 1, 2010, the fiscal year 2011 U.S. federal budget was released. The budget included various
provisions, including provisions that would (i) limit the deduction of certain related party interest; (ii) defer the deduction of interest attributable to non-U.S. source income of foreign subsidiaries; and (iii) repeal the current laws
exemption from withholding tax for interest and dividends paid by certain domestic companies. Each of these provisions would be effective only for taxable years beginning after December 31, 2010. Certain aspects of these budget provisions may
adversely impact Lazards tax rate. However, at this point in time we are unable to predict the ultimate outcome of the budget process.



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Failure to maintain effective internal controls in accordance with Section 404 of
the Sarbanes-Oxley Act could have a material adverse effect on our business.



We have documented and tested our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, which requires annual management assessments of the
effectiveness of our internal controls over financial reporting and a report by our independent auditors regarding the Companys internal control over financial reporting. We are in compliance with Section 404 of the Sarbanes-Oxley Act as of
December 31, 2009. However, if we fail to maintain the adequacy of our internal controls, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we
have effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Failure to maintain an effective internal control environment could have a material adverse effect on our business.



LAZ-MD Holdings, Lazard Group, LFCM Holdings and Lazard
Ltd entered into various arrangements, including the master separation agreement, which contain cross-indemnification obligations of LAZ-MD Holdings, Lazard Group, LFCM Holdings and Lazard Ltd, that any party may be unable to satisfy.



The master separation agreement that Lazard
Ltd entered into with Lazard Group, LAZ-MD Holdings and LFCM Holdings provides, among other things, that LFCM Holdings generally will indemnify Lazard Ltd, Lazard Group and LAZ-MD Holdings for losses that we incur arising out of, or relating to, the
separated businesses and the businesses conducted by LFCM Holdings and losses that Lazard Ltd, Lazard Group or LAZ-MD Holdings incur arising out of, or relating to, LFCM Holdings breach of the master separation agreement. In addition, LAZ-MD
Holdings generally will indemnify Lazard Ltd, Lazard Group and LFCM Holdings for losses that they incur arising out of, or relating to, LAZ-MD Holdings breach of the master separation agreement. Our ability to collect under the indemnities
from LAZ-MD Holdings or LFCM Holdings depends on their financial position. For example, persons may seek to hold us responsible for liabilities assumed by LAZ-MD Holdings or LFCM Holdings. If these liabilities are significant and we are held liable
for them, we may not be able to recover any or all of the amount of those losses from LAZ-MD Holdings or LFCM Holdings should either be financially unable to perform under their indemnification obligations.



We currently have a number of ongoing obligations in respect of
which, pursuant to the master separation agreement and other ancillary agreements, LFCM Holdings is providing certain indemnities. For example, we entered into an arrangement with LFCM Holdings relating to the costs of excess space in the U.K. LFCM
Holdings will pay to Lazard Group $25 million in the aggregate, of which $23.8 million was due and paid through December 31, 2009.



In addition, Lazard Group generally will indemnify LFCM Holdings and LAZ-MD Holdings for liabilities related to Lazard Groups
businesses and Lazard Group will indemnify LFCM Holdings and LAZ-MD Holdings for losses that they incur to the extent arising out of, or relating to, Lazard Groups or Lazard Ltds breach of the master separation agreement. Several of the
ancillary agreements that Lazard Group entered into together with the master separation agreement also provide for separate indemnification arrangements. For example, under the administrative services agreement, Lazard Group provides a range of
services to LFCM Holdings, including information technology, general office and building services and financing and accounting services, and LFCM Holdings will generally indemnify Lazard Group for liabilities that Lazard Group incurs arising from
the provision of these services absent Lazard Groups intentional misconduct. Lazard Group may face claims for indemnification from LFCM Holdings and LAZ-MD Holdings under these provisions regarding matters for which Lazard Group has agreed to
indemnify them. If these liabilities are significant, Lazard Group may be required to make substantial payments, which could materially adversely affect our results of operations. Also, in connection with the CP II MgmtCo Spin-Off (as defined in
Note 10 of Notes to Consolidated Financial Statements), the subsidiary of LFCM Holdings that manages Corporate Partners II Limited (CPII MgmtCo) has generally agreed to indemnify us against certain losses related to Corporate Partners
Limited II that arise after the date of closing of the CP II



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MgmtCo Spin-Off. However, should persons seek to hold us responsible for liabilities assumed by CP II MgmtCo, we may not be able to recover any or all of the amount of our losses from CP II
MgmtCo if CP II MgmtCo is financially unable to perform under its indemnification obligations.



We have potential conflicts of interest with LAZ-MD Holdings and LFCM Holdings, and LAZ-MD Holdings and LFCM Holdings could each act in a way that favors its interests to our detriment.



As of December 31, 2009, LAZ-MD Holdings held
approximately 25.5% of Lazard Ltds voting power through Lazard Ltds single share of Class B common stock and 25.5% of the outstanding Lazard Group common membership interests. In addition, LAZ-MD Holdings board of directors is
composed of 4 individuals, all of whom are managing directors or officers of Lazard Ltd or its affiliates. Lazard Groups board of directors and executive officers are the same as those of Lazard Ltd. The voting and equity ownership of LAZ-MD
Holdings and its members, and the service of officers and managing directors of our company as directors of LAZ-MD Holdings, could create conflicts of interest when LAZ-MD Holdings and those directors and officers are faced with decisions that could
have different implications for LAZ-MD Holdings and us, including potential acquisitions of businesses, the issuance or disposition of securities by us, the election of new or additional directors of Lazard Ltd, the payment of dividends by Lazard
Ltd and Lazard Group, our relationship with LFCM Holdings and other matters. We also expect that LAZ-MD Holdings will manage its ownership of us so that it will not be deemed to be an investment company under the Investment Company Act. This may
result in conflicts with us, including those relating to acquisitions or offerings by us involving issuances of Lazard Ltds Class A common stock or securities convertible or exchangeable into shares of Lazard Ltds Class A common stock
that would dilute LAZ-MD Holdings voting power in Lazard Ltd.



Since the members of LAZ-MD Holdings who are parties to the LAZ-MD Holdings stockholders agreement are entitled to individually direct their proportionate share of the vote of Lazard Ltds
Class B common stock on an as-if-exchanged basis and also own and control LFCM Holdings, their control of LAZ-MD Holdings and the vote of the share of Lazard Ltds Class B common stock gives rise to potential conflicts between LFCM Holdings and
LAZ-MD Holdings, on the one hand, and our company, on the other hand, as discussed below.



We may have potential business conflicts of interest with LAZ-MD Holdings and LFCM Holdings with respect to our past and ongoing relationships that could harm our business operations.



Pursuant to the LAZ-MD Holdings amended and restated
stockholders agreement, LAZ-MD Holdings will vote the single share of Lazard Ltd Class B common stock, which, as of December 31, 2009, represented approximately 25.5% of Lazard Ltds voting power, as directed by its individual
members who are party to that agreement. These same persons generally own and control LFCM Holdings, which holds the separated businesses. In addition, several employees of Lazard provide services to LFCM Holdings. Conflicts of interest may arise
between LFCM Holdings and us in a number of areas relating to our past and ongoing relationships, including:



| |  |  | labor, tax, employee benefits, indemnification and other matters arising from the separation,
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | intellectual property matters,
| | - |  | ------------------------------



| |  |  | business combinations involving us,
| | - |  | -----------------------------------



| |  |  | business operations or business opportunities of LFCM Holdings or us that would compete with the other partys business opportunities, including
investment banking by us and the management of alternative investment funds by LFCM Holdings, particularly as some of the managing directors provide services to LFCM Holdings,
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the terms of the master separation agreement and related ancillary agreements, including the operation of the alternative investment fund management
business and Lazard Groups option to purchase the business,
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the nature, quality and pricing of administrative services to be provided by us, and
| | - |  | ------------------------------------------------------------------------------------



| |  |  | the provision of services by certain of our managing directors to LFCM Holdings.
| | - |  | --------------------------------------------------------------------------------



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In addition, the administrative services agreement commits us to provide a range of services
to LFCM Holdings and LAZ-MD Holdings, which could require the expenditure of significant amounts of time by our management. Our agreements with LAZ-MD Holdings and LFCM Holdings may be amended upon agreement of the parties to those agreements.
During the time that LAZ-MD Holdings exercises significant influence over us, LAZ-MD Holdings may be able to exert significant influence over votes or decisions regarding any potential amendments to these agreements. We may not be able to resolve
any potential conflicts and, even if we do, the resolution may be less favorable to us than if we were dealing with an unaffiliated party.



The use of the Lazard brand name by subsidiaries of LFCM Holdings may expose us to reputational harm that could affect our
operations and adversely affect our financial position should these subsidiaries take actions that damage the brand name.



The Lazard brand name has over 160 years of heritage, connoting, we believe, world-class professional advice, independence and
global capabilities with deeply rooted, local know-how. LFCM Holdings operates as a separate legal entity, and Lazard Group licensed to subsidiaries of LFCM Holdings that operate the separated businesses the use of the Lazard brand name
for certain specified purposes, including in connection with alternative investment fund management and capital markets activities. As these subsidiaries of LFCM Holdings historically have and will continue to use the Lazard brand name,
and because we no longer control these entities, there is a risk of reputational harm to us if these subsidiaries have, or in the future were to, among other things, engage in poor business practices, experience adverse results or otherwise damage
the reputational value of the Lazard brand name. These risks could expose us to liability and also may adversely affect our revenue and our business prospects.



If LAZ-MD Holdings were deemed an investment company under the Investment Company Act as a result of its
ownership of Lazard Ltd, applicable restrictions could require us to alter our organizational structure which could result in additional costs or changes in our business activities.



We do not believe that LAZ-MD Holdings currently is an investment company. Rule 3a-1 under the Investment
Company Act provides an exclusion from registration as an investment company if a company meets both an asset and an income test and certain other requirements. We believe LAZ-MD Holdings currently satisfies the requirements of Rule 3a-1. A
determination that LAZ-MD Holdings is not entitled to rely on Rule 3a-1 could result in it being an investment company, unless another exemption or exclusion is available, and becoming subject to the requirements of the Investment Company Act.
Because LAZ-MD Holdings is owned exclusively by current and former managing directors and employees of Lazard Group and members of their immediate families, if it becomes unable to rely on Rule 3a-1, it may apply for an order exempting it from most
provisions of the Investment Company Act as an employees securities company. Rule 6b-1 under the Investment Company Act provides that an employees securities company that applies for such an order is exempt from all
provisions of that Act applicable to investment companies, pending a final SEC determination.



The Investment Company Act and the rules thereunder contain detailed prescriptions for the organization and operations of investment companies. Among other things, the Investment Company Act and the rules
thereunder limit or prohibit transactions with affiliates, impose limitations on the issuance of debt and equity securities, prohibit the issuance of stock options, and impose certain governance requirements. Lazard Group expects that LAZ-MD
Holdings will conduct its operations such that LAZ-MD Holdings will not be deemed to be an investment company under the Investment Company Act. However, if anything were to happen which would cause LAZ-MD Holdings to be deemed to be an investment
company under the Investment Company Act, requirements imposed by the Investment Company Act, including limitations on its or our capital structure, ability to transact business with affiliates (including LAZ-MD Holdings or us, as the case may be)
and ability to compensate key employees, could make it impractical for us to continue our business as currently conducted, impair the agreements and arrangements, including the master separation agreement and related agreements and the transactions
contemplated by those agreements, between and among Lazard Ltd, LAZ-MD Holdings, Lazard Group and LFCM Holdings or any combination thereof and materially adversely affect our business, financial condition and results of operations.



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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS



We have made statements under the captions Business,
Risk Factors, and Managements Discussion and Analysis of Financial Condition and Results of Operations and in other sections of this Form 10-K that are forward-looking statements. In some cases, you can identify these
statements by forward-looking words such as may, might, will, should, expect, plan, anticipate, believe, estimate, predict,
potential or continue, and the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to known and unknown risks, uncertainties and assumptions about us, may include
projections of our future financial performance based on our growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important
factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. In particular,
you should consider the numerous risks and uncertainties outlined in Risk Factors, including the following:



| |  |  | a continued decline or further deterioration in general economic conditions or the global financial markets,
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | losses caused by financial or other problems experienced by third parties,
| | - |  | --------------------------------------------------------------------------



| |  |  | losses due to unidentified or unanticipated risks,
| | - |  | --------------------------------------------------



| |  |  | a lack of liquidity, i.e., ready access to funds, for use in our businesses, and
| | - |  | --------------------------------------------------------------------------------



| |  |  | competitive pressure on our businesses and on our ability to retain our employees.
| | - |  | ----------------------------------------------------------------------------------



These risks and uncertainties are not exhaustive. Other sections
of this Form 10-K may include additional factors, which could adversely impact our business and financial performance. Moreover, 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 we 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.



Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes
responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. We are under no duty to update any of these forward-looking statements
after the date of this Form 10-K to conform our prior statements to actual results or revised expectations and we do not intend to do so.



Forward-looking statements include, but are not limited to, statements about the:



| |  |  | business possible or assumed future results of operations and operating cash flows,
| | - |  | ------------------------------------------------------------------------------------



| |  |  | business strategies and investment policies,
| | - |  | ---------------------------------------------



| |  |  | business financing plans and the availability of short-term borrowing,
| | - |  | -----------------------------------------------------------------------



| |  |  | business competitive position,
| | - |  | -------------------------------



| |  |  | future acquisitions, including the consideration to be paid and the timing of consummation,
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | potential growth opportunities available to our businesses,
| | - |  | -----------------------------------------------------------



| |  |  | recruitment and retention of our managing directors and employees,
| | - |  | ------------------------------------------------------------------



| |  |  | target levels of compensation expense,
| | - |  | --------------------------------------



| |  |  | business potential operating performance, achievements, productivity improvements, efficiency and cost reduction efforts,
| | - |  | --------------------------------------------------------------------------------------------------------------------------



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| |  |  | likelihood of success and impact of litigation,
| | - |  | -----------------------------------------------



| |  |  | expected tax rates,
| | - |  | -------------------



| |  |  | changes in interest and tax rates,
| | - |  | ----------------------------------



| |  |  | expectations with respect to the economy, securities markets, the market for mergers, acquisitions, strategic advisory and restructuring activity, the
market for asset management activity and other industry trends,
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | effects of competition on our business, and
| | - |  | -------------------------------------------



| |  |  | impact of future legislation and regulation on our business.
| | - |  | ------------------------------------------------------------



The Company is committed to providing timely and accurate information to the investing public, consistent with
our legal and regulatory obligations. To that end, the Company uses its websites to convey information about our businesses, including the anticipated release of quarterly financial results, quarterly financial, statistical and business-related
information, and the posting of updates of AUM in various mutual funds, hedge funds and other investment products managed by LAM and its subsidiaries. Monthly updates of these funds are posted to the LAM website (www.lazardnet.com) on the
third business day following the end of each month. Investors can link to Lazard Ltd, Lazard Group and their operating company websites through http://www.lazard.com. Our websites and the information contained therein or connected thereto
shall not be deemed to be incorporated into this Form 10-K.



|Item 1B. | Unresolved Staff Comments
|-------- | -------------------------



None.



|Item 2. | Properties
|------- | ----------



The following table lists the properties used for the entire Lazard organization as of December 31, 2009, including properties used by
the separated businesses. As a general matter, one or both of our Financial Advisory and Asset Management segments (as well as our Corporate segment) uses the following properties. We license and sublease to LFCM Holdings certain office space,
including office space that is used by the separated businesses. This includes subleasing or licensing approximately 34,280 square feet in New York City located at 30 Rockefeller Plaza to LFCM Holdings. Additionally, our New York, London and
other offices sublease 37,202, 55,676 and 16,203 square feet, respectively, to third parties. We remain fully liable for the subleased space to the extent LFCM Holdings, or the third parties, fail to perform their obligations under the subleases for
any reason. In addition, LFCM Holdings entered into indemnity arrangements in relation to excess space and abandoned former premises in London.



|                         |  |                                               |  |                                                                                                                    
|------------------------ |  | --------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------
|Location                 |  | Square Footage                                |  | Principal Offices                                                                                                  
|New York                 |  | 380,354 square feet of leased space           |  | Key office located at 30 Rockefeller Plaza, New York, New York 10020.                                              
|Other North America      |  | 151,951 square feet of leased space           |  | Atlanta, Boston, Charlotte, Chicago, Houston, Los Angeles, Minneapolis, Montreal, San Francisco and Washington D.C.
|Paris                    |  | 170,644 square feet of owned and leased space |  | Key office located at 121 Boulevard Haussmann, 75008 Paris.                                                        
|London                   |  | 86,695 square feet of leased space            |  | Key office located at 50 Stratton Street, London W1J 8LL.                                                          
|Other Europe             |  | 119,356 square feet of leased space           |  | Amsterdam, Bordeaux, Brussels, Frankfurt, Hamburg, Lyon, Madrid, Milan, Stockholm and Zurich.                      
|Asia, Australia andOther |  | 68,423 square feet of leased space            |  | Beijing, Dubai City, Hong Kong, Melbourne, Mumbai, Seoul, Singapore, Sydney and Tokyo.                             



We believe that we currently maintain sufficient space to meet
our anticipated needs.



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|Item 3. | Legal Proceedings
|------- | -----------------



The Companys businesses, as well as the financial services industry generally, are subject to extensive regulation throughout the
world. The Company is involved from time to time in a number of judicial, regulatory and arbitration proceedings and inquiries concerning matters arising in connection with the conduct of our businesses, including proceedings initiated by former
employees alleging wrongful termination. The Company reviews such matters on a case-by-case basis and establishes any required reserves if a loss is probable and the amount of such loss can be reasonably estimated. Management believes, based on
currently available information, that the results of such matters, in the aggregate, will not have a material adverse effect on the Companys financial condition but might be material to the Companys operating results or cash flows for
any particular period, depending upon the operating results for such period.



|Item 4. | [Reserved]
|------- | ----------





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Part II



|Item 5. | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|------- | ------------------------------------------------------------------------------------------------------------



As of December 31, 2009, approximately 74.5% and 25.5% of our
common membership interests are held by wholly-owned subsidiaries of Lazard Ltd and by LAZ-MD Holdings, respectively. Our co-managing member interests are held by two indirect wholly-owned subsidiaries of Lazard Ltd and our profit participation
interests are held by various managing directors. There are no public trading markets for any of these interests.



Subsequent to the equity public offering, pursuant to provisions of its amended and restated Operating Agreement, Lazard Group distributions
in respect of common membership interests are allocated to the holders of such interests on a pro rata basis. Such distributions represent amounts necessary to fund (i) dividends Lazard Ltd declares on its Class A common stock and (ii) tax
distributions in respect of income taxes that Lazard Ltds subsidiaries and members of LAZ-MD Holdings incur as a result of holding Lazard Group common membership interests. During the years ended December 31, 2009, 2008 and 2007, Lazard Group
distributed approximately $17.4 million, $20.7 million and $20.1 million, respectively, to LAZ-MD Holdings and approximately $33.5 million, $23.1 million and $18.3 million, respectively, to the subsidiaries of Lazard Ltd, which latter amounts were
used by Lazard Ltd to pay dividends to third-party stockholders of its Class A common stock. In addition, during the years ended December 31, 2009, 2008 and 2007, Lazard Group made tax distributions of approximately $67.3 million, $83.4 million and
$109.9 million, respectively, including $25.3 million, $39.2 million and $60.3 million, respectively, paid to LAZ-MD Holdings and approximately $42.0 million, $44.2 million and $49.6 million, respectively, paid to subsidiaries of Lazard Ltd.



|Item 6. | Selected Financial Data
|------- | -----------------------



The following table sets forth the selected consolidated financial data for the Company for all periods presented. The results of operations
for certain businesses that the Company no longer owns are reported as discontinued operations.



The results of operations for the period prior to May 10, 2005, the date of the equity public offering, do not reflect what our results of
operations would have been had we been a stand-alone, public company. In addition, the results of operations for the period prior to May 10, 2005 are not comparable to results of operations for subsequent periods. Specifically, for the period prior
to May 10, 2005, the results of operations do not give effect to the following matters:



| |  |  | Payment for services rendered by Lazard Groups managing directors, which, as a result of Lazard Group operating as a limited liability company,
historically had been accounted for as distributions from members capital, or in some cases as net income attributable to noncontrolling interests, rather than as compensation and benefits expense. As a result, prior to May 10, 2005, Lazard
Groups operating income did not reflect payments for services rendered by its managing directors. For periods subsequent to the consummation of the equity public offering, all payments for services rendered by our managing directors and
distributions to holders of profit participation interests (profit participation members) in Lazard Group are included within the consolidated statements of operations in compensation and benefits expense.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The use of proceeds from the financing transactions.
| | - |  | ----------------------------------------------------



| |  |  | The net incremental interest expense related to the financing transactions.
| | - |  | ---------------------------------------------------------------------------



In addition, in the accompanying consolidated financial
statements of Lazard Group for periods subsequent to the equity public offering, only a portion of Lazards Groups income is subject to U.S. federal income taxes because Lazard Group operates in the U.S. as a limited liability company
that is treated as a partnership for U.S. federal income tax purposes. Taxes related to income earned by partnerships represent obligations of the



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individual partners. Lazard Group, however, is subject to Unincorporated Business Tax (UBT) attributable to Lazard Groups operations apportioned to New York City. Outside the
U.S., Lazard Group historically has operated principally through subsidiary corporations and has been subject to local income taxes.



The consolidated statements of financial condition and operations data as of and for each of the years in the five-year period ended December
31, 2009 have been derived, as applicable, from Lazard Groups consolidated financial statements. The audited consolidated statements of financial condition as of December 31, 2009 and 2008 and consolidated statements of operations for each of
the years in the three year period ended December 31, 2009 are included elsewhere in this Form 10-K. The audited consolidated statements of financial condition as of December 31, 2007, 2006 and 2005, and consolidated statements of operations for the
years ended December 31, 2006 and 2005, are not included in this Form 10-K. Historical results are not necessarily indicative of results for any future period.



The selected consolidated financial data should be read in conjunction with Managements Discussion and Analysis of Financial
Condition and Results of Operations, and the Companys consolidated financial statements and related notes included elsewhere in this Form 10-K.



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Selected Consolidated Financial Data



|                                                                                                  |  |                                          |           |   |      |   |           |      |  |   |             |   |  |      |           |   |  |   |           |    
|------------------------------------------------------------------------------------------------- |  | ---------------------------------------- | --------- | - | ---- | - | --------- | ---- |  | - | ----------- | - |  | ---- | --------- | - |  | - | --------- | ---
|                                                                                                  |  | As Of Or For The Year Ended December 31, |          
|                                                                                                  |  | 2009                                     |           |   | 2008 |   |           | 2007 |  |   | 2006        |   |  | 2005 |          
|                                                                                                  |  | (in thousands of dollars)                |          
|Consolidated Statements of Operations Data                                                        |  |                                          |           |   |      |   |           |      |  |   |             |   |  |      |           |   |  |   |           |    
|Net Revenue:                                                                                      |  |                                          |           |   |      |   |           |      |  |   |             |   |  |      |           |   |  |   |           |    
|Financial Advisory (a)                                                                            |  | $                                        | 986,820   |   |      | $ | 1,022,913 |      |  | $ | 1,240,177   |   |  | $    | 973,337   |   |  | $ | 864,812   |    
|Asset Management (b)                                                                              |  |                                          | 601,652   |   |      |   | 614,781   |      |  |   | 724,751     |   |  |      | 553,212   |   |  |   | 466,188   |    
|Corporate (c)                                                                                     |  |                                          | (58,509   | ) |      |   | (82,725   | )    |  |   | (48,035     | ) |  |      | (33,380   | ) |  |   | (29,589   | )  
|                                                                                                  |  |                                          |           |   |      |   |           |      |  |   |             |   |  |      |           |   |  |   |           |    
|Net Revenue                                                                                       |  |                                          | 1,529,963 |   |      |   | 1,554,969 |      |  |   | 1,916,893   |   |  |      | 1,493,169 |   |  |   | 1,301,411 | (d)
|                                                                                                  |  |                                          |           |   |      |   |           |      |  |   |             |   |  |      |           |   |  |   |           |    
|Compensation and Benefits (e)(f)                                                                  |  |                                          | 1,309,231 |   |      |   | 1,128,243 |      |  |   | 1,123,058   |   |  |      | 891,411   |   |  |   | 698,683   |    
|Other Operating Expenses (g)                                                                      |  |                                          | 402,720   |   |      |   | 384,697   |      |  |   | 357,771     |   |  |      | 268,082   |   |  |   | 257,052   |    
|                                                                                                  |  |                                          |           |   |      |   |           |      |  |   |             |   |  |      |           |   |  |   |           |    
|Total Operating Expenses                                                                          |  |                                          | 1,711,951 |   |      |   | 1,512,940 |      |  |   | 1,480,829   |   |  |      | 1,159,493 |   |  |   | 955,735   |    
|                                                                                                  |  |                                          |           |   |      |   |           |      |  |   |             |   |  |      |           |   |  |   |           |    
|Operating Income (Loss) from Continuing Operations                                                |  | $                                        | (181,988  | ) |      | $ | 42,029    |      |  | $ | 436,064     |   |  | $    | 333,676   |   |  | $ | 345,676   |    
|                                                                                                  |  |                                          |           |   |      |   |           |      |  |   |             |   |  |      |           |   |  |   |           |    
|Income (Loss) from Continuing Operations (e)                                                      |  | $                                        | (213,715  | ) |      | $ | 12,338    |      |  | $ | 347,278     |   |  | $    | 269,117   |   |  | $ | 291,503   |    
|                                                                                                  |  |                                          |           |   |      |   |           |      |  |   |             |   |  |      |           |   |  |   |           |    
|Net Income (Loss) Attributable to Lazard Group                                                    |  | $                                        | (216,547  | ) |      | $ | 25,671    |      |  | $ | 342,134     |   |  | $    | 263,993   |   |  | $ | 255,224   |    
|                                                                                                  |  |                                          |           |   |      |   |           |      |  |   |             |   |  |      |           |   |  |   |           |    
|                                                                                                  |  |                                          |           |   |     
|Consolidated Statements of Financial Condition Data                                               |  |                                          |           |   |      |   |           |      |  |   |             |   |  |      |           |   |  |   |           |    
|Total Assets                                                                                      |  | $                                        | 3,115,048 |   |      | $ | 2,885,582 |      |  | $ | 3,763,942   |   |  | $    | 3,187,207 |   |  | $ | 1,907,133 |    
|Total Debt (h)                                                                                    |  | $                                        | 1,261,478 |   |      | $ | 1,264,575 |      |  | $ | 1,764,622   |   |  | $    | 1,308,945 |   |  | $ | 1,241,344 |    
|Total Lazard Group Members Equity (Deficiency)                                                   |  | $                                        | 155,371   |   |      | $ | 105,629   |      |  | $ | (26,307     | ) |  | $    | (259,209  | ) |  | $ | (870,339  | )  
|Total Members Equity (Deficiency)                                                                |  | $                                        | 282,931   |   |      | $ | 126,510   |      |  | $ | 25,448      |   |  | $    | (204,592  | ) |  | $ | (758,610  | )  
|Notes
(in thousands of dollars): (a)    Financial Advisory net revenue
consists of the following: |  |                                          |           |   |      |   |           |      |  |   |             |   |  |      |           |   |  |   |           |    
|                                                                                                  |  | For The Year Ended December 31,          |          
|                                                                                                  |  | 2009                                     |           |   | 2008 |   |           | 2007 |  |   | 2006        |   |  | 2005 |          
|M&A                                                                                               |  | $                                        | 526,225   |   |      | $ | 814,660   |      |  |   | $   969,409 |   |  |      | $792,537  |   |  |   | $674,543  |    
|Financial Restructuring                                                                           |  |                                          | 376,710   |   |      |   | 119,283   |      |  |   | 127,175     |   |  |      | 70,625    |   |  |   | 103,404   |    
|Other Financial Advisory                                                                          |  |                                          | 83,885    |   |      |   | 88,970    |      |  |   | 143,593     |   |  |      | 110,175   |   |  |   | 86,865    |    
|                                                                                                  |  |                                          |           |   |      |   |           |      |  |   |             |   |  |      |           |   |  |   |           |    
|Financial Advisory Net Revenue                                                                    |  | $                                        | 986,820   |   |      | $ | 1,022,913 |      |  |   | $1,240,177  |   |  |      | $973,337  |   |  |   | $864,812  |    
|                                                                                                  |  |                                          |           |   |      |   |           |      |  |   |             |   |  |      |           |   |  |   |           |    
|(b)    Asset Management net revenue consists of the
following:                                    |  |                                          |           |   |      |   |           |      |  |   |             |   |  |      |           |   |  |   |           |    
|                                                                                                  | 
|                                                                                                  |  | For The Year Ended December 31,          |          
|                                                                                                  |  | 2009                                     |           |   | 2008 |   |           | 2007 |  |   | 2006        |   |  | 2005 |          
|Management and Other Fees                                                                         |  | $                                        | 488,636   |   |      | $ | 568,436   |      |  |   | $   595,725 |   |  |      | $450,323  |   |  |   | $389,414  |    
|Incentive Fees                                                                                    |  |                                          | 74,795    |   |      |   | 34,961    |      |  |   | 67,032      |   |  |      | 59,371    |   |  |   | 44,627    |    
|Other Income                                                                                      |  |                                          | 38,221    |   |      |   | 11,384    |      |  |   | 61,994      |   |  |      | 43,518    |   |  |   | 32,147    |    
|                                                                                                  |  |                                          |           |   |      |   |           |      |  |   |             |   |  |      |           |   |  |   |           |    
|Asset Management Net Revenue                                                                      |  | $                                        | 601,652   |   |      | $ | 614,781   |      |  |   | $   724,751 |   |  |      | $553,212  |   |  |   | $466,188  |    
|                                                                                                  |  |                                          |           |   |      |   |           |      |  |   |             |   |  |      |           |   |  |   |           |    

|(c) | Corporate includes interest income (net of interest expense), including, for periods subsequent to May 10, 2005, the net incremental interest expense
related to the financing transactions, investment income from certain investments and net money market revenue earned by LFB, as well as any gains or losses from the extinguishment of debt.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(d) | The year ended December 31, 2005 includes a credit of $8,000, which represents accrued dividends on the Companys mandatory redeemable preferred stock which was
redeemed and cancelled pursuant to the redemption of membership interests of historical partners.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(e) | Excludes, as applicable, with respect to the period prior to May 10, 2005, payments for services rendered by Lazard Groups managing directors, which, as a result
of Lazard Group operating as a limited liability company, historically had been accounted for as distributions from members capital, or in some cases as net income attributable to noncontrolling interests, rather than as compensation and
benefits expense.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(f) | In 2008, includes $197,550 relating to the compensation portion of the LAM Merger charge. In 2009, includes charges of $86,514 related to the acceleration of
amortization expense relating to the vesting of RSUs held by Lazards former Chairman and Chief Executive Officer as the result of his death in October 2009 and $60,512 related to the accelerated vesting of the then unamortized portion of
previously awarded deferred cash incentive awards.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(g) | In 2008, includes $2,000 of non-compensation-related transaction costs relating to the LAM Merger. In 2009, includes restructuring expense of $62,550 related to the
restructuring plan announced in the first quarter of 2009.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(h) | Total debt amounts relate to the Companys continuing operations and represents the aggregate amount reflected in the Companys consolidated statements of
financial condition relating to senior debt, capital lease obligations and subordinated debt.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|
|



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|Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------



The following discussion should be read in conjunction with
Lazard Groups consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K (this Form 10-K). This discussion contains forward-looking statements that are subject to known and unknown
risks and uncertainties. Actual results and the timing of events may differ significantly from those expressed or implied in such forward-looking statements due to a number of factors, including those set forth in the section entitled Risk
Factors and elsewhere in this Form 10-K.



Business
Summary



The Companys principal sources
of revenue are derived from activities in the following business segments:



| |  |  | Financial Advisory, which includes providing general strategic and transaction-specific advice on mergers and acquisitions (M&A) and
other strategic matters, restructurings, capital structure, capital raising and various other corporate finance matters, and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Asset Management, which includes strategies for the management of equity and fixed income securities and alternative investment and private equity
funds.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------



In addition, the Company
records selected other activities in its Corporate segment, including management of cash, certain investments and the commercial banking activities of Lazard Groups Paris-based Lazard Frères Banque SA (LFB). The Company also
allocates outstanding indebtedness to its Corporate segment.



LFB is a registered bank regulated by the Banque de France and its primary operations include asset and liability management for Lazard Groups businesses in France through its money market desk and
commercial banking operations, deposit taking and, to a lesser extent, financing activities and custodial oversight over assets of various clients. LFB engages in underwritten offerings of securities in France and we expect that it may expand its
scope to include placements elsewhere in Europe.



In June 2009, the Company formed a new wealth management subsidiary, Lazard Wealth Management LLC (Lazard Wealth Management). Lazard Wealth Management, which has not yet commenced operations, is expected to provide customized,
investment management and financial planning services to high net worth investors in the U.S. Lazard Wealth Management expects to work with investors to construct, implement and monitor an asset allocation strategy designed to meet the individual
clients investment objectives, integrating tax planning, estate planning, philanthropic interests and legacy planning with investment and risk management services. Prior to the launch of this business, we registered Lazard Wealth Management as
an investment adviser with the SEC.



On
September 25, 2008, pursuant to a definitive merger agreement dated August 14, 2008, the Company, Lazard Asset Management LLC (together with its subsidiaries, LAM) and LAZ Sub I, LLC, a newly formed subsidiary of Lazard
Frères & Co. LLC (LFNY), completed the merger of LAZ Sub I, LLC with and into LAM (the LAM Merger). See Note 8 of Notes to Consolidated Financial Statements for additional information relating to the LAM
Merger.



On August 13, 2007, Lazard Group acquired
Goldsmith, Agio, Helms & Lynner, LLC (GAHL), a Minneapolis-based investment bank specializing in financial advisory services to mid-sized private companies. On July 31, 2007, Lazard Ltd acquired Carnegie, Wylie & Company
(Holdings) PTY LTD (CWC), an Australia-based financial advisory firm and concurrently sold such investment to Lazard Group. See Note 9 of Notes to Consolidated Financial Statements for additional information relating to the
acquisitions of GAHL and CWC.



Lazard and Natixis
entered into a cooperation arrangement in April 2004 (and expanded such arrangement in March 2005) to place and underwrite securities on the French equity primary capital markets and cooperate in their respective origination, syndication and
placement activities. The arrangement expired during the third quarter of 2008, although it continues to be applied in accordance with its general terms pending the outcome of continuing discussions.



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Lazard also has
a long history of making alternative investments with its own capital, usually alongside capital of qualified institutional and individual investors. At the time of Lazard Ltds equity public offering and as a part of the separation, we
transferred to LFCM Holdings LLC (LFCM Holdings) all of our alternative investment activities, except for Fonds Partenaires Gestion SA (FPG), our private equity business in France. Such activities transferred to LFCM Holdings
represented the alternative investment activities of Lazard Alternative Investments Holdings LLC (LAI) and included private equity investments of Corporate Partners II Limited (CP II) and Lazard Senior Housing Partners LP. CP
II was managed by a subsidiary of LAI until February 16, 2009. Effective February 17, 2009, ownership and control of CP II was transferred to the investment professionals who manage CP II. We also transferred to LFCM Holdings certain principal
investments by Lazard Group in the funds managed by the separated businesses, subject to certain options by us to reacquire such investments, while we retained our investment in our French private equity funds. Since 2005, consistent with our
obligations to LFCM Holdings, we have engaged in a number of alternative investments and private equity activities. Effective September 30, 2009, the Company sold FPG to a fund management company forming part of a group that manages investment
companies and funds, in some of which Lazard could earn carried interests. The managing directors and staff conducting this activity were accordingly transferred to the buyer. The sale of FPG did not have a material impact on our financial condition
or results of operations. Operating results of FPG have been included in our consolidated financial statements through the effective date of sale. See Note 10 of Notes to Consolidated Financial Statements for additional information regarding
alternative investments.



We continue to explore
and discuss opportunities to expand the scope of our alternative investment and private equity activities in Europe, the U.S. and elsewhere. These opportunities could include internal growth of new funds and direct investments by us, partnerships or
strategic relationships, investments with third parties or acquisitions of existing funds or management companies. In that regard, on July 15, 2009, the Company established a private equity business with The Edgewater Funds
(Edgewater), a Chicago-based private equity firm, through the acquisition of Edgewaters management vehicles. The acquisition was structured as a purchase by Lazard of interests in a holding company that owns interests in the
general partner and management company entities of the current Edgewater private equity funds (the Edgewater Acquisition) (see Note 9 of Notes to Consolidated Financial Statements). Also, consistent with our obligations to LFCM
Holdings, we may explore discrete capital markets opportunities.



For the years ended December 31, 2009, 2008, and 2007, the Companys consolidated net revenue was derived from the following segments:



|                   |  |                        |   |  |      |   |  |      |  
|------------------ |  | ---------------------- | - |  | ---- | - |  | ---- | -
|                   |  | Year Ended December 31 |  
|                   |  | 2009                   |   |  | 2008 |   |  | 2007 |  
|Financial Advisory |  | 65                     | % |  | 66   | % |  | 64   | %
|Asset Management   |  | 39                     |   |  | 39   |   |  | 38   |  
|Corporate          |  | (4                     | ) |  | (5   | ) |  | (2   | )
|                   |  |                        |   |  |      |   |  |      |  
|Total              |  | 100                    | % |  | 100  | % |  | 100  | %
|                   |  |                        |   |  |      |   |  |      |  



Business Environment



Economic and market conditions in the U.S. and globally have
been adversely impacted since early 2008 through March 2009 by factors including the contraction in worldwide credit markets and the related tightening of lending, volatility in currency and commodity markets and oil prices and write-downs within
the financial sector. Global markets showed significant improvement in the last six months of 2009. Overall, these economic and market conditions adversely affected our operating performance in both our Financial Advisory and Asset Management
businesses in the early part of 2009, with improvement in the second half of the year.



Lazard operates in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for Lazards management to predict all risks and
uncertainties, nor can Lazard assess the impact of all potentially applicable factors on its 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. See the section entitled Risk Factors in this Form 10-K. Furthermore, net income



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and revenue in any period may not be indicative of full-year results or the results of any other period and may vary significantly from year to year and quarter to quarter.



Financial Advisory



While M&A activity for the year ended December 31, 2009
decreased substantially versus the corresponding prior year for both global and trans-atlantic completed transactions and announced transactions, increased activity in restructuring resulted from a higher level of corporate debt defaults during
2009. According to Moodys Investors Service, Inc., in the year ended December 31, 2009, a total of 266 issuers defaulted as compared to 105 in 2008. The following table sets forth industry statistics regarding the volume of M&A
transactions in 2009 and 2008:



|                            |  |                         |       |      |   |               |  |     |   
|--------------------------- |  | ----------------------- | ----- | ---- | - | ------------- |  | --- | --
|                            |  | Year Ended December 31, |      
|                            |  | 2009                    |       | 2008 |   | %Incr /(Decr) | 
|                            |  | ($ in billions)         |      
|Completed M&A Transactions: |  |                         |       |      |   |               |  |     |   
|Global                      |  | $                       | 1,710 |      | $ | 2,809         |  | (39 | )%
|Trans-Atlantic              |  |                         | 120   |      |   | 266           |  | (55 | )%
|                            |  |                         |      
|Announced M&A Transactions: |  |                         |       |      |   |               |  |     |   
|Global                      |  |                         | 1,040 |      |   | 2,288         |  | (55 | )%
|Trans-Atlantic              |  |                         | 129   |      |   | 251           |  | (49 | )%



|Source: | Thomson Financial as of January 22, 2010.
|------- | -----------------------------------------



While overall M&A industry statistics regarding the number and size of announced transactions declined in 2009 as compared to 2008, we
believe that in the current environment we are relatively well positioned as our clients refinance, restructure and position their asset portfolios for growth. Nevertheless, we continue to remain cautious with respect to the overall economic
environment and its impact on the M&A business. Generally, during such periods of unfavorable market or economic conditions, the volume and value of M&A transactions may decrease, thereby reducing the demand for our advisory services and
increasing competition among financial services companies seeking such engagements.



While we believe that the number and value of corporate defaults may decrease in 2010, we expect that our Restructuring business should continue to be very active over the next several years from the
significant level of corporate defaults in 2009, as well as from advising companies during this period of volatility on matters relating to debt and financing restructuring and other on- and off-balance sheet assignments. Our Restructuring
assignments normally are executed over a six- to eighteen-month period.



In April 2009, governmental officials in New York announced a new policy banning the use of placement agents by funds seeking investment contributions from the New York State and New York City public
pension funds. The use of placement agents has also been prohibited or otherwise restricted with respect to investments by public pension funds in Illinois, Ohio and New Mexico, and similar measures are being considered in other jurisdictions and by
the SEC. Our Private Fund Advisory Group, which is part of our Financial Advisory segment, acts as placement agent for investment funds, including investment funds that have historically received capital from certain of these affected public pension
funds. We are continuing to evaluate the potential impact of these restrictions on our Private Fund Advisory Group.



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Asset Management



As shown in the table below, major global market indices at
December 31, 2009 improved significantly as compared to such indices at December 31, 2008.



|                             |  |                                            |  
|---------------------------- |  | ------------------------------------------ | -
|                             |  | Percentage ChangeDecember 31,2009 vs. 2008 |  
|MSCI World Index             |  | 27                                         | %
|CAC 40                       |  | 22                                         | %
|DAX                          |  | 24                                         | %
|FTSE 100                     |  | 22                                         | %
|TOPIX 100                    |  | 7                                          | %
|MSCI Emerging Market         |  | 74                                         | %
|Dow Jones Industrial Average |  | 19                                         | %
|NASDAQ                       |  | 44                                         | %
|S&P 500                      |  | 23                                         | %



The fees that we receive for providing investment management and advisory services are primarily driven by the level of assets under
management (AUM). Accordingly, since market appreciation (depreciation) and foreign currency volatility impact the level of our AUM, such items will impact the level of revenues we receive from our Asset Management business. Since a
substantial portion of our AUM is invested in equities, market appreciation reflected in the changes in Lazards AUM during the year ended December 31, 2009 generally corresponded to the changes in global market indices. While AUM at December
31, 2009 improved versus AUM at December 31, 2008, our average AUM during 2009 declined as compared to our average AUM during 2008, reflecting significant market depreciation during the second half of 2008 and first quarter of 2009. Such decrease
resulted in lower management fee revenues in 2009.



Financial
Statement Overview



Net Revenue



The majority of Lazards Financial
Advisory net revenue is earned from the successful completion of M&A transactions, strategic advisory matters, restructuring and capital structure advisory services, capital raising and similar transactions. The main driver of Financial Advisory
net revenue is overall M&A activity, the level of corporate debt defaults and the environment for capital raising activities, particularly in the industries and geographic markets in which Lazard focuses. In some client engagements, often those
involving financially distressed companies, revenue is earned in the form of retainers and similar fees that are contractually agreed upon with each client for each assignment and are not necessarily linked to the completion of a transaction. In
addition, Lazard also earns fees from providing strategic advice to clients, with such fees not being dependent on a specific transaction. Lazards Financial Advisory segment also earns revenue from public and private securities offerings in
the form of referral fees for referring opportunities to LFCM Holdings for underwriting and distribution of securities. The referral fees received from LFCM Holdings are generally one-half of the revenue recorded by LFCM Holdings in respect of such
activities. Significant fluctuations in Financial Advisory net revenue can occur over the course of any given year. These fluctuations arise because a significant portion of Financial Advisory net revenue is earned upon the successful completion of
a transaction, restructuring or capital raising activity, the timing of which is uncertain and is not subject to Lazards control.



Lazards Asset Management segment principally includes LAM, Lazard Frères Gestion SAS, FPG (through its disposition on September
30, 2009) and, effective July 15, 2009, Edgewater. Asset Management net revenue is derived from fees for investment management and advisory services provided to institutional and private clients. The main driver of Asset Management net revenue is
the level of AUM, which is influenced by Lazards investment performance, its ability to successfully attract and retain assets, the broader performance of the global equity markets and, to a lesser extent, fixed income markets. As a result,
fluctuations in financial markets and



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client asset inflows and outflows have a direct effect on Asset Management net revenue and operating income. Asset Management fees are generally based on the level of AUM measured as of the end
of a quarter or month, and an increase or reduction in AUM at such dates, due to market price fluctuations, currency fluctuations, net client asset flows or otherwise, will result in a corresponding increase or decrease in management fees. The
majority of our investment advisory contracts are generally terminable at any time or on notice of 30 days or less. Institutional and individual clients, and firms with which we have strategic alliances, can terminate their relationship with us,
reduce the aggregate amount of AUM or shift their funds to other types of accounts with different rate structures for a number of reasons, including investment performance, changes in prevailing interest rates and financial market performance. In
addition, as Lazards AUM includes significant assets that are denominated in currencies other than U.S. dollars, changes in the value of the U.S. dollar relative to foreign currencies will impact the value of Lazards AUM. Fees vary with
the type of assets managed, with higher fees earned on equity assets, alternative investments (such as hedge funds) and private equity investments, and lower fees earned on fixed income and cash management products.



The Company earns performance-based incentive fees on various
investment products, including traditional products and alternative investment funds such as hedge funds and private equity funds.



For hedge funds, incentive fees are calculated based on a specified percentage of a funds net appreciation, in some cases in excess of
established benchmarks. The Company records incentive fees on traditional products and hedge funds at the end of the relevant performance measurement period, when potential uncertainties regarding the ultimate realizable amounts have been
determined. The performance fee measurement period is generally an annual period (unless an account terminates during the year), and therefore such incentive fees are usually recorded in the fourth quarter of Lazards fiscal year. These
incentive fees received at the end of the measurement period are not subject to reversal or payback. Incentive fees on hedge funds generally are subject to loss carryforward provisions in which losses incurred by the funds in any year are applied
against certain future period net appreciation before any incentive fees can be earned.



For private equity funds, incentive fees may be earned in the form of a carried interest if profits arising from realized investments exceed a specified threshold. Typically, such carried
interest is ultimately calculated on a whole-fund basis and, therefore, clawback of carried interests during the life of the fund can occur. As a result, incentive fees earned on our private equity funds are not recorded until potential
uncertainties regarding the ultimate realizable amounts have been determined, including any potential for clawback.



Corporate segment net revenue consists primarily of net interest income, including amounts earned at LFB, and investment gains and losses on
the Companys investment portfolio of LAM-managed equity funds and principal investments in equities, debt securities at LFB and alternative investment funds. Interest expense is also included in Corporate net revenue. Corporate net revenue can
fluctuate due to changes in the fair value of investments classified as trading, and with respect to available-for-sale, when realized, or when a decline is determined to be other than temporary, with respect to
available-for-sale and held-to-maturity investments, as well as due to changes in interest and currency exchange rates and in the levels of cash, investments and indebtedness. Corporate net revenue also includes equity
method investments, including, in 2009, the write-off of the Companys investment in the Sapphire warrants (see Note 15 of Notes to Consolidated Financial Statements).



Effective July 1, 2008, as permitted by accounting principles generally accepted in the United States of
America (U.S. GAAP), the portion of LFBs corporate debt portfolio that had been previously designated as trading was re-designated to available-for-sale. During the years ended December 31, 2009 and 2008,
the Company recorded net mark-ups and mark-downs of $29 and $(41) million, respectively, in accumulated other comprehensive income (loss), net of tax (AOCI).



Although Corporate segment net revenue during the year ended December 31, 2009 represented (4)% of
Lazards net revenue, total assets in Corporate represented 55% of Lazards consolidated total assets as of



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December 31, 2009, principally attributable to assets associated with LFB, and, to a lesser extent, investments in LAM-managed funds, other securities and cash.



Operating Expenses



The majority of Lazards operating expenses relate to
compensation and benefits for employees and managing directors. Our compensation and benefits expense includes amortization of the relevant portion of the restricted stock unit awards (RSUs) under the Lazard Ltd 2005 Equity Incentive
Plan (2005 Plan) and the Lazard Ltd 2008 Incentive Compensation Plan (the 2008 Plan), with such amortization generally determined on a straight-line basis over the vesting periods and not on the basis of revenue recognition
(see Note 17 of Notes to Consolidated Financial Statements). Our compensation expense-to-operating revenue ratio for the years ended December 31, 2009, 2008 and 2007 was 71.6%, 55.6% and 55.8%, respectively, (with such ratios excluding, in 2009, the
compensation charges of approximately $87 million related to the acceleration of amortization expense relating to the vesting of RSUs held by Lazards former Chairman and Chief Executive Officer as a result of his death in October 2009 and
approximately $61 million relating to the accelerated vesting of the unamortized portion of previously awarded deferred cash incentive awards and, in 2008, the compensation charge of approximately $197 million relating to the LAM Merger).
Compensation expense in any given year is dependent on many factors, including general economic and market conditions, our operating and financial performance, staffing levels and competitive pay conditions, as well as the composition between
current and deferred compensation.



Lazards
operating expenses also include non-compensation expense, amortization of intangible assets related to business acquisitions and, in 2009, restructuring expense. Non-compensation expense includes costs for occupancy and equipment,
marketing and business development, technology and information services, professional services, fund administration and outsourced services and other expenses. Amortization of intangibles related to business acquisitions are associated with the
acquisitions of Edgewater, GAHL and CWC. Restructuring expense relates to the reduction of headcount in the first quarter of 2009, and includes severance and related benefits expense, the acceleration of unrecognized expense pertaining to RSUs
previously granted to individuals who were terminated and certain other costs related to this initiative.



Provision for Income Taxes



Lazard Group primarily operates in the U.S. as a limited liability company that is treated as a partnership for U.S. federal income tax
purposes. As a result, Lazard Groups income pertaining to the limited liability company is not subject to U.S. federal income taxes because taxes associated with such income represent obligations of the individual partners. Outside the U.S.,
Lazard Group operates principally through corporations and is subject to local income taxes. Income taxes shown on Lazards consolidated statements of operations are attributable to taxes incurred in non-U.S. entities and to New York City
Unincorporated Business Tax (UBT) attributable to Lazards operations apportioned to New York City.



Noncontrolling Interests



The Company records a charge (credit) to noncontrolling interests relating to Edgewater in 2009 and various LAM-related general partnership
interests (GPs) held directly by certain of our LAM managing directors.



See Note 16 of Notes to Consolidated Financial Statements for information regarding Companys noncontrolling interests.



41



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##### Table of Contents

Consolidated Results of Operations



Lazards consolidated financial statements are presented in U.S. dollars. Many of our non-U.S.
subsidiaries have a functional currency (i.e., the currency in which operational activities are primarily conducted) that is other than the U.S. dollar, generally the currency of the country in which the subsidiaries are domiciled. Such
subsidiaries assets and liabilities are translated into U.S. dollars using exchange rates as of the respective balance sheet date while revenue and expenses are translated at average exchange rates during the respective periods based on the
daily closing exchange rates. Adjustments that result from translating amounts from a subsidiarys functional currency are reported as a component members equity. Foreign currency remeasurement gains and losses on transactions in
non-functional currencies are included in the consolidated statements of operations.



During 2009 and 2008, the Company reported certain charges (the 2009 special items and the 2008 special item, respectively, and collectively, the 2009 and 2008 special
items) that resulted in a significant adverse impact on its operating results. The impact of such special items in 2009 and 2008 on the Companys consolidated statements of operations are described in more detail in the table below.



|                                              |  |                             |   |  |                             |   |  |                               |   |  |           |   |  |            |  
|--------------------------------------------- |  | --------------------------- | - |  | --------------------------- | - |  | ----------------------------- | - |  | --------- | - |  | ---------- | -
|                                              |  | Year EndedDecember 31, 2009 |   |  | Year EndedDecember 31, 2008 |  
|                                              |  | Restructuring(a)            |   |  | RSU Acceleration(b)         |   |  | Deferred CashAcceleration (c) |   |  | Total     |   |  | LAM Merger |  
|                                              |  | ($ in thousands)            |  
|Compensation                                  |  |                             |   |  | $86,514                     |   |  | $60,512                       |   |  | $147,026  |   |  | $197,550   |  
|Non-Compensation                              |  |                             |   |  |                             |   |  |                               |   |  |           |   |  | 2,000      |  
|Restructuring                                 |  | $62,550                     |   |  |                             |   |  |                               |   |  | 62,550    |   |  |            |  
|                                              |  |                             |   |  |                             |   |  |                               |   |  |           |   |  |            |  
|Operating Income (Loss)                       |  | (62,550                     | ) |  | (86,514                     | ) |  | (60,512                       | ) |  | (209,576  | ) |  | (199,550   | )
|Income Tax (Benefit)                          |  | (6,401                      | ) |  |                             |   |  | (2,566                        | ) |  | (8,967    | ) |  | (7,427     | )
|                                              |  |                             |   |  |                             |   |  |                               |   |  |           |   |  |            |  
|Net Income (Loss) Attributable to Lazard Ltd. |  | $(56,149                    | ) |  | $(86,514                    | ) |  | $(57,946                      | ) |  | $(200,609 | ) |  | $(192,123  | )
|                                              |  |                             |   |  |                             |   |  |                               |   |  |           |   |  |            |  



|(a) | Restructuring plan announced in the first quarter of 2009.
|--- | ----------------------------------------------------------

|(b) | Acceleration of amortization expense relating to the vesting of RSUs held by Lazards former Chairman and Chief Executive Officer as a result of his death in
October 2009.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(c) | Accelerated vesting of the unamortized portion of previously awarded deferred cash incentive awards (no portion of which relates to Lazards former Chairman and
Chief Executive Officer).
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



A
discussion of the Companys consolidated results of operations for the years ended December 31, 2009, 2008 and 2007 is set forth below, followed by a more detailed discussion of business segment results. For comparability purposes in the
discussion that follows, the 2009 and 2008 results are shown in tables below, as applicable, on both an as reported U.S. GAAP and excluding special items non-U.S. GAAP basis.



42



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|                                                                  |  |                         |                     |    |      |   |                            |      |  |   |                                          |   |  |   |                     |   |  |   |                          |   |  |   |                                         |   |  |   |                      |  
|----------------------------------------------------------------- |  | ----------------------- | ------------------- | -- | ---- | - | -------------------------- | ---- |  | - | ---------------------------------------- | - |  | - | ------------------- | - |  | - | ------------------------ | - |  | - | --------------------------------------- | - |  | - | -------------------- | -
|                                                                  |  | Year Ended December 31, |                    
|                                                                  |  | 2009                    |                     |    | 2008 |   |                            | 2007 | 
|                                                                  |  |                         | U.S. GAAPAsReported |    |      |   | Impact ofSpecial Items (a) |      |  |   | Non-U.S. GAAPExcluding Special Items (b) |   |  |   | U.S. GAAPAsReported |   |  |   | Impact ofSpecialItem (a) |   |  |   | Non-U.S. GAAPExcluding Special Item (b) |   |  |   | U.S. GAAPAs Reported |  
|                                                                  |  | ($ in thousands)        |                    
|Net Revenue                                                       |  | $                       | 1,529,963           |    |      |   |                            |      |  | $ | 1,529,963                                |   |  | $ | 1,554,969           |   |  |   |                          |   |  | $ | 1,554,969                               |   |  | $ | 1,916,893            |  
|                                                                  |  |                         |                     |    |      |   |                            |      |  |   |                                          |   |  |   |                     |   |  |   |                          |   |  |   |                                         |   |  |   |                      |  
|                                                                  |  |                         |                     |    |      |   |                           
|Operating Expenses:                                               |  |                         |                     |    |      |   |                            |      |  |   |                                          |   |  |   |                     |   |  |   |                          |   |  |   |                                         |   |  |   |                      |  
|Compensation and benefits                                         |  |                         | 1,309,231           |    |      | $ | 147,026                    |      |  |   | 1,162,205                                |   |  |   | 1,128,243           |   |  | $ | 197,550                  |   |  |   | 930,693                                 |   |  |   | 1,123,058            |  
|Non-compensation expense                                          |  |                         | 335,180             |    |      |   |                            |      |  |   | 335,180                                  |   |  |   | 380,101             |   |  |   | 2,000                    |   |  |   | 378,101                                 |   |  |   | 336,248              |  
|Amortization of intangible assets related to acquisitions         |  |                         | 4,990               |    |      |   |                            |      |  |   | 4,990                                    |   |  |   | 4,596               |   |  |   |                          |   |  |   | 4,596                                   |   |  |   | 21,523               |  
|Restructuring                                                     |  |                         | 62,550              |    |      |   | 62,550                     |      |  |   |                                         |   |  |   |                    |   |  |   |                          |   |  |   |                                        |   |  |   |                     |  
|                                                                  |  |                         |                     |    |      |   |                            |      |  |   |                                          |   |  |   |                     |   |  |   |                          |   |  |   |                                         |   |  |   |                      |  
|Total operating expenses                                          |  |                         | 1,711,951           |    |      |   | 209,576                    |      |  |   | 1,502,375                                |   |  |   | 1,512,940           |   |  |   | 199,550                  |   |  |   | 1,313,390                               |   |  |   | 1,480,829            |  
|                                                                  |  |                         |                     |    |      |   |                            |      |  |   |                                          |   |  |   |                     |   |  |   |                          |   |  |   |                                         |   |  |   |                      |  
|Operating Income (Loss)                                           |  |                         | (181,988            | )  |      |   | (209,576                   | )    |  |   | 27,588                                   |   |  |   | 42,029              |   |  |   | (199,550                 | ) |  |   | 241,579                                 |   |  |   | 436,064              |  
|Provision (benefit) for income taxes                              |  |                         | 31,727              |    |      |   | (8,967                     | )    |  |   | 40,694                                   |   |  |   | 29,691              |   |  |   | (7,427                   | ) |  |   | 37,118                                  |   |  |   | 88,786               |  
|                                                                  |  |                         |                     |    |      |   |                            |      |  |   |                                          |   |  |   |                     |   |  |   |                          |   |  |   |                                         |   |  |   |                      |  
|Net Income (Loss)                                                 |  |                         | (213,715            | )  |      |   | (200,609                   | )    |  |   | (13,106                                  | ) |  |   | 12,338              |   |  |   | (192,123                 | ) |  |   | 204,461                                 |   |  |   | 347,278              |  
|Less  Net Income (Loss) Attributable to Noncontrolling Interests |  |                         | 2,832               |    |      |   |                            |      |  |   | 2,832                                    |   |  |   | (13,333             | ) |  |   |                          |   |  |   | (13,333                                 | ) |  |   | 5,144                |  
|                                                                  |  |                         |                     |    |      |   |                            |      |  |   |                                          |   |  |   |                     |   |  |   |                          |   |  |   |                                         |   |  |   |                      |  
|Net Income (Loss) Attributable to Lazard Group                    |  | $                       | (216,547            | )  |      | $ | (200,609                   | )    |  | $ | (15,938                                  | ) |  | $ | 25,671              |   |  | $ | (192,123                 | ) |  | $ | 217,794                                 |   |  | $ | 342,134              |  
|                                                                  |  |                         |                     |    |      |   |                            |      |  |   |                                          |   |  |   |                     |   |  |   |                          |   |  |   |                                         |   |  |   |                      |  
|As a % of Net Revenue:                                            |  |                         |                     |    |      |   |                            |      |  |   |                                          |   |  |   |                     |   |  |   |                          |   |  |   |                                         |   |  |   |                      |  
|Operating Income (Loss)                                           |  |                         | (12                 | )% |      |   |                            |      |  |   | 2                                        | % |  |   | 3                   | % |  |   |                          |   |  |   | 16                                      | % |  |   | 23                   | %
|                                                                  |  |                         |                     |    |      |   |                            |      |  |   |                                          |   |  |   |                     |   |  |   |                          |   |  |   |                                         |   |  |   |                      |  



|(a) | Represents charges related to the 2009 and 2008 special items. See Notes 8, 17, 19 and 23 of Notes to Consolidated Financial Statements.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------

|(b) | A non-U.S. GAAP measure that management believes provides the most meaningful comparison between historical, present and future periods.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

The table below describes the components of operating revenue, a non-U.S. GAAP measure
used by the Company to manage total compensation and benefits expense to managing directors and employees. Management believes operating revenue provides the most meaningful basis for comparison between present, historical and future periods.



|                                                |  |                         |   |  |            |   |  |            |  
|----------------------------------------------- |  | ----------------------- | - |  | ---------- | - |  | ---------- | -
|                                                |  | Year Ended December 31, |  
|                                                |  | 2009                    |   |  | 2008       |   |  | 2007       |  
|                                                |  | ($ in thousands)        |  
|Operating revenue                               |  |                         |   |  |            |   |  |            |  
|Total revenue                                   |  | $1,643,243              |   |  | $1,696,382 |   |  | $2,053,422 |  
|Add (deduct):                                   |  |                         |   |  |            |   |  |            |  
|LFB interest expense (a)                        |  | (13,815                 | ) |  | (35,358    | ) |  | (34,827    | )
|Revenue related to noncontrolling interests (b) |  | (6,965                  | ) |  | 13,348     |   |  | (5,135     | )
|                                                |  |                         |   |  |            |   |  |            |  
|Operating revenue                               |  | $1,622,463              |   |  | $1,674,372 |   |  | $2,013,460 |  
|                                                |  |                         |   |  |            |   |  |            |  



|(a) | The interest expense incurred by LFB is excluded from total revenue because LFB is a commercial bank and we consider its interest expense to be a cost directly related
to the conduct of its business.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) | Revenue related to the consolidation of noncontrolling interests is excluded because the Company has no economic interest in such amount. Further, such results are
offset by a charge or credit to noncontrolling interests.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Certain key ratios, statistics and headcount information for the years ended December 31, 2009, 2008 and 2007 are set forth below:



|                                            |  |                         |   |  |      |   |  |      |  
|------------------------------------------- |  | ----------------------- | - |  | ---- | - |  | ---- | -
|                                            |  | Year Ended December 31, |  
|                                            |  | 2009                    |   |  | 2008 |   |  | 2007 |  
|As a % of Net Revenue, By Revenue Category: |  |                         |   |  |      |   |  |      |  
|Investment banking and other advisory fees  |  | 62                      | % |  | 64   | % |  | 62   | %
|Money management fees                       |  | 37                      |   |  | 39   |   |  | 35   |  
|Interest income                             |  | 2                       |   |  | 5    |   |  | 5    |  
|Other                                       |  | 6                       |   |  | 1    |   |  | 5    |  
|Interest expense                            |  | (7                      | ) |  | (9   | ) |  | (7   | )
|                                            |  |                         |   |  |      |   |  |      |  
|Net Revenue                                 |  | 100                     | % |  | 100  | % |  | 100  | %
|                                            |  |                         |   |  |      |   |  |      |  



See Note 23 of Notes to
Consolidated Financial Statements for additional financial information on a geographic basis.



|                                          |  |                    |  |       |  |      
|----------------------------------------- |  | ------------------ |  | ----- |  | -----
|                                          |  | As of December 31,
|                                          |  | 2009               |  | 2008  |  | 2007 
|Headcount:                                |  |                    |  |       |  |      
|Managing Directors:                       |  |                    |  |       |  |      
|Financial Advisory                        |  | 150                |  | 151   |  | 138  
|Asset Management                          |  | 56                 |  | 56    |  | 48   
|Corporate                                 |  | 7                  |  | 8     |  | 8    
|Limited Managing Directors                |  | 3                  |  | 6     |  | 6    
|Other Employees:                          |  |                    |  |       |  |      
|Business segment professionals            |  | 987                |  | 1,026 |  | 997  
|All other professionals and support staff |  | 1,091              |  | 1,187 |  | 1,261
|                                          |  |                    |  |       |  |      
|Total                                     |  | 2,294              |  | 2,434 |  | 2,458
|                                          |  |                    |  |       |  |      



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##### Table of Contents

During 2009, we continued to hire key professionals on a selective basis, and to redeploy
employees into areas where we saw potential for growth. As described above, to further optimize our mix of personnel we also reduced staff in other areas, including the back office.



Operating Results



As reflected in the table of consolidated results of operations above, charges related to the 2009 and 2008 special items had a significant
impact on the Companys reported operating results. Lazard management believes that comparisons between years are most meaningful after excluding the impact of such items.



Year Ended December 31, 2009 versus December 31, 2008



The Company reported a net loss attributable to Lazard Group of $217 million for the year ended
December 31, 2009, a decrease of $243 million, as compared to net income of $26 million in 2008. Such decrease was, in part, the result of the 2009 special items, which in the aggregate served to reduce net income attributable to Lazard Group
by $201 million. Partially offsetting such items was the impact in 2008 of the 2008 special item, which reduced net income attributable to Lazard Group in that year by $192 million. Excluding the after-tax impact of the 2009 and 2008 special items,
net loss attributable to Lazard Group in the year ended December 31, 2009 was $16 million, a decrease of $234 million, as compared to 2008. Such reduction in net income attributable to Lazard Group in 2009 was primarily affected by higher amounts
relating to compensation and benefits expense due to (i) a change in the Companys compensation policy, which resulted in an increase in the cash component of compensation (which is expensed currently), and a decrease in the aggregate amount of
compensation amortizable over future periods, and (ii) an increased amount of amortization expense related to previously granted equity-based incentive compensation and the current year portion of the previously awarded deferred cash incentive
awards, as well as an increased amount of net income attributable to noncontrolling interests, partially offset by reductions in non-compensation expense. The change in the Companys compensation policy was designed to reduce future
amortization expense associated with the equity-based compensation component, to allow greater flexibility in the future to address competitive conditions, to more closely align the current pay cycle with reported compensation and revenues, and to
maintain significant retention mechanisms by focusing stock grant awards at the more senior levels, where they are more highly effective and valued.



Net revenue decreased $25 million, or 2%, for the year ended December 31, 2009, as compared to 2008, with operating revenue decreasing $52
million, or 3%, as compared to 2008. Fees from investment banking and other advisory activities decreased $35 million, or 4%, as compared to 2008, principally reflecting a change in the composition of advisory activities as a $288 million, or 35%,
decline in M&A and Strategic Advisory revenue, was partially offset by a $257 million, or 216%, increase in Restructuring revenue, which includes fees for advising on distressed asset sales. Money management fees, including incentive fees, in
2009 decreased $40 million, or 7%, as compared to 2008, due to a $19 billion, or 15%, decline in average AUM for the year ended December 31, 2009 versus 2008, primarily as the result of market depreciation experienced in 2008 and the first quarter
of 2009, partially offset by higher incentive fees earned in 2009. Interest income decreased $47 million, or 58%, primarily due to a lower interest rate environment, combined with lower average cash balances and receivables from banks. Other revenue
increased $69 million in the year ended December 31, 2009, as compared to 2008, principally due to investment income of $18 million in the Companys investment portfolio, versus an aggregate loss of $53 million in LFBs corporate debt
portfolio (redesignated as available-for-sale effective July 1, 2008) and the Companys investment portfolio in 2008. With respect to the latter, during 2009, the Company had in place a hedging strategy to minimize its risks
associated with volatility in the equity markets. Partially offsetting the increase in other revenue in 2009 was a $13 million write-off relating to the Companys investment in warrants of Sapphire Industrials Corp., (Sapphire), a
special purpose acquisition company sponsored by Lazard. Interest expense for the year ended December 31, 2009 decreased $28 million, or 20%, primarily related to the Companys May 2008 repurchase of $437 million aggregate principal amount of
its 6.12% senior notes in connection with the remarketing of such notes, the partial repurchases of other senior notes, as well as a lower interest rate environment and reduced levels of LFBs customer deposits.



45



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##### Table of Contents

Compensation and benefits expense for the year ended December 31, 2009 increased $181
million, as compared to 2008. Compensation and benefits expense in 2009 included special items aggregating $147 million, whereas the 2008 special item included a charge of approximately $197 million. When excluding the 2009 and 2008 special items,
compensation and benefits expense increased $232 million, reflecting a change in the Companys compensation policy as previously described, and the impact of an increase in the amortization expense associated with previously granted
equity-based incentive awards and the current year portion of the previously awarded deferred cash incentive awards. Compensation and benefits expense, excluding the 2009 and 2008 special items, was 71.6% and 55.6% of operating revenue in the years
ended December 31, 2009 and 2008, respectively.



Non-compensation expense for the year ended December 31, 2009 decreased $45 million, or 12%, as compared to 2008. Factors contributing to the decrease were (i) charges in 2008 comprised of the $12 million provision for losses from
counterparty defaults related primarily to the bankruptcy filing of one of our prime brokers and the $2 million charge relating to the 2008 special item, (ii) lower spending on travel and other business development activities, lower consulting and
recruiting fees and, (iii) the strengthening of the U.S. dollar versus foreign currencies. The ratio of non-compensation expense to operating revenue was 20.7% for the year ended December 31, 2009, as compared to 22.7% of operating revenue for 2008.



Amortization of intangible assets for the year
ended December 31, 2009 was essentially unchanged principally due to lower amortization of intangibles related to the acquisitions of GAHL and CWC, partially offset by the increase related to the Edgewater Acquisition.



As announced in the first quarter of 2009, we continued to
redeploy our banking professionals into growth areas and reduced staffing in other areas to further optimize our mix of personnel. As a result, the 2009 special items include a pre-tax restructuring charge of $63 million in connection with severance
and benefit payments, the acceleration of unrecognized expense pertaining to RSUs previously granted to individuals who were terminated and certain other costs related to the restructuring initiative.



Operating loss for the year ended December 31, 2009 was $182
million, a decrease of $224 million as compared to an operating income of $42 million in 2008 (with such amounts including the impact of the 2009 and 2008 special items) and, as a percentage of net revenue, was (12)% as compared to operating
income of 3% in 2008. Excluding the impact of the 2009 and 2008 special items, operating income in 2009 was $28 million, a decline of $214 million, or 89%, as compared to operating income in 2008 of $242 million, and, as a percentage of net
revenue, was 2% in 2009, as compared to 16% in 2008.



The provision for income taxes for the year ended December 31, 2009 was $32 million, an increase of $2 million, as compared to a tax provision of $30 million in 2008. When excluding the tax benefits of $9 million and $7 million relating to
the 2009 and 2008 special items, respectively, the income tax provision in 2009 increased $4 million, principally due to valuation allowance changes affecting the provision for income taxes. The Companys effective tax rate was (17.4)% for the
year ended December 31, 2009, as compared to 70.6% in 2008. When excluding the 2009 and 2008 special items, the effective tax rate was 147.5% in 2009, as compared to 15.4% in 2008.



Net income attributable to noncontrolling interests for the year ended December 31, 2009 increased $16 million
as compared to 2008, principally due to the Edgewater acquisition in 2009 and LAM GP-related revenue.



Year Ended December 31, 2008 versus December 31, 2007



The Company reported net income attributable to Lazard Group of $26 million for the year ended December 31, 2008, a decline of $316
million as compared to net income of $342 million in 2007. Such decline was in part the result of the 2008 special item, which reduced net income in 2008 by $192 million. Net income was also adversely impacted by an 18% decline in Financial Advisory
net revenue as a result of a slowdown in global M&A activity and a 15% decline in Asset Management net revenue due principally to the decline in equity markets. These revenue decreases were partially offset by reduced compensation and benefits,
down 17%



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##### Table of Contents

when excluding the impact of the 2008 special item, and lower provisions for income taxes and net income attributable to noncontrolling interests. When excluding the impact of the 2008 special
item, the Companys net income in 2008 was $218 million, or 36% lower than 2007. As described above, the Company acquired GAHL and CWC during the third quarter of 2007. Accordingly, results for the year ended December 31, 2008 and 2007 include
the results of such acquired businesses from the respective acquisition dates.



Net revenue decreased $362 million, or 19%, for the year ended December 31, 2008, as compared to 2007, with operating revenue decreasing $339 million, or 17%, as compared to 2007. Fees from investment
banking and other advisory activities decreased $206 million, or 17%, versus 2007. Our investment banking fees reflect fees from M&A and Strategic Advisory, Restructuring and Corporate Finance assignments encompassing general strategic and
transaction-specific advice to public and private companies, governments and other parties, and includes various corporate finance services. Money management fees, including incentive fees, decreased $59 million, or 9%, as compared to the prior year
due to a $8 billion, or 6%, decrease in average AUM for the year ended December 31, 2008 versus 2007, primarily as the result of market and foreign exchange depreciation, as well as lower incentive fees earned in 2008. Interest income decreased $7
million, or 8%, due to lower average cash balances and a lower interest rate environment. Other revenue decreased $85 million, or 81%, in the year ended December 31, 2008 versus 2007. The decline in other revenue as compared to 2007 reflects a $93
million decrease in investment income due to losses and markdowns in the first quarter of 2008 in LFBs corporate debt portfolio held as in integral part of its asset-liability management program, net unrealized losses in the Companys
investment portfolio, the writedown of private equity investments (primarily in the fourth quarter), and a reduction in LAM GP-related revenues (which are, to the extent held directly by certain of our LAM managing directors or employees of the
Company, fully offset in net income attributable to noncontrolling interests), partially offset by a $20 million gain from the repurchase of a portion of the Companys senior notes and $15 million in gains from foreign currency transactions
(consisting of a $24 million gain in the Corporate segment, partially offset by an aggregate loss of $9 million in the Asset Management and Financial Advisory segments). Other revenue in 2007 included $14 million of unrealized gains on private
equity investments and a $9 million gain in connection with the Companys interest in the net proceeds related to the sale of a portion of LFCM Holdings ownership interest in Panmure Gordon & Co. plc (PG&C) (see Note
21 of Notes to Consolidated Financial Statements). Interest expense for the year ended December 31, 2008 increased $5 million, or 4%, primarily related to the Companys June 2007 issuance of $600 million aggregate principal amount of its
6.85% senior notes, partially offset by a reduction in interest expense related to the Companys May 2008 repurchase of $437 million aggregate principal amount of its 6.12% senior notes in connection with the remarketing of such notes.



Compensation and benefits expense for the year
ended December 31, 2008 increased by $5 million, as compared to 2007, including the 2008 special item. When excluding such charge, compensation and benefits expense in 2008 decreased $192 million, or 17%. Such decrease reflected lower incentive
compensation and was consistent with the decrease in operating revenue, which more than offset the additional amortization of an increased amount of RSUs granted and additional compensation associated with the strategic headcount growth of managing
directors and business segment professionals. Compensation and benefits expense, including the charge relating to the 2008 special item, was 67.4% of operating revenue in 2008. However, when excluding the 2008 special item, such expense represented
55.6% of operating revenue in 2008, as compared to 55.8% in 2007.



Non-compensation expense for the year ended December 31, 2008 increased $44 million, as compared to 2007, including the $2 million charge relating to the 2008 special item. Apart from such charge,
non-compensation expense increased $42 million, or 12%. Factors contributing to the increase include (i) the impact of investments in our business and operating expenses related to companies acquired in the third quarter of 2007, (ii) the $12
million provision for losses from counterparty defaults from one of our prime brokers, (iii) increased business development expenses for travel and market related data, and (iv) fees for outsourced services. The ratio of non-compensation expense to
operating revenue was 22.7% in 2008, or 22.6% when excluding the 2008 special item, as compared to 16.7% of operating revenue for 2007, with such increased percentage primarily attributable to the decline in operating revenues in 2008 as well as the
provision for losses from counterparty defaults described above.



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Amortization of intangible assets for the year ended December 31, 2008 amounted to $5
million, a decrease of $17 million as compared to the prior year, due to lower expense related to the acquisitions of GAHL and CWC in 2007.



Operating income for the year ended December 31, 2008 decreased $394 million, as compared to 2007, including the 2008 special item of $199
million, and, as a percentage of net revenue, operating income was 3% and 23% in 2008 and 2007, respectively. When excluding the 2008 special item, operating income decreased $194 million, and, as a percentage of net revenue, operating income was
16% and 23% in 2008 and 2007, respectively.



The
provision for income taxes for the year ended December 31, 2008 decreased $59 million, including the $7 million tax benefit relating to the 2008 special item. The remaining decrease of $52 million as compared to 2007 was principally due to lower
levels of income in 2008. The Companys effective tax rate was 70.6% for the year ended December 31, 2008, as compared to 20.4% in 2007. When excluding the impact of the 2008 special item, the Companys effective tax rate was 15.4% in
2008.



Net income attributable to noncontrolling
interests for the year ended December 31, 2008 decreased by $18 million as compared to 2007, which, in 2008 included a $13 million credit related to various LAM GPs held directly by certain of our LAM managing directors for which there is an
offsetting amount included in revenue-other, as compared to a $5 million charge recorded in 2007.



Business Segments



The following is a discussion of net revenue and operating income for the Companys business segments - Financial Advisory, Asset Management and Corporate. Each segments operating expenses
include (i) compensation and benefits expenses that are incurred directly in support of the segment and (ii) other operating expenses, which include directly incurred expenses for occupancy and equipment, marketing and business development,
technology and information services, professional services, fund administration and outsourcing, and indirect support costs (including compensation and benefits expense 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. Such support costs are allocated to the relevant segments based on various statistical drivers such as, among
other items, headcount, square footage and transactional volume. As reflected in the tables below, each segments operating results are presented, as applicable, on an as reported and excluding special items basis (see
Note 23 of Notes to Consolidated Financial Statements).



Financial Advisory



The following
table summarizes the operating results of the Financial Advisory segment:



|                                                |  |                             |   |                             |                          |   |                             |                                        |  |                     |   |  |                     |  
|----------------------------------------------- |  | --------------------------- | - | --------------------------- | ------------------------ | - | --------------------------- | -------------------------------------- |  | ------------------- | - |  | ------------------- | -
|                                                |  | Year EndedDecember 31, 2009 |   | Year EndedDecember 31, 2008 |                          |   | Year EndedDecember 31, 2007 |                                       
|                                                |  | U.S. GAAPAsReported         |   |                             | Impact ofSpecialItem (a) |   |                             | Non-U.S. GAAPExcludingSpecial Item (b) |  | U.S. GAAPAsReported |   |  | U.S. GAAPAsReported |  
|                                                |  | ($ in thousands)            |  
|M&A and Strategic Advisory                      |  | $526,225                    |   |                             |                          |   |                             | $526,225                               |  | $  814,660          |   |  | $  969,409          |  
|Restructuring                                   |  | 376,710                     |   |                             |                          |   |                             | 376,710                                |  | 119,283             |   |  | 127,175             |  
|Capital Markets and Other Advisory              |  | 83,885                      |   |                             |                          |   |                             | 83,885                                 |  | 88,970              |   |  | 143,593             |  
|                                                |  |                             |   |                             |                          |   |                             |                                        |  |                     |   |  |                     |  
|Net Revenue                                     |  | 986,820                     |   |                             |                          |   |                             | 986,820                                |  | 1,022,913           |   |  | 1,240,177           |  
|Operating Expenses (c)                          |  | 998,727                     |   |                             | $ 48,533                 |   |                             | 950,194                                |  | 796,970             |   |  | 920,705             |  
|                                                |  |                             |   |                             |                          |   |                             |                                        |  |                     |   |  |                     |  
|Operating Income (Loss)                         |  | $(11,907                    | ) |                             | $(48,533                 | ) |                             | $  36,626                              |  | $  225,943          |   |  | $  319,472          |  
|                                                |  |                             |   |                             |                          |   |                             |                                        |  |                     |   |  |                     |  
|Operating Income As A Percentage Of Net Revenue |  | (1)%                        |   |                             |                          |   |                             | 4%                                     |  | 22                  | % |  | 26                  | %
|                                                |  |                             |   |                             |                          |   |                             |                                        |  |                     |   |  |                     |  



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|                                          |  |                    |  |       |  |      
|----------------------------------------- |  | ------------------ |  | ----- |  | -----
|                                          | 
|                                          |  | As of December 31,
|                                          |  | 2009               |  | 2008  |  | 2007 
|Headcount (d):                            |  |                    |  |       |  |      
|Managing Directors                        |  | 150                |  | 151   |  | 138  
|Limited Managing Directors                |  | 3                  |  | 5     |  | 3    
|Other Employees:                          |  |                    |  |       |  |      
|Business segment professionals            |  | 678                |  | 691   |  | 654  
|All other professionals and support staff |  | 211                |  | 246   |  | 256  
|                                          |  |                    |  |       |  |      
|Total                                     |  | 1,042              |  | 1,093 |  | 1,051
|                                          |  |                    |  |       |  |      



|(a) | Represents the portion of the 2009 special items attributable to the Financial Advisory segment (see Note 23 of Notes to Consolidated Financial Statements).
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) | A non-U.S. GAAP measure that management believes provides the most meaningful comparison between historical, present and future periods.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------

|(c) | Includes indirect support costs (including compensation and benefits expense and other operating expenses related thereto), and, in 2009, 2008 and 2007, $146, $3,470
and $21,523, respectively, of amortization of intangible assets related to the business acquisitions in 2007.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(d) | Excludes headcount related to indirect support functions, with such headcount being included in the Corporate segment.
|--- | ----------------------------------------------------------------------------------------------------------------------



Net revenue trends in Financial Advisory for M&A and
Strategic Advisory and Restructuring are generally correlated to the volume of completed industry-wide M&A transactions and restructurings occurring subsequent to corporate debt defaults, respectively. However, deviations from this relationship
can occur in any given year for a number of reasons. For instance, our results can diverge from industry-wide activity where there are material variances from the level of industry-wide M&A activity in a particular market where Lazard has
significant market share, or regarding the relative number of our advisory engagements with respect to larger-sized transactions, and where we are involved in significant non-public assignments. Certain Lazard client statistics and global industry
statistics are set forth below:



|                                                                       |  |                         |   |  |      |   |  |      |  
|---------------------------------------------------------------------- |  | ----------------------- | - |  | ---- | - |  | ---- | -
|                                                                       |  | Year Ended December 31, |  
|                                                                       |  | 2009                    |   |  | 2008 |   |  | 2007 |  
|Lazard Statistics:                                                     |  |                         |   |  |      |   |  |      |  
|Number of Clients:                                                     |  |                         |   |  |      |   |  |      |  
|Total                                                                  |  | 620                     |   |  | 682  |   |  | 625  |  
|With Fees Greater than $1 million                                      |  | 256                     |   |  | 220  |   |  | 222  |  
|Percentage of Total Financial Advisory Revenue from Top 10 Clients (a) |  | 17                      | % |  | 20   | % |  | 19   | %
|Number of M&A Transactions Completed Greater than $1 billion (b)       |  | 38                      |   |  | 40   |   |  | 55   |  



|(a) | There were no individual clients that constituted more than 10% of our Financial Advisory segment net revenue in the years ended December 31, 2009, 2008 or 2007.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) | Source: Thomson Financial as of January 22, 2010.
|--- | -------------------------------------------------



The geographical distribution of Financial Advisory net revenue is set forth below in percentage terms. The offices that generate Financial
Advisory net revenue are located in the U.S., Europe (principally in the U.K., France, Italy, Spain and Germany) and the rest of the world (principally in Australia).



|              |  |                         |   |  |      |   |  |      |  
|------------- |  | ----------------------- | - |  | ---- | - |  | ---- | -
|              |  | Year Ended December 31, |  
|              |  | 2009                    |   |  | 2008 |   |  | 2007 |  
|United States |  | 51                      | % |  | 50   | % |  | 49   | %
|Europe        |  | 43                      |   |  | 43   |   |  | 44   |  
|Rest of World |  | 6                       |   |  | 7    |   |  | 7    |  
|              |  |                         |   |  |      |   |  |      |  
|Total         |  | 100                     | % |  | 100  | % |  | 100  | %
|              |  |                         |   |  |      |   |  |      |  



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The Companys managing directors and many of its professionals have significant
experience, and many of them are able to use this experience to advise on M&A, strategic advisory matters and restructuring transactions, depending on clients needs. This flexibility allows Lazard to better match its professionals with the
counter-cyclical business cycles of mergers and acquisitions and restructurings. While Lazard measures revenue by practice area, Lazard does not separately measure the costs or profitability of M&A services as compared to restructuring services.
Accordingly, Lazard measures performance in its Financial Advisory segment based on overall segment net revenue and operating income margins.



Financial Advisory Results of Operations



As reflected in the table of operating results of the Financial Advisory segment above, the portion of the 2009
special item attributable to the Financial Advisory segment had a significant impact on the segments reported operating results for such year. Lazard management believes that comparisons between years are most meaningful after excluding the
impact of such item.



Year Ended December 31,
2009 versus December 31, 2008



For the year
ended December 31, 2009, Financial Advisory net revenue decreased $36 million, or 4%, as compared to 2008, reflecting decreases in M&A and Strategic Advisory revenue of $288 million, or 35%, and Capital Markets and Other Advisory net revenue of
$5 million, or 6%, which were substantially offset by Restructuring revenue (including fees for advising on distressed asset sales), which increased $257 million, or 216%.



The decrease in M&A and Strategic Advisory revenue for the year ended December 31, 2009 was principally due to the adverse
economic and market conditions described above, which resulted in lower average fees per transaction for M&A and Strategic Advisory clients, as well as those clients generating fee revenues greater than $1 million. However, throughout 2009,
M&A and Strategic Advisory quarterly revenue improved sequentially, with revenue in the second half of 2009 up 28%, as compared to the first half of 2009. Our major clients, which in the aggregate represented 25% of our M&A and Strategic
Advisory revenue for the year, included Acciona, Anheuser-Busch InBev, Barclays, Caisse dEpargne, Republic of Ecuador, SFGI-FPIM, GlaxoSmithKline, Haas Trusts, IBM and Saint-Gobain.



Restructuring revenue is derived from various activities including bankruptcy assignments, global debt and
financing restructurings, distressed asset sales and advice on complex on- and off-balance sheet assignments, such as retiree health care obligations. Restructuring revenue during the year ended December 31, 2009 increased significantly as compared
to 2008 due to the significant increases in defaults and in-court and out-of-court restructurings. Notable assignments completed in 2009 included Cemex, Charter Communications, Lehman Brothers, Nortel Networks and the UAW.



The decrease in Capital Markets and Other Advisory net revenue
reflected decreases in the value of fund closings by our Private Fund Advisory Group and private placements by our Capital Markets Group, as well as declines in Equity Capital Markets transactions, all of which have been impacted by the uncertainty
of the financial markets during 2009. Transactions in the year ended December 31, 2009 included Gores III and Triton III, Lehman Brothers and Sterling Group III in our Private Fund Advisory Group, and Danone on their rights offering.



Operating expenses for the year ended December
31, 2009 increased $202 million, or 25%, as compared to 2008. Excluding the impact of the portion of the 2009 special item attributable to the Financial Advisory segment, operating expenses increased $153 million, or 19%, as compared to 2008.
Contributing to the increase was the change in the Companys compensation policy as previously described, an increase in the amortization expense associated with previously granted equity-based incentive awards and the current year portion of
the previously awarded deferred cash incentive awards, which were partially offset by lower salaries and benefits due to the impact of the staff reductions associated with the restructuring program implemented during the first quarter of 2009, the



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strengthening of the U.S. dollar versus foreign currencies, and lower costs related to travel and other business development expenses, including recruiting, technology expenses and amortization
of intangible assets.



Financial Advisory
operating loss for 2009 was $12 million, a decrease of $238 million as compared to 2008, and represented (1)% of segment net revenues for 2009, as compared to 22% in 2008. Excluding the impact of the portion of the 2009 special item
attributable to the Financial Advisory segment, operating income decreased $189 million and represented 4% of segment net revenues in 2009, as compared to 22% in 2008.



Year Ended December 31, 2008 versus December 31, 2007



In 2008, Financial Advisory net revenue decreased $217 million, or 18%, as compared to 2007, with M&A and
Strategic Advisory revenue decreasing $155 million, or 16%, and Restructuring revenue decreasing $8 million, or 6%, while Capital Markets and Other Advisory net revenue decreased $55 million, or 38%.



The decrease in M&A and Strategic Advisory revenue in 2008
was principally due to the adverse economic and market conditions described above, and resulted in lower average fees per transaction and the result of both a lower number of M&A transactions completed greater than $1 billion which typically
generate significant fees, as well as a lower number of clients generating fee revenues greater than $1 million. Our major clients, which in the aggregate represented 25% of our M&A and Strategic Advisory revenue for the year, included APP
Pharmaceuticals, Bear Stearns, Gaz de France, InBev, International Paper, Penn National Gaming, Resolution Life, Royal Bank of Scotland, Trane and Zinefix.



Restructuring revenue for 2008 ended slightly lower than 2007. Notable assignments completed in the fourth quarter included Lehman Brothers,
Metaldyne, Reliant Energy and Sprint Nextel. Restructuring assignments that we were involved with in North America included Charter Communications, CIFG Assurance, Fannie Mae, Hawaiian Telcom, Nortel, Pilgrims Pride, Smurfit-Stone Container,
Tarragon Corporation, Tribune Co. and The Trustees of Bernard L. Madoff Investment Securities and in Europe, Premiere, Vita Group, Belvedere, Ineos and Olympic Airways.



The decrease in Capital Markets and Other Advisory net revenue reflected decreases in the value of fund closings by our
Private Fund Advisory Group, private placements by our Capital Markets Group and declines in Equity Capital Markets transactions, all of which have been negatively impacted by the deterioration of the financial markets during 2008. Our Alternative
Capital Finance Group served as a placement agent on a number of RD Offerings, including RDs for H&R Block, Clean Energy Fuels and Orient-Express.



Operating expenses for the year ended December 31, 2008 decreased $124 million, or 13%, as compared to 2007, primarily due to decreased
compensation expense consistent with lower operating revenue and reduced amortization of intangible assets associated with the 2007 acquisitions. Such decreases were partially offset by increases related to the amortization of an increased amount of
RSUs, increased costs from the strategic headcount growth of senior bankers and relating to companies acquired in 2007 and other new offices, as well as increases in business development expenses for travel and market related data.



Financial Advisory operating income for 2008 decreased $94
million, or 29%, as compared to 2007 and represented 22% and 26% of segment net revenue for 2008 and 2007, respectively.



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Asset Management



The following table shows the composition of AUM for the Asset Management segment:



|                                        |  |                    |         |      |   |        |  |   |        
|--------------------------------------- |  | ------------------ | ------- | ---- | - | ------ |  | - | -------
|                                        |  | As of December 31,
|                                        |  | 2009               |         | 2008 |   | 2007  
|                                        |  | ($ in millions)   
|AUM:                                    |  |                    |         |      |   |        |  |   |        
|International Equities                  |  | $                  | 32,268  |      | $ | 25,000 |  | $ | 50,535 
|Global Equities                         |  |                    | 58,332  |      |   | 31,553 |  |   | 47,814 
|U.S. Equities                           |  |                    | 16,003  |      |   | 13,177 |  |   | 20,927 
|                                        |  |                    |         |      |   |        |  |   |        
|Total Equities                          |  |                    | 106,603 |      |   | 69,730 |  |   | 119,276
|                                        |  |                    |         |      |   |        |  |   |        
|European and International Fixed Income |  |                    | 13,763  |      |   | 12,690 |  |   | 10,255 
|Global Fixed Income                     |  |                    | 1,794   |      |   | 1,183  |  |   | 2,161  
|U.S. Fixed Income                       |  |                    | 2,499   |      |   | 1,951  |  |   | 1,817  
|                                        |  |                    |         |      |   |        |  |   |        
|Total Fixed Income                      |  |                    | 18,056  |      |   | 15,824 |  |   | 14,233 
|                                        |  |                    |         |      |   |        |  |   |        
|Alternative Investments                 |  |                    | 3,936   |      |   | 3,196  |  |   | 3,577  
|Private Equity (a)                      |  |                    | 839     |      |   | 1,579  |  |   | 1,401  
|Cash Management                         |  |                    | 109     |      |   | 780    |  |   | 2,926  
|                                        |  |                    |         |      |   |        |  |   |        
|Total AUM                               |  | $                  | 129,543 |      | $ | 91,109 |  | $ | 141,413
|                                        |  |                    |         |      |   |        |  |   |        



|(a) | At December 31, 2009, includes $0.6 billion related to the July 15, 2009 Edgewater Acquisition and excludes, as of December 31, 2009, the AUM of FPG and the related
investment company for which Lazard may have earned carried interests (which amounted to $1.4 billion and $1.3 billion of AUM at December 31, 2008 and 2007, respectively) due to the sale of FPG effective September 30, 2009.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Average AUM for the years ended
December 31, 2009, 2008 and 2007 is set forth below. Average AUM is based on an average of quarterly ending balances for the respective periods.



|            |  |                         |         |      |   |         |  |   |        
|----------- |  | ----------------------- | ------- | ---- | - | ------- |  | - | -------
|            |  | Year Ended December 31,
|            |  | 2009                    |         | 2008 |   | 2007   
|            |  | ($ in millions)        
|Average AUM |  | $                       | 103,988 |      | $ | 122,828 |  | $ | 130,827
|            |  |                         |         |      |   |         |  |   |        



Total AUM at December 31, 2009 increased $38.4 billion, or 42%, as compared to that at December 31, 2008. While average AUM for the year ended December 31, 2009 was 15% lower than the average AUM for
2008, average AUM increased sequentially by quarter during 2009. International, Global and U.S. equities represented 25%, 45% and 12% of total AUM at December 31, 2009, respectively, versus 27%, 35% and 14% of total AUM at December 31, 2008,
respectively.



Total AUM at December 31, 2008
decreased $50.3 billion, or 36%, as compared to that at December 31, 2007. Average AUM for the year ended December 31, 2008 decreased $8 billion, or 6%, as compared to the average AUM in 2007, with average AUM decreasing sequentially by quarter
during 2008. International, Global and U.S. equities represented 27%, 35% and 14% of total AUM at December 31, 2008, respectively, versus 36%, 34% and 15% of total AUM at December 31, 2007, respectively.



As of December 31, 2009, approximately 89% of our AUM was
managed on behalf of institutional clients, including corporations, labor unions, public pension funds, insurance companies and banks, and through sub-advisory relationships, mutual fund sponsors, broker-dealers and registered advisors versus 85% of
December 31, 2008, and, as of December 31, 2009, 11% of our AUM was managed on behalf of individual client relationships, which are principally with family offices and high-net worth individuals, versus 15% at December 31, 2008.



52



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The following is a summary of changes in AUM for the years ended December 31, 2009, 2008 and
2007.



|                                                        |  |                         |         |   |      |   |         |      |  |   |        
|------------------------------------------------------- |  | ----------------------- | ------- | - | ---- | - | ------- | ---- |  | - | -------
|                                                        |  | Year Ended December 31,
|                                                        |  | 2009                    |         |   | 2008 |   |         | 2007
|                                                        |  | ($ in millions)        
|AUMBeginning of Year                                   |  | $                       | 91,109  |   |      | $ | 141,413 |      |  | $ | 110,437
|Net Flows(a)                                            |  |                         | 10,253  |   |      |   | 1,371   |      |  |   | 16,745 
|Acquisitions/(Dispositions)(b)                          |  |                         | (831    | ) |      |   | -       |      |  |   | -      
|Market and Foreign Exchange Appreciation (Depreciation) |  |                         | 29,012  |   |      |   | (51,675 | )    |  |   | 14,231 
|                                                        |  |                         |         |   |      |   |         |      |  |   |        
|AUMEnd of Year                                         |  | $                       | 129,543 |   |      | $ | 91,109  |      |  | $ | 141,413
|                                                        |  |                         |         |   |      |   |         |      |  |   |        



|(a) | Includes inflows of $30,984, $25,923 and $42,031 and outflows of $20,731, $24,552 and $25,286 for the years ended December 31, 2009, 2008 and 2007, respectively.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) | Includes AUM and unfunded fee-earning commitments related to the Edgewater Acquisition, offset by the disposition of private equity AUM related to the sale of FPG.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



Inflows, which principally occurred
in the second half of 2009, were in a broad range of products, with emphasis on Emerging Markets and Global Thematic Equity products due to increased investments in existing accounts as well as new accounts gained. Outflows occurred most
significantly in U.S. Mid Cap and Small Cap Equity and European and U.K. Equity products.



Consistent with the industry as a whole, we experienced market appreciation subsequent to the first quarter of 2009, which was the principal contributor to the increase in AUM. During the year ended
December 31, 2009, equity products experienced the most significant market appreciation, with such increase slightly better than the global market indices previously described. As of December 31, 2009, AUM denominated in foreign currencies
represented approximately 45% of our total AUM, as compared to 50% at December 31, 2008. Foreign denominated AUM declines in value with the strengthening of the U.S. dollar and increases in value as the U.S. dollar weakens.



Inflows during the year ended December 31, 2008 occurred across
all products (principally Global Equities, International Equities, European and International Fixed Income and Alternative Investment products) due to contributions to existing accounts as well as new accounts gained. The majority of the inflows
occurred in the first half of 2008 as investors in the second half of the year delayed funding new mandates or increasing funding of existing mandates. Outflows occurred relatively evenly throughout the year also across all products due to
withdrawals from existing accounts and, to a lesser degree, accounts lost.



Significant market depreciation was experienced in 2008, including the impact of the strengthening U.S. dollar versus foreign currencies particularly in the second half of 2008, with these factors being
the principal contributors to the decrease in AUM. Equity products experienced the most significant decrease, with International and Global Equity products experiencing market depreciation of approximately 40% and U.S. Equity experiencing market
depreciation of approximately 30%. Such decreases were generally consistent with global market indices as described above.



As of February 19, 2010, AUM was $125.9 billion, a $3.6 billion decrease since December 31, 2009. The change in AUM since December 31, 2009
was due to market depreciation of $4.3 billion and net inflows of $0.7 billion. Market depreciation since December 31, 2009 was approximately 3% of AUM at December 31, 2009, which was generally consistent with the decline in global market
indices during that period.



53



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The following table summarizes the operating results of the Asset Management segment for the
years ended December 31, 2009, 2008 and 2007. Operating results for the years ended December 31, 2009 and 2008 are shown before and after the charges related to the 2009 and 2008 special items.



|                                                        |  |                             |         |   |                             |   |        |                                        |  |   |                     |   |  |                          |         |    |                                        |   |          |                     |  |   |         |   |  |   |         |  
|------------------------------------------------------- |  | --------------------------- | ------- | - | --------------------------- | - | ------ | -------------------------------------- |  | - | ------------------- | - |  | ------------------------ | ------- | -- | -------------------------------------- | - | -------- | ------------------- |  | - | ------- | - |  | - | ------- | -
|                                                        |  | Year EndedDecember 31,
2009 |         |   | Year EndedDecember 31,
2008 |   |        | Year EndedDecember 31, 2007            | 
|                                                        |  | U.S. GAAPAsReported         |         |   | Impact ofSpecialItem (a)    |   |        | Non-U.S. GAAPExcludingSpecial
Item (b) |  |   | U.S. GAAPAsReported |   |  | Impact ofSpecialItem (a) |         |    | Non-U.S. GAAPExcludingSpecial
Item (b) |   |          | U.S. GAAPAsReported | 
|                                                        |  | ($ in thousands)            |        
|Revenue:                                                |  |                             |         |   |                             |   |        |                                        |  |   |                     |   |  |                          |         |    |                                        |   |          |                     |  |   |         |   |  |   |         |  
|Management Fees                                         |  | $                           | 488,636 |   |                             |   |        |                                        |  | $ | 488,636             |   |  | $                        | 568,436 |    |                                        |   |          |                     |  | $ | 568,436 |   |  | $ | 595,725 |  
|Incentive Fees                                          |  |                             | 74,795  |   |                             |   |        |                                        |  |   | 74,795              |   |  |                          | 34,961  |    |                                        |   |          |                     |  |   | 34,961  |   |  |   | 67,032  |  
|Other Income                                            |  |                             | 31,257  |   |                             |   |        |                                        |  |   | 31,257              |   |  |                          | 24,732  |    |                                        |   |          |                     |  |   | 24,732  |   |  |   | 56,859  |  
|                                                        |  |                             |         |   |                             |   |        |                                        |  |   |                     |   |  |                          |         |    |                                        |   |          |                     |  |   |         |   |  |   |         |  
|Sub-total                                               |  |                             | 594,688 |   |                             |   |        |                                        |  |   | 594,688             |   |  |                          | 628,129 |    |                                        |   |          |                     |  |   | 628,129 |   |  |   | 719,616 |  
|Noncontrolling Interest Revenue                         |  |                             | 6,964   |   |                             |   |        |                                        |  |   | 6,964               |   |  |                          | (13,348 | )  |                                        |   |          |                     |  |   | (13,348 | ) |  |   | 5,135   |  
|                                                        |  |                             |         |   |                             |   |        |                                        |  |   |                     |   |  |                          |         |    |                                        |   |          |                     |  |   |         |   |  |   |         |  
|Net Revenue                                             |  |                             | 601,652 |   |                             |   |        |                                        |  |   | 601,652             |   |  |                          | 614,781 |    |                                        |   |          |                     |  |   | 614,781 |   |  |   | 724,751 |  
|Operating Expenses (c)                                  |  |                             | 504,452 |   |                             | $ | 7,508  |                                        |  |   | 496,944             |   |  |                          | 678,170 |    |                                        | $ | 197,550  |                     |  |   | 480,620 |   |  |   | 539,800 |  
|                                                        |  |                             |         |   |                             |   |        |                                        |  |   |                     |   |  |                          |         |    |                                        |   |          |                     |  |   |         |   |  |   |         |  
|Operating Income (Loss)                                 |  | $                           | 97,200  |   |                             | $ | (7,508 | )                                      |  | $ | 104,708             |   |  | $                        | (63,389 | )  |                                        | $ | (197,550 | )                   |  | $ | 134,161 |   |  | $ | 184,951 |  
|                                                        |  |                             |         |   |                             |   |        |                                        |  |   |                     |   |  |                          |         |    |                                        |   |          |                     |  |   |         |   |  |   |         |  
|Operating Income (Loss), As A Percentage of Net Revenue |  |                             | 16      | % |                             |   |        |                                        |  |   | 17                  | % |  |                          | (10     | )% |                                        |   |          |                     |  |   | 22      | % |  |   | 26      | %
|                                                        |  |                             |         |   |                             |   |        |                                        |  |   |                     |   |  |                          |         |    |                                        |   |          |                     |  |   |         |   |  |   |         |  



|                                                    |  |                    |  |      |  |     
|--------------------------------------------------- |  | ------------------ |  | ---- |  | ----
|                                                    |  | As of December 31,
|                                                    |  | 2009               |  | 2008 |  | 2007
|Headcount(d):                                       |  |                    |  |      |  |     
|Managing Directors                                  |  | 56                 |  | 56   |  | 48  
|Limited Managing Directors                          |  |                   |  | 1    |  | 3   
|Other Employees:                                    |  |                    |  |      |  |     
|Business segment professionals                      |  | 299                |  | 327  |  | 334 
|All other professionals and support staff functions |  | 273                |  | 301  |  | 372 
|                                                    |  |                    |  |      |  |     
|Total                                               |  | 628                |  | 685  |  | 757 
|                                                    |  |                    |  |      |  |     





|(a) | Represents the portion of the 2009 and 2008 special items attributable to the Asset Management segment (see Note 23 of Notes to Consolidated Financial Statements).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) | A non-U.S. GAAP measure that management believes provides the most meaningful comparison between historical, present and future periods.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------

|(c) | Includes indirect support costs (including compensation and benefits expense and other operating expenses related thereto).
|--- | ---------------------------------------------------------------------------------------------------------------------------

|(d) | Excludes headcount related to indirect support functions, with such headcount being included in the Corporate segment.
|--- | ----------------------------------------------------------------------------------------------------------------------



Our top ten clients accounted for 23%, 25% and 27% of our total
AUM at December 31, 2009, 2008 and 2007, respectively, and there were no individual clients that constituted more than 10% of our Asset Management segment net revenue during any of the years ended December 31, 2009, 2008 and 2007.



The geographical distribution of Asset Management net revenue is
set forth below in percentage terms:



|              |  |                         |   |  |      |   |  |      |  
|------------- |  | ----------------------- | - |  | ---- | - |  | ---- | -
|              |  | Year Ended December 31, |  
|              |  | 2009                    |   |  | 2008 |   |  | 2007 |  
|United States |  | 53                      | % |  | 52   | % |  | 54   | %
|Europe        |  | 36                      |   |  | 37   |   |  | 37   |  
|Rest of World |  | 11                      |   |  | 11   |   |  | 9    |  
|              |  |                         |   |  |      |   |  |      |  
|Total         |  | 100                     | % |  | 100  | % |  | 100  | %
|              |  |                         |   |  |      |   |  |      |  



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Asset Management Results of Operations



As reflected in the table of operating results of the Asset
Management segment above, the portion of the 2009 and 2008 special items attributable to the Asset Management segment had a significant impact on the segments reported operating results for such years. Lazard management believes that
comparisons between years are most meaningful after excluding the impact of such items.



Year Ended December 31, 2009 versus December 31, 2008



Asset Management net revenue in the year ended December 31, 2009 declined $13 million, or 2%, as compared to 2008. Management fees for
2009 decreased $80 million, or 14%, as compared to 2008, driven by a 15% decrease in average AUM. This decrease was due largely to the decline in equity markets, which was partially offset by the impact of a change in the mix of investment
products and levels of management fees on certain products. However, consistent with the sequential increase in quarterly average AUM described above, management fee revenue was 44% higher in the second half of 2009 as compared to the first half of
2009. Incentive fees in 2009 increased $40 million, or 114%, as compared to 2008, relating to both alternative and traditional long-only investment strategies. Other revenue increased $27 million, or 236%, as compared to 2008, principally
as a result of higher revenue from noncontrolling interests, foreign exchange remeasurement gains and investment income.



Operating expenses for 2009 decreased by $174 million, or 26%, as compared to 2008. Excluding the 2009 and 2008 special items, operating
expenses in 2009 increased $16 million, or 3%, principally due to the change in the Companys compensation policy as previously described. Also impacting the increase was an increase in the current year portion of amortization expense
associated with previously awarded deferred cash incentive awards, higher fees for outsourced services and an increase in the amortization of intangible assets relating to the Edgewater Acquisition, partially offset by decreased compensation related
to reduced headcount, and declines in business development expenses for travel and market-related data and professional fees.



Asset Management operating income for the year ended December 31, 2009 was $97 million, an increase of $160 million, as compared to an
operating loss of $63 million in 2008, and represented 16% of segment net revenue in 2009, as compared to (10)% in 2008. When excluding the impact of the 2009 and 2008 special items, operating income in 2009 decreased $29 million, or 22%, when
compared to 2008, and represented 17% of segment net revenue in 2009 as compared to 22% for 2008.



Year Ended December 31, 2008 versus December 31, 2007



Asset Management net revenue in 2008 declined $110 million, or 15%, as compared to 2007. Management fees for 2008 decreased
$27 million, or 5%, versus 2007 driven by a 6% decrease in average AUM due largely to market depreciation primarily during the second half of 2008 as well as the impact of a change in the mix of investment products and levels of management fees on
certain products. Incentive fees decreased $32 million, or 48%, for 2008, as compared to 2007, with the decrease principally in alternative investment strategies. Other income decreased $51 million, or 82%, as compared to 2007 principally as a
result of lower revenue from noncontrolling interests, other investment losses and foreign currency transaction losses.



Operating expenses for 2008 increased $138 million, as compared to 2007. When excluding the 2008 special item of approximately $197 million,
operating expenses in 2008 decreased $59 million, or 11%, versus 2007, due principally to decreased compensation related to lower operating revenue, partially offset by increases in outsourced services as a result of LAM outsourcing a portion of its
operations, business development expenses for travel and market related data as well as for amortization of an increased amount of RSUs granted.



Including the 2008 special item of approximately $197 million, Asset Management had an operating loss of $63 million, a decline of $248
million as compared to operating income of $185 million in 2007. Excluding the impact of the 2008 special item, Asset Management had operating income in 2008 of $134 million, a decline of $51 million, or 27%, as compared to 2007, with operating
income as a percentage of segment net revenue being 22% for 2008, as compared to 26% for 2007.



55



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Corporate



The following table summarizes the results of the Corporate segment:



|                              |  |                             |          |   |                             |   |          |                                        |  |   |                      |   |  |                          |          |   |                                       |   |        |                      |  |   |          |   |  |   |          |  
|----------------------------- |  | --------------------------- | -------- | - | --------------------------- | - | -------- | -------------------------------------- |  | - | -------------------- | - |  | ------------------------ | -------- | - | ------------------------------------- | - | ------ | -------------------- |  | - | -------- | - |  | - | -------- | -
|                              |  | Year EndedDecember 31, 2009 |          |   | Year EndedDecember 31, 2008 |   |          | Year EndedDecember 31, 2007            | 
|                              |  | U.S. GAAPAs Reported        |          |   | Impact ofSpecialItems
(a)   |   |          | Non-U.S. GAAPExcludingSpecialItems (b) |  |   | U.S. GAAPAs Reported |   |  | Impact ofSpecialItem (a) |          |   | Non-U.S. GAAPExcludingSpecialItem (b) |   |        | U.S. GAAPAs Reported | 
|                              |  | ($ in thousands)            |         
|Interest Income               |  | $                           | 28,191   |   |                             |   |          |                                        |  | $ | 28,191               |   |  | $                        | 62,969   |   |                                       |   |        |                      |  | $ | 62,969   |   |  | $ | 67,493   |  
|Interest Expense              |  |                             | (108,521 | ) |                             |   |          |                                        |  |   | (108,521             | ) |  |                          | (139,620 | ) |                                       |   |        |                      |  |   | (139,620 | ) |  |   | (136,016 | )
|                              |  |                             |          |   |                             |   |          |                                        |  |   |                      |   |  |                          |          |   |                                       |   |        |                      |  |   |          |   |  |   |          |  
|Net Interest Income (Expense) |  |                             | (80,330  | ) |                             |   |          |                                        |  |   | (80,330              | ) |  |                          | (76,651  | ) |                                       |   |        |                      |  |   | (76,651  | ) |  |   | (68,523  | )
|Other Revenue                 |  |                             | 21,821   |   |                             |   |          |                                        |  |   | 21,821               |   |  |                          | (6,074)  |   |                                       |   |        |                      |  |   | (6,074   | ) |  |   | 20,488   |  
|                              |  |                             |          |   |                             |   |          |                                        |  |   |                      |   |  |                          |          |   |                                       |   |        |                      |  |   |          |   |  |   |          |  
|Net Revenue (Expense)         |  |                             | (58,509  | ) |                             |   |          |                                        |  |   | (58,509              | ) |  |                          | (82,725  | ) |                                       |   |        |                      |  |   | (82,725  | ) |  |   | (48,035  | )
|Operating Expenses            |  |                             | 208,772  |   |                             | $ | 153,535  |                                        |  |   | 55,237               |   |  |                          | 37,800   |   |                                       | $ | 2,000  |                      |  |   | 35,800   |   |  |   | 20,324   |  
|                              |  |                             |          |   |                             |   |          |                                        |  |   |                      |   |  |                          |          |   |                                       |   |        |                      |  |   |          |   |  |   |          |  
|Operating Loss                |  | $                           | (267,281 | ) |                             | $ | (153,535 | )                                      |  | $ | (113,746             | ) |  | $                        | (120,525 | ) |                                       | $ | (2,000 | )                    |  | $ | (118,525 | ) |  | $ | (68,359  | )
|                              |  |                             |          |   |                             |   |          |                                        |  |   |                      |   |  |                          |          |   |                                       |   |        |                      |  |   |          |   |  |   |          |  



|                                          |  |                    |  |      |  |      |  |  |  |  |  |  |  | 
|----------------------------------------- |  | ------------------ |  | ---- |  | ---- |  |  |  |  |  |  |  | 
|                                          |  | As of December 31,
|                                          |  | 2009               |  | 2008 |  | 2007
|                                          |  |                    | 
|Headcount (c):                            |  |                    |  |      |  |     
|Managing Directors                        |  | 7                  |  | 8    |  | 8   
|Limited Managing Directors                |  | -                  |  | -    |  | -   
|Other Employees:                          |  |                    |  |      |  |     
|Business segment professionals            |  | 10                 |  | 8    |  | 9   
|All other professionals and support staff |  | 607                |  | 640  |  | 633 
|                                          |  |                    |  |      |  |     
|Total                                     |  | 624                |  | 656  |  | 650 
|                                          |  |                    |  |      |  |     



|(a) | Represents the portion of the 2009 and 2008 special items attributable to the Corporate segment (see Note 23 of Notes to Consolidated Financial Statements).
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) | A non-U.S. GAAP measure that management believes provides the most meaningful comparison between historical, present and future periods.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------

|(c) | Includes headcount related to support functions.
|--- | ------------------------------------------------



Corporate Results of Operations



As reflected in the table of operating results of the Corporate segment above, the 2009 and 2008 special items had a significant impact on
the segments reported operating results in such years. Lazard management believes that comparisons between years are most meaningful after excluding the impact such item.



Year Ended December 31, 2009 versus December 31, 2008



Net interest expense in the year ended December 31, 2009
increased $4 million, or 5%, as compared to 2008. During 2009, interest income declined $35 million due to a lower interest rate environment, a decrease in the balance of interest earning assets at LFB as well as lower average cash balances. Average
cash decreased as a result of the share repurchases of Class A common stock as well as the repurchase of a portion of the Companys outstanding 6.85% and 7.125% senior notes. The decrease in interest income was substantially offset by lower
interest expense in 2009 of $31 million, principally as a result of the reduction in interest expense related to the Companys May 2008 purchase of $437 million aggregate principal amount of its 6.12% senior notes in connection with the
remarketing of such notes and by the above-mentioned repurchases of senior notes, as well as a lower interest rate environment and reduced levels of LFBs customer deposits.



Other revenue increased $28 million in the year ended December 31, 2009, as compared to 2008, principally due
to investment income in 2009 of $18 million in the Companys investment portfolio, versus an aggregate loss of $53 million in 2008 in LFBs corporate debt portfolio (redesignated as available-for-sale effective July 1,
2008) and the Companys investment portfolio. With respect to the latter, during 2009, the Company had in place



56



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##### Table of Contents

a hedging strategy to minimize its risks associated with volatility in the equity markets. Other factors contributing to the increase were revenues from various other investments of $7 million in
2009 versus losses of $5 million in 2008, partially offset by (i) a $13 million charge relating to the write-off of the Companys investment in warrants of Sapphire, (ii) a $20 million gain in 2008 on the repurchase of a portion of the
Companys senior notes and (iii) a $24 million gain in 2008 from a foreign currency transaction.



Operating expenses for 2009 increased $171 million, as compared to 2008, principally due to the 2009 special items attributable to the
Corporate segment. When excluding the impact of the 2009 and 2008 special items, operating expenses increased $19 million, or 54%, in 2009. Factors contributing to the increase were principally due to the change in the Companys compensation
policy described above, as well as an increase in the amortization expense associated with the current year portion of previously awarded deferred cash incentive awards, which were partially offset by the $12 million provision for counterparty
defaults in 2008.



Year Ended December 31, 2008
versus December 31, 2007



Net interest
expense in the year ended December 31, 2008 increased $8 million, or 12%, as compared to 2007. Lower interest income was the principal contributing factor to the decline, due to lower average cash balances and a lower interest rate environment.
Average cash decreased as a result of the share repurchases of Lazard Ltds Class A common stock as well as the repurchase of a portion of the Companys outstanding 6.85% and 7.125% senior notes. Interest expense increased principally as a
result of the June 2007 issuance of the aforementioned 6.85% senior notes, partially offset by the reduction in interest expense related to the Companys May 2008 purchase of $437 million aggregate principal amount of its 6.12% senior notes in
connection with the remarketing of such notes and by the repayment of certain senior and subordinated notes in June 2007.



Other revenue declined $27 million in the year ended December 31, 2008, as compared to 2007, due to the extraordinary disruption and
volatility in the equity and credit markets during 2008 which adversely impacted investment income. The decline in other revenue as compared to 2007 reflects a $60 million decrease in investment income due to losses and markdowns in the first
quarter of 2008 of LFBs corporate debt portfolio held as an integral part of its asset-liability management program, net unrealized losses in the Companys investment portfolio, and a $12 million write-down of private equity investments
(primarily in the fourth quarter of 2008), partially offset by a $20 million gain from the repurchase of a portion of the Companys senior notes and a $24 million gain from a foreign currency transaction. Other revenue in 2007 included $14
million of unrealized gains on private equity investments and a $9 million gain in connection with the Companys share in the net proceeds related to the sale of a portion of LFCM Holdings ownership interest in PG&C (see Note 21 of
Notes to Consolidated Financial Statements.)



Operating expenses for 2008 increased $17 million, as compared to 2007, including the $2 million charge relating to the 2008 special item attributable to the Corporate segment, and increases in other operating expenses in 2008 of $15
million, or 76%, as compared to 2007. The increase in operating expenses in 2008 was principally due to a provision of $12 million for losses from counterparty defaults primarily relating to the bankruptcy of one of our prime brokers and in
professional fees for legal expenses related to various corporate activities during 2008. Decreases in compensation and benefits resulting from lower operating revenue were offset by increases in various other expense categories.



Cash Flows



The Companys cash flows are influenced by the timing of the receipt of Financial Advisory and Asset
Management fees, the timing of distributions to members and payments of incentive compensation to managing directors and employees. M&A, Strategic Advisory and Asset Management fees are generally collected within 60 days of billing, while
restructuring fee collections may extend beyond 60 days, particularly those that involve bankruptcies with court-ordered holdbacks. Fees from our private fund advisory activities are generally collected over a four-year period from billing and
typically include an interest component.



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Lazard Group traditionally pays a significant portion of its incentive compensation during
the first four months of each calendar year with respect to the prior years results.



Summary of Cash Flows:



|                                                                       |  |                         |        |   |      |   |         |  
|---------------------------------------------------------------------- |  | ----------------------- | ------ | - | ---- | - | ------- | -
|                                                                       |  | Year Ended December 31, |       
|                                                                       |  | 2009                    |        |   | 2008 |  
|                                                                       |  | ($ in millions)         |       
|Cash Provided By (Used In):                                            |  |                         |        |   |      |   |         |  
|Operating activities:                                                  |  |                         |        |   |      |   |         |  
|Net income (loss)                                                      |  | $                       | (213.7 | ) |      | $ | 12.3    |  
|Noncash charges (a)                                                    |  |                         | 390.6  |   |      |   | 297.9   |  
|Other operating activities (b)                                         |  |                         | 94.5   |   |      |   | 292.4   |  
|                                                                       |  |                         |        |   |      |   |         |  
|Net cash provided by operating activities                              |  |                         | 271.4  |   |      |   | 602.6   |  
|Investing activities (c)                                               |  |                         | (96.6  | ) |      |   | (151.9  | )
|Financing activities (d)                                               |  |                         | (207.4 | ) |      |   | (480.9  | )
|Effect of exchange rate changes                                        |  |                         | 25.0   |   |      |   | (63.1   | )
|                                                                       |  |                         |        |   |      |   |         |  
|Net Increase (Decrease) in Cash and Cash Equivalents                   |  |                         | (7.6   | ) |      |   | (93.3   | )
|Cash and Cash Equivalents:                                             |  |                         |        |   |      |   |         |  
|Beginning of Year                                                      |  |                         | 907.3  |   |      |   | 1,000.6 |  
|                                                                       |  |                         |        |   |      |   |         |  
|End of Year                                                            |  | $                       | 899.7  |   |      | $ | 907.3   |  
|                                                                       |  |                         |        |   |      |   |         |  
|(a)    Consists of the following:                                      | 
|                                                                       |  |                        
|Depreciation and amortization of property                              |  | $                       | 22.5   |   |      | $ | 20.8    |  
|Amortization of deferred expenses, stock units and interest rate hedge |  |                         | 371.4  |   |      |   | 245.6   |  
|Deferred tax benefit                                                   |  |                         | (8.0   | ) |      |   | (17.3   | )
|Amortization of intangible assets related to business acquisitions     |  |                         | 5.0    |   |      |   | 4.6     |  
|Non-cash portion of charge related to 2008 special item                |  |                         |       |   |      |   | 64.5    |  
|Gain on extinguishment of debt                                         |  |                         | (0.3   | ) |      |   | (20.3   | )
|                                                                       |  |                         |        |   |      |   |         |  
|                                                                       |  | $                       | 390.6  |   |      | $ | 297.9   |  
|                                                                       |  |                         |        |   |      |   |         |  

|(b) | Includes net changes in operating assets and liabilities relating to increases and decreases between years in both the deposits and other payables and
receivables-net captions on the statements of cash flows and relates primarily to LFB. Included within the receivables-net caption on the statements of cash flows are amounts related to LFBs short-term inter-bank
deposits, which represent substantially all of the separately identified amount recorded as receivablesnet: banks on the Companys statements of financial condition. The level of these inter-bank deposits is primarily driven
by the level of LFB customer and bank-related interest-bearing time and demand deposits, which can fluctuate significantly on a daily basis. As the amount of such deposits change, there is generally a corresponding, but indirect, impact on the level
of short-term inter-bank deposits.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(c) | Principally relates to the Edgewater Acquisition and our equity method investment in Sapphire (see Notes 9 and 15 of Notes to Consolidated Financial Statements),
purchases and proceeds from sales and maturities of available-for-sale and held-to maturity securities and the purchase of our equity method investment in Merchant Bankers Asociados.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(d) | Primarily includes distributions to members and noncontrolling interest holders, repurchases of common membership interests from LAZ-MD Holdings and shares of
Class A common stock and activity related to borrowings, including, in 2008, the Companys purchase of $437 million aggregate principal amount of its 6.12% senior notes in connection with the remarketing and the concurrent settlement of
the purchase contract component of the equity security units (ESUs), which resulted in Lazard Group issuing 14,582,750 common membership interests for aggregate proceeds of $438 million, as well as the repurchase in 2008 and 2009 of a
portion of the Companys outstanding 6.85% and 7.125% senior notes.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Liquidity and Capital Resources



The Companys liquidity and capital resources are derived from operating activities, financing agreements
and equity offerings.



Operating Activities



Net revenue, operating income (loss) and
cash receipts fluctuate significantly between quarters. In the case of Financial Advisory, fee receipts are principally dependent upon the successful completion of client transactions, the occurrence and timing of which is irregular and not subject
to Lazards control. In the case of Asset Management, incentive fees earned on AUM are generally not earned until the end of the applicable measurement period, which is generally the fourth quarter of Lazards fiscal year, with the
respective receivable collected in the first quarter of the following year.



Liquidity is significantly impacted by incentive compensation payments, a significant portion of which historically have been made during the first four months of the year. As a consequence, cash on hand
generally declines in the beginning of the year and gradually builds over the remainder of the year. We also pay certain tax advances during the year on behalf of our managing directors, which serve to reduce their respective incentive compensation
payments. We expect this seasonal pattern of cash flow to continue.



Lazards consolidated financial statements are presented in U.S. dollars. Many of Lazards non-U.S. subsidiaries have a functional currency (i.e., the currency in which operational
activities are primarily conducted) that is other than the U.S. dollar, generally the currency of the country in which such subsidiaries are domiciled. Such subsidiaries assets and liabilities are translated into U.S. dollars at the respective
balance sheet date exchange rates, while revenue and expenses are translated at average exchange rates during the year based on the daily closing exchange rates. Adjustments that result from translating amounts from a subsidiarys functional
currency are reported as a component of members equity. Foreign currency remeasurement gains and losses on transactions in non-functional currencies are included on the consolidated statements of operations.



We regularly monitor our liquidity position, including cash
levels, credit lines, principal investment commitments, interest and principal payments on debt, capital expenditures and matters relating to liquidity and to compliance with regulatory net capital requirements. At December 31, 2009, Lazard had
approximately $1.1 billion of cash and liquid securities, including $148 million of U.S. government debt and agencies securities and $82 million of investments in marketable equity securities and public and private asset management funds. We
maintain lines of credit in excess of anticipated liquidity requirements. As of December 31, 2009, Lazard had approximately $262 million in unused lines of credit available to it, including a $150 million senior revolving credit facility with a
group of lenders that matures in May 2010 (the Credit Facility) (see Financing below) and an aggregate of $89 million of unused lines of credit available to LFB and Edgewater. In addition, LFB has access to the
Eurosystem Covered Bond Purchase Program of the Banque de France.



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Financing



Over the past several years, Lazard has entered into several financing agreements designed to strengthen both
its capital base and liquidity. Each of these agreements is discussed in more detail in our consolidated financial statements and related notes included elsewhere in this Form 10-K. The table below sets forth our corporate indebtedness as of
December 31, 2009 and 2008.



|                                   |  |              |      |                    |         |                    |   |         |  |   |      |  
|---------------------------------- |  | ------------ | ---- | ------------------ | ------- | ------------------ | - | ------- |  | - | ---- | -
|                                   |  | MaturityDate |      | As of December 31, |         | Increase(Decrease) |  
|                                   |  |              | 2009 |                    | 2008    |                   
|                                   |  |              |      | ($ in millions)    |         |                    |  
|Senior Debt:                       |  |              |      |                    |         |                    |   |         |  |   |      |  
|7.125%                             |  | 2015         |      | $                  | 538.5   |                    | $ | 538.5   |  | $ |     |  
|6.85%(a)                           |  | 2017         |      |                    | 548.4   |                    |   | 549.3   |  |   | (0.9 | )
|Subordinated Debt:                 |  |              |      |                    |         |                    |   |         |  |   |      |  
|3.25%(b)                           |  | 2016         |      |                    | 150.0   |                    |   | 150.0   |  |   |     |  
|                                   |  |              |      |                    |         |                    |   |         |  |   |      |  
|Total Senior and Subordinated Debt |  |              |      | $                  | 1,236.9 |                    | $ | 1,237.8 |  | $ | (0.9 | )
|                                   |  |              |      |                    |         |                    |   |         |  |   |      |  



|(a) | During the year ended December 31, 2009, the Company repurchased $0.9 million principal amount of its 6.85% Senior Notes due in 2017, and recognized an aggregate
gain of $0.3 million in revenue-other.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) | Convertible into shares of Class A common stock at an effective conversion price of $57 per share. One third in principal amount became convertible on and after July 1,
2008, an additional one third in principal amount became convertible on and after July 1, 2009, and a final one third in principal amount will become convertible on and after July 1, 2010, with no principal amounts convertible after June 30, 2011.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Lazards annual cash flow
generated from operations historically has been sufficient to enable it to meet its annual obligations. Lazard has not had an outstanding balance under its Credit Facility since June 30, 2006. We believe that our cash flows from operating
activities, along with the use of our credit lines as needed, should be sufficient for us to fund our current obligations for the next 12 months and beyond.



As long as the lenders commitments remain in effect, any loan pursuant to the Credit Facility remains outstanding and unpaid or any
other amount is owing to the lending bank group, the Credit Facility includes financial condition covenants that require that Lazard Group not permit (i) its Consolidated Leverage Ratio (as defined in the Credit Facility) for the 12-month period
ending on the last day of any fiscal quarter to be greater than 4.00 to 1.00 or (ii) its Consolidated Interest Coverage Ratio (as defined in the Credit Facility) for the 12-month period ending on the last day of any fiscal quarter to be less than
3.00 to 1.00. For the 12-month period ended December 31, 2009 Lazard Group was in compliance with such ratios, with its Consolidated Leverage Ratio being 2.76 to 1.00 and its Consolidated Interest Coverage Ratio being 5.35 to 1.00. Notwithstanding
such compliance, no amounts were outstanding under the Credit Facility as of December 31, 2009.



In addition, the Credit Facility, indenture and supplemental indentures relating to Lazard Groups senior notes, as well as its $150
Million Subordinated Convertible Note, contain certain other covenants (none of which relate to financial condition), events of default and other customary provisions. At December 31, 2009, the Company was in compliance with all of these provisions.
We may, to the extent required and subject to restrictions contained in our financing arrangements, use other financing sources, which may cause us to be subject to additional restrictions or covenants.



Lazard Groups senior debt is currently rated BBB
(stable outlook) by both Standard & Poors and Fitch Ratings and Bal by Moodys Investors Service. On February 2, 2010, Moodys announced that they had placed the ratings of Lazard Group on review for possible downgrade.



See Note 14 of Notes to Consolidated Financial
Statements for additional information regarding senior and subordinated debt.



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Members Equity



At December 31, 2009, total members equity was $283 million as compared to $127 million at
December 31, 2008, including $128 million and $21 million of noncontrolling interests on the respective dates. The increase in members equity of $156 million in the year ended December 31, 2009 was principally due to (i) amortization
of RSUs and deferred stock units (DSUs) amounting to $358 million, (ii) increases in AOCI (including noncontrolling interests portion thereof) of $63 million, (iii) common membership interests issued in connection with business
acquisitions of $32 million, and (iv) adjustments related to business acquisitions and related amortization of $11 million, with these items partially offset by (i) a net loss of $214 million, (ii) purchases of Lazard Ltd Class A common
stock of $50 million, (iii) acquisitions of (net of distributions) to members and noncontrolling interests of $17 million, (iv) $13 million principally for withholding taxes related to the delivery of Lazard Ltd Class A common stock in connection
with the settlement of vested RSUs, and (v) the repurchase of common membership interests from LAZ-MD Holdings of $13 million. The increases in AOCI described above are due primarily to (i) net positive foreign currency translation adjustments
of $63 million and (ii) net mark-ups of $29 million related to securities designated as available-for-sale, with these items partially offset by adjustments to employee benefit plans of $30 million.



During the year ended December 31, 2009, the Company repurchased
1,984,997 shares of Class A common stock and 500,924 Lazard Group common membership interests for an aggregate cost of approximately $64 million. At December 31, 2009, $63 million of the initial $500 million share purchase authorization
was unused and expired. On January 27, 2010, the Board of Directors of Lazard Ltd authorized, on a cumulative basis, a new share repurchase program permitting the repurchase of up to $200 million in aggregate cost of its Class A common stock and
Lazard Group common membership interests through December 31, 2011 (see Note 16 of Notes to Consolidated Financial Statements for information regarding the share repurchase program).



At December 31, 2008, total members equity was $127 million as compared to $25 million at
December 31, 2007, including $21 million and $52 million of noncontrolling interests on the respective dates. The increase in members equity of $102 million in the year ended December 31, 2009 was principally due to (i) to the
issuance on May 15, 2008 of 14,582,750 common membership interests in connection with the settlement of the $438 million of purchase contracts forming part of the ESUs (see Note 16 of Notes to Consolidated Financial Statements), (ii) amortization of
RSUs and DSUs amounting to $235 million, (iii) common membership interests issued in connection with business acquisitions of $18 million, (iv) net income of $12 million, and (v) adjustments related to business acquisitions and
related amortization of $4 million, with these items partially offset by (i) purchases of Lazard Ltd Class A common stock of $277 million, (ii) distributions to members and noncontrolling interests of $145 million, (iii) decreases in AOCI
(including noncontrolling interests portion thereof) of $177 million, (iv) $4 million principally for withholding taxes related to the delivery of Lazard Ltd Class A common stock in connection with the settlement of vested RSUs, and
(v) the repurchase of common membership interests from LAZ-MD Holdings of $3 million. The decreases in AOCI described above are due primarily to (i) net negative foreign currency translation adjustments of $152 million and (ii) net mark-downs
of $41 million related to securities designated as available-for-sale, with these items partially offset by adjustments to employee benefit plans of $14 million.



On September 3, 2008, certain selling shareholders of Lazard Ltd (which include current and former managing
directors of Lazard and certain of our executive officers) and their permitted transferees (the 2008 Selling Shareholders) sold 6,442,721 shares, of Class A common stock to the public. Pursuant to the underwriting agreement and the
pricing agreement, the underwriters had the option to purchase up to an additional 715,858 shares of Class A common stock (together with the offering of 6,442,721 shares of Class A common stock (the 2008 Secondary Offering)) from the
2008 Selling Shareholders. To the extent that this option was not exercised in full, Lazard Group agreed to separately purchase from the 2008 Selling Shareholders, at the public offering price less the underwriting discount, all of those shares
covered by the option and not purchased pursuant to the option. Pursuant to that separate purchase agreement, Lazard Group purchased 68,238 shares of Class A common stock for an aggregate cost of $2.43 million ($35.61 per share). In addition,
pursuant



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to the underwriting agreement, Lazard Group also separately purchased 715,858 shares of Class A common stock from the 2008 Selling Shareholders for an aggregate cost of $25.49 million ($35.61 per
share). The shares of Class A common stock described in this paragraph purchased by Lazard Group were purchased as part of the share repurchase program (see Note 16 of Notes to Consolidated Financial Statements). In the aggregate, the 2008 Selling
Shareholders sold a total of 7,874,437 shares of Class A common stock (including 1,472,906 shares of Class A common stock previously exchanged for LAZ-MD Holdings exchangeable interests and 6,401,531 shares of Class A common stock exchanged for
LAZ-MD Holdings interests simultaneously with the 2008 Secondary Offering).



In June 2009, pursuant to a Prospectus Supplement dated June 2, 2009, certain selling shareholders of Lazard Ltd (which include current and former managing directors of Lazard and certain of our executive
officers) and their permitted transferees (the June 2009 Selling Shareholders) sold 4,000,000 shares of Class A common stock at a price of $26.00 per share (the June 2009 Secondary Offering). Separately, in connection with
the June 2009 Secondary Offering, Lazard Group agreed to purchase from the June 2009 Selling Shareholders 1,700,000 shares of Class A common stock for an aggregate cost of $44.20 million ($26.00 per share), with such purchase being part of the share
repurchase program. In the aggregate, the June 2009 Selling Shareholders sold a total of 5,700,000 shares of Class A common stock (including 2,110,754 shares of Class A common stock previously received upon the exchange of a like number of LAZ-MD
Holdings exchangeable interests and 3,589,246 shares of Class A common stock received upon a simultaneous exchange of a like number of LAZ-MD Holdings exchangeable interests).



In September 2009, pursuant to a Prospectus Supplement dated September 8, 2009, certain selling shareholders of
Lazard Ltd (which include current and former managing directors of Lazard and certain of our executive officers) and their permitted transferees (the September 2009 Selling Shareholders) sold 5,215,921 shares of Class A common stock
(including 2,411,001 shares of Class A common stock previously received upon the exchange of a like number of LAZ-MD Holdings exchangeable interests and 2,804,920 shares of Class A common stock received upon a simultaneous exchange of a like number
of LAZ-MD Holdings exchangeable interests) at a price of $37.00 per share (the September 2009 Secondary Offering, together with the June 2009 Secondary Offering, the 2009 Secondary Offerings).



In addition to the simultaneous exchanges that occurred in
connection with the 2008 Secondary Offering and 2009 Secondary Offerings (collectively, the 2008 and 2009 Secondary Offerings), during 2008 and 2009 Lazard Ltd issued 2,910,657 and 7,523,236 shares of Class A common stock, respectively,
in connection with the exchange of a like number of common membership interests of Lazard Group (received from members of LAZ-MD Holdings in exchange for a like number of LAZ-MD Holdings exchangeable interests).



Lazard Ltd did not receive any proceeds from the sale of common
stock in the 2008 and 2009 Secondary Offerings or the above-mentioned exchanges of shares. See Note 16 of Notes to Financial Statements for additional information regarding the 2008 and 2009 Secondary Offerings and share exchanges.



Regulatory Capital



We actively monitor our regulatory capital base. Our principal
subsidiaries are subject to regulatory requirements in their respective jurisdictions to ensure their general financial soundness and liquidity, which require, among other things, that we comply with certain minimum capital requirements,
record-keeping, reporting procedures, relationships with customers, experience and training requirements for employees and certain other requirements and procedures. These regulatory requirements may restrict the flow of funds to affiliates. See
Note 22 of Notes to Consolidated Financial Statements for further information. These regulations differ in the U.S., the U.K., France and other countries in which we operate. Our capital structure is designed to provide each of our subsidiaries with
capital and liquidity consistent with its business and regulatory requirements. For a discussion of regulations relating to us, see Item 1-BusinessRegulation included in this Form 10-K.



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Contractual Obligations



The following table sets forth information relating to Lazards contractual obligations as of
December 31, 2009:



|                                                                |  |                                               |           |                 |   |           |  |           |         |                  |          |  |   |           
|--------------------------------------------------------------- |  | --------------------------------------------- | --------- | --------------- | - | --------- |  | --------- | ------- | ---------------- | -------- |  | - | ----------
|                                                                |  | Contractual Obligations Payment Due by Period
|                                                                |  | Total                                         |           | Less than1 Year |   | 1-3 Years |  | 3-5 Years |         | More than5 Years
|                                                                |  | ($ in thousands)                             
|Senior and Subordinated Debt (including interest) (a)           |  | $                                             | 1,766,152 |                 | $ | 80,805    |  | $         | 161,610 |                  | $161,610 |  | $ | 1,362,127 
|Operating Leases (exclusive of $101,017 of sublease income) (b) |  |                                               | 422,929   |                 |   | 65,164    |  |           | 103,779 |                  | 58,943   |  |   | 195,043   
|LAM Merger cash consideration (c)                               |  |                                               | 90,348    |                 |   |           |  |           | 90,348  |                  |          |  |   |           
|Capital Leases (including interest) (b)                         |  |                                               | 31,723    |                 |   | 3,738     |  |           | 6,980   |                  | 5,839    |  |   | 15,166    
|Private Equity Funding Commitments (b)                          |  |                                               | 9,276     |                 |   | 8,994     |  |           | 282     |                  |          |  |   |           
|Deferred cash incentive awards (d)                              |  |                                               | 94,868    |                 |   | 94,868    |  |           |         |                  |          |  |   |           
|                                                                |  |                                               |           |                 |   |           |  |           |         |                  |          |  |   |           
|Total (e)                                                       |  | $                                             | 2,415,296 |                 | $ | 253,569   |  | $         | 362,999 |                  | $226,392 |  |   | $1,572,336
|                                                                |  |                                               |           |                 |   |           |  |           |         |                  |          |  |   |           



|(a) | See Note 14 of Notes to Consolidated Financial Statements.
|--- | ----------------------------------------------------------

|(b) | See Note 15 of Notes to Consolidated Financial Statements.
|--- | ----------------------------------------------------------

|(c) | See Note 8 of Notes to Consolidated Financial Statements.
|--- | ---------------------------------------------------------

|(d) | See Note 17 of Notes to Consolidated Financial Statements.
|--- | ----------------------------------------------------------

|(e) | The table above excludes contingent obligations and any possible payments for uncertain tax positions given the inability to estimate the timing of the latter payments.
See Notes 15, 17, 18 and 20 of Notes to Consolidated Financial Statements regarding information in connection with commitments, incentive plans, employee benefit plans and income taxes.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Effect of Inflation



We do not believe inflation will significantly affect our
compensation costs as they are substantially variable in nature. However, the rate of inflation may affect certain of our other expenses, such as information technology and occupancy costs. To the extent inflation results in rising interest rates
and has other effects upon the securities markets, it may adversely affect our financial position and results of operations by reducing AUM, net revenue or otherwise. See Risk FactorsOther Business RisksDifficult market conditions
can adversely affect our business in many ways, including by reducing the volume of transactions involving our Financial Advisory business and reducing the value or performance of the assets we manage in our Asset Management business, which, in each
case, could materially reduce our revenue or income and adversely affect our financial position.



Critical Accounting Policies and Estimates



Managements discussion and analysis of our consolidated financial condition and results of operations are based upon our consolidated
financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America. The preparation of Lazards consolidated financial statements requires us to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, Lazard evaluates its estimates, including those related to revenue
recognition, compensation liabilities, income taxes, investing activities and goodwill. Lazard bases these estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances, the results of
which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.



Lazard believes that the critical accounting policies set forth
below comprise the most significant estimates and judgments used in the preparation of its consolidated financial statements.



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Revenue Recognition



Lazard generates substantially all of its net revenue from
providing Financial Advisory and Asset Management services to clients. Lazard recognizes revenue when the following criteria are met:



| |  |  | there is persuasive evidence of an arrangement with a client,
| | - |  | -------------------------------------------------------------



| |  |  | the agreed-upon services have been provided,
| | - |  | --------------------------------------------



| |  |  | fees are fixed or determinable, and
| | - |  | -----------------------------------



| |  |  | collection is probable.
| | - |  | -----------------------



The Company earns performance-based incentive fees on various investment products, including traditional products and alternative investment
funds such as hedge funds and private equity funds.



For hedge funds, incentive fees are calculated based on a specified percentage of a funds net appreciation, in some cases in excess of established benchmarks. The Company records incentive fees on traditional products and hedge funds
at the end of the relevant performance measurement period, when potential uncertainties regarding the ultimate realizable amounts have been determined. The performance fee measurement period is generally an annual period (unless an account
terminates during the year), and therefore such incentive fees are usually recorded in the fourth quarter of Lazards fiscal year. These incentive fees received at the end of the measurement period are not subject to reversal or payback.
Incentive fees on hedge funds generally are subject to loss carryforward provisions in which losses incurred by the funds in any year are applied against certain future period net appreciation before any incentive fees can be earned.



For private equity funds, incentive fees may be earned in the
form of a carried interest if profits arising from realized investments exceed a specified threshold. Typically, such carried interest is ultimately calculated on a whole-fund basis and, therefore, clawback of carried interests during
the life of the fund can occur. As a result, incentive fees earned on our private equity funds are not recorded until potential uncertainties regarding the ultimate realizable amounts have been determined, including any potential for clawback.



If, in Lazards judgment, collection of a
fee is not probable, Lazard will not recognize revenue until the uncertainty is removed. We maintain an allowance for bad debts to provide coverage for estimated losses from our fee and customer receivables. We determine the adequacy of the
allowance by estimating the probability of loss based on managements analysis of the clients creditworthiness and specifically reserve against exposures where we determine the receivables are impaired, which may include situations where
a fee is in dispute or litigation has commenced.



With respect to fees receivable from Financial Advisory activities, such receivables are generally deemed past due when they are outstanding 60 days from the date of invoice. However, some Financial Advisory transactions include specific
contractual payment terms that may vary from one month to four years (as is the case for our Private Fund Advisory fees) following the invoice date or may be subject to court approval (as is the case with restructuring assignments that include
bankruptcy proceedings). In such cases, receivables are deemed past due when payment is not received by the agreed-upon contractual date or the court approval date, respectively. Financial Advisory fee receivables past due in excess of 180 days are
fully provided for unless there is evidence that the balance is collectible. Asset Management fees are deemed past due and fully provided for when such receivables are outstanding 12 months after the invoice date. Notwithstanding our policy for
receivables past due, we specifically reserve against exposures relating to Financial Advisory and Asset Management fees where we determine receivables are impaired.



At December 31, 2009 and 2008, the Company had receivables past due of approximately $14 million and $18
million, respectively, and its allowance for doubtful accounts was $12 million and $16 million, respectively.



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Income Taxes



As part of the process of preparing its consolidated financial statements, Lazard is required to estimate its
income taxes in each of the jurisdictions in which it operates. This process requires Lazard to estimate its actual current tax liability and to assess temporary differences resulting from differing book versus tax treatment of items, such as
deferred revenue, compensation and benefits expense, unrealized gains or losses on investments and depreciation. These temporary differences result in deferred tax assets and liabilities, which are included within Lazards consolidated
statements of financial condition. Significant management judgment is required in determining Lazards provision for income taxes, its deferred tax assets and liabilities and any valuation allowance recorded against its net deferred tax
assets. At December 31, 2009, the Company recorded deferred tax assets of approximately $177 million, with such amount partially offset by a valuation allowance of approximately $110 million due to the uncertainty of realizing the benefits
of the book versus tax basis differences and certain net operating loss carry-forwards. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax
assets will be realized and, when necessary, valuation allowances are established. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences become
deductible. Management considers the level of historical taxable income, scheduled reversals of deferred taxes, projected future taxable income and tax planning strategies that can be implemented by the Company in making this assessment. If actual
results differ from these estimates or Lazard adjusts these estimates in future periods, Lazard may need to adjust its valuation allowance, which could materially impact Lazards consolidated financial position and results of operations.
Furthermore, management applies the more likely than not criteria prior to the recognition of a financial statement benefit of a tax position taken or expected to be taken in a tax return with respect to uncertainties in income taxes.



Tax contingencies can involve complex issues and may require an
extended period of time to resolve. Changes in the geographic mix or estimated level of annual pre-tax income can affect Lazards overall effective tax rate. Significant management judgment is required in determining Lazards provision for
income taxes, its deferred tax assets and liabilities and any valuation allowance recorded against its net deferred tax assets. Furthermore, Lazards interpretation of complex tax laws may impact its recognition and measurement of current and
deferred income taxes.



Investments



Investments consist principally of debt
securities, equities, interests in LAM alternative asset management funds and other private equity investments.



These investments are carried at either fair value on the consolidated statements of financial condition, with any increases or decreases in
fair value reflected (i) in earnings, to the extent held by our broker-dealer subsidiaries or when designated as trading securities within our non-broker-dealer subsidiaries, and (ii) in AOCI, to the extent designated as
available-for-sale securities until such time they are realized and reclassified to earnings, or, if designated as held-to-maturity securities, amortized cost on the consolidated statements of financial condition. Any
declines in the fair value of available-for-sale and held-to-maturity securities that are determined to be other than temporary are charged to earnings. As described in Note 5 of Notes to Consolidated Financial Statements,
effective July 1, 2008, as permitted under U.S. GAAP, certain debt securities held by LFB, which were previously designated as trading securities, were re-designated as available-for-sale securities.



Gains and losses on investment positions held, which arise from
sales or changes in the fair value of the investments, are not predictable and can cause periodic fluctuations in net income or AOCI and therefore subject Lazard to market and credit risk.



At December 31, 2009, investments aggregated $802 million (net
of securities sold, not yet purchased of $5 million), or 25% of total assets. Included in this amount is $461 million of debt securities, representing 57% of



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aggregate investments that primarily consist of fixed and floating rate European corporate bonds, U.S. Government and agencies and French government debt securities, all of which subject Lazard
to market risk. Approximately 45%, 21%, 14%, 12% and 8% of such debt securities are invested in the government, financial, consumer, industrial and other sectors, respectively. At December 31, 2009, approximately 85% of the corporate bonds held
investment grade ratings and approximately $19 million of pre-tax unrealized losses are included in AOCI related to such portfolio.



Also included in the $803 million of aggregate investments were $77 million, or 10%, of investments in equities (net of securities sold, not
yet purchased) all of which subject the Company to market risk. Approximately 60% of such amount represents the Companys investment in marketable equity securities invested 27%, 25%, 10% and 38% in the consumer, financial, industrial and other
sectors, respectively. Asset Management fund investments represent the remaining 40% of total equities. The Companys asset management fund investments are diversified and may incorporate particular strategies; however, there are no investments
in funds with single sector specific strategies.



In addition to the equity securities above, at December 31, 2009 Lazard held $50 million, or 6%, of aggregate investments in LAM alternative asset management funds principally representing GP interests in LAM-managed hedge funds, which
subject Lazard to market risk. The fair value of such interests reflects the pro rata value of the ownership of the underlying securities in the funds. Such funds are broadly diversified and may incorporate particular strategies; however, there are
no investments in funds with a single sector specific strategy.



Private equity investments owned by Lazard of $103 million represent approximately 13% of aggregate investments and 3% of total assets at December 31, 2009 and are comprised of investments in private
equity funds and direct private equity interests that are generally not subject to short-term market fluctuation, but may subject Lazard to market/credit risk. Private equity investments primarily include (i) a mezzanine fund, which invests in
mezzanine debt of a diversified selection of small- to mid-cap European companies (the mezzanine fund); (ii) Corporate Partners II Limited, a private equity fund targeting significant noncontrolling investments in established public
and private companies; and (iii) Lazard Senior Housing Partners LP, which acquires companies and assets in the senior housing, extended-stay hotel and shopping center sectors.



The remaining $111 million, or 14%, of aggregate investments at December 31, 2009 represents investments
(i) accounted for under the equity method of accounting and (ii) private equity and general partnership interests that are consolidated but not owned by Lazard, and therefore do not subject the Company to market or credit risk. The
associated noncontrolling interests are presented within members equity on the consolidated statements of financial condition.



At December 31, 2008, investments aggregated $613 million (net of securities sold, not yet purchased of $7 million), or 21% of total
assets. Included in this amount was $333 million of debt securities, representing 54% of aggregate investments that primarily consist of fixed and floating rate European corporate bonds and French government debt securities, all of which subject
Lazard to market risk. Approximately 37%, 26%, 10%, 15% and 12% of such debt securities were invested in the financial, industrial, communications, consumer and other sectors, respectively. At December 31, 2008, approximately 92% of the
corporate bonds held investment grade ratings and approximately $62 million of pre-tax unrealized losses included in AOCI related to such portfolio.



Also included in the $613 million of aggregate investments were $64 million, or 10%, of investments in equities (net of securities sold, not
yet purchased) all of which subject the Company to market risk. Approximately 48% of which represents the Companys investment in marketable equity securities invested 39%, 30%, 12% and 19% in the consumer, financial, industrial and other
sectors, respectively. Asset management fund investments represent the remaining 52% of total equities. The Companys asset management fund investments are diversified and may incorporate particular strategies; however, there are no investments
in funds with single sector specific strategies.



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In addition to the equity securities above, at December 31, 2008 Lazard had $35 million, or
6%, of aggregate investments in LAM alternative asset management funds, principally representing GP interests in LAM-managed hedge funds, which subject Lazard to market risk. The fair value of such interests reflects the pro rata value of the
ownership of the underlying securities in the funds. Such funds are broadly diversified and may incorporate particular strategies; however, there are no investments in funds with a single sector specific strategy.



Private equity investments owned by Lazard of $84 million
represent approximately 14% of aggregate investments and 3% of total assets at December 31, 2008 and are comprised of investments in private equity funds and direct private equity interests that are generally not subject to short-term market
fluctuation, but may subject Lazard to market/credit risk. Private equity investments primarily include (i) the mezzanine fund; (ii) Corporate Partners II Limited; and (iii) Lazard Senior Housing Partners LP.



The remaining $97 million, or 16%, of aggregate investments at
December 31, 2008 represented investments (i) accounted for under the equity method of accounting and (ii) general partnership interests that are consolidated but not owned by Lazard, and therefore do not subject the Company to market
or credit risk. The associated noncontrolling interests are presented within members equity on the consolidated statements of financial condition.



The increase in the aggregate investments at December 31, 2009 compared to December 31, 2008 of $188
million relates to purchases of investments in U.S. government and agency debt securities, private equity investments that are consolidated but not owned by Lazard related to the Edgewater Acquisition and additional investments in corporate equities
to seed Asset Management products, partially offset by sales and maturities in the corporate bond portfolio and the 2009 write-off of our investment in warrants of Sapphire.



On January 1, 2008, the Company adopted the required fair value measurements accounting guidance issued by the
FASB, which, among other things, defines fair value, establishes a framework for measuring fair value and enhances disclosure requirements about fair value measurements with respect to its financial assets and financial liabilities. Pursuant to such
guidance, Lazard categorizes its investments and certain other assets and liabilities recorded at fair value into a three-level fair value hierarchy as follows:



Level 1. Assets and liabilities whose values are based on unadjusted quoted prices for
identical assets or liabilities in an active market that Lazard has the ability to access.



Level 2. Assets and liabilities whose values are based on quoted prices for similar assets or liabilities in an active
market, quoted prices for identical or similar assets or liabilities in non-active markets or inputs other than quoted prices that are directly observable or derived principally from or corroborated by market data.



Level 3. Assets and liabilities whose values
are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect managements own assumptions about the assumptions a market participant would
use in pricing the asset or liability. Items included in Level 3 include securities or other financial assets whose volume and level of activity have significantly decreased when compared with normal market activity and there is no longer sufficient
frequency or volume to provide pricing information on an ongoing basis.



Principally all of the Companys investments in corporate bonds are considered Level 2 investments with such fair value based on observable data, principally broker quotes as provided by external
pricing services. All other debt securities at fair value are considered Level 1 investments with such fair value based on unadjusted quoted prices in active markets.



The fair value of our equities is principally classified as Level 1 or Level 2 as follows: marketable equity
securities are classified as Level 1 and are valued based on the last trade price on the primary exchange for that security; public asset management funds are classified as Level 1 and are valued based on the reported closing



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price for the fund; and investments in private asset management funds are classified as Level 2 and are primarily valued based on information provided by fund managers and secondarily, from
external pricing services to the extent managed by LAM.



The fair value of our interests in LAM alternative asset management funds is classified as Level 2 and is based on information provided by external pricing services.



The fair value of our private equity investments is classified as Level 3 and is based on financial statements
provided by fund managers, appraisals and internal valuations.



Where information reported is based on broker quotes, the Company generally obtains one quote/price per instrument. In some cases, quotes related to corporate bonds obtained through external pricing
services represent the average of several broker quotes.



Where information reported is based on data received from fund managers or from external pricing services, the Company reviews such information to ascertain at which level within the fair value hierarchy to classify the investment.



For additional information regarding risks
associated with our investments, see Risk ManagementMarket and Credit Risks.



See Notes 5 and 6 of Notes to Consolidated Financial Statements for additional information regarding investments and certain other assets and liabilities measured at fair value, including the levels of
fair value within which such measurements of fair value fall.



Assets Under Management



AUM managed by LAM and LFG, which represents substantially all of the Companys total AUM, principally consist of debt and equity instruments whose value is readily available based on quoted prices
on a recognized exchange or by a broker. Accordingly, significant estimates and judgments are generally not involved in the calculation of the value of our AUM.



Goodwill



In accordance with current accounting guidance, goodwill has an indefinite life and is tested for impairment annually or more frequently if
circumstances indicate impairment may have occurred. In this process, Lazard makes estimates and assumptions in order to determine the fair value of its assets and liabilities and to project future earnings using various valuation techniques.
Lazards assumptions and estimates are used in projecting future earnings as part of the valuation, and actual results could differ from those estimates. See Note 12 of Notes to Consolidated Financial Statements for additional information
regarding goodwill.



Consolidation of VIEs



The consolidated
financial statements include the accounts of Lazard Group and all other entities in which it has a controlling interest. Lazard determines whether it has a controlling interest in an entity by first evaluating whether the entity is a voting interest
entity or a variable interest entity (VIE) under U.S. GAAP.



| |  |  | Voting Interest Entities. Voting interest entities are entities in which (i) the total equity investment at risk is sufficient to enable the entity to
finance itself independently and (ii) the equity holders have the obligation to absorb losses, the right to receive residual returns and the right to make decisions about the entitys activities. Lazard is required to consolidate a voting
interest entity that it maintains an ownership interest in if it holds a majority of the voting interest in such entity.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Variable Interest Entities. VIEs are entities that lack one or more of the characteristics of a voting interest entity. If Lazard has a variable
interest, or a combination of variable interests, in a VIE and it will absorb a majority of the VIEs expected losses, receive a majority of the VIEs expected residual returns, or both, it is required to consolidate such VIE.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Lazard is involved with various
entities in the normal course of business that are VIEs and holds variable interests in such VIEs. Transactions associated with these entities primarily include investment management, real estate and private equity investments. Those VIEs for which
Lazard was determined to be the primary beneficiary were consolidated in accordance with current accounting guidance. Those VIEs included company- sponsored venture capital investment vehicles established in connection with Lazards
compensation plans. In connection with the separation, Lazard Group transferred its general partnership interests in those VIEs to a subsidiary of LFCM Holdings. Lazard Group has determined that it is no longer the primary beneficiary with respect
to those VIEs and, as a result, the Company no longer consolidates such VIEs.



Risk Management



The Company encounters risk in the normal course of business and therefore we have designed risk management processes to help manage and monitor such risks considering both the nature of our business and
our operating model. The Company is subject to varying degrees of credit, market, operational and liquidity risks (see Liquidity and Capital Resources) and monitors these risks at both an entity and on a consolidated basis.
Management within each of Lazards operating locations are principally responsible for managing the risks within its respective businesses on a day-to-day basis.



Market and Credit Risks



Lazard is subject to credit and market risks and therefore has established procedures to assess such risks, as
well as specific interest rate and currency risk, and has established limits related to various positions. Market and/or credit risks related to investments are discussed under Investments above.



Lazard enters into interest rate swaps and foreign currency
exchange contracts to hedge exposures to interest rates and currency exchange rates and uses equity swap contracts to hedge a portion of its market exposure with respect to certain equity investments.



At December 31, 2009 and 2008, derivative contracts related
primarily to interest rate swaps, equity and foreign currency exchange rate contracts, and are recorded at fair value. Derivative assets amounted to $1 million and $5 million at December 31, 2009 and 2008, respectively, with derivative liabilities
amounting to $17 million and $44 million, at such respective dates. The decrease in derivative liabilities at December 31, 2009 as compared to December 31, 2008 related principally to the Companys foreign currency exchange contracts.



With respect to LFBs operations, LFB
engages in commercial banking activities that primarily include investing in securities, deposit taking and, to a lesser degree, lending. In addition, LFB may take open foreign exchange positions with a view to profit, but does not sell foreign
exchange options in this context, and enters into interest rate swaps, forward foreign exchange contracts and other derivative contracts to hedge exposures to interest rate and currency fluctuations.



The primary market risks associated with LFBs securities
portfolio, foreign currency exchange hedging and lending activities are sensitivity to changes in the general level of credit spreads and interest rate and foreign exchange risk. The risk management strategies that we employ use various risk
sensitivity metrics to measure such risks and to examine behavior under significant adverse market conditions, such as those we are currently experiencing. The following sensitivity metrics provide the resultant effects on the Companys
operating income for the year ended December 31, 2009:



| |  |  | LFBs credit spread risk, as measured by a 100+/ basis point change in credit spreads totaled $(11) million and $12 million, respectively.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | LFBs interest rate risk as measured by a 100+/ basis point change in interest rates totaled $30 thousand.
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | Foreign currency risk associated with LFBs open positions, in the aggregate, as measured by a 200+/ basis point change against the
U.S. dollar, totaled approximately $22 thousand.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



LFB fully secures its collateralized financing transactions with fixed income securities.



Risks Related to Receivables



We maintain an allowance for bad debts to provide coverage for probable losses from our fee and customer receivables. We determine the
adequacy of the allowance by estimating the probability of loss based on managements analysis of the clients creditworthiness and specifically reserve against exposures where we determine the receivables are impaired. At December 31,
2009, total receivables amounted to $701 million, net of an allowance for bad debts of $12 million. As of that date, inter-bank deposits, financial advisory and asset management fees, customer and related party receivables comprised 20%,
62%, 11% and 7% of total receivables, respectively. At December 31, 2008, total receivables amounted to $769 million, net of an allowance for bad debts of $16 million. As of that date, inter-bank deposits, financial advisory and asset management
fee, customer and related party receivables comprised 30%, 51%, 10% and 9% of total receivables, respectively. The Company recorded bad debt expense of approximately $5 million, $5 million and $1 million in the years ended December 31, 2009,
2008, and 2007, respectively. See also Revenue Recognition above and Note 4 of Notes to Consolidated Financial Statements for additional information regarding receivables.



Receivables from banks represent those related to LFBs
short-term inter-bank deposits. The level of these inter-bank deposits is primarily driven by the level of LFB customer and bank-related interest-bearing time and demand deposits, which can fluctuate significantly on a daily basis. As the amount of
such deposits held at LFB changes, there is generally a corresponding, but indirect, impact on the level of short-term inter-bank deposits. While historically the risk of loss associated with such inter-bank deposits was extremely low, with the
unprecedented disruption and volatility in the financial markets during 2008, a number of financial institutions disclosed liquidity and credit quality issues. LFB executes such deposit agreements with leading French financial institutions and the
Company closely monitors the creditworthiness of such counterparties to minimize its exposure to loss in such market conditions. Based on its review of its receivables from banks at December 31, 2009 and 2008, LFB has determined that an
allowance for doubtful accounts related to such receivables from banks was not required.



Credit Concentration



To reduce the exposure to concentrations of credit from banking activities within LFB, the Company has established limits for corporate counterparties and monitors the exposure against such limits. At
December 31, 2009, LFB had no exposure to an individual counterparty that exceeded $33 million (with such amount being fully collateralized), excluding deposits with inter-bank counterparties.



With respect to activities outside LFB, as of December 31, 2009,
the Companys largest individual counterparty exposure was a Financial Advisory-related fee receivable of $25 million.



Risks Related to Short-Term Investments and Corporate Indebtedness



A significant portion of the Companys liabilities has
fixed interest rates, while its cash and short-term investments generally have floating interest rates. Based on account balances as of December 31, 2009, Lazard estimates that operating income relating to cash and short-term investments and
corporate indebtedness would change by approximately $9 million, on an annual basis, in the event interest rates were to increase or decrease by 1%.



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As of December 31, 2009, the Companys cash and cash equivalents totaled
$900 million. Approximately 36% of this was invested in short-term interest earning accounts at a number of leading banks throughout the world, or short-term certificates of deposit from such banks. The remaining cash and cash equivalents were
invested in highly liquid institutional money market funds, a significant majority of which were invested solely in U.S. government or agency securities, or in institutional money market funds that have announced that they are participating in the
U.S. Treasury Departments Temporary Guarantee Program for Money Market Funds. On a regular basis, management reviews and updates its list of approved depositor banks as well as deposit and investment thresholds.



Operational Risks



Operational risk is inherent in all our business and may, for
example, manifest itself in the form of errors, breaches in the system of internal controls, business interruptions, fraud or legal actions due to operating deficiencies or noncompliance. The Company maintains a framework including policies and a
system of internal controls designed to monitor and manage operational risk and provide management with timely and accurate information. Management within each of the operating companies is primarily responsible for its operational risk programs.
The Company has in place business continuity and disaster recovery programs that manage its capabilities to provide services in the case of a disruption. We purchase insurance programs designed to protect the Company against accidental loss and
losses, which may significantly affect our financial objectives, personnel, property, or our ability to continue to meet our responsibilities to our various stakeholder groups.



Recent Accounting Developments



For a discussion of recently issued accounting pronouncements and their impact or potential impact on Lazards consolidated financial
statements, see Note 3 of Notes to Consolidated Financial Statements.



|Item 7A. | Quantitative and Qualitative Disclosures About Market Risk
|-------- | ----------------------------------------------------------



Risk Management



Quantitative and qualitative disclosures about market risk are included under the caption Managements Discussion and Analysis of
Financial Condition and Results of OperationsRisk Management.



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|Item 8. | Financial Statements and Supplementary Data
|------- | -------------------------------------------



|                                                                                                                         |  |      
|------------------------------------------------------------------------------------------------------------------------ |  | -----
|Index to Consolidated Financial Statements                                                                               |  | Page 
|Managements Report On Internal Control Over Financial Reporting                                                         |  | 73   
|Reports of Independent Registered Public Accounting Firm                                                                 |  | 74-75
|Consolidated Statements of Financial Condition as of December 31, 2009 and 2008                                          |  | 76   
|Consolidated Statements of Operations for the years ended December 31, 2009, 2008 and
2007                               |  | 78   
|Consolidated Statements of Cash Flows for the years ended December 31, 2009, 2008 and
2007                               |  | 79   
|Consolidated Statements of Changes in Members Equity (Deficiency) for the years ended December 
31, 2009, 2008 and 2007 |  | 80   
|Notes to Consolidated Financial Statements                                                                               |  | 83   
|                                                                                                                         | 
|Supplemental Financial Information                                                                                       |  |      
|Quarterly Results                                                                                                        |  | 133  
|                                                                                                                         | 
|Financial Statement Schedule                                                                                             |  |      
|                                                                                                                         | 
|Schedule ICondensed Financial Information of Registrant (Parent Company Only)                                           |  |      
|Condensed Statements of Financial Condition as of December 31, 2009 and 2008                                             |  | F-2  
|Condensed Statements of Operations for the years ended December 31, 2009, 2008 and 2007                                  |  | F-3  
|Condensed Statements of Cash Flows for the years ended December 31, 2009, 2008 and 2007                                  |  | F-4  
|Condensed Statements of Changes in Members Equity (Deficiency) for the years ended December 
31, 2009, 2008 and 2007    |  | F-5  
|Notes to Condensed Financial Statements                                                                                  |  | F-8  



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MANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING



Management of Lazard Group LLC and
its subsidiaries (the Company) is responsible for establishing and maintaining adequate internal control over financial reporting. 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 purposes in accordance
with U.S. generally accepted accounting principles.



Our internal control over financial reporting includes those policies and procedures that:



| |  |  | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
Company;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S.
generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of the Companys management and directors; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a
material effect on the financial statements.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Management assessed the effectiveness of the Companys internal control over financial reporting as of December 31, 2009. In making this assessment, management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.Based on managements assessment and those criteria, management believes that the Company maintained effective internal
control over financial reporting as of December 31, 2009.



Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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.



The Companys independent registered public accounting firm, Deloitte & Touche LLP, audited the Companys internal control over
financial reporting as of December 31, 2009, as stated in their report which appears under Reports of Independent Registered Public Accounting Firm.



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Board of Directors and Members of Lazard Group LLC:



We have audited the internal control over
financial reporting of Lazard Group LLC and subsidiaries (the Company) as of December 31, 2009 based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission. The Company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, included in the
accompanying Managements Report On Internal Control Over Financial Reporting. Our responsibility is to express an opinion on 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, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, 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 by, or under the supervision of, the
companys principal executive and principal financial officers, or persons performing similar functions, and effected by the companys board of directors, management, and other personnel 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 the inherent limitations
of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of
any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the 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, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on the criteria established in Internal ControlIntegrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission.



We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2009
of the Company and our report dated February 26, 2010 expressed an unqualified opinion on those consolidated financial statements and financial statement schedule.



/s/    Deloitte & Touche LLP

New York, New York

February 26, 2010



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Board of Directors and Members of Lazard Group LLC:



We have audited the accompanying consolidated statements of
financial condition of Lazard Group LLC and subsidiaries (the Company) as of December 31, 2009 and 2008, and the related consolidated statements of operations, cash flows, and changes in members equity (deficiency), for each of the
three years in the period ended December 31, 2009. Our audits also included the financial statement schedule listed in the Index at Item 8. These consolidated financial statements and financial statement schedule are the responsibility of the
Companys management. Our responsibility is to express an opinion on the consolidated financial statements and financial statement schedule 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, such consolidated financial statements present fairly, in all material respects, the financial position of Lazard Group LLC and subsidiaries at December 31, 2009 and 2008, and the results
of their operations and their cash flows for each of the three years in the period ended December 31, 2009, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement
schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.



We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the Companys internal control over financial reporting as of December 31, 2009, based on the criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated February 26, 2010 expressed an unqualified opinion on the Companys internal control over financial reporting.



/s/    Deloitte & Touche LLP

New York, New York

February 26, 2010



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LAZARD GROUP LLC



CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

DECEMBER 31, 2009 and 2008

(dollars in thousands)



|                                                                                                                                        |  |              |           |      |   |          
|--------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | --------- | ---- | - | ---------
|                                                                                                                                        |  | December 31,
|                                                                                                                                        |  | 2009         |           | 2008
|ASSETS                                                                                                                                  |  |              |           |      |   |          
|Cash and cash equivalents                                                                                                               |  |              | $899,733  |      | $ | 907,278  
|Cash deposited with clearing organizations and other segregated cash                                                                    |  |              | 20,217    |      |   | 14,583   
|                                                                                                                                        |  |             
|Receivablesnet:                                                                                                                        |  |              |           |      |   |          
|Banks                                                                                                                                   |  |              | 143,778   |      |   | 229,092  
|Fees                                                                                                                                    |  |              | 437,532   |      |   | 391,251  
|Customers and other                                                                                                                     |  |              | 73,750    |      |   | 81,806   
|Related parties                                                                                                                         |  |              | 46,099    |      |   | 66,491   
|                                                                                                                                        |  |              |           |      |   |          
|                                                                                                                                        |  |              | 701,159   |      |   | 768,640  
|Investments:                                                                                                                            |  |              |           |      |   |          
|Debt:                                                                                                                                   |  |              |           |      |   |          
|U.S. Government and agencies (includes $126,413 of securities at amortized cost at December 31, 2009)                                   |  |              | 147,507   |      |   |         
|Other (includes $10,217 of securities at amortized cost at December 31, 2009)                                                           |  |              | 313,342   |      |   | 333,070  
|Equities                                                                                                                                |  |              | 82,442    |      |   | 71,105   
|Other                                                                                                                                   |  |              | 264,402   |      |   | 215,792  
|                                                                                                                                        |  |              |           |      |   |          
|                                                                                                                                        |  |              | 807,693   |      |   | 619,967  
|Property (net of accumulated amortization and depreciation of $239,603 and $213,249 at December 31, 2009 and 2008, respectively)        |  |              | 166,913   |      |   | 171,443  
|                                                                                                                                        |  |             
|Goodwill and other intangible assets (net of accumulated amortization of $7,140 and $2,150 at December 31, 2009 and 2008,
respectively) |  |              | 317,780   |      |   | 175,144  
|Other assets                                                                                                                            |  |              | 201,553   |      |   | 228,527  
|                                                                                                                                        |  |              |           |      |   |          
|Total assets                                                                                                                            |  | $            | 3,115,048 |      | $ | 2,885,582
|                                                                                                                                        |  |              |           |      |   |          



See notes to consolidated financial statements.



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LAZARD GROUP LLC



CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION(Continued)

DECEMBER 31, 2009 and 2008

(dollars in thousands)



|                                                                                                                                                                         |  |              |           |   |      |   |           |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------ | --------- | - | ---- | - | --------- | -
|                                                                                                                                                                         |  | December 31, |          
|                                                                                                                                                                         |  | 2009         |           |   | 2008 |  
|LIABILITIES AND MEMBERS EQUITY                                                                                                                                          |  |              |           |   |      |   |           |  
|Liabilities:                                                                                                                                                             |  |              |           |   |      |   |           |  
|Deposits and other customer payables                                                                                                                                     |  | $            | 322,101   |   |      | $ | 541,784   |  
|Accrued compensation and benefits                                                                                                                                        |  |              | 515,033   |   |      |   | 203,750   |  
|Senior debt                                                                                                                                                              |  |              | 1,086,850 |   |      |   | 1,087,750 |  
|Capital lease obligations                                                                                                                                                |  |              | 24,628    |   |      |   | 26,825    |  
|Related party payables                                                                                                                                                   |  |              | 242,284   |   |      |   | 263,975   |  
|Other liabilities                                                                                                                                                        |  |              | 491,221   |   |      |   | 484,988   |  
|Subordinated debt                                                                                                                                                        |  |              | 150,000   |   |      |   | 150,000   |  
|                                                                                                                                                                         |  |              |           |   |      |   |           |  
|Total liabilities                                                                                                                                                        |  |              | 2,832,117 |   |      |   | 2,759,072 |  
|Commitments and contingencies                                                                                                                                            |  |              |           |   |      |   |           |  
|                                                                                                                                                                         |  |             
|MEMBERS EQUITY                                                                                                                                                          |  |              |           |   |      |   |           |  
|Members equity (net of 5,850,775 and 9,376,162 shares of Lazard Ltd Class A common stock,
at cost of $191,140 and $321,852 at December 31, 2009 and 2008, respectively) |  |              | 214,163   |   |      |   | 227,036   |  
|Accumulated other comprehensive loss, net of tax                                                                                                                         |  |              | (58,792   | ) |      |   | (121,407  | )
|                                                                                                                                                                         |  |              |           |   |      |   |           |  
|Total Lazard Group members equity                                                                                                                                       |  |              | 155,371   |   |      |   | 105,629   |  
|Noncontrolling interests                                                                                                                                                 |  |              | 127,560   |   |      |   | 20,881    |  
|                                                                                                                                                                         |  |              |           |   |      |   |           |  
|Total members equity                                                                                                                                                    |  |              | 282,931   |   |      |   | 126,510   |  
|                                                                                                                                                                         |  |              |           |   |      |   |           |  
|Total liabilities and members equity                                                                                                                                    |  | $            | 3,115,048 |   |      | $ | 2,885,582 |  
|                                                                                                                                                                         |  |              |           |   |      |   |           |  



See notes to consolidated
financial statements.



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LAZARD GROUP LLC



CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007

(dollars in thousands)



|                                                                  |  |                         |           |   |      |   |           |      |  |   |          
|----------------------------------------------------------------- |  | ----------------------- | --------- | - | ---- | - | --------- | ---- |  | - | ---------
|                                                                  |  | Year Ended December 31,
|                                                                  |  | 2009                    |           |   | 2008 |   |           | 2007
|REVENUE                                                           |  |                         |           |   |      |   |           |      |  |   |          
|Investment banking and other advisory fees                        |  | $                       | 956,075   |   |      | $ | 990,923   |      |  | $ | 1,196,648
|Money management fees                                             |  |                         | 563,932   |   |      |   | 603,908   |      |  |   | 663,316  
|Interest income                                                   |  |                         | 34,056    |   |      |   | 81,223    |      |  |   | 88,530   
|Other                                                             |  |                         | 89,180    |   |      |   | 20,328    |      |  |   | 104,928  
|                                                                  |  |                         |           |   |      |   |           |      |  |   |          
|Total revenue                                                     |  |                         | 1,643,243 |   |      |   | 1,696,382 |      |  |   | 2,053,422
|Interest expense                                                  |  |                         | 113,280   |   |      |   | 141,413   |      |  |   | 136,529  
|                                                                  |  |                         |           |   |      |   |           |      |  |   |          
|Net revenue                                                       |  |                         | 1,529,963 |   |      |   | 1,554,969 |      |  |   | 1,916,893
|                                                                  |  |                         |           |   |      |   |           |      |  |   |          
|OPERATING EXPENSES                                                |  |                         |           |   |      |   |           |      |  |   |          
|Compensation and benefits                                         |  |                         | 1,309,231 |   |      |   | 1,128,243 |      |  |   | 1,123,058
|Occupancy and equipment                                           |  |                         | 88,445    |   |      |   | 97,178    |      |  |   | 91,095   
|Marketing and business development                                |  |                         | 64,045    |   |      |   | 81,270    |      |  |   | 74,507   
|Technology and information services                               |  |                         | 69,620    |   |      |   | 67,892    |      |  |   | 59,408   
|Professional services                                             |  |                         | 42,669    |   |      |   | 51,520    |      |  |   | 47,208   
|Fund administration and outsourced services                       |  |                         | 37,927    |   |      |   | 30,830    |      |  |   | 22,045   
|Amortization of intangible assets related to acquisitions         |  |                         | 4,990     |   |      |   | 4,596     |      |  |   | 21,523   
|Restructuring                                                     |  |                         | 62,550    |   |      |   |          |      |  |   |         
|Other                                                             |  |                         | 32,474    |   |      |   | 51,411    |      |  |   | 41,985   
|                                                                  |  |                         |           |   |      |   |           |      |  |   |          
|Total operating expenses                                          |  |                         | 1,711,951 |   |      |   | 1,512,940 |      |  |   | 1,480,829
|                                                                  |  |                         |           |   |      |   |           |      |  |   |          
|OPERATING INCOME (LOSS)                                           |  |                         | (181,988  | ) |      |   | 42,029    |      |  |   | 436,064  
|                                                                  |  |                         |          
|Provision for income taxes                                        |  |                         | 31,727    |   |      |   | 29,691    |      |  |   | 88,786   
|                                                                  |  |                         |           |   |      |   |           |      |  |   |          
|NET INCOME (LOSS)                                                 |  |                         | (213,715  | ) |      |   | 12,338    |      |  |   | 347,278  
|                                                                  |  |                         |          
|LESS - NET INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTERESTS |  |                         | 2,832     |   |      |   | (13,333   | )    |  |   | 5,144    
|                                                                  |  |                         |           |   |      |   |           |      |  |   |          
|NET INCOME (LOSS) ATTRIBUTABLE TO LAZARD GROUP                    |  | $                       | (216,547  | ) |      | $ | 25,671    |      |  | $ | 342,134  
|                                                                  |  |                         |           |   |      |   |           |      |  |   |          





See notes to consolidated financial statements.



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LAZARD GROUP LLC



CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007

(dollars in thousands)



|                                                                                                                                    |  |                         |           |   |      |   |           |      |  |   |           |  
|----------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | --------- | - | ---- | - | --------- | ---- |  | - | --------- | -
|                                                                                                                                    |  | Year Ended December 31, |          
|                                                                                                                                    |  | 2009                    |           |   | 2008 |   |           | 2007 | 
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                                                               |  |                         |           |   |      |   |           |      |  |   |           |  
|Net income (loss)                                                                                                                   |  | $                       | (213,715) |   |      | $ | 12,338    |      |  | $ | 347,278   |  
|Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:                                  |  |                         |           |   |      |   |           |      |  |   |           |  
|Noncash items included in net income (loss):                                                                                        |  |                         |           |   |      |   |           |      |  |   |           |  
|Depreciation and amortization of property                                                                                           |  |                         | 22,541    |   |      |   | 20,825    |      |  |   | 16,734    |  
|Amortization of deferred expenses, stock units and interest rate hedge                                                              |  |                         | 371,363   |   |      |   | 245,575   |      |  |   | 110,174   |  
|Amortization of intangible assets related to business acquisitions                                                                  |  |                         | 4,990     |   |      |   | 4,596     |      |  |   | 21,523    |  
|Deferred tax benefit                                                                                                                |  |                         | (8,017    | ) |      |   | (17,259   | )    |  |   | (6,999    | )
|Gain on extinguishment of debt                                                                                                      |  |                         | (258      | ) |      |   | (20,253   | )    |  |   |          |  
|LAM Merger                                                                                                                          |  |                         |          |   |      |   | 64,512    |      |  |   |          |  
|(Increase) decrease in operating assets:                                                                                            |  |                         |           |   |      |   |           |      |  |   |           |  
|Cash deposited with clearing organizations and other segregated cash                                                                |  |                         | (5,004    | ) |      |   | 9,007     |      |  |   | (6,309    | )
|Receivables-net                                                                                                                     |  |                         | 82,106    |   |      |   | 292,385   |      |  |   | 229,431   |  
|Investments                                                                                                                         |  |                         | (35,468   | ) |      |   | 517,288   |      |  |   | (262,080  | )
|Other assets                                                                                                                        |  |                         | 25,930    |   |      |   | (21,056   | )    |  |   | (37,986   | )
|Increase (decrease) in operating liabilities:                                                                                       |  |                         |           |   |      |   |           |      |  |   |           |  
|Deposits and other payables                                                                                                         |  |                         | (247,892  | ) |      |   | (130,840  | )    |  |   | (443,858  | )
|Accrued compensation and benefits and other liabilities                                                                             |  |                         | 274,778   |   |      |   | (374,465  | )    |  |   | 112,509   |  
|                                                                                                                                    |  |                         |           |   |      |   |           |      |  |   |           |  
|Net cash provided by operating activities                                                                                           |  |                         | 271,354   |   |      |   | 602,653   |      |  |   | 80,417    |  
|                                                                                                                                    |  |                         |           |   |      |   |           |      |  |   |           |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                                                               |  |                         |           |   |      |   |           |      |  |   |           |  
|Acquisition of businesses in 2009 and 2007, net of cash acquired of $6,641 and $19,002, respectively, and equity method
investments |  |                         | (39,139   | ) |      |   | (74,855   | )    |  |   | (135,060  | )
|Additions to property                                                                                                               |  |                         | (11,913   | ) |      |   | (18,509   | )    |  |   | (16,441   | )
|Disposals of property                                                                                                               |  |                         | 583       |   |      |   | 743       |      |  |   | 1,915     |  
|Purchases of held-to-maturity securities                                                                                            |  |                         | (136,095  | ) |      |   |          |      |  |   |          |  
|Purchases of available-for-sale securities                                                                                          |  |                         | (3,466    | ) |      |   | (147,340  | )    |  |   | (73,235   | )
|Proceeds from sales and maturities of available-for-sale securities                                                                 |  |                         | 93,472    |   |      |   | 88,033    |      |  |   |          |  
|                                                                                                                                    |  |                         |           |   |      |   |           |      |  |   |           |  
|Net cash used in investing activities                                                                                               |  |                         | (96,558   | ) |      |   | (151,928  | )    |  |   | (222,821  | )
|                                                                                                                                    |  |                         |           |   |      |   |           |      |  |   |           |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                                                               |  |                         |           |   |      |   |           |      |  |   |           |  
|Proceeds from:                                                                                                                      |  |                         |           |   |      |   |           |      |  |   |           |  
|Issuance of common membership interests                                                                                             |  |                         |          |   |      |   | 437,500   |      |  |   |          |  
|Senior borrowings, net of expenses                                                                                                  |  |                         |          |   |      |   |          |      |  |   | 593,485   |  
|Other financing activities                                                                                                          |  |                         | 52        |   |      |   | 359       |      |  |   | 4,569     |  
|Payments for:                                                                                                                       |  |                         |           |   |      |   |           |      |  |   |           |  
|Senior borrowings                                                                                                                   |  |                         | (635      | ) |      |   | (478,925  | )    |  |   | (96,000   | )
|Subordinated borrowings                                                                                                             |  |                         |          |   |      |   |          |      |  |   | (50,000   | )
|Capital lease obligations                                                                                                           |  |                         | (2,980    | ) |      |   | (3,095    | )    |  |   | (1,423    | )
|Distributions to noncontrolling interests                                                                                           |  |                         | (8,337    | ) |      |   | (17,616   | )    |  |   | (18,767   | )
|Repurchase of common membership interests from members of LAZ-MD Holdings                                                           |  |                         | (13,285   | ) |      |   | (2,559    | )    |  |   | (21,840   | )
|Purchase of Lazard Ltd Class A common stock                                                                                         |  |                         | (50,479   | ) |      |   | (277,064  | )    |  |   | (68,052   | )
|Distribution to members                                                                                                             |  |                         | (118,214  | ) |      |   | (127,108  | )    |  |   | (148,272  | )
|Settlement of vested RSUs                                                                                                           |  |                         | (13,220   | ) |      |   | (4,291    | )    |  |   | (21       | )
|Other financing activities                                                                                                          |  |                         | (210      | ) |      |   | (8,137    | )    |  |   |          |  
|                                                                                                                                    |  |                         |           |   |      |   |           |      |  |   |           |  
|Net cash provided by (used in) financing activities                                                                                 |  |                         | (207,308  | ) |      |   | (480,936  | )    |  |   | 193,679   |  
|                                                                                                                                    |  |                         |           |   |      |   |           |      |  |   |           |  
|EFFECT OF EXCHANGE RATE CHANGES ON CASH                                                                                             |  |                         | 24,967    |   |      |   | (63,084   | )    |  |   | (5,818    | )
|                                                                                                                                    |  |                         |           |   |      |   |           |      |  |   |           |  
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                                                                |  |                         | (7,545    | ) |      |   | (93,295   | )    |  |   | 45,457    |  
|CASH AND CASH EQUIVALENTSJanuary 1                                                                                                 |  |                         | 907,278   |   |      |   | 1,000,573 |      |  |   | 955,116   |  
|                                                                                                                                    |  |                         |           |   |      |   |           |      |  |   |           |  
|CASH AND CASH EQUIVALENTSDecember 31                                                                                               |  | $                       | 899,733   |   |      | $ | 907,278   |      |  | $ | 1,000,573 |  
|                                                                                                                                    |  |                         |           |   |      |   |           |      |  |   |           |  
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                                                                                  |  |                         |           |   |      |   |           |      |  |   |           |  
|Cash paid during the year for:                                                                                                      |  |                         |           |   |      |   |           |      |  |   |           |  
|Interest                                                                                                                            |  | $                       | 98,611    |   |      | $ | 141,452   |      |  | $ | 138,559   |  
|                                                                                                                                    |  |                         |           |   |      |   |           |      |  |   |           |  
|Income taxes                                                                                                                        |  | $                       | 28,185    |   |      | $ | 98,248    |      |  | $ | 72,741    |  
|                                                                                                                                    |  |                         |           |   |      |   |           |      |  |   |           |  



See notes to consolidated
financial statements.



79



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##### Table of Contents

LAZARD GROUP LLC



CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS EQUITY
(DEFICIENCY)

FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007

(dollars in thousands)



|                                                                          |  |                            |          |   |                                                       |   |        |                                               |  |   |                         |   |  |                                 |        |   |  |   |          |  
|------------------------------------------------------------------------- |  | -------------------------- | -------- | - | ----------------------------------------------------- | - | ------ | --------------------------------------------- |  | - | ----------------------- | - |  | ------------------------------- | ------ | - |  | - | -------- | -
|                                                                          |  | MembersEquity(Deficiency) |          |   | AccumulatedOtherComprehensiveIncome (Loss),Net of Tax |   |        | Total Lazard GroupMembers Equity(Deficiency) |  |   | NoncontrollingInterests |   |  | TotalMembersEquity(Deficiency) |       
|                                                                          |  |                            |          |   |                                                      
|                                                                          |  |                            |          |   |                                                      
|Balance  January 1, 2007                                                 |  | $                          | (292,472 | ) |                                                       | $ | 33,263 |                                               |  | $ | (259,209                | ) |  | $                               | 54,617 |   |  | $ | (204,592 | )
|                                                                          |  |                            |          |   |                                                       |   |        |                                               |  |   |                         |   |  |                                 |        |   |  |   |          |  
|Comprehensive income (loss):                                              |  |                            |          |   |                                                       |   |        |                                               |  |   |                         |   |  |                                 |        |   |  |   |          |  
|Net income                                                                |  |                            | 342,134  |   |                                                       |   |        |                                               |  |   | 342,134                 |   |  |                                 | 5,144  |   |  |   | 347,278  |  
|Other comprehensive income (loss) - net of tax:                           |  |                            |          |   |                                                       |   |        |                                               |  |   |                         |   |  |                                 |        |   |  |   |          |  
|Currency translation adjustments                                          |  |                            |          |   |                                                       |   | 25,839 |                                               |  |   | 25,839                  |   |  |                                 | 2      |   |  |   | 25,841   |  
|Amortization of interest rate hedge                                       |  |                            |          |   |                                                       |   | 1,100  |                                               |  |   | 1,100                   |   |  |                                 |        |   |  |   | 1,100    |  
|Available-for-sale securities:                                            |  |                            |          |   |                                                       |   |        |                                               |  |   |                         |   |  |                                 |        |   |  |   |          |  
|Net unrealized loss                                                       |  |                            |          |   |                                                       |   | (670   | )                                             |  |   | (670                    | ) |  |                                 |        |   |  |   | (670     | )
|Employee benefit plans:                                                   |  |                            |          |   |                                                       |   |        |                                               |  |   |                         |   |  |                                 |        |   |  |   |          |  
|Net actuarial loss                                                        |  |                            |          |   |                                                       |   | (3,440 | )                                             |  |   | (3,440                  | ) |  |                                 |        |   |  |   | (3,440   | )
|Adjustments for items reclassified to earnings                            |  |                            |          |   |                                                       |   | (419   | )                                             |  |   | (419                    | ) |  |                                 |        |   |  |   | (419     | )
|                                                                          |  |                            |          |   |                                                       |   |        |                                               |  |   |                         |   |  |                                 |        |   |  |   |          |  
|Comprehensive income                                                      |  |                            |          |   |                                                       |   |        |                                               |  |   | 364,544                 |   |  |                                 | 5,146  |   |  |   | 369,690  |  
|                                                                          |  |                            |          |   |                                                       |   |        |                                               |  |   |                         |   |  |                                 |        |   |  |   |          |  
|Amortization of stock units                                               |  |                            | 104,765  |   |                                                       |   |        |                                               |  |   | 104,765                 |   |  |                                 |        |   |  |   | 104,765  |  
|Distributions to members and noncontrolling interests                     |  |                            | (148,272 | ) |                                                       |   |        |                                               |  |   | (148,272                | ) |  |                                 | (8,008 | ) |  |   | (156,280 | )
|Purchase of Lazard Ltd class A common stock                               |  |                            | (68,052  | ) |                                                       |   |        |                                               |  |   | (68,052                 | ) |  |                                 |        |   |  |   | (68,052  | )
|Delivery of Lazard Ltd Class A common stock for settlement of vested RSUs |  |                            | (21      | ) |                                                       |   |        |                                               |  |   | (21                     | ) |  |                                 |        |   |  |   | (21      | )
|Repurchase of common membership interests from LAZ-MD Holdings            |  |                            | (21,840  | ) |                                                       |   |        |                                               |  |   | (21,840                 | ) |  |                                 |        |   |  |   | (21,840  | )
|Adjustments related to business acquisitions and related amortization     |  |                            | 1,636    |   |                                                       |   |        |                                               |  |   | 1,636                   |   |  |                                 |        |   |  |   | 1,636    |  
|Other                                                                     |  |                            | 142      |   |                                                       |   |        |                                               |  |   | 142                     |   |  |                                 |        |   |  |   | 142      |  
|                                                                          |  |                            |          |   |                                                       |   |        |                                               |  |   |                         |   |  |                                 |        |   |  |   |          |  
|Balance  December 31, 2007(*)                                            |  | $                          | (81,980  | ) |                                                       | $ | 55,673 |                                               |  | $ | (26,307                 | ) |  | $                               | 51,755 |   |  | $ | 25,448   |  
|                                                                          |  |                            |          |   |                                                       |   |        |                                               |  |   |                         |   |  |                                 |        |   |  |   |          |  



80



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##### Table of Contents

LAZARD GROUP LLC



CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS EQUITY (DEFICIENCY)

FOR THE YEARS ENDED 2009, 2008 AND 2007(Continued)

(dollars in thousands)



|                                                                                                                        |  |                            |          |   |                                                       |   |          |                                               |  |   |                         |   |  |                     |         |   |  |   |          |  
|----------------------------------------------------------------------------------------------------------------------- |  | -------------------------- | -------- | - | ----------------------------------------------------- | - | -------- | --------------------------------------------- |  | - | ----------------------- | - |  | ------------------- | ------- | - |  | - | -------- | -
|                                                                                                                        |  | MembersEquity(Deficiency) |          |   | AccumulatedOtherComprehensiveIncome (Loss),Net of Tax |   |          | Total Lazard GroupMembers Equity(Deficiency) |  |   | NoncontrollingInterests |   |  | TotalMembersEquity |        
|Balance  January 1, 2008                                                                                               |  | $                          | (81,980  | ) |                                                       | $ | 55,673   |                                               |  | $ | (26,307                 | ) |  | $                   | 51,755  |   |  | $ | 25,448   |  
|                                                                                                                        |  |                            |          |   |                                                       |   |          |                                               |  |   |                         |   |  |                     |         |   |  |   |          |  
|Comprehensive income (loss):                                                                                            |  |                            |          |   |                                                       |   |          |                                               |  |   |                         |   |  |                     |         |   |  |   |          |  
|Net income                                                                                                              |  |                            | 25,671   |   |                                                       |   |          |                                               |  |   | 25,671                  |   |  |                     | (13,333 | ) |  |   | 12,338   |  
|Other comprehensive income (loss) - net of tax:                                                                         |  |                            |          |   |                                                       |   |          |                                               |  |   |                         |   |  |                     |         |   |  |   |          |  
|Currency translation adjustments                                                                                        |  |                            |          |   |                                                       |   | (151,761 | )                                             |  |   | (151,761                | ) |  |                     | (1      | ) |  |   | (151,762 | )
|Amortization of interest rate hedge                                                                                     |  |                            |          |   |                                                       |   | 1,246    |                                               |  |   | 1,246                   |   |  |                     |         |   |  |   | 1,246    |  
|Available-for-sale securities:                                                                                          |  |                            |          |   |                                                       |   |          |                                               |  |   |                         |   |  |                     |         |   |  |   |          |  
|Net unrealized loss                                                                                                     |  |                            |          |   |                                                       |   | (40,847  | )                                             |  |   | (40,847                 | ) |  |                     | (3      | ) |  |   | (40,850  | )
|Adjustment for items reclassified to earnings                                                                           |  |                            |          |   |                                                       |   | 5        |                                               |  |   | 5                       |   |  |                     |         |   |  |   | 5        |  
|Employee benefit plans:                                                                                                 |  |                            |          |   |                                                       |   |          |                                               |  |   |                         |   |  |                     |         |   |  |   |          |  
|Net actuarial gain                                                                                                      |  |                            |          |   |                                                       |   | 14,154   |                                               |  |   | 14,154                  |   |  |                     |         |   |  |   | 14,154   |  
|Adjustment for items reclassified to earnings                                                                           |  |                            |          |   |                                                       |   | 123      |                                               |  |   | 123                     |   |  |                     |         |   |  |   | 123      |  
|                                                                                                                        |  |                            |          |   |                                                       |   |          |                                               |  |   |                         |   |  |                     |         |   |  |   |          |  
|Comprehensive loss                                                                                                      |  |                            |          |   |                                                       |   |          |                                               |  |   | (151,409                | ) |  |                     | (13,337 | ) |  |   | (164,746 | )
|                                                                                                                        |  |                            |          |   |                                                       |   |          |                                               |  |   |                         |   |  |                     |         |   |  |   |          |  
|Amortization of stock units                                                                                             |  |                            | 234,602  |   |                                                       |   |          |                                               |  |   | 234,602                 |   |  |                     |         |   |  |   | 234,602  |  
|Distributions to members and noncontrolling interests                                                                   |  |                            | (127,108 | ) |                                                       |   |          |                                               |  |   | (127,108                | ) |  |                     | (17,537 | ) |  |   | (144,645 | )
|Purchase of Lazard Ltd Class A common stock                                                                             |  |                            | (277,064 | ) |                                                       |   |          |                                               |  |   | (277,064                | ) |  |                     |         |   |  |   | (277,064 | )
|Delivery of Lazard Ltd Class A common stock for settlement of vested RSUs and
DSUs                                      |  |                            | (4,291   | ) |                                                       |   |          |                                               |  |   | (4,291                  | ) |  |                     |         |   |  |   | (4,291   | )
|Issuance of 14,582,750 common membership interests in the settlement of the purchase contracts
forming part of the ESUs |  |                            | 437,500  |   |                                                       |   |          |                                               |  |   | 437,500                 |   |  |                     |         |   |  |   | 437,500  |  
|Repurchase of common membership interests from LAZ-MD Holdings                                                          |  |                            | (2,559   | ) |                                                       |   |          |                                               |  |   | (2,559                  | ) |  |                     |         |   |  |   | (2,559   | )
|Common membership interests issued in connection withbusiness acquisitions                                              |  |                            | 18,416   |   |                                                       |   |          |                                               |  |   | 18,416                  |   |  |                     |         |   |  |   | 18,416   |  
|Adjustments related to business acquisitions and related amortization                                                   |  |                            | 3,690    |   |                                                       |   |          |                                               |  |   | 3,690                   |   |  |                     |         |   |  |   | 3,690    |  
|Other                                                                                                                   |  |                            | 159      |   |                                                       |   |          |                                               |  |   | 159                     |   |  |                     |         |   |  |   | 159      |  
|                                                                                                                        |  |                            |          |   |                                                       |   |          |                                               |  |   |                         |   |  |                     |         |   |  |   |          |  
|Balance  December 31, 2008(*)                                                                                          |  | $                          | 227,036  |   |                                                       | $ | (121,407 | )                                             |  | $ | 105,629                 |   |  | $                   | 20,881  |   |  | $ | 126,510  |  
|                                                                                                                        |  |                            |          |   |                                                       |   |          |                                               |  |   |                         |   |  |                     |         |   |  |   |          |  



81



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##### Table of Contents

LAZARD GROUP LLC



CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS EQUITY (DEFICIENCY)

FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007(Continued)

(dollars in thousands)

|                                                                                   |  |                |   |  |                                                       |   |  |                                  |   |  |                         |  |                     |  
|---------------------------------------------------------------------------------- |  | -------------- | - |  | ----------------------------------------------------- | - |  | -------------------------------- | - |  | ----------------------- |  | ------------------- | -
|                                                                                   |  | MembersEquity |   |  | AccumulatedOtherComprehensiveIncome (Loss),Net of Tax |   |  | TotalLazard GroupMembers Equity |   |  | NoncontrollingInterests |  | TotalMembersEquity |  
|Balance  January 1, 2009                                                          |  | $227,036       |   |  | $ (121,407                                            | ) |  | $105,629                         |   |  | $20,881                 |  | $126,510            |  
|                                                                                   |  |                |   |  |                                                       |   |  |                                  |   |  |                         |  |                     |  
|Comprehensive income (loss):                                                       |  |                |   |  |                                                       |   |  |                                  |   |  |                         |  |                     |  
|Net loss                                                                           |  | (216,547       | ) |  |                                                       |   |  | (216,547                         | ) |  | 2,832                   |  | (213,715            | )
|Other comprehensive income (loss) - net of tax:                                    |  |                |   |  |                                                       |   |  |                                  |   |  |                         |  |                     |  
|Currency translation adjustments                                                   |  |                |   |  | 62,992                                                |   |  | 62,992                           |   |  | 197                     |  | 63,189              |  
|Amortization of interest rate hedge                                                |  |                |   |  | 1,077                                                 |   |  | 1,077                            |   |  |                         |  | 1,077               |  
|Available-for-sale securities:                                                     |  |                |   |  |                                                       |   |  |                                  |   |  |                         |  |                     |  
|Net unrealized gain                                                                |  |                |   |  | 27,612                                                |   |  | 27,612                           |   |  | 2                       |  | 27,614              |  
|Adjustment for items reclassified to earnings                                      |  |                |   |  | 1,268                                                 |   |  | 1,268                            |   |  |                         |  | 1,268               |  
|Employee benefit plans:                                                            |  |                |   |  |                                                       |   |  |                                  |   |  |                         |  |                     |  
|Prior service costs                                                                |  |                |   |  | (15,152                                               | ) |  | (15,152                          | ) |  |                         |  | (15,152             | )
|Net actuarial loss                                                                 |  |                |   |  | (18,215                                               | ) |  | (18,215                          | ) |  |                         |  | (18,215             | )
|Adjustment for items reclassified to earnings                                      |  |                |   |  | 3,033                                                 |   |  | 3,033                            |   |  |                         |  | 3,033               |  
|                                                                                   |  |                |   |  |                                                       |   |  |                                  |   |  |                         |  |                     |  
|Comprehensive income (loss)                                                        |  |                |   |  |                                                       |   |  | (153,932                         | ) |  | 3,031                   |  | (150,901            | )
|                                                                                   |  |                |   |  |                                                       |   |  |                                  |   |  |                         |  |                     |  
|Amortization of stock units                                                        |  | 358,062        |   |  |                                                       |   |  | 358,062                          |   |  |                         |  | 358,062             |  
|Acquisitions of and distributions to members and noncontrolling interests          |  | (118,214       | ) |  |                                                       |   |  | (118,214                         | ) |  | 101,505                 |  | (16,709             | )
|Purchase of Lazard Ltd Class A common stock                                        |  | (50,479        | ) |  |                                                       |   |  | (50,479                          | ) |  |                         |  | (50,479             | )
|Delivery of Lazard Ltd Class A common stock for settlement of vested RSUs and DSUs |  | (13,220        | ) |  |                                                       |   |  | (13,220                          | ) |  |                         |  | (13,220             | )
|Repurchase of common membership interests from LAZ-MD Holdings                     |  | (13,285        | ) |  |                                                       |   |  | (13,285                          | ) |  |                         |  | (13,285             | )
|Common membership interests issued in connection with business acquisitions        |  | 32,384         |   |  |                                                       |   |  | 32,384                           |   |  |                         |  | 32,384              |  
|Adjustments related to noncontrolling interests                                    |  | (2,143         | ) |  |                                                       |   |  | (2,143                           | ) |  | 2,143                   |  |                    |  
|Adjustments related to business acquisitions and related amortization              |  | 10,778         |   |  |                                                       |   |  | 10,778                           |   |  |                         |  | 10,778              |  
|Other                                                                              |  | (209           | ) |  |                                                       |   |  | (209                             | ) |  |                         |  | (209                | )
|                                                                                   |  |                |   |  |                                                       |   |  |                                  |   |  |                         |  |                     |  
|Balance  December 31, 2009(*)                                                     |  | $214,163       |   |  | $(58,792                                              | ) |  | $155,371                         |   |  | $127,560                |  | $282,931            |  
|                                                                                   |  |                |   |  |                                                       |   |  |                                  |   |  |                         |  |                     |  



|(*) | Includes 107,068,617, 122,233,664 and 123,686,338 common membership interests at December 31, 2007, 2008 and 2009, respectively. Also includes profit
participation interests and two managing member interests at each such date.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



See notes to consolidated financial statements.





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LAZARD GROUP LLC



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, unless otherwise noted)



|1. | ORGANIZATION AND BASIS OF PRESENTATION
|-- | --------------------------------------



Organization



The accompanying consolidated financial statements are those of Lazard Group LLC and its subsidiaries (collectively referred to with its
subsidiaries as Lazard Group or the Company). Lazard Group is a Delaware limited liability company and is governed by an Operating Agreement dated as of May 10, 2005, as amended (the Operating Agreement).



Lazard Ltd, a Bermuda holding company, through
its subsidiaries held approximately 74.5% and 62.4% of all outstanding Lazard Group common membership interests as of December 31, 2009 and 2008, respectively. Lazard Ltd, through its control of the managing members of Lazard Group, controls Lazard
Group.



Lazard Ltd, including its indirect
investment in Lazard Group, is one of the worlds preeminent financial advisory and asset management firms and has long specialized in crafting solutions to the complex financial and strategic challenges of our clients. We serve a diverse set
of clients around the world, including corporations, partnerships, institutions, governments and high net worth individuals.



LAZ-MD Holdings LLC (LAZ-MD Holdings), an entity owned by Lazard Groups current and former managing directors, held
approximately 25.5% and 37.6% of the outstanding Lazard Group common membership interests as of December 31, 2009 and 2008, respectively. Additionally, LAZ-MD Holdings was the sole owner of the one issued and outstanding share of Lazard Ltds
Class B common stock (the Class B common stock) which provided LAZ-MD Holdings with approximately 25.5%, and 37.6% of the voting power but no economic rights in the Company as of December 31, 2009 and 2008, respectively. Subject to
certain limitations, LAZ-MD Holdings interests in Lazard Group are exchangeable for Lazard Ltd Class A common stock, par value $0.01 per share (Class A common stock).



Lazard Groups principal operating activities are included in two business segments:



| |  |  | Financial Advisory, which includes providing advice on mergers and acquisitions (M&A) and strategic advisory matters, restructurings
and capital structure advisory services, capital raising and other transactions, and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Asset Management, which includes the management of equity and fixed income securities, alternative investments and private equity funds.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------



In addition, the Company
records selected other activities in its Corporate segment, including management of cash, certain investments and the commercial banking activities of Lazard Groups Paris-based Lazard Frères Banque SA (LFB). The Company also
allocates outstanding indebtedness to its Corporate segment.



LFB is a registered bank regulated by the Banque de France and its primary operations include asset and liability management for Lazard Groups businesses in France through its money market desk and
commercial banking operations, deposit taking and, to a lesser extent, financing activities and custodial oversight over assets of various clients. LFB also engages in underwritten offerings of securities in France.



Basis of Presentation



The consolidated financial statements are prepared in
conformity with accounting principles generally accepted in the United States of America (U.S. GAAP). The Companys policy is to consolidate (i) entities in which it has a controlling financial interest, (ii) variable interest
entities (VIEs) where the Company has a



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LAZARD GROUP LLC



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



variable interest and is deemed to be the primary beneficiary and (iii) limited partnerships where the Company is the general partner, unless the presumption of control is overcome. When the
Company does not have a controlling interest in an entity, but exerts significant influence over the entitys operating and financial decisions, the Company applies the equity method of accounting in which it records in earnings its share of
earnings or losses of the entity. All material intercompany transactions and balances have been eliminated. Any material events or transactions that occurred subsequent to December 31, 2009 through the date of filing of this Annual Report on Form
10-K were reviewed for purposes of determining whether any adjustments or additional disclosures were required to be made to the accompanying consolidated financial statements.



The consolidated financial statements include Lazard Group and Lazard Groups principal operating
subsidiaries: Lazard Frères & Co. LLC (LFNY), a New York limited liability company, along with its subsidiaries, including Lazard Asset Management LLC and its subsidiaries (collectively referred to as LAM); its
French limited liability companies Compagnie Financière Lazard Frères SAS (CFLF) along with its subsidiaries, LFB and Lazard Frères Gestion SAS (LFG) and Maison Lazard SAS and its subsidiaries; and Lazard
& Co., Limited (LCL), through Lazard & Co., Holdings Limited, an English private limited company (LCH), together with their jointly owned affiliates and subsidiaries.



Certain prior period amounts have been
reclassified to conform to the manner of presentation in the current period, including those amounts pertaining to noncontrolling (minority) interests in subsidiaries as required by recent accounting guidance issued by the Financial Accounting
Standards Board (the FASB) (see Note 3 of Notes to Consolidated Financial Statements).



2.    SIGNIFICANT ACCOUNTING POLICIES



The accounting policies below relate to reported amounts on the consolidated financial statements.



Foreign Currency TranslationThe consolidated
financial statements are presented in U.S. dollars. Many of the Companys non-U.S. subsidiaries have a functional currency (i.e., the currency in which operational activities are primarily conducted) that is other than the U.S. dollar,
generally the currency of the country in which such subsidiaries are domiciled. Such subsidiaries assets and liabilities are translated into U.S. dollars at year-end exchange rates, while revenue and expenses are translated at average exchange
rates during the year based on the daily closing exchange rates. Adjustments that result from translating amounts from a subsidiarys functional currency to U.S. dollars are reported in accumulated other comprehensive income (loss), net
of tax (AOCI). Foreign currency remeasurement gains and losses on transactions in non-functional currencies are included on the consolidated statements of operations. Net foreign currency remeasurement gains amounted to $5,713,
$14,654 and $5,691, respectively, for the years ended December 31, 2009, 2008 and 2007, and are included in revenue-other on the respective consolidated statements of operations.



Use of EstimatesIn preparing the
consolidated financial statements, management makes estimates and assumptions regarding:



| |  |  | valuations of assets and liabilities requiring fair value estimates including, but not limited to, investments, derivatives and securities sold, not
yet purchased;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the adequacy of the allowance for doubtful accounts;
| | - |  | ----------------------------------------------------



| |  |  | the realization of deferred taxes and adequacy of tax reserves for uncertain tax positions;
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | the outcome of litigation;
| | - |  | --------------------------



| |  |  | the carrying amount of goodwill and other intangible assets;
| | - |  | ------------------------------------------------------------



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LAZARD GROUP LLC



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



| |  |  | the amortization period of intangible assets;
| | - |  | ---------------------------------------------



| |  |  | share-based compensation plan forfeitures; and
| | - |  | ----------------------------------------------



| |  |  | other matters that affect the reported amounts and disclosure of contingencies in the financial statements.
| | - |  | -----------------------------------------------------------------------------------------------------------



Estimates, by their nature, are based on judgment and available
information. Therefore, actual results could differ from those estimates and could have a material impact on the consolidated financial statements.



Cash and Cash EquivalentsThe Company defines cash equivalents as short-term, highly liquid securities and cash deposits
with original maturities of 90 days or less when purchased.



Cash Deposited with Clearing Organizations and Other Segregated CashPrimarily represents restricted cash deposits made by the Company, including those to satisfy the requirements of
clearing organizations.



Allowance for
Doubtful AccountsWe maintain an allowance for bad debts to provide coverage for estimated losses from our fee and customer receivables. We determine the adequacy of the allowance by estimating the probability of loss based on
managements analysis of the clients creditworthiness and specifically reserve against exposures where we determine the receivables may be impaired, which may include situations where a fee is in dispute or litigation has commenced.



With respect to fees receivable from Financial
Advisory activities, such receivables are generally deemed past due when they are outstanding 60 days from the date of invoice. However, some Financial Advisory transactions include specific contractual payment terms that may vary from one month to
four years (as is the case for our Private Fund Advisory fees) following the invoice date or may be subject to court approval (as is the case with restructuring assignments that include bankruptcy proceedings). In such cases, receivables are deemed
past due when payment is not received by the agreed-upon contractual date or the court approval date, respectively. Financial Advisory fee receivables past due in excess of 180 days are fully provided for unless there is evidence that the balance is
collectable. Asset Management fees are deemed past due and fully provided for when such receivables are outstanding 12 months after the invoice date. Notwithstanding our policy for receivables past due, we specifically reserve against exposures
relating to Financial Advisory and Asset Management fees where we determine receivables are impaired.



See Note 4 of Notes to Consolidated Financial Statements for additional information regarding receivables.



InvestmentsInvestments in debt and
marketable equity securities held either directly or indirectly through asset management funds at the Companys broker-dealer subsidiaries are accounted for at fair value, with any increase or decrease in fair value recorded in earnings in
accordance with standard industry practices. Such amounts are reflected in revenue-other in the consolidated statements of operations.



Investments in debt and marketable equity securities held at the Companys non broker-dealer subsidiaries include trading,
available-for-sale and held-to-maturity securities. Investments in debt and marketable equity securities considered trading securities are accounted for at fair value, with any increase or decrease in fair value
reflected in revenue-other in the consolidated statements of operations. Investments in debt securities considered available-for-sale securities are accounted for at fair value, with any increase or decrease in fair value
reported in AOCI, until such time they are realized and reclassified to earnings. Investments in debt securities considered held-to-maturity securities are accounted for at amortized cost. Declines in the fair value of
available-for-sale and held-to-maturity securities that are determined to be other-than-temporary are charged to earnings, which, upon



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



adoption of new accounting guidance on other-than-temporary impairments of debt securities, may only include the credit loss component of such declines for periods beginning after April 1, 2009.



Other investments include general partnership
interests in alternative asset management funds and private equity investments accounted for at fair value, as well as investments accounted for under the equity method of accounting.



Dividend income is reflected in revenue-other on the consolidated statements of operations.
Interest income includes accretion or amortization of any discount or premium arising at acquisition of the related debt security. Securities transactions and the related revenue and expenses are recorded on a trade date basis.



See Note 5 of Notes to Consolidated Financial Statements for
additional information regarding the Companys investments.



Property-netBuildings, leasehold improvements and furniture and equipment are stated at cost or, in the case of buildings under capital leases, the present value of the future minimum
lease payments, less accumulated depreciation and amortization. Buildings represent owned property and amounts recorded pursuant to capital leases (see Notes 11 and 15 of Notes to Consolidated Financial Statements), with the related obligations
recorded as capital lease obligations. Such buildings are depreciated on a straight-line basis over their estimated useful lives. Leasehold improvements are capitalized and are amortized over the lesser of the economic useful life of the improvement
or the term of the lease. Depreciation of furniture and equipment, including computer hardware and software, is determined on a straight-line basis using estimated useful lives. Depreciation and amortization expense aggregating $22,541, $20,825 and
$16,734 for the years ended December 31, 2009, 2008 and 2007, respectively, is included on the respective consolidated statements of operations in occupancy and equipment or technology and information services, depending on
the nature of the underlying asset. Repairs and maintenance are expensed as incurred.



Goodwill and Other Intangible AssetsAs goodwill has an indefinite life, it is required to be tested for impairment annually or more frequently if circumstances indicate impairment may
have occurred. The Company assesses whether any goodwill recorded by its applicable reporting units is impaired by comparing the fair value of each business with its respective carrying amount. In this process, Lazard uses its best
judgment and information available to it at the time to perform this review and utilizes various valuation techniques in order to determine the applicable fair values.



Intangible assets that are not deemed to have an indefinite life are amortized over their estimated useful lives and are
reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. This analysis is performed by comparing the carrying value of the intangible asset being reviewed for
impairment to the current and expected future cash flows expected to be generated from such asset on an undiscounted basis, including eventual disposition. An impairment loss would be measured for the amount by which the carrying amount of the
intangible asset exceeds its fair value.



See Note
12 of Notes to Consolidated Financial Statements with respect to goodwill and other intangible assets.



Derivative InstrumentsA derivative is typically defined as an instrument whose value is derived from
underlying assets, indices or reference rates, such as a future, forward, swap, or option contract, or other financial instrument with similar characteristics. Derivative contracts often involve future commitments to exchange interest payment
streams or currencies based on a notional or contractual amount (e.g., interest rate swaps or currency forwards) or to purchase or sell other financial instruments at specified terms on a specified date (e.g., options to buy or sell
securities or currencies).



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LAZARD GROUP LLC



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



The Company enters into forward foreign currency exchange rate contracts, interest rate
swaps, interest rate futures, equity swaps and other derivative contracts to hedge exposures to fluctuations in interest rates, currency exchange rates and equity markets. The Company reports its derivative instruments separately as assets and
liabilities unless a legal right of set-off exists under a master netting agreement enforceable by law. The Companys derivative instruments are recorded at their fair value and are included in other assets and other
liabilities on the consolidated statements of financial condition. The Company elected not to apply hedge accounting to its derivative instruments held, except for derivatives hedging available-for-sale securities. Gains and losses
on the Companys derivatives not designated as hedging instruments, as well as gains and losses on derivatives accounted for as fair value hedges, are included in interest income and interest expense, respectively, or
revenue-other, depending on the nature of the underlying item, on the consolidated statements of operations. Furthermore, with respect to derivatives designated as fair value hedges, the hedged item is required to be adjusted for changes
in fair value of the risk being hedged, with such adjustment accounted for in the consolidated statements of operations.



Securities Sold, Not Yet PurchasedSecurities sold, not yet purchased represents liabilities for securities sold for which
payment has been received and the obligations to deliver such securities are included within other liabilities in the consolidated statements of financial condition. These securities are accounted for at fair value, with any increase or
decrease in fair value recorded in earnings in accordance with standard industry practices. Such gains and losses are reflected in revenue-other in the consolidated statements of operations.



Fair Value of Financial Assets and
LiabilitiesThe majority of the Companys financial assets and liabilities are recorded at fair value or at amounts that approximate fair value. Such assets and liabilities include cash and cash equivalents, cash and securities
segregated for regulatory purposes, receivables, investments, derivative instruments and deposits and other customer payables. For information regarding the fair value of the Companys senior and subordinated debt, see Note 14 of Notes to
Consolidated Financial Statements.



Revenue
Recognition



Investment Banking and
Other Advisory FeesFees for M&A and strategic advisory services and restructuring advisory services are recorded when earned, which is generally the date the related transactions are consummated. Expenses that are directly related
to such transactions and billable to clients are deferred to match revenue recognition. Client reimbursements of expenses are presented net in investment banking and other advisory fees on the Companys consolidated statements of
operations. The amount of expenses reimbursed by clients for the years ended December 31, 2009, 2008 and 2007 are $21,673, $18,124 and $19,267, respectively.



Money Management and Incentive FeesMoney management fees are derived from fees for investment management and advisory
services provided to institutional and private clients. Revenue is recorded on an accrual basis primarily based on a percentage of client assets managed. Fees vary with the type of assets managed, with higher fees earned on equity assets,
alternative investment (such as hedge funds) and private equity products, and lower fees earned on fixed income and money market products.



The Company may earn performance-based incentive fees on various investment products, including alternative investment funds such as
hedge funds, private equity funds, and traditional investment strategies. Incentive fees are calculated based on a specified percentage of a funds net appreciation, in some cases in excess of established benchmarks. Incentive fees on private
equity funds also may be earned in the form of a carried interest if profits from investments exceed a specified threshold. These incentive fees are recorded when realized and are paid at the end of the measurement period. Incentive fees on hedge
funds generally are subject to loss carry-forward provisions in which losses incurred by the funds in any year are applied against certain future period net appreciation before any incentive fees can be earned.



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LAZARD GROUP LLC



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



The Company records incentive fees at the end of the relevant performance measurement
period, when potential uncertainties regarding the ultimate realizable amounts have been determined. The performance fee measurement period is generally an annual period, unless an account terminates during the year. These incentive fees received at
the end of the measurement period are not subject to reversal or payback.



Receivables relating to money management and incentive fees are reported in fees receivable on the consolidated statements of financial condition.



Soft Dollar
ArrangementsThe Companys Asset Management business obtains research and other services through soft dollar arrangements. Consistent with the soft dollar safe harbor
established by Section 28(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act), the Asset Management business does not have any contractual obligation or arrangement requiring it to pay for research and other services
obtained through soft dollar arrangements with brokers. Instead, the provider is obligated to pay for the services. Consequently, the Company does not incur any liability and does not accrue any expenses in connection with any research or other
services obtained by the Asset Management business pursuant to such soft dollar arrangements. If the use of soft dollars is limited or prohibited in the future by regulation, we may have to bear the costs of such research and other services.



Share-Based Payment
AwardsShare-based payment awards that do not require future service are expensed immediately and share-based payment awards that require future service are amortized over the requisite service period. The Company recognizes in
compensation and benefits expense (and, in 2009, restructuring expense for individuals impacted by the Companys restructuring plan described in Note 19 of Notes to Consolidated Financial Statements) the amortized
portion of the grant date fair value of the equity awards, net of an estimated forfeiture rate.



Income TaxesDeferred income taxes reflect the net tax effects of temporary differences between the financial reporting
and tax basis 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. Such temporary differences are reflected as deferred tax assets and liabilities and
are included in other assets and other liabilities, respectively, on the consolidated statements of financial condition.



In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of
the deferred tax assets will be realized and, when necessary, a valuation allowance is established. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary
differences become deductible. Management considers the level of historical taxable income, scheduled reversals of deferred taxes, projected future taxable income and tax planning strategies that can be implemented by the Company in making this
assessment. Furthermore, management applies the more likely than not criteria prior to the recognition of a financial statement benefit of a tax position taken or expected to be taken in a tax return with respect to uncertainty in income taxes.



The Company recognizes interest and/or penalties
related to income tax matters in income tax expense.



See Note 20 of Notes to Consolidated Financial Statements for additional information relating to income taxes.



3.    RECENT ACCOUNTING DEVELOPMENTS



Fair Value MeasurementsOn January 1, 2008, the Company adopted, on a prospective basis, the
required provisions of new accounting guidance issued by the FASB on fair value measurements, which, among other



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LAZARD GROUP LLC



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



things, defined fair value, established a framework for measuring fair value and enhanced disclosure requirements about fair value measurements with respect to its financial assets and financial
liabilities. On January 1, 2009, the Company adopted the remaining provisions of the new guidance issued, as permitted by an amendment which delayed the effective date of the new accounting guidance for all nonfinancial assets and nonfinancial
liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). These nonfinancial items included, for example, reporting units required to be measured at fair value for
annual goodwill impairment testing purposes and nonfinancial assets acquired and liabilities assumed in a business combination. Neither the adoption of the required provisions of the new guidance, nor the subsequent adoption of the remaining
provisions of the new guidance as permitted by the amendment, had a material impact on the Companys consolidated financial statements.



On April 1, 2009, the Company adopted, on a prospective basis, additional accounting guidance issued by the FASB on fair value measurements.
The additional accounting guidance assists in the determination of fair value for securities or other financial assets when the volume and level of activity for such items have significantly decreased when compared with normal market activity and
there is no longer sufficient frequency or volume to provide pricing information on an ongoing basis. The additional accounting guidance also assists in determining whether or not a transaction is orderly and whether or not a transaction or quoted
price can be considered in the determination of fair value. Accordingly, the additional accounting guidance does not apply to quoted prices for identical assets or liabilities in active markets categorized as Level 1 in the fair value measurement
hierarchy, and also requires that additional fair value disclosures be included on an interim basis. See Note 6 of Notes to Consolidated Financial Statements for the additional disclosures provided pursuant to the additional accounting guidance. The
adoption of additional guidance regarding fair value measurements did not materially impact the Companys consolidated financial statements.



On January 21, 2010, the FASB amended its guidance on fair value measurement disclosures to add new requirements for disclosures about
transfers into and out of the Level 1 and 2 categories in the fair value measurement hierarchy, and separate disclosures about purchases, sales, issuances, and settlements relating to Level 3 measurements. The amended guidance also clarifies
existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value. The new requirements for disclosures and clarifications of existing disclosures are effective for interim and
annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activities in Level 3 fair value measurements, which are effective for interim and
annual reporting periods beginning after December 15, 2010. The Company does not anticipate that the adoption of the amended guidance on fair value measurement-related disclosures will have a material impact on its consolidated financial statements.



Business CombinationsOn
January 1, 2009, the Company adopted, on a prospective basis, new accounting guidance issued by the FASB on business combinations. The new accounting guidance supersedes or amends other related authoritative literature although it retains the
fundamental requirements that the acquisition method of accounting (previously referred to as the purchase method) be used for all business combinations and that an acquirer be identified for each business combination. The
new guidance also establishes principles and requirements for how the acquirer (a) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in an acquiree;
(b) recognizes and measures the goodwill acquired in a business combination or a gain from a bargain purchase; and (c) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial
effects of a business combination. The new guidance also requires the acquirer to expense, as incurred, costs relating to any acquisitions. The adoption of the new accounting guidance did not materially impact on the Companys consolidated
financial statements. Prospectively, all acquisitions conform to the new accounting guidance.



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LAZARD GROUP LLC



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



On April 1, 2009, the Company adopted amended accounting guidance issued by the FASB for
business combinations. The amended guidance clarifies the initial recognition and measurement, subsequent measurement and accounting and disclosure of assets and liabilities arising from contingencies in a business combination. The adoption of the
amended guidance did not materially impact the Companys consolidated financial statements.



Noncontrolling InterestsOn January 1, 2009, the Company adopted, on a retrospective basis, new presentation and disclosure
requirements issued by the FASB with respect to noncontrolling interests in consolidated financial statements. Additional guidance was also issued to establish accounting and reporting standards for the noncontrolling (minority) interest in a
subsidiary and for the deconsolidation of a subsidiary. The new accounting guidance clarified that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated
financial statements. In addition, the new guidance also changes the way the consolidated income statement is presented by requiring consolidated net income to include amounts attributable to both the parent and the noncontrolling interests with
separate disclosure of each component on the face of the consolidated income statement.



Derivative Instruments and Hedging ActivitiesOn January 1, 2009, the Company adopted, on a prospective basis, new disclosure guidance issued by the FASB regarding derivative instruments
and hedging activities. The new guidance enhances the current disclosure framework for derivative instruments and hedging activities, including how and why an entity uses derivative instruments, how derivative instruments and related hedged items
are accounted for and how derivative instruments and related hedged items affect an entitys financial position, financial performance and cash flows. See Note 7 of Notes to Consolidated Financial Statements for the additional disclosures
provided pursuant to the new guidance. The adoption of the new disclosure guidance did not materially impact the Companys consolidated financial statements.



Fair Value Estimates for Certain Financial InstrumentsOn April 1, 2009, the Company adopted, on a
prospective basis, additional disclosure requirements issued by the FASB regarding the fair value of certain financial instruments. The additional disclosure requirements increase the frequency of qualitative and quantitative information about fair
value estimates for all financial instruments not remeasured on the balance sheet at fair value by requiring this information on an interim basis. The adoption of the additional disclosure requirements did not materially impact the Companys
consolidated financial statements. See Note 14 of Notes to Consolidated Financial Statements.



Other-Than-Temporary Impairments of Debt SecuritiesOn April 1, 2009, the Company adopted, on a prospective basis, new accounting guidance issued by the FASB with respect to the recognition
and presentation of other-than-temporary impairments pertaining to debt securities. The new accounting guidance requires greater clarity about the credit and non-credit components of debt securities that are not expected to be sold and whose fair
value is below amortized cost, and also requires increased disclosures regarding expected cash flows, credit losses and an aging of securities with unrealized losses. The adoption of the new accounting guidance did not materially impact the
Companys consolidated financial statements. See Note 5 of Notes to Consolidated Financial Statements.



Employers Post-retirement Benefit PlansIn December 2008, the FASB amended its disclosure requirements with respect to
employers post-retirement benefit plan assets by requiring more detailed disclosures about an employers plan assets, including an employers investment strategies, major categories of plan assets, concentrations of risk within plan
assets and valuation techniques used to measure the fair value of plan assets. The disclosures about plan assets required by this amendment are required to be provided for fiscal years ending after December 15, 2009. Upon initial application,
the provisions of this amendment are not



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LAZARD GROUP LLC



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



required for earlier periods that are presented for comparative purposes. Earlier application of the provisions of this amendment is permitted. The adoption of this amendment did not materially
impact the Companys consolidated financial statements in 2009.



VIEsIn June 2009, the FASB amended its guidance on VIEs. The amended guidance changes how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be
consolidated. It also requires a company to provide additional disclosures about its involvement with VIEs and any significant changes in risk exposure due to that involvement. The requirements of the amended accounting guidance are effective for
interim and annual periods beginning after November 15, 2009 and early adoption is prohibited. On January 27, 2010, the FASB voted to defer the application of its guidance on consolidation of a reporting enterprises interest in an entity when
certain conditions are met. This deferral is effective for interim and annual periods beginning after November 15, 2009. The Company does not anticipate that the adoption of the amended guidance and related disclosures will have a material impact on
its consolidated financial statements.



|4. | RECEIVABLESNET AND DEPOSITS AND OTHER CUSTOMER PAYABLES
|-- | --------------------------------------------------------



ReceivablesnetRepresents receivables from banks, fees, customers and other and related
parties.



Receivables from banks represent those
related to LFBs short-term inter-bank deposits. The level of these inter-bank deposits is primarily driven by the level of LFB customer and bank-related interest-bearing time and demand deposits, which can fluctuate significantly on a daily
basis. As the amount of such deposits held at LFB changes, there is generally a corresponding, but indirect, impact on the level of short-term inter-bank deposits.



In connection with collateralized lending activities of LFB, the Company typically receives a pledge of
specifically identified securities of equal or greater value than the amount of the cash loaned. Collateralized customer loan receivables, which amounted to $2,305 and $8,907 at December 31, 2009 and 2008, respectively, were collateralized by
securities of equal or greater value at each such date. Securities owned by customers and pledged to collateralize secured loan receivables are not reflected on the consolidated statements of financial condition.



Customers and other receivables at December 31, 2009 and 2008
include $4,466 and $13,109, respectively, of loans by LFB to managing directors and employees in France that are made in the ordinary course of business at market terms.



Receivables are stated net of an estimated allowance for doubtful accounts of $11,575 and $15,883 at December 31, 2009
and 2008, respectively, for past due amounts and for specific accounts deemed uncollectible. The Company recorded bad debt expense of $4,509, $5,388 and $540 for the years ended December 31, 2009, 2008 and 2007, respectively. In addition, the
Company recorded charge-offs, foreign currency translation and other adjustments, which resulted in a net increase (decrease) to the allowance for doubtful accounts of $(8,817), $(2,795) and $1,434 for the years ended December 31, 2009, 2008 and
2007, respectively. At December 31, 2009 and 2008, the Company had $14,150 and $17,916, respectively, of receivables deemed past due or uncollectible.



Deposits and Other Customer PayablesPrincipally relates to LFB customer-related interest-bearing time and demand
deposits, short-term inter-bank borrowing with banks and amounts due on collateralized borrowing activities. Collateralized borrowing activities amounted to $18,008 and $15,170 at December 31, 2009 and 2008, respectively, and were fully
collateralized with pledged assets of equal or greater value at each such date.



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LAZARD GROUP LLC



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



|5. | INVESTMENTS
|-- | -----------



The Companys investments and securities sold, not yet purchased consist of the following at December 31, 2009 and 2008:



|                                                                     |  |              |         |      |   |        
|-------------------------------------------------------------------- |  | ------------ | ------- | ---- | - | -------
|                                                                     |  | December 31,
|                                                                     |  | 2009         |         | 2008
|Debt:                                                                |  |              |         |      |   |        
|U.S. Government and agencies                                         |  | $            | 147,507 |      | $ |       
|                                                                     |  |              |         |      |   |        
|Other:                                                               |  |              |         |      |   |        
|Non-U.S. Governments and agencies                                    |  |              | 43,501  |      |   | 36,396 
|U.S. states and municipals                                           |  |              | 15,728  |      |   |       
|Corporates                                                           |  |              | 254,113 |      |   | 296,674
|                                                                     |  |              |         |      |   |        
|                                                                     |  |              | 313,342 |      |   | 333,070
|                                                                     |  |              |         |      |   |        
|                                                                     |  |             
|Equities                                                             |  |              | 82,442  |      |   | 71,105 
|                                                                     |  |              |         |      |   |        
|Other:                                                               |  |              |         |      |   |        
|Interest in LAM alternative asset management funds:                  |  |              |         |      |   |        
|General Partner (GP) interests owned                               |  |              | 50,080  |      |   | 35,300 
|GP interests consolidated but not owned                              |  |              | 13,038  |      |   | 20,866 
|Private equity:                                                      |  |              |         |      |   |        
|Investments owned                                                    |  |              | 102,983 |      |   | 83,931 
|Investments consolidated but not owned                               |  |              | 35,743  |      |   |       
|Equity method                                                        |  |              | 62,558  |      |   | 75,695 
|                                                                     |  |              |         |      |   |        
|                                                                     |  |              | 264,402 |      |   | 215,792
|                                                                     |  |              |         |      |   |        
|Total investments                                                    |  |              | 807,693 |      |   | 619,967
|Less:                                                                |  |              |         |      |   |        
|Debt at amortized cost                                               |  |              | 136,630 |      |   |       
|Equity method investments                                            |  |              | 62,558  |      |   | 75,695 
|                                                                     |  |              |         |      |   |        
|Investments, at fair value                                           |  | $            | 608,505 |      | $ | 544,272
|                                                                     |  |              |         |      |   |        
|Securities sold, not yet purchased (included in other liabilities) |  | $            | 5,179   |      | $ | 6,975  
|                                                                     |  |              |         |      |   |        



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LAZARD GROUP LLC



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



Debt investments at December 31, 2009 and 2008 were categorized as follows:



|                                  |  |              |         |      |   |        
|--------------------------------- |  | ------------ | ------- | ---- | - | -------
|                                  |  | December 31,
|                                  |  | 2009         |         | 2008
|Trading securities:               |  |              |         |      |   |        
|U.S. Government and agencies      |  | $            | 21,094  |      | $ |       
|Non-U.S. Governments and agencies |  |              | 33,284  |      |   | 36,396 
|U.S. states and municipals        |  |              | 15,728  |      |   |       
|Corporates                        |  |              | 450     |      |   | 7,573  
|                                  |  |              |         |      |   |        
|                                  |  |              | 70,556  |      |   | 43,969 
|                                  |  |              |         |      |   |        
|Available-for-sale securities:    |  |              |         |      |   |        
|Corporates                        |  |              | 253,663 |      |   | 289,101
|                                  |  |              |         |      |   |        
|                                  |  |             
|Held-to-maturity securities:      |  |              |         |      |   |        
|U.S. Government and agencies      |  |              | 126,413 |      |   |       
|Non-U.S. Government and agencies  |  |              | 10,217  |      |   |       
|                                  |  |              |         |      |   |        
|                                  |  |              | 136,630 |      |   |       
|                                  |  |              |         |      |   |        
|Total debt securities             |  | $            | 460,849 |      | $ | 333,070
|                                  |  |              |         |      |   |        



Substantially all of the corporate and non-U.S. Government debt securities are held by LFB and primarily consist of fixed and floating rate European corporate and French government debt securities. Such
securities are typically held long-term, as part of its asset-liability management program.



Effective July 1, 2008, certain debt securities held by LFB with a carrying value of $236,999 on that date, which were previously designated as trading securities, were redesignated as
available-for-sale securities. Such re-designation represented a non-cash transaction between trading and available-for-sale securities.



The fair value and amortized cost basis pertaining to debt securities classified as
available-for-sale at December 31, 2009, by maturity date/first call date, are as follows:



|                               |  |            |          |                    |   |        
|------------------------------ |  | ---------- | -------- | ------------------ | - | -------
|Maturity Date/First Call Date  |  | Fair Value |          | AmortizedCostBasis
|Within one year                |  | $          | 38,715   |                    | $ | 40,619 
|After 1 year through 5 years   |  |            | 136,222  |                    |   | 142,361
|After 5 years through 10 years |  |            | 63,444   |                    |   | 75,360 
|After 10 years                 |  |            | 15,282   |                    |   | 14,646 
|                               |  |            |          |                    |   |        
|                               |  |            | $253,663 |                    | $ | 272,986
|                               |  |            |          |                    |   |        



Debt investments include corporate perpetual securities that are callable. Such securities are listed in the table above based on their respective first call dates. All other
available-for-sale securities are listed in the table based on their contractual maturities.



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LAZARD GROUP LLC



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



Debt securities classified as available-for-sale at December 31, 2009 and
2008 that are in an unrealized loss position are as follows:



|                                                                 |  |                                                                  |  |                                                                  |  |                                                                  |  |            |  |                 |  |            |  |                
|---------------------------------------------------------------- |  | ---------------------------------------------------------------- |  | ---------------------------------------------------------------- |  | ---------------------------------------------------------------- |  | ---------- |  | --------------- |  | ---------- |  | ---------------
|December 31, 2009                                                |  | December 31, 2008                                               
|Securities in a Continuous Loss Position for Less than 12 Months |  | Securities in a Continuous Loss Position for 12 Months or Longer |  | Securities in a Continuous Loss Position for Less than 12 Months |  | Securities in a Continuous Loss Position for 12 Months or Longer
|Fair Value                                                       |  | Unrealized Loss                                                  |  | Fair Value                                                       |  | Unrealized Loss                                                  |  | Fair Value |  | Unrealized Loss |  | Fair Value |  | Unrealized Loss
|$                                                               |  | $                                                               |  | $166,094                                                         |  | $21,381                                                          |  | $210,866   |  | $52,883         |  | $58,368    |  | $10,794        
|                                                                 |  |                                                                  |  |                                                                  |  |                                                                  |  |            |  |                 |  |            |  |                



The unrealized loss for securities in a continuous loss position for 12 months or longer at December 31, 2009 has been reduced by an other-than-temporary impairment charge of $1,825 reclassified from AOCI
to revenue-other on the consolidated statement of operations during the year ended December 31, 2009. Such amount represents managements estimate of the credit loss component of debt securities whose fair value is below its
amortized cost. There was no other-than-temporary impairment charge recognized during the years ended December 31, 2008 and 2007.



LFB does not intend to sell its debt securities classified as available-for-sale, nor is it more likely than not that LFB will be
required to sell such debt securities before their anticipated recovery. Based on the qualitative and quantitative analysis performed, debt securities in unrealized loss positions were not considered to be other-than-temporarily impaired at December
31, 2009, except for the amount recognized above.



The fair value and amortized cost basis pertaining to debt securities classified as held-to-maturity at December 31, 2009, by maturity date, are as follows:



|                             |  |            |         |                    |   |        
|---------------------------- |  | ---------- | ------- | ------------------ | - | -------
|Maturity Date                |  | Fair Value |         | AmortizedCostBasis
|After 1 year through 5 years |  | $          | 137,776 |                    | $ | 136,630
|                             |  |            |         |                    |   |        



There were no debt securities classified as held-to-maturity at December 31, 2009 that were in an unrecognized loss position.



Equities principally represent the Companys investments in marketable equity securities of large-, mid-
and small-cap domestic, international and global companies to seed new Asset Management products and includes investments in public and private asset management funds managed both by LAM and third-party asset managers.



In 2008, LFNY was a party to a Prime Brokerage Agreement with
LBI for certain accounts involving investment strategies managed by LAM. On September 9, 2008, LAM requested a transfer of such accounts, of which $11,368 was not received. On September 15, 2008, LBI, the ultimate parent company in the Lehman Group,
filed for protection under Chapter 11 of the United States Bankruptcy Code and a number of Lehman Group entities in the UK entered into administration proceedings under the Insolvency Act 1986. In addition, the Securities Investor Protection
Corporation (SIPC) commenced liquidation proceedings on September 19, 2008 pursuant to the Securities Investor Protection Act of 1970, as amended, with respect to Lehman Brothers Holdings, Inc. The Chapter 11 filing, Insolvency Act
Administration and SIPC proceedings exposed Lazard to possible loss due to counterparty credit and other risk. During 2008, the Company reserved the entire amount of such possible loss, and, through December 31, 2009, no funds have been received by
the Company. We continue to actively seek recovery of all amounts.



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LAZARD GROUP LLC



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



Interests in LAM alternative asset management funds represent (i) GP interests owned by
Lazard in LAM-managed alternative asset management funds and (ii) GP interests consolidated by the Company pertaining to noncontrolling interests in LAM alternative asset management funds. Such noncontrolling interests in LAM alternative asset
management funds, which represent GP interests held directly by certain of our LAM managing directors or employees of the Company, are deemed to be controlled by, and therefore consolidated by, the Company in accordance with U.S. GAAP.
Noncontrolling interests are presented within members equity on the consolidated statements of financial condition (see Note 16 of Notes to Consolidated Financial Statements).



Private equity investments owned by Lazard are primarily
comprised of investments in private equity funds and direct private equity interests. Such investments primarily include (i) a mezzanine fund, which invests in mezzanine debt of a diversified selection of small- to mid-cap European companies; (ii)
Corporate Partners II Limited (CP II), a private equity fund targeting significant noncontrolling-stake investments in established public and private companies and (iii) Lazard Senior Housing Partners LP (Senior Housing),
which acquires companies and assets in the senior housing, extended-stay hotel and shopping center sectors.



Private equity investments consolidated but not owned by Lazard are related solely to Lazards establishment of a private equity
business with the Edgewater Funds (Edgewater), a Chicago-based private equity firm, through the acquisition of Edgewaters management vehicles on July 15, 2009. The acquisition was structured as a purchase by Lazard of interests in
a holding company that owns interests in the general partner and management company entities of the current Edgewater private equity funds (the Edgewater Acquisition). Edgewater is focused on buyout and growth equity investments in
middle market companies. The economic interests that the Company does not own are owned by the current leadership team and other investors in the Edgewater management vehicles.



Equity method investments include investments made in the first quarter of 2008 in Sapphire Industrials Corp.
(Sapphire) (approximately $13,000 of which was subsequently written-off in the fourth quarter of 2009 principally relating to the Companys investment in Sapphire warrants) and Merchant Bankers Asociados (MBA), an
Argentina-based financial advisory services firm with offices across Central and South America and the parent company of MBA Banco de Inversiones (see Notes 9 and 15 of Notes to Consolidated Financial Statements for additional information regarding
MBA and Sapphire, respectively).



The Company
recognized gross investment gains and losses on investments measured at fair value for the years ended December 31, 2009, 2008 and 2007 in revenue-other on the respective consolidated statements of operations as follows:



|                        |  |                         |        |      |   |         |  |   |       
|----------------------- |  | ----------------------- | ------ | ---- | - | ------- |  | - | ------
|                        |  | Year Ended December 31,
|                        |  | 2009                    |        | 2008 |   | 2007   
|Gross investment gains  |  | $                       | 53,319 |      | $ | 52,748  |  | $ | 63,721
|Gross investment losses |  | $                       | 19,740 |      | $ | 164,135 |  | $ | 47,501



The table above includes gross unrealized investment gains and losses pertaining to trading securities as follows:



|                                   |  |                         |       |      |   |        |  |   |       
|---------------------------------- |  | ----------------------- | ----- | ---- | - | ------ |  | - | ------
|                                   |  | Year Ended December 31,
|                                   |  | 2009                    |       | 2008 |   | 2007  
|Gross unrealized investment gains  |  | $                       | 3,723 |      | $ | 18,672 |  | $ | 8,610 
|Gross unrealized investment losses |  | $                       |      |      | $ | 9,125  |  | $ | 24,186



In addition, within AOCI, the Company recorded gross pre-tax unrealized investment losses of $195, $62,655 and $1,022 during the years ended
December 31, 2009, 2008 and 2007, respectively, and gross pre-tax



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LAZARD GROUP LLC



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



unrealized investment gains of $46,468, $308 and $0 during the years ended December 31, 2009, 2008 and 2007, respectively, pertaining to debt securities held at LFB that are designated as
available-for-sale. The average cost basis is utilized for purposes of calculating realized investment gains and losses.



|6. | FAIR VALUE MEASUREMENTS
|-- | -----------------------



Lazard categorizes its investments and certain other assets and liabilities recorded at fair value into a three-level fair value hierarchy as
follows:



|Level 1. | Assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that Lazard has the ability to access.
|-------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Level 2. | Assets and liabilities whose values are based on quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or
liabilities in non-active markets or inputs other than quoted prices that are directly observable or derived principally from or corroborated by market data.
|-------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Level 3. | Assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value
measurement. These inputs reflect managements own assumptions about the assumptions a market participant would use in pricing the asset or liability. Items included in Level 3 include securities or other financial assets whose volume and level
of activity have significantly decreased when compared with normal market activity and there is no longer sufficient frequency or volume to provide pricing information on an ongoing basis.
|-------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Principally all of the Companys investments in corporate
debt securities are considered Level 2 investments with such fair value based on observable data, principally broker quotes as provided by external pricing services. The Companys other debt securities at fair value are considered Level 1
investments with such fair value based on unadjusted quoted prices in active markets.



The fair value of equities is principally classified as Level 1 or Level 2 as follows: marketable equity securities are classified as Level 1 and are valued based on the last trade price on the primary
exchange for that security; public asset management funds are classified as Level 1 and are valued based on the reported closing price for the fund; and investments in private asset management funds are classified as Level 2 and are primarily valued
based on information provided by fund managers and, secondarily, from external pricing services to the extent managed by LAM.



The fair value of interests in LAM alternative asset management funds is classified as Level 2 and is based on information provided by
external pricing services.



The fair value of
private equity investments is classified as Level 3 and is based on financial statements provided by fund managers, appraisals and internal valuations.



Where information reported is based on broker quotes, the Company generally obtains one quote/price per instrument. In some cases, quotes
related to corporate bonds obtained through external pricing services represent the average of several broker quotes.



Where information reported is based on data received from fund managers or from external pricing services, the Company reviews such
information to ascertain at which level within the fair value hierarchy to classify the investment.



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LAZARD GROUP LLC



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



The following tables present the categorization of investments and certain other assets
and liabilities measured at fair value on a recurring basis as of December 31, 2009 and 2008 into a three-level fair value hierarchy in accordance with fair value measurement disclosure requirements:



|                                                    |  |                                                                     |         |         |   |         |  |       |         |  |   |        
|--------------------------------------------------- |  | ------------------------------------------------------------------- | ------- | ------- | - | ------- |  | ----- | ------- |  | - | -------
|                                                    |  | Fair Value Measurements on a Recurring BasisAs of December 31, 2009
|                                                    |  | Level 1                                                             |         | Level 2 |   | Level 3 |  | Total
|Assets:                                             |  |                                                                     |         |         |   |         |  |       |         |  |   |        
|Investments:                                        |  |                                                                     |         |         |   |         |  |       |         |  |   |        
|Debt (excluding securities at amortized cost)       |  | $                                                                   | 70,556  |         | $ | 253,663 |  | $     |        |  | $ | 324,219
|Equities                                            |  |                                                                     | 65,932  |         |   | 16,205  |  |       | 305     |  |   | 82,442 
|Other (excluding equity method investments):        |  |                                                                     |         |         |   |         |  |       |         |  |   |        
|Interest in LAM alternative asset management funds: |  |                                                                     |         |         |   |         |  |       |         |  |   |        
|GP interests owned                                  |  |                                                                     |        |         |   | 50,080  |  |       |        |  |   | 50,080 
|GP interests consolidated                           |  |                                                                     |        |         |   | 13,038  |  |       |        |  |   | 13,038 
|Private equity:                                     |  |                                                                     |         |         |   |         |  |       |         |  |   |        
|Investments owned                                   |  |                                                                     |        |         |   | 2,812   |  |       | 100,171 |  |   | 102,983
|Investments consolidated but not owned              |  |                                                                     |        |         |   |        |  |       | 35,743  |  |   | 35,743 
|Derivatives                                         |  |                                                                     | 5       |         |   | 916     |  |       |        |  |   | 921    
|                                                    |  |                                                                     |         |         |   |         |  |       |         |  |   |        
|Total Assets                                        |  | $                                                                   | 136,493 |         | $ | 336,714 |  | $     | 136,219 |  | $ | 609,426
|                                                    |  |                                                                     |         |         |   |         |  |       |         |  |   |        
|Liabilities:                                        |  |                                                                     |         |         |   |         |  |       |         |  |   |        
|Securities sold, not yet purchased                  |  | $                                                                   | 5,179   |         | $ |        |  | $     |        |  | $ | 5,179  
|Derivatives                                         |  |                                                                     |        |         |   | 17,383  |  |       |        |  |   | 17,383 
|                                                    |  |                                                                     |         |         |   |         |  |       |         |  |   |        
|Total Liabilities                                   |  | $                                                                   | 5,179   |         | $ | 17,383  |  | $     |        |  | $ | 22,562 
|                                                    |  |                                                                     |         |         |   |         |  |       |         |  |   |        



|                                                    |  |                                                                     |        |         |   |         |  |       |        |  |   |        
|--------------------------------------------------- |  | ------------------------------------------------------------------- | ------ | ------- | - | ------- |  | ----- | ------ |  | - | -------
|                                                    |  | Fair Value Measurements on a Recurring BasisAs of December 31, 2008
|                                                    |  | Level 1                                                             |        | Level 2 |   | Level 3 |  | Total
|Assets:                                             |  |                                                                     |        |         |   |         |  |       |        |  |   |        
|Investments:                                        |  |                                                                     |        |         |   |         |  |       |        |  |   |        
|Debt                                                |  | $                                                                   | 43,969 |         | $ | 289,101 |  | $     |       |  | $ | 333,070
|Equities                                            |  |                                                                     | 54,108 |         |   | 14,544  |  |       | 2,453  |  |   | 71,105 
|Other (excluding equity method investments):        |  |                                                                     |        |         |   |         |  |       |        |  |   |        
|Interest in LAM alternative asset management funds: |  |                                                                     |        |         |   |         |  |       |        |  |   |        
|GP interests owned                                  |  |                                                                     |       |         |   | 35,300  |  |       |       |  |   | 35,300 
|GP interests consolidated                           |  |                                                                     |       |         |   | 20,866  |  |       |       |  |   | 20,866 
|Private equity investments owned                    |  |                                                                     |       |         |   |        |  |       | 83,931 |  |   | 83,931 
|Derivatives                                         |  |                                                                     |       |         |   | 4,661   |  |       |       |  |   | 4,661  
|                                                    |  |                                                                     |        |         |   |         |  |       |        |  |   |        
|Total Assets                                        |  | $                                                                   | 98,077 |         | $ | 364,472 |  | $     | 86,384 |  | $ | 548,933
|                                                    |  |                                                                     |        |         |   |         |  |       |        |  |   |        
|Liabilities:                                        |  |                                                                     |        |         |   |         |  |       |        |  |   |        
|Securities sold, not yet purchased                  |  | $                                                                   | 6,975  |         | $ |        |  | $     |       |  | $ | 6,975  
|Derivatives                                         |  |                                                                     |       |         |   | 43,990  |  |       |       |  |   | 43,990 
|                                                    |  |                                                                     |        |         |   |         |  |       |        |  |   |        
|Total Liabilities                                   |  | $                                                                   | 6,975  |         | $ | 43,990  |  | $     |       |  | $ | 50,965 
|                                                    |  |                                                                     |        |         |   |         |  |       |        |  |   |        



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LAZARD GROUP LLC



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



The following tables provide a summary of changes in fair value of the Companys
Level 3 assets for the years ended December 31, 2009 and 2008:



|                                       |  |                                                    |        |                                                               |   |       |                                                   |  |   |                                       |   |               |   |       |  |   |        
|-------------------------------------- |  | -------------------------------------------------- | ------ | ------------------------------------------------------------- | - | ----- | ------------------------------------------------- |  | - | ------------------------------------- | - | ------------- | - | ----- |  | - | -------
|                                       |  | Level 3 AssetsFor the Year Ended
December 31, 2009
|                                       |  | BeginningBalance                                   |        | Net Unrealized/RealizedGains (Losses)Included InRevenue-Other |   |       | NetPurchases,IssuancesandSettlements/Acquisitions |  |   | ForeignCurrencyTranslationAdjustments |   | EndingBalance
|                                       |  |                                                    |        |                                                              
|Investments:                           |  |                                                    |        |                                                               |   |       |                                                   |  |   |                                       |   |               |   |       |  |   |        
|Equities                               |  | $                                                  | 2,453  |                                                               | $ | (97   | )                                                 |  | $ | (2,051                                | ) |               | $ |      |  | $ | 305    
|Private equity:                        |  |                                                    |        |                                                               |   |       |                                                   |  |   |                                       |   |               |   |       |  |   |        
|Investments owned                      |  |                                                    | 83,931 |                                                               |   | 2,769 |                                                   |  |   | 11,932                                |   |               |   | 1,539 |  |   | 100,171
|Investments consolidated but not owned |  |                                                    |       |                                                               |   | 3,824 |                                                   |  |   | 31,919                                |   |               |   |      |  |   | 35,743 
|                                       |  |                                                    |        |                                                               |   |       |                                                   |  |   |                                       |   |               |   |       |  |   |        
|Total Level 3 Assets                   |  | $                                                  | 86,384 |                                                               | $ | 6,496 |                                                   |  | $ | 41,800                                |   |               | $ | 1,539 |  | $ | 136,219
|                                       |  |                                                    |        |                                                               |   |       |                                                   |  |   |                                       |   |               |   |       |  |   |        



|                                 |  |                                                    |        |                                                               |   |         |                                                   |  |   |                                       |   |  |               |        |   |  |   |       
|-------------------------------- |  | -------------------------------------------------- | ------ | ------------------------------------------------------------- | - | ------- | ------------------------------------------------- |  | - | ------------------------------------- | - |  | ------------- | ------ | - |  | - | ------
|                                 |  | Level 3 AssetsFor the Year Ended
December 31, 2008
|                                 |  | BeginningBalance                                   |        | Net Unrealized/RealizedGains (Losses)Included InRevenue-Other |   |         | NetPurchases,IssuancesandSettlements/Acquisitions |  |   | ForeignCurrencyTranslationAdjustments |   |  | EndingBalance
|                                 |  |                                                    |        |                                                              
|Investments:                     |  |                                                    |        |                                                               |   |         |                                                   |  |   |                                       |   |  |               |        |   |  |   |       
|Equities                         |  | $                                                  | 4,469  |                                                               | $ | 212     |                                                   |  | $ | (1,944                                | ) |  | $             | (284   | ) |  | $ | 2,453 
|Private equity investments owned |  |                                                    | 74,051 |                                                               |   | (12,391 | )                                                 |  |   | 25,733                                |   |  |               | (3,462 | ) |  |   | 83,931
|                                 |  |                                                    |        |                                                               |   |         |                                                   |  |   |                                       |   |  |               |        |   |  |   |       
|Total Level 3 Assets             |  | $                                                  | 78,520 |                                                               | $ | (12,179 | )                                                 |  | $ | 23,789                                |   |  | $             | (3,746 | ) |  | $ | 86,384
|                                 |  |                                                    |        |                                                               |   |         |                                                   |  |   |                                       |   |  |               |        |   |  |   |       



There were net realized gains (losses) of $(682) and $1,810 included in income during the years ended December 31, 2009 and 2008, respectively, with respect to Level 3 assets.



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LAZARD GROUP LLC



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



|7. | DERIVATIVES
|-- | -----------



The table below represents the fair values of the Companys derivative assets and liabilities reported within other assets
and other liabilities on the accompanying consolidated statements of financial condition as of December 31, 2009 and 2008:



|                                                 |  |                                              |        |                                                  |   |              |  |      |       |      |   |        |  |   |        |  |   |       
|------------------------------------------------ |  | -------------------------------------------- | ------ | ------------------------------------------------ | - | ------------ |  | ---- | ----- | ---- | - | ------ |  | - | ------ |  | - | ------
|                                                 |  | Derivatives Designatedas Hedging Instruments |        | Derivatives Not Designatedas Hedging Instruments |   | Total       
|                                                 |  | December 31,                                 |        | December 31,                                     |   | December 31,
|                                                 |  | 2009                                         |        | 2008                                             |   | 2009         |  | 2008 |       | 2009 |   | 2008  
|Derivative Assets:                               |  |                                              |        |                                                  |   |              |  |      |       |      |   |        |  |   |        |  |   |       
|Forward foreign currency exchange rate contracts |  | $                                            |       |                                                  | $ |             |  | $    | 836   |      | $ | 4,377  |  | $ | 836    |  | $ | 4,377 
|Interest rate swaps                              |  |                                              |       |                                                  |   | 75           |  |      | 80    |      |   | 209    |  |   | 80     |  |   | 284   
|Other derivatives                                |  |                                              |       |                                                  |   |             |  |      | 5     |      |   |       |  |   | 5      |  |   |      
|                                                 |  |                                              |        |                                                  |   |              |  |      |       |      |   |        |  |   |        |  |   |       
|                                                 |  | $                                            |       |                                                  | $ | 75           |  | $    | 921   |      | $ | 4,586  |  | $ | 921    |  | $ | 4,661 
|                                                 |  |                                              |        |                                                  |   |              |  |      |       |      |   |        |  |   |        |  |   |       
|Derivative Liabilities:                          |  |                                              |        |                                                  |   |              |  |      |       |      |   |        |  |   |        |  |   |       
|Forward foreign currency exchange rate contracts |  | $                                            |       |                                                  | $ |             |  | $    | 2,213 |      | $ | 26,593 |  | $ | 2,213  |  | $ | 26,593
|Interest rate swaps                              |  |                                              | 14,147 |                                                  |   | 12,980       |  |      | 56    |      |   | 1,051  |  |   | 14,203 |  |   | 14,031
|Equity swaps                                     |  |                                              |       |                                                  |   |             |  |      | 967   |      |   | 3,366  |  |   | 967    |  |   | 3,366 
|                                                 |  |                                              |        |                                                  |   |              |  |      |       |      |   |        |  |   |        |  |   |       
|                                                 |  | $                                            | 14,147 |                                                  | $ | 12,980       |  | $    | 3,236 |      | $ | 31,010 |  | $ | 17,383 |  | $ | 43,990
|                                                 |  |                                              |        |                                                  |   |              |  |      |       |      |   |        |  |   |        |  |   |       



The effect of gains (losses) with respect to derivatives not designated as hedging instruments on the accompanying consolidated statement of operations for the year ended December 31, 2009 (predominantly
reflected in revenue-other), by type of derivative, is as follows:



|                                                 |  |                             |         |  
|------------------------------------------------ |  | --------------------------- | ------- | -
|                                                 |  | Year EndedDecember 31, 2009 |        
|Forward foreign currency exchange rate contracts |  | $                           | 3,311   |  
|Interest rate swaps                              |  |                             | 625     |  
|Equity swaps and other derivatives               |  |                             | (13,810 | )
|                                                 |  |                             |         |  
|                                                 |  | $                           | (9,874  | )
|                                                 |  |                             |         |  



With respect to derivatives
designated as hedging instruments, such derivatives relate to interest rate swaps that hedge available-for-sale securities and are being accounted for as fair value hedges. For the year ended December 31, 2009, net pre-tax losses of
$1,263 pertaining to such interest rate swaps were recognized, which was substantially offset by an equivalent amount on the hedged risk portion of such available-for-sale securities.



|8. | LAM MERGER TRANSACTION
|-- | ----------------------



On September 25, 2008, the Company, LAM and LAZ Sub I, LLC, a then newly-formed subsidiary of LFNY, completed the merger of LAZ Sub I, LLC
with and into LAM (the LAM Merger). Prior to the LAM Merger, the common equity interests of LAM were held by LFNY and certain other equity interests of LAM, representing contingent payments should a fundamental transaction occur, as
described below, were held by present and former employees of LAM. Following the LAM Merger, all equity interests of LAM are owned directly or indirectly by LFNY. The equity interests of LAM that were held, prior to the LAM Merger, by the



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



then present and former employees of LAM and its subsidiaries (and certain related phantom rights issued as incentive compensation) entitled the holders to payments totaling approximately 23% of
the net proceeds or imputed valuation of LAM (after deductions for payments to creditors of LAM and the return of capital in LAM) in connection with certain specified fundamental transactions concerning LAM or Lazard, including a sale of LAM or
Lazard, certain non-ordinary course asset sales and major acquisitions. As a consequence of the LAM Merger, during the three month period ended September 30, 2008, the Company recorded a reduction to its after-tax income of $192,123, consisting of
compensation and benefits expense of $197,550 related to the equity interests of LAM held by present and former employees of LAM and $2,000 of non-compensation related transaction costs (together aggregating to a reduction of operating income of
$199,550), with these charges partially offset by an associated income tax credit of $7,427.



The aggregate non-contingent consideration relating to the equity interests of LAM (and the phantom rights referred to above) held by present and former employees of LAM and its subsidiaries (the
Transaction Consideration) consists of (i) cash payments made from the closing of the LAM Merger through January 2, 2009 of approximately $60,100, (ii) a cash payment on October 31, 2011 of approximately $90,300 and (iii) an issuance on
October 31, 2011 of 2,201,457 shares of Lazard Ltds Class A common stock (plus additional shares of Class A common stock in an amount determined by reference to the cash dividends paid on Class A common stock since the closing of the LAM
Merger), subject, in the case of clause (ii) and (iii) and with respect to certain present employees of LAM and its subsidiaries, to delayed payment/issuance until the eighth anniversary of the closing of the LAM Merger if the applicable employee is
no longer employed by Lazard or its affiliates on October 31, 2011, subject to certain exceptions. The merger agreement also generally provides that if there is a change in control of the Company or a sale of LAM, any and all of the Transaction
Consideration will be payable as of the date of such change in control. The related liabilities for the present value of the unpaid cash consideration have been recorded in accrued compensation and benefits and other
liabilities, and amounted to $14,252 and $65,308, respectively, as of December 31, 2009, and $16,013 and $60,324, respectively, as of December 31, 2008.



In connection with the LAM Merger, Lazard Group recorded a related party payable to subsidiaries of Lazard Ltd of $64,305 and $64,512 at
December 31, 2009 and 2008, respectively, which corresponds to the increase in stockholders equity recorded by Lazard Ltd for such merger (see Note 21 of Notes to Consolidated Financial Statements).



|9. | BUSINESS ACQUISITIONS AND JOINT VENTURE INVESTMENT
|-- | --------------------------------------------------



On July 15, 2009, the Company established a private equity business with Edgewater, a private equity firm based
in Chicago, Illinois, through the Edgewater Acquisition. Following such acquisition, Edgewaters current leadership team retained a substantial economic interest in such entities. Edgewater primarily manages two middle market funds, Edgewater
Growth Capital Partners, L.P. and Edgewater Growth Capital Partners II, L.P. (the underlying funds), with an aggregate of approximately $700,000 of capital raised. The acquisition was structured as a purchase by Lazard Group of interests
in a holding company that in turn owns interests in the general partner and management company entities of the current Edgewater private equity funds.



The aggregate fair value of the consideration recognized by the Company at the acquisition date was $61,624. Such consideration consisted of
(i) a one-time cash payment, (ii) 1,142,857 shares of Class A common stock (the Initial Shares) and (iii) up to 1,142,857 additional shares of Class A common stock subject to earnout criteria and payable over time (the Earnout
Shares). The Initial Shares are subject to transfer restrictions and forfeiture provisions that lapse only upon the achievement of certain performance thresholds for



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



the next Edgewater fund that must be met by July 15, 2011. The Earnout Shares will be issued only if certain performance thresholds for the next two Edgewater funds are met.



The Edgewater Acquisition was accounted for under the
acquisition method of accounting, whereby the results of the acquired business are included in our consolidated financial results from July 15, 2009, the effective date of the acquisition. As a result of the acquisition, we recorded net tangible
assets, identifiable intangible assets and goodwill of approximately $53,635 (consisting primarily of Edgewaters investments in their underlying funds and cash), $56,200 and $61,630, respectively, which include amounts for Edgewaters
noncontrolling interests held (whose economic interests approximate 50%) aggregating approximately $109,841. Goodwill pertaining to this acquisition is deductible for income tax purposes. See Note 12 of Notes to Consolidated Financial Statements for
additional information relating to goodwill and other intangible assets. The operating results relating to Edgewater, which have not been material, are included in the Companys Asset Management segment.



On August 13, 2007, Lazard Group acquired all of the outstanding
ownership interests of Goldsmith, Agio, Helms & Lynner, LLC (GAHL), a Minneapolis-based investment bank specializing in financial advisory services to mid-sized private companies. On July 31, 2007, Lazard Ltd acquired all of the
outstanding shares of Carnegie, Wylie & Company (Holdings) PTY LTD (CWC), an Australia-based financial advisory firm, and concurrently sold such investment to Lazard Group. These purchases were effected through an exchange of a
combination of cash, Class A common stock, and by Lazard Ltd issuing shares of non-participating convertible Series A and Series B preferred stock (the Series A preferred stock and Series B preferred stock,
respectively, which are or were each convertible into Class A common stock). The total number of Class A common shares to be issued in connection with the acquisitions will depend, in part, upon the future performance of each of GAHL and CWC.



The aggregate non-contingent consideration
relating to the GAHL and the CWC acquisitions (before transaction costs) consisted of cash and Lazard Ltd stock and aggregated to approximately $227,100 and $216,200 through December 31, 2009 and 2008, respectively. At December 31, 2009 and
2008, 662,015 and 993,024 shares of Class A common stock, respectively, were issuable on a non-contingent basis. Additionally, at both December 31, 2009 and 2008, 7,293 shares of Series A preferred stock were convertible into Class A common shares
on a non-contingent basis, with the number of Class A common shares dependent, in part, upon future prices of the Class A common stock. At both December 31, 2009 and 2008, 948,631 shares of Class A common stock were contingently issuable and,
at December 31, 2009 and 2008, 19,590 and 24,452 shares of Series A preferred stock, respectively, were contingently convertible into shares of Class A common stock, dependent upon the future performance of GAHL and CWC. The Class A common
stock described above related to the GAHL and CWC acquisitions is issuable over multi-year periods.



In connection with Lazard Groups acquisitions of GAHL and Edgewaters management vehicles, as well as Lazard Ltds
acquisition of CWC and subsequent contribution of CWC to Lazard Group, Lazard Group recorded related party payables of $39,820 and $43,634 at December 31, 2009 and 2008, respectively, to subsidiaries of Lazard Ltd. When combined with the additional
members equity recorded by Lazard Group of $50,800 and $18,416 at December 31, 2009 and 2008, respectively, these increases correspond to the increases in stockholders equity recorded by Lazard Ltd for such acquisitions (see Note 21 of
Notes to Consolidated Financial Statements).



On
January 31, 2008, Lazard Group acquired a 50% interest in MBA. The Company accounts for the investment in MBA using the equity method of accounting.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



|10. | LAZARD ALTERNATIVE INVESTMENTS
|--- | ------------------------------



On May 10, 2005, Lazard Group and LFCM Holdings LLC (LFCM Holdings) entered into the business alliance agreement (the
business alliance agreement) that, among other things, granted Lazard Group the option to acquire the North American and European fund management activities of Lazard Alternative Investments Holdings LLC (LAI), the subsidiary
of LFCM Holdings that owns and operates LFCM Holdings alternative investment (including private equity) activities, for an aggregate purchase price of $8,000 and $2,000, respectively. On December 15, 2009, Lazard Group exercised its
option to acquire the European fund management activities of LAI for a purchase price of $2,000. The remaining option to purchase the North American fund management activities is currently exercisable at any time prior to May 10, 2014, for a
purchase price of $2,500. The reduced option price for the North American option reflects (i) a reduction of $1,500 due to the payment of a like amount in February 2008 to LFCM Holdings in connection with the initial public offering of Sapphire
whereby LFCM Holdings agreed not to assert certain claims that it may believe that it had under the business alliance agreement and (ii) a reduction of $4,000 due to the payment of a like amount in February 2009 to LFCM Holdings in connection with
the spin-off of the management company of CP II and the amendments to the business alliance agreement described below. LAIs fund management activities consist of the fund management and general partner entities, together with Lazard
Groups direct investments in related funds that were transferred to LFCM Holdings pursuant to or in anticipation of the May 10, 2005 separation (the separation) from the Company of its former Capital Markets and Other business
segment.



The business alliance agreement provides
Lazard Group with certain governance rights with respect to LAI and provides for support by LFCM Holdings of the business of LAI. With respect to historical investments and funds transferred to LFCM Holdings as part of the separation, profits
realized prior to the exercise of the option are for the account of LFCM Holdings, whereas profits realized after the exercise of the option are for the account of Lazard Group. The master separation agreement, dated as of May 10, 2005, by and among
Lazard Ltd, Lazard Group, LAZ-MD Holdings and LFCM Holdings (the master separation agreement) and the business alliance agreement provide for Lazard Group (i) to invest capital in future funds to be managed by LFCM Holdings
subsidiaries and (ii) to receive incentive distributions from such funds, as well as profits related to such investments, if any, irrespective of whether it exercises its purchase option.



In February 2005, Lazard Group formed CP II, with a maximum of $1,000,000 of institutional capital commitments
and a $100,000 maximum capital commitment from Lazard Group, the principal portion of which may require funding at any time through 2010, except for potential follow-on investments and/or CP II expenses (see Note 15 of Notes to Consolidated
Financial Statements). As of December 31, 2009, Lazard Group contributed $43,079 of its capital commitment, which is recorded as a private equity investment within investments - other on the consolidated statement of financial condition.
Pursuant to the master separation and business alliance agreements, CP II was managed by a subsidiary of LFCM Holdings (CP II MgmtCo), and Lazard Group retained a capital commitment to CP II and is entitled to receive the carried
interest distributions made by CP II (other than the carried interest distributions made to investment professionals who manage the fund).



In February 2009, pursuant to agreements entered into by the Company with a subsidiary of LAI (LAI North America), LFCM Holdings
and the investment professionals who manage CP II, equity ownership of CP II MgmtCo was transferred from LAI North America to the investment professionals who manage CP II (the CP II MgmtCo Spin-Off). Concurrently with the
CP II MgmtCo Spin-Off, CP II MgmtCo became a standalone entity and Lazard Groups capital commitment to CP II was reduced from $100,000 to $50,000 (and CP IIs institutional capital commitments were reduced from $1,000,000 to $500,000). In
addition, in connection with a $4,000 cash payment from Lazard Group to LFCM Holdings, the business alliance agreement was amended to remove any restriction on the Company engaging in private equity businesses in North America other than certain
investments in real estate and technology and information services. Such amendment reduced



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



the then purchase price relating to our option to acquire the fund management activities of LAI in North America from $6,500 to $2,500. As part of the CP II MgmtCo Spin-Off, we retained our
entitlement to receive a slightly reduced portion of the carried interest distributions made by CP II.



See Note 15 of Notes to Consolidated Financial Statements for additional information relating to LFCM Holdings, and with respect to
commitments to CP II and to private equity funds managed by LAI.



11.    PROPERTY-NET



At December 31, 2009 and 2008 property-net consists of the following:



|                                                 |  |                                   |      |              |          |      |  |   |          |  
|------------------------------------------------ |  | --------------------------------- | ---- | ------------ | -------- | ---- |  | - | -------- | -
|                                                 |  | EstimatedDepreciableLife in Years |      | December 31, |         
|                                                 |  |                                   | 2009 |              |          | 2008 | 
|Buildings                                        |  | 33                                |      | $            | 181,679  |      |  | $ | 175,426  |  
|Leasehold improvements                           |  | 5-20                              |      |              | 157,335  |      |  |   | 149,043  |  
|Furniture and equipment                          |  | 3-10                              |      |              | 67,502   |      |  |   | 60,223   |  
|                                                 |  |                                   |      |              |          |      |  |   |          |  
|Total                                            |  |                                   |      |              | 406,516  |      |  |   | 384,692  |  
|Less - Accumulated depreciation and amortization |  |                                   |      |              | (239,603 | )    |  |   | (213,249 | )
|                                                 |  |                                   |      |              |          |      |  |   |          |  
|Property-net                                     |  |                                   |      | $            | 166,913  |      |  | $ | 171,443  |  
|                                                 |  |                                   |      |              |          |      |  |   |          |  



12.    GOODWILL AND
OTHER INTANGIBLE ASSETS



The components
of goodwill and other intangible assets at December 31, 2009 and 2008 are presented below:



|                                                          |  |              |         |      |   |        
|--------------------------------------------------------- |  | ------------ | ------- | ---- | - | -------
|                                                          |  | December 31,
|                                                          |  | 2009         |         | 2008
|Goodwill                                                  |  | $            | 261,703 |      | $ | 170,277
|Other intangible assets (net of accumulated amortization) |  |              | 56,077  |      |   | 4,867  
|                                                          |  |              |         |      |   |        
|                                                          |  | $            | 317,780 |      | $ | 175,144
|                                                          |  |              |         |      |   |        



At December 31, 2009, $200,073 of goodwill was attributable to the Companys Financial Advisory segment and $61,630 of goodwill was attributable to the Companys Asset Management segment. At
December 31, 2008, the entire amount of goodwill was attributable to the Companys Financial Advisory segment.



Changes in the carrying amount of goodwill for the years ended December 31, 2009, 2008 and 2007 are as follows:



|                                                                            |  |                         |         |      |   |         |      |  |   |        
|--------------------------------------------------------------------------- |  | ----------------------- | ------- | ---- | - | ------- | ---- |  | - | -------
|                                                                            |  | Year Ended December 31,
|                                                                            |  | 2009                    |         | 2008 |   |         | 2007
|Balance, January 1                                                          |  | $                       | 170,277 |      | $ | 178,446 |      |  | $ | 16,945 
|Business acquisitions, including additional contingent consideration earned |  |                         | 70,965  |      |   | 9,282   |      |  |   | 159,343
|Foreign currency translation adjustments                                    |  |                         | 20,461  |      |   | (17,451 | )    |  |   | 2,158  
|                                                                            |  |                         |         |      |   |         |      |  |   |        
|Balance, December 31                                                        |  | $                       | 261,703 |      | $ | 170,277 |      |  | $ | 178,446
|                                                                            |  |                         |         |      |   |         |      |  |   |        



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



The Company performs a goodwill impairment test annually or more frequently if
circumstances indicate that impairment may have occurred. The Company has selected December 31 as the date to perform its annual impairment test. Pursuant to the Companys goodwill impairment review for the years ended December 31, 2009, 2008
and 2007, the Company compared the fair value of each of its applicable reporting units to their corresponding carrying amounts, including goodwill, and determined that no impairment existed.



The gross cost and accumulated amortization of other intangible
assets as of December 31, 2009 and 2008, by major intangible asset category, are as follows:



|                                                                   |  |                   |        |                         |   |                   |  |           |        |                         |   |                   |  |   |       |  |   |      
|------------------------------------------------------------------ |  | ----------------- | ------ | ----------------------- | - | ----------------- |  | --------- | ------ | ----------------------- | - | ----------------- |  | - | ----- |  | - | -----
|                                                                   |  | December 31, 2009 |        | December 31, 2008      
|                                                                   |  | GrossCost         |        | AccumulatedAmortization |   | NetCarryingAmount |  | GrossCost |        | AccumulatedAmortization |   | NetCarryingAmount
|Success/performance fees                                           |  | $                 | 30,740 |                         | $ |                  |  | $         | 30,740 |                         | $ |                  |  | $ |      |  | $ |     
|Management fees, customer relationships and non-compete agreements |  |                   | 32,477 |                         |   | 7,140             |  |           | 25,337 |                         |   | 7,017             |  |   | 2,150 |  |   | 4,867
|                                                                   |  |                   |        |                         |   |                   |  |           |        |                         |   |                   |  |   |       |  |   |      
|                                                                   |  | $                 | 63,217 |                         | $ | 7,140             |  | $         | 56,077 |                         | $ | 7,017             |  | $ | 2,150 |  | $ | 4,867
|                                                                   |  |                   |        |                         |   |                   |  |           |        |                         |   |                   |  |   |       |  |   |      



Amortization expense of intangible assets for the years ended December 31, 2009, 2008 and 2007 was $4,990, $4,596 and $21,523, respectively. Estimated future amortization expense is as follows:



|                           |  |                         |       
|-------------------------- |  | ----------------------- | ------
|Year Ending December 31,   |  | AmortizationExpense (a)
|2010                       |  | $                       | 6,987 
|2011                       |  |                         | 5,718 
|2012                       |  |                         | 6,302 
|2013                       |  |                         | 13,022
|2014                       |  |                         | 10,083
|Thereafter                 |  |                         | 13,965
|                           |  |                         |       
|Total amortization expense |  | $                       | 56,077
|                           |  |                         |       



| | (a) | Approximately 47% of intangible asset amortization is attributable to a noncontrolling interest.
| | --- | ------------------------------------------------------------------------------------------------



13.    OTHER ASSETS AND OTHER LIABILITIES



The following table sets forth the
Companys other assets, by type, as of December 31, 2009 and 2008:



|                                                                                          |  |              |         |      |   |        
|----------------------------------------------------------------------------------------- |  | ------------ | ------- | ---- | - | -------
|                                                                                          |  | December 31,
|                                                                                          |  | 2009         |         | 2008
|Current and deferred income taxes receivable (net of valuation allowance) and other taxes |  | $            | 88,117  |      | $ | 87,389 
|Accruals and prepayments (including prepaid pension assets, see Note 18)                  |  |              | 65,311  |      |   | 75,293 
|Deferred debt issuance costs                                                              |  |              | 7,550   |      |   | 8,957  
|Other                                                                                     |  |              | 40,575  |      |   | 56,888 
|                                                                                          |  |              |         |      |   |        
|Total                                                                                     |  | $            | 201,553 |      | $ | 228,527
|                                                                                          |  |              |         |      |   |        



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



The following table sets forth the Companys other liabilities, by type, as of
December 31, 2009 and 2008:



|                                                        |  |              |         |      |   |        
|------------------------------------------------------- |  | ------------ | ------- | ---- | - | -------
|                                                        |  | December 31,
|                                                        |  | 2009         |         | 2008
|Accrued expenses                                        |  | $            | 132,125 |      | $ | 114,856
|Current and deferred income taxes and other taxes       |  |              | 105,094 |      |   | 68,493 
|Employee benefit-related liabilities                    |  |              | 80,349  |      |   | 69,345 
|LAM Merger (present value of unpaid cash consideration) |  |              | 65,308  |      |   | 60,324 
|Unclaimed funds at LFB                                  |  |              | 26,329  |      |   | 55,583 
|Abandoned leased space (principally in the U.K.)        |  |              | 10,850  |      |   | 10,259 
|Securities sold, not yet purchased                      |  |              | 5,179   |      |   | 6,975  
|Other                                                   |  |              | 65,987  |      |   | 99,153 
|                                                        |  |              |         |      |   |        
|Total                                                   |  | $            | 491,221 |      | $ | 484,988
|                                                        |  |              |         |      |   |        



|14. | SENIOR AND SUBORDINATED DEBT
|--- | ----------------------------



Senior DebtSenior debt is comprised of the following as of December 31, 2009 and 2008:



|                                    |  |                        |         |              |         |                    |       |   |                               |   |           |  |   |          
|----------------------------------- |  | ---------------------- | ------- | ------------ | ------- | ------------------ | ----- | - | ----------------------------- | - | --------- |  | - | ---------
|                                    |  | InitialPrincipalAmount |         | MaturityDate |         | AnnualInterestRate |       |   | Outstanding As OfDecember 31,
|                                    |  |                        |         |              | 2009    |                    | 2008 
|Lazard Group 7.125% Senior Notes(a) |  | $                      | 550,000 |              | 5/15/15 |                    | 7.125 | % |                               | $ | 538,500   |  | $ | 538,500  
|Lazard Group 6.85% Senior Notes(b)  |  |                        | 600,000 |              | 6/15/17 |                    | 6.85  | % |                               |   | 548,350   |  |   | 549,250  
|Lazard Group Credit Facility(c)     |  |                        | 150,000 |              | 5/10/10 |                    | 1.69  | % |                               |   |          |  |   |         
|                                    |  |                        |         |              |         |                    |       |   |                               |   |           |  |   |          
|Total                               |  |                        |         |              |         |                    |       |   |                               | $ | 1,086,850 |  | $ | 1,087,750
|                                    |  |                        |         |              |         |                    |       |   |                               |   |           |  |   |          



|(a) | Concurrent with Lazard Ltds initial public offering on May 10, 2005 (the equity public offering), Lazard Group issued $550,000 aggregate principal
amount of 7.125% senior notes due May 15, 2015 (the 7.125% Senior Notes). During the year ended December 31, 2008, the Company repurchased $11,500 principal amount of the 7.125% Senior Notes at a cost, excluding accrued interest, of
$7,974 and, after the write-off of applicable unamortized debt issuance costs of $75, the Company recognized a pre-tax gain of $3,451.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | In connection with the issuance of the 7.125% Senior Notes, on April 1, 2005, Lazard Group entered into an interest rate forward agreement for a notional amount of
$650,000 to ensure that the base rate (excluding market-driven credit spreads) on the 7.125% Senior Notes would be no greater than 4.5%. Lazard Group settled the interest rate forward agreement as of May 9, 2005, which required a payment by Lazard
Group of $13,004. Of this amount, $11,003 was deemed to be the effective portion of the hedge and recorded within AOCI, and is being amortized as a charge to interest expense over the ten year term of the 7.125% Senior Notes.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | On June 21, 2007, Lazard Group issued $600,000 aggregate principal amount of 6.85% senior notes due June 15, 2017 (the 6.85% Senior Notes). During
the years ended December 31, 2009 and 2008, the Company repurchased $900 and $50,750 principal amount of the 6.85% Senior Notes, respectively, at a cost, excluding accrued interest, of $635 and $33,463, respectively, and, after the write-off of
unamortized debt issuance costs of $7 and $485 in the respective years, the Company recognized pre-tax gains of $258 and $16,802, respectively.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(c) | Lazard Group maintains a $150,000 senior revolving credit facility with a group of lenders that matures on May 10, 2010 (the Credit
Facility). Interest rates under the Credit Facility vary and are based on either a
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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LAZARD GROUP LLC



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



| | Federal Funds rate or a Eurodollar rate, in each case plus an applicable margin. As of December 31, 2009 and 2008, the annual interest rate for a loan accruing interest (based on the Federal
Funds overnight rate), including the applicable margin, was 1.69% and 1.75%, respectively. At December 31, 2009 and 2008, no amounts were outstanding under the Credit Facility.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Subordinated DebtSubordinated debt at
December 31, 2009 and 2008 amounted to $150,000 at each date and represents a note which is convertible into a maximum of 2,631,570 shares of Class A common stock at an effective conversion price of $57 per share. The note matures on September 30,
2016 and has a fixed interest rate of 3.25% per annum. One-third in principal amount became convertible on and after July 1, 2008, an additional one-third became convertible on and after July 1, 2009 and a final one-third in principal amount will
become convertible on and after July 1, 2010, and no principal amount will be convertible after June 30, 2011. As of December 31, 2009 there have been no conversions of the note.



Debt maturities relating to senior and subordinated borrowings outstanding at December 31, 2009 for each of the
five years in the period ending December 31, 2014 and thereafter are set forth in the table below. For purposes of this table, it was assumed that the $150,000 subordinated convertible note remains outstanding in accordance with its stated terms.



|                         |  |             |           |                  |   |         |  |   |          
|------------------------ |  | ----------- | --------- | ---------------- | - | ------- |  | - | ---------
|Year Ending December 31, |  | Senior Debt |           | SubordinatedDebt |   | Total  
|2010-2014                |  | $           |          |                  | $ |        |  | $ |         
|Thereafter               |  |             | 1,086,850 |                  |   | 150,000 |  |   | 1,236,850
|                         |  |             |           |                  |   |         |  |   |          
|Total                    |  | $           | 1,086,850 |                  | $ | 150,000 |  | $ | 1,236,850
|                         |  |             |           |                  |   |         |  |   |          



The Credit Facility contains certain financial condition covenants. In addition, the Credit Facility, the indenture and supplemental indentures relating to Lazard Groups senior notes as well as its
subordinated convertible note contain certain covenants (none of which relate to financial condition), events of default and other customary provisions, including a customary make-whole provision in the event of early redemption where applicable. As
of December 31, 2009, the Company was in compliance with all of these provisions. All of the Companys senior and subordinated debt obligations are unsecured.



As of December 31, 2009, the Company had approximately $262,000 in unused lines of credit available to it,
including approximately $44,000 and $45,000 of unused lines of credit available to LFB and Edgewater, respectively. In addition, LFB has access to the Eurosystem Covered Bond Purchase Program of the Banque de France.



The Companys senior and subordinated debt are recorded at
historical amounts. At December 31, 2009, the fair value of the Companys senior and subordinated debt of $1,255,254 exceeded the aggregate carrying value by $18,404. At December 31, 2008, the fair value of the Companys senior and
subordinated debt of $883,368 was less than the aggregate carrying value by $354,382. The fair value of the Companys senior and subordinated debt was estimated using a discounted cash flow analysis based on the Companys current borrowing
rates for similar types of borrowing arrangements or based on market quotations where available.



15.    COMMITMENTS AND CONTINGENCIES



LeasesThe Company leases office space and equipment under non-cancelable lease agreements, which expire on various dates
through 2022.



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LAZARD GROUP LLC



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



Occupancy lease agreements, in addition to base rentals, generally are subject to
escalation provisions based on certain costs incurred by the landlord. For the years ended December 31, 2009, 2008 and 2007, aggregate rental expense relating to operating leases amounted to $69,404, $74,550 and $73,302, respectively, and is
included in occupancy and equipment or technology and information services on the consolidated statements of operations, depending on the nature of the underlying asset. The Company subleases office space under agreements,
which expire on various dates through 2022. Sublease income from such agreements was $11,327, $11,531 and $12,511 for the years ended December 31, 2009, 2008 and 2007, respectively.



Capital lease obligations recorded under sale/leaseback transactions are payable through 2017 at a weighted
average interest rate of approximately 6.31%. Such obligations are collateralized by certain buildings with a net book value of approximately $27,364 and $27,458 at December 31, 2009 and 2008, respectively. The net book value of all assets recorded
under capital leases aggregated $28,728 and $30,089 at December 31, 2009 and 2008, respectively.



At December 31, 2009, minimum rental commitments under non-cancelable leases, net of sublease income, are approximately as follows:



|                                           |         |                            |           |  |   |        
|------------------------------------------ | ------- | -------------------------- | --------- |  | - | -------
|Year Ending December 31,                   |         | Minimum Rental Commitments
|                                           | Capital |                            | Operating
|2010                                       |         | $                          | 3,738     |  | $ | 65,164 
|2011                                       |         |                            | 3,711     |  |   | 59,412 
|2012                                       |         |                            | 3,269     |  |   | 44,367 
|2013                                       |         |                            | 3,202     |  |   | 30,869 
|2014                                       |         |                            | 2,637     |  |   | 28,074 
|Thereafter                                 |         |                            | 15,166    |  |   | 195,043
|                                           |         |                            |           |  |   |        
|Total minimum lease payments               |         |                            | 31,723    |  |   | 422,929
|Less amount representing interest          |         |                            | 7,095     |  |   |        
|                                           |         |                            |           |  |   |        
|Present value of capital lease commitments |         | $                          | 24,628    |  |   |        
|                                           |         |                            |           |  |   |        
|Sublease proceeds                          |         |                            |           |  |   | 101,017
|                                           |         |                            |           |  |   |        
|Net lease payments                         |         |                            |           |  | $ | 321,912
|                                           |         |                            |           |  |   |        



With respect to abandoned leased facilities in the U.K., at December 31, 2009 and 2008, the Company has recognized liabilities of $9,991 and $9,522, respectively, which are included in other
liabilities on the consolidated statements of financial condition. Payments toward the liabilities continue through the remaining term of the leases. Such liabilities are based on the discounted future commitment, net of expected sublease
income.



GuaranteesOn March
12, 2007, Lazard entered into an agreement to guarantee to a foreign tax jurisdiction the deferred payment of certain income tax obligations and potential tax penalties of certain managing directors of Lazard Group, which, as of December 31, 2009,
aggregate to $7,659. In order to collateralize such guarantee, these managing directors have pledged their interests in LAZ-MD Holdings (which are exchangeable into shares of Class A common stock) and unsold shares of Class A common stock received
in exchange for such interests, with the value of such collateral in each case exceeding the guarantee provided by Lazard.



In the normal course of business, LFB provides indemnifications to third parties to protect them in the event of non-performance by its
clients. At December 31, 2009, LFB had $6,882 of such indemnifications and held



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LAZARD GROUP LLC



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



$4,394 of collateral/counter-guarantees to secure these commitments. The Company believes the likelihood of loss with respect to these indemnities is remote. Accordingly, no liability is recorded
in the consolidated statement of financial condition.



Private Equity Funding CommitmentsAt December 31, 2009, the principal commitments by the Company for capital contributions to private equity investment funds were as set forth below. Senior Housing is managed by LAI. CP
II was managed by a subsidiary of LAI until February 16, 2009. Effective February 17, 2009, ownership and control of CP II was transferred to the investment professionals who manage CP II.



|               |  |                              |  |                             |  |                       |  |                               
|-------------- |  | ---------------------------- |  | --------------------------- |  | --------------------- |  | ------------------------------
|               |  |                              |  | Total Lazard Commitment (a)
|Name of Fund   |  | TotalInstitutionalCommitment |  | MaximumCommitment           |  | FundingExpirationDate |  | UnfundedAs ofDecember 31, 2009
|CP II          |  | $500,000                     |  | $50,000                     |  | 2/9/10(b)             |  | $6,921                        
|Senior Housing |  | 201,000                      |  | 10,000                      |  | 7/6/09(c)             |  |                              
|               |  |                              |  |                             |  |                       |  |                               
|               |  | $701,000                     |  | $60,000                     |  |                       |  | $6,921                        
|               |  |                              |  |                             |  |                       |  |                               



|(a) | Excludes other unfunded commitments by Lazard at December 31, 2009 of $2,355 to Company-sponsored private equity investment funds (including $1,741 in connection with
the Companys compensation plans), which are contingent upon certain events and have no definitive final payment dates.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | The remaining unfunded commitment after February 9, 2010 is for potential follow-on investments and/or for CP II expenses through the earlier of (i)
February 25, 2017 or (ii) the liquidation of the fund.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(c) | Certain additional funding of up to $829 may be called at anytime until liquidation of the fund.
|--- | ------------------------------------------------------------------------------------------------



Other CommitmentsIn the normal course of
business, LFB enters into commitments to extend credit, predominately at variable interest rates. The commitments have an expiration date and, once drawn upon, may require the counterparty to post collateral depending on the counterpartys
creditworthiness. Outstanding commitments at December 31, 2009 were $17,408. This amount may not represent future cash requirements as commitments may expire without being drawn upon.



On January 24, 2008, Sapphire, a then newly-organized special purpose acquisition company formed by Lazard
Funding Limited LLC (Lazard Funding), a wholly-owned subsidiary of Lazard Group, completed an initial public offering which, prior to offering costs, raised $800,000 through the sale of 80,000,000 units at an offering price of $10.00 per
unit (the Sapphire IPO). Each unit consisted of one share of Sapphire common stock and one warrant, with such warrant entitling the holder to purchase one share of Sapphire common stock for $7.00. Sapphire was formed for the purpose of
effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more operating businesses primarily with general industrial companies in North America within a 24-month period
(collectively referred to as the Initial Business Combination). Net proceeds from the Sapphire IPO were placed in a trust account by Sapphire (the Trust Account) pending consummation of the Initial Business Combination.



In connection with the formation of Sapphire,
Lazard Funding purchased from Sapphire 15,144,000 founders units (Founders Units) at a total cost of approximately $95. Each Founders Unit consisted of one share of Sapphire common stock and one warrant to purchase one
share of Sapphire common stock for $7.50. On January 24, 2008, in connection with the Sapphire IPO, Lazard Funding purchased (i) 5,000,000 units in the Sapphire IPO at a purchase price equal to the public offering price of $10.00 per unit (for
an aggregate purchase



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LAZARD GROUP LLC



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



price of $50,000), and (ii) an aggregate of 12,500,000 warrants from Sapphire at a price of $1.00 per warrant (for a total purchase price of $12,500). Furthermore, Lazard Funding entered
into an agreement with the underwriter to purchase up to an additional $37,500 worth of Sapphire common shares in open market purchases, commencing two business days after Sapphire files a proxy statement relating to the Initial Business Combination
and ending on the business day immediately preceding the record date for the meeting of Sapphire stockholders at which such Initial Business Combination is to be approved, or earlier in certain circumstances (the Sapphire Commitment).



On January 6, 2010, Sapphire announced that it
had not completed the Initial Business Combination and it would dissolve and distribute the funds in the Trust Account to all its public shareholders, to the extent they are holders of shares issued in the Sapphire IPO, in proportion to their
respective equity interests. Pursuant to such dissolution, on January 26, 2010, Sapphire distributed an initial distribution equivalent to approximately $10.06 per share of Sapphire common stock. All Sapphire warrants expired without value. During
the fourth quarter of 2009, the Company recognized a loss of approximately $13,000 with respect to its investment in warrants of Sapphire, with such loss being recorded in revenue-other in the accompanying Consolidated Statement of
Operations. As a result of the Initial Business Combination not being consummated, the Sapphire Commitment terminated.



See Notes 8 and 9 of Notes to Consolidated Financial Statements for information regarding commitments relating to the LAM Merger and business
acquisitions, respectively. See Note 18 of Notes to Consolidated Financial Statements for information regarding obligations to fund our pension plans.



The Company has various other contractual commitments arising in the ordinary course of business. In the opinion of management, the
consummation of such commitments will not have a material adverse effect on the Companys consolidated financial position or results of operations. In addition, from time to time, LFB enters into underwriting commitments in which it
participates as a joint underwriter. The settlement of such transactions are not expected to have a material adverse effect on the Companys consolidated financial position or results of operations.



LegalThe Companys
businesses, as well as the financial services industry generally, are subject to extensive regulation throughout the world. The Company is involved from time to time in a number of judicial, regulatory and arbitration proceedings and inquiries
concerning matters arising in connection with the conduct of our businesses, including proceedings initiated by former employees alleging wrongful termination. The Company reviews such matters on a case-by-case basis and establishes any required
reserves if a loss is probable and the amount of such loss can be reasonably estimated. Management believes, based on currently available information, that the results of such matters, in the aggregate, will not have a material adverse effect on its
financial condition but might be material to its operating results or cash flows for any particular period, depending upon the operating results for such period.



|16. | MEMBERS EQUITY
|--- | ---------------



Pursuant to Lazard Groups Operating Agreement, Lazard Group allocates and distributes to its members a substantial portion of its
distributable profits in three monthly installments, as soon as practicable after the end of each fiscal year. Such installment distributions usually begin in February. In addition, other periodic distributions to members included, as applicable,
capital withdrawals, fixed return on members equity and income tax advances made on behalf of members.



At December 31, 2009 and 2008, Lazard Group common membership interests held by subsidiaries of Lazard Ltd amounted to 74.5% and 62.4%,
respectively, and by LAZ-MD Holdings amounted to 25.5% and



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LAZARD GROUP LLC



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



37.6%, respectively. Pursuant to provisions of its Operating Agreement, Lazard Group distributions in respect of its common membership interests are allocated to the holders of such interests on
a pro rata basis. Such distributions represent amounts necessary to fund (i) any dividends Lazard Ltd may declare on its Class A common stock and (ii) tax distributions in respect of income taxes that Lazard Ltds subsidiaries and the members
of LAZ-MD Holdings incur as a result of holding Lazard Group common membership interests. During the years ended December 31, 2009, 2008 and 2007, Lazard Group distributed $17,403, $20,694 and $20,056, respectively, to LAZ-MD Holdings and $33,451,
$23,056 and $18,308, respectively, to the subsidiaries of Lazard Ltd, which latter amounts were used by Lazard Ltd to pay dividends to third-party holders of its Class A common stock. In addition, during the years ended December 31, 2009, 2008 and
2007, Lazard Group made tax distributions of $67,360, $83,358 and $109,908, respectively, including $25,316, $39,205 and $60,334, respectively, paid to LAZ-MD Holdings and $42,044, $44,153 and $49,574, respectively, paid to subsidiaries of Lazard
Ltd.



Secondary
OfferingsPursuant to a Prospectus Supplement dated September 3, 2008, certain selling shareholders of Lazard Ltd (which include current and former managing directors of Lazard (and certain of our executive officers) who hold
LAZ-MD Holdings exchangeable interests and/or Class A common stock) offered to sell 6,442,721 shares of Class A common stock pursuant to an underwriting agreement and pricing agreement.



Pursuant to the underwriting agreement and the pricing agreement, the underwriters had the option to purchase
up to an additional 715,858 shares of Class A common stock (together with the offering of 6,442,721 shares of Class A common stock (the 2008 Secondary Offering)) from the selling shareholders (the 2008 Selling Shareholders).
To the extent that this option was not exercised in full, Lazard Group agreed to separately purchase from the 2008 Selling Shareholders, at the public offering price less the underwriting discount, all of those shares covered by the option and not
purchased pursuant to the option. Pursuant to that separate purchase agreement, Lazard Group purchased 68,238 shares of Class A common stock for an aggregate cost of $2,430 ($35.61 per share). In addition, pursuant to the underwriting agreement,
Lazard Group also separately purchased 715,858 shares of Class A common stock from the 2008 Selling Shareholders for an aggregate cost of $25,493 ($35.61 per share). The shares of Class A common stock described in this paragraph purchased by Lazard
Group were purchased as part of the share repurchase program described below. In the aggregate, the 2008 Selling Shareholders sold a total of 7,874,437 shares of Class A common stock (including 1,472,906 shares of Class A common stock previously
exchanged for LAZ-MD Holdings exchangeable interests and 6,401,531 shares of Class A common stock exchanged for LAZ-MD Holdings interests simultaneously with the 2008 Secondary Offering).



As a result of the 2008 offering, Lazard Ltds ownership interest in Lazard Group increased from 56.8%
prior to the offerings to 62.0% subsequent thereto. Correspondingly, LAZ-MD Holdings ownership in Lazard Group decreased from 43.2% prior to the offerings to 38.0% subsequent thereto.



Lazard Capital Markets LLC (LCM), a wholly-owned
subsidiary of LFCM Holdings, was a member of the underwriting group for the 2008 Secondary Offering, and, in such capacity, earned revenue, net of estimated underwriting expenses, of approximately $1,852. The business alliance agreement provides for
Lazard Group to receive a referral fee equal to approximately one-half of the net revenue obtained by LCM in respect of any underwriting or distribution opportunity referred to it by Lazard Group. In that connection, as of December 31, 2008, Lazard
Group had recorded a receivable from LCM of approximately $926, and recognized a corresponding amount of income in revenue-other. See Note 21 of Notes to Consolidated Financial Statements for additional information regarding the business
alliance agreement.



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LAZARD GROUP LLC



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



In June 2009, pursuant to a Prospectus Supplement dated June 2, 2009, certain selling
shareholders of Lazard Ltd (which include current and former managing directors of Lazard and certain of our executive officers) and their permitted transferees (the June 2009 Selling Shareholders) sold 4,000,000 shares of Class A common
stock at a price of $26.00 per share (the June 2009 Secondary Offering). Separately, in connection with the June 2009 Secondary Offering, Lazard Group agreed to purchase from the June 2009 Selling Shareholders 1,700,000 shares of Class A
common stock for an aggregate cost of $44,200 ($26.00 per share), with such purchase being part of the share repurchase program described below. In the aggregate, the June 2009 Selling Shareholders sold a total of 5,700,000 shares of Class A common
stock (including 2,110,754 shares of Class A common stock previously received upon the exchange of a like number of LAZ-MD Holdings exchangeable interests and 3,589,246 shares of Class A common stock received upon a simultaneous exchange of a like
number of LAZ-MD Holdings exchangeable interests).



In September 2009, pursuant to a Prospectus Supplement dated September 8, 2009, certain selling shareholders of Lazard Ltd (which include current and former managing directors of Lazard and certain of our executive officers) and their
permitted transferees (the September 2009 Selling Shareholders) sold 5,215,921 shares of Class A common stock (including 2,411,001 shares of Class A common stock previously received upon the exchange of a like number of LAZ-MD Holdings
exchangeable interests and 2,804,920 shares of Class A common stock received upon a simultaneous exchange of a like number of LAZ-MD Holdings exchangeable interests) at a price of $37.00 per share (the September 2009 Secondary Offering,
together with the June 2009 Secondary Offering, the 2009 Secondary Offerings).



Lazard Ltd did not receive any net proceeds from the sales of Class A common stock from the 2008 Secondary Offering and from the 2009 Secondary Offerings (collectively, the 2008 and 2009 Secondary
Offerings).



Exchange of Lazard Group
Common Membership InterestsIn addition to the simultaneous exchanges that occurred in connection with the 2008 and 2009 Secondary Offerings, during 2008 and 2009 Lazard Ltd issued 2,910,657 and 7,523,236 shares of Class A common stock,
respectively, in connection with the exchange of a like number of common membership interests of Lazard Group (received from members of LAZ-MD Holdings in exchange for a like number of LAZ-MD Holdings exchangeable interests).



Share Repurchase Program



The Board of Directors of Lazard Ltd had authorized, on a
cumulative basis, the repurchase of up to $500,000 in aggregate cost of its Class A common stock and Lazard Group common membership interests through December 31, 2009. Pursuant to this authorization, purchases have been made in the open market or
through privately negotiated transactions, and since inception of the program in February 2006 through December 31, 2009, Lazard Group purchased an aggregate of 12,086,767 shares of Class A common stock at an average price of $33.08 per share
(including, during the year ended December 31, 2009, 1,984,997 shares at an average price of $25.43 per share, inclusive of the 1,700,000 shares purchased in connection with the June 2009 Secondary Offering described above), and an aggregate of
1,156,675 Lazard Group common membership interests at an average price of $32.58 per common membership interest (including, during the year ended December 31, 2009, 500,924 common membership interests at an average price of $26.52 per common
membership interest). As a result of Lazard Groups delivery of an aggregate of 6,235,992 shares for the settlement of vested restricted stock unit grants (RSUs) and deferred stock unit grants (DSUs) during the three
year period ended December 31, 2009, there were 5,850,775 and 9,376,162 shares of Class A common stock held by Lazard Group at December 31, 2009 and 2008, respectively. Such Class A common shares are reported, at cost, as a reduction of
members equity within the consolidated statements of financial condition.



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LAZARD GROUP LLC



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



As of December 31, 2009, $62,542 of the initial $500,000 repurchase authorization under
the share repurchase program was unused and expired. On January 27, 2010, the Board of Directors of Lazard Ltd authorized, on a cumulative basis, a new share repurchase program for the repurchase of up to $200,000 in aggregate cost of its Class A
common stock and Lazard Group common membership interests through December 31, 2011.



The Company expects that the share repurchase program, with respect to the Class A common stock, will be used primarily to offset a portion of the shares that have been or will be issued under the Lazard
Ltd 2005 Equity Incentive Plan (the 2005 Plan) and the Lazard Ltd 2008 Incentive Compensation Plan (the 2008 Plan).



ESU SettlementConcurrent with Lazard Ltds equity public offering on May 10, 2005, Lazard Ltd consummated an initial
offering of equity security units (the ESUs) in an aggregate offering amount of $287,500, and issued an additional $150,000 aggregate principal amount of ESUs in a private placement. Each ESU was issued for $25 and consisted of (i) a
purchase contract (the purchase contract) which obligated holders to purchase, and Lazard Ltd to sell, on May 15, 2008, a number of newly issued shares of Class A common stock equal to a settlement rate (the settlement rate)
based on the trading price of its Class A common stock during a period preceding that date and (ii) a 1/40, or 2.5%, ownership interest in a 6.12% senior note due 2035 of Lazard Group (the 6.12% Senior Notes).



The terms of the ESUs provided for a remarketing of the 6.12%
Senior Notes, which commenced on May 2, 2008 (the remarketing). In connection with the remarketing, on May 15, 2008 (i) the stated maturity of the 6.12% Senior Notes was reset to May 15, 2010, (ii) the interest rate on the 6.12% Senior
Notes was reset to 4.00% per annum and (iii) $437,488 aggregate principal amount of the 6.12% Senior Notes was purchased by Lazard Group. The $12 aggregate principal amount of the 6.12% Senior Notes remaining outstanding has been included in
other liabilities on the consolidated statement of financial condition at December 31, 2009 and 2008.



On May 15, 2008, Lazard Ltd settled the purchase contracts with respect to its then outstanding aggregate principal amount of ESUs at the
settlement rate and, in connection therewith, the Company issued 14,582,750 common membership interests. This resulted in an increase in members equity of $437,500.



Accumulated Other Comprehensive Income (Loss), Net of Tax



The components of AOCI at December 31, 2009 and 2008 are as
follows:



|                                                     |  |              |         |   |      |   |          |  
|---------------------------------------------------- |  | ------------ | ------- | - | ---- | - | -------- | -
|                                                     |  | December 31, |        
|                                                     |  | 2009         |         |   | 2008 |  
|Currency translation adjustments                     |  | $            | 35,890  |   |      | $ | (27,299  | )
|Interest rate hedge                                  |  |              | (5,774  | ) |      |   | (6,851   | )
|Available-for-sale securities                        |  |              | (12,630 | ) |      |   | (41,512  | )
|Employee benefit plans                               |  |              | (76,079 | ) |      |   | (45,745  | )
|                                                     |  |              |         |   |      |   |          |  
|Total AOCI                                           |  |              | (58,593 | ) |      |   | (121,407 | )
|Less amount attributable to noncontrolling interests |  |              | 199     |   |      |   |         |  
|                                                     |  |              |         |   |      |   |          |  
|Total Lazard Group AOCI                              |  | $            | (58,792 | ) |      | $ | (121,407 | )
|                                                     |  |              |         |   |      |   |          |  



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LAZARD GROUP LLC



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



Noncontrolling Interests



Noncontrolling interests represent interests in various
LAM-related GP interests and Edgewaters management vehicles that the Company is deemed to control but does not own.



The tables below summarize noncontrolling interest in net income (loss) for the years ended December 31, 2009, 2008 and 2007 and
noncontrolling interest as of December 31, 2009 and 2008 in the Companys consolidated financial statements:



|          |  |                                                               |       |   |      |   |         |      |  |   |      
|--------- |  | ------------------------------------------------------------- | ----- | - | ---- | - | ------- | ---- |  | - | -----
|          |  | Noncontrolling Interests in Net IncomeYear Ended December 31,
|          |  | 2009                                                          |       |   | 2008 |   |         | 2007
|LAM GPs   |  |                                                               | $ 266 |   |      | $ | (13,348 | )    |  | $ | 5,135
|Edgewater |  |                                                               | 2,927 |   |      |   |         |      |  |   |      
|Other     |  |                                                               | (361  | ) |      |   | 15      |      |  |   | 9    
|          |  |                                                               |       |   |      |   |         |      |  |   |      
|Total     |  | $                                                             | 2,832 |   |      | $ | (13,333 | )    |  | $ | 5,144
|          |  |                                                               |       |   |      |   |         |      |  |   |      



|          |  |                                            |         |      |   |       
|--------- |  | ------------------------------------------ | ------- | ---- | - | ------
|          |  | Noncontrolling InterestsAs Of December 31,
|          |  | 2009                                       |         | 2008
|LAM GPs   |  | $                                          | 13,409  |      | $ | 20,866
|Edgewater |  |                                            | 112,158 |      |   |      
|Other     |  |                                            | 1,993   |      |   | 15    
|          |  |                                            |         |      |   |       
|Total     |  | $                                          | 127,560 |      | $ | 20,881
|          |  |                                            |         |      |   |       



|17. | INCENTIVE PLANS
|--- | ---------------



Share-Based Incentive Plan Awards



A description of Lazard Ltds 2005 Plan, and 2008 Plan and activity with respect thereto during the years ended December 31, 2009, 2008
and 2007, is presented below.



Shares
Available Under the 2005 Plan and 2008 Plan



The 2005 Plan authorizes the issuance of up to 25,000,000 shares of Class A common stock pursuant to the grant or exercise of stock options, stock appreciation rights, restricted stock, stock units and other equity-based awards. Each stock
unit granted under the 2005 Plan represents a contingent right to receive one share of Class A common stock, at no cost to the recipient. The fair value of such stock unit awards is determined based on the closing market price of Lazard Ltds
Class A common stock at the date of grant.



In
addition to the shares available under the 2005 Plan, additional shares of Class A common stock are available under the 2008 Plan, which was approved by the stockholders of Lazard Ltd on May 6, 2008. The maximum number of shares available under the
2008 Plan is based on a formula that limits the aggregate number of shares that may, at any time, be subject to awards that are considered outstanding under the 2008 Plan to 30% of the then-outstanding shares of Class A common stock
(treating, for this purpose, the then-outstanding exchangeable interests of LAZ-MD Holdings on a fully-exchanged basis as described in the 2008 Plan).



Restricted and Deferred Stock Units



RSUs require future service as a condition for the delivery of
the underlying shares of Class A common stock and convert into Class A common stock on a one-for-one basis after the stipulated vesting periods. The grant date fair value



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LAZARD GROUP LLC



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



of the RSUs, net of an estimated forfeiture rate, is amortized over the vesting periods or requisite service periods. Expense relating to RSUs is charged to compensation and benefits
expense (and, as applicable in 2009, restructuring expense, with respect to the expense associated with the acceleration of unrecognized expense pertaining to RSUs granted previously to individuals who were terminated in the
restructuring) within the consolidated statements of operations, and amounted to $358,062 (including a charge of $86,514 relating to the acceleration of the amortization expense relating to the vesting of RSUs held by Lazards former Chairman
and Chief Executive Officer as a result of his death in October 2009 and $24,239 in restructuring expense recognized in the first quarter of 2009), $234,602 and $104,765 for the years ended December 31, 2009, 2008 and 2007, respectively. RSUs issued
subsequent to December 31, 2005 generally include a dividend participation right that provides that during vesting periods each RSU is attributed additional RSUs (or fractions thereof) equivalent to any ordinary quarterly dividends paid on Class A
common stock during such period. During the years ended December 31, 2009, 2008 and 2007, dividend participation rights required the issuance of 331,642, 208,596 and 55,836 RSUs, respectively.



Non-executive members of the Board of Directors of Lazard Group
(who are also the same Non-Executive Directors of Lazard Ltd) receive approximately 55% of their annual compensation for service on the Board of Directors and its committees in the form of DSUs resulting in 36,627, 28,090, and 12,459 DSUs granted
during the years ended December 31, 2009, 2008 and 2007, respectively. Their remaining compensation is payable in cash, which they may elect to receive in the form of additional DSUs under the Directors Fee Deferral Unit Plan described below.
DSUs are convertible into Class A common stock at the time of cessation of service to the Board. The DSUs include a cash dividend participation right equivalent to any ordinary quarterly dividends paid on Class A common stock resulting in nominal
cash payments for the years ended December 31, 2009, 2008 and 2007. DSU awards are expensed at their fair value on their date of grant, which, inclusive of amounts related to the Directors Fee Deferral Unit Plan, totaled $658, $666 and $411
during the years ended December 31, 2009, 2008 and 2007, respectively.



On May 9, 2006, the Board of Directors adopted the Directors Fee Deferral Unit Plan, which allows the Companys Non-Executive Directors to elect to receive additional DSUs pursuant to the 2005
Plan in lieu of some or all of their cash fees. The number of DSUs that shall be granted to a Non-Executive Director pursuant to this election will equal the value of cash fees that the applicable Non-Executive Director has elected to forego
pursuant to such election, divided by the market value of a share of Class A common stock on the date on which the foregone cash fees would otherwise have been paid. During the years ended December 31, 2009, 2008 and 2007, 8,899, 7,694 and 3,161
DSUs, respectively, had been granted pursuant such Plan.



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LAZARD GROUP LLC



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



The following is a summary of activity relating to RSUs and DSUs during the three-year
period ended December 31, 2009:



|                                                                    |  |            |   |      |                                     |       |       |         |   |                                     |   |      
|------------------------------------------------------------------- |  | ---------- | - | ---- | ----------------------------------- | ----- | ----- | ------- | - | ----------------------------------- | - | -----
|                                                                    |  | RSUs       |   | DSUs
|                                                                    |  | Units      |   |      | WeightedAverageGrant DateFair Value |       | Units |         |   | WeightedAverageGrant DateFair Value
|Balance, January 1, 2007                                            |  | 4,009,382  |   |      | $                                   | 32.13 |       | 19,690  |   |                                     | $ | 35.71
|Granted (including 55,836 RSUs relating to dividend participation)  |  | 5,873,905  |   |      | $                                   | 49.28 |       | 15,620  |   |                                     | $ | 52.55
|Forfeited                                                           |  | (294,145   | ) |      | $                                   | 40.36 |       |        |   |                                     |   |     
|Vested/Converted                                                    |  | (81,207    | ) |      | $                                   | 47.15 |       |        |   |                                     |   |     
|                                                                    |  |            |   |      |                                     |       |       |         |   |                                     |   |      
|Balance, December 31, 2007                                          |  | 9,507,935  |   |      | $                                   | 42.35 |       | 35,310  |   |                                     | $ | 43.16
|                                                                    |  |            |   |     
|Granted (including 208,596 RSUs relating to dividend participation) |  | 14,032,621 |   |      | $                                   | 37.02 |       | 35,784  |   |                                     | $ | 37.19
|Forfeited                                                           |  | (635,753   | ) |      | $                                   | 40.40 |       |        |   |                                     |   |     
|Vested/Converted                                                    |  | (763,335   | ) |      | $                                   | 37.90 |       | (5,838  | ) |                                     | $ | 38.28
|                                                                    |  |            |   |      |                                     |       |       |         |   |                                     |   |      
|Balance, December 31, 2008                                          |  | 22,141,468 |   |      | $                                   | 39.17 |       | 65,256  |   |                                     | $ | 40.32
|Granted (including 331,642 RSUs relating to dividend participation) |  | 8,006,287  |   |      | $                                   | 31.50 |       | 45,526  |   |                                     | $ | 28.92
|Forfeited                                                           |  | (831,022   | ) |      | $                                   | 36.91 |       |        |   |                                     |   |     
|Vested/Converted                                                    |  | (5,948,920 | ) |      | $                                   | 37.64 |       | (7,636  | ) |                                     | $ | 34.05
|                                                                    |  |            |   |      |                                     |       |       |         |   |                                     |   |      
|Balance, December 31, 2009                                          |  | 23,367,813 |   |      | $                                   | 37.01 |       | 103,146 |   |                                     | $ | 35.75
|                                                                    |  |            |   |      |                                     |       |       |         |   |                                     |   |      



During the years ended
December 31, 2009 and 2008, 5,948,920 RSUs (including the acceleration of 4,406,440 RSUs held by Lazards former Chairman and Chief Executive Officer as a result of his death) and 763,335 RSUs vested, respectively. In connection therewith, and
after considering the withholding tax obligations pertaining thereto, 5,502,748 and 639,016 shares of Class A common stock held by Lazard Group were delivered during the years ended December 31, 2009 and 2008, respectively.



As of December 31, 2009 and 2008, unrecognized RSU compensation
expense, adjusted for estimated forfeitures, was approximately $301,413 and $457,839, respectively, with such unrecognized compensation expense at December 31, 2009 expected to be recognized over a weighted average period of approximately 1.6 years.
The ultimate amount of such expense is dependent upon the actual number of RSUs that vest. The Company periodically assesses the forfeiture rates used for such estimates. A change in estimated forfeiture rates would cause the aggregate amount of
compensation expense recognized in future periods to differ from the estimated unrecognized compensation expense described herein.



Other Incentive Awards



A portion of the incentive awards granted in February 2009 included a deferred cash component, which was originally scheduled to vest over a
maximum period of four years. During the fourth quarter of 2009, in connection with a review of the Companys compensation policy, the Company accelerated the vesting of the then unamortized portion of such previously awarded deferred cash
incentive awards which resulted in a pre-tax charge to compensation and benefits expense of $60,512.



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LAZARD GROUP LLC



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



Incentive Awards Granted In February 2010



In February 2010, the Company granted 6,477,409 RSUs to
eligible employees, one-third of which vest on March 1, 2012 and two-thirds of which vest on March 1, 2013, and had an aggregate fair value on the date of grant of $36.10 per RSU. The compensation expense with respect to such RSU awards will be
recognized over a weighted average period of 2.7 years.



|18. | EMPLOYEE BENEFIT PLANS
|--- | ----------------------



The Company provides retirement and other post-retirement benefits to certain of its employees through defined contribution and defined
benefit pension plans and other post-retirement plans. These plans generally provide benefits to participants based on average levels of compensation. Expenses (benefits) related to the Companys employee benefit plans are included in
compensation and benefits expense on the consolidated statements of operations.



Effective January 31, 2005, the Companys U.S. defined benefit pension plans were amended to cease future benefit accruals and future participation. As a result of such amendment, active participants
continue to receive credit for service completed after January 31, 2005 for purposes of vesting; however, future service is not taken into consideration for purposes of future benefit accruals under these plans. Vested benefits for active
participants as of January 31, 2005 have been retained.



Effective March 31, 2006, certain of the Companys non-U.S. pension plans were amended to cease future accruals. As a result of such amendment, future service and compensation increases will not be taken into account for purposes of
future benefit accruals under these plans. Vested benefits for active participants as of March 31, 2006 were retained.



The Company also offers a partially funded contributory post-retirement medical plan covering qualifying U.S. employees (the Medical
Plan). The Medical Plan pays a stated percentage of most necessary medical expenses incurred by retirees, after subtracting payments by Medicare or other providers and after stated deductibles have been met. Participants become eligible for
benefits if they retire from the Company after meeting certain age and service requirements. Effective January 1, 2005, post-retirement health care benefits are no longer offered to those managing directors and employees hired on or after January 1,
2005 and for those managing directors and employees hired before January 1, 2005 who did not attain the age of 40 before December 31, 2005. In addition, effective January 1, 2006, the cost sharing policy changed for those who qualify for the
benefit. The plan was amended effective January 1, 2008, such that previously ineligible managing directors and employees who meet the Medical Plans age and service requirements have the ability, upon retirement, to elect to purchase medical
coverage through the Medical Plan at no cost to the Company. The Company will continue to contribute towards the cost of retiree medical premiums for those employees hired before January 1, 2005 who were age 55 or older on or before December 31,
2005.



Employer Contributions to Pension
PlansThe Companys funding policy for its U.S. and non-U.S. pension plans is to fund when required or when applicable upon an agreement with the plans Trustees. Management also evaluates from time to time
whether to make voluntary contributions to the plans. For the U.S. pension plans, there were no minimum required cash contributions and no voluntary cash contributions for the year ended December 31, 2009.



In accordance with agreements reached with the Trustees of
certain non-U.S. pension plans in 2005, the Company contributed a final committed payment of approximately $16,200 (8.2 million British pounds) during



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LAZARD GROUP LLC



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



the year ended December 31, 2008. Under the same agreements, the Company is contingently obligated to make further contributions to such pension plans depending on the cumulative performance of
the plans assets against specific benchmarks as measured on June 1, 2009 (the measurement date) and subsequently on June 1, 2010 (the remeasurement date). The obligation related to the cumulative underperformance of the
plans assets (the underperformance obligation) at the measurement date was 11.5 million British pounds ($18,654 at December 31, 2009 exchange rates) which is payable over four years commencing June 1, 2009 in equal monthly
installments, and will be subject to further adjustment on the remeasurement date. During the year ended December 31, 2009, the Company contributed approximately $2,600 (1.7 million British pounds) with respect to the underperformance obligation.



In addition, on June 30, 2009 the Company and
Trustees concluded the December 31, 2007 triennial valuation of the non-U.S. pension plans discussed above, pursuant to which: (i) the Company agreed to contribute 2.3 million British pounds ($3,731 at December 31, 2009 exchange rates), during
each year from 2011 to 2018 inclusive, subject to adjustment resulting from the December 31, 2010 triennial valuation, which the Company expects to have concluded prior to the contribution payment scheduled for 2011, and (ii) to secure the
Companys obligations thereunder, on July 15, 2009 the Company placed in escrow 12.5 million British pounds, with a final redemption date of December 31, 2018. Income on the escrow balance accretes to the Company. This amount is
subject to adjustment based on the results of the December 31, 2010 triennial valuation and subsequent triennial valuations. The escrow balance as of December 31, 2009 has been recorded in cash deposited with clearing organizations and
other segregated cash and investments: debt-other in the amounts of 6.25 million British pounds and 6.25 million British pounds ($10,138 and $10,138 at December 31, 2009 exchange rates), respectively, on the accompanying
consolidated statement of financial condition as of December 31, 2009.



During the year ended December 31, 2009, contributions were made to other non-U.S. pension plans amounting to approximately $4,900. The Company is expected to contribute approximately the same amount in
the year ending December 31, 2010.



The following
table summarizes the changes in the benefit obligations, the fair value of the assets, the funded status and amounts recognized in the consolidated statements of financial condition for the U.S. defined benefit pension plan and post-retirement
Medical Plan and plans outside the U.S. The Company uses a December 31 measurement date for its employee benefit plans.



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LAZARD GROUP LLC



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



|                                                                                                                                            |  |              |         |   |                             |   |          |      |  |   |        |   |  |   |        |  
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------- | - | --------------------------- | - | -------- | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                                                                                            |  | PensionPlans |         |   | Post-RetirementMedical Plan |  
|                                                                                                                                            |  | 2009         |         |   | 2008                        |   |          | 2009 |  |   | 2008   |  
|Change in benefit obligation                                                                                                                |  |              |         |   |                             |   |          |      |  |   |        |   |  |   |        |  
|Benefit obligation at beginning of year                                                                                                     |  | $            | 367,789 |   |                             | $ | 553,950  |      |  | $ | 6,734  |   |  | $ | 6,977  |  
|Service cost                                                                                                                                |  |              | 1,432   |   |                             |   |          |      |  |   | 98     |   |  |   | 117    |  
|Interest cost                                                                                                                               |  |              | 27,419  |   |                             |   | 28,987   |      |  |   | 310    |   |  |   | 412    |  
|Amendments                                                                                                                                  |  |              | (2,449  | ) |                             |   |          |      |  |   |        |   |  |   | (146   | )
|Actuarial (gain) loss                                                                                                                       |  |              | 47,745  |   |                             |   | (50,316  | )    |  |   | (1,406 | ) |  |   | (139   | )
|Benefits paid                                                                                                                               |  |              | (22,201 | ) |                             |   | (18,705  | )    |  |   | (378   | ) |  |   | (432   | )
|Foreign currency translation and other adjustments                                                                                          |  |              | 105,723 |   |                             |   | (146,127 | )    |  |   |        |   |  |   | (55    | )
|                                                                                                                                            |  |              |         |   |                             |   |          |      |  |   |        |   |  |   |        |  
|Benefit obligation at end of year                                                                                                           |  |              | 525,458 |   |                             |   | 367,789  |      |  |   | 5,358  |   |  |   | 6,734  |  
|                                                                                                                                            |  |              |         |   |                             |   |          |      |  |   |        |   |  |   |        |  
|Change in plan assets                                                                                                                       |  |              |         |   |                             |   |          |      |  |   |        |   |  |   |        |  
|Fair value of plan assets at beginning of year                                                                                              |  |              | 400,364 |   |                             |   | 574,194  |      |  |   |        |   |  |   |        |  
|Actual return on plan assets                                                                                                                |  |              | 53,499  |   |                             |   | (26,004  | )    |  |   |        |   |  |   |        |  
|Employer contributions                                                                                                                      |  |              | 7,581   |   |                             |   | 16,208   |      |  |   | 378    |   |  |   | 432    |  
|Benefits paid                                                                                                                               |  |              | (22,201 | ) |                             |   | (18,705  | )    |  |   | (378   | ) |  |   | (432   | )
|Foreign currency translation and other adjustments                                                                                          |  |              | 85,413  |   |                             |   | (145,329 | )    |  |   |        |   |  |   |        |  
|                                                                                                                                            |  |              |         |   |                             |   |          |      |  |   |        |   |  |   |        |  
|Fair value of plan assets at end of year                                                                                                    |  |              | 524,656 |   |                             |   | 400,364  |      |  |   |       |   |  |   |       |  
|                                                                                                                                            |  |              |         |   |                             |   |          |      |  |   |        |   |  |   |        |  
|Funded surplus (deficit) at end of year                                                                                                     |  | $            | (802    | ) |                             | $ | 32,575   |      |  | $ | (5,358 | ) |  | $ | (6,734 | )
|                                                                                                                                            |  |              |         |   |                             |   |          |      |  |   |        |   |  |   |        |  
|Amounts recognized in the consolidated statements of financial condition at December 31, 2009 and 2008 consist
of:                          |  |              |         |   |                             |   |          |      |  |   |        |   |  |   |        |  
|Prepaid pension asset (included in other assets)                                                                                          |  | $            | 27,386  |   |                             | $ | 39,589   |      |  |   |        |   |  |   |        |  
|Accrued benefit liability (included in other liabilities)                                                                                 |  |              | (28,188 | ) |                             |   | (7,014   | )    |  | $ | (5,358 | ) |  | $ | (6,734 | )
|                                                                                                                                            |  |              |         |   |                             |   |          |      |  |   |        |   |  |   |        |  
|Net amount recognized                                                                                                                       |  | $            | (802    | ) |                             | $ | 32,575   |      |  | $ | (5,358 | ) |  | $ | (6,734 | )
|                                                                                                                                            |  |              |         |   |                             |   |          |      |  |   |        |   |  |   |        |  
|Amounts recognized in AOCI (excluding tax charge (benefit) of $(10,219) and $3,196 at December 31, 2009 and 2008,
respectively) consist of: |  |              |         |   |                             |   |          |      |  |   |        |   |  |   |        |  
|Actuarial net (gain) loss                                                                                                                   |  | $            | 66,113  |   |                             | $ | 43,980   |      |  | $ | (433   | ) |  | $ | 973    |  
|Prior service (credit) cost                                                                                                                 |  |              | 21,641  |   |                             |   |          |      |  |   | (1,023 | ) |  |   | (2,404 | )
|                                                                                                                                            |  |              |         |   |                             |   |          |      |  |   |        |   |  |   |        |  
|Net amount recognized                                                                                                                       |  | $            | 87,754  |   |                             | $ | 43,980   |      |  | $ | (1,456 | ) |  | $ | (1,431 | )
|                                                                                                                                            |  |              |         |   |                             |   |          |      |  |   |        |   |  |   |        |  



The following table summarizes
the fair value of plan assets, the accumulated benefit obligation and the projected benefit obligation at December 31, 2009 and 2008:



|                               |  |                                      |  |                                          |  |                         |  |          |  |          |  |         
|------------------------------ |  | ------------------------------------ |  | ---------------------------------------- |  | ----------------------- |  | -------- |  | -------- |  | --------
|                               |  | U.S. Pension PlansAs Of December 31, |  | Non-U.S. Pension PlansAs Of
December 31, |  | TotalAs Of December 31,
|                               |  | 2009                                 |  | 2008                                     |  | 2009                    |  | 2008     |  | 2009     |  | 2008    
|Fair value of plan assets      |  | $22,325                              |  | $20,332                                  |  | $502,331                |  | $380,032 |  | $524,656 |  | $400,364
|Accumulated benefit obligation |  | $26,263                              |  | $27,346                                  |  | $499,195                |  | $340,443 |  | $525,458 |  | $367,789
|Projected benefit obligation   |  | $26,263                              |  | $27,346                                  |  | $499,195                |  | $340,443 |  | $525,458 |  | $367,789



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LAZARD GROUP LLC



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



The following table summarizes the components of benefit costs, the return on plan
assets, benefits paid, contributions and other amounts recognized in AOCI for the years ended December 31, 2009, 2008 and 2007:



|                                                                                                                                                                                                                |  |                                              |         |   |                                                             |   |         |      |  |   |         |   |  |      |        |   |      |   |        |   |  |   |        |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------- | ------- | - | ----------------------------------------------------------- | - | ------- | ---- |  | - | ------- | - |  | ---- | ------ | - | ---- | - | ------ | - |  | - | ------ | -
|                                                                                                                                                                                                                |  | Pension PlansFor The Years EndedDecember 31, |         |   | Post-Retirement Medical PlanFor The Years EndedDecember 31, |  
|                                                                                                                                                                                                                |  | 2009                                         |         |   | 2008                                                        |   |         | 2007 |  |   | 2009    |   |  | 2008 |        |   | 2007 |  
|Components of Net Periodic Benefit Cost (Credit):                                                                                                                                                               |  |                                              |         |   |                                                             |   |         |      |  |   |         |   |  |      |        |   |      |   |        |   |  |   |        |  
|Service cost                                                                                                                                                                                                    |  | $                                            | 1,432   |   |                                                             |   |         |      |  |   |         |   |  | $    | 98     |   |      | $ | 117    |   |  | $ | 165    |  
|Interest cost                                                                                                                                                                                                   |  |                                              | 27,419  |   |                                                             | $ | 28,987  |      |  | $ | 27,426  |   |  |      | 310    |   |      |   | 412    |   |  |   | 435    |  
|Expected return on plan assets                                                                                                                                                                                  |  |                                              | (28,310 | ) |                                                             |   | (33,451 | )    |  |   | (33,579 | ) |  |      |        |   |      |   |        |   |  |   |        |  
|Amortization of:                                                                                                                                                                                                |  |                                              |         |   |                                                             |   |         |      |  |   |         |   |  |      |        |   |      |   |        |   |  |   |        |  
|Prior service (credit) cost                                                                                                                                                                                     |  |                                              | 3,099   |   |                                                             |   |         |      |  |   |         |   |  |      | (1,382 | ) |      |   | (1,382 | ) |  |   | (1,382 | )
|Net actuarial loss                                                                                                                                                                                              |  |                                              | 1,323   |   |                                                             |   | 376     |      |  |   | 379     |   |  |      |        |   |      |   | 87     |   |  |   | 584    |  
|                                                                                                                                                                                                                |  |                                              |         |   |                                                             |   |         |      |  |   |         |   |  |      |        |   |      |   |        |   |  |   |        |  
|Net periodic benefit cost (credit)                                                                                                                                                                              |  |                                              | 4,963   |   |                                                             |   | (4,088  | )    |  |   | (5,774  | ) |  |      | (974   | ) |      |   | (766   | ) |  |   | (198   | )
|Settlements (curtailments)                                                                                                                                                                                      |  |                                              | (7      | ) |                                                             |   | 1,041   |      |  |   |         |   |  |      |        |   |      |   | (146   | ) |  |   | (1,695 | )
|                                                                                                                                                                                                                |  |                                              |         |   |                                                             |   |         |      |  |   |         |   |  |      |        |   |      |   |        |   |  |   |        |  
|Total benefit cost (credit)                                                                                                                                                                                     |  | $                                            | 4,956   |   |                                                             | $ | (3,047  | )    |  | $ | (5,774  | ) |  | $    | (974   | ) |      | $ | (912   | ) |  | $ | (1,893 | )
|                                                                                                                                                                                                                |  |                                              |         |   |                                                             |   |         |      |  |   |         |   |  |      |        |   |      |   |        |   |  |   |        |  
|                                                                                                                                                                                                                |  |                                              |         |   |                                                             |  
|Actual return on plan assets                                                                                                                                                                                    |  | $                                            | 53,499  |   |                                                             | $ | (26,004 | )    |  | $ | 31,592  |   |  |      |        |   |      |   |        |   |  |   |        |  
|Employer contributions                                                                                                                                                                                          |  | $                                            | 7,581   |   |                                                             | $ | 16,208  |      |  | $ | 16,431  |   |  | $    | 378    |   |      | $ | 432    |   |  | $ | 643    |  
|Benefits paid                                                                                                                                                                                                   |  | $                                            | 22,201  |   |                                                             | $ | 18,705  |      |  | $ | 20,980  |   |  | $    | 378    |   |      | $ | 432    |   |  | $ | 643    |  
|                                                                                                                                                                                                                |  |                                              |         |   |                                                             |  
|Other changes in plan assets and benefit obligations recognized in AOCI (excluding tax charge (benefit) of $(13,415), $2,840 and
$(478) during the years ended December 31, 2009, 2008 and 2007, respectively): |  |                                              |         |   |                                                             |   |         |      |  |   |         |   |  |      |        |   |      |   |        |   |  |   |        |  
|Net actuarial (gain) loss                                                                                                                                                                                       |  | $                                            | 22,122  |   |                                                             | $ | (1,486  | )    |  | $ | 4,410   |   |  | $    | (1,407 | ) |      | $ | (139   | ) |  | $ | (1,631 | )
|Prior service cost (credit)                                                                                                                                                                                     |  |                                              | (2,449  | ) |                                                             |   |         |      |  |   |         |   |  |      |        |   |      |   |        |   |  |   |        |  
|Reclassification of prior service credit (cost) to earnings                                                                                                                                                     |  |                                              | (3,099  | ) |                                                             |   |         |      |  |   |         |   |  |      | 1,382  |   |      |   | 1,382  |   |  |   | 1,382  |  
|Reclassification of actuarial loss to earnings                                                                                                                                                                  |  |                                              | (1,316  | ) |                                                             |   | (1,418  | )    |  |   | (379    | ) |  |      |        |   |      |   | (87    | ) |  |   | (584   | )
|Currency translation and other adjustments                                                                                                                                                                      |  |                                              | 28,516  |   |                                                             |   | (15,369 | )    |  |   | 1,139   |   |  |      |        |   |      |   |        |   |  |   |        |  
|                                                                                                                                                                                                                |  |                                              |         |   |                                                             |   |         |      |  |   |         |   |  |      |        |   |      |   |        |   |  |   |        |  
|Total recognized in AOCI                                                                                                                                                                                        |  | $                                            | 43,774  |   |                                                             | $ | (18,273 | )    |  | $ | 5,170   |   |  | $    | (25    | ) |      | $ | 1,156  |   |  | $ | (833   | )
|                                                                                                                                                                                                                |  |                                              |         |   |                                                             |   |         |      |  |   |         |   |  |      |        |   |      |   |        |   |  |   |        |  
|Net amount recognized in total periodic benefit cost andAOCI                                                                                                                                                    |  | $                                            | 48,730  |   |                                                             | $ | (21,320 | )    |  | $ | (604    | ) |  | $    | (999   | ) |      | $ | 244    |   |  | $ | (2,726 | )
|                                                                                                                                                                                                                |  |                                              |         |   |                                                             |   |         |      |  |   |         |   |  |      |        |   |      |   |        |   |  |   |        |  



The amounts in AOCI on the
consolidated statement of financial condition as of December 31, 2009 that are expected to be recognized as components of net periodic benefit cost (credit) for the year ending December 31, 2010 are as follows:



|                            |  |              |       |                            |   |        |       |  |   |      
|--------------------------- |  | ------------ | ----- | -------------------------- | - | ------ | ----- |  | - | -----
|                            |  | PensionPlans |       | Post-RetirementMedicalPlan |   |        | Total
|Prior service (credit) cost |  | $            | 3,211 |                            | $ | (1,023 | )     |  | $ | 2,188
|Net actuarial (gain) loss   |  | $            | 834   |                            | $ |       |       |  | $ | 834  



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LAZARD GROUP LLC



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



The assumptions used to develop actuarial present value of the projected benefit
obligation and net periodic pension cost are set forth below:



|                                                                          |  |                                                       |  |                                                                     |  |      |  |      |  |      |  |      
|------------------------------------------------------------------------- |  | ----------------------------------------------------- |  | ------------------------------------------------------------------- |  | ---- |  | ---- |  | ---- |  | -----
|                                                                          |  | Pension PlansAs Of Or For the Years EndedDecember 31, |  | Post-RetirementMedical
PlanAs Of Or For the Years EndedDecember 31,
|                                                                          |  | 2009                                                  |  | 2008                                                                |  | 2007 |  | 2009 |  | 2008 |  | 2007 
|Weighted average assumptions used to determine benefit obligations:       |  |                                                       |  |                                                                     |  |      |  |      |  |      |  |      
|Discount rate                                                             |  | 5.7%                                                  |  | 6.2%                                                                |  | 5.8% |  | 5.6% |  | 5.8% |  | 6.5% 
|Weighted average assumptions used to determine net periodic benefit cost: |  |                                                       |  |                                                                     |  |      |  |      |  |      |  |      
|Discount rate                                                             |  | 5.5%                                                  |  | 5.8%                                                                |  | 5.1% |  | 5.8% |  | 6.5% |  | 5.5% 
|Expected long-term rate of return on plan assets                          |  | 6.2%                                                  |  | 6.3%                                                                |  | 6.1% |  |      |  |      |  |      
|Healthcare cost trend rates used to determine net periodic benefit cost:  |  |                                                       |  |                                                                     |  |      |  |      |  |      |  |      
|Initial                                                                   |  |                                                       |  |                                                                     |  |      |  | 9.0% |  | 9.0% |  | 10.0%
|Ultimate                                                                  |  |                                                       |  |                                                                     |  |      |  | 6.0% |  | 6.0% |  | 6.0% 
|Year ultimate trend rate achieved                                         |  |                                                       |  |                                                                     |  |      |  | 2015 |  | 2014 |  | 2011 



Generally, the Company determined the discount rates for its defined benefit plans by utilizing indices for long-term, high-quality bonds and
ensuring that the discount rate does not exceed the yield reported for those indices after adjustment for the duration of the plans liabilities.



In selecting the expected long-term rate of return on plan assets, the Company considered the average rate of earnings expected on the funds
invested or to be invested to provide for the benefits of the plan, giving consideration to expected returns on different asset classes held by the plans in light of prevailing economic conditions as well as historic returns. This basis is
consistent for all years presented.



The assumed
cost of healthcare has an effect on the amounts reported for the Companys post-retirement plans. A 1% change in the assumed healthcare cost trend rate would increase (decrease) our cost and obligation as follows:



|           |  |             |     |             |   |      |  |   |      |   |  |   |      |  
|---------- |  | ----------- | --- | ----------- | - | ---- |  | - | ---- | - |  | - | ---- | -
|           |  | 1% Increase |     | 1% Decrease |  
|           |  | 2009        |     | 2008        |   | 2009 |  |   | 2008 |  
|Cost       |  | $           | 45  |             |   | $63  |  | $ | (38  | ) |  | $ | (53  | )
|Obligation |  | $           | 564 |             | $ | 805  |  | $ | (490 | ) |  | $ | (688 | )



Expected Benefit PaymentsThe following table summarizes the expected benefit payments for the Companys plans for
each of the next five fiscal years and in the aggregate for the five fiscal years thereafter:



|          |  |              |         |                             |   |      
|--------- |  | ------------ | ------- | --------------------------- | - | -----
|          |  | PensionPlans |         | Post-RetirementMedical Plan
|2010      |  | $            | 21,962  |                             | $ | 353  
|2011      |  |              | 23,106  |                             |   | 389  
|2012      |  |              | 23,090  |                             |   | 425  
|2013      |  |              | 25,303  |                             |   | 448  
|2014      |  |              | 24,964  |                             |   | 447  
|2015-2019 |  |              | 157,840 |                             |   | 2,059



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LAZARD GROUP LLC



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



Plan AssetsThe following table presents the categorization of plan
assets, measured at fair value as of December 31, 2009:



|                                                      |  |         
|----------------------------------------------------- |  | --------
|Asset Category                                        |  |         
|Equity Securities                                     |  | $235,564
|Debt Securities                                       |  | 279,961 
|Other (includes cash, annuities and accrued dividends |  | 9,131   
|                                                      |  |         
|Total                                                 |  | $524,656
|                                                      |  |         



At December 31, 2009, the Companys U.S. pension plans had 50% of the plans assets invested in three exchange-traded mutual funds that invest in equity securities and 50% invested in an
exchange-traded mutual fund that invests in debt securities. The Companys non-U.S. pension plans did not have any individual investment holding that constituted more than 10% of plan assets as of December 31, 2009.



Investment Policies and StrategiesThe
primary investment goal is to ensure that the plans remain well funded, taking account of the likely future risks to investment returns and contributions. As a result, a portfolio of assets is maintained with appropriate liquidity and
diversification that can be expected to generate long-term future returns that minimize the long-term costs of the pension plan without exposing the trust to an unacceptable risk of under-funding. The Companys likely future ability to pay such
contributions as are required to maintain the funded status of the plans over a reasonable time period is considered when determining the level of risk that is appropriate. All plan investments are classified as Level 1 investments and their fair
values are based on market quotes.



Defined Contribution PlansPursuant to certain matching contributions, the Company contributes to employer sponsored defined contribution plans. Such contributions amounted to $8,409, $10,316 and $9,294 for
the years ended December 31, 2009, 2008 and 2007, respectively, which are included in compensation and benefits expense on the consolidated statements of operations.



|19. | RESTRUCTURING PLAN
|--- | ------------------



In February 2009, the Company announced a restructuring plan to optimize its mix of personnel, which included certain staff reductions and
realignments of personnel. In connection with such plan, the Company recorded a charge of $62,550 (consisting of compensation-related expenses, including the acceleration of unrecognized expense pertaining to RSUs previously granted to individuals
who were terminated pursuant to the restructuring, severance and benefit payments and other costs), with this charge partially offset by an associated income tax credit of $6,401.



As of December 31, 2009, the remaining liability associated with the restructuring plan was approximately
$11,500. Such aggregate amount is reported within accrued compensation and benefits and other liabilities on the accompanying consolidated statement of financial condition as of December 31, 2009.



|20. | INCOME TAXES
|--- | ------------



The Company recorded income tax provisions of $31,727, $29,691 and $88,786 for the years ended December 31, 2009, 2008 and 2007,
respectively, representing effective tax rates of (17.4)%, 70.6% and 20.4%, respectively. Excluding (i) the income tax benefit of $6,401 related to the $62,550 restructuring charge in 2009,



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LAZARD GROUP LLC



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



(ii) the income tax benefit of $2,566 related to the $60,512 charge in 2009 for the acceleration of the unamortized portion of the previously awarded deferred cash incentive awards, (iii) the
$86,514 charge in 2009 related to the acceleration of amortization expense associated with the vesting of RSU awards held by Lazards former Chairman and Chief Executive Officer as a result of his death in October 2009, for which there was no
tax benefit, and (iv) the income tax benefit of $7,427 related to the $199,550 LAM Merger charge in 2008, the Company had income tax provisions of $40,694, $37,118 and $88,786 for the years ended December 31, 2009, 2008 and 2007, respectively,
representing effective tax rates of 147.5%, 15.4% and 20.4%, respectively.



Although a portion of Lazard Groups income is subject to U.S. federal income taxes, the principal difference between the U.S. federal statutory tax rate of 35.0% and Lazard Groups effective
tax rates is due to Lazard Group primarily operating in the U.S. as a limited liability company that is treated as a partnership for U.S. federal income tax purposes. As a result, Lazard Groups income from its U.S. operations is generally not
subject to U.S. federal income taxes, because taxes associated with such income represent obligations of the individual partners. Lazard Group, however, is subject to New York City Unincorporated Business Tax (UBT), which is attributable
to Lazard Groups operations apportioned to New York City. UBT is incremental to the U.S. federal statutory tax rate. Outside the U.S., Lazard Group operates principally through subsidiary corporations that are subject to local income taxes.



The components of the Companys provision
(benefit) for income taxes for the years ended December 31, 2009, 2008 and 2007, and a reconciliation of the U.S. federal statutory income tax rate to the Companys effective tax rates for such periods are shown below.



|                                |  |                         |        |   |      |   |         |      |  |   |        |  
|------------------------------- |  | ----------------------- | ------ | - | ---- | - | ------- | ---- |  | - | ------ | -
|                                |  | Year Ended December 31, |       
|                                |  | 2009                    |        |   | 2008 |   |         | 2007 | 
|Current:                        |  |                         |        |   |      |   |         |      |  |   |        |  
|Federal                         |  | $                       | 4,627  |   |      | $ | 3,201   |      |  | $ | 955    |  
|Foreign                         |  |                         | 34,587 |   |      |   | 37,085  |      |  |   | 83,939 |  
|State and local (primarily UBT) |  |                         | 530    |   |      |   | 6,664   |      |  |   | 10,891 |  
|                                |  |                         |        |   |      |   |         |      |  |   |        |  
|Total current                   |  |                         | 39,744 |   |      |   | 46,950  |      |  |   | 95,785 |  
|                                |  |                         |        |   |      |   |         |      |  |   |        |  
|Deferred:                       |  |                         |        |   |      |   |         |      |  |   |        |  
|Federal                         |  |                         | (3,871 | ) |      |   |        |      |  |   |       |  
|Foreign                         |  |                         | (4,146 | ) |      |   | (17,259 | )    |  |   | (6,999 | )
|                                |  |                         |        |   |      |   |         |      |  |   |        |  
|Total deferred                  |  |                         | (8,017 | ) |      |   | (17,259 | )    |  |   | (6,999 | )
|                                |  |                         |        |   |      |   |         |      |  |   |        |  
|Total                           |  | $                       | 31,727 |   |      | $ | 29,691  |      |  | $ | 88,786 |  
|                                |  |                         |        |   |      |   |         |      |  |   |        |  



|                                             |  |                         |    |  |       |   |  |       |  
|-------------------------------------------- |  | ----------------------- | -- |  | ----- | - |  | ----- | -
|                                             |  | Year Ended December 31, |   
|                                             |  | 2009                    |    |  | 2008  |   |  | 2007  |  
|U.S. federal statutory income tax rate       |  | 35.0                    | %  |  | 35.0  | % |  | 35.0  | %
|Rate benefit for U.S. partnership operations |  | (35.0                   | )  |  | (35.0 | ) |  | (35.0 | )
|Foreign taxes                                |  | (16.7                   | )  |  | 47.2  |   |  | 17.6  |  
|State and local taxes (primarily UBT)        |  | (0.3                    | )  |  | 15.9  |   |  | 2.5   |  
|Other, net                                   |  | (0.4                    | )  |  | 7.5   |   |  | 0.3   |  
|                                             |  |                         |    |  |       |   |  |       |  
|Effective income tax rate                    |  | (17.4                   | )% |  | 70.6  | % |  | 20.4  | %
|                                             |  |                         |    |  |       |   |  |       |  



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LAZARD GROUP LLC



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



Deferred income taxes are provided for the effects of temporary differences between the
tax basis of an asset or liability and its reported amount in the consolidated statements of financial condition. These temporary differences result in taxable or deductible amounts in future years. Details of the Companys deferred tax assets
and liabilities, which are included in other assets and other liabilities, respectively, on the consolidated statements of financial condition, are as follows:



|                                                                                                                                                                                       |  |              |          |   |      |   |          |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | -------- | - | ---- | - | -------- | -
|                                                                                                                                                                                       |  | December 31, |         
|                                                                                                                                                                                       |  | 2009         |          |   | 2008 |  
|Deferred Tax Assets:                                                                                                                                                                   |  |              |          |   |      |   |          |  
|Basis adjustments (primarily as a result of the reorganization related to the separation and recapitalization transactions that
occurred during 2005 and from the secondary offerings) |  | $            | 52,460   |   |      | $ | 58,384   |  
|Compensation and benefits                                                                                                                                                              |  |              | 71,548   |   |      |   | 47,578   |  
|Net operating loss and tax credit carryforwards                                                                                                                                        |  |              | 39,419   |   |      |   | 37,172   |  
|Depreciation and amortization                                                                                                                                                          |  |              | 937      |   |      |   | 1,356    |  
|Other                                                                                                                                                                                  |  |              | 12,492   |   |      |   | 10,309   |  
|                                                                                                                                                                                       |  |              |          |   |      |   |          |  
|Gross deferred tax assets                                                                                                                                                              |  |              | 176,856  |   |      |   | 154,799  |  
|Valuation allowance                                                                                                                                                                    |  |              | (110,127 | ) |      |   | (108,312 | )
|                                                                                                                                                                                       |  |              |          |   |      |   |          |  
|Total deferred tax assets (net of valuation allowance)                                                                                                                                 |  | $            | 66,729   |   |      | $ | 46,487   |  
|                                                                                                                                                                                       |  |              |          |   |      |   |          |  
|Deferred Tax Liabilities:                                                                                                                                                              |  |              |          |   |      |   |          |  
|Depreciation and amortization                                                                                                                                                          |  | $            | 18,577   |   |      | $ | 18,515   |  
|Compensation and benefits                                                                                                                                                              |  |              | 8,005    |   |      |   | 11,084   |  
|Other                                                                                                                                                                                  |  |              | 4,825    |   |      |   | 2,872    |  
|                                                                                                                                                                                       |  |              |          |   |      |   |          |  
|Total deferred tax liabilities                                                                                                                                                         |  | $            | 31,407   |   |      | $ | 32,471   |  
|                                                                                                                                                                                       |  |              |          |   |      |   |          |  



As a result of a reorganization
of the ownership structure of several legal entities that occurred within Lazard Group during the year ended December 31, 2007, certain deferred tax assets previously reflected by Lazard Ltd were recorded by Lazard Group. These deferred tax assets
primarily relate to a step-up in tax basis of net assets that occurred concurrently with the separation and recapitalization transactions by Lazard Ltd during 2005 and the secondary offerings. These deferred tax assets have, in large part, been
offset by a valuation allowance due to the uncertainty of the realization of the benefits of the tax versus book basis differences.



The Companys net operating loss and tax credit carryforwards primarily relate to (i) carryforwards in the U.K. at December 31, 2009 and
2008, which may be carried forward indefinitely, subject to various limitations, and (ii) carryforwards in Italy and the U.S. at December 31, 2009 and 2008, which begin expiring in 2011.



UBT attributable to certain member distributions has been reimbursed by the members under an agreement with the
Company.



The Company adopted accounting guidance
for uncertainty in income taxes on January 1, 2007. The cumulative effect of the Companys adoption of such guidance was a charge of $14,721 which is reflected in the January 1, 2007 members deficiency balance.



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LAZARD GROUP LLC



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



With few exceptions, the Company is no longer subject to income tax examination by
foreign tax authorities for years prior to 2005 and by U.S. federal, state and local tax authorities for years prior to 2006. While we are under examination in various tax jurisdictions with respect to certain open years, the Company believes that
the result of any final determination related to these examinations is not expected to have a material impact on its financial statements. Developments with respect to such examinations are monitored on an ongoing basis and adjustments to tax
liabilities are made as appropriate.



A
reconciliation of the beginning to the ending amount of gross unrecognized tax benefits (excluding interest and penalties) for the years ended December 31, 2009, 2008 and 2007 is as follows:



|                                                                                                   |  |                        |        |   |      |   |        |      |  |   |        |  
|-------------------------------------------------------------------------------------------------- |  | ---------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                                                                   |  | Year EndedDecember 31, |       
|                                                                                                   |  | 2009                   |        |   | 2008 |   |        | 2007 | 
|Balance, January 1 (excluding interest and penalties of $5,408, $5,195 and $5,132, respectively)   |  | $                      | 31,256 |   |      | $ | 23,368 |      |  | $ | 26,123 |  
|Increases in gross unrecognized tax benefits relating to tax positions taken during:               |  |                        |        |   |      |   |        |      |  |   |        |  
|Prior years                                                                                        |  |                        | 4,859  |   |      |   | 4,011  |      |  |   |       |  
|Current year                                                                                       |  |                        | 13,157 |   |      |   | 7,846  |      |  |   | 5,486  |  
|Decreases in gross unrecognized tax benefits relating to:                                          |  |                        |        |   |      |   |        |      |  |   |        |  
|Tax positions taken during prior years                                                             |  |                        |       |   |      |   | (393   | )    |  |   | (7,052 | )
|Settlements with tax authorities                                                                   |  |                        |       |   |      |   | (212   | )    |  |   | (702   | )
|Lapse of the applicable statute of limitations                                                     |  |                        | (7,203 | ) |      |   | (3,364 | )    |  |   | (487   | )
|                                                                                                   |  |                        |        |   |      |   |        |      |  |   |        |  
|Balance, December 31 (excluding interest and penalties of $7,059, $5,408 and $5,195, respectively) |  | $                      | 42,069 |   |      | $ | 31,256 |      |  | $ | 23,368 |  
|                                                                                                   |  |                        |        |   |      |   |        |      |  |   |        |  



Additional information with
respect to unrecognized tax benefits is as follows:



|                                                                                                                                                                                                   |  |                         |        |      |   |        |  |   |       
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------ | ---- | - | ------ |  | - | ------
|                                                                                                                                                                                                   |  | Year Ended December 31,
|                                                                                                                                                                                                   |  | 2009                    |        | 2008 |   | 2007  
|Unrecognized tax benefits at the end of the period that, if recognized, would favorably affect the effective tax rate (includes
interest and penalties of $7,059, $5,408 and $5,195, respectively) |  | $                       | 41,405 |      | $ | 27,770 |  | $ | 25,477
|Offset to deferred tax assets for unrecognized tax benefits                                                                                                                                        |  | $                       | 7,723  |      | $ | 8,894  |  | $ | 3,086 
|Interest and penalties recognized in current income tax expense (after giving effect to the reversal of interest and penalties of
$1,223, $1,730 and $1,002, respectively)                         |  | $                       | 1,651  |      | $ | 213    |  | $ | 63    



The Company anticipates that it is reasonably possible that the total amount of unrecognized tax benefits recorded at December 31, 2009 will
decrease within 12 months by an amount up to approximately $12,200 as a result of the lapse of the statute of limitations in various tax jurisdictions.



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LAZARD GROUP LLC



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



|21. | RELATED PARTIES
|--- | ---------------



Amounts receivable from, and payable to, related parties as of December 31, 2009 and 2008 are set forth below:



|                        |  |              |         |      |   |        
|----------------------- |  | ------------ | ------- | ---- | - | -------
|                        |  | December 31,
|                        |  | 2009         |         | 2008
|Receivables             |  |              |         |      |   |        
|LFCM Holdings           |  | $            | 14,212  |      | $ | 10,377 
|Lazard Ltd Subsidiaries |  |              | 31,684  |      |   | 56,114 
|Other                   |  |              | 203     |      |   |       
|                        |  |              |         |      |   |        
|Total                   |  | $            | 46,099  |      | $ | 66,491 
|                        |  |              |         |      |   |        
|Payables                |  |              |         |      |   |        
|LFCM Holdings           |  | $            | 1,747   |      | $ | 704    
|Lazard Ltd Subsidiaries |  |              | 240,518 |      |   | 262,875
|Other                   |  |              | 19      |      |   | 396    
|                        |  |              |         |      |   |        
|Total                   |  | $            | 242,284 |      | $ | 263,975
|                        |  |              |         |      |   |        



LFCM Holdings



LFCM Holdings owns and operates the capital markets business and fund management activities, as well as other specified non-operating assets and liabilities, that were transferred to it by Lazard Group
(referred to as the separated businesses) in May 2005 and is owned by the current and former working members, including certain of Lazards current and former managing directors (which also include our executive officers) who are
also members of LAZ-MD Holdings. In addition to the master separation agreement, which effected the separation and recapitalization that occurred in May 2005, LFCM Holdings entered into an insurance matters agreement and a license agreement that
addressed various business matters associated with the separation, as well as several other agreements discussed below.



Under the employee benefits agreement, dated as of May 10, 2005, by and among Lazard Ltd, Lazard Group, LAZ-MD Holdings and LFCM Holdings,
LFCM Holdings generally assumed, as of the completion of the separation and recapitalization transactions, all outstanding and future liabilities in respect of the current and former employees of the separated businesses. The Company retained all
accrued liabilities under, and assets of, the pension plans in the U.S. and the U.K. as well as the 401(k) plan accounts of the inactive employees of LFCM Holdings and its subsidiaries.



Pursuant to the administrative services agreement, dated as of May 10, 2005, by and among LAZ-MD Holdings, LFCM
Holdings and Lazard Group (the administrative services agreement), Lazard Group provides selected administrative and support services to LAZ-MD Holdings and LFCM Holdings, such as cash management and debt service administration,
accounting and financing activities, tax, payroll, human resources administration, financial transaction support, information technology, public communications, data processing, procurement, real estate management and other general administrative
functions. Lazard Group charges for these services based on Lazard Groups cost allocation methodology.



The services provided pursuant to the administrative services agreement by Lazard Group to LFCM Holdings and by LFCM Holdings to Lazard Group
generally expired December 31, 2008, and were subject to automatic annual renewal, unless either party gives 180 days notice of termination. As of December 31, 2009,



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LAZARD GROUP LLC



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



neither party has given the required notice of termination, and the agreement has been automatically renewed for a period of one year. LFCM Holdings and Lazard Group have a right to terminate the
services earlier if there is a change of control of either party or the business alliance provided in the business alliance agreement (described below) expires or is terminated. The party receiving a service may also terminate a service earlier upon
180 days notice as long as the receiving party pays the service provider an additional three months of service fee for the terminated service. In addition, in connection with the various agreements entered into regarding the CP II MgmtCo
Spin-Off, Lazard Group agreed to provide certain specified services to LFCM Holdings (which, in turn, LFCM Holdings may provide to CP II MgmtCo) and to generally not terminate such specified services until June 30, 2010.



The business alliance agreement provides, among other matters,
that Lazard Group will refer to LFCM Holdings selected opportunities for underwriting and distribution of securities. In addition, Lazard Group will provide assistance in the execution of any such referred business. In exchange for the referral
obligation and assistance, Lazard Group will receive a referral fee from LFCM Holdings equal to approximately one-half of the revenue obtained by LFCM Holdings in respect of any underwriting or distribution opportunity. In addition, LFCM Holdings
will refer opportunities in the Financial Advisory and Asset Management businesses to Lazard Group. In exchange for this referral, LFCM Holdings will be entitled to a customary finders fee from Lazard Group. The business alliance agreement
further provides that, during the term of the business alliance, LFNY and Lazard Asset Management Securities LLC, an indirect wholly-owned subsidiary of LFNY, will introduce execution and settlement transactions to broker-dealer entities affiliated
with LFCM Holdings. The term of the business alliance will expire on the fifth anniversary of the equity public offering, subject to periodic automatic renewal, unless either party elects to terminate in connection with any such renewal or elects to
terminate on account of a change of control of either party.



For the years ended December 31, 2009, 2008 and 2007, amounts recorded by Lazard Group relating to administrative and support services under the administrative services agreement amounted to $9,717,
$7,138 and $3,769, respectively, and net referral fees for underwriting, private placement, M&A and restructuring transactions under the business alliance agreement amounted to $12,301, $26,472 and $31,722, respectively. Amounts relating to
administrative and support services under the administrative services agreement are reported as reductions to operating expenses. Net referral fees for underwriting transactions under the business alliance agreement are reported as reductions to
revenue-other. Net referral fees for private placement, M&A and restructuring transactions under the business alliance agreement are reported as reductions to advisory fee revenue.



In connection with the separation, Lazard Group transferred to
LFCM Holdings its ownership interest in Panmure Gordon & Co. plc (PG&C). Lazard Group and LFCM Holdings agreed to share any net cash proceeds derived prior to May 2013 from any subsequent sale by LFCM Holdings of the shares it
owns in PG&C. As a result of LFCM Holdings selling a portion of its interest in PG&C in June 2007, the Company recorded a gain of $9,296, which is included in revenue-other on the consolidated statement of operations for the year
ended December 31, 2007. The above-mentioned transaction resulted in a $4,025 increase in operating income for year ended December 31, 2007. As of December 31, 2009 and 2008, LFCM Holdings owned 8.24% and 15.6% of PG&C, respectively.



Under a master separation agreement and a related
lease indemnity agreement, dated as of May 10, 2005 and related agreements, LFCM Holdings is obligated to indemnify Lazard Group for certain liabilities relating to abandoned leased space in the U.K. The net present value of the receivable due from
LFCM Holdings with respect to such indemnification at December 31, 2009 and 2008 was $1,180 and $4,085, respectively. The balance is due based on a schedule of periodic payments through May 10, 2010.



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LAZARD GROUP LLC



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



The remaining receivables from LFCM Holdings and its subsidiaries as of
December 31, 2009 and 2008 primarily include $5,891 and $4,949, respectively, related to administrative and support services and reimbursement of expenses incurred on behalf of LFCM Holdings and $6,202 and $1,087, respectively, related to
referral fees for underwriting and private placement transactions. Payables to LFCM Holdings and its subsidiaries at December 31, 2009 and 2008 principally relate to referral fees for Financial Advisory transactions.



See Note 16 of Notes to Consolidated Financial Statements for
information regarding the 2008 Secondary Offering for which LCM participated as an underwriter. In addition, see Notes 10 and 15 of Notes to Consolidated Financial Statements for information regarding the CP MgmtCo Spin-Off and Sapphire,
respectively.



LAZ-MD Holdings



Lazard Group provides selected
administrative and support services to LAZ-MD Holdings through the administrative services agreement as discussed above, with such services generally to be provided until December 31, 2014 unless terminated earlier because of a change in control of
either party. Lazard Group charges LAZ-MD Holdings for these services based on Lazard Groups cost allocation methodology and, for the years ended December 31, 2009, 2008 and 2007, such charges amounted to $750, $750 and $1,300,
respectively.



Lazard Ltd Subsidiaries



Lazard Groups receivables from
subsidiaries of Lazard Ltd at December 31, 2009 and 2008 include interest-bearing loans of $29,732 and $55,715, respectively, including accrued interest thereon. Interest income relating to interest-bearing loans with subsidiaries of Lazard Ltd
amounted to $4,887 and $413 for the years ended December 31, 2009 and 2008, respectively.



As of December 31, 2009 and 2008, Lazard Groups payables to subsidiaries of Lazard Ltd included $64,305 and $64,512, respectively, related to the LAM Merger (see Note 8 of Notes to Consolidated
Financial Statements), as well as payables at December 31, 2009 and 2008 aggregating $39,820 and $43,634, respectively, in connection with Lazard Groups acquisition of GAHL and Edgewaters management vehicles, and with respect to Lazard
Ltds acquisition of CWC and subsequent contribution of CWC to Lazard Group (see Note 9 of Notes to Consolidated Financial Statements). In addition, as of December 31, 2009 and 2008, Lazard Groups payables to subsidiaries of Lazard Ltd
include interest-bearing loans, plus accrued interest thereon, of $136,329 and $154,706, respectively. Interest expense relating to interest-bearing loans with subsidiaries of Lazard Ltd amounted to $6,181 and $1,847 for the years ended December 31,
2009 and 2008, respectively.



Other



For the year ended December 31, 2008,
expenses recorded by Lazard Group relating to referral fees for restructuring transactions and fee sharing with MBA amounted to $2,397. There were no such amounts for the years ended December 31, 2009 and 2007. At December 31, 2008, the balance
of such related party transactions are included within related party payables in the accompanying consolidated statement of financial condition.



|22. | REGULATORY AUTHORITIES
|--- | ----------------------



LFNY is a U.S. registered broker-dealer and is subject to the net capital requirements of Rule 15c3-1 under the Exchange Act. Under the basic
method permitted by this rule, the minimum required net capital, as defined,



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LAZARD GROUP LLC



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



is a specified fixed percentage of total aggregate indebtedness recorded in LFNYs Financial and Operational Combined Uniform Single (FOCUS) report filed with the Financial
Industry Regulatory Authority (FINRA), or $100, whichever is greater. At December 31, 2009, LFNYs regulatory net capital was $45,417, which exceeded the minimum requirement by $35,843.



Certain U.K. subsidiaries of the Company, including LCL, Lazard
Fund Managers Limited and Lazard Asset Management Limited (the U.K. Subsidiaries) are regulated by the Financial Services Authority. At December 31, 2009, the aggregate regulatory net capital of the U.K. Subsidiaries was $153,043, which
exceeded the minimum requirement by $115,198.



CFLF, through which non-corporate finance advisory activities are carried out in France, is subject to regulation by the Commission Bancaire and the Comité des Etablissements de Crédit et des Entreprises dInvestissement
for its banking activities conducted through its subsidiary, LFB. In addition, the investment services activities of the Paris group, exercised through LFB and other subsidiaries of CFLF, primarily LFG (asset management), are subject to regulation
and supervision by the Autorité des Marchés Financiers. At December 31, 2009, the consolidated regulatory net capital of CFLF was $191,636, which exceeded the minimum requirement set for regulatory capital levels by $86,219.



Certain other U.S. and non-U.S. subsidiaries are
subject to various capital adequacy requirements promulgated by various regulatory and exchange authorities in the countries in which they operate. At December 31, 2009, for those subsidiaries with regulatory capital requirements, their
aggregate net capital was $77,725, which exceeded the minimum required capital by $55,381.



At December 31, 2009, each of these subsidiaries individually was in compliance with its regulatory capital requirements.



Lazard Ltd is currently subject to supervision by the SEC as a Supervised Investment Bank Holding Company
(SIBHC). As a SIBHC, Lazard Ltd is subject to group-wide supervision, which requires it to compute allowable capital and risk allowances on a consolidated basis. We believe that Lazard Ltd is the only institution currently subject to
supervision by the SEC as a SIBHC. We are in discussions with the SEC and other authorities regarding the scope and nature of Lazard Ltds reporting and other obligations under the SIBHC program.



On December 11, 2009, the U.S. House of Representatives passed
The Wall Street Reform and Consumer Protection Act of 2009 (the 2009 Act). The 2009 Act is currently pending in the U.S. Senate. We are not able to predict what action or changes, if any, will result from the Senates consideration
of the 2009 Act. We currently are in the process of examining the potential impact of the 2009 Act on us and the SIBHC program, but, given the uncertainty of possible changes to the 2009 Act, we are not able to predict the ultimate effect on us and
the SIBHC program.



|23. | SEGMENT INFORMATION
|--- | -------------------



The Companys reportable segments offer different products and services and are managed separately as different levels and types of
expertise are required to effectively manage the segments transactions. Each segment is reviewed to determine the allocation of resources and to assess its performance. The Companys principal operating activities are included in two
business segments: Financial Advisory (which includes providing general strategic and transaction-specific advice on M&A and other strategic matters, restructurings, capital structure, capital raising and various other corporate finance
matters), and Asset Management (which includes the management of equity and fixed income



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LAZARD GROUP LLC



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



securities and alternative investment and private equity funds). In addition, the Company records selected other activities in its Corporate segment, including management of cash, certain
investments and the commercial banking activities of LFB. The Company also allocates outstanding indebtedness to its Corporate segment.



The Companys segment information for the years ended December 31, 2009, 2008 and 2007 is prepared using the following methodology:



| |  |  | Revenue and expenses directly associated with each segment are included in determining operating income.
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | Expenses not directly associated with specific segments are allocated based on the most relevant measures applicable, including headcount, square
footage and other factors.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Segment assets are based on those directly associated with each segment, and include an allocation of certain assets relating to various segments,
based on the most relevant measures applicable, including headcount, square footage and other factors.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Company allocates investment gains and losses, interest income and interest expense among the various segments based on the segment in
which the underlying asset or liability is reported.



Each segments operating expenses include (i) compensation and benefits expenses incurred directly in support of the businesses and (ii) other operating expenses, which include directly incurred expenses for occupancy and equipment,
marketing and business development, technology and information services, professional services, fund administration and outsourced services 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.



There were no clients for the years ended December 31, 2009, 2008 and 2007 that individually constituted more
than 10% of the net revenue of either of the Companys business segments.



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LAZARD GROUP LLC



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



Management evaluates segment results based on net revenue and operating income and
believes that the following information provides a reasonable representation of each segments contribution with respect to net revenue, operating income (loss) and total assets:



|                   |  |                             |  |                                          |           |   |      |   |           |      |  |   |           |  
|------------------ |  | --------------------------- |  | ---------------------------------------- | --------- | - | ---- | - | --------- | ---- |  | - | --------- | -
|                   |  |                             |  | As Of Or For The Year Ended December 31, |          
|                   |  |                             |  | 2009                                     |           |   | 2008 |   |           | 2007 | 
|Financial Advisory |  | Net Revenue                 |  | $                                        | 986,820   |   |      | $ | 1,022,913 |      |  | $ | 1,240,177 |  
|                   |  | Operating Expenses (a)      |  |                                          | 998,727   |   |      |   | 796,970   |      |  |   | 920,705   |  
|                   |  |                             |  |                                          |           |   |      |   |           |      |  |   |           |  
|                   |  | Operating Income (Loss) (b) |  | $                                        | (11,907   | ) |      | $ | 225,943   |      |  | $ | 319,472   |  
|                   |  |                             |  |                                          |           |   |      |   |           |      |  |   |           |  
|                   |  | Total Assets                |  | $                                        | 706,785   |   |      | $ | 739,444   |      |  | $ | 811,752   |  
|                   |  |                             |  |                                          |           |   |      |   |           |      |  |   |           |  
|                   |  |                             |  |                                         
|Asset Management   |  | Net Revenue                 |  | $                                        | 601,652   |   |      | $ | 614,781   |      |  | $ | 724,751   |  
|                   |  | Operating Expenses (a)      |  |                                          | 504,452   |   |      |   | 678,170   |      |  |   | 539,800   |  
|                   |  |                             |  |                                          |           |   |      |   |           |      |  |   |           |  
|                   |  | Operating Income (Loss) (b) |  | $                                        | 97,200    |   |      | $ | (63,389   | )    |  | $ | 184,951   |  
|                   |  |                             |  |                                          |           |   |      |   |           |      |  |   |           |  
|                   |  | Total Assets                |  | $                                        | 702,775   |   |      | $ | 419,858   |      |  | $ | 580,716   |  
|                   |  |                             |  |                                          |           |   |      |   |           |      |  |   |           |  
|                   |  |                             |  |                                         
|Corporate          |  | Net Revenue                 |  | $                                        | (58,509   | ) |      | $ | (82,725   | )    |  | $ | (48,035   | )
|                   |  | Operating Expenses (a)      |  |                                          | 208,772   |   |      |   | 37,800    |      |  |   | 20,324    |  
|                   |  |                             |  |                                          |           |   |      |   |           |      |  |   |           |  
|                   |  | Operating Income (Loss) (b) |  | $                                        | (267,281  | ) |      | $ | (120,525  | )    |  | $ | (68,359   | )
|                   |  |                             |  |                                          |           |   |      |   |           |      |  |   |           |  
|                   |  | Total Assets                |  | $                                        | 1,705,488 |   |      | $ | 1,726,280 |      |  | $ | 2,371,474 |  
|                   |  |                             |  |                                          |           |   |      |   |           |      |  |   |           |  
|                   |  |                             |  |                                         
|Total              |  | Net Revenue                 |  | $                                        | 1,529,963 |   |      | $ | 1,554,969 |      |  | $ | 1,916,893 |  
|                   |  | Operating Expenses (a)      |  |                                          | 1,711,951 |   |      |   | 1,512,940 |      |  |   | 1,480,829 |  
|                   |  |                             |  |                                          |           |   |      |   |           |      |  |   |           |  
|                   |  | Operating Income (Loss) (b) |  | $                                        | (181,988  | ) |      | $ | 42,029    |      |  | $ | 436,064   |  
|                   |  |                             |  |                                          |           |   |      |   |           |      |  |   |           |  
|                   |  | Total Assets                |  | $                                        | 3,115,048 |   |      | $ | 2,885,582 |      |  | $ | 3,763,942 |  
|                   |  |                             |  |                                          |           |   |      |   |           |      |  |   |           |  



|(a) | Operating expenses include depreciation and amortization of property as set forth in table below.
|--- | -------------------------------------------------------------------------------------------------



|                   |  |                         |        |      |   |        |  |   |       
|------------------ |  | ----------------------- | ------ | ---- | - | ------ |  | - | ------
|                   |  | Year Ended December 31,
|                   |  | 2009                    |        | 2008 |   | 2007  
|Financial Advisory |  | $                       | 5,933  |      | $ | 5,583  |  | $ | 4,508 
|Asset Management   |  |                         | 3,557  |      |   | 3,451  |  |   | 2,888 
|Corporate          |  |                         | 13,051 |      |   | 11,791 |  |   | 9,338 
|                   |  |                         |        |      |   |        |  |   |       
|Total              |  | $                       | 22,541 |      | $ | 20,825 |  | $ | 16,734
|                   |  |                         |        |      |   |        |  |   |       



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LAZARD GROUP LLC



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



|(b) | Operating income (loss) in 2009 and 2008 was significantly impacted by certain special items. Such impact, including the amounts attributable to each of the
Companys business segments, are described in the table below:
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                                                                                                 |      |                         |   |      |             |   |      |          |  
|-------------------------------------------------------------------------------------------------------------------------------- | ---- | ----------------------- | - | ---- | ----------- | - | ---- | -------- | -
|                                                                                                                                 |      | Year Ended December 31, |  
|                                                                                                                                 | 2009 |                         |   | 2008 |             |   | 2007 |         
|Financial Advisory                                                                                                               |      |                         |   |      |             |   |      |          |  
|Operating income (loss), as reported above                                                                                       |      | $(11,907                | ) |      | $225,943    |   |      | $319,472 |  
|Special item:                                                                                                                    |      |                         |   |      |             |   |      |          |  
|Acceleration of amortization expense related to previously awarded deferred cash incentive awards                                |      | 48,533                  |   |      |             |   |      |          |  
|                                                                                                                                 |      |                         |   |      |             |   |      |          |  
|Operating income, excluding impact of special item                                                                               |      | $36,626                 |   |      | $225,943    |   |      | $319,472 |  
|                                                                                                                                 |      |                         |   |      |             |   |      |          |  
|                                                                                                                                 |      |                         |  
|Asset Management                                                                                                                 |      |                         |   |      |             |   |      |          |  
|Operating income (loss), as reported above                                                                                       |      | $97,200                 |   |      | $(63,389    | ) |      | $184,951 |  
|Special items:                                                                                                                   |      |                         |   |      |             |   |      |          |  
|Impact of the LAM Merger                                                                                                         |      |                         |   |      | 197,550     |   |      |          |  
|Acceleration of amortization expense related to previously awarded deferred cash incentive awards                                |      | 7,508                   |   |      |             |   |      |          |  
|                                                                                                                                 |      |                         |   |      |             |   |      |          |  
|Operating income, excluding impact of special items                                                                              |      | $104,708                |   |      | $134,161    |   |      | $184,951 |  
|                                                                                                                                 |      |                         |   |      |             |   |      |          |  
|                                                                                                                                 |      |                         |  
|Corporate                                                                                                                        |      |                         |   |      |             |   |      |          |  
|Operating loss, as reported above                                                                                                |      | $(267,281               | ) |      | $(120,525   | ) |      | $(68,359 | )
|Special items:                                                                                                                   |      |                         |   |      |             |   |      |          |  
|Impact of the LAM Merger                                                                                                         |      |                         |   |      | 2,000       |   |      |          |  
|Restructuring expense                                                                                                            |      | 62,550                  |   |      |             |   |      |          |  
|Acceleration of amortization expense related to the vesting of RSUs held by Lazards former Chairman and Chief Executive
Officer |      | 86,514                  |   |      |             |   |      |          |  
|Acceleration of amortization expense related to previously awarded deferred cash incentive awards                                |      | 4,471                   |   |      |             |   |      |          |  
|                                                                                                                                 |      |                         |   |      |             |   |      |          |  
|Operating loss, excluding impact of special items                                                                                |      | $(113,746               | ) |      | $(118,525   | ) |      | $(68,359 | )
|                                                                                                                                 |      |                         |   |      |             |   |      |          |  
|                                                                                                                                 |      |                         |  
|Consolidated                                                                                                                     |      |                         |   |      |             |   |      |          |  
|Operating income (loss), as reported above                                                                                       |      | $(181,988               | ) |      | $42,029     |   |      | $436,064 |  
|Special items:                                                                                                                   |      |                         |   |      |             |   |      |          |  
|Impact of the LAM Merger                                                                                                         |      |                         |   |      | 199,550     |   |      |          |  
|Restructuring expense                                                                                                            |      | 62,550                  |   |      |             |   |      |          |  
|Acceleration of amortization expense related to the vesting of RSUs held by Lazards former Chairman and Chief Executive
Officer |      | 86,514                  |   |      |             |   |      |          |  
|Acceleration of amortization expense related to previously awarded deferred cash incentive awards                                |      | 60,512                  |   |      |             |   |      |          |  
|                                                                                                                                 |      |                         |   |      |             |   |      |          |  
|Operating income, excluding impact of special items                                                                              |      | $   27,588              |   |      | $   241,579 |   |      | $436,064 |  
|                                                                                                                                 |      |                         |   |      |             |   |      |          |  



Geographic Information



Due to the highly integrated nature of international financial
markets, the Company manages its business based on the profitability of the enterprise as a whole. Accordingly, management believes that profitability by geographic region is not necessarily meaningful. The Companys revenue and identifiable
assets are generally allocated based on the country or domicile of the legal entity providing the service.



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LAZARD GROUP LLC



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(dollars in thousands, unless otherwise noted)



The following table sets forth the net revenue from, and identifiable assets for, the
Company and its consolidated subsidiaries by geographic region allocated on the basis described above.



|                         |  |                                          |           |   |      |   |           |      |  |   |          
|------------------------ |  | ---------------------------------------- | --------- | - | ---- | - | --------- | ---- |  | - | ---------
|                         |  | As Of Or For The Year Ended December 31,
|                         |  | 2009                                     |           |   | 2008 |   |           | 2007
|Net Revenue:             |  |                                          |           |   |      |   |           |      |  |   |          
|United States            |  | $                                        | 802,895   |   |      | $ | 791,468   |      |  | $ | 971,193  
|United Kingdom           |  |                                          | 191,521   |   |      |   | 224,520   |      |  |   | 275,536  
|France                   |  |                                          | 247,510   |   |      |   | 257,381   |      |  |   | 358,074  
|Other Western Europe     |  |                                          | 176,450   |   |      |   | 159,141   |      |  |   | 186,270  
|Rest of World            |  |                                          | 111,587   |   |      |   | 122,459   |      |  |   | 125,820  
|                         |  |                                          |           |   |      |   |           |      |  |   |          
|Total                    |  | $                                        | 1,529,963 |   |      | $ | 1,554,969 |      |  | $ | 1,916,893
|                         |  |                                          |           |   |      |   |           |      |  |   |          
|Operating Income (Loss): |  |                                          |           |   |      |   |           |      |  |   |          
|United States            |  | $                                        | (155,399  | ) |      | $ | (35,770   | )    |  | $ | 230,482  
|United Kingdom           |  |                                          | (11,485   | ) |      |   | 22,915    |      |  |   | 59,363   
|France                   |  |                                          | (9,143    | ) |      |   | 21,609    |      |  |   | 94,582   
|Other Western Europe     |  |                                          | (5,463    | ) |      |   | 16,941    |      |  |   | 26,365   
|Rest of World            |  |                                          | (498      | ) |      |   | 16,334    |      |  |   | 25,272   
|                         |  |                                          |           |   |      |   |           |      |  |   |          
|Total (c)                |  | $                                        | (181,988  | ) |      | $ | 42,029    |      |  | $ | 436,064  
|                         |  |                                          |           |   |      |   |           |      |  |   |          
|Identifiable Assets:     |  |                                          |           |   |      |   |           |      |  |   |          
|United States            |  | $                                        | 1,557,006 |   |      | $ | 1,159,121 |      |  | $ | 1,471,009
|United Kingdom           |  |                                          | 277,751   |   |      |   | 250,788   |      |  |   | 352,695  
|France                   |  |                                          | 908,137   |   |      |   | 1,128,714 |      |  |   | 1,518,606
|Other Western Europe     |  |                                          | 163,899   |   |      |   | 176,282   |      |  |   | 216,094  
|Rest of World            |  |                                          | 208,255   |   |      |   | 170,677   |      |  |   | 205,538  
|                         |  |                                          |           |   |      |   |           |      |  |   |          
|Total                    |  | $                                        | 3,115,048 |   |      | $ | 2,885,582 |      |  | $ | 3,763,942
|                         |  |                                          |           |   |      |   |           |      |  |   |          



|(c) | As described in Note (b) above, operating income (loss) in 2009 and 2008 was significantly impacted by certain special items as described therein.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------



24.    SUBSEQUENT EVENTS



Retirement
PolicyIn January 2010, the Company amended its retirement policy with respect to RSU awards. Such amendment served to modify the retirement eligibility requirements of existing and future RSU awards, and, as such, Lazard
accelerated the recognition of compensation expense for the affected RSU awards. Accordingly, the Company expects to record a pre-tax, non-cash charge to compensation and benefits expense of approximately $24,800 in the first quarter of 2010.



RestructuringIn
February 2010, the Company announced a plan of selective staff reductions. In connection with such plan, the Company expects to record a pre-tax charge in the first quarter of 2010 of approximately $90,000 (principally consisting of
compensation-related expenses, including the acceleration of unrecognized expense pertaining to RSUs previously granted to individuals who are being terminated pursuant to the restructuring).



The above charges will be partially offset by the applicable
income tax credits.



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SUPPLEMENTAL FINANCIAL INFORMATION



QUARTERLY RESULTS (UNAUDITED)



The following represents the
Companys unaudited quarterly results for the years ended December 31, 2009 and 2008. These quarterly results were prepared in conformity with generally accepted accounting principles and reflect all adjustments that are, in the opinion of
management, necessary for a fair statement of the results. These adjustments are of a normal recurring nature.



|                                                                  |  |                        |         |   |        |   |         |  |   |          |   |  |      |          |   |  |   |           |  
|----------------------------------------------------------------- |  | ---------------------- | ------- | - | ------ | - | ------- |  | - | -------- | - |  | ---- | -------- | - |  | - | --------- | -
|                                                                  |  | 2009 Fiscal Quarter    |        
|                                                                  |  | First                  |         |   | Second |   | Third   |  |   | Fourth   |   |  | Year |         
|                                                                  |  | (dollars in thousands) |        
|Net revenue                                                       |  | $                      | 247,867 |   |        | $ | 376,035 |  | $ | 411,406  |   |  | $    | 494,655  |   |  | $ | 1,529,963 |  
|Operating expenses                                                |  |                        | 338,775 |   |        |   | 317,920 |  |   | 338,236  |   |  |      | 717,020  |   |  |   | 1,711,951 |  
|                                                                  |  |                        |         |   |        |   |         |  |   |          |   |  |      |          |   |  |   |           |  
|Operating income (loss)                                           |  | $                      | (90,908 | ) |        | $ | 58,115  |  | $ | 73,170   |   |  | $    | (222,365 | ) |  | $ | (181,988  | )
|                                                                  |  |                        |         |   |        |   |         |  |   |          |   |  |      |          |   |  |   |           |  
|Net income (loss)                                                 |  | $                      | (86,354 | ) |        | $ | 44,896  |  | $ | 51,884   |   |  | $    | (224,141 | ) |  | $ | (213,715  | )
|Less - net income (loss) attributable to noncontrolling interests |  |                        | (1,071  | ) |        |   | 259     |  |   | 2,030    |   |  |      | 1,614    |   |  |   | 2,832     |  
|                                                                  |  |                        |         |   |        |   |         |  |   |          |   |  |      |          |   |  |   |           |  
|Net income (loss) attributable to Lazard Group                    |  | $                      | (85,283 | ) |        | $ | 44,637  |  | $ | 49,854   |   |  | $    | (225,755 | ) |  | $ | (216,547  | )
|                                                                  |  |                        |         |   |        |   |         |  |   |          |   |  |      |          |   |  |   |           |  
|                                                                  | 
|                                                                  |  | 2008 Fiscal Quarter    |        
|                                                                  |  | First                  |         |   | Second |   | Third   |  |   | Fourth   |   |  | Year |         
|                                                                  |  | (dollars in thousands) |        
|Net revenue                                                       |  | $                      | 307,508 |   |        | $ | 466,855 |  | $ | 405,536  |   |  | $    | 375,070  |   |  | $ | 1,554,969 |  
|Operating expenses                                                |  |                        | 289,711 |   |        |   | 378,705 |  |   | 540,201  |   |  |      | 304,323  |   |  |   | 1,512,940 |  
|                                                                  |  |                        |         |   |        |   |         |  |   |          |   |  |      |          |   |  |   |           |  
|Operating income (loss)                                           |  | $                      | 17,797  |   |        | $ | 88,150  |  | $ | (134,665 | ) |  | $    | 70,747   |   |  | $ | 42,029    |  
|                                                                  |  |                        |         |   |        |   |         |  |   |          |   |  |      |          |   |  |   |           |  
|Net income (loss)                                                 |  | $                      | 13,460  |   |        | $ | 74,095  |  | $ | (139,549 | ) |  | $    | 64,332   |   |  | $ | 12,338    |  
|Less - net income (loss) attributable to noncontrolling interests |  |                        | (3,254  | ) |        |   | 1,645   |  |   | (8,161   | ) |  |      | (3,563   | ) |  |   | (13,333   | )
|                                                                  |  |                        |         |   |        |   |         |  |   |          |   |  |      |          |   |  |   |           |  
|Net income (loss) attributable to Lazard Group                    |  | $                      | 16,714  |   |        | $ | 72,450  |  | $ | (131,388 | ) |  | $    | 67,895   |   |  | $ | 25,671    |  
|                                                                  |  |                        |         |   |        |   |         |  |   |          |   |  |      |          |   |  |   |           |  



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|Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
|------- | -------------------------------------------------------------------------------------



There were no changes in or disagreements with accountants on
accounting and financial disclosure during the last two fiscal years.



|Item 9A. | Controls and Procedures
|-------- | -----------------------



Our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and
procedures pursuant to Rule 13a-15 under the Exchange Act as of December 31, 2009 (the end of the period covered by this Annual Report on Form 10-K). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have
concluded that, as of the end of the period covered by this Annual Report on Form 10-K, our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) are effective, to ensure that information we are required to
disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and
communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.



In addition, no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act)
occurred during our most recent fiscal quarter that has materially affected, or is likely to materially affect, our internal control over financial reporting.



Managements Report on Internal Controls Over Financial Reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act),
and the related report of our independent registered public accounting firm, are set forth in Part II, Item 8 of this Annual Report on Form 10-K and are incorporated herein by reference.



|Item 9B. | Other Information
|-------- | -----------------



Mr. Ashish Bhutani and Mr. Gary Parr have each agreed to join the Board of Directors of Lazard Ltd and Lazard Group LLC effective as of March
8, 2010 and to be named as a Vice Chairman of Lazard.



Mr. Bhutani, age 49, is a Vice Chairman and Managing Director of Lazard and has been the Chief Executive Officer of LAM since March 2004. Mr. Bhutani previously served as Head of New Products and Strategic Planning for LAM from June 2003 to
March 2004. Prior to joining Lazard, he was Co-Chief Executive Officer North America of Dresdner Kleinwort Wasserstein from 2001 to the end of 2002, and was a member of its Global Corporate and Markets Board, and a member of the Global Executive
Committee. Mr. Bhutani worked at Wasserstein Perella Group (the predecessor to Dresdner Kleinwort Wasserstein) from 1989 to 2001, serving as Deputy Chairman of Wasserstein Perella Group and Chief Executive Officer of Wasserstein Perella Securities
from 1994 to 2001. Mr. Bhutani began his career at Salomon Brothers in 1985, where he was a Vice President in Fixed Income. Mr. Bhutani is a member of the Board of Directors of four registered investment companies, which are part of the Lazard fund
complex.



Mr. Parr, age 52, is a Vice Chairman and
Managing Director of Lazard having previously served as Deputy Chairman of Lazard from April 2003 until November 2009. For over 25 years, he has focused on providing strategic advice to financial institutions worldwide. Prior to joining Lazard, Mr.
Parr was with Morgan Stanley, serving in numerous capacities, including Vice-Chairman-Institutional Securities and Investment Banking, Chairman and Head of the Global Financial Institutions Group and Co-Head of the Global Mergers and Acquisitions
Department. Prior to joining Morgan Stanley, Mr. Parr was with a group from First Boston that formed Wasserstein Perella, where he rose to become Co-President.



Steven J. Golub, who recently served as Interim Chief Executive Officer of Lazard from October 14, 2009 until November 16, 2009, has
relinquished his role as an executive officer of Lazard and Chairman of its Financial Advisory Group. Mr. Golub will continue as a Vice Chairman and Managing Director of Lazard.



There have been no new contracts or arrangements or amendments to prior contracts or arrangements entered into
as a result of the forgoing appointments.



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PART III



|Item 10. | Directors, Executive Officers and Corporate Governance
|-------- | ------------------------------------------------------



Information regarding our executive officers is included in Part I of this Form 10-K under the caption Executive Officers of the
Registrant. Our Board of Directors is divided into three classes, and members of each class serve for a three-year term. Lazard Groups board of directors and executive officers are the same as those of Lazard Ltd.



Class II Directors with Terms Expiring in 2010



Ellis Jones, age 56, has served as a director of Lazard
Ltd and Lazard Group since May 2005. Mr. Jones has served as Chief Executive Officer of Wasserstein & Co., LP since January 2001. Prior to becoming Chief Executive Officer of Wasserstein & Co., LP, Mr. Jones was a Managing Director of the
investment banking firm Wasserstein Perella Group Inc. from February 1995 to January 2001. Prior to joining Wasserstein Perella Inc., Mr. Jones was a Managing Director at Salomon Brothers Inc. in its Corporate Finance Department from March 1989 to
February 1995. Prior to joining Salomon Brothers Group Inc., Mr. Jones worked in the Investment Banking Department at The First Boston Corporation from September 1979 to March 1989. Mr. Jones is a member of the Board of Directors of Harry &
David Holdings, Inc. Mr. Jones was selected to be a director of the Company pursuant to an agreement that Lazard entered into with the Wasserstein family trusts at the time of our IPO in 2005. See Agreements with Natixis and the Wasserstein
Family Trusts.



Laurent Mignon, age
46, has served as a director of Lazard Ltd and Lazard Group since July 2009. Mr. Mignon has served as Chief Executive Officer of Natixis (the successor to IXIS Corporate & Investment Bank) since May 2009. From September 2007 to May 2009, he
was General Partner of Oddo & Cie, a private French investment bank. Prior to joining Oddo & Cie, Mr. Mignon was the Chief Executive Officer of AGF France. He joined AGF France in 1997 as Chief Financial Officer and was nominated to be a
member of the Executive Committee in 1998. Prior to joining the AGF Group, Mr. Mignon held a variety of positions in banking over a ten-year period, ranging from trading to investment banking. Mr. Mignon is a member of the Board of Directors of
Sequana, and member of the Board of Directors and of the Audit Committee of Arkema. Mr. Mignon was selected to be a director of the Company pursuant to an agreement that Lazard entered into with Natixis at the time of our IPO in 2005. See
Agreements with Natixis and the Wasserstein Family Trusts.



Hal S. Scott, age 66, has served as a director of Lazard Ltd and Lazard Group since March 2006. Professor Scott is the Nomura Professor and Director of the Program on International Financial
Systems at Harvard Law School, where he has taught since 1975. Before joining Harvard he served as a Law Clerk for the Hon. Justice Byron R. White, U.S. Supreme Court, from 1973 to 1974, and as an Assistant Professor of Law, University of California
at Berkeley from 1974 to 1975. Professor Scott has published numerous books and articles on finance, international trade and securities laws. He is the President of the Committee on Capital Markets Regulation, Inc. and a member of the Senior
Advisory Board of Oliver Wyman. Professor Scott is a past President of the International Academy of Consumer and Commercial Law and a past Governor of the American Stock Exchange (2002-2005). Professor Scott is the chairman of the Nominating &
Governance Committee and a member of the Audit Committee of the Board of Directors of Lazard Ltd. Professor Scott was selected to be a director of the Company because of his impressive academic background and expertise in public policy and global
financial market regulation as it affects the financial services industry.



Class I Directors with Terms Expiring in 2011



Kenneth M. Jacobs, age 51, has served as Chairman and Chief Executive Officer of Lazard Ltd and Lazard Group LLC since November 2009. Mr. Jacobs served as a Managing Director of Lazard since 1991
and had been a deputy chairman of Lazard from January 2002 until November 2009. He has also served as Chief Executive Officer of Lazard North America since 2002. Mr. Jacobs initially joined Lazard in 1988. Mr. Jacobs is a member



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of the Board of Trustees of the University of Chicago and the Brookings Institution. Mr. Jacobs was selected to be the Chairman and Chief Executive Officer of Lazard because of his vision,
intellect and dynamism, his proven track record of creativity in building new businesses, as well as his skills as a trusted advisor, collaborator and team leader.



Ronald J. Doerfler, age 68, has served as a director of Lazard Ltd and Lazard Group since June 2006.
Mr. Doerfler has been Senior Vice PresidentFinance and Administration of The Hearst Corporation since December 2009, having previously served as Senior Vice President and Chief Financial Officer from February 1998 until December 2009, and
was elected a member of Hearsts Board of Directors in August 2002. In December 2008, Mr. Doerfler was elected a trustee of the Hearst Family Trust, the sole shareholder of The Hearst Corporation. Hearst is one of the nations largest
diversified communications companies, with interests in magazine and newspaper publishing, television and radio stations, newspaper comics and features syndication, cable TV networks, television production and syndication, and new media activities.
Mr. Doerfler arrived at Hearst from ABC, Inc., where he was Senior Vice President and Chief Financial Officer. He joined Capital Cities Communications in 1969, was appointed Treasurer in 1977 and Senior Vice President and Chief Financial Officer in
1980. He played a major role in Capital Cities acquisition of ABC in 1986, and with the combined groups 1996 merger with The Walt Disney Company. Mr. Doerfler is the chairman of the Audit Committee of the Board of Directors of Lazard
Ltd. Mr. Doerfler was selected to be a director of the Company because of his extensive experience and background in the media and entertainment industry, as well as his qualifications as an audit committee financial expert.



Philip A. Laskawy, age 68, has served as a director of
Lazard Ltd and Lazard Group since July 2008. Mr. Laskawy served as Chairman and Chief Executive Officer of Ernst & Young from 1994 until his retirement in 2001, after 40 years of service with the professional services firm. Mr. Laskawy
served as Chairman of the International Accounting Standards Board from 2006 to 2007, and as a member of the 1999 Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit Committees. Mr. Laskawy has served as Chairman of Fannie Mae
since September 2008 and is also a member of the board of directors of General Motors Corp., Capgemini, Loews Corp. and Henry Schein, Inc. Mr. Laskawy had previously served on the boards of directors of Discover Financial Services until September
2008 and The Progressive Corporation until December 2007. Mr. Laskawy is a member of the Audit Committee of the Board of Directors of Lazard Ltd. Mr. Laskawy was selected to be a director of the Company because of his expertise in the areas of
auditing and accounting, his qualifications as an audit committee financial expert and the unique perspective he brings as a former chief executive of one of the big four accounting firms.



Michael J. Turner, CBE, age 61, has served as a
director of Lazard Ltd and Lazard Group since March 2006. In November 2008, Mr. Turner was appointed the non-executive Chairman of Babcock International Group PLC. Mr. Turner was the Chief Executive Officer of BAE Systems plc from March 2002 until
August 2008. Mr. Turner joined BAE Systems in 1966 and held a number of commercial, marketing and general management positions, including Chief Operating Officer from 1999 to March 2002. Mr. Turner is Chairman of the Defence Industries Council
and Joint Chairman of the National Defence Industries Council in the UK, as well as a non-executive director of GKN PLC. Mr. Turner had previously served on the Board of Directors of Peninsular and Oriental Steam Navigation Company until March 2006.
Mr. Turner is a member of the Compensation Committee and the Nominating & Governance Committee of the Board of Directors of Lazard Ltd. Mr. Turner was selected to be a director of the Company because of his extensive background, experience and
leadership as a former chief executive in the aerospace and defense industry and the Boards desire to add geographical diversity to its membership that reflects the Companys client base in Europe.



Class III Directors with Terms Expiring in 2012



Steven J. Heyer, age 57, has served as a director of
Lazard Ltd and Lazard Group since June 2005 and was appointed Lead Director in November 2009. Mr. Heyer is currently the Chairman and Chief Executive Officer of Harry & David Holdings, Inc., founder of Avra Kehdabra Animation LLC, and Chairman
of Next 3D, a software company. Mr. Heyer was the Chief Executive Officer of Starwood Hotels & Resorts Worldwide from October



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2004 until April 2007. Prior to joining Starwood, he was President and Chief Operating Officer of The Coca-Cola Company from 2002 to September 2004. From 1994 to 2001 he was President and Chief
Operating Officer of Turner Broadcasting System, Inc., and a member of AOL Time Warners Operating Committee. Previously, Mr. Heyer was President and Chief Operating Officer of Young & Rubicam Advertising Worldwide, and before that spent 15
years at Booz Allen & Hamilton, ultimately becoming Senior Vice President and Managing Partner. He is a member of the Board of Directors of Omnicare, Inc. and the National Collegiate Athletic Association. Mr. Heyer has ownership positions in a
portfolio of private companies and is a member of many of their boards of directors. Mr. Heyer had previously served on the Board of Directors of Starwood Hotels & Resorts Worldwide until April 2007. Mr. Heyer is the chairman of the Compensation
Committee and a member of the Nominating & Governance Committee of the Board of Directors of Lazard Ltd. Mr. Heyer was selected to be a director of the Company because of the depth of his analytical skills which he has applied in a variety of
leadership positions across diverse industry groupings, including broadcast media, consumer products, and hotel and leisure companies.



Sylvia Jay, CBE, age 63, has served as a director of Lazard Ltd and Lazard Group since March 2006. Lady Jay is Vice Chairman of
LOreal UK, a position she has held since September 2005. From January 2001 to August 2005, she was the Director General of the Food & Drink Federation, a UK trade body. Lady Jay joined the United Kingdom Civil Service in 1971. Her civil
service career, until she resigned in 1995, mainly concerned government financial aid to developing countries, including being a non-executive director to the Gibraltar Ship Repair Company. She also worked in the Civil Service Selection Board to
recruit fast stream administrators and diplomats; the French Ministere de la Cooperation; the French Tresor and was one of a small international team which set up the European Bank for Reconstruction and Development. Lady Jay is a member of the
Board of Directors of Saint-Gobain and Alcatel-Lucent, and was Chairman of Food from Britain from 2005 until 2009. Lady Jay is a member of the Compensation Committee and the Nominating & Governance Committee of the Board of Directors of Lazard
Ltd. Lady Jay was selected to be a director of the Company because of her extensive background and experience in government service and the Boards desire to add geographical diversity that reflects the Companys client base in Europe.



Vernon E. Jordan, Jr., age 74, has served
as a director of Lazard Ltd and Lazard Group since May 2005. Mr. Jordan has served as a Senior Managing Director of Lazard Frères & Co. LLC since January 2000. Mr. Jordan has been Senior Counsel at Akin Gump Strauss Hauer & Feld
LLP since January 2000, where he served as Senior Executive Partner from January 1982 to December 1999. Prior to that, Mr. Jordan served as President and Chief Executive Officer of the National Urban League, Inc. from January 1972 to December 1981.
Mr. Jordan currently serves on the Boards of Directors of Asbury Automotive Group, Inc. and Xerox Corporation; as a senior advisor to the Board of Directors of American Express Company; as a trustee to Howard University and DePauw University; and on
the International Advisory Board of Barrick Gold. Mr. Jordan had previously served on the Board of Directors of Xerox Corporation until May 2009; the American Express Company until May 2008; J.C. Penny Company until August 2007; and Sara Lee
Corporation until May 2005. Mr. Jordan was selected to be a director of the Company because of his extensive background and expertise in legal and corporate matters, his knowledge of corporate governance and his experience as a board member of
numerous public companies.



Agreements with Natixis and the
Wasserstein Family Trusts



As of February 28,
2010, Natixis (the successor to IXIS Corporate & Investment Bank) held 6,999,800 shares of Class A common stock of Lazard Ltd, of which 2,000,000 shares of Class A common stock of Lazard Ltd were acquired in our recapitalization
transactions in May 2005 and 4,999,800 shares were acquired in May 2008 upon the settlement of the purchase contracts related to $150 million of Lazards equity security units (which equity security units were also acquired in our
recapitalization transactions in May 2005). In connection with this investment by Natixis in May 2005, we agreed that we will nominate one person designated by Natixis to our Board of Directors until such time as (1) the shares of our common stock
then owned by Natixis, plus (2) the shares of our common stock issuable under the terms of any exchangeable securities issued by us then owned



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by Natixis, constitute less than 50% of the sum of (a) the shares of our common stock initially purchased by Natixis, plus (b) the shares of our common stock issuable under the terms of any
exchangeable securities issued by us initially purchased by Natixis. Laurent Mignon is currently the Natixis nominee to our Board of Directors.



The Wasserstein family trusts hold 7,978,859 LAZ-MD Holdings exchangeable interests that may be exchanged on a one for one basis into our
Class A common stock. At the time of ourIPO, we agreed that we would nominate one person designated by the Wasserstein family trusts to our Board of Directors until such time as (1) the shares of our common stock then owned directly or
indirectly by the family trusts or any beneficiaries of the Wasserstein family trusts (in the aggregate), plus (2) the shares of our common stock issuable under the terms of any exchangeable interests issued by us then owned directly or indirectly
by the Wasserstein family trusts or any beneficiaries of the Wasserstein family trusts (in the aggregate), constitute less than 50% of the shares of our common stock issuable under the terms of any exchangeable securities initially issued by us in
connection with the separation and recapitalization transactions on May 10, 2005 and held by the Wasserstein family trusts (in the aggregate) as of the date of our IPO. Ellis Jones is currently the nominee of the Wasserstein family trusts to our
Board of Directors.



Audit Committee
Financial Expert



Since Lazard Ltds
Class A common stock is listed on the New York Stock Exchange and Lazard Group is part of Lazard Ltds consolidated reporting group, Lazard Group is not required to have a separate audit committee. Lazard Ltd maintains an independent audit
committee and the Board of Directors of Lazard Ltd has determined that Mr. Ronald J. Doerfler and Philip A. Laskawy have the requisite qualifications to satisfy the SEC definition of audit committee financial expert.



Code of Business Conduct and Ethics



Lazard Ltd has adopted the Code of Business Conduct and Ethics
that is applicable to all directors, managing directors, officers and employees of Lazard Ltd, Lazard Group and their subsidiaries and affiliates, as well as a Supplement to the Code of Business Conduct and Ethics for certain other senior officers,
including Lazard Groups chief executive officer, chief financial officer and principal accounting officer. Each of these codes are available on our website at http://www.lazard.com/Investorrelations/ConductsandEthics.aspx and a copy has
been filed as an exhibit to this Form 10-K. A printed copy of each of these documents is available upon request. We intend to disclose amendments to, or waivers from, the Code of Business Conduct and Ethics, if any, on our website.



|Item 11. | Executive Compensation
|-------- | ----------------------



The Lazard Ltd Compensation Committee oversees the compensation of the Lazard Group executive officers and references below to the
Compensation Committee refer to the Lazard Ltd Compensation Committee. The executive officers of Lazard Group are the same as those of Lazard Ltd.



Compensation Discussion and Analysis



Philosophy and Objectives of Our Compensation Programs



General. Our compensation programs are designed to attract, retain and motivate executives and
professionals of the highest level of quality and effectiveness. These compensation programs focus on rewarding the types of performance that increase shareholder value, including growing revenue, retaining clients, developing new client
relationships, improving operational efficiency and managing risks. A substantial portion of each executives total compensation is intended to be variable and delivered on a pay-for-performance basis. The programs will provide compensation
opportunities, contingent upon performance, that are competitive with practices of other similar financial services organizations. We target annual operating revenue, earnings and total



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shareholder return*as our key performance metrics. In allocating compensation to our executive officers, managing directors and other senior professionals, the primary emphasis, in addition to our performance, is on each
individuals contribution to the Company, business unit performance and compensation recommendations of the individuals to whom participants report. The Compensation Committee monitors the effectiveness of our compensation programs throughout
the year and performs an annual reassessment of the programs in January of each year in connection with year-end compensation decisions. The Committee directly engaged Steven Hall & Partners, LLC, an independent compensation consulting firm, to
assist it with benchmarking and compensation analyses.



Competitive Compensation Considerations. Because the competition to attract and retain high performing executives and professionals in the financial services industry is intense, the amount and composition of
total compensation paid to our executives must be considered in light of competitive compensation levels. In this regard, for our named executive officers, the Compensation Committee used as a benchmark an independently prepared survey regarding
compensation levels in 2008 and, to the extent available, 2009, for comparable positions at Black Rock, Inc., Goldman Sachs Group, Inc., Greenhill & Co., Inc., Jefferies Group, Inc., Legg Mason, Inc., and Morgan Stanley. While some of the
companies listed above are larger than Lazard, we chose this comparator group because we compete in the same marketplace with these companies for highly qualified and talented financial service professionals.



The unprecedented disruption and volatility in the financial
markets and the consequent general economic downturn both in the U.S. and globally in the fourth quarter of 2008 and the first half of 2009 have placed additional stress on our compensation programs. During the fourth quarter of 2009, the Company
revised its compensation structure in order to enhance the competitiveness of our business model and position Lazard to drive shareholder value, while still maintaining significant retention mechanisms. As part of that effort, we:



| |  |  | accelerated the vesting of the deferred cash incentive compensation (which were paid out in February 2010), which was awarded as part of the 2008
compensation cycle, and would have been expensed in future periods;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changed the mix of our incentive compensation awards granted with respect to the 2008 compensation cycle by increasing the current cash and deferred
equity-based components and eliminating deferred cash awards with respect to the 2009 compensation cycle. These changes were made with the intention to: (i) be in line with the practices followed by Lazard in the 2006 and 2007 compensation cycles;
(ii) reduce future compensation charges required to be amortized in future years and allow greater flexibility in the future to address competitive conditions; (iii) more closely align our current pay cycle with reported compensation and revenues;
and (iv) maintain significant retention mechanisms by focusing stock grant awards at the more senior levels, where they are most effective and valued; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | held the aggregate 2009 current cash compensation plus deferrals awarded for the 2009 compensation cycle, in line with levels of current cash
compensation plus deferrals awarded for the 2008 and 2006 compensation cycles.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



While we believe these changes to our current policy will enhance our competitive position over the long term, some of these changes have had
an adverse effect on our operating results for 2009. As a result, our ratio of total compensation and benefits expense to annual operating revenue (excluding special charges) for fiscal 2009 was 71.8%.



Design of Our Compensation Programs



Compensation for each of our executive officers, managing
directors and other senior professionals is viewed on a total compensation basis and then subdivided into two primary categoriesbase salary and incentive compensation. With the exception of the 2008 compensation cycle, our annual incentive
compensation awards since our IPO in 2005 (including for the 2009 compensation cycle) have had two components: a cash bonus and



|* | Total shareholder return reflects the share price performance of Lazards Class A common stock, assuming the full reinvestment of any dividends, over the time
period selected.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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an equity-based award. With respect to the 2008 compensation cycle, due to the unprecedented disruption and volatility in the financial services industry, we altered our historical mix of
incentive compensation to add a deferred cash component. The deferred cash awards, which were granted in February 2009 and related to the 2008 compensation cycle, reduced the cash and the overall amount of equity awards granted for the 2008
compensation cycle. As described in more detail under the headingPhilosophy and Objectives of Our Compensation ProgramsCompetitive Compensation Considerations, the Compensation Committee has determined, however, for the 2009
compensation cycle, to eliminate the deferred cash award component and return to our historical mix of incentive compensationcash bonus and equity-based awards. Decisions with regard to incentive compensation are generally made in January of
each year and are based on Company and individual performance in the prior fiscal year. The Compensation Committee determines and approves the total compensation package (salary and incentive compensation award) to be paid to our chief executive
officer, Mr. Jacobs. Mr. Jacobs, in turn, makes recommendations to the Compensation Committee as to the total compensation package to be paid to the other executive officers, which are then subject to the review and approval of the Compensation
Committee. Before any year-end compensation decisions are made, the Compensation Committee reviews a comprehensive tally sheet of all elements of each executive officers compensation. The tally sheets include information on cash and non-cash
compensation for the past three fiscal years (including current and prior year base salaries, annual bonuses, RSUs and deferred cash awards), the value of benefits and other perquisites paid to our executive officers, the value of unrealized
gains/losses on prior equity-based awards and the LAZ-MD Holdings exchangeable interests held by each of our executive officers, as well as potential amounts to be delivered under all post-employment scenarios. The tally sheets are used to ensure
that each member of the Compensation Committee has a complete picture of the compensation and benefits paid to, and equity holdings of, each of our executive officers and is just one of the tools used by the Compensation Committee in making year-end
compensation decisions.



Upon the recommendation
of management, during the fourth quarter of 2009, the Compensation Committee approved the acceleration of the deferred cash awards that were granted to our managing directors, including our named executive officers, as part of the 2008 compensation
cycle. This decision was made in an effort to reduce the need to amortize compensation charges in future years and to allow greater flexibility in the future to address competitive conditions, while still maintaining significant retention
mechanisms. Under the terms of the deferred cash awards, each recipient was entitled to accrued interest from February 10, 2009 through February 24, 2010, at a rate of 5% per annum on all installments that were originally scheduled to vest after
2009. The first interest payment was made on January 28, 2010 and a final interest payment was made on February 24, 2010. The accelerated deferred cash awards were paid out on February 24, 2010 as follows: $3.9 million to Mr. Jacobs; $1.005 million
to Mr. Castellano; $4.56 million to Mr. Golub; $1.395 million to Mr. Hoffman; $1.175 million to Mr. Stern; and $1.575 million to Mr. Ward.



Base Salary. Base salaries are intended to reflect the experience, skill and knowledge of our executive officers,
managing directors and other senior professionals in their particular roles and responsibilities, while retaining the flexibility to appropriately compensate for performance, both of the firm and the individual. Base salaries for our executive
officers and any subsequent adjustments thereto are reviewed and approved by the Compensation Committee annually, based on a review of relevant market data and each executives performance for the prior year, as well as each executives
experience, expertise and position. During 2009, each of our named executive officers, other than Messrs. Jacobs and Stern, was a party to a retention or employment agreement with Lazard that provides for a minimum annual base salary during the term
of those agreements. See Retention Agreements with Named Executive Officers.



IncentiveCompensation. Incentive compensation is a key component of our executive compensation strategy. Incentive compensation
payouts can be highly variable from year to year and are generally based on our operating revenue, earnings and total shareholder return in the immediately preceding fiscal year, as well as each individuals contribution to revenue and to the
Companys development, including business unit performance. In addition, careful attention is paid to competitive compensation practices in the financial services industry.



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In January of each year a determination is made as to the total amount of incentive
compensation to be awarded to our managing directors, including our executive officers, based on Company and individual performance in the prior fiscal year. This year, given the overall performance of Lazard and the competitive environment in the
financial services industry, senior management recommended to the Compensation Committee that total compensation for the 2009 compensation cycle should be maintained broadly in line with the level of total compensation for the 2008 and 2006
compensation cycles. We applied a progressive formula based on total compensation for all of our managing directors and senior professionals, including the executive officers. Pursuant to this formula, as a participants total compensation
(salary, cash bonus and equity-based awards) increases, a greater percentage of his or her total compensation is composed of an equity-based award. This formula is based on a sliding scale that effectively begins at 6% for some of our vice
presidents and directors and generally reaches 50% for our highest paid managing directors and is in line with our philosophy of focusing stock grant awards at the more senior levels, where they are most effective and valued. The remainder of an
individuals total incentive compensation award is payable in cash.



For the 2009 compensation cycle, equity-based compensation was awarded to our executive officers in the form of RSUs granted under the 2005 Equity Incentive Plan. An RSU is a contractual right to receive
a share of our Class A common stock upon vesting of the RSU. The RSUs granted to our executive officers in 2010 (which relate to 2009 performance) generally vest approximately two or three years after the date of grant, subject to the
executives continued service with the Company. See Grant of Plan Based Awards below for a discussion of the terms of the RSUs. The purpose of the RSU awards is to maximize shareholder value by aligning the long-term interests of
our senior executives with those of our shareholders. Each individual who receives an RSU becomes, economically, a long-term shareholder of Lazard, with the same interests as our other shareholders. This economic interest results because the amount
a recipient ultimately realizes from an RSU depends on the value of our Class A common stock when actual shares are delivered upon vesting. The number of RSUs that an individual was granted in 2010 as part of the 2009 compensation cycle was
determined based on the average closing price of our stock price on the NYSE on the five trading days prior to the grant date. RSUs also serve as an important retention mechanism for Lazard by putting a significant portion of each recipients
compensation at risk of forfeiture if he or she leaves the firm prior to the vesting date. In addition, our executive officers each own considerable interests in Lazard through their holdings of LAZ-MD Holdings exchangeable interests and previous
grants of RSUs. As a result, we believe our executive officers have a demonstrable and significant interest in increasing shareholder value over the long term.



RSU awards are typically made in early February following our year-end earnings release. This year, RSUs were granted to each of our named
executive officers on February 11, 2010, approximately one week after our public announcement of year-end earnings. The number of RSUs granted in 2010 (which relate to 2009 performance) was determined by dividing the dollar amount allocated to be
granted as an equity-based award by the average closing price of our Class A common stock on the NYSE on the five trading days prior to February 11, 2010 ($36.74). The RSUs granted on February 11, 2010 will generally vest 33% on March 1, 2012 and
67% on March 1, 2013.



In exchange for their RSU
awards, our named executive officers agreed to restrictions on their ability to compete with Lazard or to solicit our clients and employees, which serves to protect the Companys intellectual and human capital. Year-end incentive compensation
awards are based on Company and individual performance during the prior fiscal year, and an executive officers total equity interest in Lazard is not factored into the Compensation Committees decision-making process concerning future
equity-based awards.



Impact of 2009 Performance on
Compensation



In setting compensation levels
for our employees for 2009, we primarily considered annual operating revenue, earnings and competitive conditions in the financial services industry. As we began to see a developing economic recovery in the second half of 2009, we became acutely
aware of our need to continue to attract, retain and motivate executives and professionals of the highest level of quality and effectiveness. Part of our business



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strategy is to recruit and retain proven senior professionals who have strong client relationships and industry expertise. Because of the value they bring to the Company, these individuals
command high levels of compensation. For 2009, based on managements recommendation and in light of our annual operating revenue of $1.62 billion, the Compensation Committee determined that the target level of total compensation and benefits
expense to operating revenue needed to be set at 71.8%, in order to meet our compensation and retention objectives. The Compensation Committee concluded that this ratio of total compensation and benefits expense to annual operating revenue was
appropriate for us in light of its discussions with our executive officers, current economic and competitive conditions in the marketplace, information provided by Steven Hall & Partners, LLC, and our financial performance in 2009.



Compensation For Each of Our Named Executive Officers in 2009



2009 Base
Salaries. Mr. Jacobs was named the Companys Chairman and Chief Executive Officer in November 2009. Prior to this appointment Mr. Jacobs served as a Deputy Chairman of Lazard and Chief Executive Officer of Lazard North America.
In that position, he was receiving an annual base salary of $1,500,000. In connection with his appointment as Chairman and Chief Executive Officer of Lazard, Mr. Jacobs agreed to a reduction in his annual base salary to $900,000 and, as a result,
his 2009 base salary reflects a blended rate having received approximately 11 months of salary at the previous rate. Mr. Stern received a base salary of $750,000 for 2009, which was determined based on his experience, level of responsibility and the
salaries for comparable positions at our core competitors. We have retention agreements with Messrs. Castellano, Golub, Hoffman and Ward that establish their respective minimum annual base salaries. These amounts were negotiated and were meant to
ensure that Lazard would have the services of each of these executive officers during the term of their respective agreements. See Retention Agreements with Named Executive Officers. The base salaries paid in 2009 to each of
Messrs. Castellano, Golub, Hoffman and Ward was the minimum required under each of their retention agreements: $500,000 to Mr. Castellano; $900,000 to Mr. Golub; $600,000 to Mr. Hoffman; and $900,000 to Mr. Ward. Mr. Hoffmans annual base
salary was increased to $750,000 effective as of January 1, 2010. See the discussion of Mr. Hoffmans 2009 performance under 2009 Incentive CompensationOther Named Executive Officers.



2009 Incentive Compensation.



Mr. Jacobs. In determining the
amount of incentive compensation to be paid to Mr. Jacobs, the Compensation Committee considered his recent appointment as Chairman and Chief Executive Officer in November 2009 and his performance as Chief Executive Officer of Lazard North America.
The performance evaluation was not based on any numerical targets. Mr. Jacobs is a highly regarded investment banker whose advice was sought in a number of high profile transactions in which Lazard was engaged in 2009, including advising the Haas
Family Trusts in the $18.8 billion sale of Rohm and Haas to Dow Chemical, and GlaxoSmithKlines acquisition of Stiefel Laboratories for up to $3.6 billion. Mr. Jacobs leadership of Lazard North America and attention to the needs of
clients was evident in the increased business activity and improved results of operations in Lazards financial advisory business in the second half of 2009. The Compensation Committee reviewed the specific client engagements for which
Mr. Jacobs was responsible and their contribution to the Companys overall revenues in 2009. The Compensation Committee also considered Mr. Jacobs positioning on an internal pay equity scale vis-à-vis other managing directors within
Lazard, and the competitive compensation practices at the other firms included in our comparator group. The tracking of revenue back to particular client relationships was an important factor considered by the Committee in determining Mr.
Jacobs incentive compensation for 2009. Based on its review, the Compensation Committee decided to grant Mr. Jacobs an incentive compensation award of $6,072,115 payable as follows: $2,322,115 in a cash bonus and an RSU award valued at
$3,750,000. The RSU award constituted 50% of Mr. Jacobs total compensation for 2009. Given the increased component of current cash and the significant RSU award, the Compensation Committee believes it has struck the right balance between
rewarding current achievements and the desire to keep Mr. Jacobs focused on Lazards long-term performance.



The following table shows the base salary and incentive compensation awarded to Mr. Jacobs for his performance in 2009 in the manner it was
considered by the Compensation Committee. This presentation differs from that contained in the Summary Compensation Table by (i) showing the full grant date value of the RSUs



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awarded on February 11, 2010, which related to 2009 performance but is not reflected in the Summary Compensation Table because they were granted after the end of our 2009 fiscal year, and (ii)
excluding the full grant date value of the RSUs and deferred cash awards granted on February 10, 2009, which related to 2008 performance and is included in the Summary Compensation Table. In addition, the Change in Pension Value column
and the All Other Compensation column are omitted, as they were not material elements of Mr. Jacobs compensation.



|                  |  |      |                  |            |                                   |                        |  |                   |  |           
|----------------- |  | ---- | ---------------- | ---------- | --------------------------------- | ---------------------- |  | ----------------- |  | ----------
|                  |  | Year |                  | Salary     |                                   | Incentive Compensation |  | TotalCompensation
|                  |  |      | Annual CashBonus |            | AnnualRestricted StockUnit Awards |                       
|Kenneth M. Jacobs |  | 2009 |                  | $1,427,885 |                                   | $2,322,115             |  | $3,750,000        |  | $7,500,000



Other Named Executive Officers. Annual incentive compensation for each of our other named executive
officers was established based on the recommendation of Mr. Jacobs and approval by the Compensation Committee. The retention agreements with Messrs. Castellano, Golub, Hoffman and Ward generally provide that each is entitled to an annual bonus to be
determined under the applicable annual bonus plan of the Company on the same basis as annual bonuses are determined for other executive officers of Lazard and paid in the same ratio of cash to equity awards as is applicable to other executives. Mr.
Jacobs reviewed with the Compensation Committee the performance of each of the named executive officers individually and their overall contribution to the Company in 2009, which was not based on any numerical targets.



In determining annual incentive compensation for (i) Mr. Golub,
who served as interim Chief Executive Officer of Lazard following the death of Mr. Wasserstein, as well as vice chairman of Lazard and chairman of the financial advisory group, both before and after his service as interim Chief Executive Officer,
(ii) Mr. Stern, as Chief Operating Officer of Lazard, and (iii) Mr. Ward, as president of Lazard and chairman of the asset management group, Mr. Jacobs considered the role that each individual plays in the Lazard organization, maintaining a balance
between their leadership and administrative responsibilities within the firm, while continuing to cultivate important client relationships. In addition to the administrative role that each plays as an officer of Lazard, each of these executives also
plays a significant role in the revenue generation side of our business. The client relationships cultivated by each of these executives led to specific engagements that have contributed to the Companys overall revenues in 2009. In making a
recommendation on incentive compensation for each of Messrs. Golub, Stern, andWard, Mr. Jacobs reviewed total revenue generated from each of their particular client relationships, each executives positioning on an internal pay equity
scale vis-à-vis other managing directors within Lazard, and the competitive compensation practices at the other firms included in our comparator group. The tracking of revenue back to particular client relationships was an important factor
considered in differentiating incentive compensation among Lazards managing director group. Another factor that Mr. Jacobs considered was the difficulty and expense of replacing each of these executives should they decide to leave.
Based on Mr. Jacobs recommendation, the Compensation Committee approved the following incentive compensation for each of Messrs. Golub, Stern, and Ward for their performance in 2009: Mr. Golub received a cash bonus of $2,100,000and an
RSU award valued at $3,000,000; Mr. Stern received a cash bonus of $1,097,500 and an RSU award valued at $1,652,500; and Mr. Ward received a cash bonus of $747,500 and an RSU award valued at $1,352,500. The RSUs awarded to Messrs. Golub, Stern, and
Ward constituted approximately 50%, 47% and 45% of their total compensation for 2009 (salary, cash bonus and equity-based awards), respectively.



In determining incentive compensation for Mr. Castellano and Mr. Hoffman, Mr. Jacobs noted that each provides significant leadership to
Lazard in their roles as chief financial officer and general counsel, respectively. Mr. Castellano has overall responsibility for corporate finance and accounting at Lazard on a worldwide basis, and Mr. Hoffman oversees legal and compliance, human
resources and public relations and communications. Mr. Jacobs noted that both executives have been tasked with primary responsibility for establishing and implementing uniform internal policies within Lazard, so that other members of senior
management can focus on



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building the Lazard franchise and cultivating client relationships. In making a recommendation on incentive compensation for Mr. Castellano, Mr. Jacobs noted his contribution to the overall
strength of the firm and his leadership and steadiness in executing the firms corporate finance strategy in the midst of an extremely volatile economic climate in the first half of 2009. With respect to Mr. Hoffman, Mr. Jacobs noted his
wide-ranging responsibility in overseeing legal operations worldwide, human resources and public relations. Mr. Hoffman was instrumental in helping to steady the firm and providing counsel and advice to the Board of Directors in the uncertain
environment that arose when our former Chairman and Chief Executive Officer became critically ill and subsequently passed away in October 2009. Mr. Hoffman was singled out by the Board of Directors for acclamation in his handling of this crisis
situation and for the assistance he continued to provide throughout the succession process. Based on Mr. Jacobs recommendation, the Compensation Committee approved the following incentive compensation for each of Mr. Castellano and Mr. Hoffman
for their performance in 2009: Mr. Castellano was paid a cash bonus of $900,000 and received an RSU award valued at $1,050,000; Mr. Hoffman was paid a cash bonus of $1,247,500 and received an RSU award valued at $1,652,500. The RSUs awarded to
Mr. Castellano and Mr. Hoffman constituted approximately 43% and 47% of their total compensation (salary, bonus and equity award) for 2009, respectively.



The following table shows the base salary and incentive compensation paid to Messrs. Castellano, Golub, Hoffman, Stern and Ward for their
performance in 2009 in the manner it was considered by the Compensation Committee. This presentation differs from that contained in the Summary Compensation Table by (i) showing the full grant date value of the RSUs awarded on February 11, 2010,
which related to 2009 performance but is not reflected in the Summary Compensation Table because they were granted after the end of our 2009 fiscal year, and (ii) excluding the full grant date value of the RSUs and deferred cash awards granted on
February 10, 2009, which related to 2008 performance and is included in the Summary Compensation Table. In addition, the Change in Pension Value column and the All Other Compensation column are omitted, as they were not
material elements of any of the named executives compensation.



|                      |  |      |                  |          |                            |                        |  |                   |  |           
|--------------------- |  | ---- | ---------------- | -------- | -------------------------- | ---------------------- |  | ----------------- |  | ----------
|                      |  | Year |                  | Salary   |                            | Incentive Compensation |  | TotalCompensation
|                      |  |      | Annual CashBonus |          | RestrictedStock UnitAwards |                       
|Michael J. Castellano |  | 2009 |                  | $500,000 |                            | $   900,000            |  | $1,050,000        |  | $2,450,000
|Steven J. Golub       |  | 2009 |                  | $900,000 |                            | $2,100,000             |  | $3,000,000        |  | $6,000,000
|Scott D. Hoffman      |  | 2009 |                  | $600,000 |                            | $1,247,500             |  | $1,652,500        |  | $3,500,000
|Alexander F. Stern    |  | 2009 |                  | $750,000 |                            | $1,097,500             |  | $1,652,500        |  | $3,500,000
|Charles G. Ward, III  |  | 2009 |                  | $900,000 |                            | $   747,500            |  | $1,352,500        |  | $3,000,000



Perquisites. In 2009, the Company provided a limited number of perquisites, with each of our named executive officers receiving less
than $18,100 in perquisite compensation. Our named executive officers receive the same perquisite compensation provided to all of our U.S. managing directors as a group. In August of 2009, Lazard began to pay a portion of the insurance premiums for
each of our U.S. managing directors on the same basis that it does for all U.S. employees. Our U.S. managing directors are the beneficiaries of a Company provided life insurance and excess liability insurance policy and beginning on August 1, 2009,
the Company began to provide long-term disability insurance. None of our U.S. managing directors receive any matching contributions from the Company on their personal contributions to Lazards 401(k) plan. Each of our U.S. managing directors is
entitled to have his year-end personal tax returns prepared by our tax department. Messrs. Jacobs, Castellano, Golub, Hoffman and Stern have availed themselves of this benefit, while Mr. Ward has chosen to use and pay for his own tax advisor.
This perquisite has been an historical practice of the firm, and is provided due to the complexity involved in preparing such tax returns as the Company continues to be viewed as a partnership for U.S. tax purposes.



Post-Employment Benefits.Each of Messrs. Jacobs, Golub, Hoffman and Stern has an accrued benefit under the Lazard Frères & Co. LLC Employees Pension Plan, a qualified defined-benefit pension plan, and Mr. Hoffman and Mr. Stern have accrued
additional benefits under a related supplemental defined-benefit



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pension plan. In each case, these benefits accrued prior to the applicable officers becoming a managing director of Lazard. The annual benefit under such plans, payable as a single life
annuity commencing at age 65, would be $6,447 for Mr. Jacobs, $4,328 for Mr. Golub, $18,845 for Mr. Hoffman and $12,421 for Mr. Stern. Under the terms of the supplemental defined-benefit pension plan, the benefits are only payable in a single lump
sum payment. Benefit accruals under both of these plans were frozen for all participants effective January 31, 2005, and our named executive officers will not accrue any additional benefits. Messrs. Castellano and Ward do not participate in these
plans. For the value of the benefits accrued by Messrs. Jacobs, Golub, Hoffman and Stern under these plans as of December 31, 2009, see Pension Benefits.



The retention or employment agreement with each of our named executive officers, other than Messrs. Jacobs
and Stern, provides for certain severance benefits in the event of a termination of employment prior to March 31, 2011 by us other than for cause or, by the executive officer for good reason (we refer to these as a qualifying
terminations). We provide for such severance payments on the condition that the departed executive not compete with us, solicit our clients or employees, or take other actions that harm our business for specified periods. The level of the
severance benefits depends on whether the qualifying termination occurs prior to or following a change in control of Lazard Ltd, with qualifying terminations following a change in control triggering an enhanced benefit. In addition, the retention or
employment agreement with each of our named executive officers, other than Messrs. Jacobs and Stern, provides that in the event that the executive officers receipt of any payment made by us under the agreement or otherwise is subject to the
excise tax imposed under Section 4999 of the Code, an additional payment will be made to restore the executive to the after-tax position that he would have been in if the excise tax had not been imposed. The events giving rise to a severance payment
as well as the amount of the payments under the retention agreements were negotiated terms and based on common industry practice for agreements of this kind at the time they were negotiated. See Retention Agreements with Named Executive
OfficersPayments and Benefits Upon Certain Terminations of Service and also see Potential Payments Upon Termination or Change in Control for an estimate of potential payouts under each scenario.



In general, non-vested RSUs are forfeited by our named executive
officers upon termination of employment, except in limited cases such as death, disability or a termination by the Company other than for cause, except that Messrs. Golub and Castellano are currently eligible to retire and retain their
RSUs, subject to certain limitations, pursuant to a retirement policy approved by the Compensation Committee. In the event of a change of control of Lazard Ltd, any unvested RSUs will automatically vest, without regard to whether the executive
officer is terminated. In this way, our named executive officers can realize value from these awards in the same way as shareholders in connection with the change of control transaction, and thus encourage our named executive officers to consider
and support transactions that might benefit shareholders.



Former Chairman and Chief Executive Officer



Bruce Wasserstein, who served as Lazards Chairman & Chief Executive Officer, passed away on October 14, 2009. The terms of Mr. Wassersteins employment with Lazard were governed by the
amended and restated retention agreement dated as of January 29, 2008 between Mr. Wasserstein and Lazard. Pursuant to that agreement, upon Mr. Wassersteins death, 4,420,893 RSUs vested and an equivalent number of shares of Lazard Class A
common stock were delivered to his estate. In 2009, through the date of his death, Mr. Wasserstein had received a salary of $712,500. No other payments were made to Mr. Wasserstein or his estate in 2009.



2010 Compensation Actions





RSU Retirement Policy. In January 2010, the Company amended its retirement policy with respect to RSU awards. The amended policy provides for minimum age and length of service
requirements for employees to be eligible to vest in their RSU awards upon retirement. The requirements are (i) 56 years minimum age, (ii) 5 years minimum service and (iii) 70 years minimum combined age and service. Assuming such requirements are
met, RSU awards will continue to vest following retirement subject to continued compliance with non-compete, non-solicit and other provisions in the RSU agreements.



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Conclusion



Our compensation program is designed to permit the Company to provide our executive officers, managing directors and other senior
professionals with total compensation that is linked to our performance and reinforces the alignment of employee and shareholder interests. At the same time it is intended to provide us with sufficient flexibility to assure that such compensation is
appropriate to attract and retain these employees who are vital to the continued success of Lazard and to drive outstanding individual and institutional performance. We believe the program met these objectives in 2009.



COMPENSATION COMMITTEE REPORT



The Compensation Committee of Lazard Ltd has reviewed and
discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Lazard Ltd Compensation Committee recommended to the Board that the Compensation Discussion
and Analysis be included in this Annual Report on Form 10-K.



Compensation Committee



Steven J. Heyer (Chair),
Sylvia Jay and Michael J. Turner



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Compensation of Executive Officers



The following table contains information
with respect to our Chief Executive Officer, Chief Financial Officer, and the three other most highly compensated executive officers of Lazard Ltd. Pursuant to SEC rules, we have also included information on Bruce Wasserstein, who served as Chairman
and Chief Executive Officer of Lazard until his passing on October 14, 2009 and Steven Golub, who served as interim Chief Executive Officer from October 14thuntil November 16th, 2009. These officers are collectively referred to as the named executive officers. We believe that the
better way to view this information is as set forth under Compensation Discussion and AnalysisCompensation for Each of Our Named Executive Officers in 2009, as the information set forth below (i) includes in 2009 compensation RSUs
that related to 2008 performance, which were awarded on February 10, 2009 and does not include in 2009 compensation RSUs that related to 2009 performance, which were awarded on February 11, 2010, and (ii) includes in 2009 compensation deferred cash
awards that related to 2008 performance, which were awarded on February 10, 2009 and were paid in February 2010.



Summary Compensation Table



|                                                                                                            |      |      |   |           |           |       |           |           |                                |   |                                                                       |             |                           |   |        |       |       |         |     |   |            |            
|----------------------------------------------------------------------------------------------------------- | ---- | ---- | - | --------- | --------- | ----- | --------- | --------- | ------------------------------ | - | --------------------------------------------------------------------- | ----------- | ------------------------- | - | ------ | ----- | ----- | ------- | --- | - | ---------- | -----------
|Name and Principal Position                                                                                 |      | Year |   | Salary    |           | Bonus |           |           | RestrictedStock UnitAwards (b) |   | Change inPension ValueandNonqualifiedDeferredCompensationEarnings
(c) |             | All OtherCompensation (d) |   |        | Total
|Kenneth M. Jacobs                                                                                           |      | 2009 |   | $         | 1,427,885 |       | $         | 6,222,115 | (a)                            |   | $                                                                     | 2,300,000   |                           | $ | 458    |       | $     | 193,561 | (e) |   | $          | 10,144,019 
|Chairman and Chief Executive Officer                                                                        |      |      |   |           |           |       |           |           |                                |   |                                                                       |             |                           |   |        |       |       |         |     |   |            |            
|                                                                                                            |      |      |   |           |           |       |          
|Steven J. Golub                                                                                             |      | 2009 |   | $         | 900,000   |       | $         | 6,660,000 | (a)                            |   | $                                                                     | 2,640,000   |                           | $ | 1,616  |       | $     | 219,988 | (e) |   | $          | 10,421,604 
|Interim Chief Executive Officer From October 14th until November 16th, 2009 and Vice Chairman of Lazard Ltd |      | 2008 |   | $         | 1,112,115 |       | $         | 487,885   | (a)                            |   | $                                                                     | 10,000,000  |                           | $ | 6,383  |       | $     | 10,049  | (e) |   | $          | 11,616,432 
|                                                                                                            | 2007 |      | $ | 1,500,000 |           | $     | 4,500,000 |           |                                | $ | 7,100,000                                                             |             | $                         | 0 |        | $     | 9,563 | (e)     |     | $ | 13,109,563
|                                                                                                            |      |      |   |           |           |       |          
|Bruce Wasserstein                                                                                           |      | 2009 |   | $         | 712,500   |       |           |          |                                |   |                                                                       |            |                           |   |       |       | $     | 11,500  |     |   | $          | 724,000    
|Former Chairman and Chief Executive Officer deceased October 14, 2009                                       |      | 2008 |   | $         | 1,225,000 |       |           |          |                                |   | $                                                                     | 132,482,000 |                           |   |       |       | $     | 1,650   |     |   | $          | 133,708,650
|                                                                                                            | 2007 |      | $ | 4,800,000 |           |       |          |           |                                | $ | 18,000,000                                                            |             |                           |  |        | $     | 1,618 |         |     | $ | 22,801,618
|                                                                                                            |      |      |   |           |           |       |          
|Michael J. Castellano                                                                                       |      | 2009 |   | $         | 500,000   |       | $         | 1,905,000 | (a)                            |   | $                                                                     | 645,000     |                           |   |       |       | $     | 57,443  | (e) |   | $          | 3,107,443  
|Chief Financial Officer                                                                                     |      | 2008 |   | $         | 500,000   |       |           |          | (a)                            |   | $                                                                     | 900,000     |                           |   |       |       | $     | 11,184  | (e) |   | $          | 1,411,184  
|                                                                                                            |      | 2007 |   | $         | 500,000   |       | $         | 1,600,000 |                                |   | $                                                                     | 450,000     |                           |   |       |       | $     | 10,698  | (e) |   | $          | 2,560,698  
|                                                                                                            |      |      |   |           |           |       |          
|Scott D. Hoffman                                                                                            |      | 2009 |   | $         | 600,000   |       | $         | 2,642,500 | (a)                            |   | $                                                                     | 855,000     |                           | $ | 444    |       | $     | 77,048  | (e) |   | $          | 4,174,992  
|General Counsel                                                                                             |      | 2008 |   | $         | 600,000   |       |           |          | (a)                            |   | $                                                                     | 1,500,000   |                           | $ | 15,771 |       | $     | 10,503  | (e) |   | $          | 2,126,274  
|                                                                                                            |      | 2007 |   | $         | 600,000   |       | $         | 1,900,000 |                                |   | $                                                                     | 625,000     |                           | $ | 0      |       | $     | 10,018  | (e) |   | $          | 3,135,018  
|                                                                                                            |      |      |   |           |           |       |          
|Alexander F. Stern                                                                                          |      | 2009 |   | $         | 750,000   |       | $         | 2,272,500 | (a)                            |   | $                                                                     | 825,000     |                           | $ | 0      |       | $     | 63,730  | (e) |   | $          | 3,911,230  
|Chief Operating Officer                                                                                     |      | 2008 |   | $         | 750,000   |       |           |          | (a)                            |   | $                                                                     | 2,200,000   |                           | $ | 9,699  |       | $     | 10,049  | (e) |   | $          | 2,969,748  
|                                                                                                            |      |      |   |           |           |       |          
|Charles G. Ward, III                                                                                        |      | 2009 |   | $         | 900,000   |       | $         | 2,322,500 | (a)                            |   | $                                                                     | 1,162,885   |                           |   |       |       | $     | 76,966  | (e) |   | $          | 4,462,351  
|President  Lazard Ltd, and Chairman of the Asset Management Group                                          |      | 2008 |   | $         | 1,112,115 |       |           |          | (a)                            |   | $                                                                     | 4,200,000   |                           |   |       |       | $     | 1,650   |     |   | $          | 5,313,765  
|                                                                                                            | 2007 |      | $ | 1,500,000 |           | $     | 1,300,000 |           |                                | $ | 1,000,000                                                             |             |                           |  |        | $     | 1,618 |         |     | $ | 3,801,618 



|(a) | As was the case for most of our senior employees, each of Messrs. Jacobs, Castellano, Golub, Hoffman, Stern and Ward received deferred cash awards on
February 10, 2009, which related to 2008 performance. As required under SEC rules for compensation disclosure in proxy statements, the deferred cash awards are included in the fiscal year actually granted (2009), rather than the year to which they
relate (2008). During
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | the fourth quarter of 2009, the Compensation Committee approved the acceleration of the deferred cash awards to be paid out in February 2010 for all recipients, including our executive officers.
Amounts reported in the Bonus column above include these accelerated deferred cash awards as follows: $3.9 million to Mr. Jacobs; $1.005 million to Mr. Castellano; $4.56 million to Mr. Golub; $1.395 million to Mr. Hoffman; $1.175 million to Mr.
Stern; and $1.575 million to Mr. Ward. See Compensation Discussion and AnalysisDesign of Our Compensation Programs.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | Represents RSUs granted to each of the named executive officers during fiscal year 2009, which relate to 2008 performance. As required under SEC rules for compensation
disclosure in proxy statements, the value of the RSUs reported in the Summary Compensation Table is based on the grant date fair value of awards in the fiscal year actually granted (rather than in the year to which it relates) and computed in
accordance with FASB ASC Topic 718. See Note 17 of Notes to the Consolidated Financial Statements contained in Lazards 2009 Annual Report on Form 10-K for a discussion of the assumptions used in the valuation of the RSUs.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(c) | Represents the aggregate change in actuarial present value of the listed officers accumulated benefit under the Lazard Frères & Co. LLC Employees
Pension Plan, and in the case of Mr. Hoffman and Mr. Stern, a related supplemental defined-benefit pension plan. With respect to Mr. Stern, the actuarial present value decreased by $29 in 2009 compared to 2008 because benefit accruals under both of
these plans were frozen for all participants effective January 31, 2005 and the discount rate used in the calculations increased from 5.80% to 6.00%.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(d) | Each of our named executive officers is the beneficiary of Company provided life insurance, and an excess liability insurance policy, and beginning on August 1, 2009,
the Company began to provide long term disability insurance. In addition, beginning on August 1, 2009, the firm began paying a portion of the health insurance premiums for our named executive officers, as it does for all U.S. employees.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(e) | Each of our named executive officers (other than Mr. Wasserstein) received interest payments on the deferred cash awards they were granted as part of the 2008
compensation cycle for the period from the date of the grant through December 31, 2009, as follows: $175,500 to Mr. Jacobs; $45,225 to Mr. Castellano; $205,200 to Mr. Golub; $62,775 to Mr. Hoffman; $52,875 to Mr. Stern; and $70,875 to Mr. Ward.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Perquisite compensation for
Messrs. Jacobs, Castellano, Golub, Hoffman and Stern includes the incremental cost to the Company of providing U.S. tax advice and preparation of year-end personal tax returns.



Grants of Plan Based Awards



The following table provides information about RSUs granted to each of the named executive officers during fiscal year 2009, which relate to
2008 performance. For information on the grant date fair value of RSU awards made to each of our named executive officers, other than Mr. Wasserstein, during fiscal year 2010, which relate to 2009 performance, see Compensation Discussion and
AnalysisCompensation For Each of Our Named Executive Officers in 2009.



|                        |  |                   |  |                     |  |                                              
|----------------------- |  | ----------------- |  | ------------------- |  | ---------------------------------------------
|Named Executive Officer |  | Grant Date        |  | Number ofRestricted |  | Grant Date FairValue of RestrictedStock Units
|Kenneth M. Jacobs       |  | February 10, 2009 |  | 73,789              |  | $2,300,000                                   
|Bruce Wasserstein       |  | February 10, 2009 |  |                    |  |                                             
|Steven J. Golub         |  | February 10, 2009 |  | 84,697              |  | $2,640,000                                   
|Michael J. Castellano   |  | February 10, 2009 |  | 20,693              |  | $   645,000                                  
|Scott D. Hoffman        |  | February 10, 2009 |  | 27,430              |  | $   855,000                                  
|Alexander F. Stern      |  | February 10, 2009 |  | 26,468              |  | $   825,000                                  
|Charles G. Ward, III    |  | February 10, 2009 |  | 37,308              |  | $1,162,885                                   





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The RSUs included in the table above were granted under our 2008 Incentive
Compensation Plan and represent a contingent right to receive an equivalent number of shares of Class A common stock. The RSUs shown in the table were valued by multiplying the number of RSUs awarded to each named executive officer by the closing
price-per-share of the Class A common stock on the NYSE on the day before the grant date. The closing price on February 9, 2009 was $31.17 per share. The RSUs granted on February 10, 2009 to each of our named executive officers relate to 2008
performance and will vest on March 1, 2013. Each of our named executive officers signed an RSU agreement in connection with his award. In general, these agreements provide that non-vested RSUs are forfeited on termination of employment, except in
limited cases such as death, disability or a termination by the Company other than for cause. In the event of a Change in Control (as defined in the 2008 Incentive Compensation Plan), any unvested but outstanding RSUs
automatically will vest. All RSUs receive dividend equivalents at the same rate that dividends are paid on shares of Class A common stock. These dividends are credited in the form of additional RSUs with the same restrictions as the underlying RSUs
to which they relate. In addition, the RSU agreements contain standard covenants, including among others, noncompetition and nonsolicitation of our clients and employees.



Bonus Plan



To align employee and shareholder interests, we adopted the 2005 Bonus Plan for purposes of determining annual bonuses for our senior
executives. The Compensation Committee has full direct responsibility and authority for determining our Chief Executive Officers compensation under the plan. The Committee reviews and approves the recommendations of our Chief Executive Officer
with regard to the compensation of our other executive officers under the plan. Subject to overall compensation limits as determined from time to time and, with respect to plan participants, the terms of the plan, our Chief Executive Officer has
responsibility for determining the compensation of all employees except as provided above.



The actual size of the bonus pool is determined at the end of each fiscal year, taking into account our results of operations, shareholder return, and/or other measures of our financial performance or of
the financial performance of one or more of our subsidiaries or divisions, as well as competitive compensation practices in the financial services industry. A target maximum ratio of aggregate compensation and benefits expense for the year
(including annual incentive payments under the plan) to annual revenue or income (or to similar measures of corporate profitability) may also be taken into account. The bonus pool is allocated among the participants in the plan with respect to each
fiscal year. This allocation may be made at any time prior to payment of bonuses for such year, and may take into account any factors deemed appropriate, including, without limitation, assessments of individual, subsidiary or division performance
and input of management.



Amounts payable with
respect to bonuses are satisfied in cash and through equity awards granted under either the 2008 Incentive Compensation Plan or under our 2005 Equity Incentive Plan.



Retention Agreements with Named Executive Officers



Each of the named executive officers has entered into a retention or employment agreement with Lazard.
Generally, the provision of services under the retention agreements is terminable by either party upon three months notice, and the agreements also contain the following terms and conditions:



Compensation and Employee Benefits.
Each of Messrs. Jacobs and Stern entered into a retention agreement with Lazard on March 18, 2005 and October 4, 2004, respectively. Messrs. Castellano, Golub, Hoffman and Ward entered into amended retention agreements with Lazard on May 7, 2008.
These retention agreements provide for an annual base salary of $1,500,000 for Mr. Jacobs; $500,000 for Mr. Castellano; $900,000 for Mr. Golub; $600,000 for Mr. Hoffman; $750,000 for Mr. Stern; and $900,000 for Mr. Ward. In connection with his
appointment to Chief Executive Officer of Lazard on November 16, 2009, Mr. Jacobs agreed to reduce his annual salary to $900,000. The term of the agreements for Messrs. Castellano, Golub, Hoffman and Ward continue until March 31, 2011, unless
earlier terminated in accordance with their terms. In addition, each of



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Messrs. Castellano, Golub, Hoffman and Ward is entitled to an annual bonus to be determined under the applicable annual bonus plan of Lazard on the same basis as annual bonuses are determined for
other executive officers of Lazard and paid in the same ratio of cash to equity awards as is applicable to other executives, provided that he is employed by Lazard at the end of the applicable fiscal year.



In addition, the retention agreements with each of Messrs.
Jacobs, Castellano, Golub, Hoffman, Stern, and Ward provide that they will be entitled to participate in employee retirement and welfare benefit plans and programs of the type made available to our most senior executives.



Payments and Benefits Upon Certain Terminations of
Service.Each retention agreement with our named executive officers, other than Messrs. Jacobs and Stern, provides for certain severance benefits in the event of a termination prior to March 31, 2011, by us other than for cause or by
the named executive officer for good reason (which we refer to below as a qualifying termination). The level of the severance benefits depends on whether the applicable termination occurs prior to or following a change in control of
Lazard Ltd.



In the event of a qualifying
termination of any of Messrs. Castellano, Golub, Hoffman, or Ward prior to a change in control, the executive generally would be entitled to receive in a lump sum (1) any unpaid base salary accrued through the date of termination, (2) any earned but
unpaid bonuses for years completed prior to the date of termination, (3) a prorated bonus for the year of termination and (4) a severance payment in the following amount: two times the sum of such executive officers base salary and average
annual bonus for the two fiscal years that ended prior to the date of such executive officers termination. Upon such a qualifying termination, Messrs. Castellano, Golub, Hoffman and Ward and their eligible dependents would generally continue
to be eligible to participate in our medical and dental benefit plans, on the same basis as in effect immediately prior to the date of termination (which currently requires the named executive officer to pay a portion of the premiums), for two years
following such termination. The period of such medical and dental benefits continuation would generally be credited towards the named executive officers credited age and service for the purpose of our retiree medical program.



In the event of a qualifying termination of any of Messrs.
Castellano, Golub or Ward on or following a change in control, such executive officer would receive the severance payments and benefits described in the preceding paragraph, except that the severance payments would be in the following amount: three
times the sum of such executive officers base salary and average annual bonus for the two fiscal years that ended prior to the date of such executive officers termination. In addition, each of the named executive officers, other than
Messrs. Jacobs and Stern, and their eligible dependents, would be eligible for continued participation in our medical and dental benefit plans and receive age and service credit, as described above, except that the applicable period would be 36
months following the date of termination of service.



The retention agreement with each of Messrs. Golub and Castellano provides that if the executive officer voluntarily retires after March 31, 2011, the RSUs that he currently holds, as well as any RSUs that he is granted in later years as
part of ordinary annual incentive compensation will continue to vest on the original vesting dates, subject only to compliance with the applicable restrictive covenants through the applicable vesting date (without regard to the earlier expiration of
the stated duration of any such restricted covenant), and will not be forfeited upon the termination of his employment. In order to address certain rules on partnership taxation which could result in taxation of Messrs. Golub and Castellano on their
RSUs awards immediately following March 31, 2011, on that date, Messrs. Golub and Castellano will receive 50% of the shares of Class A common stock subject to their then outstanding RSUs awards. All remaining shares will continue to be subject to
the applicable restrictive covenants and will not be paid to the applicable executive until the relevant vesting dates.



Change in Control Excise Tax Gross-up.Each retention agreement with our named executive officers, other than
Messrs. Jacobs and Stern, provides that in the event that the executive officers receipt of any payment made by us under the retention agreement or otherwise is subject to the excise tax imposed under Section 4999 of the Code, an additional
payment will be made to restore the executive to the after-tax position that he would have been in if the excise tax had not been imposed.



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Noncompetition and Nonsolicitation of Clients.While providing
services to us and during the three-month period following termination of the named executive officers services to us (one-month period in the event of such a termination by us without cause), the named executive officer may not:



| |  |  | perform services in a line of business that is similar to any line of business in which the named executive officer provided services to us in a
capacity that is similar to the capacity in which the named executive officer acted for us while providing services to us (competing services) for any business enterprise that engages in any activity, or owns a significant interest in
any entity that engages in any activity, that competes with any activity in which we are engaged up to and including the date of termination of employment (a competitive enterprise),
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | acquire an ownership or voting interest of 5% or more in any competitive enterprise, or
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | solicit any of our clients on behalf of a competitive enterprise in connection with the performance of services that would be competing services or
otherwise interfere with or disrupt any clients relationship with us.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Nonsolicitation of Employees.While providing services to us and during the six-month period following termination of the named executive officers services, the named
executive officer may not, directly or indirectly, in any manner, solicit or hire any of our employees at the associate level or above to apply for, or accept employment with, any competitive enterprise or otherwise interfere with any such
employees relationship with us.



Transfer of Client Relationships, Nondisparagement and Notice Period Restrictions.The named executive officer is required, upon termination of his services to us and during the 90-day period following
termination, to take all actions and do all things reasonably requested by us to maintain for us the business, goodwill and business relationships with our clients with which he worked, provided that such actions and things do not materially
interfere with other employment or professional activities of the named executive officer. In addition, while providing services to us and thereafter, the named executive officer generally may not disparage us, and before and during the three-month
notice period prior to termination, the named executive officer is prohibited from entering into a written agreement to perform services for a competitive enterprise.



Provisions Relating to the Restrictive Covenants.Generally, the retention
agreements with the named executive officers contain restrictive covenants and provisions that are substantially similar. However, we would treat a termination by any of Messrs. Castellano, Golub, Hoffman, or Ward for good reason as a termination by
us without cause for purposes of the duration of the restrictive covenants and the provisions governing the timing of exchangeability of LAZ-MD Holdings LLC exchangeable interests into shares of our Class A common stock.



Outstanding Equity Awards at 2009 Fiscal Year-End



The following table provides information about the number and
value of RSUs held by the named executive officers as of December 31, 2009. The market value of the RSUs was calculated based on the closing price of the Lazard Class A common stock on the NYSE on December 31, 2009 ($37.97). The table does not
include RSU awards that relate to 2009 performance, which were granted in February 2010.



|                        |  |                                                          |  |                                                            |             
|----------------------- |  | -------------------------------------------------------- |  | ---------------------------------------------------------- | ------------
|Named Executive Officer |  | Number of Restricted StockUnits That Have Not Vested (1) |  | Market Value of RestrictedStock Units That Have Not Vested
|Kenneth M. Jacobs       |  | 454,021                                                  |  |                                                            | $17,239,177 
|Bruce Wasserstein       |  |                                                         |  |                                                            |            
|Steven J. Golub         |  | 635,128                                                  |  |                                                            | $24,115,810 
|Michael J. Castellano   |  | 62,696                                                   |  |                                                            | $  2,380,567
|Scott D. Hoffman        |  | 91,181                                                   |  |                                                            | $  3,462,143
|Alexander F. Stern      |  | 132,717                                                  |  |                                                            | $  5,039,264
|Charles G. Ward, III    |  | 187,197                                                  |  |                                                            | $  7,107,870



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|(1) | RSU awards are typically granted to our named executive officers in February of each year under Lazards 2005 Equity Incentive Plan or the 2008 Incentive
Compensation Plan and relate to the prior years performance. The scheduled vesting dates for RSU awards granted to each of the named executive officers are as follows: (i) RSUs granted on February 10, 2009 will vest on March 1, 2013; (ii) RSUs
granted on January 30, 2008 will vest on March 31, 2011; (iii) RSUs granted on January 23, 2007 will vest 50% on March 31, 2010 and 50% on March 31, 2011; and (iv) RSUs granted on January 24, 2006 will vest on March 31, 2010.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Pension Benefits



The following table provides information with respect to Lazard
Frères & Co. LLC Employees Pension Plan, a qualified defined-benefit pension plan, and a related supplemental defined-benefit pension plan. Each of Messrs. Jacobs, Golub, Hoffman, and Stern has an accrued benefit under the Lazard
Frères & Co. LLC Employees Pension Plan, and Messrs. Hoffman and Stern have accrued additional benefits under the related supplemental defined-benefit pension plan. The annual benefit under such plans, payable as a single life
annuity commencing at age 65, would be $6,447 for Mr. Jacobs, $4,328 for Mr. Golub, $18,845 for Mr. Hoffman and $12,421 for Mr. Stern. Under the terms of the supplemental defined-benefit pension plan, the benefits are only payable in a single lump
sum payment. These benefits accrued in each case prior to the applicable officers becoming a managing director of Lazard. Benefit accruals under both of these plans were frozen for all participants effective January 31, 2005. For a discussion
of the valuation method and all material assumptions applied in quantifying the present value of the current accrued benefit, see Note 18 of Notes to Lazards Consolidated Financial Statements contained in its 2009 Annual Report on Form 10-K.
Messrs. Wasserstein, Castellano and Ward do not participate in any of these plans.



|                        |  |                                                 |  |                                   |  |                                           |  |                                   
|----------------------- |  | ----------------------------------------------- |  | --------------------------------- |  | ----------------------------------------- |  | ----------------------------------
|Named Executive Officer |  | Plan Name                                       |  | Number ofYearsCreditedService (1) |  | PresentValue ofAccumulatedBenefit ($) (2) |  | PaymentsDuring LastFiscal Year ($)
|Kenneth M. Jacobs       |  | Lazard Frères & Co. LLC Employees Pension Plan |  | 3                                 |  | $31,340                                   |  | $0                                
|                        |  |                                                 |  |                                  
|Steven J. Golub         |  | Lazard Frères & Co. LLC Employees Pension Plan |  | 2                                 |  | $43,798                                   |  | $0                                
|                        |  |                                                 |  |                                  
|Scott D. Hoffman        |  | Lazard Frères & Co. LLC Employees Pension Plan |  | 5                                 |  | $41,658                                   |  | $0                                
|                        |  | Supplemental Defined-Benefit Pension            |  | 5                                 |  | $32,322                                   |  | $0                                
|                        |  |                                                 |  |                                  
|Alexander F. Stern      |  | Lazard Frères & Co. LLC Employees Pension Plan |  | 6                                 |  | $35,753                                   |  | $0                                
|                        |  | Supplemental Defined-Benefit Pension Plan       |  | 6                                 |  | $  1,925                                  |  | $0                                



|(1) | Mr. Jacobs has been employed by Lazard for 22 years, Mr. Golub 25 years, Mr. Hoffman 16 years, and Mr. Stern 14 years. Mr. Jacobs became a managing director of
Lazard in 1991, Mr. Golub in 1986, Mr. Hoffman in 1999, and Mr. Stern in 2002, at which point they ceased accruing benefits under these plans.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | In calculating the present value of accumulated benefits outlined above, Messrs. Jacobs, Golub, Hoffman, and Stern are assumed to live to age 65 and
subsequently retire. They are also assumed to choose the single life annuity form of benefit under the Lazard Frères & Co. LLC Employees Pension Plan and the lump sum form of benefit under the Supplemental Defined-Benefit Pension
Plan (for Mr. Hoffman and Mr. Stern only). The interest rate and mortality used to determine the Employees Pension Plan present value is 6.00%
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | for all years and the RP-2000 Mortality Table (with 9 years improvement and adjusted for white collar workers) after retirement only. The Supplemental Defined-Benefit Pension Plan assumes that
the annuity benefit will be converted to a lump sum at age 65 using a 5.75% interest rate and the mortality outlined in IRS Notice 2008-85 applicable for lump sum payments (projected to the year participant attains age 65 using Scale AA). A 6.00%
discount rate is used to determine the present value of this single payment at age 65 at December 31, 2009.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Potential Payments Upon Termination or Change-in-Control



As described above, each of our named executive officers has entered into a retention or employment agreement with Lazard. However, the
retention agreements with Messrs. Jacobs and Stern do not provide for any payments or benefits in connection with the termination of their employment. The retention agreements with Messrs. Castellano, Golub, Hoffman, and Ward provide for certain
severance benefits in the event of a termination prior to March 31, 2011 by us other than for cause or by such named executive officer for good reason. The level of the severance benefits depends on whether the applicable termination occurs prior to
or following a change in control of Lazard Ltd. For a discussion of the severance benefits provided pursuant to the retention agreements, see Retention Agreements with Named Executive Officers.



Each of our named executive officers has received RSUs pursuant
to Lazards 2005 Equity Incentive Plan or the 2008 Incentive Compensation Plan. In the event of a change in control of Lazard Ltd, all RSUs granted under the 2005 Equity Incentive Plan or the 2008 Incentive Compensation Plan will automatically
vest.



The following table shows the potential
payments that would be made by Lazard to each of the named executive officers assuming that such officers employment with Lazard terminated, or a change in control occurred, on December 31, 2009 under the circumstances outlined in the table.
As a result, the RSU awards granted in February 2010 (which relate to 2009 performance) are not reflected in the table. In the case of Mr. Wasserstein, the table reports the value of the Lazard Class A common stock to which his estate became
entitled upon his passing on October 14, 2009. For purposes of this table (other than with respect to shares delivered to the estate of Mr. Wasserstein), the price of Lazard Class A common stock is assumed to be $37.97, which was the closing price
on December 31, 2009.



|                                      |  |                              |             |                                      |   |                                 |  |                             |            |                    |   |                                                                        |  |   |            |  |   |           
|------------------------------------- |  | ---------------------------- | ----------- | ------------------------------------ | - | ------------------------------- |  | --------------------------- | ---------- | ------------------ | - | ---------------------------------------------------------------------- |  | - | ---------- |  | - | ----------
|                                      |  | Prior to a Change in Control |             | On or After a Change in Control     
|Named Executive Officer               |  | Death orDisability           |             | InvoluntaryTerminationwithoutCause |   | Resignationfor GoodReason (1) |  | No Terminationof Employment |            | Death orDisability |   | InvoluntaryTerminationwithoutCause
orResignation forGoodReason (1)
|Kenneth M. Jacobs                     |  |                              |             |                                      |   |                                 |  |                             |            |                    |   |                                                                        |  |   |            |  |   |           
|Severance Payment                     |  |                              |            |                                      |   |                                |  |                             |           |                    |   |                                                                       |  |   |           |  |   |          
|RSU Vesting (2)(3)                    |  | $                            | 17,239,177  |                                      | $ | 17,239,177                      |  |                             |           |                    | $ | 17,239,177                                                             |  | $ | 17,239,177 |  | $ | 17,239,177
|Pro-rata Annual Incentive Payment (4) |  | $                            | 6,072,115   |                                      |   |                                |  |                             |           |                    |   |                                                                       |  | $ | 6,072,115  |  |   |          
|Deferred Cash Award Vesting (5)       |  | $                            | 3,900,000   |                                      | $ | 3,900,000                       |  |                             |           |                    | $ | 3,900,000                                                              |  | $ | 3,900,000  |  | $ | 3,900,000 
|Excise Tax Gross-up Payment (6)       |  |                              |            |                                      |   |                                |  |                             |           |                    |   |                                                                       |  |   |           |  |   |          
|                                      |  |                              |             |                                      |   |                                
|Bruce Wasserstein                     |  |                              |             |                                      |   |                                 |  |                             |            |                    |   |                                                                        |  |   |            |  |   |           
|Severance Payment                     |  |                              |            |                                      |   |                                |  |                             |           |                    |   |                                                                       |  |   |           |  |   |          
|RSU Vesting (3)(7)                    |  | $                            | 191,217,584 |                                      |   |                                |  |                             |           |                    |   |                                                                       |  |   |           |  |   |          
|Pro-rata Annual Incentive Payment (4) |  |                              |            |                                      |   |                                |  |                             |           |                    |   |                                                                       |  |   |           |  |   |          
|Deferred Cash Award Vesting (5)       |  |                              |            |                                      |   |                                |  |                             |           |                    |   |                                                                       |  |   |           |  |   |          
|Excise Tax Gross-up Payment (6)       |  |                              |            |                                      |   |                                |  |                             |           |                    |   |                                                                       |  |   |           |  |   |          
|                                      |  |                              |             |                                      |   |                                
|Steven J. Golub                       |  |                              |             |                                      |   |                                 |  |                             |            |                    |   |                                                                        |  |   |            |  |   |           
|Severance Payment                     |  |                              |            |                                      | $ | 23,987,885                      |  | $                           | 23,987,885 |                    |   |                                                                       |  |   |           |  | $ | 35,981,828
|RSU Vesting (2)(3)                    |  | $                            | 24,115,807  |                                      | $ | 24,115,807                      |  |                             |           |                    | $ | 24,115,807                                                             |  | $ | 24,115,807 |  | $ | 24,115,807
|Pro-rata Annual Incentive Payment (4) |  | $                            | 5,100,000   |                                      | $ | 5,100,000                       |  | $                           | 5,100,000  |                    |   |                                                                       |  | $ | 5,100,000  |  | $ | 5,100,000 
|Deferred Cash Award Vesting (5)       |  | $                            | 4,560,000   |                                      | $ | 4,560,000                       |  |                             |           |                    | $ | 4,560,000                                                              |  | $ | 4,560,000  |  | $ | 4,560,000 
|Excise Tax Gross-up Payment (6)       |  |                              |            |                                      |   |                                |  |                             |           |                    |   |                                                                       |  |   |           |  | $ | 20,861,152



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|                                      |  |                              |           |                                      |   |                                 |  |                             |            |                    |   |                                                                        |  |   |           |  |   |           
|------------------------------------- |  | ---------------------------- | --------- | ------------------------------------ | - | ------------------------------- |  | --------------------------- | ---------- | ------------------ | - | ---------------------------------------------------------------------- |  | - | --------- |  | - | ----------
|                                      |  | Prior to a Change in Control |           | On or After a Change in Control     
|Named Executive Officer               |  | Death orDisability           |           | InvoluntaryTerminationwithoutCause |   | Resignationfor GoodReason (1) |  | No Terminationof Employment |            | Death orDisability |   | InvoluntaryTerminationwithoutCause
orResignation forGoodReason (1)
|Michael J. Castellano                 |  |                              |           |                                      |   |                                 |  |                             |            |                    |   |                                                                        |  |   |           |  |   |           
|Severance Payment                     |  |                              |          |                                      | $ | 5,150,000                       |  | $                           | 5,150,000  |                    |   |                                                                       |  |   |          |  | $ | 7,725,000 
|RSU Vesting (2)(3)                    |  | $                            | 2,380,560 |                                      | $ | 2,380,560                       |  |                             |           |                    | $ | 2,380,560                                                              |  | $ | 2,380,560 |  | $ | 2,380,560 
|Pro-rata Annual Incentive Payment (4) |  | $                            | 1,950,000 |                                      | $ | 1,950,000                       |  | $                           | 1,950,000  |                    |   |                                                                       |  | $ | 1,950,000 |  | $ | 1,950,000 
|Deferred Cash Award Vesting (5)       |  | $                            | 1,005,000 |                                      | $ | 1,005,000                       |  |                             |           |                    | $ | 1,005,000                                                              |  | $ | 1,005,000 |  | $ | 1,005,000 
|Excise Tax Gross-up Payment (6)       |  |                              |          |                                      |   |                                |  |                             |           |                    |   |                                                                       |  |   |          |  | $ | 3,786,633 
|                                      |  |                              |           |                                      |   |                                
|Scott D. Hoffman                      |  |                              |           |                                      |   |                                 |  |                             |            |                    |   |                                                                        |  |   |           |  |   |           
|Severance Payment                     |  |                              |          |                                      | $ | 6,850,000                       |  | $                           | 6,850,000  |                    |   |                                                                       |  |   |          |  | $ | 10,275,000
|RSU Vesting (2)(3)                    |  | $                            | 3,462,097 |                                      | $ | 3,462,097                       |  |                             |           |                    | $ | 3,462,097                                                              |  | $ | 3,462,097 |  | $ | 3,462,097 
|Pro-rata Annual Incentive Payment (4) |  | $                            | 2,900,000 |                                      | $ | 2,900,000                       |  | $                           | 2,900,000  |                    |   |                                                                       |  | $ | 2,900,000 |  | $ | 2,900,000 
|Deferred Cash Award Vesting (5)       |  | $                            | 1,395,000 |                                      | $ | 1,395,000                       |  |                             |           |                    | $ | 1,395,000                                                              |  | $ | 1,395,000 |  | $ | 1,395,000 
|Excise Tax Gross-up Payment (6)       |  |                              |          |                                      |   |                                |  |                             |           |                    |   |                                                                       |  |   |          |  | $ | 5,368,069 
|                                      |  |                              |           |                                      |   |                                
|Alexander F. Stern                    |  |                              |           |                                      |   |                                 |  |                             |            |                    |   |                                                                        |  |   |           |  |   |           
|Severance Payment                     |  |                              |          |                                      |   |                                |  |                             |           |                    |   |                                                                       |  |   |          |  |   |          
|RSU Vesting (2)(3)                    |  | $                            | 5,039,264 |                                      | $ | 5,039,264                       |  |                             |           |                    | $ | 5,039,264                                                              |  | $ | 5,039,264 |  | $ | 5,039,264 
|Pro-rata Annual Incentive Payment (4) |  | $                            | 2,750,000 |                                      |   |                                |  |                             |           |                    |   |                                                                       |  | $ | 2,750,000 |  |   |          
|Deferred Cash Award Vesting (5)       |  | $                            | 1,175,000 |                                      | $ | 1,175,000                       |  |                             |           |                    | $ | 1,175,000                                                              |  | $ | 1,175,000 |  | $ | 1,175,000 
|Excise Tax Gross-up Payment (6)       |  |                              |          |                                      |   |                                |  |                             |           |                    |   |                                                                       |  |   |          |  |   |          
|                                      |  |                              |           |                                      |   |                                
|Charles G. Ward, III                  |  |                              |           |                                      |   |                                 |  |                             |            |                    |   |                                                                        |  |   |           |  |   |           
|Severance Payment                     |  |                              |          |                                      | $ | 10,037,885                      |  | $                           | 10,037,885 |                    |   |                                                                       |  |   |          |  | $ | 15,056,828
|RSU Vesting (2)(3)                    |  | $                            | 7,107,851 |                                      | $ | 7,107,851                       |  |                             |           |                    | $ | 7,107,851                                                              |  | $ | 7,107,851 |  | $ | 7,107,851 
|Pro-rata Annual Incentive Payment (4) |  | $                            | 2,100,000 |                                      | $ | 2,100,000                       |  | $                           | 2,100,000  |                    |   |                                                                       |  | $ | 2,100,000 |  | $ | 2,100,000 
|Deferred Cash Award Vesting (5)       |  | $                            | 1,575,000 |                                      | $ | 1,575,000                       |  |                             |           |                    | $ | 1,575,000                                                              |  | $ | 1,575,000 |  | $ | 1,575,000 
|Excise Tax Gross-up Payment (6)       |  |                              |          |                                      |   |                                |  |                             |           |                    |   |                                                                       |  |   |          |  | $ | 8,080,396 



|(1) | Messrs. Jacobs and Stern are not entitled to any payments upon a resignation for Good Reason.
|--- | -----------------------------------------------------------------------------------------------



|(2) | Valuation of all RSU awards is based upon the full value of the underlying Lazard Class A common stock at the close of business on December 31, 2009, without taking
into account any discount for the present value of such awards. Upon a Change in Control, all RSU awards immediately vest in full.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | Upon death, all RSU awards vest upon the earlier of 30 days or the scheduled vesting date. Upon disability, or a termination without cause, the executive
may be immediately taxed on 100% of the shares underlying the RSUs. Accordingly, 50% of the shares underlying the RSUs will be delivered to the executive immediately upon termination to allow payment of taxes, and the remaining 50% will be delivered
on the original vesting dates, provided that the executive does not violate his restrictive covenants. The scheduled vesting date for our various RSU awards are as follows: (i) RSUs granted on February 10, 2009 will vest on March 31, 2013; (ii) RSUs
granted on January 30, 2008 will vest on March 31, 2011; (iii) RSUs granted on January 23, 2007 will vest 50% on March 31, 2010 and 50% on March 31, 2011; and (iv) RSUs granted on January 24, 2006 will vest on March 31, 2010. See Footnote (1) to the
Outstanding Equity Awards at 2009 Fiscal Year-End table.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | Under the terms of the 2005 Bonus Plan, upon death or disability, each named executive officer may receive a pro-rated portion of the annual incentive compensation that
he would have received in the absence of such termination. Assuming a December 31, 2009 death or disability, all named executive officers were assumed to have received their full incentive compensation award for 2009 (annual cash bonus plus value of
RSU award).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Pursuant to their
retention agreements, in the event of an involuntary termination without Cause or resignation for Good Reason, each of Messrs. Castellano, Golub, Hoffman and Ward is entitled to a pro-rated portion of the bonus payment that
he would have received in the absence of such termination. Under such circumstances, we have assumed that each named executive officer would receive his full incentive compensation award for 2009 (annual cash bonus plus value of RSU award).



|(5) | Upon death, all deferred cash awards vest upon the earlier of 30 days or the scheduled vesting date. Upon disability, or a termination without cause, the
executive may be immediately taxed on 100% of the value of the deferred cash awards. Accordingly, 50% of the unpaid installments under the deferred cash awards will be paid out to the executive immediately upon termination to allow payment of taxes,
and the remaining 50% will be paid out in equal installments on each of the subsequent original vesting dates, provided that the executive does not violate his restrictive covenants. All payments to be made with respect to the deferred cash awards
upon a termination due to disability or without cause or in the event of death prior to the final vesting date of the deferred cash awards but subsequent to a termination of employment are conditioned on the named executive officer signing an
irrevocable release of claims in favor of the Company and its affiliates. Prior to the acceleration of vesting of the deferred cash awards, the deferred cash awards were scheduled to vest in three equal installments on November 30, 2010, February
28, 2012 and February 28, 2013.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(6) | Amounts represent the amount needed to pay each named executive officer in order to provide them with a gross up for their excise tax obligations under Section 4999 of
the Code, which imposes an excise tax on certain payments made in connection with a change in control of the Company, and any additional tax cost related to the gross-up payment, assuming that a change in control of the Company and a qualifying
termination of employment occurred on December 31, 2009. Amounts were determined in accordance with Section 280G of the Code and the regulations issued thereunder, assuming a regular income tax rate ranging from 43.7% to 44.6% based on each named
executive officers work location and personal residence, each named executive officers Lazard compensation for the period from 2004-2008 and an interest rate equal to 0.83%.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(7) | Mr. Wasserstein passed away on October 14, 2009. At the time of his death he held 4,406,440 RSUs, which were converted into shares of Lazard Class A common stock and
delivered to his estate on November 13, 2009. The closing price of the Lazard Class A common stock on the NYSE on October 14, 2009 was $43.27 per share. In addition, his estate became entitled to receive an additional 14,452 RSUs pursuant to the
dividend equivalent provisions of the underlying award based on a Lazard dividend declared on October 27, 2009 to shareholders of record on November 6, 2009 and payable on November 27, 2009. These additional RSUs were immediately converted into
shares of Lazard Class A common stock and delivered to Mr. Wassersteins estate. The closing price of the Lazard Class A common stock on the NYSE on November 27, 2009 was $38.12 per share.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



If a named executive officer had voluntarily resigned or retired
from Lazard on December 31, 2009 without good reason or was terminated by Lazard for cause, he would not have been entitled to receive any severance payments from Lazard and any unvested RSUs and deferred cash awards would have been
forfeited.



With respect to a termination for
Cause of a named executive officer, the term Cause shall mean: (A) conviction of, or a guilty plea to, a felony, or of any other crime that legally prohibits the named executive officer from working for Lazard; (B) a breach of a regulatory rule that
materially adversely affects the named executive officers ability to perform his duties for Lazard; (C) willful and deliberate failure on the part of the named executive officer (i) to perform his employment duties in any material respect or
(ii) to follow specific reasonable directions received from Lazard; or (D) a breach of the covenants contained in the retention agreements that is (individually or combined with other such breaches) demonstrably and materially injurious to Lazard or
any of its affiliates. Notwithstanding the foregoing, with respect to the events described in clauses (B) and (C)(i) of the prior sentence, the named executive officers acts or failure to act shall not constitute cause to the extent taken (or
not taken) based upon the direct instructions of the Chief Executive Officer of Lazard or the Board of Directors of Lazard or a more senior executive officer of Lazard.



With respect to a termination of any of Messrs. Castellano, Golub, Hoffman or Ward for Good Reason, their retention agreements
define Good Reason as: (i) the assignment of the named executive officer to any duties inconsistent in any material respect with his position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as in
effect as of May 7, 2008, or any other action by Lazard which results in a material diminution in such position, authority, duties or responsibilities from the level in effect as of May 7, 2008; (ii) a material breach by Lazard of the terms of the
retention agreement, or (iii) any requirement that the named executive officers principal place of employment be relocated to a location that increases the executives commute from his primary residence by more than 30 miles.



The term Change in Control, as used in the retention
agreements and in the 2005 Equity Incentive Plan and the 2008 Incentive Compensation Plan, shall mean any of the following events: (i) an acquisition (other than directly from the Company) by an individual, entity or a group (excluding the Company
or an employee benefit plan of the Company or a corporation controlled by the Companys shareholders) of 20% (30% for purposes of the 2008 Incentive Compensation Plan) or more of either (A) the then-outstanding shares of Common Stock (treating,
for this purpose, the then-outstanding Class II interests of LAZ-MD Holdings (Class II interests) as shares of Common Stock on an as-if fully exchanged basis in accordance with the Master Separation Agreement) (the Outstanding
Company Common Stock), assuming the full exchange of all of the then-outstanding Class II interests for shares of Common Stock in accordance with the Master Separation Agreementor (B) the combined voting power of the then-outstanding
voting securities of the Company entitled to vote generally in the election of directors (the Outstanding Company Voting Securities); (ii) a change in a majority of the current Board of Directors (the Incumbent Board)
(excluding any persons approved by a vote of at least a majority of the Incumbent Board other than in connection with an actual or threatened proxy contest); (iii) consummation of a merger, consolidation or sale of all or substantially all of the
Companys assets (collectively, a Business Combination) other than a Business Combination in which all or substantially all of the individuals and entities



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who are the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination (assuming in each
case the full exchange of the Class II Interests for shares of Company Common Stock in accordance with the Master Separation Agreement) will beneficially own, directly or indirectly, more than 50% of, respectively, the outstanding shares of common
stock, and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination, at least a majority of the Board
of Directors of the resulting corporation were members of the Incumbent Board, and after which no Person owns 20% (30% for purposes of the 2008 Incentive Compensation Plan) or more of the stock of the resulting corporation, who did not own such
stock immediately before the Business Combination or (iv) shareholder approval of a complete liquidation or dissolution of the Company.



Director Compensation for 2009



Directors who are officers of Lazard do not receive any fees for their service as directors. In 2009, our directors
compensation program provided that each of our non-executive directors would receive an annual cash retainer of $96,750 and an annual award of deferred stock units (DSUs) with a grant date value of $118,250. The chair of the Audit
Committee of Lazard Ltd is paid an additional annual retainer of $30,000 and the chairs of each of the Nominating & Governance Committee of Lazard Ltd and the Compensation Committee of Lazard Ltd are paid an additional annual retainer of
$20,000, in each case 45% of which is paid in cash and 55% in DSUs. The other members of the Audit Committee of Lazard Ltd are paid an additional annual retainer of $20,000 and the other members of the Nominating & Governance Committee of Lazard
Ltd and the Compensation Committee of Lazard Ltd are paid an additional annual retainer of $15,000, in each case 45% of which is paid in cash and 55% in DSUs. Cash compensation is paid out on a quarterly basis (on February 15th, May 15th, August 15th, and November 15th) and the DSU awards described above are granted on an annual basis on June 1stof each year, except for initial pro-rated grants made to new
directors upon their joining the Board of Lazard Ltd. The number of DSUs granted is based on the closing price of Lazard Ltd Class A common stock on the NYSE on the date of grant.



Non-executive directors may elect to receive additional DSUs in lieu of some or all of their cash compensation
pursuant to the Directors Fee Deferral Unit Plan. DSUs awarded under this plan are granted on the same quarterly payment date as cash compensation would have been received and the number of DSUs is calculated based on the closing price of our Class
A common stock on the NYSE on the date of grant.



All DSUs awarded under these arrangements (1) were issued under either the 2005 Equity Incentive Plan or the 2008 Incentive Compensation Plan, and (2) are converted to Class A common stock of Lazard Ltd on a one-for-one basis and
distributed to the director after he or she resigns or otherwise ceases to be a member of our Board. All DSUs receive dividend equivalents at the same rate and time that dividends are paid on shares of Lazard Ltd Class A common stock.



|                         |  |                            |         |                 |   |                           |  |       |       |  |   |        
|------------------------ |  | -------------------------- | ------- | --------------- | - | ------------------------- |  | ----- | ----- |  | - | -------
|Directors                |  | Fees Earned orPaid in Cash |         | StockAwards (1) |   | All OtherCompensation (2) |  | Total
|Ronald J. Doerfler       |  | $                          | 110,250 |                 | $ | 134,779                   |  | $     | 4,307 |  | $ | 249,336
|Dominique Ferrero (3)(4) |  |                            |        |                 | $ | 48,416                    |  | $     | 3,174 |  | $ | 51,590 
|Steven J. Heyer (3)      |  |                            |        |                 | $ | 250,131                   |  | $     | 8,948 |  | $ | 259,079
|Sylvia Jay               |  | $                          | 110,250 |                 | $ | 134,807                   |  | $     | 4,453 |  | $ | 249,510
|Ellis Jones (3)          |  |                            |        |                 | $ | 215,078                   |  | $     | 7,077 |  | $ | 222,155
|Philip A. Laskawy        |  | $                          | 105,750 |                 | $ | 129,261                   |  | $     | 2,412 |  | $ | 237,423
|Laurent Mignon (3)(4)    |  |                            |        |                 | $ | 129,184                   |  | $     | 834   |  | $ | 130,018
|Hal S. Scott             |  | $                          | 114,750 |                 | $ | 140,270                   |  | $     | 4,676 |  | $ | 259,696
|Michael J. Turner        |  | $                          | 110,250 |                 | $ | 134,807                   |  | $     | 4,453 |  | $ | 249,510



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|1. | The value of the DSUs reported in the table above is based on the grant date fair value of awards computed in accordance with FASB ASC Topic 718. See Note 17 of Notes
to the Consolidated Financial Statements contained in Lazards 2009 Annual Report on Form 10-K for a discussion of the assumptions used in the valuation of the DSUs. The number and grant date fair value of DSUs granted on June 1, 2009 under FAS
ASC Topic 718 (based on the closing price of our Class A common stock on the NYSE at the time of the grant) were as follows: Mr. Doerfler, 4,836, valued at $134,779; Mr. Heyer, 4,935, valued at $137,538; Lady Jay, 4,837, valued at $134,807; Mr.
Jones, 4,243, valued at $118,252; Mr. Laskawy, 4,638, valued at $129,261; Mr. Mignon, 3,268, valued at $99,870 (granted on July 28, 2009, when he joined the Board); Mr. Scott, 5,033, valued at $140,270; and Mr. Turner, 4,837, valued at
$134,807. The total number of DSUs held by each of our non-executive directors at December 31, 2009 was as follows: Mr. Doerfler, 11,721; Mr. Heyer, 24,003; Lady Jay, 12,045; Mr. Jones, 19,268; Mr. Laskawy, 7,421; Mr. Mignon, 4,015;
Mr. Scott, 12,628; and Mr. Turner, 12,045.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2. | Represents cash dividends paid on the DSUs to each of the directors listed in the table.
|-- | ----------------------------------------------------------------------------------------



|3. | Messrs. Ferrero, Heyer, Jones, and Mignon elected to defer their quarterly cash compensation into additional DSUs, pursuant to the terms of the Directors Fee Deferral
Unit Plan, which was approved by our Board of Directors on May 9, 2006. As a result, Messrs. Ferrero, Heyer, Jones, and Mignon received 1,722, 3,457, 2,973, and 747 additional DSUs in lieu of cash, respectively, in 2009.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4. | Mr. Ferrero resigned from the Board on May 18, 2009 and Mr. Mignon joined the Board on July 28, 2009.
|-- | -----------------------------------------------------------------------------------------------------



Vernon E. Jordan, Jr. is a member of our Board of Directors and
is a senior managing director of Lazard. Mr. Jordan is not an executive officer of Lazard, as that term is defined in the rules and regulations promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act), and was
therefore not included in the Summary Compensation Table. Mr. Jordan does not receive any fees for his service as director of Lazard. In connection with our recapitalization in May 2005, Mr. Jordan entered into a retention agreement in the form
applicable to our named executive officers generally. See Retention Agreements with Named Executive Officers. Mr. Jordans total compensation as a senior managing director for 2009, as viewed by senior management and the
Compensation Committee, was as follows: base salary, $500,000; annual cash bonus, $922,500; RSU award, $1,077,500; for total compensation of $2,500,000. This presentation differs from the presentation in the table below by (i) including the full
grant date value of the restricted stock units (RSUs) awarded on February 11, 2010, which related to 2009 performance but are not reflected in the table because they were granted after the end of our 2009 fiscal year, (ii) excluding the
full grant date value of the RSUs and deferred cash awards granted on February 10, 2009, which related to 2008 performance, and (iii) excluding the compensation related to Mr. Jordans use of a corporate apartment in New York as described in
footnote 3 below.



The following table sets forth
Mr. Jordans compensation as a senior managing director for 2009 as required under SEC rules for director compensation disclosure in proxy statements.



|         |  |                      |  |                                 |  |                           |  |           
|-------- |  | -------------------- |  | ------------------------------- |  | ------------------------- |  | ----------
|Salary   |  | Annual CashBonus (1) |  | Restricted StockUnit Awards (2) |  | All OtherCompensation (3) |  | Total     
|$500,000 |  | $1,847,500           |  | $825,000                        |  | $537,627                  |  | $3,710,127



|(1) | As was the case for most of our senior employees, Mr. Jordan received a deferred cash award of $925,000 on February 10, 2009, which related to 2008 performance. As
required under SEC rules for compensation disclosure in proxy statements, the deferred cash awards are included in the fiscal year actually granted (2009), rather than the year to which they relate (2008). During the fourth quarter of 2009, the
Compensation Committee approved the acceleration of the deferred cash awards to be paid out in February 2010 for all recipients, including Mr. Jordan. See Compensation Discussion and AnalysisDesign of Our Compensation Programs.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | The value of the RSUs is based on the grant date fair value of awards computed in accordance with FASB ASC Topic 718 for the 2009 fiscal year. The
total number of RSUs held by Mr. Jordan at December 31, 2009 was 83,477. See the narrative discussion under the heading Grants of Plan Based Awards for a description of the terms and conditions of the January 2009 RSU grants. On February
11, 2010, Mr. Jordan
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | received an RSU award with a grant date value of $1,077,500, which related to 2009 performance. See the narrative discussion under the heading Compensation Discussion and Analysis
Design of Our Compensation ProgramsIncentive Compensation for a description of the terms and conditions of the February 2010 RSU grants.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | Pursuant to a letter agreement entered into with Mr. Jordan in 1999 and subsequently amended on January 1, 2004, Mr. Jordan is entitled to benefits on the same basis as
other managing directors and to use, on a priority basis, a corporate apartment in New York. The incremental cost to Lazard of providing Mr. Jordan with use of this apartment was $288,000 in 2009. Mr. Jordan also received a tax gross-up payment of
$217,356 as reimbursement for taxes paid on the imputed income from the use of the apartment. In connection with the deferred cash award granted to Mr. Jordan on February 10, 2009, he received an interest payment of $28,125 for the period from the
date of the grant through December 31, 2009. Mr. Jordan is also the beneficiary of a Company provided life insurance and excess liability insurance policy, and beginning on August 1, 2009, the Company began to provide long-term disability insurance
to Mr. Jordan. In addition, beginning on August 1, 2009, the firm began paying a portion of his health insurance premiums, as it does for all U.S. employees.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Compensation Committee Interlocks and Insider Participation



The members of Lazard Ltds Compensation Committee are Steven J. Heyer, Sylvia Jay and Michael J. Turner.
Mr. Wasserstein, our former Chairman and Chief Executive Officer, served as the Chairman and is the majority owner of Wasserstein Holdings, LLC, the ultimate general partner of Wasserstein & Co., LP, a separate merchant banking firm in which
Lazard does not hold any economic interest and at which Ellis Jones, who serves on our Board of Directors, serves as Chief Executive Officer. See Certain Relationships with our Directors, Executive Officers and Employees below.



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



As of December 31, 2009, approximately 74.5% and 25.5% of our
common membership interests are held by wholly-owned subsidiaries of Lazard Ltd and by LAZ-MD Holdings, respectively. Our managing member interests are held by two indirect wholly owned subsidiaries of Lazard Ltd and our profit participation
interests are held by various managing directors.



|Item 13. | Certain Relationships and Related Transactions, and Director Independence
|-------- | -------------------------------------------------------------------------



Director Independence



Pursuant to the corporate governance listing standards of the NYSE, the Board of Directors has adopted standards for determining whether
directors have material relationships with Lazard. The standards are set forth on Annex A to Lazard Ltds proxy statement. Under these standards, a director employed by Lazard cannot be deemed to be an independent director, and
consequently Messrs. Jacobs and Jordan are not independent directors of Lazard.



The Board has determined that Messrs. Doerfler, Heyer, Jones, Laskawy, Scott, Turner and Lady Jay do not have a material relationship with Lazard under the Boards standards for independence and
accordingly each is independent under the NYSE corporate governance listing standards. In making its independence determinations the Board considered the engagement of Lazard in 2009 by The Hearst Corporation and LOreal USA, Inc., a sister
company of LOreal UK. Mr. Doerfler is the Chief Financial Officer of The Hearst Corporation and Lady Jay is Vice Chairman of LOreal UK. In both instances Lazard provided M&A advisory services in the ordinary course of business and
the engagements were deemed per se immaterial pursuant to Lazards Standards of Director Independence, as set forth on Annex A to the Lazard Ltd proxy statement.



The Board also determined that Mr. Mignon was independent, after giving careful consideration to the
relationship between Lazard and Natixis, of which Mr. Mignon is the Chief Executive Officer. Natixis is the successor entity in a merger with IXIS Corporate & Investment Bank, which participated as an investor in our



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recapitalization transactions in May 2005, purchasing $150 million of our equity security units and 2,000,000 shares of Class A common stock at the IPO price of $25 per share. In May 2008,
Natixis acquired 4,999,800 additional shares of Lazards Class A common stock upon the settlement of the purchase contracts comprising a portion of our equity security units. In connection with the original investment by Natixis in May 2005,
Lazard agreed to nominate one person designated by Natixis to our Board of Directors, currently Mr. Mignon. At the time of our equity public offering, Lazard also had in place a cooperation arrangement with Natixis in France. This cooperation
arrangement was originally set to expire during the third quarter of 2008; however, the arrangement continues to be applied in accordance with its general terms pending the outcome of the continuing discussions regarding its formal extension. The
cooperation arrangement provides that Lazard Group and Natixis will (1) place and underwrite securities on the French equity primary capital markets under a common brand, Lazard-Natixis, and cooperate in their respective origination,
syndication and placement activities, (2) form an alliance in real estate advisory work with the objective of establishing a common brand for advisory and financing operations within France, and (3) create an exclusive mutual referral cooperation
arrangement, subject to the fiduciary duties of each firm, with the goal of referring clients from Lazard Group to Natixis for services relating to corporate banking, lending, securitizations and derivatives within France and from Natixis to Lazard
Group for mergers and acquisitions advisory services within France. In 2009, the cooperation arrangement generated approximately $25.5 million of gross revenue for Natixis and $14.4 million of gross revenue for Lazard. We also received advisory fees
in 2009 of $2.1 million with respect to one transaction involving Natixis. In 2008, we received advisory fees of $600,000 with respect to one transaction involving Natixis. In 2007, we received advisory fees of $5.4 million with respect to several
transactions involving Natixis and its affiliates. The Board determined, in its business judgment, that these relationships were not material, noting that 2009 gross revenue generated pursuant to the cooperation arrangement and other transactions
referenced above were less than 1.1% of Lazards gross revenue for 2009 and less than 1.0% of the annual gross revenue of Natixis for 2009. See Agreement with Natixis and the Wasserstein Family Trusts and Certain Relationships
with Our Directors, Executive Officers and Employees.



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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS



Policy on Related Party Transactions



Our Board of Directors has adopted a written policy requiring
that all Interested Transactions (as defined below) be approved or ratified by either the Nominating & Governance Committee of Lazard Ltd or, under certain circumstances, the Chair of the Nominating & Governance Committee of
Lazard Ltd. The Nominating & Governance Committee of Lazard Ltd is required to review the material facts of all Interested Transactions that require the Committees approval or ratification and either approve or disapprove of the entry into
the Interested Transaction. In determining whether to approve or ratify an Interested Transaction, the Nominating & Governance Committee of Lazard Ltd takes into account, among other factors it deems appropriate, whether the Interested
Transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances and the extent of the interest of the Related Party (as defined below) in the transaction. In
addition, the Board of Directors has delegated to the Chair of the Nominating & Governance Committee of Lazard Ltd the authority to pre-approve or ratify (as applicable) any Interested Transaction with a Related Party in which the aggregate
amount involved is expected to be less than $1 million. A report is then made to the Nominating & Governance Committee of Lazard Ltd at its next regularly scheduled meeting of each new Interested Transaction pre-approved by the Chair of the
Nominating & Governance Committee of Lazard Ltd. Any director who is a Related Party with respect to an Interested Transaction may not participate in any discussion or approval of such Interested Transaction. An Interested
Transaction is one in which (i) we are a participant, (ii) the aggregate amount involved will or may be expected to exceed $120,000, (iii) one of our executive officers, directors, director nominees, 5% shareholders, or their family members
(each a Related Party) has a direct or indirect material interest in the transaction and (iv) the transaction is required to be disclosed in our Proxy Statement or Annual Report on Form 10-K pursuant to the rules and regulations
promulgated by the SEC.



Related Party Transactions



On May 10, 2005, we completed a series of
financing transactions the net proceeds of which were primarily used to redeem the outstanding Lazard Group membership interests of Lazard Groups historical partners. In the discussions below, we refer to these financing transactions and the
IPO, collectively, as the recapitalization. Concurrently, on May 10, 2005, Lazard Group transferred its capital markets business, which consisted of equity, fixed income and convertibles sales and trading, broking, research and
underwriting services, its fund management activities outside of France and specified non-operating assets and liabilities, to LFCM Holdings. In the discussions below, we refer to these businesses, assets and liabilities as the separated
businesses and these transfers collectively as the separation.



Relationship with LAZ-MD Holdings and LFCM Holdings



LAZ-MD Holdings is a significant stockholder of Lazard Ltd. As of December 31, 2009, LAZ-MD Holdings owned approximately 25.5% of the voting
power of all shares of Lazard Ltds voting stock through its ownership of the Class B common stock and is thereby able to exercise significant influence in the election of Lazard Ltds directors. LAZ-MD Holdings voting power in
Lazard Ltd is intended to mirror its economic interest in Lazard Group, and its voting power will decrease over time in connection with the exchange of the LAZ-MD Holdings exchangeable interests by the current and former working members of Lazard
Group for shares of Lazard Ltds Class A common stock. The current and former working members of Lazard Group, including our managing directors who held working member interests at the time of the recapitalization, own LAZ-MD Holdings
exchangeable interests and, through the LAZ-MD Holdings stockholders agreement, have the right to cause LAZ-MD Holdings to vote its Class B common stock on an as-if-exchanged basis.



In addition, LFCM Holdings, which is the entity that owns and operates the separated businesses, ceased to be a
subsidiary of Lazard Group and LAZ-MD Holdings at the time of the separation. It is owned by current and former working members of Lazard Group, including our managing directors and named executive officers, who



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are members of LAZ-MD Holdings. A managing director of Lazard Frères & Co LLC, a wholly owned subsidiary of Lazard Group, is the chairman of LFCM Holdings. LFCM Holdings reimbursed us
$1.5 million for a portion of his salary and bonus in 2009 for services that he rendered to LFCM Holdings as its chairman. In addition, the chairman of Lazard Alternative Investments Holdings LLC (LAI), a subsidiary of LFCM Holdings, is
our President, Charles G. Ward, III. Mr. Ward does not receive any compensation from LAI for his services as chairman and was appointed to this position to oversee Lazard Groups interest in LAI pursuant to the business alliance agreement. See
Business Alliance Agreement.



We
entered into several agreements with Lazard Group, LAZ-MD Holdings and LFCM Holdings to effect the separation and recapitalization transactions and to define and regulate the relationships of the parties. Except as described in this section, we do
not have any material arrangements with LAZ-MD Holdings and LFCM Holdings other than ordinary course business relationships on arms length terms.



Pursuant to a Prospectus Supplement dated June 2, 2009, certain holders of LAZ-MD exchangeable interests (including certain of our executive
officers) exchanged their interests for Lazard Ltd Class A common stock (the selling shareholders) and sold 4,000,000 shares of common stock of Lazard Ltd to Goldman, Sachs & Co. (Goldman Sachs) at a price of $26.00 per
share. In connection with this offering, Lazard Group LLC purchased an additional 1,700,000 shares of Lazard Ltd Class A common stock from the selling shareholders through Goldman Sachs, as agent, at the price of $26.00 per share. In the aggregate,
the selling shareholders sold a total of 5,700,000 shares of Lazard Ltd Class A common stock. Lazard Group did not receive any net proceeds from the sale of the Lazard Ltd Class A common stock. The purchase price was agreed upon based upon
negotiations between a committee for the selling shareholders and Goldman Sachs. In addition, pursuant to a Prospectus Supplement dated September 8, 2009, certain holders of LAZ-MD exchangeable interests (including certain of our executive officers)
exchanged their interests for Lazard Ltd Class A common stock and sold 5,215,921 shares of Lazard Ltd common stock to Goldman Sachs at a price of $37.00 per share. Lazard Group did not receive any net proceeds from the sale of the Lazard Ltd Class A
common stock. The purchase price was agreed upon based upon negotiations between a committee for the selling shareholders and Goldman Sachs. Both of these transactions were approved by our Board of Directors.



Agreements with LAZ-MD Holdings and LFCM Holdings



We have provided below summary descriptions of
the master separation agreement and the other key related agreements we entered into with Lazard Group, LAZ-MD Holdings and LFCM Holdings in connection with the separation and recapitalization transactions, as well as any material amendments
thereto. These agreements effected the separation and recapitalization transactions and also provide a framework for our ongoing relationship with LAZ-MD Holdings and LFCM Holdings. These agreements include:



| |  |  | the master separation agreement,
| | - |  | --------------------------------



| |  |  | the license agreement,
| | - |  | ----------------------



| |  |  | the administrative services agreement,
| | - |  | --------------------------------------



| |  |  | the business alliance agreement, and
| | - |  | ------------------------------------



| |  |  | the tax receivable agreement.
| | - |  | -----------------------------



The descriptions set forth below, which summarize selected terms of these agreements, are not complete. Copies of these agreements have been
filed as exhibits to our Annual Report on Form 10-K and are available to the public from the SECs internet site at www.sec.gov.



Master Separation Agreement



On May 10, 2005, Lazard Ltd entered into the master separation agreement with Lazard Group, LAZ-MD Holdings and LFCM Holdings. The master
separation agreement contains key provisions relating to the separation and recapitalization transactions and the relationship among the parties after completion of the



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separation and recapitalization. The master separation agreement identified the assets, liabilities and businesses of Lazard Group that were transferred to LFCM Holdings in connection with the
separation and recapitalization and described when and how the separation and recapitalization occurred. In addition, the master separation agreement continues to regulate aspects of the relationship among the parties, including the exchange
mechanics of the LAZ-MD Holdings exchangeable interests.



Relationship Among Lazard Ltd, Lazard Group, LAZ-MD Holdings and LFCM Holdings.The master separation agreement contains various provisions governing the relationship among Lazard Ltd, Lazard Group, LAZ-MD Holdings and LFCM Holdings
after the separation and recapitalization, including with respect to the following matters.



Limitation on Scope of LAZ-MD Holdings Operations. The master separation agreement provides that LAZ-MD Holdings will not engage in any business other than to act as the holding company for
the working members interests in Lazard Group and Lazard Ltds Class B common stock and actions incidental thereto, except as otherwise agreed by Lazard Ltd.



Parity of Lazard Group Common Membership Interests and Lazard Ltds common stock. The master separation agreement
sets forth the intention of Lazard Group and Lazard Ltd that the number of Lazard Group common membership interests held by Lazard Ltd (or its subsidiaries) will at all times be equal in number to the number of outstanding shares of Lazard
Ltds common stock, subject to customary anti-dilution adjustments.



Expenses. The master separation agreement sets forth the intention of Lazard Group to reimburse Lazard Ltd for its costs and expenses incurred in the ordinary course of business.



LAZ-MD Holdings Exchangeable Interests.The master
separation agreement sets forth the terms and arrangements with respect to the LAZ-MD Holdings exchangeable interests, including the exchange rate and timing of exchangeability of those interests.



Indemnification.In general, under the master separation
agreement, Lazard Group indemnifies LFCM Holdings, LAZ-MD Holdings and their respective representatives and affiliates for any and all losses (including tax losses) that such persons incur to the extent arising out of or relating to our business
(both historically and in the future) and any and all losses that LFCM Holdings, LAZ-MD Holdings and their respective representatives and affiliates incur arising out of or relating to any breach of the master separation agreement by Lazard Group or
Lazard Ltd.



In general, under the master
separation agreement, LFCM Holdings indemnifies Lazard Ltd, Lazard Group, LAZ-MD Holdings and their respective representatives and affiliates for any and all losses (including tax losses) that such persons incur arising out of or relating to the
separated businesses and the businesses conducted by LFCM Holdings (both historically and in the future) and any and all losses that Lazard Ltd, Lazard Group, LAZ-MD Holdings and their respective representatives or affiliates incur arising out of or
relating to any breach of the master separation agreement by LFCM Holdings.



In general, under the master separation agreement, LAZ-MD Holdings indemnifies Lazard Ltd, Lazard Group, LFCM Holdings and their respective representatives and affiliates for any and all losses that such
persons incur to the extent arising out of or relating to any breach of the master separation agreement by LAZ-MD Holdings.



Any indemnification amounts are reduced by any insurance proceeds and other offsetting amounts recovered by the indemnitee. The master
separation agreement specifies procedures with respect to claims subject to indemnification and related matters.



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Other Provisions.The master separation agreement also contains provisions governing
the sharing of information between Lazard Ltd and Lazard Group, on the one hand, and LAZ-MD Holdings and LFCM Holdings, on the other hand.



On November 6, 2006, Lazard Ltd, Lazard Group and LAZ-MD Holdings entered into Amendment No. 1 to the master separation agreement (the
amendment). The amendment modified the provisions of the master separation agreement relating to the exchange terms of the LAZ-MD Holdings exchangeable interests. The modifications included the following:



| |  |  | An exchange of LAZ-MD Holdings exchangeable interests may be conditioned upon the actual sale of all or any portion (such amount designated by the
holder) of the LAZ-MD Holdings exchangeable interests in connection with a registered offering.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Holders of LAZ-MD Holdings exchangeable interests that are then exchangeable may exchange these interests not only at annual registration periods but
also in connection with demand and piggy-back registration opportunities and during window periods after the filing of selected Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K by Lazard Ltd.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In addition to requiring the consent of Lazard Ltd, Lazard Group and LAZ-MD Holdings to amend the exchangeability provisions, any amendment that
materially and adversely impacts the rights of any holder thereunder requires the consent of such holder or it will not apply to such person unless such amendment applies to and affects the rights of all holders equally, regardless of whether or not
such person is providing services to Lazard Ltd.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Lazard License Agreement



The logo, trademarks, trade names and service marks of Lazard are currently property of various wholly-owned subsidiaries of Lazard Group. Pursuant to the master separation agreement, Lazard Group and
those subsidiaries entered into a license agreement with LFCM Holdings that governs the use of the Lazard and LF names by LFCM Holdings in connection with the separated businesses.



In general, LFCM Holdings is permitted to use the Lazard and LF names to the extent that the Lazard name was
being used at the time of the separation and recapitalization by the separated businesses and is permitted to use the LF name solely for the use of the name LFCM Holdings LLC in its capacity as a holding company for the separated businesses. Under
the agreement, LFCM Holdings pays $100,000 per year for the right to license the Lazard name. The license survives with respect to capital markets activities until the expiration or termination of the business alliance provided for in the business
alliance agreement that LFCM Holdings entered into with Lazard Group. With respect to alternative investment (including private equity) activities, LFCM Holdings license survives until the earlier of the expiration, termination or closing of
the options to purchase the North American and European fund management activities, granted in the business alliance agreement, as described in Business Alliance Agreement, or until the business alliance agreement is terminated.
The license for the LF name in LFCM Holdings LLC may be terminated by either party for any reason after the license with respect to the capital markets business and the license for the alternative investment activities have both expired or been
terminated. Upon termination of either the license with respect to the capital markets business or the license for the alternative investment activities, the license fee for the calendar year following the termination and each year thereafter will
be $75,000 per year. If both of those licenses are terminated, the license fee for the calendar year following the termination and each year thereafter will be $25,000 per year.



Administrative Services Agreement



We entered into an administrative services agreement with LAZ-MD Holdings and LFCM Holdings regarding the
provision of administrative and support services after the separation and recapitalization.



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Pursuant to the administrative services agreement, Lazard Group provides selected
administrative and support services to LAZ-MD Holdings and LFCM Holdings, such as:



| |  |  | cash management and debt service administration,
| | - |  | ------------------------------------------------



| |  |  | accounting and financing activities,
| | - |  | ------------------------------------



| |  |  | tax,
| | - |  | ----



| |  |  | payroll,
| | - |  | --------



| |  |  | human resources administration,
| | - |  | -------------------------------



| |  |  | financial transaction support,
| | - |  | ------------------------------



| |  |  | information technology,
| | - |  | -----------------------



| |  |  | public communications,
| | - |  | ----------------------



| |  |  | data processing,
| | - |  | ----------------



| |  |  | procurement,
| | - |  | ------------



| |  |  | real estate management, and
| | - |  | ---------------------------



| |  |  | other general administrative functions.
| | - |  | ---------------------------------------



Lazard Group charges LFCM Holdings for the above services based on Lazard Groups cost allocation methodology. Notwithstanding Lazard
Groups providing data processing services, Lazard Group does not provide any security administration services, as such services were transferred to LFCM Holdings.



Pursuant to the administrative services agreement, Lazard Group also provides tax services to LAZ-MD Holdings and LFCM
Holdings provides security administrative services to Lazard Group.



The services provided by Lazard Group to LFCM Holdings, and by LFCM Holdings to Lazard Group, under the administrative services agreement generally were to be provided until December 31, 2008, and were
subject to automatic annual renewal, unless either party gives 180 days notice of termination. As of December 31, 2009, neither party has given notice of termination, and the agreement has been automatically renewed for an additional one year
period. LFCM Holdings and Lazard Group have a right to terminate the services earlier if there is a change of control of either party or the business alliance provided in the business alliance agreement expires or is terminated. The party receiving
a service may also terminate a service earlier upon 180 days notice as long as such receiving party pays the service provider an additional 3 months of service fee for the terminated service. The services provided by Lazard Group to LAZ-MD
Holdings will generally be provided until December 31, 2014, unless terminated earlier because of a change of control of either party. See Note 22 of Notes to the Consolidated Financial Statements contained in Lazards 2009 Annual Report on
Form 10-K for a discussion of payments made in 2009 under the administrative services agreement.



In addition, in connection with the various agreements entered into in connection with the CP II MgmtCo Spin-Off, Lazard Group agreed to
provide certain specified services to LFCM Holdings (which, in turn, LFCM Holdings may provide to CP II MgmtCo) pursuant to the administrative services agreement and to generally not terminate such specified services until June 30, 2010. See
Business Alliance Agreement for a discussion of the CP II MgmtCo Spin-Off.



In the absence of gross negligence or willful misconduct, the party receiving services under the administrative services agreement waives any rights and claims it may have against the service provider in
respect of any services provided under the administrative services agreement.



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Business Alliance Agreement



Lazard Group and LFCM Holdings entered into a business alliance
agreement that provides for the continuation of Lazard Groups and LFCM Holdings business relationships in the areas and on the terms summarized below.



The business alliance agreement provides that Lazard Group will refer to LFCM Holdings selected opportunities
for underwriting and distribution of securities. In addition, Lazard Group will provide assistance in the execution of any such referred business. In exchange for this referral obligation and assistance, Lazard Group is entitled to a referral fee
from LFCM Holdings equal to approximately half of the revenue obtained by LFCM Holdings in respect of any underwriting or distribution opportunity. In addition, LFCM Holdings will refer opportunities in the Financial Advisory and Asset Management
businesses to Lazard Group. In exchange for this referral, LFCM Holdings is entitled to a customary finders fee from Lazard Group. In addition, the business alliance agreement further provides that, during the term of the business alliance,
Lazard Frères & Co. LLC and LAM Securities will introduce execution and settlement transactions to newly formed broker-dealer entities affiliated with LFCM Holdings. The term of the business alliance expires on May 10, 2010, subject to
periodic automatic renewal, unless either party elects to terminate in connection with any such renewal or elects to terminate on account of a change of control of either party. See Note 22 of Notes to the Consolidated Financial Statements contained
in Lazards 2009 Annual Report on Form 10-K for a discussion of payments made in 2009 under the business alliance agreement.



In addition, the business alliance agreement granted Lazard Group options to acquire the North American and European fund management
activities of Lazard Alternative Investments Holdings LLC, or LAI, the subsidiary of LFCM Holdings that owns and operates LFCM Holdings alternative investment activities. On December 15, 2009, Lazard Group exercised its option to
acquire the European fund management activities of LAI for a purchase price of $2 million. This transaction was approved by the Nominating & Governance Committee pursuant to our policy on related party transactions.



The remaining option to purchase the North American fund
management activities is currently exercisable at any time prior to May 10, 2014 for a purchase price of $2.5 million. This reflects a reduction of $1.5 million due to the payment of a like amount to LFCM Holdings in February 2008 in connection with
the initial public offering of Sapphire Industrials Corp., a special purpose acquisition company formed by a subsidiary of Lazard Group and a reduction of $4 million due to the payment of a like amount in February 2009 to LFCM Holdings in connection
with the CP II MgmtCo Spin-Off and the amendments to the business alliance agreement described below. In addition to the option price reduction, the $1.5 million payment was made in exchange for an agreement by LFCM Holdings not to assert certain
claims that it may believe that it had under the business alliance agreement following the initial public offering of Sapphire. LAIs fund management activities initially consisted of fund management and general partner entities that were
transferred to LFCM Holdings in connection with the separation. The business alliance agreement provides that, prior to the expiration, termination or exercise of the options, Lazard Group has certain governance rights with respect to LAI, and LFCM
Holdings is required to support the business of LAI. Lazard Group may agree to new capital commitments and other obligations with respect to newly formed funds in its sole discretion. Lazard Group may be entitled to receive from LFCM Holdings all or
a portion of payments from the incentive fees attributable to newly established LAI funds less compensation payable to investment professionals who manage these funds. In addition, Lazard Group is obligated to abide by obligations that existed as of
the date of the separation and recapitalization with respect to funds existing as of such date. In February 2009, pursuant to agreements entered into by us, a subsidiary of LAI (LAI North America), LFCM Holdings and the investment
professionals who manage Corporate Partners II Limited (CP II), equity ownership of the management company of CP II (CP II MgmtCo) was transferred from LAI North America investment professionals who manage CP II (the CP
II MgmtCo Spin-Off). In connection with the CP II MgmtCo Spin-Off, Lazard Group made a $4 million cash payment to LFCM Holdings. In consideration for this payment, the business alliance agreement was amended to remove any restriction on Lazard
Group engaging in private equity businesses in North America and to reduce the price of our option to acquire the fund management activities of LAI in North America from $6.5 million to $2.5 million. See Note 10



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of Notes to the Consolidated Financial Statements contained in Lazards 2009 Annual Report on Form 10-K for a further discussion of the CP II MgmtCo Spin-Off.



Pursuant to the business alliance agreement, LFCM Holdings
agreed not to compete with any existing Lazard Group businesses until the latest to occur of the termination of the license agreement, the expiration, termination or exercise of the options to purchase the North American merchant banking activities
and the European merchant banking activities or the expiration or termination of the business alliance.



LAZ-MD Holdings Stockholders Agreement



Members of LAZ-MD Holdings, consisting of the current and former working members of Lazard Group, including our managing directors and named
executive officers, have entered into a stockholders agreement with LAZ-MD Holdings and Lazard Ltd that addresses, among other things, LAZ-MD Holdings voting of its share of Class B common stock and registration rights in favor of the
shareholders who are party to the agreement. Every working member at the time of the separation and recapitalization was offered the opportunity to become a party to the LAZ-MD Holdings stockholders agreement.



The LAZ-MD Holdings stockholders agreement will continue
in effect until all LAZ-MD Holdings exchangeable interests have been exchanged for shares of Lazard Ltds common stock, and individual members of LAZ-MD Holdings will cease being party to the LAZ-MD Holdings stockholders agreement upon
full exchange of his or her LAZ-MD Holdings exchangeable interests and underlying Lazard Group interests for Lazard Ltds common stock and such common stock is capable of resale generally under Rule 144 of the Securities Act of 1933, as amended
(the Securities Act). The LAZ-MD Holdings stockholders agreement may be terminated on an earlier date by LAZ-MD Holdings members entitled to vote at least 66 2/3% of the aggregate voting power represented by the LAZ-MD Holdings
members who are party to the LAZ-MD Holdings stockholders agreement. The LAZ-MD Holdings stockholders agreement generally may be amended at any time by a majority of the aggregate voting power represented by LAZ-MD Holdings members who
are party to the LAZ-MD Holdings stockholders agreement.



On November 6, 2006, Lazard Group delivered to LAZ-MD Holdings an acknowledgement letter (the acknowledgement letter) modifying the terms of the retention agreements of persons party to the
amended and restated LAZ-MD stockholders agreement who were at that time current managing directors. The modifications include Lazard Groups agreement that, in the event that any such person shall become entitled to exchangeability
immediately following the third anniversary of the initial equity public offering, or May 10, 2008, of his or her LAZ-MD Holdings exchangeable interests, that person will not forfeit the right to early exchangeability with respect to the first
tranche of his or her LAZ-MD Holdings exchangeable interests if he or she breaches the restrictive covenants (i.e., non-compete and non-solicitation provisions) in the retention agreement of such individual (although shares in the second and
third tranches that would otherwise become exchangeable would not be exchangeable until the eighth anniversary of our equity public offering (May 10, 2013) in such an instance). The terms of the acknowledgement letter were approved by our Board of
Directors.



Registration Rights. On
November 6, 2006, the LAZ-MD Holdings stockholders agreement was amended and restated. The amended and restated stockholders agreement modified in certain respects the terms of the registration rights granted to holders of the LAZ-MD
Holdings exchangeable interests who are party to that agreement.



The amended and restated LAZ-MD Holdings stockholders agreement provides that the holders of shares of Lazard Ltds common stock already issued or to be issued upon exchange of the LAZ-MD
Holdings exchangeable interests or the Lazard Group common membership interests currently held by LAZ-MD Holdings will be granted registration rights. These shares we refer to as registrable securities, and the holders of these
registrable securities we refer to as holders. The holders are third-party beneficiaries for that purpose under the amended and restated LAZ-MD Holdings stockholders agreement, meaning that they will have the right to request
LAZ-MD Holdings to compel Lazard Ltd to honor those obligations under the amended and restated LAZ-MD Holdings stockholders agreement.



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The amended and restated LAZ-MD Holdings stockholders agreement provides that, after
exchange for shares of Lazard Ltds common stock, each holder is entitled to unlimited piggyback registration rights, meaning that each holder can include his or her registrable securities in registration statements filed by Lazard
Ltd, subject to certain limitations. Holders also have demand registration rights, meaning that, subject to certain limitations, after exchange for shares of Lazard Ltds common stock, they may require us to register the registrable
securities held by them, provided that the minimum number of registrable securities necessary to effect a demand registration is the lesser of (1) the number of shares having a market value in excess of $50 million at such time (or $20
million after the ninth anniversary of our equity public offering (May 10, 2014)) or (2) 2,000,000 shares of our common stock. Lazard Ltd will pay the costs associated with all such registrations. Moreover, Lazard Ltd also will use its reasonable
best efforts to file and make effective a registration statement on the third through the ninth anniversaries of the separation and recapitalization, in order to register registrable securities that were issued on those anniversaries or otherwise
subject to continuing volume or transfer restrictions under Rule 144 of the Securities Act upon the exchange of the LAZ-MD Holdings exchangeable interests and the Lazard Group common membership interests, provided that the amount of registrable
securities subject to such registration constitutes at least $50 million of shares of Lazard Ltds outstanding common stock.



Shares of Lazard Ltds common stock will cease to be registrable securities upon the consummation of any sale of such shares pursuant to
an effective registration statement or under Rule 144 of the Securities Act or when they become eligible for sale under Rule 144 of the Securities Act. However, any holder who has shares that would have been registrable securities but for their
eligibility for sale under Rule 144 and who holds, in the aggregate, an amount of registrable securities with a market value in excess of $25 million of Lazard Ltds outstanding common stock will be entitled to continued demand, annual
registration and piggyback registration rights as described above.



Any amendments to the registration rights provisions of the amended and restated stockholders agreement shall require the affirmative approval of holders holding two-thirds of the shares of Lazard
Ltd common stock covered under the amended and restated stockholders agreement in addition to the consent of Lazard Ltd and LAZ-MD Holdings, and any amendment that materially and adversely impacts the rights of any holder under the amended and
restated stockholders agreement will also require the consent of such holder or it will not apply to such person unless such amendment applies to and affects the rights of all holders equally, regardless of whether or not such person is
providing services to Lazard Ltd.



Each holder of
registrable securities party to the amended and restated stockholders agreement may enforce his or her registration rights directly against Lazard Ltd, although LAZ-MD Holdings may elect to assume, seek and conduct the enforcement of any
claims itself on behalf of such holder.



We expect
that substantially all of Lazard Ltds common stock to be issued upon exchange of the LAZ-MD Holdings exchangeable interests will have the foregoing registration rights.



Voting Rights.Prior to any vote of the shareholders of Lazard Ltd, the LAZ-MD Holdings
stockholders agreement requires a separate, preliminary vote of the members of LAZ-MD Holdings who are party to the LAZ-MD Holdings stockholders agreement (either by a meeting or by proxy or written instruction of the members of LAZ-MD
Holdings) on each matter upon which a vote of the shareholders is proposed to be taken. Pursuant to the LAZ-MD Holdings stockholders agreement, members of LAZ-MD Holdings holding LAZ-MD exchangeable interests who are party to that agreement
are individually entitled to direct LAZ-MD Holdings how to vote their proportionate interest in Lazard Ltds Class B common stock on an as-if-exchanged basis. For example, if a current or former working members LAZ-MD Holdings
exchangeable interests were exchangeable for 1,000 shares of Lazard Ltds common stock, that working member would be able to instruct LAZ-MD Holdings how to vote 1,000 of the votes represented by the Class B common stock. However, the LAZ-MD
Holdings Board of Directors has the ability to vote the voting interest represented by the Class B common stock in its discretion if the LAZ-MD Holdings Board of Directors determines that it is in the best interests of LAZ-MD Holdings.



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The votes under the Class B common stock that are associated with any current or former
working member who does not direct LAZ-MD Holdings how to vote on a particular matter will be abstained from voting. The terms of the LAZ-MD Holdings stockholders agreement with respect to voting continue to apply to any party to the LAZ-MD
Holdings stockholders agreement who receives Lazard Group common membership interests upon exchange of his or her LAZ-MD Holdings exchangeable interests, until such time as that holder exchanges all of his or her Lazard Group common membership
interests for shares of Lazard Ltds common stock.



Certain Relationships with Our Directors, Executive Officers and Employees



Laurent Mignon, a member of our Board of Directors, is the Chief Executive Officer of Natixis. In April 2004, Lazard Group and Natixis (as the successor to IXIS Corporate & Investment Bank) entered
into a cooperation arrangement to place and underwrite securities on the French equity primary capital markets under a common brand, Lazard-Natixis (formerly Lazard-Ixis), and cooperate in their respective origination,
syndication and placement activities. This cooperation covers French listed companies exceeding a market capitalization of 500 million. On March 15, 2005, Lazard Group and Natixis expanded this arrangement into an exclusive arrangement within
France. The cooperation arrangement also provides for an alliance in real estate advisory work with the objective of establishing a common brand for advisory and financing operations within France. It also added an exclusive mutual referral
cooperation arrangement, subject to the fiduciary duties of each firm, with the goal of referring clients from Lazard Group to Natixis for services relating to corporate banking, lending, securitizations and derivatives within France and from
Natixis to Lazard Group for mergers and acquisitions advisory services within France. This expanded cooperation arrangement was set to expire during the third quarter of 2008, however, the arrangement continues to be applied in accordance with its
general terms pending the outcome of the currently ongoing discussions regarding its formal extension. In 2009, the cooperation arrangement generated $14.4 million of gross revenue for Lazard.



|Item 14. | Principal Accountant Fees and Services
|-------- | --------------------------------------



Fees of Independent Registered Public Accounting Firm



For the fiscal years ended December 31, 2009 and 2008, fees for services provided by Deloitte & Touche LLP, the member firms of Deloitte
Touche Tohmatsu and their respective affiliates were as follows (in thousands of dollars):



|                                                                                                                                                                                                                                                                                                                                 |  |          |  |         
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------- |  | --------
|Fees                                                                                                                                                                                                                                                                                                                             |  | 2009     |  | 2008    
|Audit Feesfor the audit of Lazards annual financial statements, the audit of the effectiveness of Lazards
controls over financial reporting and reviews of the financial statements included in Lazards quarterly reports on Form 10-Q, including services in connection with statutory and regulatory filings or engagements |  | $6,250   |  | $6,310  
|                                                                                                                                                                                                                                                                                                                                 |  |         
|Audit-Related Fees, including fees for audits of employee benefit plans, computer and control related audit services,
agreed-upon procedures, merger and acquisition assistance and other accounting research services                                                                                                           |  | $1,120   |  | $   829 
|                                                                                                                                                                                                                                                                                                                                 |  |         
|Tax Feesfor tax consulting and compliance services not related to the audit                                                                                                                                                                                                                                                      |  | $1,223   |  | $1,095  
|                                                                                                                                                                                                                                                                                                                                 |  |         
|All Other Fees                                                                                                                                                                                                                                                                                                                   |  | $     30 |  | $     30



The Audit Committee of Lazard Ltd has adopted a policy regarding pre-approval of audit and non-audit services provided by Deloitte &
Touche LLP to Lazard and its subsidiaries. The policy provides the guidelines necessary to adhere to Lazards commitment to auditor independence and compliance with relevant laws, regulations and guidelines relating to auditor independence. The
policy contains a list of prohibited non-audit services, and sets forth four categories of permitted services (Audit, Audit-Related, Tax and Other), listing the types of permitted services in each category. All of the permitted services require
pre-approval by the Audit Committee of Lazard Ltd. In lieu of Audit Committee pre-approval on an engagement-by-engagement basis,



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each category of permitted services, with reasonable detail as to the types of services contemplated, is pre-approved as part of the annual budget approval by the Audit Committee. Permitted
services not contemplated during the budget process must be presented to the Audit Committee for approval prior to the commencement of the relevant engagement. The Audit Committee chair, or, if he is not available, any other member of the Committee,
may grant approval for any such engagement if approval is required prior to the next scheduled meeting of the Committee. At least twice a year, the Audit Committee of Lazard Ltd is presented with a report showing amounts billed by the independent
auditor compared to the budget approvals for each of the categories of permitted services. The Audit Committee of Lazard Ltd reviews the suitability of the pre-approval policy at least annually.



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PART IV



|Item 15. | Exhibits and Financial Statement Schedules
|-------- | ------------------------------------------



|(a) | Documents filed as part of this Report:
|--- | ---------------------------------------



| | 1. | Consolidated Financial Statements
| | -- | ---------------------------------



| |  | The consolidated financial statements required to be filed in the Annual Report on Form 10-K are listed on page F-1 hereof and in Part II, Item 8 hereof.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | Financial Statement Schedule
| | -- | ----------------------------



| |  | The financial statement schedule required in the Annual Report on Form 10-K is listed on page F-1 hereof. The required schedule appears on pages F-2 through F-8 hereof.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | Exhibits
| | -- | --------



|    |  |                                                                                                                                                                                                                                                                                                     
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1 |  | Lazard Group LLCs Certificate of Formation (incorporated by reference to Exhibit 3.1 to Lazard Group LLCs Registration Statement (File No. 333-126751) on Form S-4 filed
on July 21, 2005).                                                                                                       
|    | 
|3.2 |  | Lazard Group LLCs Certificate of Amendment of Certificate of Formation of Lazard Group LLC, changing name to Lazard Group LLC (incorporated by reference to Exhibit 3.2 to
Lazard Group LLCs Registration Statement (File No. 333-126751) on Form S-4 filed on July 21, 2005).                    
|    | 
|3.3 |  | Operating Agreement of Lazard Group LLC, dated as of May 10, 2005 (incorporated by reference to Exhibit 10.2 to Lazard Ltds Quarterly Report (File No. 001-32492) on
Form 10-Q filed on June 16, 2005).                                                                                            
|    | 
|3.4 |  | Amendment No. 1 to the Operating Agreement of Lazard Group LLC, dated as of December 19, 2005 (incorporated by reference to Exhibit
3.01 to Lazard Group LLCs Current Report on Form 8-K (File No. 333-126751) filed on December 19, 2005).                                                        
|    | 
|3.5 |  | Amendment No. 2 dated as of May 7, 2008, to the Operating Agreement of Lazard Group LLC dated as of May 10, 2005 (incorporated by
reference to Exhibit 3.1 to the Registrants Current Report on Form 8-K (File No. 333-126751) filed on May 8, 2008).                                              
|    | 
|4.1 |  | Indenture, dated as of May 10, 2005, by and between Lazard Group LLC and The Bank of New York, as Trustee (incorporated by reference to Exhibit 4.1 to Lazard Group LLCs
Registration Statement (File No. 333-126751) on Form S-4 filed on July 21, 2005).                                         
|    | 
|4.2 |  | First Supplemental Indenture, dated as of May 10, 2005, by and between Lazard Group LLC and The Bank of New York, as Trustee (incorporated by reference to Exhibit 4.2 to Lazard
Group LLCs Registration Statement (File No. 333-126751) on Form S-4 filed on July 21, 2005).                      
|    | 
|4.3 |  | Second Supplemental Indenture, dated as of May 10, 2005, by and between Lazard Group LLC and The Bank of New York, as Trustee (incorporated by reference to Exhibit 10.37 to Lazard
Group LLCs Registration Statement (File No. 333-126751) on Form S-4 filed on July 21, 2005).                   
|    | 
|4.4 |  | Amended and Restated Third Supplemental Indenture, dated as of May 15, 2008, by and among Lazard Group LLC and The Bank of New
York, as trustee (incorporated by reference to Exhibit 4.01 to Lazard Group LLCs Current Report on Form 8-K (Commission File No. 333-126751) filed on May 16, 2008).
|    | 
|4.5 |  | Form of Senior Note (included in Exhibit 4.4).                                                                                                                                                                                                                                                      
|    | 
|4.6 |  | $546 million 7.125% Senior Notes Due 2015, issued by Lazard Group LLC (incorporated by reference to Exhibit 4.5 to Lazard Group LLCs Quarterly Report (File No. 333-126751) on
Form 10-Q filed on November 10, 2005).                                                                              



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|      |  |                                                                                                                                                                                                                                                                                                                                                
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.7   |  | Fourth Supplemental Indenture, dated as of June 21, 2007, between Lazard Group LLC and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.1 to the
Registrants Current Report on Form 8-K (File No. 333-126751) filed on June 22, 2007).                                                                                
|      | 
|10.1  |  | Master Separation Agreement, dated as of May 10, 2005, by and among Lazard Ltd, Lazard Group LLC, LAZ-MD Holdings LLC and LFCM Holdings LLC (incorporated by reference to
Exhibit 2.1 to Lazard Ltds Quarterly Report (File No. 001-32492) on Form 10-Q filed on June 16, 2005).                                                              
|      | 
|10.2  |  | Amendment No. 1, dated as of November 6, 2006, to the Master Separation Agreement, dated as of May 10, 2005, by and among the Lazard Ltd, Lazard Group LLC and LAZ-MD Holdings LLC
(incorporated by reference to Exhibit 10.2 to the Registrants Quarterly Report (File No. 333-126751) on Form 10-Q filed on November 7, 2006).              
|      | 
|10.3  |  | Second Amendment, dated as of May 7, 2008, to the Master Separation Agreement dated as of May 10, 2005, as amended, by and among
Lazard Ltd, Lazard Group LLC and LAZ-MD Holdings LLC (incorporated by reference to Exhibit 2.1 to the Registrants Current Report on Form 8-K (File No. 333-126751) filed on May 8, 2008).                    
|      | 
|10.4  |  | Class B-1 and Class C Members Transaction Agreement (incorporated by reference to Exhibit 2.2 to Lazard Ltds Registration Statement (File No. 333-121407) on Form S-1 filed on
December 17, 2004).                                                                                                                                            
|      | 
|10.5  |  | Amended and Restated Stockholders Agreement, dated as of November 6, 2006, by and among LAZ-MD Holdings LLC, Lazard Ltd and certain members of LAZ-MD Holdings LLC
(incorporated by reference to Exhibit 10.4 to the Registrants Quarterly Report (File No. 333-126751) on Form 10-Q filed on November 7, 2006).                             
|      | 
|10.6  |  | First Amendment dated as of May 7, 2008, to the Amended and Restated Stockholders Agreement dated as of November 6, 2006, between LAZ- MD Holdings LLC and Lazard Ltd
(incorporated by reference to Exhibit 10.6 to the Registrants Quarterly Report (File No. 333-126751) on Form 10-Q filed on May 9, 2008).                               
|      | 
|10.7  |  | Employee Benefits Agreement, dated as of May 10, 2005, by and among Lazard Ltd, Lazard Group LLC, LAZ-MD Holdings LLC and LFCM Holdings LLC (incorporated by reference to Exhibit
10.4 to Lazard Ltds Quarterly Report (File No. 001-32492) on Form 10-Q filed on June 16, 2005).                                                             
|      | 
|10.8  |  | Insurance Matters Agreement, dated as of May 10, 2005, by and between Lazard Group LLC and LFCM Holdings LLC (incorporated by reference to Exhibit 10.5 to Lazard Ltds
Quarterly Report (File No. 001-32492) on Form 10-Q filed on June 16, 2005).                                                                                            
|      | 
|10.9  |  | License Agreement, dated as of May 10, 2005, by and among Lazard Strategic Coordination Company, LLC, Lazard Frères & Co. LLC, Lazard Frères S.A.S., Lazard &
Co. Holdings Limited and LFCM Holdings LLC (incorporated by reference to Exhibit 10.6 to Lazard Ltds Quarterly Report (File No. 001-32492) on Form 10-Q filed on June 16, 2005).
|      | 
|10.10 |  | Administrative Services Agreement, dated as of May 10, 2005, by and among LAZ-MD Holdings LLC, LFCM Holdings LLC and Lazard Group LLC (incorporated by reference to Exhibit 10.7 to
Lazard Ltds Quarterly Report (File No. 001-32492) on Form 10-Q filed on June 16, 2005).                                                                   
|      | 
|10.11 |  | Business Alliance Agreement, dated as of May 10, 2005, by and between Lazard Group LLC and LFCM Holdings LLC (incorporated by reference to Exhibit 10.8 to Lazard Ltds
Quarterly Report (File No. 001-32492) on Form 10-Q filed on June 16, 2005).                                                                                            
|      | 
|10.12 |  | Amendment and Consent, dated February 9, 2009, to the Business Alliance Agreement, dated as of May 10, 2005, by and between Lazard Group LLC and LFCM Holdings LLC (incorporated by
reference to Exhibit 10.12 to Registrants Annual Report (File No. 333-126751) on Form 10-K filed on March 2, 2009).                                       



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|       |  |                                                                                                                                                                                                                                                                                                                                                                                 
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.13  |  | Amended and Restated Operating Agreement of Lazard Strategic Coordination Company LLC, dated as of January 1, 2002 (incorporated by reference to Exhibit 10.16 to Lazard Ltds
Registration Statement (File No. 333-121407) on Form S-1/A filed on February 11, 2005).                                                                                                          
|       | 
|10.14  |  | Lease, dated as of January 27, 1994, by and between Rockefeller Center Properties and Lazard Frères & Co. LLC (incorporated by reference to Exhibit 10.19
to Lazard Ltds Registration Statement (File No. 333-121407) on Form S-1/A filed on February 11, 2005).                                                                                                               
|       | 
|10.15  |  | Lease with an Option to Purchase, dated as of July 11, 1990, by and between Sicomibail and Finabail and SCI du 121 Boulevard Hausmann (English translation) (incorporated by
reference to Exhibit 10.20 to Lazard Ltds Registration Statement (File No. 333-121407) on Form S-1/A filed on February 11, 2005).                                                                 
|       | 
|10.16  |  | Occupational Lease, dated as of August 9, 2002, by and among Burford (Stratton) Nominee 1 Limited, Burford (Stratton) Nominee 2 Limited, Burford (Stratton) Limited, Lazard &
Co., Limited and Lazard LLC (incorporated by reference to Exhibit 10.21 to Lazard Ltds Registration Statement (File No. 333-121407) on Form S-1/A filed on February 11, 2005).                   
|       | 
|10.17* |  | Lazard Ltds 2005 Equity Incentive Plan (incorporated by reference to Exhibit 10.21 to Lazard Ltds Registration Statement (File No. 333-121407) on Form S-1/A filed on May
2, 2005).                                                                                                                                                                                           
|       | 
|10.18* |  | Lazard Ltds 2008 Incentive Compensation Plan (incorporated by reference to Annex B to Lazard Ltds Definitive Proxy Statement on Schedule 14A (File
No. 001-32492) filed on March 24, 2008).                                                                                                                                                                                   
|       | 
|10.19* |  | Lazard Ltds 2005 Bonus Plan (incorporated by reference to Exhibit 10.23 to Lazard Ltds Registration Statement (File No. 333-121407) on Form S-1/A filed on March 21,
2005).                                                                                                                                                                                                   
|       | 
|10.20* |  | Amended and Restated Agreement Relating to Retention and Noncompetition and Other Covenants, dated as of January 29, 2008, by and among Lazard Ltd, Lazard Group LLC and Bruce
Wasserstein (incorporated by reference to Exhibit 10.1 to Lazard Group LLCs Current Report on Form 8-K (File No. 333-126751) filed on February 1, 2008).                                        
|       | 
|10.21* |  | Agreement Relating to Reorganization of Lazard, dated as of May 10, 2005, by and among Lazard LLC and Bruce Wasserstein (incorporated by reference to Exhibit 10.24 to Lazard
Ltds Quarterly Report (File No. 001-32492) on Form 10-Q filed on June 16, 2005).                                                                                                                 
|       | 
|10.22* |  | Amended and Restated Agreement Relating to Retention and Noncompetition and Other Covenants, dated as of May 7, 2008, by and among Lazard Ltd, Lazard Group LLC and Steven J. Golub
(incorporated by reference to Exhibit 10.1 to the Registrants Current Report (File No. 333-126751) on Form 8-K filed on May 8, 2008).                                                      
|       | 
|10.23* |  | Amendment No. 1, dated as of February 26, 2009, to the Amended and Restated Agreement Relating to Retention and Noncompetition and Other Covenants, dated as of May 7, 2008, by and
among Lazard Ltd, Lazard Group LLC and Steven J. Golub (incorporated by reference to Exhibit 10.23 to Registrants Annual Report (File No. 333-126751) on Form 10-K filed on March 2, 2009).
|       | 
|10.24* |  | Form of Agreement Relating to Retention and Noncompetition and Other Covenants, dated as of May 4, 2005, applicable to, and related Schedule I for, each of Michael J. Castellano,
Scott D. Hoffman and Charles G. Ward III (incorporated by reference to Exhibit 10.26 to Lazard Ltds Quarterly Report (File No. 001-32492) on Form 10-Q filed on June 16, 2005).             
|       | 
|10.25* |  | Form of First Amendment, dated as of May 7, 2008, to Agreement Relating to Retention and Noncompetition and Other Covenants dated as of May 4, 2005, for each of Michael J.
Castellano, Scott D. Hoffman and Charles G. Ward, III (incorporated by reference to Exhibit 10.2 to the Registrants Current Report on Form 8-K (File No. 333-126751) filed on May 8, 2008).        
|       | 
|10.26* |  | Second Amendment, dated as of February 26, 2009, to Agreement Relating to Retention and Noncompetition and Other Covenants dated as of
May 4, 2005 (as amended from time to time), for Michael J. Castellano (incorporated by reference to Exhibit 10.26 to Registrants Annual Report (File No. 333-126751) on Form 10-K filed on March 2, 2009).                              



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|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.27* |  | Form of Agreements Relating to Retention and Noncompetition and Other Covenants (incorporated by reference to Exhibit 10.27 to Lazard
Ltds Registration Statement (File No. 333-121407) on Form S-1/A filed on April 11, 2005).                                                                                                                                                                                                                                           
|       | 
|10.28* |  | Agreement Relating to Retention and Noncompetition and Other Covenants, dated as of October 4, 2004 by and between Lazard Group LLC and Alexander F. Stern (incorporated by reference
to Exhibit 10.28 to Registrants Annual Report (File No. 333-126751) on Form 10-K filed on March 2, 2009).                                                                                                                                                                           
|       | 
|10.29* |  | Agreement Relating to Retention and Noncompetition and Other Covenants, dated as of March 18, 2005, by and between Lazard Group LLC and Kenneth M. Jacobs.                                                                                                                                                                                                                                                                                                                 
|       | 
|10.30* |  | Amended and Restated Letter Agreement, effective as of January 1, 2004, between Vernon E. Jordan, Jr. and Lazard Frères & Co. LLC (incorporated by reference to
Exhibit 10.28 to Lazard Ltds Quarterly Report (File No. 001-32492) on Form 10-Q filed on June 16, 2005).                                                                                                                                                                                                  
|       | 
|10.31* |  | Acknowledgement Letter, dated as of November 6, 2006, from Lazard Group LLC to certain managing directors of Lazard Group LLC modifying the terms of the retention agreements of
persons party to the Amended and Restated Stockholders Agreement, dated as of November 6, 2006 (incorporated by reference to Exhibit 10.23 to the Registrants Quarterly Report (File No. 333-126751) on Form 10-Q filed on November 7,
2006).                                           
|       | 
|10.32  |  | Letter Agreement, dated as of March 15, 2005, from IXIS Corporate and Investment Bank to Lazard LLC and Lazard Ltd (incorporated by reference to Exhibit 10.27 to Lazard
Ltds Registration Statement (File No. 333-121407) on Form S-1/A filed on March 21, 2005).                                                                                                                                                                                                        
|       | 
|10.33  |  | Registration Rights Agreement, dated as of May 10, 2005, by and among Lazard Group Finance LLC, the Registrant, Lazard Group LLC and IXIS Corporate and Investment Bank (incorporated
by reference to Exhibit 10.30 to Lazard Ltds Quarterly Report (File No. 001-32492) on Form 10-Q filed on June 16, 2005).                                                                                                                                                            
|       | 
|10.34  |  | Letter Agreement, dated as of May 10, 2005, with Bruce Wasserstein family trusts (incorporated by reference to Exhibit 10.31 to Lazard Ltds Quarterly Report (File
No. 001-32492) on Form 10-Q filed on June 16, 2005).                                                                                                                                                                                                                                                   
|       | 
|10.35  |  | Senior Revolving Credit Agreement, dated as of May 10, 2005, among Lazard Group LLC, the Banks from time to time parties thereto, Citibank, N.A., The Bank of New York, New York
Branch, JP Morgan Chase Bank, N.A. and JP Morgan Chase Bank, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.32 to Lazard Ltds Quarterly Report (File No. 001-32492) on Form 10-Q filed on June 16,
2005).                                                        
|       | 
|10.36  |  | First Amendment, dated as of March 28, 2006, to the Senior Revolving Credit Agreement, dated as of May 10, 2005, among Lazard Group LLC, the Banks from time to time parties thereto,
Citibank, N.A., The Bank of New York, New York Branch, JP Morgan Chase Bank, N.A. and JP Morgan Chase Bank, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.38 to the Registrants Quarterly Report on Form 10-Q (File No.
333-126751) filed on May 11, 2006).
|       | 
|10.37  |  | Second Amendment, dated as of May 17, 2006, to the Senior Revolving Credit Agreement, dated as of May 10, 2005, among Lazard Group LLC, the Banks from time to time parties thereto,
Citibank, N.A., The Bank of New York, New York Branch, JP Morgan Chase Bank, N.A. and JP Morgan Chase Bank, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K (File No.
333-126751) filed on May 17, 2006).     
|       | 
|10.38  |  | Third Amendment, dated as of June 18, 2007, to the Senior Revolving Credit Agreement, dated as of May 10, 2005, among Lazard Group LLC, the Banks from time to time parties thereto,
Citibank, N.A., The Bank of New York, New York Branch, JP Morgan Chase Bank, N.A. and JP Morgan Chase Bank, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K (File No.
333-126751) filed on June 22, 2007).    
|       | 
|10.39* |  | Description of Non-Executive Director Compensation (incorporated by reference to Exhibit 10.33 to Lazard Ltds Quarterly Report (File No. 001-32492) on Form 10-Q for the
quarter ended June 30, 2005).                                                                                                                                                                                                                                                                    



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|       |  |                                                                                                                                                                                                                                                                                                     
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.40* |  | Form of Award Letter for Annual Grant of Deferred Stock Units to Non-Executive Directors (incorporated by reference to Exhibit 99.1 to Lazard Ltds Current Report on Form 8-K
(File No. 001-32492) filed on September 8, 2005).                                                                    
|       | 
|10.41* |  | Form of Agreement evidencing a grant of Restricted Stock Units to Executive Officers under the Lazard Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to Lazard
Ltds Current Report on Form 8-K (File No. 001-32492) filed on January 26, 2006).                                  
|       | 
|10.42* |  | Form of Agreement evidencing a grant of Restricted Stock Units to Executive Officers under the 2008 Incentive Compensation Plan (incorporated by reference to Exhibit 10.41 to
Registrants Annual Report (File No. 333-126751) on Form 10-K filed on March 2, 2009).                               
|       | 
|10.43* |  | Form of Agreement evidencing a grant of Deferred Cash Awards to Executive Officers under the 2008 Incentive Compensation Plan (incorporated by reference to Exhibit 10.42 to
Registrants Annual Report (File No. 333-126751) on Form 10-K filed on March 2, 2009).                                 
|       | 
|10.44  |  | Termination Agreement, dated as of March 31, 2006, by and among Banca Intesa S.p.A., Lazard Group LLC, and Lazard & Co. S.r.l. (incorporated by reference to Exhibit 10.1 to
the Registrants Current Report on Form 8-K (File No. 333-126751) filed on April 4, 2006).                             
|       | 
|10.45  |  | Amended and Restated $150 Million Subordinated Convertible Promissory Note due 2018, issued by Lazard Funding LLC to Banca Intesa S.p.A. (incorporated by reference to
Exhibit 10.3 to the Registrants Current Report on Form 8-K (File No. 333-126751) filed on May 17, 2006).                    
|       | 
|10.46  |  | Amended and Restated Guaranty of Lazard Group LLC to Banca Intesa S.p.A., dated as of May 15, 2006 (incorporated by reference to Exhibit 10.4 to the Registrants Current Report
on Form 8-K (File No. 333-126751) filed on May 17, 2006).                                                          
|       | 
|10.47* |  | Directors Fee Deferral Unit Plan (incorporated by reference to Exhibit 10.37 to the Registrants Quarterly Report on Form 10-Q (File No. 333-126751) filed on May 11,
2006).                                                                                                                       
|       | 
|10.48* |  | First Amended Form of Agreement evidencing a grant of Restricted Stock Units to Executive Officers under the Lazard 2005 Equity Incentive Plan (incorporated by reference to
Exhibit 10.40 to the Registrants Annual Report on Form 10-K (File No. 333-126751) filed on March 1, 2007).            
|       | 
|10.49  |  | Agreement and Plan of Merger, dated as of August 14, 2008, by and among Lazard Ltd, LAZ Sub I, Lazard Asset Management LLC, and Lazard Asset Management Limited (incorporated by
reference to Exhibit 2.1 to Lazard Ltds Current Report on Form 8-K (file No. 001-32492) filed on August 15, 2008).
|       | 
|12.1   |  | Computation of Ratio of Earnings to Fixed Charges.                                                                                                                                                                                                                                                  
|       | 
|21.1   |  | Subsidiaries of Registrant.                                                                                                                                                                                                                                                                         
|       | 
|23.1   |  | Consent of Independent Registered Public Accounting Firm.                                                                                                                                                                                                                                           
|       | 
|31.1   |  | Rule 13a-14(a) Certification of Kenneth M. Jacobs.                                                                                                                                                                                                                                                  
|       | 
|31.2   |  | Rule 13a-14(a) Certification of Michael J. Castellano.                                                                                                                                                                                                                                              
|       | 
|32.1   |  | Section 1350 Certification for Kenneth M. Jacobs.                                                                                                                                                                                                                                                   
|       | 
|32.2   |  | Section 1350 Certification for Michael J. Castellano.                                                                                                                                                                                                                                               



|* | Management contract or compensatory plan or arrangement
|- | -------------------------------------------------------



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LAZARD GROUP LLC



INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE



ITEMS 15 (a)(1) AND 15 (a)(2)



|                                                                                                                         |  |        
|------------------------------------------------------------------------------------------------------------------------ |  | -------
|                                                                                                                         |  | PageNo.
|Managements Report on Internal Control Over Financial Reporting                                                         |  | 73     
|                                                                                                                         | 
|Reports of Independent Registered Public Accounting Firm                                                                 |  | 74-75  
|                                                                                                                         | 
|Consolidated Financial Statements                                                                                        |  |        
|                                                                                                                         | 
|Consolidated Statements of Financial Condition as of December 31, 2009 and 2008                                          |  | 76     
|                                                                                                                         | 
|Consolidated Statements of Operations for the years ended December 31, 2009, 2008 and 2007                               |  | 78     
|                                                                                                                         | 
|Consolidated Statements of Cash Flows for the years ended December 31, 2009, 2008 and 2007                               |  | 79     
|                                                                                                                         | 
|Consolidated Statements of Changes in Members Equity (Deficiency) for the years ended December 
31, 2009, 2008 and 2007 |  | 80     
|                                                                                                                         | 
|Notes to Consolidated Financial Statements                                                                               |  | 83     
|                                                                                                                         | 
|Supplemental Financial Information                                                                                       |  |        
|                                                                                                                         | 
|Quarterly Results                                                                                                        |  | 133    
|                                                                                                                         | 
|Financial Statement Schedule                                                                                             |  |        
|                                                                                                                         | 
|Schedule ICondensed Financial Information of Registrant (Parent Company Only)                                           |  |        
|                                                                                                                         | 
|Condensed Statements of Financial Condition as of December 31, 2009 and 2008                                             |  | F-2    
|                                                                                                                         | 
|Condensed Statements of Operations for the years ended December 31, 2009, 2008 and
2007                                  |  | F-3    
|                                                                                                                         | 
|Condensed Statements of Cash Flows for the years ended December 31, 2009, 2008 and
2007                                  |  | F-4    
|                                                                                                                         | 
|Condensed Statements of Changes in Members Equity (Deficiency) for the years ended December 
31, 2009, 2008 and 2007    |  | F-5    
|                                                                                                                         | 
|Notes to Condensed Financial Statements                                                                                  |  | F-8    



Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the
consolidated financial statements or notes thereto.



F-1



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##### Table of Contents

LAZARD GROUP LLC

(parent company only)



CONDENSED STATEMENTS OF FINANCIAL CONDITION

DECEMBER 31, 2009 AND 2008

(dollars in thousands)



|                                                                                    |  |              |   |  |              |  
|----------------------------------------------------------------------------------- |  | ------------ | - |  | ------------ | -
|                                                                                    |  | December 31, |  
|                                                                                    |  | 2009         |   |  | 2008         |  
|ASSETS:                                                                             |  |              |   |  |              |  
|Cash and cash equivalents                                                           |  | $   186,009  |   |  | $   202,422  |  
|Investments in subsidiaries, equity method                                          |  | 1,050,151    |   |  | 1,102,066    |  
|Due from subsidiaries of Lazard Ltd                                                 |  | 334,435      |   |  | 260,312      |  
|Receivablesnet                                                                     |  | 3,260        |   |  | 4,366        |  
|Investments (includes $126,413 of securities at amortized costat December 31, 2009) |  | 175,544      |   |  | 18,480       |  
|Intangible assets                                                                   |  | 3,118        |   |  | 4,867        |  
|Other assets                                                                        |  | 14,703       |   |  | 27,040       |  
|                                                                                    |  |              |   |  |              |  
|Total Assets                                                                        |  | $1,767,220   |   |  | $1,619,553   |  
|                                                                                    |  |              |   |  |              |  
|                                                                                    |  |             
|LIABILITIES AND MEMBERS EQUITY:                                                    |  |              |   |  |              |  
|Liabilities:                                                                        |  |              |   |  |              |  
|Accrued compensation and benefits                                                   |  | $   134,541  |   |  | $     11,457 |  
|Due to subsidiaries of Lazard Ltd                                                   |  | 305,213      |   |  | 340,079      |  
|Senior debt                                                                         |  | 1,086,850    |   |  | 1,087,750    |  
|Other liabilities                                                                   |  | 85,245       |   |  | 74,638       |  
|                                                                                    |  |              |   |  |              |  
|Total Liabilities                                                                   |  | 1,611,849    |   |  | 1,513,924    |  
|Commitments and contingencies                                                       |  |              |   |  |              |  
|Members Equity:                                                                    |  |              |   |  |              |  
|Members equity                                                                     |  | 214,163      |   |  | 227,036      |  
|Accumulated other comprehensive loss, net of tax                                    |  | (58,792      | ) |  | (121,407     | )
|                                                                                    |  |              |   |  |              |  
|Total members equity                                                               |  | 155,371      |   |  | 105,629      |  
|                                                                                    |  |              |   |  |              |  
|Total liabilities and members equity                                               |  | $1,767,220   |   |  | $1,619,553   |  
|                                                                                    |  |              |   |  |              |  



See notes to condensed financial
statements.



F-2



---

##### Table of Contents

LAZARD GROUP LLC

(parent company only)



CONDENSED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007

(dollars in
thousands)



|                                                          |  |                         |          |   |      |   |         |  |   |        
|--------------------------------------------------------- |  | ----------------------- | -------- | - | ---- | - | ------- |  | - | -------
|                                                          |  | Year Ended December 31,
|                                                          |  | 2009                    |          |   | 2008 |   | 2007   
|REVENUE                                                   |  |                         |          |   |      |   |         |  |   |        
|Equity in earnings of subsidiaries                        |  | $                       | 200,938  |   |      | $ | 198,500 |  | $ | 617,401
|Interest income                                           |  |                         | 14,778   |   |      |   | 18,869  |  |   | 32,723 
|Other                                                     |  |                         | 18,086   |   |      |   | 16,388  |  |   | 10,166 
|                                                          |  |                         |          |   |      |   |         |  |   |        
|Total revenue                                             |  |                         | 233,802  |   |      |   | 233,757 |  |   | 660,290
|Interest expense                                          |  |                         | 91,216   |   |      |   | 98,609  |  |   | 95,026 
|                                                          |  |                         |          |   |      |   |         |  |   |        
|Net revenue                                               |  |                         | 142,586  |   |      |   | 135,148 |  |   | 565,264
|                                                          |  |                         |          |   |      |   |         |  |   |        
|                                                          |  |                         |         
|OPERATING EXPENSES                                        |  |                         |          |   |      |   |         |  |   |        
|Compensation and benefits                                 |  |                         | 339,795  |   |      |   | 90,248  |  |   | 188,612
|Professional services                                     |  |                         | 10,290   |   |      |   | 8,020   |  |   | 3,782  
|Amortization of intangible assets related to acquisitions |  |                         | 1,749    |   |      |   | 4,596   |  |   | 21,523 
|Other                                                     |  |                         | 6,640    |   |      |   | 2,721   |  |   | 1,433  
|                                                          |  |                         |          |   |      |   |         |  |   |        
|Total operating expenses                                  |  |                         | 358,474  |   |      |   | 105,585 |  |   | 215,350
|                                                          |  |                         |          |   |      |   |         |  |   |        
|OPERATING INCOME (LOSS)                                   |  |                         | (215,888 | ) |      |   | 29,563  |  |   | 349,914
|Provision for incomes taxes                               |  |                         | 659      |   |      |   | 3,892   |  |   | 7,780  
|                                                          |  |                         |          |   |      |   |         |  |   |        
|NET INCOME (LOSS)                                         |  | $                       | (216,547 | ) |      | $ | 25,671  |  | $ | 342,134
|                                                          |  |                         |          |   |      |   |         |  |   |        







See notes to condensed financial statements.



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##### Table of Contents

LAZARD GROUP LLC

(parent company only)



CONDENSED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007

(dollars in
thousands)



|                                                                                                    |  |                         |   |  |           |   |  |          |  
|--------------------------------------------------------------------------------------------------- |  | ----------------------- | - |  | --------- | - |  | -------- | -
|                                                                                                    |  | Year Ended December 31, |  
|                                                                                                    |  | 2009                    |   |  | 2008      |   |  | 2007     |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                               |  |                         |   |  |           |   |  |          |  
|Net income (loss)                                                                                   |  | $(216,547)              |   |  | $  25,671 |   |  | $342,134 |  
|Adjustments to reconcile net income amounts to net cash provided by (used in) operating activities: |  |                         |   |  |           |   |  |          |  
|Noncash transactions in net income (loss):                                                          |  |                         |   |  |           |   |  |          |  
|Equity in earnings of subsidiaries                                                                  |  | (200,938                | ) |  | (198,500  | ) |  | (617,401 | )
|Gain on extinguishment of debt                                                                      |  | (258                    | ) |  | (20,253   | ) |  |         |  
|Amortization of deferred expenses, stock units and interest rate hedge                              |  | 368,122                 |   |  | 245,452   |   |  | 110,593  |  
|Amortization of intangible assets related to acquisitions                                           |  | 1,749                   |   |  | 4,596     |   |  | 21,523   |  
|Dividends received from subsidiaries                                                                |  | 394,097                 |   |  | 412,819   |   |  | 436,120  |  
|Changes in due to/from subsidiaries                                                                 |  | (103,563                | ) |  | 181,518   |   |  | (268,111 | )
|Changes in other operating assets and liabilities                                                   |  | 143,552                 |   |  | (243,452  | ) |  | (78,220  | )
|                                                                                                    |  |                         |   |  |           |   |  |          |  
|Net cash provided by (used in) operating activities                                                 |  | 386,214                 |   |  | 407,851   |   |  | (53,362  | )
|                                                                                                    |  |                         |   |  |           |   |  |          |  
|                                                                                                    |  |                         |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                               |  |                         |   |  |           |   |  |          |  
|Acquisition of businesses in 2009 and 2007 and equity methodinvestments in 2008                     |  | (44,000                 | ) |  | (10,760   | ) |  | (154,062 | )
|Purchases of held-to-maturity securities                                                            |  | (126,347                | ) |  |          |   |  |         |  
|Capital contributed to subsidiaries                                                                 |  | (36,237                 | ) |  | (54,395   | ) |  | (9,900   | )
|                                                                                                    |  |                         |   |  |           |   |  |          |  
|Net cash used in investing activities                                                               |  | (206,584                | ) |  | (65,155   | ) |  | (163,962 | )
|                                                                                                    |  |                         |   |  |           |   |  |          |  
|                                                                                                    |  |                         |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                               |  |                         |   |  |           |   |  |          |  
|Proceeds from sale of common membership interests relating to the settlement of ESUs                |  |                        |   |  | 437,500   |   |  |         |  
|Proceeds from issuance of senior debt, net of expenses                                              |  |                        |   |  |          |   |  | 593,485  |  
|Payments for other senior debt                                                                      |  | (635                    | ) |  | (478,925  | ) |  | (96,000  | )
|Payments for subordinated debt                                                                      |  |                        |   |  |          |   |  | (50,000  | )
|Distributions to members                                                                            |  | (118,214                | ) |  | (127,108  | ) |  | (148,272 | )
|Repurchase of common membership interests from LAZ-MD Holdings                                      |  | (13,285                 | ) |  | (2,559    | ) |  | (21,840  | )
|Purchase of Lazard Ltd Class A common stock                                                         |  | (50,479                 | ) |  | (277,064  | ) |  | (68,052  | )
|Settlement of vested RSUs and DSUs                                                                  |  | (13,220                 | ) |  | (4,291    | ) |  | (21      | )
|Other financing transactions                                                                        |  | (210                    | ) |  | 161       |   |  | 140      |  
|                                                                                                    |  |                         |   |  |           |   |  |          |  
|Net cash provided by (used in) financing activities                                                 |  | (196,043                | ) |  | (452,286  | ) |  | 209,440  |  
|                                                                                                    |  |                         |   |  |           |   |  |          |  
|Net decrease in cash and cash equivalents                                                           |  | (16,413                 | ) |  | (109,590  | ) |  | (7,884   | )
|Cash and cash equivalents, January 1                                                                |  | 202,422                 |   |  | 312,012   |   |  | 319,896  |  
|                                                                                                    |  |                         |   |  |           |   |  |          |  
|Cash and cash equivalents, December 31                                                              |  | $186,009                |   |  | $202,422  |   |  | $312,012 |  
|                                                                                                    |  |                         |   |  |           |   |  |          |  



See notes to condensed financial
statements.



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##### Table of Contents

LAZARD GROUP LLC

(parent company only)



CONDENSED STATEMENTS OF CHANGES IN MEMBERS EQUITY (DEFICIENCY)

FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007

(dollars in thousands)



|                                                                          |  |                            |          |   |                                                       |   |        |                                               |  |   |          |  
|------------------------------------------------------------------------- |  | -------------------------- | -------- | - | ----------------------------------------------------- | - | ------ | --------------------------------------------- |  | - | -------- | -
|                                                                          |  | MembersEquity(Deficiency) |          |   | AccumulatedOtherComprehensiveIncome (Loss),Net of Tax |   |        | Total Lazard GroupMembers Equity(Deficiency) | 
|                                                                          |  |                            |         
|                                                                          |  |                            |         
|Balance  January 1, 2007                                                 |  | $                          | (292,472 | ) |                                                       | $ | 33,263 |                                               |  | $ | (259,209 | )
|Comprehensive income (loss):                                              |  |                            |          |   |                                                       |   |        |                                               |  |   |          |  
|Net income                                                                |  |                            | 342,134  |   |                                                       |   |        |                                               |  |   | 342,134  |  
|Other comprehensive income (loss) - net of tax:                           |  |                            |          |   |                                                       |   |        |                                               |  |   |          |  
|Currency translation adjustments                                          |  |                            |          |   |                                                       |   | 25,839 |                                               |  |   | 25,839   |  
|Amortization of interest rate hedge                                       |  |                            |          |   |                                                       |   | 1,100  |                                               |  |   | 1,100    |  
|Available-for-sale securities:                                            |  |                            |          |   |                                                       |   |        |                                               |  |   |          |  
|Net unrealized loss                                                       |  |                            |          |   |                                                       |   | (670   | )                                             |  |   | (670     | )
|Employee benefit plans:                                                   |  |                            |          |   |                                                       |   |        |                                               |  |   |          |  
|Net actuarial loss                                                        |  |                            |          |   |                                                       |   | (3,440 | )                                             |  |   | (3,440   | )
|Adjustments for items reclassified to earnings                            |  |                            |          |   |                                                       |   | (419   | )                                             |  |   | (419     | )
|                                                                          |  |                            |          |   |                                                       |   |        |                                               |  |   |          |  
|Comprehensive income                                                      |  |                            |          |   |                                                       |   |        |                                               |  |   | 364,544  |  
|                                                                          |  |                            |          |   |                                                       |   |        |                                               |  |   |          |  
|Amortization of stock units                                               |  |                            | 104,765  |   |                                                       |   |        |                                               |  |   | 104,765  |  
|Distributions to members                                                  |  |                            | (148,272 | ) |                                                       |   |        |                                               |  |   | (148,272 | )
|Purchase of Lazard Ltd class A common stock                               |  |                            | (68,052  | ) |                                                       |   |        |                                               |  |   | (68,052  | )
|Delivery of Lazard Ltd Class A common stock for settlement of vested RSUs |  |                            | (21      | ) |                                                       |   |        |                                               |  |   | (21      | )
|Repurchase of common membership interests from LAZ-MD Holdings            |  |                            | (21,840  | ) |                                                       |   |        |                                               |  |   | (21,840  | )
|Adjustments related to business acquisitions and related amortization     |  |                            | 1,636    |   |                                                       |   |        |                                               |  |   | 1,636    |  
|Other                                                                     |  |                            | 142      |   |                                                       |   |        |                                               |  |   | 142      |  
|                                                                          |  |                            |          |   |                                                       |   |        |                                               |  |   |          |  
|Balance  December 31, 2007(*)                                            |  | $                          | (81,980  | ) |                                                       | $ | 55,673 |                                               |  | $ | (26,307  | )
|                                                                          |  |                            |          |   |                                                       |   |        |                                               |  |   |          |  



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##### Table of Contents

LAZARD GROUP LLC

(parent company only)



CONDENSED STATEMENTS OF CHANGES IN MEMBERS EQUITY (DEFICIENCY)

FOR
THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007  (Continued)

(dollars in thousands)



|                                                                                                                       |  |                            |          |   |                                                       |   |          |                                               |  |   |          |  
|---------------------------------------------------------------------------------------------------------------------- |  | -------------------------- | -------- | - | ----------------------------------------------------- | - | -------- | --------------------------------------------- |  | - | -------- | -
|                                                                                                                       |  | MembersEquity(Deficiency) |          |   | AccumulatedOtherComprehensiveIncome (Loss),Net of Tax |   |          | Total Lazard GroupMembers Equity(Deficiency) | 
|                                                                                                                       |  |                            |         
|                                                                                                                       |  |                            |         
|Balance  January 1, 2008                                                                                              |  | $                          | (81,980  | ) |                                                       | $ | 55,673   |                                               |  | $ | (26,307  | )
|                                                                                                                       |  |                            |          |   |                                                       |   |          |                                               |  |   |          |  
|Comprehensive income (loss):                                                                                           |  |                            |          |   |                                                       |   |          |                                               |  |   |          |  
|Net income                                                                                                             |  |                            | 25,671   |   |                                                       |   |          |                                               |  |   | 25,671   |  
|Other comprehensive income (loss) - net of tax:                                                                        |  |                            |          |   |                                                       |   |          |                                               |  |   |          |  
|Currency translation adjustments                                                                                       |  |                            |          |   |                                                       |   | (151,761 | )                                             |  |   | (151,761 | )
|Amortization of interest rate hedge                                                                                    |  |                            |          |   |                                                       |   | 1,246    |                                               |  |   | 1,246    |  
|Available-for-sale securities:                                                                                         |  |                            |          |   |                                                       |   |          |                                               |  |   |          |  
|Net unrealized loss                                                                                                    |  |                            |          |   |                                                       |   | (40,847  | )                                             |  |   | (40,847  | )
|Adjustment for items reclassified to earnings                                                                          |  |                            |          |   |                                                       |   | 5        |                                               |  |   | 5        |  
|Employee benefit plans:                                                                                                |  |                            |          |   |                                                       |   |          |                                               |  |   |          |  
|Net actuarial gain                                                                                                     |  |                            |          |   |                                                       |   | 14,154   |                                               |  |   | 14,154   |  
|Adjustment for items reclassified to earnings                                                                          |  |                            |          |   |                                                       |   | 123      |                                               |  |   | 123      |  
|                                                                                                                       |  |                            |          |   |                                                       |   |          |                                               |  |   |          |  
|Comprehensive loss                                                                                                     |  |                            |          |   |                                                       |   |          |                                               |  |   | (151,409 | )
|                                                                                                                       |  |                            |          |   |                                                       |   |          |                                               |  |   |          |  
|Amortization of stock units                                                                                            |  |                            | 234,602  |   |                                                       |   |          |                                               |  |   | 234,602  |  
|Distributions to members                                                                                               |  |                            | (127,108 | ) |                                                       |   |          |                                               |  |   | (127,108 | )
|Purchase of Lazard Ltd Class A common stock                                                                            |  |                            | (277,064 | ) |                                                       |   |          |                                               |  |   | (277,064 | )
|Delivery of Lazard Ltd Class A common stock for settlement of vested RSUs and
DSUs                                     |  |                            | (4,291   | ) |                                                       |   |          |                                               |  |   | (4,291   | )
|Issuance of 14,582,750 common membership interests in the settlement of the purchase
contractsforming part of the ESUs |  |                            | 437,500  |   |                                                       |   |          |                                               |  |   | 437,500  |  
|Repurchase of common membership interests from LAZ-MD Holdings                                                         |  |                            | (2,559   | ) |                                                       |   |          |                                               |  |   | (2,559   | )
|Common membership interests issued in connection with business acquisitions                                            |  |                            | 18,416   |   |                                                       |   |          |                                               |  |   | 18,416   |  
|Adjustments related to business acquisitions and related amortization                                                  |  |                            | 3,690    |   |                                                       |   |          |                                               |  |   | 3,690    |  
|Other                                                                                                                  |  |                            | 159      |   |                                                       |   |          |                                               |  |   | 159      |  
|                                                                                                                       |  |                            |          |   |                                                       |   |          |                                               |  |   |          |  
|Balance  December 31, 2008(*)                                                                                         |  | $                          | 227,036  |   |                                                       | $ | (121,407 | )                                             |  | $ | 105,629  |  
|                                                                                                                       |  |                            |          |   |                                                       |   |          |                                               |  |   |          |  



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##### Table of Contents

LAZARD GROUP LLC

(parent company only)



CONDENSED STATEMENTS OF CHANGES IN MEMBERS EQUITY (DEFICIENCY)

FOR
THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007(Continued)

(dollars in thousands)



|                                                                                   |  |                |   |  |                                                       |   |  |                                  |  
|---------------------------------------------------------------------------------- |  | -------------- | - |  | ----------------------------------------------------- | - |  | -------------------------------- | -
|                                                                                   |  | MembersEquity |   |  | AccumulatedOtherComprehensiveIncome (Loss),Net of Tax |   |  | TotalLazard GroupMembers Equity |  
|Balance  January 1, 2009                                                          |  | $227,036       |   |  | $ (121,407                                            | ) |  | $105,629                         |  
|                                                                                   |  |                |   |  |                                                       |   |  |                                  |  
|Comprehensive income (loss):                                                       |  |                |   |  |                                                       |   |  |                                  |  
|Net loss                                                                           |  | (216,547       | ) |  |                                                       |   |  | (216,547                         | )
|Other comprehensive income (loss) - net of tax:                                    |  |                |   |  |                                                       |   |  |                                  |  
|Currency translation adjustments                                                   |  |                |   |  | 62,992                                                |   |  | 62,992                           |  
|Amortization of interest rate hedge                                                |  |                |   |  | 1,077                                                 |   |  | 1,077                            |  
|Available-for-sale securities:                                                     |  |                |   |  |                                                       |   |  |                                  |  
|Net unrealized gain                                                                |  |                |   |  | 27,612                                                |   |  | 27,612                           |  
|Adjustment for items reclassified to earnings                                      |  |                |   |  | 1,268                                                 |   |  | 1,268                            |  
|Employee benefit plans:                                                            |  |                |   |  |                                                       |   |  |                                  |  
|Prior service costs                                                                |  |                |   |  | (15,152                                               | ) |  | (15,152                          | )
|Net actuarial loss                                                                 |  |                |   |  | (18,215                                               | ) |  | (18,215                          | )
|Adjustment for items reclassified to earnings                                      |  |                |   |  | 3,033                                                 |   |  | 3,033                            |  
|                                                                                   |  |                |   |  |                                                       |   |  |                                  |  
|Comprehensive loss                                                                 |  |                |   |  |                                                       |   |  | (153,932                         | )
|                                                                                   |  |                |   |  |                                                       |   |  |                                  |  
|Amortization of stock units                                                        |  | 358,062        |   |  |                                                       |   |  | 358,062                          |  
|Distributions to members                                                           |  | (118,214       | ) |  |                                                       |   |  | (118,214                         | )
|Purchase of Lazard Ltd Class A common stock                                        |  | (50,479        | ) |  |                                                       |   |  | (50,479                          | )
|Delivery of Lazard Ltd Class A common stock for settlement of vested RSUs and DSUs |  | (13,220        | ) |  |                                                       |   |  | (13,220                          | )
|Repurchase of common membership interests from LAZ-MD Holdings                     |  | (13,285        | ) |  |                                                       |   |  | (13,285                          | )
|Common membership interests issued in connection with business acquisitions        |  | 32,384         |   |  |                                                       |   |  | 32,384                           |  
|Adjustments related to noncontrolling interests                                    |  | (2,143         | ) |  |                                                       |   |  | (2,143                           | )
|Adjustments related to business acquisitions and related amortization              |  | 10,778         |   |  |                                                       |   |  | 10,778                           |  
|Other                                                                              |  | (209           | ) |  |                                                       |   |  | (209                             | )
|                                                                                   |  |                |   |  |                                                       |   |  |                                  |  
|Balance  December 31, 2009(*)                                                     |  | $214,163       |   |  | $(58,792                                              | ) |  | $155,371                         |  
|                                                                                   |  |                |   |  |                                                       |   |  |                                  |  



|(*) | Includes
107,068,617, 122,233,664 and 123,686,338 common membership interests at December 31, 2007, 2008 and 2009, respectively. Also includes profit participation and two managing member interests at each such date.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



See notes to condensed financial statements.



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##### Table of Contents

LAZARD GROUP LLC

(parent company only)



NOTES TO CONDENSED FINANCIAL STATEMENTS



1.    BASIS OF PRESENTATION



The accompanying Lazard Group LLC condensed financial statements (the Parent Company Financial Statements), including the notes
thereto, should be read in conjunction with the consolidated financial statements of Lazard Group LLC and its subsidiaries (the Company) and the notes thereto.



The Parent Company Financial Statements as of December 31, 2009 and 2008, and for each of the three years in the period ended
December 31, 2009, are prepared in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP), which require management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, revenue and expenses, and the disclosures in the condensed financial statements. Management believes that the estimates utilized in the preparation of the condensed financial statements are reasonable. Actual results could
differ materially from these estimates.



The
Parent Company Financial Statements include investments in subsidiaries, accounted for under the equity method.



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##### Table of Contents

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: February 26, 2010



LAZARD GROUP LLCBy:

/s/    Kenneth M. JacobsKenneth M. JacobsChairman and Chief Executive Officer




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/    Kenneth M. JacobsKenneth M. Jacobs         |  | Chairman, Chief Executive Officer and Director (Principal Executive Officer) |  | February 26, 2010
|                                                  |  |                                                                             
|/s/    Michael J. CastellanoMichael J. Castellano |  | Chief Financial Officer (Principal Financial and Accounting Officer)         |  | February 26, 2010
|                                                  |  |                                                                             
|/s/    Ronald J. DoerflerRonald J. Doerfler       |  | Director                                                                     |  | February 26, 2010
|                                                  |  |                                                                             
|/s/    Laurent MignonLaurent Mignon               |  | Director                                                                     |  | February 26, 2010
|                                                  |  |                                                                             
|/s/    Steven J. HeyerSteven J. Heyer             |  | Director                                                                     |  | February 26, 2010
|                                                  |  |                                                                             
|/s/    Sylvia JaySylvia Jay                       |  | Director                                                                     |  | February 26, 2010
|                                                  |  |                                                                             
|/s/    Ellis JonesEllis Jones                     |  | Director                                                                     |  | February 26, 2010
|                                                  |  |                                                                             
|/s/    Vernon E. Jordan, Jr.Vernon E. Jordan, Jr. |  | Director                                                                     |  | February 26, 2010
|                                                  |  |                                                                             
|/s/    Philip A. LaskawyPhilip A. Laskawy         |  | Director                                                                     |  | February 26, 2010



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##### Table of Contents

|                                          |  |          |  |                  
|----------------------------------------- |  | -------- |  | -----------------
|Signature                                 |  | Capacity |  | Date             
|                                          |  |         
|/s/    Hal S. ScottHal S. Scott           |  | Director |  | February 26, 2010
|                                          |  |         
|/s/    Michael J. TurnerMichael J. Turner |  | Director |  | February 26, 2010



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