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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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(Mark One)



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



For the quarterly period ended September 30, 2007



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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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 is a large accelerated filer, an accelerated filer or a non-accelerated filer.
See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.

Large
Accelerated Filer  x    Accelerated Filer ̈Non-Accelerated Filer ̈



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 October 31, 2007, in addition to profit participation interests, there
were 107,068,617 common membership interests and two managing member interests outstanding.



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TABLE OF CONTENTS



When we use the terms Lazard
Group,Lazard, we, us, our, and the Company, we mean Lazard Group LLC (formerly named Lazard 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 its respective subsidiaries. Lazard Ltd has no material assets other than indirect ownership as of September 30, 2007 of approximately 48.3% 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.



|                                                                                              |  |     
|--------------------------------------------------------------------------------------------- |  | ----
|                                                                                              |  | Page
|Part I. Financial Information                                                                 |  |     
|                                                                                              | 
|Item 1. Financial Statements (Unaudited)                                                      |  | 1   
|                                                                                              | 
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 28  
|                                                                                              | 
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                            |  | 54  
|                                                                                              | 
|Item 4. Controls and Procedures                                                               |  | 54  
|                                                                                              | 
|Part II. Other Information                                                                    |  |     
|                                                                                              | 
|Item 1. Legal Proceedings                                                                     |  | 55  
|                                                                                              | 
|Item 1A. Risk Factors                                                                         |  | 55  
|                                                                                              | 
|Item 2. Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 55  
|                                                                                              | 
|Item 3. Defaults Upon Senior Securities                                                       |  | 55  
|                                                                                              | 
|Item 4. Submission of Matters to a Vote of Security Holders                                   |  | 55  
|                                                                                              | 
|Item 5. Other Information                                                                     |  | 55  
|                                                                                              | 
|Item 6. Exhibits                                                                              |  | 56  
|                                                                                              | 
|Signatures                                                                                    |  | 61  



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PART I. FINANCIAL INFORMATION



|Item 1. | Financial Statements (Unaudited)
|------- | --------------------------------



|                                                                                                                         |  |     
|------------------------------------------------------------------------------------------------------------------------ |  | ----
|                                                                                                                         |  | Page
|Condensed Consolidated Statements of Financial Condition as of September 30, 2007 and December 31, 2006                  |  | 2   
|Condensed Consolidated Statements of Income for the three month and nine month periods ended September 30, 2007 and 2006 |  | 4   
|Condensed Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2007 and 2006             |  | 5   
|Condensed Consolidated Statement of Changes in Members Deficiency for the nine month period ended September 30, 2007    |  | 6   
|Notes to Condensed Consolidated Financial Statements                                                                     |  | 7   



1



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LAZARD GROUP LLC



CONDENSED
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

SEPTEMBER 30, 2007 AND DECEMBER 31, 2006

(UNAUDITED)

(dollars in thousands)



|                                                                                                                                               |  |                   |           |                  |   |          
|---------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | --------- | ---------------- | - | ---------
|                                                                                                                                               |  | September 30,2007 |           | December 31,2006
|                                                                                                                                               |  |                  
|ASSETS                                                                                                                                         |  |                   |           |                  |   |          
|Cash and cash equivalents                                                                                                                      |  | $                 | 905,101   |                  | $ | 955,116  
|Cash segregated for regulatory purposes or deposited with clearing organizations                                                               |  |                   | 29,946    |                  |   | 16,023   
|Securities ownedat fair value:                                                                                                                |  |                   |           |                  |   |          
|BondsCorporate                                                                                                                                |  |                   | 493,932   |                  |   | 527,421  
|Equities                                                                                                                                       |  |                   | 236,168   |                  |   | 23,185   
|Non-U.S. Government and agency securities                                                                                                      |  |                   | 35,068    |                  |   | 28,729   
|                                                                                                                                               |  |                   |           |                  |   |          
|                                                                                                                                               |  |                   | 765,168   |                  |   | 579,335  
|                                                                                                                                               |  |                  
|Receivablesnet:                                                                                                                               |  |                   |           |                  |   |          
|Banks                                                                                                                                          |  |                   | 465,386   |                  |   | 721,002  
|Fees                                                                                                                                           |  |                   | 428,176   |                  |   | 417,519  
|Customers                                                                                                                                      |  |                   | 102,579   |                  |   | 77,832   
|Related parties                                                                                                                                |  |                   | 25,585    |                  |   | 18,560   
|                                                                                                                                               |  |                   |           |                  |   |          
|                                                                                                                                               |  |                   | 1,021,726 |                  |   | 1,234,913
|                                                                                                                                               |  |                  
|Long-term investmentsat fair value                                                                                                            |  |                   | 188,626   |                  |   | 99,057   
|                                                                                                                                               |  |                  
|Property (net of accumulated amortization and depreciation of $201,535 and $181,812 at September 30, 2007 and December 31, 2006, respectively) |  |                   | 180,374   |                  |   | 168,310  
|Goodwill and other intangible assets                                                                                                           |  |                   | 184,292   |                  |   | 16,945   
|Other assets                                                                                                                                   |  |                   | 164,758   |                  |   | 117,508  
|                                                                                                                                               |  |                   |           |                  |   |          
|Total assets                                                                                                                                   |  | $                 | 3,439,991 |                  | $ | 3,187,207
|                                                                                                                                               |  |                   |           |                  |   |          



See notes to condensed
consolidated financial statements.



2



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LAZARD GROUP LLC



CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION(Continued)

SEPTEMBER 30, 2007 AND DECEMBER 31, 2006

(UNAUDITED)

(dollars in thousands)



|                                                                                                                                                                                       |  |                   |           |   |                  |   |           |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | --------- | - | ---------------- | - | --------- | -
|                                                                                                                                                                                       |  | September 30,2007 |           |   | December 31,2006 |  
|LIABILITIES, MINORITY INTEREST AND MEMBERS DEFICIENCY                                                                                                                                 |  |                   |           |   |                  |   |           |  
|Liabilities:                                                                                                                                                                           |  |                   |           |   |                  |   |           |  
|Deposits and other customer payables                                                                                                                                                   |  | $                 | 914,039   |   |                  | $ | 1,195,014 |  
|Accrued compensation and benefits                                                                                                                                                      |  |                   | 341,670   |   |                  |   | 437,738   |  
|Senior borrowings                                                                                                                                                                      |  |                   | 1,592,851 |   |                  |   | 1,087,057 |  
|Capital lease obligations                                                                                                                                                              |  |                   | 26,525    |   |                  |   | 25,445    |  
|Related party payables                                                                                                                                                                 |  |                   | 48,837    |   |                  |   | 3,513     |  
|Other liabilities                                                                                                                                                                      |  |                   | 480,747   |   |                  |   | 428,311   |  
|Subordinated borrowings                                                                                                                                                                |  |                   | 150,000   |   |                  |   | 200,000   |  
|                                                                                                                                                                                       |  |                   |           |   |                  |   |           |  
|Total liabilities                                                                                                                                                                      |  |                   | 3,554,669 |   |                  |   | 3,377,078 |  
|                                                                                                                                                                                       |  |                  
|Commitments and contingencies                                                                                                                                                          |  |                   |           |   |                  |   |           |  
|                                                                                                                                                                                       |  |                  
|Minority interest                                                                                                                                                                      |  |                   | 47,952    |   |                  |   | 54,617    |  
|                                                                                                                                                                                       |  |                  
|MEMBERS DEFICIENCY                                                                                                                                                                    |  |                   |           |   |                  |   |           |  
|Members deficiency (net of 1,792,858 and 115,000 shares of Lazard Ltd Class A common stock, at cost of
$72,204 and $4,179 at September 30, 2007 and December 31, 2006, respectively). |  |                   | (215,586  | ) |                  |   | (277,751  | )
|Accumulated other comprehensive income, net of tax                                                                                                                                     |  |                   | 52,956    |   |                  |   | 33,263    |  
|                                                                                                                                                                                       |  |                   |           |   |                  |   |           |  
|Total members deficiency                                                                                                                                                              |  |                   | (162,630  | ) |                  |   | (244,488  | )
|                                                                                                                                                                                       |  |                   |           |   |                  |   |           |  
|Total liabilities, minority interest and members deficiency                                                                                                                           |  | $                 | 3,439,991 |   |                  | $ | 3,187,207 |  
|                                                                                                                                                                                       |  |                   |           |   |                  |   |           |  



See notes to condensed
consolidated financial statements.



3



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LAZARD GROUP LLC



CONDENSED
CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE MONTH AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2007 AND 2006

(UNAUDITED)

(dollars in thousands)



|                                              |  |                                 |         |                                 |           |      |   |           |  |   |          
|--------------------------------------------- |  | ------------------------------- | ------- | ------------------------------- | --------- | ---- | - | --------- |  | - | ---------
|                                              |  | Three Months EndedSeptember 30, |         | Nine Months Ended September 30,
|                                              |  | 2007                            |         | 2006                            |           | 2007 |   | 2006     
|REVENUE                                       |  |                                 |         |                                 |           |      |   |           |  |   |          
|Investment banking and other advisory fees    |  | $                               | 369,857 |                                 | $183,318  |      | $ | 813,145   |  | $ | 655,704  
|Money management fees                         |  |                                 | 164,405 |                                 | 116,113   |      |   | 448,749   |  |   | 346,584  
|Interest income                               |  |                                 | 23,346  |                                 | 11,661    |      |   | 63,596    |  |   | 29,433   
|Other                                         |  |                                 | 22,038  |                                 | 12,837    |      |   | 105,076   |  |   | 65,691   
|                                              |  |                                 |         |                                 |           |      |   |           |  |   |          
|Total revenue                                 |  |                                 | 579,646 |                                 | 323,929   |      |   | 1,430,566 |  |   | 1,097,412
|Interest expense                              |  |                                 | 37,759  |                                 | 26,543    |      |   | 98,437    |  |   | 76,987   
|                                              |  |                                 |         |                                 |           |      |   |           |  |   |          
|Net revenue                                   |  |                                 | 541,887 |                                 | 297,386   |      |   | 1,332,129 |  |   | 1,020,425
|                                              |  |                                 |         |                                 |           |      |   |           |  |   |          
|OPERATING EXPENSES                            |  |                                 |         |                                 |           |      |   |           |  |   |          
|Compensation and benefits                     |  |                                 | 323,150 |                                 | 180,979   |      |   | 792,228   |  |   | 615,261  
|Occupancy and equipment                       |  |                                 | 21,462  |                                 | 18,257    |      |   | 65,428    |  |   | 55,702   
|Marketing and business development            |  |                                 | 16,890  |                                 | 13,853    |      |   | 50,238    |  |   | 41,702   
|Technology and information services           |  |                                 | 15,203  |                                 | 11,942    |      |   | 41,970    |  |   | 35,913   
|Professional services                         |  |                                 | 13,056  |                                 | 14,160    |      |   | 34,902    |  |   | 33,686   
|Fund administration and outsourced services   |  |                                 | 6,074   |                                 | 3,703     |      |   | 15,042    |  |   | 10,831   
|Other                                         |  |                                 | 27,482  |                                 | 5,262     |      |   | 45,853    |  |   | 14,808   
|                                              |  |                                 |         |                                 |           |      |   |           |  |   |          
|Total operating expenses                      |  |                                 | 423,317 |                                 | 248,156   |      |   | 1,045,661 |  |   | 807,903  
|                                              |  |                                 |         |                                 |           |      |   |           |  |   |          
|OPERATING INCOME                              |  |                                 | 118,570 |                                 | 49,230    |      |   | 286,468   |  |   | 212,522  
|                                              |  |                                 |         |                                
|Provision for income taxes                    |  |                                 | 24,368  |                                 | 8,081     |      |   | 54,564    |  |   | 36,727   
|                                              |  |                                 |         |                                 |           |      |   |           |  |   |          
|INCOME BEFORE MINORITY INTEREST IN NET INCOME |  |                                 | 94,202  |                                 | 41,149    |      |   | 231,904   |  |   | 175,795  
|Minority interest in net income               |  |                                 | 2,524   |                                 | 603       |      |   | 8,082     |  |   | 3,144    
|                                              |  |                                 |         |                                 |           |      |   |           |  |   |          
|NET INCOME                                    |  | $                               | 91,678  |                                 | $  40,546 |      | $ | 223,822   |  | $ | 172,651  
|                                              |  |                                 |         |                                 |           |      |   |           |  |   |          



See notes to condensed
consolidated financial statements.



4



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LAZARD GROUP LLC



CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2007 AND 2006

(UNAUDITED)

(dollars in thousands)



|                                                                                                                                          |  |                                |          |   |      |   |          |  
|----------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------ | -------- | - | ---- | - | -------- | -
|                                                                                                                                          |  | Nine Months EndedSeptember 30, |         
|                                                                                                                                          |  | 2007                           |          |   | 2006 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                                                                     |  |                                |          |   |      |   |          |  
|Net income                                                                                                                                |  | $                              | 223,822  |   |      | $ | 172,651  |  
|Adjustments to reconcile net income to net cash provided by (used in) operating activities:                                               |  |                                |          |   |      |   |          |  
|Noncash charges (credits) included in net income:                                                                                         |  |                                |          |   |      |   |          |  
|Depreciation and amortization of property                                                                                                 |  |                                | 11,691   |   |      |   | 10,684   |  
|Amortization of deferred expenses, stock units and interest rate hedge                                                                    |  |                                | 77,906   |   |      |   | 17,648   |  
|Amortization of other intangible assets                                                                                                   |  |                                | 18,156   |   |      |   |          |  
|Minority interest in net income                                                                                                           |  |                                | 8,082    |   |      |   | 3,144    |  
|Gain on termination of strategic alliance in Italy                                                                                        |  |                                |          |   |      |   | (13,695  | )
|(Increase) decrease in operating assets:                                                                                                  |  |                                |          |   |      |   |          |  
|Cash segregated for regulatory purposes or deposited with clearing organizations                                                          |  |                                | (12,073  | ) |      |   | (7,088   | )
|Securities owned - at fair value                                                                                                          |  |                                | (147,563 | ) |      |   | (101,388 | )
|Receivables - net                                                                                                                         |  |                                | 273,373  |   |      |   | 106,312  |  
|Long-term investments - at fair value                                                                                                     |  |                                | (87,663  | ) |      |   | 5,528    |  
|Other assets                                                                                                                              |  |                                | (29,560  | ) |      |   | (6,932   | )
|Increase (decrease) in operating liabilities:                                                                                             |  |                                |          |   |      |   |          |  
|Deposits and other payables                                                                                                               |  |                                | (349,949 | ) |      |   | 85,634   |  
|Accrued compensation and benefits and other liabilities                                                                                   |  |                                | (99,803  | ) |      |   | (122,516 | )
|                                                                                                                                          |  |                                |          |   |      |   |          |  
|Net cash provided by (used in) operating activities                                                                                       |  |                                | (113,581 | ) |      |   | 149,982  |  
|                                                                                                                                          |  |                                |          |   |      |   |          |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                                                                     |  |                                |          |   |      |   |          |  
|Business acquisitions, net of cash acquired of $19,002                                                                                    |  |                                | (135,385 | ) |      |   |          |  
|Additions to property                                                                                                                     |  |                                | (10,524  | ) |      |   | (5,253   | )
|Disposals of property                                                                                                                     |  |                                | 1,795    |   |      |   | 602      |  
|                                                                                                                                          |  |                                |          |   |      |   |          |  
|Net cash used in investing activities                                                                                                     |  |                                | (144,114 | ) |      |   | (4,651   | )
|                                                                                                                                          |  |                                |          |   |      |   |          |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                                                                     |  |                                |          |   |      |   |          |  
|Proceeds from senior borrowings, including issuance of $600,000 senior notes, net of original issue discount and other expenses of
$6,522 |  |                                | 598,825  |   |      |   |          |  
|Repayment of senior borrowings                                                                                                            |  |                                | (99,553  | ) |      |   | (34,570  | )
|Repayment of subordinated borrowings                                                                                                      |  |                                | (50,000  | ) |      |   |          |  
|Repayment of capital lease obligations                                                                                                    |  |                                | (1,030   | ) |      |   | (882     | )
|Distributions relating to minority interest                                                                                               |  |                                | (14,618  | ) |      |   | (22,984  | )
|Distributions to members                                                                                                                  |  |                                | (132,728 | ) |      |   | (60,991  | )
|Repurchase of common membership interest from LAZ-MD Holdings                                                                             |  |                                | (21,840  | ) |      |   |          |  
|Repurchase of Lazard Ltd Class A common stock                                                                                             |  |                                | (68,052  | ) |      |   | (4,179   | )
|Other financing activities                                                                                                                |  |                                | 119      |   |      |   | (1,797   | )
|                                                                                                                                          |  |                                |          |   |      |   |          |  
|Net cash provided by (used in) financing activities                                                                                       |  |                                | 211,123  |   |      |   | (125,403 | )
|                                                                                                                                          |  |                                |          |   |      |   |          |  
|EFFECT OF EXCHANGE RATE CHANGES ON CASH                                                                                                   |  |                                | (3,443   | ) |      |   | 7,836    |  
|                                                                                                                                          |  |                                |          |   |      |   |          |  
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                                                                      |  |                                | (50,015  | ) |      |   | 27,764   |  
|CASH AND CASH EQUIVALENTSJanuary 1                                                                                                       |  |                                | 955,116  |   |      |   | 490,446  |  
|                                                                                                                                          |  |                                |          |   |      |   |          |  
|CASH AND CASH EQUIVALENTSSeptember 30                                                                                                    |  | $                              | 905,101  |   |      | $ | 518,210  |  
|                                                                                                                                          |  |                                |          |   |      |   |          |  
|Supplemental financing non-cash transaction:                                                                                              |  |                                |          |   |      |   |          |  
|Issuance of senior promissory note for the acquisition of equity interest in Italy                                                        |  |                                |          |   |      | $ | 96,000   |  
|                                                                                                                                          |  |                                |          |   |      |   |          |  



See notes to condensed
consolidated financial statements.



5



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##### Table of Contents

LAZARD GROUP LLC



CONDENSED
CONSOLIDATED STATEMENT OF CHANGES IN MEMBERS DEFICIENCY

FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2007

(UNAUDITED)

(dollars in thousands)



|                                                                                |  |                     |   |  |                                                       |   |  |                         |  
|------------------------------------------------------------------------------- |  | ------------------- | - |  | ----------------------------------------------------- | - |  | ----------------------- | -
|                                                                                |  | Members Deficiency |   |  | AccumulatedOtherComprehensiveIncome (Loss),Net of Tax |   |  | TotalMembersDeficiency |  
|Balance, as previously reported - January 1, 2007                               |  | $(277,751           | ) |  | $33,263                                               |   |  | $(244,488               | )
|Adjustment for the cumulative effect on prior years from the adoption of FIN 48 |  | (14,721             | ) |  |                                                       |   |  | (14,721                 | )
|                                                                                |  |                     |   |  |                                                       |   |  |                         |  
|Balance, as adjusted - January 1, 2007                                          |  | (292,472            | ) |  | 33,263                                                |   |  | (259,209                | )
|                                                                                |  |                     |   |  |                                                       |   |  |                         |  
|Comprehensive income:                                                           |  |                     |   |  |                                                       |   |  |                         |  
|Net income                                                                      |  | 223,822             |   |  |                                                       |   |  | 223,822                 |  
|Other comprehensive income (loss) - net of tax:                                 |  |                     |   |  |                                                       |   |  |                         |  
|Currency translation adjustments                                                |  |                     |   |  | 18,824                                                |   |  | 18,824                  |  
|Amortization of interest rate hedge                                             |  |                     |   |  | 825                                                   |   |  | 825                     |  
|Employee benefit plans:                                                         |  |                     |   |  |                                                       |   |  |                         |  
|Net actuarial gain                                                              |  |                     |   |  | 1,080                                                 |   |  | 1,080                   |  
|Net prior service cost (credit)                                                 |  |                     |   |  | (1,036                                                | ) |  | (1,036                  | )
|                                                                                |  |                     |   |  |                                                       |   |  |                         |  
|Comprehensive income                                                            |  |                     |   |  |                                                       |   |  | 243,515                 |  
|                                                                                |  |                     |   |  |                                                       |   |  |                         |  
|Repurchase of common membership interest from LAZ-MD Holdings                   |  | (21,840             | ) |  |                                                       |   |  | (21,840                 | )
|Amortization of stock units                                                     |  | 75,025              |   |  |                                                       |   |  | 75,025                  |  
|Distributions to members                                                        |  | (132,728            | ) |  |                                                       |   |  | (132,728                | )
|Purchase of Lazard Ltds Class A common stock                                   |  | (68,052             | ) |  |                                                       |   |  | (68,052                 | )
|Delivery of Lazard Ltd Class A common stock for settlement of vested RSUs       |  | (21                 | ) |  |                                                       |   |  | (21                     | )
|Other capital transactions                                                      |  | 680                 |   |  |                                                       |   |  | 680                     |  
|                                                                                |  |                     |   |  |                                                       |   |  |                         |  
|Balance - September 30, 2007*                                                   |  | $(215,586           | ) |  | $52,956                                               |   |  | $(162,630               | )
|                                                                                |  |                     |   |  |                                                       |   |  |                         |  

---

|* | Includes profit participation interests as well as 107,068,617 common membership interests and two managing member interests outstanding.
|- | -----------------------------------------------------------------------------------------------------------------------------------------



See notes to condensed consolidated financial statements.



6



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##### Table of Contents

LAZARD GROUP LLC



NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars in thousands, unless otherwise noted)



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



Organization



The accompanying condensed consolidated financial statements of Lazard Group LLC and subsidiaries (a Delaware limited liability company, formerly known as
Lazard LLC and collectively referred to, together with its subsidiaries, as Lazard Group, Lazard or the Company), have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission
(the SEC) regarding interim financial reporting. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America (U.S. GAAP) for complete
financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto included in Lazard Groups annual report on Form 10-K for the year ended December 31, 2006 (the Form 10-K).
The December 31, 2006 unaudited condensed consolidated statement of financial condition data was derived from audited consolidated financial statements, but does not include all disclosures required by U.S. GAAP for annual financial statement
purposes. The accompanying condensed consolidated financial statements reflect all adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the
interim periods presented. Preparing financial statements requires management to make estimates and assumptions that affect the amounts that are reported in the financial statements and the accompanying disclosures. Although these estimates are
based on managements knowledge of current events and actions that Lazard may undertake in the future, actual results may differ materially from the estimates. The consolidated results of operations for the three month and nine month periods
ended September 30, 2007 are not necessarily indicative of the results to be expected for any future period or the full fiscal year.



The condensed consolidated financial statements include Lazard Group and its 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); Compagnie Financière Lazard Frères SAS
(CFLF) (formerly Lazard Frères SAS) and Maison Lazard SAS, French limited liability companies, along with their respective subsidiaries, including the Paris-based Lazard Frères Banque SA (LFB) and Lazard
Frères Gestion SAS (LFG); and Lazard & Co., Limited (LCL), through Lazard & Co., Holdings Limited, an English private limited company (LCH); together with their jointly-owned affiliates and
subsidiaries.



On May 10, 2005, Lazard Ltd consummated an
equity public offering (the equity public offering) of its Class A common stock, par value $0.01 per share (Class A common stock). Lazard Ltd, through a number of newly-formed, wholly-owned subsidiaries, contributed the net
proceeds from the equity public offering, along with the net proceeds it received from the financing transactions (as described in Note 2 of Notes to Condensed Consolidated Financial Statements), to Lazard Group in exchange for 37,500,000 Lazard
Group common membership interests, representing ownership of 37.5% of Lazard Groups total common membership interests as of May 10, 2005, and, after giving effect to (i) the repurchase and forfeiture of a portion of the Lazard Group common
membership interests held by LAZ-MD Holdings LLC (LAZ-MD Holdings), as well as (ii) certain subsequent share issuances by Lazard Ltd (principally related to the primary and secondary offerings of Class A common stock as described in Note
2 of Notes to Condensed Consolidated Financial Statements), it held approximately 48.3% and 47.9% of all outstanding Lazard Group common membership interests as of September 30, 2007 and December 31, 2006, respectively. Lazard Ltd, through
its control of the managing members of Lazard Group, controls Lazard Group.



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##### Table of Contents

LAZARD GROUP LLC



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)

(dollars in thousands,
unless otherwise noted)



Lazard Group is governed by an Operating Agreement dated as of May 10, 2005, as amended (the
Operating Agreement).



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



| |  |  | Financial Advisory, which includes providing advice on mergers and acquisitions, restructurings, capital raising and similar transactions, and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------



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



In addition, Lazard Group records selected
other activities in its Corporate segment, including management of cash, certain investments and the commercial banking activities of LFB. LFB is a registered bank regulated by the Banque de France and its primary commercial banking operations
include the management of the treasury positions of Lazard Groups Paris House through its money market desk and, to a lesser extent, credit activities relating to securing loans granted to clients of LFG and custodial oversight over assets of
various clients. In addition, LFB operates many support functions relating to our business in Paris. Lazard Group also allocates outstanding indebtedness to its Corporate segment.



Prior to May 10, 2005, Lazard Group also had a business segment called Capital Markets and Other, which consisted of equity,
fixed income and convertibles sales and trading, broking, research and underwriting services and private equity fund management activities outside of France as well as other specified non-operating assets and liabilities. This business
segments assets and liabilities (referred to below as the separated businesses) were separated from Lazard Group on May 10, 2005. We refer to the transfer of the separated business as the separation.



Basis of Presentation



The condensed consolidated financial statements are prepared in conformity
with U.S. GAAP. The Companys policy is to consolidate (i) all majority-owned subsidiaries in which it has a controlling financial interest, (ii) variable interest entities (VIEs) where the Company has a 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. All material intercompany transactions and balances have been eliminated.



Certain prior period amounts have been reclassified to conform to the manner
of presentation in the current year.



|2. | THE SEPARATION AND RECAPITALIZATION TRANSACTIONS IN MAY, 2005, AND PRIMARY AND SECONDARY OFFERINGS IN DECEMBER, 2006
|-- | --------------------------------------------------------------------------------------------------------------------



As more fully described in the Form 10-K, on May 10, 2005, Lazard completed
the separation and recapitalization transactions, including the financing transactions, pursuant to the master separation agreement, dated as of May 10, 2005, by and among Lazard Ltd, Lazard Group, LAZ-MD Holdings and LFCM Holdings LLC (LFCM
Holdings) (the master separation agreement).



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##### Table of Contents

LAZARD GROUP LLC



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)

(dollars in thousands,
unless otherwise noted)



The Separation



In the separation, Lazard Group transferred the separated businesses to LFCM Holdings through several steps. First, LAZ-MD
Holdings was formed as the new holding company for Lazard Group. Pursuant to this formation, all of the persons who were members of Lazard Group prior to the formation became members of LAZ-MD Holdings and ceased to hold any membership interests in
Lazard Group. Lazard Group then contributed the separated businesses to LFCM Holdings, which was then a subsidiary of Lazard Group, and distributed all of the LFCM Holdings interests to LAZ-MD Holdings. After the redemption of the historical
partners described below, LAZ-MD Holdings distributed all of the LFCM Holdings interests to its members. Accordingly, after the separation, LFCM Holdings was wholly-owned by the members of LAZ-MD Holdings, including Lazard Groups managing
directors at the time of the separation.



In the separation,
Lazard Group retained all of the Companys Financial Advisory and Asset Management businesses. In addition, under the business alliance agreement, dated as of May 10, 2005, between Lazard Group and LFCM Holdings (the business alliance
agreement), Lazard Group was granted the option to acquire the North American and European private equity fund management activities of LFCM Holdings.



The Recapitalization



On the same day as the separation, LAZ-MD Holdings and Lazard Group effected a recapitalization of their companies. The recapitalization had three
principal partsthe financing transactions, the redemption of the historical partners interests and mandatorily redeemable preferred interests of Lazard Group and the issuance of LAZ-MD Holdings exchangeable interests to working members.



The Financing Transactions



On May 10, 2005, the Company completed the financing transactions, which
consisted of:



| |  |  | the equity public offering,
| | - |  | ---------------------------



| |  |  | the initial offering (the ESU offering) of equity security units (the ESUs) in an aggregate principal amount of $287,500,
| | - |  | -----------------------------------------------------------------------------------------------------------------------------



| |  |  | the private offering of Lazard Group senior notes in an aggregate principal amount of $550,000, and
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | the private placement of securities to IXISCorporate & Investment Bank (IXIS), consisting of $150,000 principal amount of ESUs and $50,000 in
shares of Class A common stock.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The
Redemption of the Historical Partners Interests



As noted above, a primary purpose of the financing transactions was the redemption of the historical partners interests and mandatorily redeemable preferred interests of Lazard Group. As part of the recapitalization transactions,
historical partner interests and preferred interests generally were redeemed for cash.



Exchange of Working Member Interests for LAZ-MD Holdings Interests



In connection with the formation of LAZ-MD Holdings, the working member interests were exchanged with LAZ-MD Holdings for limited liability company
interests in LAZ-MD Holdings. Each holder of a working member interest at the time of the separation and recapitalization transactions received, in exchange for his or her working member interest, a redeemable capital interest in LAZ-MD Holdings
consisting of an equivalent amount



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LAZARD GROUP LLC



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)

(dollars in thousands,
unless otherwise noted)



of capital of LAZ-MD Holdings, an exchangeable interest in LAZ-MD Holdings and, in certain instances, a right to receive distributions from LAZ-MD Holdings.
The former holders of working member interests hold all of the limited liability company interests in LAZ-MD Holdings.



Credit FacilityConcurrent with the equity public offering, Lazard Group entered into a five year, $125,000 senior revolving credit
facility (the Credit Facility) with a group of lenders. On May 17, 2006, the Credit Facility was amended to provide for an increase in the aggregate commitments from $125,000 to $150,000.



Primary and Secondary Offerings in December,
2006As described in more detail in the Form 10-K, on December 6, 2006, Lazard Ltd closed an underwritten public offering of additional shares of its Class A common stock. The offering was comprised of a primary
offering (the Primary Offering) of 8,050,400 newly-issued shares by Lazard Ltd and a secondary offering (the Secondary Offering) of 6,000,000 shares offered to the public by certain current and former managing directors
of Lazard and their permitted transferees (the Selling Shareholders).



The primary offering provided Lazard Ltd with net proceeds, after underwriters discounts and other estimated expenses, of $349,137. Lazard Ltd did not receive any net proceeds from the sales of common stock
offered by the Selling Shareholders. Immediately following the Primary Offering, Lazard Ltd and its subsidiaries received 8,050,400 additional Lazard Group common membership interests in exchange for the net proceeds from the Primary Offering. In
the Secondary Offering, Lazard Ltd and its subsidiaries received an additional 6,000,000 Lazard Group common membership interests from the exchanging LAZ-MD Holdings members in exchange for the issuance to them of 6,000,000 shares of Class A common
stock. LAZ-MD Holdings members then sold those shares to the public.



As a result of the offerings, Lazard Ltds ownership interest in Lazard Group increased from 37.7% prior to the offerings to 47.9% subsequent thereto. Correspondingly, LAZ-MD Holdings ownership in Lazard Group decreased from
62.3% prior to the offerings to 52.1% subsequent thereto.



Lazard Capital Markets LLC (LCM), a wholly-owned subsidiary of LFCM Holdings, was a member of the underwriting group for both the Primary and Secondary Offerings, and, in such capacity, earned revenue, net of estimated
underwriting expenses, of $4,118. The business alliance agreement provides for Lazard Group to receive a referral fee equal to approximately 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, 2006 Lazard Groups condensed consolidated statement of financial condition included a receivable from LFCM Holdings of $2,059, with the portion of such amount relating to the
Primary Offering of $1,180 being recorded as an increase to its members equity in the fourth quarter of 2006 and the portion of such amount relating to the Secondary Offering of $879 being recorded in other revenue in such period.
See Note 13 of Notes to Condensed Consolidated Financial Statements for additional information regarding the business alliance agreement.



3.    NEW ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS



On January 1, 2007, the Company adopted Financial Accounting Standards Board (FASB) Interpretation No. 48,
Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109(FIN 48). FIN 48 clarifies the accounting for and reporting of income tax uncertainties and requires additional
disclosures related to uncertain tax positions. The Companys accounting policy provides that interest and



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LAZARD GROUP LLC



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)

(dollars in thousands,
unless otherwise noted)



penalties related to income taxes be included in income tax expense. See Note 12 of Notes to Condensed Consolidated Financial Statements for additional
information relating to the adoption of FIN 48.



In September
2006, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements (SFAS 157). SFAS 157 defines fair value, establishes a framework for measuring fair value, and
enhances disclosures about fair value measurements. This Statement applies to other accounting pronouncements that require the use of fair value measurements. SFAS 157 is effective for interim and annual financial statements issued for fiscal years
beginning after November 15, 2007. We are currently assessing the impact of adopting SFAS 157 on the Companys consolidated financial statements.



In February 2007, the FASB issued SFAS No. 159 The Fair Value Option for Financial Assets and Financial LiabilitiesIncluding
an amendment of FASB Statement No. 115 (SFAS 159). SFAS 159 permits an entity to elect to measure various financial instruments and certain other items at fair value. It provides entities with the opportunity to mitigate
volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement requires that a business entity report unrealized gains and losses, on items
for which the fair value option has been elected, in earnings at each subsequent reporting date. SFAS 159 is effective as of the beginning of the first annual period beginning after November 15, 2007. We are currently assessing the impact of
adopting SFAS 159 on the Companys consolidated financial statements.



|4. | LONG-TERM INVESTMENTS
|-- | ---------------------



The Companys long-term investments, which are recorded at fair value in the accompanying condensed consolidated statements of financial condition,
consist of the following at September 30, 2007 and December 31, 2006:



|                                                     |  |                    |         |                   |   |       
|---------------------------------------------------- |  | ------------------ | ------- | ----------------- | - | ------
|                                                     |  | September 30, 2007 |         | December 31, 2006
|Interests in LAM alternative asset management funds: |  |                    |         |                   |   |       
|General Partnership interests owned by Lazard        |  |                    | $42,179 |                   | $ | 10,140
|Minority interests                                   |  |                    | 47,689  |                   |   | 47,152
|Private equity investments                           |  |                    | 61,652  |                   |   | 35,629
|Equity securities                                    |  |                    | 37,106  |                   |   | 6,136 
|                                                     |  |                    |         |                   |   |       
|Total long-term investments, at fair value           |  | $                  | 188,626 |                   | $ | 99,057
|                                                     |  |                    |         |                   |   |       



Interests in LAM
alternative asset management funds principally represent general partnership interests in LAM-managed hedge funds. The fair value of such investments reflects the pro rata value of the ownership of the underlying securities in the funds, the fair
market value of which is determined through quoted market values of the underlying securities as provided by external pricing sources.



Minority interests in LAM alternative asset management funds represent general partnership interests held directly by certain of our LAM managing
directors or employees of the Company but controlled and consolidated by Lazard. The associated minority interest amounting to $47,689 and $47,152 at September 30, 2007 and December 31, 2006, respectively, is included in minority
interest on the condensed consolidated statements of financial condition (see Note 5 of Notes to Condensed Consolidated Financial Statements).



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LAZARD GROUP LLC



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)

(dollars in thousands,
unless otherwise noted)



Private equity investments are primarily comprised of investments in private equity funds and direct
private equity interests that are valued, in the absence of observable market prices, using the following valuation methodology. Investments are initially carried at cost, which is subsequently adjusted for additional capital raising transactions
such as the issuance of new member interests or through a sale of existing equity to a third party or other events that are indicative of fair value. In the absence of third party transactions, the carrying value of such investments may be adjusted
if its determined that the expected realizable value of the investment differs from the carrying value. In reaching that determination, consideration is given to many factors including, but not limited to, the operating cash flows and financial
performance of the investee, trends within sectors and/or regions, underlying business models, expected exit timing and strategy, and any specific rights or terms associated with the investment, such as conversion features, liquidation preferences
or restrictions. With respect to the majority of private equity investments, we rely on the third party fund managers for estimates of such fair values.



Investments in equity securities are primarily comprised of investments in non-publicly-traded asset management funds that invest in marketable equity
securities.



|5. | MINORITY INTEREST
|-- | -----------------



Minority interest principally consists of minority interests in various LAM-related general partnership interests that the Company controls but does not
wholly own, as well as minority interests in LAM. As a result of consolidating these companies, the Company recognizes the portion of income not associated with the Companys ownership as minority interest.



|6. | BUSINESS ACQUISITIONS AND JOINT VENTURE INVESTMENT
|-- | --------------------------------------------------



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 investment advisory firm and concurrently contributed such investment to Lazard Group. These purchases were affected though an exchange of a combination of cash, Class A common stock, and by Lazard Ltd
issuing 36,607 shares of non-participating convertible Series A preferred stock and 277 shares of non-participating convertible Series B preferred stock (the Series A preferred stock and Series B preferred stock,
respectively, which are 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) consists of approximately $154,400 of cash and approximately $46,700 of stock. At September 30, 2007, 815,558 shares of Class A common stock are issuable on a non-contingent basis. Additionally, at September
30, 2007, 9,724 shares of Series A preferred stock and 277 shares of Series B preferred stock are convertible into Class A common shares on a non-contingent basis, with the number of Class A common shares dependant, in part, upon future prices of
the Class A common stock. At September 30, 2007, 1,329,987 shares of Class A common stock were contingently issuable and 26,883 shares of Series A preferred stock were contingently convertible into shares of Class A common stock, in each case
dependant upon the future performance of each of GAHL and CWC, respectively.



The Class A common stock for the GAHL and CWC acquisitions is issuable over multi-year periods.





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LAZARD GROUP LLC



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)

(dollars in thousands,
unless otherwise noted)



In connection with Lazard Groups acquisition of GAHL and Lazard Ltds acquisition of CWC
and subsequent contribution of CWC to Lazard Group, Lazard Group recorded related party payables of approximately $46,700 to subsidiaries of Lazard Ltd, which corresponds to the increase in equity recorded by Lazard Ltd for such acquisitions (see
Note 13 of Notes to the Condensed Consolidated Financial Statements).



We account for business acquisitions using the purchase method of accounting, whereby the results of the acquired businesses are included in our consolidated financial results from the effective date of the respective acquisitions. As a
result of the GAHL and CWC acquisitions, we recorded net tangible assets, identifiable intangible assets and goodwill of approximately $22,600, $31,000 and $153,500, respectively. Goodwill pertaining to these acquisitions is deductible for income
tax purposes. As of September 30, 2007, the purchase price allocation is preliminary, and is therefore subject to final adjustment. A substantial portion of any contingent consideration will represent goodwill, and will be recognized in the period
the contingencies have been satisfied. At September 30, 2007, the weighted average amortization period of identifiable intangible assets recorded is approximately 3.3 years. The operating results related to the acquisitions described above will
primarily be included in the Companys Financial Advisory segment.



On May 22, 2007, Lazard Group entered into a Shareholders Agreement to acquire 50% of Merchant Bankers Asociados (MBA) (the parent company of MBA Banco de Inversiones), an Argentina-based financial advisory services firm with
offices across Central and South America. The purchase of the 50% interest in MBA (the MBA joint venture) is subject to approval by the applicable regulatory authorities. As of October 31, 2007, approval of this transaction is still
pending. Upon such approval, we will account for the investment in the MBA joint venture using the equity method of accounting.



|7. | TERMINATION OF STRATEGIC ALLIANCE IN ITALY
|-- | ------------------------------------------



On May 15, 2006, Lazard Group completed the termination of its strategic alliance with Banca Intesa S.p.A (Intesa), which conducted selected
Italian investment banking business solely through Lazard & Co. S.r.l. (Lazard Italy), an indirect subsidiary of Lazard Group. In accordance with the provisions of the Termination Agreement, dated as of March 31, 2006, by and among
Intesa, Lazard Group and Lazard Italy, the following adjustments were made to the terms of Intesas investment in Lazard Italy and Lazard Funding Limited LLC (Lazard Funding), a wholly-owned subsidiary of Lazard Group:



| |  |  | The $150,000 Subordinated Convertible Note Intesa purchased in March 2003 from Lazard Funding was amended and restated, among other things, to provide for its
convertibility into a maximum of 2,631,570 shares of Class A common stock at an effective conversion price of $57 per share. The amended $150,000 subordinated convertible note (the Amended $150,000 Subordinated Convertible Note) matures
on September 30, 2016 and has a fixed interest rate of 3.25% per annum. One-third in principal amount will generally be convertible after July 1, 2008, an additional one-third after July 1, 2009 and the last one-third after July 1, 2010, and no
principal amount will be convertible after June 30, 2011.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Intesas 40% equity interest in Lazard Italy and a $50,000 subordinated promissory note of Lazard Italy held by Intesa were acquired by Lazard Group in
exchange for the issuance by Lazard Group to Intesa of a $96,000 senior promissory note (the $96,000 Senior Promissory Note) and a $50,000 subordinated promissory note (the $50,000 Subordinated Promissory Note), respectively,
with both Notes having been scheduled to mature on February 28, 2008. The $96,000 Senior Promissory Note and the $50,000 Subordinated Promissory Note had fixed interest rates of 4.25% and 4.6% per annum,
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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LAZARD GROUP LLC



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)

(dollars in thousands,
unless otherwise noted)



| | respectively, and each Note contained customary events of default for indebtedness of its type. On May 15, 2006, Intesa sold and assigned all its rights
and interests relating to both Notes to a commercial bank.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Lazard Group paid Intesa an amount equal to a 3% annualized return on Intesas ownership interest from April 1, 2006 through the May 15, 2006 termination
closing and the accrued and unpaid interest on the $50,000 Subordinated Promissory Note as of the termination closing.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



As a result of the termination of the strategic alliance with Intesa and Lazard Groups repurchase of Intesas ownership interest, the Company
realized a gain in the second quarter of 2006 of $13,695 that, after transaction and other costs, resulted in an increase in operating income of $5,274.



On June 29, 2007, Lazard Group redeemed both the $96,000 Senior Promissory Note and the $50,000 Subordinated Promissory Note.



|8. | SENIOR AND SUBORDINATED DEBT
|-- | ----------------------------



Senior DebtSenior debt is comprised of the following as of September 30, 2007 and December 31, 2006:



|                                                        |  |                  |         |               |                   |     |                      |         |   |                   |   |           |  |   |          
|------------------------------------------------------- |  | ---------------- | ------- | ------------- | ----------------- | --- | -------------------- | ------- | - | ----------------- | - | --------- |  | - | ---------
|                                                        |  | Principal Amount |         | Maturity Date |                   |     | Annual Interest Rate |         |   | Outstanding As Of
|                                                        |  |                  |         |               | September 30,2007 |     | December 31, 2006   
|Lazard Group Senior Notes(a)                            |  | $                | 550,000 |               | 2015              |     |                      | 7.125   | % |                   | $ | 550,000   |  | $ | 550,000  
|Lazard Group Senior Note                                |  |                  | 96,000  |               |                  | (b) |                      | 4.25    | % |                   |   |          |  |   | 96,000   
|Lazard Group Notes issued in connectionwith the ESUs(a) |  |                  | 437,500 |               | 2008-2035         | (c) |                      | 6.12    | % |                   |   | 437,500   |  |   | 437,500  
|Lazard Group Senior Notes(d)                            |  |                  | 600,000 |               | 2017              |     |                      | 6.85    | % |                   |   | 600,000   |  |   |         
|Other                                                   |  |                  |         |               | 2007-2008         |     |                      | Various |   |                   |   | 5,351     |  |   | 3,557    
|                                                        |  |                  |         |               |                   |     |                      |         |   |                   |   |           |  |   |          
|Total                                                   |  |                  |         |               |                   |     |                      |         |   |                   | $ | 1,592,851 |  | $ | 1,087,057
|                                                        |  |                  |         |               |                   |     |                      |         |   |                   |   |           |  |   |          

---

|(a) | See Note 2 of Notes to Condensed Consolidated Financial Statements.
|--- | -------------------------------------------------------------------

|(b) | Redeemed in June, 2007 (see Note 7 of Notes to Condensed Consolidated Financial Statements).
|--- | --------------------------------------------------------------------------------------------

|(c) | Maturity date can vary based on a remarketing of the Lazard Group Notes, and will mature (i) in the event of a successful remarketing, on any date no earlier than May 15, 2010
and no later than May 15, 2035, as we may elect, (ii) in the event of a failed remarketing, on May 15, 2008 and (iii) otherwise on May 15, 2035.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(d) | On June 21, 2007, Lazard Group completed a private placement of $600,000 aggregate principal amount of 6.85% senior notes due June 15, 2017. Interest on the notes is
payable on June 15 and December 15 of each year, beginning on December 15, 2007. Lazard Group also entered into a registration rights agreement with the initial purchasers of the notes pursuant to which Lazard Group has agreed, among other
things, to file with the SEC an exchange offer registration statement enabling holders to exchange their notes (the old notes) for substantially identical notes registered under the Securities Act of 1933, as amended (the exchange
notes). In connection therewith, Lazard Group filed a registration statement on Form S-4 on July 3, 2007 that was declared effective by the SEC on July 19, 2007, and Lazard Group commenced an exchange offer (the exchange
offer) on that date to exchange an aggregate principal amount of up to $600,000 of the notes for an equal aggregate principal amount of the exchange notes. The exchange offer expired on August 16, 2007. On August 16, 2007, Lazard Group
closed the exchange offer, at which time it exchanged $599,300 in aggregate principal amount of its old notes (approximately 99.9% of the aggregate principal amount of old notes outstanding) for $599,300 in aggregate principal amount of its exchange
notes. The exchange notes are substantially identical to the old notes, except that the exchange notes have been registered under the Securities Act of 1933, as amended; and, as a result, the transfer restrictions applicable to the old notes do not
apply to the exchange notes.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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LAZARD GROUP LLC



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)

(dollars in thousands,
unless otherwise noted)



As of September 30, 2007 and December 31, 2006, there were no amounts outstanding under the Credit
Facility. The Credit Facility bears interest at either a Eurodollar or Federal Funds rate, plus an applicable margin, which varies from 125 to 200 basis points, depending on Lazard Groups rating as determined by designated credit rating
agencies. The Credit Facility contains affirmative and negative covenants. Such covenants include, among other things, limitations on the ability of Lazard Group to incur debt, grant liens, pay dividends, enter into mergers or to sell all or
substantially all of its assets, as well as financial maintenance covenants.



The indenture and supplemental indentures relating to Lazard Groups senior notes contain certain covenants, events of default and other customary provisions.



Subordinated DebtSubordinated debt at September 30, 2007
and December 31, 2006 amounted to $150,000 and $200,000, respectively, and consists of amounts associated with the termination of the strategic alliance transaction in Italy (see Note 7 of Notes to Condensed Consolidated Financial Statements).



As of September 30, 2007, the Company is in compliance with
all obligations under its various senior and subordinated borrowing arrangements.



|9. | COMMITMENTS AND CONTINGENCIES
|-- | -----------------------------



LeasesLazard has various leases and other contractual commitments arising in the ordinary course of business. In the opinion of
management, the fulfillment of such commitments in accordance with their terms will not have a material adverse effect on Lazards consolidated financial position, results of operations or cash flows.



With respect to abandoned leased facilities in the U.K., at September 30,
2007 and December 31, 2006, the Company has recognized liabilities of $28,374 and $31,910, respectively, exclusive of the indemnification described below, which are included in other liabilities on the condensed 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, and includes a charge of $4,034 recorded in
the nine month period ended September 30, 2007 based on managements current estimate of costs for the abandoned leased facilities. No such charge was recorded in the three month periods ended September 30, 2007 and 2006 and for the nine month
period ended September 30, 2006.



Under the master separation
agreement and a related lease indemnity agreement, dated as of May 10, 2005, LFCM Holdings is obligated to indemnify Lazard Group for certain liabilities relating to abandoned leased space in the U.K. During the fourth quarter of 2005, Lazard Group
entered into an agreement with LFCM Holdings which provided for LFCM Holdings to pay to Lazard Group $25,000 in full satisfaction of its indemnification obligations with respect to the abandoned leased space. The net present value of the balance due
at September 30, 2007 and December 31, 2006 of $8,589 and $9,989, respectively, after giving effect to payments received through the respective dates, is included in receivables - related parties on the condensed consolidated statements
of financial condition (see Note 13 of Notes to Condensed Consolidated Financial Statements). The balance is due based on a schedule of periodic payments through May 10, 2010.



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 September 30, 2007, aggregate approximately $24,300. These managing directors have pledged their interests
in LAZ-MD Holdings (which are exchangeable into shares of Class A common stock) to collateralize such guarantee, with the value of such collateral exceeding the guarantee provided by Lazard.



15



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##### Table of Contents

LAZARD GROUP LLC



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)

(dollars in thousands,
unless otherwise noted)





As of September 30,
2007, CWC had guarantees of $41,307 on behalf of a consortium of investors in support of margin loans secured against the consortiums underlying equity investment. As of September 30, 2007, such investment had a market value of approximately
$93,400. Subsequent to September 30, 2007, such guarantees have been reduced to $4,692.



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 in a number of
judicial, regulatory and arbitration proceedings and inquiries concerning matters arising in connection with the conduct of our businesses. The Company reviews such matters on a case by case basis and establishes its reserves in accordance with SFAS
No. 5, Accounting For Contingencies. 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.



In 2004, we received a request for information from the NASD as part of an industry investigation relating to gifts and gratuities, which was focused
primarily on the Companys former Capital Markets business, which business was transferred to LFCM Holdings as a part of the separation. In addition, the Company received requests for information from the NASD, SEC and the U.S. Attorneys
Office for the District of Massachusetts seeking information concerning gifts and entertainment involving an unaffiliated mutual fund company, which are also focused on that same business. In the course of an internal review of these matters, there
were resignations or discipline of certain individuals associated with Lazards former Capital Markets business. These investigations are continuing and the Company cannot predict their potential outcomes. Accordingly, the Company has not
recorded an accrual for losses related to any such judicial, regulatory or arbitration proceedings.



Private equity commitmentIn the third quarter of 2007, the Company made a capital commitment through 2017 of approximately $43,000 to
a mezzanine fund. As of September 30, 2007, the Company had invested approximately $17,000 relating to such commitment, which is recorded as a private equity investment in long-term investments on the condensed consolidated statement of
financial condition (see Note 4 of Notes to Condensed Consolidated Financial Statements).



|10. | MEMBERS DEFICIENCY
|--- | -------------------



At September 30, 2007 and 2006, Lazard Group common membership interests held by subsidiaries of Lazard Ltd amounted to 48.3% and 37.7%, respectively, and
by LAZ-MD Holdings amounted to 51.7% and 62.3%, 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 nine month periods ended September 30, 2007 and 2006, Lazard Group distributed $15,077 and $16,768, respectively, to LAZ-MD Holdings and $13,812 and $10,115,
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 nine month periods ended September 30, 2007 and 2006,
Lazard Group made tax distributions of $103,839 and $34,108, respectively, including $57,197 and $21,268, respectively, paid to LAZ-MD Holdings and $46,642 and $12,840, respectively, paid to subsidiaries of Lazard Ltd.



16



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##### Table of Contents

LAZARD GROUP LLC



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)

(dollars in thousands,
unless otherwise noted)



A description of Lazard Ltds 2005 Equity Incentive Plan (the Equity Incentive
Plan), and activity with respect thereto during the nine month periods ended September 30, 2007 and 2006, is presented below.



Shares Available Under the Equity Incentive Plan



The Equity Incentive 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 Equity Incentive 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.



Restricted Stock Unit Grants (RSUs)



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 fair value of the RSUs, net of an estimated forfeiture rate, is amortized over the vesting periods or requisite service periods as required under SFAS
123 (revised 2004), Share-Based Payment (SFAS 123R). Expense relating to RSUs is charged to compensation and benefits expense within the condensed consolidated statements of income, and amounted to $27,032
and $75,025 for the three month and nine month periods ended September 30, 2007, respectively, and $6,309 and $15,544 for the three month and nine month periods ended September 30, 2006, 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 nine month periods ended September 30, 2007 and 2006, such dividend participation rights required the issuance of 41,595 and 19,034 RSUs, respectively.



Deferred Stock Unit Grants (DSUs)



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, which amounted to 12,459 and 12,321 DSUs granted in the nine month periods ended September 30, 2007 and 2006,
respectively. Their remaining compensation is payable in cash. 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. 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 described below, totaled $19 and $392 during the three
month and nine month periods ended September 30, 2007, respectively, and $8 and $260 during the three month and nine month periods ended September 30, 2006, 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 Equity Incentive Plan in lieu of some or all of their cash fees. The number of DSUs that will 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
nine month period ended September 30, 2007, 2,288 DSUs were granted pursuant to the Directors Fee Deferral Unit Plan. As of September 30, 2006, 414 DSUs had been granted pursuant to such Plan.



17



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##### Table of Contents

LAZARD GROUP LLC



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)

(dollars in thousands,
unless otherwise noted)



The following is a summary of activity relating to RSUs and DSUs during the nine month periods ended
September 30, 2006 and 2007:



|                                                                        |  |           |   |      |                                        |       |       |        |   |                                        |   |       
|----------------------------------------------------------------------- |  | --------- | - | ---- | -------------------------------------- | ----- | ----- | ------ | - | -------------------------------------- | - | ------
|                                                                        |  | RSUs      |   | DSUs
|                                                                        |  | Units     |   |      | Grant Date Weighted Average Fair Value |       | Units |        |   | Grant Date Weighted Average Fair Value
|                                                                        |  |           |   |     
|Balance, January 1, 2006                                                |  | 1,033,733 |   |      | $                                      | 23.87 |       | 9,968  |   |                                        | $ | 25.33 
|Granted (including 19,034 RSU units relating to dividend participation) |  | 3,038,483 |   |      | $                                      | 34.73 |       | 12,735 |   |                                        | $ | 40.82 
|Forfeited                                                               |  | (132,828  | ) |      | $                                      | 34.23 |       |        |   |                                        |   |       
|Converted                                                               |  |           |   |      |                                        |       |       | (3,668 | ) |                                        | $ | 26.89 
|                                                                        |  |           |   |      |                                        |       |       |        |   |                                        |   |       
|Balance, September 30, 2006                                             |  | 3,939,388 |   |      | $                                      | 31.90 |       | 19,035 |   |                                        | $ | 35.40 
|                                                                        |  |           |   |      |                                        |       |       |        |   |                                        |   |       
|                                                                        |  |          
|                                                                        |  | RSUs      |   | DSUs
|                                                                        |  | Units     |   |      | Grant Date Weighted Average Fair Value |       | Units |        |   | Grant Date Weighted Average Fair Value
|                                                                        |  |           |   |     
|Balance, January 1, 2007                                                |  | 4,009,382 |   |      | $                                      | 32.13 |       | 19,690 |   |                                        |   | $35.71
|Granted (including 41,595 RSUs relating to dividend participation)      |  | 5,621,605 |   |      | $                                      | 49.49 |       | 14,747 |   |                                        |   | $53.10
|Forfeited                                                               |  | (255,614  | ) |      | $                                      | 40.01 |       |        |   |                                        |   |       
|Converted                                                               |  | (1,195    | ) |      | $                                      | 37.80 |       |        |   |                                        |   |       
|                                                                        |  |           |   |      |                                        |       |       |        |   |                                        |   |       
|Balance, September 30, 2007                                             |  | 9,374,178 |   |      | $                                      | 42.33 |       | 34,437 |   |                                        |   | $43.16
|                                                                        |  |           |   |      |                                        |       |       |        |   |                                        |   |       



As of September 30,
2007, unrecognized RSU compensation expense, adjusted for estimated forfeitures, was approximately $245,207, with such unrecognized compensation expense expected to be recognized over a weighted average period of approximately 2.6 years subsequent
to September 30, 2007. 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.



Share Repurchase Program



On February 7, 2006, the Board of Directors of Lazard Ltd authorized the repurchase of up to $100,000 in aggregate cost of its Class A common stock and
Lazard Group common membership interests. On August 9, 2007, the Board of Directors increased this repurchase authorization by an additional $100,000. The Companys intention is that the share repurchase program, with respect to the Class A
common stock, will be used primarily to offset shares to be issued under the Equity Incentive Plan. Purchases may be made in the open market or through privately negotiated transactions through 2008.



During the nine month period ended September 30, 2007 and the year ended
December 31, 2006, Lazard Group purchased 1,678,600 shares and 115,000 shares, respectively, of Class A common stock in the open market for an aggregate cost of $68,052 and $4,179, respectively (at average purchase prices of $40.54 per share



18



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##### Table of Contents

LAZARD GROUP LLC



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)

(dollars in thousands,
unless otherwise noted)



and $36.34 per share, respectively). As a result of Lazard Groups delivery of 742 shares for the settlement of vested RSUs during the nine month period
ended September 30, 2007, there were 1,792,858 shares of Class A common stock held by Lazard Group at September 30, 2007. Such Class A common shares are reported, at cost, as a reduction of members equity within the condensed consolidated
statements of financial condition. Furthermore, pursuant to the share repurchase program, through September 30, 2007 Lazard Group purchased 583,899 common membership interests (which were exchangeable at future dates for shares of Class A common
stock) from LAZ-MD Holdings in privately negotiated transactions with an aggregate cost of $21,840.



As of September 30, 2007, $105,929 remained available under the stock repurchase program.



|11. | EMPLOYEE BENEFIT PLANS
|--- | ----------------------



The Company, through its subsidiaries, provides retirement and other post-employment benefits to certain of its employees through defined contribution and
defined benefit pension plans and other post-retirement benefit plans. The Company has the right to amend or terminate its benefit plans at any time subject to the terms of such plans. Expenses (benefits) related to the Companys employee
benefit plans are included in compensation and benefits expense on the condensed consolidated statements of income. The Company uses December 31 as the measurement date for its employee benefit plans.



In September 2006, the FASB issued SFAS No. 158, Employers
Accounting for Defined Benefit Pension and Other Post-Retirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R) (SFAS 158), which the Company adopted as of December 31, 2006. In accordance with
SFAS 158, at December 31, 2006 the Company recognized, in its consolidated statement of financial condition, the funded status of its defined benefit pension and other post-retirement benefit plans, measured as the difference between the fair
value of the plan assets and the corresponding benefit obligations. Additionally, pursuant to SFAS 158, the Company is required to recognize changes in the funded status of its defined benefit pension plans and other post-retirement benefit plans in
accumulated other comprehensive income, net of tax, to the extent such changes are not recognized in earnings as a component of net periodic benefit cost (credit).



LFNY Defined Benefit Pension Plan and Post-Retirement Medical Plan Settlement TransactionsDuring
the three month and nine month periods ended September 30, 2006, the Company recognized settlement losses of $135 and $1,038, respectively, attributable to settlements with pension plan participants who elected lump sum payments upon their
retirement or discontinuation of service to the Company. Additionally, during the nine month period ended September 30, 2006, the Company recognized a settlement loss of $303 as a result of the settlement of post-retirement medical plan obligations
associated with employees in the separated businesses. The losses described herein were included in compensation and benefits expense on the condensed consolidated statements of income.



Amendments to LCH Pension PlansEffective
March 31, 2006, the LCH pension plans were amended to cease future accruals. As a result of such amendments, future service and compensation increases will not be taken into account for purposes of future benefit accruals under the plans. Vested
benefits for active participants as of March 31, 2006 were retained.



Termination of LCHs Post-Retirement Medical PlanIn April 2004, LCH announced a plan to terminate its post-retirement medical plan. As a result of such action, benefits available to eligible active employees and
retirees ceased on February 28, 2007. In accordance with SFAS No. 106, Employers Accounting for Post-Retirement Benefits Other Than Pensions, the Company recognized the effect of such termination as a reduction



19



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##### Table of Contents

LAZARD GROUP LLC



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)

(dollars in thousands,
unless otherwise noted)



of employee compensation and benefits expense over the period ended February, 2007. Compensation and benefits expense on the condensed
consolidated statements of income was reduced for the related effect of such termination by $96 and $1,683 for the three month and nine month periods ended September 30, 2007, respectively, and by $2,279 and $6,635 for the three month and nine month
periods ended September 30, 2006, respectively.



Employer
Contributions to Pension PlansThe Company contributed approximately $16,000 (8.2 million British pounds) in the nine month period ended September 30, 2007 in full satisfaction of its obligation to fund LCHs pension
plans for the year ended December 31, 2007. No other contributions to defined benefit plans were made by the Company during the nine month period ended September 30, 2007.



Defined Contribution PlansLFNY and LCH also contribute to employer sponsored defined contribution plans.
Contributions to these plans amounted to $2,120 and $7,333 for the three month and nine month periods ended September 30, 2007, respectively, and $1,664 and $5,757 for the three month and nine month periods ended September 30, 2006,
respectively, which are included in compensation and benefits expense on the condensed consolidated statements of income.



The following tables summarize the components of benefit costs (credits) for the three month and nine month periods ended September 30, 2007 and 2006:



|                                                  |  |                                          |        |   |                        |   |                              |      |  |      |    |      |   |    |      |             |   |  |   |        |  
|------------------------------------------------- |  | ---------------------------------------- | ------ | - | ---------------------- | - | ---------------------------- | ---- |  | ---- | -- | ---- | - | -- | ---- | ----------- | - |  | - | ------ | -
|                                                  |  | Pension Plans                            |        |   | Pension PlanSupplement |   | Post-RetirementMedical Plans |     
|                                                  |  | For The Three Months Ended September 30, |       
|                                                  |  | 2007                                     |        |   | 2006                   |   |                              | 2007 |  | 2006 |    | 2007 |   |    | 2006 |            
|Components of Net Periodic Benefit Cost (Credit): |  |                                          |        |   |                        |   |                              |      |  |      |    |      |   |    |      |             |   |  |   |        |  
|Service cost                                      |  |                                          |        |   |                        | $ | 25                           |      |  |      |    |      |   |    |      | $        41 |   |  | $ | 35     |  
|Interest cost                                     |  | $                                        | 6,684  |   |                        |   | 6,293                        |      |  | $    | 14 |      | $ | 15 |      | 108         |   |  |   | 109    |  
|Expected return on plan assets                    |  |                                          | (8,204 | ) |                        |   | (7,342                       | )    |  |      |    |      |   |    |      |             |   |  |   |        |  
|Amortization of:                                  |  |                                          |        |   |                        |   |                              |      |  |      |    |      |   |    |      |             |   |  |   |        |  
|Prior service credit                              |  |                                          |        |   |                        |   |                              |      |  |      |    |      |   |    |      | (345        | ) |  |   | (363   | )
|Net actuarial loss                                |  |                                          | 95     |   |                        |   | 427                          |      |  |      |    |      |   |    |      | 146         |   |  |   | 80     |  
|                                                  |  |                                          |        |   |                        |   |                              |      |  |      |    |      |   |    |      |             |   |  |   |        |  
|Net periodic benefit cost (credit)                |  |                                          | (1,425 | ) |                        |   | (597                         | )    |  |      | 14 |      |   | 15 |      | (50         | ) |  |   | (139   | )
|Settlements (curtailments)                        |  |                                          |        |   |                        |   | 135                          |      |  |      |    |      |   |    |      | (96         | ) |  |   | (2,279 | )
|                                                  |  |                                          |        |   |                        |   |                              |      |  |      |    |      |   |    |      |             |   |  |   |        |  
|Total benefit cost (credit)                       |  | $                                        | (1,425 | ) |                        | $ | (462                         | )    |  | $    | 14 |      | $ | 15 |      | $    (146)  |   |  | $ | (2,418 | )
|                                                  |  |                                          |        |   |                        |   |                              |      |  |      |    |      |   |    |      |             |   |  |   |        |  



|                                                  |  |                                         |         |   |                        |   |         |                              |  |      |    |  |      |    |   |      |   |        |   |  |   |        |  
|------------------------------------------------- |  | --------------------------------------- | ------- | - | ---------------------- | - | ------- | ---------------------------- |  | ---- | -- |  | ---- | -- | - | ---- | - | ------ | - |  | - | ------ | -
|                                                  |  | Pension Plans                           |         |   | Pension PlanSupplement |   |         | Post-RetirementMedical Plans | 
|                                                  |  | For The Nine Months Ended September 30, |        
|                                                  |  | 2007                                    |         |   | 2006                   |   |         | 2007                         |  | 2006 |    |  | 2007 |    |   | 2006 |  
|Components of Net Periodic Benefit Cost (Credit): |  |                                         |         |   |                        |   |         |                              |  |      |    |  |      |    |   |      |   |        |   |  |   |        |  
|Service cost                                      |  |                                         |         |   |                        | $ | 1,575   |                              |  |      |    |  |      |    |   |      | $ | 124    |   |  | $ | 99     |  
|Interest cost                                     |  | $                                       | 20,385  |   |                        |   | 18,408  |                              |  | $    | 43 |  | $    | 47 |   |      |   | 326    |   |  |   | 307    |  
|Expected return on plan assets                    |  |                                         | (25,014 | ) |                        |   | (21,537 | )                            |  |      |    |  |      |    |   |      |   |        |   |  |   |        |  
|Amortization of:                                  |  |                                         |         |   |                        |   |         |                              |  |      |    |  |      |    |   |      |   |        |   |  |   |        |  
|Prior service credit                              |  |                                         |         |   |                        |   |         |                              |  |      |    |  |      |    |   |      |   | (1,036 | ) |  |   | (1,019 | )
|Net actuarial loss                                |  |                                         | 284     |   |                        |   | 1,341   |                              |  |      |    |  |      |    |   |      |   | 438    |   |  |   | 240    |  
|                                                  |  |                                         |         |   |                        |   |         |                              |  |      |    |  |      |    |   |      |   |        |   |  |   |        |  
|Net periodic benefit cost (credit)                |  |                                         | (4,345  | ) |                        |   | (213    | )                            |  |      | 43 |  |      | 47 |   |      |   | (148   | ) |  |   | (373   | )
|Settlements (curtailments)                        |  |                                         |         |   |                        |   | 1,045   |                              |  |      |    |  |      | (7 | ) |      |   | (1,683 | ) |  |   | (6,332 | )
|                                                  |  |                                         |         |   |                        |   |         |                              |  |      |    |  |      |    |   |      |   |        |   |  |   |        |  
|Total benefit cost (credit)                       |  | $                                       | (4,345  | ) |                        | $ | 832     |                              |  | $    | 43 |  | $    | 40 |   |      | $ | (1,831 | ) |  | $ | (6,705 | )
|                                                  |  |                                         |         |   |                        |   |         |                              |  |      |    |  |      |    |   |      |   |        |   |  |   |        |  



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LAZARD GROUP LLC



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)

(dollars in thousands,
unless otherwise noted)



|12. | INCOME TAXES
|--- | ------------



The Companys provision for income taxes for the three month and nine month periods ended September 30, 2007 and for the three month and nine
month periods ended September 30, 2006 was $24,368, $54,564, $8,081 and $36,727, respectively, representing effective tax rates on operating income of 20.6%, 19.0%, 16.4% and 17.3%, 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% and the effective tax rates described above 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 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 subsidiary corporations that are subject to local income taxes. Additionally, Lazard Group is subject to Unincorporated Business Tax
(UBT) attributable to Lazard Groups operations apportioned to New York City, which is incremental to the U.S. federal statutory tax rate.



As a result of a reorganization of the ownership structure of several legal entities that occurred within Lazard Group during the nine month period ended
September 30, 2007, certain deferred tax assets previously reflected by Lazard Ltd are now recorded by Lazard Group at September 30, 2007. These deferred tax assets primarily relate to a step-up in tax basis of net assets that occurred concurrently
with the recapitalization and equity offering transactions by Lazard Ltd during 2005 and 2006 (see Note 2 of Notes to Condensed Consolidated Financial Statements.) These deferred tax assets have been fully offset by a valuation allowance due to the
uncertainty of the realization of the benefits of the tax versus book basis differences.



The cumulative effect of the Companys adoption of FIN 48 was a charge of $14,721 to the January 1, 2007 members deficiency balance. As of the adoption date, the Company had gross unrecognized tax benefits
of $31,255, including $5,132 related to interest and penalties, of which $27,352, if recognized, would favorably affect the effective tax rate. The Company recognizes interest and/or penalties related to income tax matters in income tax expense.
With few exceptions, the Company is no longer subject to income tax examination by foreign tax authorities for years prior to 2002 and by U.S. federal, state and local tax authorities for years prior to 2003. 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 each period and adjustments to tax liabilities are made as appropriate.



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##### Table of Contents

LAZARD GROUP LLC



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)

(dollars in thousands,
unless otherwise noted)



|13. | RELATED PARTIES
|--- | ---------------



Amounts receivable from, and payable to, related parties as of September 30, 2007 and December 31, 2006 are set forth below:



|                        |  |                   |        |                  |   |       
|----------------------- |  | ----------------- | ------ | ---------------- | - | ------
|                        |  | September 30,2007 |        | December 31,2006
|Receivables             |  |                   |        |                  |   |       
|LFCM Holdings           |  | $                 | 24,774 |                  | $ | 18,493
|LAZ-MD Holdings         |  |                   |        |                  |   | 50    
|Lazard Ltd subsidiaries |  |                   | 811    |                  |   | 17    
|                        |  |                   |        |                  |   |       
|Total                   |  | $                 | 25,585 |                  | $ | 18,560
|                        |  |                   |        |                  |   |       
|Payables                |  |                   |        |                  |   |       
|LFCM Holdings           |  | $                 | 182    |                  | $ | 376   
|Lazard Ltd subsidiaries |  |                   | 48,655 |                  |   | 3,137 
|                        |  |                   |        |                  |   |       
|Total                   |  | $                 | 48,837 |                  | $ | 3,513 
|                        |  |                   |        |                  |   |       



LFCM Holdings



LFCM Holdings owns and operates the separated businesses and
is owned by the working members, including Lazards 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 discussed in Note 2 of Notes to Condensed Consolidated Financial Statements, 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 by Lazard Group to LFCM
Holdings and by LFCM Holdings to Lazard Group under the administrative services agreement generally will be provided until December 31, 2008. 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 the receiving party pays
the service provider an additional three months of service fee for terminated service.



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##### Table of Contents

LAZARD GROUP LLC



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)

(dollars in thousands,
unless otherwise noted)



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 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 newly-formed 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 three month and
nine month periods ended September 30, 2007, amounts recorded by Lazard Group relating to administrative and support services amounted to $920 and $2,711, respectively, and referral fees for underwriting and private placement transactions amounted
to $4,475 and $18,890, respectively. For the three month and nine month periods ended September 30, 2006, amounts recorded by Lazard Group relating to administrative and support services amounted to $1,940 and $3,997, respectively, and referral fees
for underwriting transactions amounted to $1,044 and $3,297, respectively. Such amounts are reported as reductions to operating expenses and as other revenue, respectively.



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 unaudited condensed consolidated statements of income for the nine month period ended September 30,
2007. Such amount is included in the receivable from LFCM Holdings as of September 30, 2007. The above-mentioned transaction resulted in a $4,025 increase in operating income for the nine month period ended September 30, 2007.



The remaining receivables from LFCM Holdings and its subsidiaries as of
September 30, 2007 and December 31, 2006 primarily include $8,589 and $9,989, respectively, related to the lease indemnity agreement, $1,360 and $3,061, respectively, related to administrative and support services and reimbursement of expenses
incurred on behalf of LFCM Holdings and $4,796 and $4,091, respectively, related to referral fees for underwriting transactions.



LAZ-MD Holdings



LAZ-MD Holdings held approximately 51.7% and 52.1% of the common membership interest in Lazard Group as of September 30, 2007 and December 31, 2006,
respectively, and Lazard Ltd held the remaining 48.3% and 47.9% of the common membership interest as of such respective dates. Additionally, LAZ-MD Holdings is the sole owner of the one issued and outstanding share of Class B common stock (the
Class B common stock) of Lazard Ltd as of both dates. As of September 30, 2007 and December 31, 2006, the Class B common stock provides LAZ-MD Holdings with approximately 51.7% and 52.1%, respectively, of the voting power but no economic
rights in Lazard Ltd. Subject to certain limitations, LAZ-MD Holdings exchangeable interests are exchangeable for Class A common stock. However, the Class B common stock will represent no less than 50.1% of the voting power until December 31, 2007.



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##### Table of Contents

LAZARD GROUP LLC



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)

(dollars in thousands,
unless otherwise noted)



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 three month and nine month periods ended September 30, 2007 such charges amounted to $50 and $150, respectively. For the three month and nine month periods ended
September 30, 2006 such charges amounted to $50 and $150, respectively.



Lazard Ltd Subsidiaries



As of September 30,
2007 and December 31, 2006, Lazard Groups receivables from subsidiaries of Lazard Ltd primarily relate to amounts paid by Lazard Group on behalf of such subsidiaries.



As of September 30, 2007, Lazard Groups payables to subsidiaries of Lazard Ltd include amounts payable in connection
with Lazard Groups acquisition of GAHL and Lazard Ltds acquisition of CWC and subsequent contribution of CWC to Lazard Group of approximately $46,700 (see Note 6 of Notes to Condensed Consolidated Financial Statements). In addition, as
of September 30, 2007 and December 31, 2006, Lazard Groups payables to subsidiaries of Lazard Ltd include amounts payable for the quarterly contract adjustment payments on the purchase contracts associated with the ESUs of $1,589 and $3,137,
respectively (see Note 2 of Notes to Condensed Consolidated Financial Statements).



|14. | REGULATORY AUTHORITIES
|--- | ----------------------



LFNY is a U.S. registered broker-dealer and is subject to the net capital requirements of Rule 15c3-1 under the Securities Exchange Act of 1934, as
amended. Under the basic method permitted by this rule, the minimum required net capital, as defined, is a specified fixed percentage of total aggregate indebtedness recorded on LFNYs statement of financial condition, or $5, whichever is
greater. At September 30, 2007, LFNYs regulatory net capital was $202,185 which exceeded the minimum requirement by $196,173.



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 September 30, 2007, the aggregate regulatory net capital of the U.K. Subsidiaries was $241,673, which exceeded the minimum requirement by $188,138.



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) and Fonds Partenaires Gestion (private equity), are subject to regulation and supervision by the
Autorité des Marchés Financiers. At September 30, 2007, the consolidated regulatory net capital of CFLF was $182,692, which exceeded the minimum requirement set for regulatory capital levels by $78,902.



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 September 30, 2007, for those subsidiaries with regulatory capital requirements, their aggregate net capital was
$62,529, which exceeded the minimum required capital by $44,706.



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##### Table of Contents

LAZARD GROUP LLC



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)

(dollars in thousands,
unless otherwise noted)



At September 30, 2007, each of these subsidiaries individually was in compliance with its regulatory
capital requirements.



|15. | SEGMENT OPERATING RESULTS
|--- | -------------------------



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 advice on mergers and acquisitions, restructurings, capital raising and similar transactions, and Asset Management which includes 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 LFB. The Company also
allocates outstanding indebtedness to its Corporate segment.



The Companys segment information for the three month and nine month periods ended September 30, 2007 and 2006 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 expense 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.



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##### Table of Contents

LAZARD GROUP LLC



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)

(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 to operations with respect to net revenue, operating income and total assets:



|                   |  |                         |  |                                  |         |   |                                 |   |         |      |  |   |           |   |  |   |           |  
|------------------ |  | ----------------------- |  | -------------------------------- | ------- | - | ------------------------------- | - | ------- | ---- |  | - | --------- | - |  | - | --------- | -
|                   |  |                         |  | Three Months Ended September 30, |         |   | Nine Months Ended September 30, |  
|                   |  |                         |  | 2007                             |         |   | 2006                            |   |         | 2007 |  |   | 2006      |  
|Financial Advisory |  | Net Revenue             |  | $                                | 379,772 |   |                                 | $ | 187,050 |      |  | $ | 847,315   |   |  | $ | 671,245   |  
|                   |  | Operating Expenses      |  |                                  | 279,728 |   |                                 |   | 142,696 |      |  |   | 644,290   |   |  |   | 498,619   |  
|                   |  |                         |  |                                  |         |   |                                 |   |         |      |  |   |           |   |  |   |           |  
|                   |  | Operating Income        |  | $                                | 100,044 |   |                                 | $ | 44,354  |      |  | $ | 203,025   |   |  | $ | 172,626   |  
|                   |  |                         |  |                                  |         |   |                                 |   |         |      |  |   |           |   |  |   |           |  
|                   |  |                         |  |                                  |        
|Asset Management   |  | Net Revenue             |  | $                                | 179,941 |   |                                 | $ | 125,388 |      |  | $ | 493,715   |   |  | $ | 376,792   |  
|                   |  | Operating Expenses      |  |                                  | 135,411 |   |                                 |   | 103,080 |      |  |   | 368,444   |   |  |   | 294,512   |  
|                   |  |                         |  |                                  |         |   |                                 |   |         |      |  |   |           |   |  |   |           |  
|                   |  | Operating Income        |  | $                                | 44,530  |   |                                 | $ | 22,308  |      |  | $ | 125,271   |   |  | $ | 82,280    |  
|                   |  |                         |  |                                  |         |   |                                 |   |         |      |  |   |           |   |  |   |           |  
|                   |  |                         |  |                                  |        
|Corporate          |  | Net Revenue             |  | $                                | (17,826 | ) |                                 | $ | (15,052 | )    |  | $ | (8,901    | ) |  | $ | (27,612   | )
|                   |  | Operating Expenses      |  |                                  | 8,178   |   |                                 |   | 2,380   |      |  |   | 32,927    |   |  |   | 14,772    |  
|                   |  |                         |  |                                  |         |   |                                 |   |         |      |  |   |           |   |  |   |           |  
|                   |  | Operating Income (Loss) |  | $                                | (26,004 | ) |                                 | $ | (17,432 | )    |  | $ | (41,828   | ) |  | $ | (42,384   | )
|                   |  |                         |  |                                  |         |   |                                 |   |         |      |  |   |           |   |  |   |           |  
|                   |  |                         |  |                                  |        
|Total              |  | Net Revenue             |  | $                                | 541,887 |   |                                 | $ | 297,386 |      |  | $ | 1,332,129 |   |  | $ | 1,020,425 |  
|                   |  | Operating Expenses      |  |                                  | 423,317 |   |                                 |   | 248,156 |      |  |   | 1,045,661 |   |  |   | 807,903   |  
|                   |  |                         |  |                                  |         |   |                                 |   |         |      |  |   |           |   |  |   |           |  
|                   |  | Operating Income        |  | $                                | 118,570 |   |                                 | $ | 49,230  |      |  | $ | 286,468   |   |  | $ | 212,522   |  
|                   |  |                         |  |                                  |         |   |                                 |   |         |      |  |   |           |   |  |   |           |  



|                   |  |   |           |  |   |           |  |                    |  |                   |  | 
|------------------ |  | - | --------- |  | - | --------- |  | ------------------ |  | ----------------- |  | 
|                   |  |   |           | 
|                   |  |   |           |  |   |           |  | As of             
|                   |  |   |           |  |   |           |  | September 30, 2007 |  | December 31, 2006
|Total Assets:      |  |   |           |  |   |           |  |                    |  |                  
|Financial Advisory |  | $ | 624,740   |  | $ | 452,627  
|Asset Management   |  |   | 528,063   |  |   | 418,538  
|Corporate          |  |   | 2,287,188 |  |   | 2,316,042
|                   |  |   |           |  |   |           |  |                    |  |                   |  | 
|Total              |  | $ | 3,439,991 |  | $ | 3,187,207
|                   |  |   |           |  |   |           |  |                    |  |                   |  | 



|16. | SUBSEQUENT EVENT
|--- | ----------------



On October 11, 2007, Sapphire Industrials Corp. (Sapphire), a newly-organized special purpose acquisition company formed by Lazard Funding,
filed a registration statement on Form S-1 with the SEC to raise $500,000 (the IPO), through the sale of 50 million units at an expected offering price of $10 per unit. Sapphire also granted the underwriter a 30-day option to purchase up
to an additional 7,500,000 units to cover over-allotments, if any. Each unit consists 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 $7.50.



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 (collectively referred to as the initial business combination).



In connection with the formation of Sapphire, on October 2, 2007 Lazard
Funding purchased from Sapphire 10,884,750 units at a total cost of approximately $109. In addition, assuming the IPO is consummated, (i)



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##### Table of Contents

LAZARD GROUP LLC



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)

(dollars in thousands,
unless otherwise noted)



Sapphire has asked the underwriter to reserve 5,000,000 units in the IPO for sale to Lazard at a purchase price equal to the expected public offering price
of $10 per unit (for an aggregate purchase price of $50,000); (ii) Lazard has committed to purchase an aggregate of 10,000,000 warrants from Sapphire at a price of $1.00 per warrant (for a total purchase price of $10,000); and (iii) Lazard will
enter into an agreement with the underwriter to purchase, subsequent to the IPO and prior to the closing of the initial business combination, an additional $40,000 of Sapphire common shares in open market purchases (and/or newly-issued units
purchased directly from Sapphire at the expected offering price of $10 per unit).



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##### Table of Contents

|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------



The following discussion should be read in conjunction with Lazard Groups condensed consolidated financial
statements and the related notes included elsewhere in this Form 10-Q.



Forward-Looking Statements and Certain Factors that May Affect Our Business



Management has included in Parts I and II of this Quarterly Report on Form 10-Q (the Form 10-Q), including in its Managements Discussion and Analysis of Financial Condition and Results of Operations
(the MD&A), statements 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. These factors include, but are not limited to, those discussed in our Annual Report on Form 10-K for the year ended
December 31, 2006 (the Form 10-K) under the caption Risk Factors, including the following:



| |  |  | a decline 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.
| | - |  | ---------------------



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



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-Q 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,
| | - |  | -------------------------------



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



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



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



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##### Table of Contents

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



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



| |  |  | expected tax rate,
| | - |  | ------------------



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



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



| |  |  | effects on our businesses resulting from the separation and recapitalization transactions, including the equity public offering and the financing transactions,
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



Lazard Group 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 its businesses, including the anticipated release of quarterly financial results, quarterly financial, statistical and business-related information
and the posting of updates of assets under management (AUM) in various mutual funds, hedge funds and other investment products managed by Lazard Asset Management LLC and its subsidiaries. Monthly updates of these funds are posted to the
Lazard Asset Management website (www.lazardnet.com) on the 3rd business day following the end of each month. Investors can link to Lazard and its operating company websites through www.lazard.com. Our websites and the information
contained therein or connected thereto are not incorporated into this quarterly report.



Business Summary



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



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



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



In addition, the Company records selected
other activities in Corporate, including management of cash, certain investments, and the commercial banking activities of Lazard Groups Paris-based Lazard Frères Banque SA (LFB). LFB is a registered bank regulated by the
Banque de France. LFBs primary commercial banking operations include the management of the treasury positions of the Companys Paris House through its money market desk and, to a lesser extent, credit activities relating to securing loans
granted to clients of Lazard Frères Gestion SAS (LFG) and custodial oversight over assets of various clients. In addition, LFB also operates many support functions of the Paris House. The Company also allocates outstanding
indebtedness to Corporate.



For the three month and nine month
periods ended September 30, 2007 and 2006 the Companys consolidated net revenue was derived from the following business segments:



|                   |  |                                 |   |  |                                 |   |  |      |   |  |      |  
|------------------ |  | ------------------------------- | - |  | ------------------------------- | - |  | ---- | - |  | ---- | -
|                   |  | Three Months EndedSeptember 30, |   |  | Nine Months Ended September 30, |  
|                   |  | 2007                            |   |  | 2006                            |   |  | 2007 |   |  | 2006 |  
|Financial Advisory |  | 70                              | % |  | 63                              | % |  | 64   | % |  | 66   | %
|Asset Management   |  | 33                              |   |  | 42                              |   |  | 37   |   |  | 37   |  
|Corporate          |  | (3                              | ) |  | (5                              | ) |  | (1   | ) |  | (3   | )
|                   |  |                                 |   |  |                                 |   |  |      |   |  |      |  
|Total              |  | 100                             | % |  | 100                             | % |  | 100  | % |  | 100  | %
|                   |  |                                 |   |  |                                 |   |  |      |   |  |      |  



29



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##### Table of Contents



Business Environment



Economic and market conditions, particularly global M&A activity, can
significantly affect our financial performance. 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 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 the Form 10-K. Net income 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



Global M&A activity for the three month and nine
month periods ended September 30, 2007 increased versus the corresponding prior year periods for both global and trans-atlantic completed transactions and announced transactions, as evidenced by the following industry statistics regarding the volume
of transactions:



|                            |  |                                  |     |      |                                 |                |  |    |      |  |      |       |                  |   |       |  |    |  
|--------------------------- |  | -------------------------------- | --- | ---- | ------------------------------- | -------------- |  | -- | ---- |  | ---- | ----- | ---------------- | - | ----- |  | -- | -
|                            |  | Three Months Ended September 30, |     |      | Nine Months Ended September 30, |               
|                            |  | 2007                             |     | 2006 |                                 | % Incr /(Decr) |  |    | 2007 |  | 2006 |       | %    Incr/(Decr) |  
|                            |  | ($ in billions)                  |    
|Completed M&A Transactions: |  |                                  |     |      |                                 |                |  |    |      |  |      |       |                  |   |       |  |    |  
|Global                      |  | $                                | 745 |      | $                               | 675            |  | 10 | %    |  | $    | 2,513 |                  | $ | 2,016 |  | 25 | %
|Trans-Atlantic              |  |                                  | 73  |      |                                 | 50             |  | 46 | %    |  |      | 195   |                  |   | 146   |  | 34 | %
|                            |  |                                  |     |      |                                 |               
|Announced M&A Transactions: |  |                                  |     |      |                                 |                |  |    |      |  |      |       |                  |   |       |  |    |  
|Global                      |  |                                  | 879 |      |                                 | 667            |  | 32 | %    |  |      | 3,312 |                  |   | 2,398 |  | 38 | %
|Trans-Atlantic              |  |                                  | 63  |      |                                 | 47             |  | 34 | %    |  |      | 257   |                  |   | 174   |  | 48 | %

---

|Source: | Thomson Financial as of October 15, 2007
|------- | ----------------------------------------



While overall M&A industry statistics regarding the volume of announced transactions remained strong in the third quarter of 2007, the number and size
of announced transactions began to slow down toward the end of the quarter. According to global industry statistics, there was a reduction in the number of billion dollar deals, with such deals taking longer to close than in the first half of 2007
which was attributable, in part, to less favorable financing conditions in the third quarter of 2007.



Activity in financial restructuring during the nine month period ended September 30, 2007 continued at low levels, with the amount of corporate debt
defaults, according to Moodys Investors Service, Inc, at $4.4 billion slightly higher than the $4.2 billion recorded for the corresponding period in 2006.



Asset Management



As shown in the table below, global market indices at September 30, 2007 increased as compared to such indices at December 31, 2006, and increased more
significantly as compared to September 30, 2006.



|                             |  |                                          |   |  |                    |  
|---------------------------- |  | ---------------------------------------- | - |  | ------------------ | -
|                             |  | Percentage Change September 30, 2007 vs. |  
|                             |  | December 31, 2006                        |   |  | September 30, 2006 |  
|MSCI World Index             |  | 10                                       | % |  | 24                 | %
|CAC 40                       |  | 3                                        |   |  | 15                 |  
|DAX                          |  | 19                                       |   |  | 38                 |  
|FTSE 100                     |  | 4                                        |   |  | 11                 |  
|Dow Jones Industrial Average |  | 12                                       |   |  | 25                 |  
|NASDAQ                       |  | 12                                       |   |  | 24                 |  
|S&P 500                      |  | 8                                        |   |  | 20                 |  



Lazards
market-related changes in its AUM during the nine month and twelve month periods ended September 30, 2007 generally correspond to the changes in global market indices.



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##### Table of Contents

Key Financial Measures and Indicators



Net Revenue



The majority of Lazards Financial Advisory net revenue is earned from the successful completion of mergers, acquisitions, restructurings, 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 conjunction with activities of its former Capital Markets and Other segment. In general, such fees are shared equally with Lazard Capital Markets, a wholly-owned subsidiary of LFCM
Holdings, LLC (LFCM Holdings). Subsequent to the equity public offering, Lazard entered into an arrangement with LFCM Holdings under which LFCM Holdings would continue to distribute securities in public offerings originated by
Lazards Financial Advisory business in a manner similar to its practice prior to the equity public offering.



Lazards Asset Management segment includes Lazard Asset Management LLC and its subsidiaries (collectively referred to as LAM), LFG and
Fonds Partenaires Gestion (FPG). 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 in large part by Lazards investment performance and by Lazards ability to successfully attract and retain assets, as well as the broader performance of the global equity markets and, to a lesser extent,
fixed income markets. As a result, fluctuations in financial markets and client asset inflows and outflows have a direct effect on Asset Management net revenue and operating income. In addition, as Lazards AUM include significant assets that
are denominated in currencies other than U.S. dollars, changes in the value of the U.S. dollar relative to non-U.S. 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 also earns performance-based incentive fees on various investment products, including alternative investment funds such as hedge funds,
private equity funds, and traditional products. 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 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 future period net appreciation before any incentive fees can be earned.



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.



Corporate net revenue consists primarily
of net interest income, including LFB, and investment income, including investments in LAM-managed equity funds and principal investments in equities, private equity and alternative investment funds. Corporate net revenue can fluctuate due to fair
value adjustments, changes in interest rates and in interest rate and credit spreads and changes in the levels of cash, investments and indebtedness. Although Corporate net revenue during the nine month period ended September 30, 2007 represented
(1)% of Lazards net revenue, total assets in Corporate represented 66% of Lazards consolidated total assets as of September 30, 2007, principally attributable to assets associated with LFB and, to a lesser extent, investments in
LAM-managed funds and cash.



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Lazard expects to experience significant fluctuations in net revenue and operating income during 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, financial restructuring or capital raising activity, the timing of which is
uncertain and is not subject to Lazards control. Asset Management net revenue is also subject to periodic fluctuations. Asset Management fees are generally based on 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. In addition, incentive fees earned on AUM are generally not
recorded until potential uncertainties regarding the ultimate realizable amounts have been determined. For most of our funds that determination is made at year-end, and therefore such incentive fees are recorded in the fourth quarter of
Lazards fiscal year.



Operating Expenses



The majority of Lazards operating expenses relate to
compensation and benefits for employees and managing directors. The balance of Lazards operating expenses are referred to below as non-compensation expense, which includes costs for occupancy and equipment, marketing and business
development, technology and information services, professional services, fund administration and outsourced services and other expenses. Effective as of June 30, 2007, Lazard implemented a revised categorization of non-compensation expenses to
better reflect the manner in which we manage and review expenses. As such, certain expense categories were (i) eliminated and reclassified to other categories, (ii) added to enhance clarity to those expenses which may, for example, fluctuate
consistent with AUM, or (iii) renamed and combined to more effectively capture related expenses previously included in other categories.



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 condensed consolidated statements of income are attributable to taxes incurred by non-U.S. entities and by New York City
Unincorporated Business Tax attributable to Lazards operations apportioned to New York City.



Minority Interest In Net Income



Minority interest in net income principally consists of minority interests in various LAM-related general partnerships held directly by certain of our LAM
managing directors.



See Note 5 of Notes to Condensed
Consolidated Financial Statements for additional information regarding minority interest.



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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 of members deficiency. Foreign currency
remeasurement gains and losses on transactions in non-functional currencies are included in the consolidated statements of income.



A discussion of the Companys consolidated results of operations for the three month and nine month periods ended September 30, 2007 and 2006 is
set forth below, followed by a more detailed discussion of business segment results.



|                                              |  |                                 |         |                                 |   |         |  |      |           |  |   |          
|--------------------------------------------- |  | ------------------------------- | ------- | ------------------------------- | - | ------- |  | ---- | --------- |  | - | ---------
|                                              |  | Three Months EndedSeptember 30, |         | Nine Months Ended September 30,
|                                              |  | 2007                            |         | 2006                            |   | 2007    |  | 2006
|                                              |  | ($ in thousands)               
|Revenue                                       |  |                                 |         |                                 |   |         |  |      |           |  |   |          
|Investment banking and other advisory fees    |  | $                               | 369,857 |                                 | $ | 183,318 |  | $    | 813,145   |  | $ | 655,704  
|Money management fees                         |  |                                 | 164,405 |                                 |   | 116,113 |  |      | 448,749   |  |   | 346,584  
|Interest income                               |  |                                 | 23,346  |                                 |   | 11,661  |  |      | 63,596    |  |   | 29,433   
|Other                                         |  |                                 | 22,038  |                                 |   | 12,837  |  |      | 105,076   |  |   | 65,691   
|                                              |  |                                 |         |                                 |   |         |  |      |           |  |   |          
|Total revenue                                 |  |                                 | 579,646 |                                 |   | 323,929 |  |      | 1,430,566 |  |   | 1,097,412
|Interest expense                              |  |                                 | 37,759  |                                 |   | 26,543  |  |      | 98,437    |  |   | 76,987   
|                                              |  |                                 |         |                                 |   |         |  |      |           |  |   |          
|Net revenue                                   |  |                                 | 541,887 |                                 |   | 297,386 |  |      | 1,332,129 |  |   | 1,020,425
|                                              |  |                                 |         |                                 |   |         |  |      |           |  |   |          
|Operating Expenses                            |  |                                 |         |                                 |   |         |  |      |           |  |   |          
|Compensation and benefits                     |  |                                 | 323,150 |                                 |   | 180,979 |  |      | 792,228   |  |   | 615,261  
|Non-compensation expense                      |  |                                 | 100,167 |                                 |   | 67,177  |  |      | 253,433   |  |   | 192,642  
|                                              |  |                                 |         |                                 |   |         |  |      |           |  |   |          
|Total operating expenses                      |  |                                 | 423,317 |                                 |   | 248,156 |  |      | 1,045,661 |  |   | 807,903  
|                                              |  |                                 |         |                                 |   |         |  |      |           |  |   |          
|Operating Income                              |  |                                 | 118,570 |                                 |   | 49,230  |  |      | 286,468   |  |   | 212,522  
|Provision for income taxes                    |  |                                 | 24,368  |                                 |   | 8,081   |  |      | 54,564    |  |   | 36,727   
|                                              |  |                                 |         |                                 |   |         |  |      |           |  |   |          
|Income Before Minority Interest in Net Income |  |                                 | 94,202  |                                 |   | 41,149  |  |      | 231,904   |  |   | 175,795  
|Minority interest in net income               |  |                                 | 2,524   |                                 |   | 603     |  |      | 8,082     |  |   | 3,144    
|                                              |  |                                 |         |                                 |   |         |  |      |           |  |   |          
|Net Income                                    |  | $                               | 91,678  |                                 | $ | 40,546  |  | $    | 223,822   |  | $ | 172,651  
|                                              |  |                                 |         |                                 |   |         |  |      |           |  |   |          



The Company calculates
operating revenue for the three month and nine month periods ended September 30, 2007 and 2006 as follows:



|                                                             |  |                                 |         |   |                                 |   |         |      |  |   |           |   |  |   |           |  
|------------------------------------------------------------ |  | ------------------------------- | ------- | - | ------------------------------- | - | ------- | ---- |  | - | --------- | - |  | - | --------- | -
|                                                             |  | Three Months EndedSeptember 30, |         |   | Nine Months Ended September 30, |  
|                                                             |  | 2007                            |         |   | 2006                            |   |         | 2007 |  |   | 2006      |  
|                                                             |  | ($ in thousands)                |        
|Total revenue                                                |  | $                               | 579,646 |   |                                 | $ | 323,929 |      |  | $ | 1,430,566 |   |  | $ | 1,097,412 |  
|Deduct:                                                      |  |                                 |         |   |                                 |   |         |      |  |   |           |   |  |   |           |  
|LFB interest expense                                         |  |                                 | (8,083  | ) |                                 |   | (5,817  | )    |  |   | (26,150   | ) |  |   | (14,866   | )
|Revenue related to consolidation of LAM general partnerships |  |                                 | (2,521  | ) |                                 |   | (600    | )    |  |   | (8,076    | ) |  |   | (3,137    | )
|                                                             |  |                                 |         |   |                                 |   |         |      |  |   |           |   |  |   |           |  
|Operating revenue                                            |  | $                               | 569,042 |   |                                 | $ | 317,512 |      |  | $ | 1,396,340 |   |  | $ | 1,079,409 |  
|                                                             |  |                                 |         |   |                                 |   |         |      |  |   |           |   |  |   |           |  



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Certain key ratios, statistics and headcount information for the three month and nine month periods ended
September 30, 2007 and 2006 are set forth below:



|                                            |  |                                 |   |  |                                |   |  |      |   |  |      |  
|------------------------------------------- |  | ------------------------------- | - |  | ------------------------------ | - |  | ---- | - |  | ---- | -
|                                            |  | Three Months EndedSeptember
30, |   |  | Nine Months Ended September 30 |  
|                                            |  | 2007                            |   |  | 2006                           |   |  | 2007 |   |  | 2006 |  
|As a % of Net Revenue, By Revenue Category: |  |                                 |   |  |                                |   |  |      |   |  |      |  
|Investment banking and other advisory fees  |  | 68                              | % |  | 62                             | % |  | 61   | % |  | 64   | %
|Money management fees                       |  | 30                              |   |  | 39                             |   |  | 33   |   |  | 34   |  
|Interest income                             |  | 5                               |   |  | 4                              |   |  | 5    |   |  | 3    |  
|Other                                       |  | 4                               |   |  | 4                              |   |  | 8    |   |  | 6    |  
|Interest expense                            |  | (7                              | ) |  | (9                             | ) |  | (7   | ) |  | (7   | )
|                                            |  |                                 |   |  |                                |   |  |      |   |  |      |  
|Net Revenue                                 |  | 100                             | % |  | 100                            | % |  | 100  | % |  | 100  | %
|                                            |  |                                 |   |  |                                |   |  |      |   |  |      |  
|As a % of Net Revenue:                      |  |                                 |   |  |                                |   |  |      |   |  |      |  
|Operating Income                            |  | 22                              | % |  | 17                             | % |  | 22   | % |  | 21   | %
|                                            |  |                                 |   |  |                                |   |  |      |   |  |      |  
|                                            |  |                                 |  
|                                            |  | As of September 30,             |   |  |                                |   |  |      |  
|                                            |  | 2007                            |   |  | 2006                           |   |  |      |   |  |      |  
|                                            |  |                                 |   | 
|Headcount:                                  |  |                                 |   |  |                                |   |  |      |   |  |      |  
|Managing Directors:                         |  |                                 |   |  |                                |   |  |      |   |  |      |  
|Financial Advisory                          |  | 142                             |   |  | 125                            |   |  |      |   |  |      |  
|Asset Management                            |  | 47                              |   |  | 43                             |   |  |      |   |  |      |  
|Corporate                                   |  | 8                               |   |  | 8                              |   |  |      |   |  |      |  
|Limited Managing Directors                  |  | 6                               |   |  | 5                              |   |  |      |   |  |      |  
|Other Employees:                            |  |                                 |   |  |                                |   |  |      |   |  |      |  
|Business segment professionals              |  | 952                             |   |  | 794                            |   |  |      |   |  |      |  
|All other professionals and support staff   |  | 1,255                           |   |  | 1,197                          |   |  |      |   |  |      |  
|                                            |  |                                 |   |  |                                |   |  |      |   |  |      |  
|Total                                       |  | 2,410                           |   |  | 2,172                          |   |  |      |   |  |      |  
|                                            |  |                                 |   |  |                                |   |  |      |   |  |      |  



Operating Results



The Companys quarterly revenue and profits
can fluctuate materially depending on the number, size and timing of completed transactions on which it advised, as well as seasonality and other factors. Accordingly, the revenue and profits in any particular quarter may not be indicative of future
results. Lazard management believes that annual results are the most meaningful basis for comparison among present, historical and future periods.



Three Months Ended September 30, 2007 versus September 30, 2006



Net income for the three month period ended September 30, 2007 was $92 million, up $51 million, or 126%, versus $41 million for the corresponding period
in 2006. As described in Note 6 of Notes to Condensed Consolidated Financial Statements, the Company acquired Goldsmith, Agio, Helms & Lynner, LLC (GAHL) and Carnegie, Wylie & Company (Holdings) PTY LTD (CWC) during
the third quarter of 2007. Our results for the three month period ended September 30, 2007 include the results of such acquired businesses from their respective acquisition dates, which, in the aggregate, had an immaterial impact on net income.



Net revenue was $542 million for the three month period ended
September 30, 2007, up $245 million, or 82%, versus net revenue of $297 million in the corresponding period in 2006. During the 2007 period, fees from investment banking and other advisory activities were $370 million, an increase of $187 million,
or 102%, versus fees of $183 million in the corresponding period in 2006. The increase reflects both increased size and volume of completed M&A transactions during the three month period ended September 30, 2007 as compared to the



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corresponding period in 2006 and, to a lesser extent, net revenue attributable to the acquisitions of GAHL and CWC. Money management fees for the three month
period ended September 30, 2007, were $164 million, an increase of $48 million, or 42%, versus $116 million in the corresponding period in 2006. The increase in money management fees was principally the result of a $42 billion, or 44%, increase
in average AUM for the three month period ended September 30, 2007 as compared to the corresponding period in 2006. Interest income of $23 million for the three month period ended September 30, 2007 increased $12 million, or 100%, versus the
corresponding period in 2006 principally due to interest earned on higher average cash balances in the 2007 period. The higher cash balances were principally the result of the net proceeds from the primary offering of Class A common stock in
December, 2006, and from the June, 2007 issuance of the Companys $600 million principal amount of 6.85% senior notes, as well as interest income related to the commercial banking activities in LFB. Other revenue of $22 million for the three
month period ended September 30, 2007 increased by $9 million, or 72%, versus the corresponding period in 2006 principally due to increased net investment gains and dividends, as well as the net change in revenue recorded from LAM general
partnerships held directly by certain of our LAM managing directors. Such LAM-related revenue was approximately $3 million for the three month period ended September 30, 2007 versus approximately $1 million in the corresponding period in 2006. The
level of net investment gains was adversely impacted by the widening of credit spreads due to sub-prime concerns in the markets during the 2007 period. Interest expense of $38 million in the 2007 period increased by $11 million primarily as a result
of the incremental interest expense related to the June, 2007 issuance of the senior notes described above and from higher average customer deposits in LFB.



Compensation and benefits expense was $323 million for the three month period ended September 30, 2007, or 56.8% of operating revenue of $569 million in
the 2007 period, compared with $181 million, or 57.0% of operating revenue of $318 million for the corresponding period in 2006. The increase of $142 million, or 79%, is due to an increased level of operating revenue, as well as increased incentive
compensation relating to amortization of restricted stock units (RSUs) and additional compensation associated with an increased number of managing directors and business segment professionals, including incremental headcount related to
GAHL and CWC.



Non-compensation expense was $100 million for
the three month period ended September 30, 2007, or 17.6 % of operating revenue in the period, compared with $67 million, or 21.2% of operating revenue for the corresponding period in 2006. The percentage of non-compensation expense to operating
revenue can vary from quarter to quarter due to quarterly fluctuations in revenue, among other factors. Higher non-compensation expense reflects amortization expense of $18 million related to intangible assets acquired as a result of the
acquisitions of GAHL and CWC during the 2007 period, as well as current period increases in expenses related to (i) increased business activity, including fund administration and services associated with the growth in AUM, as well as higher costs
for electronic data services, (ii) business investments, including new office locations, travel and other market development costs, and (iii) the impact of the strengthening of foreign currencies against the U.S. Dollar.



Operating income, was $119 million for the three month period ended September
30, 2007, an increase of $69 million, or 141%, versus $49 million in the corresponding period in 2006. Operating income as a percentage of net revenue was 22% for three month period ended September 30, 2007 versus 17% for the 2006 period.



The provision for income taxes for the three month period
ended September 30, 2007 was $24 million, an increase of $16 million, versus $8 million for the corresponding period in 2006. The increase in the 2007 period was principally due to higher levels of income in the 2007 period. The Companys
effective tax rate was 20.6% for the three month period ended September 30, 2007, as compared to 16.4% for the corresponding period in 2006.



Minority interest in net income for the three month period ended September 30, 2007 was approximately $3 million, an increase of $2 million, versus
approximately $1 million in the corresponding period in 2006. The increase was due to a higher level of LAM GP-related revenue which is entirely offset in minority interest in net income due to the consolidation of such LAM entities.



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Nine Months Ended September 30, 2007
versus September 30, 2006



Net income for the nine month
period ended September 30, 2007 was $224 million, up $51 million, or 30%, versus $173 million for the corresponding period in 2006. As described in Note 6 of Notes to Condensed Consolidated Financial Statements, the Company acquired GAHL and CWC
during the third quarter of 2007. Our results for the nine month period ended September 30, 2007 include the results of such acquired businesses from their respective acquisition dates, which, in the aggregate, had an immaterial impact on net
income.



Net revenue was $1,332 million for the nine month
period ended September 30, 2007, up $312 million, or 31%, versus net revenue of $1,020 million in the corresponding period in 2006. During the 2007 period, fees from investment banking and other advisory activities were $813 million, an increase of
$157 million, or 24%, versus fees of $656 million in the corresponding period in 2006. The increase reflects both increased size and volume of completed M&A transactions during the nine month period ended September 30, 2007 as compared to the
corresponding period in 2006 and, to a lesser extent, net revenue attributable to the acquisitions of GAHL and CWC. Money management fees were $449 million, an increase of $102 million, or 29%, versus $347 million in the corresponding period in
2006. The increase in money management fees was principally the result of a $34 billion, or 36%, increase in average AUM for the nine month period ended September 30, 2007 as compared to the corresponding period in 2006. Interest income of
$64 million for the nine month period ended September 30, 2007 increased $34 million, or 116%, versus the corresponding period in 2006 principally due to interest earned on higher average cash balances in the 2007 period. The higher cash
balances were principally the result of the net proceeds from the primary offering of Class A common stock in December, 2006, and from the June, 2007 issuance of the Companys $600 million principal amount of 6.85% senior notes, as well as
interest income related to the commercial banking activities in LFB. Other revenue of $105 million for the nine month period ended September 30, 2007 increased $39 million, or 60%, versus the corresponding period in 2006 principally due to increased
net investment gains and dividends as well as the net change in revenue recorded from LAM general partnerships held directly by certain of our LAM managing directors. Such LAM-related revenue was approximately $8 million for the nine month period
ended September 30, 2007 versus $3 million in the corresponding period in 2006. Other revenue for the 2007 period also includes 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 13 of Notes to Condensed Consolidated Financial Statements). The corresponding period in 2006 included a $14 million gain recognized as a result of the termination of the Intesa joint
venture. Interest expense for the nine month period ended September 30, 2007 of $98 million increased by $21 million versus the corresponding period in 2006 primarily as a result of the incremental interest expense related to the June, 2007 issuance
of the senior notes described above and from higher average customer deposits in LFB.



Compensation and benefits expense was $792 million for the nine month period ended September 30, 2007, or 56.7% of operating revenue of $1,396 million in the 2007 period, compared with $615 million, or 57.0% of
operating revenue of $1,079 million for the corresponding period in 2006. The increase of $177 million, or 29%, is due to an increased level of operating revenue as well as increased incentive compensation relating to amortization of RSUs and
additional compensation associated with an increased number of managing directors and business segment professionals.



Non-compensation expense was $253 million for the nine month period ended September 30, 2007, or 18.2% of operating revenue in the nine month period ended
September 30, 2007, compared with $193 million, or 17.9% of operating revenue for the corresponding period in 2006. The increase in non-compensation expense reflects amortization expense of $18 million related to intangible assets acquired as a
result of the acquisitions of GAHL and CWC during the 2007 period, as well as current period increases in expenses related to (i) increased business activity, including fund administration and services associated with the growth in AUM, as well as
higher costs for electronic data services, (ii) business investments, including new office locations, recruitment costs, travel and other market development costs, and (iii) the impact of the strengthening of foreign currencies against the U.S.
Dollar, as well as one-time VAT and other cost recoveries recorded in the 2006 period. In addition, in the 2007 period, occupancy and equipment cost includes a charge of $4 million relating to abandoned leased facilities.



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Operating income, was $286
million for the nine month period ended September 30, 2007, an increase of $74 million versus $213 million in the corresponding period in 2006. Operating income as a percentage of net revenue was 22% for the nine month period ended September 30,
2007 versus 21% for the 2006 period.



The provision for income
taxes for the nine month period ended September 30, 2007 was $55 million, an increase of $18 million, versus $37 million for the corresponding period in 2006. The increase in 2007 was principally due to higher levels of income in the 2007 period.
The Companys effective tax rate was 19.0% for the nine month period ended September 30, 2007 as compared to 17.3% for the corresponding period in 2006.



Minority interest in net income for the nine month period ended September 30, 2007 was $8 million, an increase of $5 million, versus $3 million in the
corresponding period in 2006. The increase was due to the higher level of LAM GP-related revenue which is entirely offset in minority interest in net income due to the consolidation of such LAM entities.



Business Segments



The following data discusses net revenue and operating income for the Companys business segments, Financial Advisory
and Asset Management. Each segments operating expenses include (i) compensation and benefits expenses that are 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 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. In addition, data is also presented below for the Companys Corporate segment.



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Financial Advisory



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



|                                                |  |                                 |         |   |                                |           |   |      |   |         |      |  |   |         |  
|----------------------------------------------- |  | ------------------------------- | ------- | - | ------------------------------ | --------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                |  | Three Months EndedSeptember 30, |         |   | Nine Months EndedSeptember 30, |          
|                                                |  | 2007                            |         |   | 2006                           |           |   | 2007 |   |         | 2006 | 
|                                                |  | ($ in thousands)                |        
|M&A                                             |  | $                               | 295,401 |   |                                | $153,215  |   |      | $ | 655,787 |      |  | $ | 545,054 |  
|Financial Restructuring                         |  |                                 | 56,161  |   |                                | 15,562    |   |      |   | 94,854  |      |  |   | 50,202  |  
|Corporate Finance and Other                     |  |                                 | 28,210  |   |                                | 18,273    |   |      |   | 96,674  |      |  |   | 75,989  |  
|                                                |  |                                 |         |   |                                |           |   |      |   |         |      |  |   |         |  
|Net Revenue                                     |  |                                 | 379,772 |   |                                | 187,050   |   |      |   | 847,315 |      |  |   | 671,245 |  
|                                                |  |                                 |         |   |                                |           |   |      |   |         |      |  |   |         |  
|Direct Compensation and Benefits                |  |                                 | 198,730 |   |                                | 94,615    |   |      |   | 455,928 |      |  |   | 360,983 |  
|Other Operating Expenses (a)                    |  |                                 | 80,998  |   |                                | 48,081    |   |      |   | 188,362 |      |  |   | 137,636 |  
|                                                |  |                                 |         |   |                                |           |   |      |   |         |      |  |   |         |  
|Total Operating Expenses                        |  |                                 | 279,728 |   |                                | 142,696   |   |      |   | 644,290 |      |  |   | 498,619 |  
|                                                |  |                                 |         |   |                                |           |   |      |   |         |      |  |   |         |  
|Operating Income                                |  | $                               | 100,044 |   |                                | $  44,354 |   |      | $ | 203,025 |      |  | $ | 172,626 |  
|                                                |  |                                 |         |   |                                |           |   |      |   |         |      |  |   |         |  
|Operating Income as a Percentage of Net Revenue |  |                                 | 26      | % |                                | 24        | % |      |   | 24      | %    |  |   | 26      | %
|                                                |  |                                 |         |   |                                |           |   |      |   |         |      |  |   |         |  
|                                                |  |                                 |        
|                                                |  | As of September 30,             |         |   |                                |           |   |      |  
|                                                |  | 2007                            |         |   | 2006                           |           |   |      |   |         |      | 
|Headcount (b):                                  |  |                                 |         |   |                                |           |   |      |   |         |      |  |   |         |  
|Managing Directors                              |  |                                 | 142     |   |                                | 125       |   |      |   |         |      |  |   |         |  
|Limited Managing Directors                      |  |                                 | 3       |   |                                | 2         |   |      |   |         |      |  |   |         |  
|Other Employees:                                |  |                                 |         |   |                                |           |   |      |   |         |      |  |   |         |  
|Business segment professionals                  |  |                                 | 635     |   |                                | 501       |   |      |   |         |      |  |   |         |  
|All other professionals and support staff       |  |                                 | 274     |   |                                | 246       |   |      |   |         |      |  |   |         |  
|                                                |  |                                 |         |   |                                |           |   |      |   |         |      |  |   |         |  
|Total                                           |  |                                 | 1,054   |   |                                | 874       |   |      |   |         |      |  |   |         |  
|                                                |  |                                 |         |   |                                |           |   |      |   |         |      |  |   |         |  

---

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

|(b) | Includes, in the 2007 period, an aggregate of six managing directors, 101 business segment professionals and 47 other professionals and support staff applicable to GAHL and CWC. In
addition, both periods exclude headcount related to indirect support functions, with such headcount being included in Corporate.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Net revenue trends in Financial Advisory for M&A and Financial Restructuring generally are correlated to the volume of completed industry-wide mergers
and acquisitions 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, material variances in the level of
mergers and acquisitions activity in a particular geography where Lazard has significant market share or the number of its advisory engagements with respect to larger-sized transactions can cause its results to diverge from industry-wide activity.
Certain Lazard client statistics and global industry statistics are set forth below:



|                                                                   |  |                                |   |  |      |  
|------------------------------------------------------------------ |  | ------------------------------ | - |  | ---- | -
|                                                                   |  | Nine Months EndedSeptember 30, |  
|                                                                   |  | 2007                           |   |  | 2006 |  
|Lazard Statistics:                                                 |  |                                |   |  |      |  
|Number of Clients:                                                 |  |                                |   |  |      |  
|Total                                                              |  | 460                            |   |  | 377  |  
|With Fees Greater than $1 million                                  |  | 158                            |   |  | 144  |  
|Percentage of Total Financial Advisory Revenue from Top 10 Clients |  | 23                             | % |  | 25   | %
|Number of M&A Transactions Completed Greater than $1 billion (a)   |  | 34                             |   |  | 37   |  

---

|(a) | Source: Thomson Financial as of October 15, 2007
|--- | ------------------------------------------------



38



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##### Table of Contents



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 United States, Europe (principally in the U.K., France, Italy, Spain and Germany) and the
rest of the world (principally in Australia, which, for the 2007 periods, includes the impact of the acquisition of CWC).



|              |  |                                 |   |  |                                |   |  |      |   |  |      |  
|------------- |  | ------------------------------- | - |  | ------------------------------ | - |  | ---- | - |  | ---- | -
|              |  | Three MonthsEnded September 30, |   |  | Nine MonthsEnded September 30, |  
|              |  | 2007                            |   |  | 2006                           |   |  | 2007 |   |  | 2006 |  
|United States |  | 46                              | % |  | 41                             | % |  | 49   | % |  | 54   | %
|Europe        |  | 43                              |   |  | 58                             |   |  | 44   |   |  | 44   |  
|Rest of World |  | 11                              |   |  | 1                              |   |  | 7    |   |  | 2    |  
|              |  |                                 |   |  |                                |   |  |      |   |  |      |  
|Total         |  | 100                             | % |  | 100                            | % |  | 100  | % |  | 100  | %
|              |  |                                 |   |  |                                |   |  |      |   |  |      |  



The change in the
distribution of geographical revenues demonstrates that our revenue can fluctuate materially from quarter to quarter due to the number, size and timing of closings of completed transactions, as well as seasonality and other factors. As such, the
geographical distribution of revenues in any particular quarter may not be indicative of future results.



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 both mergers and acquisitions and financial restructuring transactions, depending on clients needs. This flexibility allows Lazard to better match its professional staff with the counter-cyclical business cycles of mergers and
acquisitions and financial restructurings. While Lazard measures revenue by practice area, Lazard does not separately measure the separate costs or profitability of mergers and acquisitions services as compared to financial restructuring services.
Accordingly, Lazard measures performance in its Financial Advisory segment based on overall segment net revenue and operating income margins.



Operating Results



The Companys quarterly revenue and profits can fluctuate materially depending on the number, size and timing of completed transactions on which
it advised, as well as seasonality and other factors. Accordingly, the revenue and profits in any particular quarter or period may not be indicative of future results. Lazard management believes that annual results are the most meaningful basis for
comparison among present, historical and future periods.



Three Months Ended September 30, 2007 versus September 30, 2006



In the 2007 period, Financial Advisory net revenue was $380 million, an increase of $193 million, or 103%, versus $187 million in the corresponding period in 2006. M&A net revenue of $295 million increased $142
million, or 93%, versus $153 million in the 2006 period. Corporate Finance and Other net revenue of $28 million increased by approximately $10 million, or 54%, versus net revenue of $18 million in the corresponding period in 2006. Financial
Restructuring net revenue of $56 million increased by $41 million, or 261%, versus $15 million in the 2006 period.



The higher level of financial advisory revenues for the three month period ended September 30, 2007 as compared to the corresponding period in 2006
reflects both the increased volume and size of transactions completed. Significant M&A transactions completed for the three month period ended September 30, 2007 included Alinta, Arrow International, Dollar General, Eckes Granini, First Choice
Holidays, Keyspan, Louis Dreyfus Group, Mellon Financial, Microsoft and Nestlé. Restructuring assignments generating significant fees in the 2007 period included Eurotunnel, Northwest Airlines, Tower Automotive and the United Auto Workers.



Operating expenses were $280 million in the 2007 period, an
increase of approximately $137 million, or 96%, as compared with $143 million in the corresponding period in 2006. Compensation and benefits expense in the 2007 period increased by $104 million, or 110% as compared to the 2006 period, due to an
increased level of operating



39



---

##### Table of Contents

revenue, including an increase in amortization of RSUs. All other operating expenses increased by $33 million, or 68%, primarily due to amortization of $18
million of intangible assets acquired as a result of the GAHL and CWC acquisitions in the 2007 period as well as increased business development-related activities and the impact of the strengthening of foreign currencies against the U.S. Dollar.



Financial Advisory operating income was $100 million for the
2007 period, an increase of $56 million, or 126%, versus operating income of $44 million in the corresponding period in 2006. Operating income as a percentage of segment net revenue was 26% for the 2007 period versus 24% in the 2006 period.



Nine Months Ended September 30, 2007 versus September 30,
2006



In the 2007 period, Financial Advisory net revenue
was $847 million, an increase of $176 million, or 26%, as compared to $671 million in the corresponding period in 2006. M&A net revenue of $656 million increased $111 million, or 20%, versus $545 million in the 2006 period. Corporate Finance and
Other net revenue of $97 million increased by $21 million, or 27%, versus $76 million in the corresponding period in 2006. Financial Restructuring net revenue of $95 million increased by $45 million, or 89%, versus $50 million in the 2006 period.



Operating expenses were $644 million in the 2007 period, an
increase of approximately $146 million, or 29%, versus operating expenses of $498 million in the corresponding period in 2006. Compensation and benefits expense was $456 million, an increase of $95 million, or 26%, versus the 2006 period, due to an
increased level of operating revenue, including an increase in amortization of RSUs. All other operating expenses increased by $51 million, or 37%, primarily due to amortization of $18 million of intangible assets acquired as a result of the GAHL
and CWC acquisitions as well as increased business development-related activities, the impact of the strengthening of foreign currencies against the U.S. Dollar, and the net impact of one-time cost recoveries in the 2006 period.



Financial Advisory operating income was $203 million for the 2007 period, an
increase of $30 million, or 18%, versus operating income of $173 million in the corresponding period in 2006. Operating income as a percentage of segment net revenue was 24% for the 2007 period versus 26% in the 2006 period.



Asset Management



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



|                                        |  |                   |         |                  |   |        
|--------------------------------------- |  | ----------------- | ------- | ---------------- | - | -------
|                                        |  | As of            
|                                        |  | September 30,2007 |         | December 31,2006
|                                        |  | ($ in millions)  
|AUM:                                    |  |                   |         |                  |   |        
|International Equities                  |  | $                 | 52,801  |                  | $ | 52,033 
|Global Equities                         |  |                   | 45,570  |                  |   | 26,453 
|U.S. Equities                           |  |                   | 22,231  |                  |   | 13,708 
|                                        |  |                   |         |                  |   |        
|Total Equities                          |  |                   | 120,602 |                  |   | 92,194 
|                                        |  |                   |         |                  |   |        
|European and International Fixed Income |  |                   | 10,487  |                  |   | 8,418  
|Global Fixed Income                     |  |                   | 1,572   |                  |   | 1,095  
|U.S. Fixed Income                       |  |                   | 1,897   |                  |   | 2,310  
|                                        |  |                   |         |                  |   |        
|Total Fixed Income                      |  |                   | 13,956  |                  |   | 11,823 
|                                        |  |                   |         |                  |   |        
|Alternative Investments                 |  |                   | 3,609   |                  |   | 3,457  
|Private Equity                          |  |                   | 1,117   |                  |   | 883    
|Cash Management                         |  |                   | 2,800   |                  |   | 2,080  
|                                        |  |                   |         |                  |   |        
|Total AUM                               |  | $                 | 142,084 |                  | $ | 110,437
|                                        |  |                   |         |                  |   |        



40



---

##### Table of Contents

Average AUM for the three month and nine month periods ended September 30, 2007 and 2006 is set forth
below. Average AUM is based on an average of quarterly ending balances for the respective periods.



|            |  |                                 |         |                                |   |        |  |      |         |  |   |       
|----------- |  | ------------------------------- | ------- | ------------------------------ | - | ------ |  | ---- | ------- |  | - | ------
|            |  | Three Months EndedSeptember 30, |         | Nine Months EndedSeptember 30,
|            |  | 2007                            |         | 2006                           |   | 2007   |  | 2006
|            |  | ($ in millions)                
|Average AUM |  | $                               | 138,717 |                                | $ | 96,618 |  | $    | 128,181 |  | $ | 94,151
|            |  |                                 |         |                                |   |        |  |      |         |  |   |       



The following is a
summary of changes in AUM for the three month and nine month periods ended September 30, 2007 and 2006.



|                             |  |                                 |         |      |                                |        |      |  |      |         |  |   |       
|---------------------------- |  | ------------------------------- | ------- | ---- | ------------------------------ | ------ | ---- |  | ---- | ------- |  | - | ------
|                             |  | Three Months EndedSeptember
30, |         |      | Nine Months EndedSeptember
30,
|                             |  | 2007                            |         | 2006 |                                |        | 2007 |  | 2006
|                             |  | ($ in millions)                
|AUMBeginning of Period      |  | $                               | 135,350 |      | $                              | 93,901 |      |  | $    | 110,437 |  | $ | 88,234
|Net Flows                    |  |                                 | 3,295   |      |                                | 1,693  |      |  |      | 17,485  |  |   | 983   
|Market Appreciation          |  |                                 | 2,733   |      |                                | 3,792  |      |  |      | 13,122  |  |   | 9,337 
|Foreign Currency Adjustments |  |                                 | 706     |      |                                | (52    | )    |  |      | 1,040   |  |   | 780   
|                             |  |                                 |         |      |                                |        |      |  |      |         |  |   |       
|AUMEnd of Period            |  | $                               | 142,084 |      | $                              | 99,334 |      |  | $    | 142,084 |  | $ | 99,334
|                             |  |                                 |         |      |                                |        |      |  |      |         |  |   |       



AUM as of September
30, 2007 was $142.1 billion, an increase of $31.6 billion as compared to AUM as of December 31, 2006. Private equity AUM as of September 30, 2007 and December 31, 2006 includes $0.8 billion and $0.6 billion at the respective dates which
represents assets held by an investment company for which Lazard may earn carried interests. During the nine month period ended September 30, 2007, net inflows of $17.5 billion were accompanied by market appreciation of $13.1 billion and the
positive impact of changes in foreign currency exchange rates of approximately $1.0 billion. Net inflows were experienced primarily in U.S. and Global Equity products.



During the three month period ended September 30, 2007, average AUM was $138.7 billion, an increase of approximately $42.1 billion, or
44%, versus average AUM of $96.6 billion in the corresponding period in 2006. For the nine month period, ended September 30, 2007, average AUM was $128.2 billion, an increase of approximately $34.0 billion, or 36%, versus $94.2 billion in the
corresponding period in 2006.



The following table summarizes
the operating results of the Asset Management segment.



|                                                                                           |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|------------------------------------------------------------------------------------------ |  | ------------------------------- | ------- | - | ------------------------------ | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                                                           |  | Three Months EndedSeptember 30, |         |   | Nine Months EndedSeptember 30, |  
|                                                                                           |  | 2007                            |         |   | 2006                           |   |         | 2007 |  |   | 2006    |  
|                                                                                           |  | ($ in thousands)                |        
|Management Fees                                                                            |  | $                               | 157,424 |   |                                | $ | 112,726 |      |  | $ | 430,293 |   |  | $ | 328,734 |  
|Incentive Fees                                                                             |  |                                 | 7,315   |   |                                |   | 3,423   |      |  |   | 18,073  |   |  |   | 17,362  |  
|Other Income                                                                               |  |                                 | 12,681  |   |                                |   | 8,639   |      |  |   | 37,273  |   |  |   | 27,559  |  
|                                                                                           |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Sub-total                                                                                  |  |                                 | 177,420 |   |                                |   | 124,788 |      |  |   | 485,639 |   |  |   | 373,655 |  
|LAM GP-Related Revenue                                                                     |  |                                 | 2,521   |   |                                |   | 600     |      |  |   | 8,076   |   |  |   | 3,137   |  
|                                                                                           |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Net Revenue                                                                                |  |                                 | 179,941 |   |                                |   | 125,388 |      |  |   | 493,715 |   |  |   | 376,792 |  
|                                                                                           |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Direct Compensation and Benefits                                                           |  |                                 | 85,949  |   |                                |   | 60,708  |      |  |   | 226,038 |   |  |   | 173,698 |  
|Other Operating Expenses (a)                                                               |  |                                 | 49,462  |   |                                |   | 42,372  |      |  |   | 142,406 |   |  |   | 120,814 |  
|                                                                                           |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Total Operating Expenses                                                                   |  |                                 | 135,411 |   |                                |   | 103,080 |      |  |   | 368,444 |   |  |   | 294,512 |  
|                                                                                           |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Operating Income                                                                           |  | $                               | 44,530  |   |                                | $ | 22,308  |      |  | $ | 125,271 |   |  | $ | 82,280  |  
|                                                                                           |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Operating Income, excluding LAM GP-Related Revenue (b)                                     |  | $                               | 42,009  |   |                                | $ | 21,708  |      |  | $ | 117,195 |   |  | $ | 79,143  |  
|                                                                                           |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Operating Income as a Percentage of Net Revenue                                            |  |                                 | 25      | % |                                |   | 18      | %    |  |   | 25      | % |  |   | 22      | %
|                                                                                           |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Operating Income, as a Percentage of Net Revenue, each excluding LAM GP-Related Revenue(b) |  |                                 | 24      | % |                                |   | 17      | %    |  |   | 24      | % |  |   | 21      | %
|                                                                                           |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  



41



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##### Table of Contents

|                                                    |  |                     |  |     
|--------------------------------------------------- |  | ------------------- |  | ----
|                                                    |  | As of September 30,
|                                                    |  | 2007                |  | 2006
|Headcount (c):                                      |  |                     |  |     
|Managing Directors                                  |  | 47                  |  | 43  
|Limited Managing Directors                          |  | 3                   |  | 2   
|Other Employees:                                    |  |                     |  |     
|Business segment professionals                      |  | 308                 |  | 285 
|All other professionals and support staff functions |  | 366                 |  | 326 
|                                                    |  |                     |  |     
|Total                                               |  | 724                 |  | 656 
|                                                    |  |                     |  |     

---

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

|(b) | Management also evaluates the results of Asset Management based on revenue and operating income excluding the LAM GP-related revenue since such revenue is offset entirely by
minority interest which is not a charge to operating income.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(c) | Excludes headcount related to indirect support functions. Such headcount is included in the Corporate headcount.
|--- | ----------------------------------------------------------------------------------------------------------------



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



|              |  |                                 |   |  |                                 |   |  |      |   |  |      |  
|------------- |  | ------------------------------- | - |  | ------------------------------- | - |  | ---- | - |  | ---- | -
|              |  | Three Months EndedSeptember 30, |   |  | Nine Months Ended September 30, |  
|              |  | 2007                            |   |  | 2006                            |   |  | 2007 |   |  | 2006 |  
|United States |  | 53                              | % |  | 55                              | % |  | 53   | % |  | 56   | %
|Europe        |  | 37                              |   |  | 37                              |   |  | 37   |   |  | 36   |  
|Rest of World |  | 10                              |   |  | 8                               |   |  | 10   |   |  | 8    |  
|              |  |                                 |   |  |                                 |   |  |      |   |  |      |  
|Total         |  | 100                             | % |  | 100                             | % |  | 100  | % |  | 100  | %
|              |  |                                 |   |  |                                 |   |  |      |   |  |      |  



Operating
Results



Three Months Ended September 30, 2007
versus September 30, 2006



Asset Management net revenue
was $180 million for the three month period in 2007, an increase of $55 million, or 44%, versus $125 million in the corresponding period in 2006. Management fees for the 2007 period were $157 million, up $45 million, or 40%, compared to
$112 million in the 2006 period. The percentage increase in average AUM was greater than the percentage increase in management fees principally due to a change in mix of certain investment products. Incentive fees earned for the 2007 period were $7
million, an increase of $4 million, as compared to $3 million in the 2006 period. Other income was $13 million, an increase of $4 million, versus $9 million in the corresponding period in 2006. In addition, during the three month period ended
September 30, 2007, revenue of approximately $3 million was recorded from LAM general partnerships held directly by certain of our LAM managing directors, with these amounts also included as minority interest in net income, versus
approximately $1 million for the corresponding period in 2006.



Operating expenses were $135 million for the 2007 period, an increase of $32 million, or 31%, versus operating expenses of $103 million for the 2006 period. Compensation and benefits expense increased $25 million, or 42%, as compared
to the 2006 period. The increase was principally due to increases in incentive compensation as a result of higher operating revenues, including an increase in amortization of RSUs, as well as additional compensation as a result of headcount
increases of managing directors, business segment professionals and other staff. Other operating expenses increased $7 million, or 17%, versus for the corresponding period in 2006, principally due to higher (i) fund administration and servicing
associated with the growth in AUM, (ii) occupancy costs and (iii) other business development activities.



Asset Management operating income was $45 million in the 2007 period, an increase of approximately $23 million, or 100%, as compared to operating
income of $22 million for the 2006 period. Operating income as a percentage of segment net revenue was 25% for the 2007 period versus 18% for the 2006 period. Excluding LAM GP-related revenue, operating income was approximately $42 million, or 24%
of net revenue, excluding LAM GP-related revenue, as compared to $22 million, or 17%, for the 2006 period.



42



---

##### Table of Contents



Nine Months Ended
September 30, 2007 versus September 30, 2006



Asset
Management net revenue was $494 million for the nine month period in 2007, an increase of $117 million, or 31%, versus $377 million in the corresponding period in 2006. Management fees for the 2007 period were $430 million, up $102
million, or 31%, compared to $328 million in the 2006 period. The percentage increase in average AUM was greater than the percentage increase in management fees principally due to a change in mix of certain investment products. Incentive fees earned
for the 2007 period were $18 million, slightly higher than the amount recorded for the 2006 period. Other income was $37 million, an increase of $10 million, or 35%, versus $27 million in the corresponding period in 2006. In addition, during the
nine month period ended September 30, 2007, revenue of $8 million was recorded from LAM general partnerships held directly by certain of our LAM managing directors, with these amounts also included as minority interest in net income,
versus $3 million for the corresponding period in 2006.



Operating expenses were $368 million for the 2007 period, an increase of $74 million, or 25%, versus operating expenses of $294 million for the 2006 period. Compensation and benefits expense increased $52 million, or 30%, as compared
to the 2006 period. The increase was principally due to increases in incentive compensation as a result of higher operating revenues, including an increase in amortization of RSUs, as well as additional compensation as a result of headcount
increases of managing directors, business segment professionals and other staff. Other operating expenses increased $22 million, or 18%, versus for the corresponding period in 2006, principally due to (i) higher occupancy costs, (ii) fund
administration and servicing associated with the growth in AUM and (iii) other business development activities, including professional fees for recruiting.



Asset Management operating income was $125 million in the 2007 period, an increase of $43 million, or 52%, as compared to operating income of $82 million
for the 2006 period. Operating income as a percentage of segment net revenue was 25% for the 2007 period versus 22% for the 2006 period. Excluding LAM GP-related revenue, operating income was $117 million, or 24% of net revenue, excluding
LAM GP-related revenue, as compared to approximately $79 million, or 21%, for the 2006 period.



Corporate

The following table summarizes the results of the Corporate segment:



|                                          |  |                     |         |   |                   |   |         |      |  |   |         |   |  |   |         |   |  |  |  |  |  |  |  | 
|----------------------------------------- |  | ------------------- | ------- | - | ----------------- | - | ------- | ---- |  | - | ------- | - |  | - | ------- | - |  |  |  |  |  |  |  | 
|                                          |  | Three Months Ended  |         |   | Nine Months Ended |  
|                                          |  | September 30,       |         |   | September 30,     |  
|                                          |  | 2007                |         |   | 2006              |   |         | 2007 |  |   | 2006    |  
|                                          |  | ($ in thousands)    |        
|Interest Income                           |  | $                   | 21,533  |   |                   | $ | 7,089   |      |  | $ | 49,546  |   |  | $ | 19,361  |  
|Interest Expense                          |  |                     | (41,883 | ) |                   |   | (24,893 | )    |  |   | (97,314 | ) |  |   | (73,157 | )
|                                          |  |                     |         |   |                   |   |         |      |  |   |         |   |  |   |         |   |  |  |  |  |  |  |  | 
|Net Interest (Expense)                    |  |                     | (20,350 | ) |                   |   | (17,804 | )    |  |   | (47,768 | ) |  |   | (53,796 | )
|Other Income                              |  |                     | 2,524   |   |                   |   | 2,752   |      |  |   | 38,867  |   |  |   | 26,184  |  
|                                          |  |                     |         |   |                   |   |         |      |  |   |         |   |  |   |         |  
|Net Revenue (Expense)                     |  |                     | (17,826 | ) |                   |   | (15,052 | )    |  |   | (8,901  | ) |  |   | (27,612 | )
|Operating Expenses                        |  |                     | 8,178   |   |                   |   | 2,380   |      |  |   | 32,927  |   |  |   | 14,772  |  
|                                          |  |                     |         |   |                   |   |         |      |  |   |         |   |  |   |         |  
|Operating Income (Loss)                   |  | $                   | (26,004 | ) |                   | $ | (17,432 | )    |  | $ | (41,828 | ) |  | $ | (42,384 | )
|                                          |  |                     |         |   |                   |   |         |      |  |   |         |   |  |   |         |  
|                                          |  |                     |        
|                                          |  | As of September 30, |         |   |                   |   |         |      | 
|                                          |  | 2007                |         |   | 2006              |   |         |      |  |   |         |  
|                                          |  |                     |         |  
|Headcount (a):                            |  |                     |         |   |                   |   |         |      |  |   |         |   |  |   |         |  
|Managing Directors                        |  |                     | 8       |   |                   |   | 8       |      |  |   |         |   |  |   |         |  
|Limited Managing Directors                |  |                     |         |   |                   |   | 1       |      |  |   |         |   |  |   |         |  
|                                          |  |                     |         |  
|Other Employees:                          |  |                     |         |   |                   |   |         |      |  |   |         |   |  |   |         |  
|Business segment professionals            |  |                     | 9       |   |                   |   | 8       |      |  |   |         |   |  |   |         |  
|All other professionals and support staff |  |                     | 615     |   |                   |   | 625     |      |  |   |         |   |  |   |         |  
|                                          |  |                     |         |   |                   |   |         |      |  |   |         |   |  |   |         |  
|Total                                     |  |                     | 632     |   |                   |   | 642     |      |  |   |         |   |  |   |         |  
|                                          |  |                     |         |   |                   |   |         |      |  |   |         |   |  |   |         |  

---

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



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Corporate Results of Operations



Three Months Ended September 30, 2007 versus September 30, 2006



Net interest expense of $20 million increased by $3
million, or 14%, principally due to the net incremental interest expense related to the June, 2007 issuance of the Companys $600 million principal amount of 6.85% senior notes, partially offset by interest income earned from higher average
cash balances in the 2007 period.



Other income of $3 million,
which includes investment gains, was substantially unchanged from the prior period. The level of net investment gains was adversely impacted by the widening of credit spreads due to sub-prime concerns in the markets during the 2007 period.



Operating expenses were $8 million in the period, an increase
of $6 million, or 243%, versus operating expenses of $2 million in the corresponding period in 2006. The increase was primarily due to increased compensation due to the increase in the Companys operating revenue, including an increase in
amortization of RSUs.



Nine Months Ended September 30, 2007
versus September 30, 2006



Net interest expense of $48
million decreased by $6 million, or 11%, principally due to interest income earned from higher average cash balances in the 2007 period, which was partially offset by the net incremental interest expense related to the June, 2007 issuance of the
Companys $600 million principal amount of 6.85% senior notes.



Other income of $39 million increased $13 million, or 48%, as compared to the 2006 period as a result of net investment gains and dividends. In addition, the 2007 period includes 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 13 of Notes to Condensed Consolidated Financial Statements). The corresponding period in 2006 included a $14 million gain recognized
as a result of the termination the strategic alliance with Intesa (see Note 7 of Notes to Condensed Consolidated Financial Statements).



Operating expenses were $33 million in the period, an increase of $18 million, or123%, versus operating expenses of $15 million in the
corresponding period in 2006. The increase was primarily due to increased compensation due to the increase in the Companys operating revenue, including an increase in amortization of RSUs.



Cash Flows



The Companys cash flows are influenced primarily by the timing of the receipt of Financial Advisory and Asset
Management fees, the timing of distributions to members and payment of incentive compensation bonuses to managing directors and employees. The M&A and Asset Management fee receivable collection periods generally are 60 days or less. However, the
collection time for restructuring transactions may extend beyond 60 days, particularly those that involve bankruptcies due to issues such as court-ordered holdbacks. In addition, fee receivables from our private fund advisory activities are
generally collected over a four year period.



Lazard Group
traditionally makes payments for employee incentive compensation and distributions to members primarily in the first four months of the year with respect to the prior years results.



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Summary of Cash Flows:



|                                                                       |  |                                |        |   |      |   |        |  
|---------------------------------------------------------------------- |  | ------------------------------ | ------ | - | ---- | - | ------ | -
|                                                                       |  | Nine Months EndedSeptember 30, |       
|                                                                       |  | 2007                           |        |   | 2006 |  
|                                                                       |  | ($ in millions)                |       
|Cash Provided By (Used In):                                            |  |                                |        |   |      |   |        |  
|Operating activities:                                                  |  |                                |        |   |      |   |        |  
|Net income                                                             |  | $                              | 223.8  |   |      | $ | 172.7  |  
|Noncash charges (a)                                                    |  |                                | 115.9  |   |      |   | 17.8   |  
|Other operating activities (b)                                         |  |                                | (453.3 | ) |      |   | (40.5  | )
|                                                                       |  |                                |        |   |      |   |        |  
|Net cash provided by (used in) operating activities                    |  |                                | (113.6 | ) |      |   | 150.0  |  
|                                                                       |  |                                |        |   |      |   |        |  
|Investing activities (c)                                               |  |                                | (144.1 | ) |      |   | (4.6   | )
|Financing activities (d)                                               |  |                                | 211.1  |   |      |   | (125.4 | )
|Effect of exchange rate changes                                        |  |                                | (3.4   | ) |      |   | 7.8    |  
|                                                                       |  |                                |        |   |      |   |        |  
|Net Increase (Decrease) in Cash and Cash Equivalents                   |  |                                | (50.0  | ) |      |   | 27.8   |  
|Cash and Cash Equivalents:                                             |  |                                |        |   |      |   |        |  
|Beginning of Period                                                    |  |                                | 955.1  |   |      |   | 490.4  |  
|                                                                       |  |                                |        |   |      |   |        |  
|End of Period                                                          |  | $                              | 905.1  |   |      | $ | 518.2  |  
|                                                                       |  |                                |        |   |      |   |        |  
|(a) Consists of the following:                                         |  |                                |        |   |      |   |        |  
|                                                                       |  |                               
|Depreciation and amortization of property                              |  | $                              | 11.7   |   |      | $ | 10.7   |  
|Amortization of deferred expenses, stock units and interest rate hedge |  |                                | 77.9   |   |      |   | 17.7   |  
|Amortization of other intangible assets                                |  |                                | 18.2   |   |      |   |        |  
|Minority interest in net income                                        |  |                                | 8.1    |   |      |   | 3.1    |  
|Gain on termination of Strategic Alliance in Italy                     |  |                                |        |   |      |   | (13.7  | )
|                                                                       |  |                                |        |   |      |   |        |  
|                                                                       |  | $                              | 115.9  |   |      | $ | 17.8   |  
|                                                                       |  |                                |        |   |      |   |        |  



(b) Includes net
changes in operating assets and liabilities.



(c) Relates to
the net additions and disposals of property, including, in 2007, business acquisitions.



(d) Primarily includes distributions to members, repayments of senior and subordinated borrowings, repurchases of common membership interests from LAZ-MD Holdings and shares of Class A common stock and, in 2007, the
issuance of the $600 million aggregate principal amount of 6.85% senior notes due 2017.



Liquidity and Capital Resources



Historically,
the Companys source of liquidity has been cash provided by operations, with a traditional seasonal pattern of cash flow. While employee salaries are paid throughout the year, annual incentive compensation has historically been paid to
employees in the early months following year-end. The Companys managing directors are paid a salary during the year, but a majority of their annual cash distributions with respect to the prior year have historically been paid to them in three
monthly installments in February, March and April following year-end. In addition, and to a lesser extent, during the year we pay tax advances on behalf of certain of our managing directors, and these advances serve to reduce the amounts due to
those managing directors in the three installments described above. As a consequence, our level of cash on hand generally decreases significantly during the first four months of the year and gradually builds up over the remainder of the year. We
expect this seasonal pattern of cash flow to continue.



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. We maintain lines of credit in excess of anticipated liquidity requirements. As of September 30, 2007, Lazard had approximately $240 million in unused lines of credit available to it, including $58 million of unused
lines of credit available to LFB.



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Lazards annual cash flow generated from operations historically has been sufficient to enable it to
meet its annual obligations. We believe that our cash flows from operating activities, including 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 noted above, we
intend to maintain lines of credit that can be utilized should the need arise. Concurrent with the equity public offering, Lazard Group entered into a five year, $125 million senior revolving credit facility with a group of lenders, with such
revolving credit facility having been amended on May 17, 2006 to provide for aggregate commitments of $150 million. As of September 30, 2007 there were no amounts outstanding under this credit facility. The senior revolving credit facility contains
customary affirmative and negative covenants and events of default for facilities of this type. Furthermore, the senior revolving credit facility, among other things, limits the ability of the borrower to incur debt, grant liens, pay dividends,
enter into mergers or to sell all or substantially all of its assets and contains financial covenants that must be maintained. We may, to the extent required and subject to restrictions contained in our financing arrangements, use other financing
sources in addition to any new credit facilities. In addition, the indenture and supplemental indentures relating to Lazard Groups senior notes contain certain covenants, events of default and other customary provisions.



On June 21, 2007, Lazard Group completed a private placement of $600 million
aggregate principal amount of 6.85% senior notes due June 15, 2017. Interest on the notes is payable on June 15 and December 15 of each year, beginning on December 15, 2007. Lazard Group also entered into a registration rights agreement with the
initial purchasers of the notes pursuant to which Lazard Group agreed, among other things, to file with the SEC an exchange offer registration statement enabling holders to exchange their notes (the old notes) for substantially identical
notes registered under the Securities Act of 1933, as amended (the exchange notes). In connection therewith, Lazard Group filed a registration statement on Form S-4 on July 3, 2007 that was declared effective by the SEC on July 19, 2007,
and Lazard Group commenced an exchange offer (the exchange offer) on that date to exchange an aggregate principal amount of up to $600 million of the notes for an equal aggregate principal amount of the exchange notes. The exchange offer
expired on August 16, 2007. On August 16, 2007, Lazard Group closed the exchange offer, at which time it exchanged $599 million in aggregate principal amount of its old notes (approximately 99.9% of the aggregate principal amount of old notes
outstanding) for $599 million in aggregate principal amount of its exchange notes. The exchange notes are substantially identical to the old notes, except that the exchange notes have been registered under the Securities Act of 1933, as amended;
and, as a result, the transfer restrictions applicable to the old notes do not apply to the exchange notes. Lazard Group used a portion of the net proceeds from the sale of the notes for repayment of Lazard Groups $96 million senior promissory
note and $50 million subordinated promissory note, each originally scheduled to mature in February 2008, and each of which were redeemed on June 29, 2007, and intends to use the balance for (i) expansion of its Financial Advisory and Asset
Management businesses, (ii) other strategic acquisitions or investments and (iii) general corporate purposes.



As of September 30, 2007, the Company invested a portion of the remaining net proceeds from the December, 2006 primary offering of Class A common stock,
as well as a portion of the net proceeds of the June 21, 2007 $600 million private placement described above, in accounts managed by LAM that are primarily invested in equities. Securities owned - equities on the condensed
consolidated statement of financial condition as of September 30, 2007 principally reflects such investments.



As of September 30, 2007, Lazard was in compliance with all of its obligations under its various borrowing arrangements.



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. Regulatory approval is
generally required for paying dividends in excess of certain established levels. See Note 14 of Notes to Condensed Consolidated Financial Statements for further information. These regulations differ in the U.S., the



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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 the Form 10-K.



Net revenue and operating income historically have fluctuated significantly between quarters. This variability arises from
the fact that transaction completion fees comprise the majority of our net revenue, with the billing and recognition of such fees being dependent upon the successful completion of client transactions, the occurrence and timing of which is irregular
and not subject to Lazards control. In addition, incentive fees earned on AUM and compensation related thereto are generally not recorded until the end of the applicable measurement period, which is generally the fourth quarter of
Lazards fiscal year, when potential uncertainties regarding the ultimate realizable amounts have been determined.



Contractual Obligations



The following table sets forth information relating to Lazards contractual obligations as of September 30, 2007:



|                                                                                 |  |                                               |           |                 |   |           |  |           |         |                  |   |         |  |   |          
|-------------------------------------------------------------------------------- |  | --------------------------------------------- | --------- | --------------- | - | --------- |  | --------- | ------- | ---------------- | - | ------- |  | - | ---------
|                                                                                 |  | Contractual Obligations Payment Due by Period
|                                                                                 |  | Total                                         |           | Less than1 Year |   | 1-3 Years |  | 3-5 Years |         | More than5 Years
|                                                                                 |  | ($ in thousands)                             
|Operating Leases (exclusive of $73,331 of sublease income)                       |  | $                                             | 498,223   |                 | $ | 68,686    |  | $         | 111,497 |                  | $ | 83,033  |  | $ | 235,007  
|Capital Leases (including interest)                                              |  |                                               | 36,622    |                 |   | 3,264     |  |           | 6,008   |                  |   | 5,991   |  |   | 21,359   
|Senior Debt (including interest)(a)                                              |  |                                               | 2,308,784 |                 |   | 541,254   |  |           | 160,575 |                  |   | 160,575 |  |   | 1,446,380
|Subordinated Loans (including interest) (b)                                      |  |                                               | 193,875   |                 |   | 4,875     |  |           | 9,750   |                  |   | 9,750   |  |   | 169,500  
|Private Equity Commitments:LAI managed funds (c)                                 |  |                                               | 85,687    |                 |   | 50,653    |  |           | 35,034  |                  |   |         |  |   |          
|Other (d)                                                                        |  |                                               | 29,106    |                 |   | 28,530    |  |           |         |                  |   | 537     |  |   | 39       
|Contractual Commitments to Managing Directors, Senior Advisors and Employees (e) |  |                                               | 92,172    |                 |   | 42,445    |  |           | 31,062  |                  |   | 16,487  |  |   | 2,178    
|                                                                                 |  |                                               |           |                 |   |           |  |           |         |                  |   |         |  |   |          
|Total (f)                                                                        |  | $                                             | 3,244,469 |                 | $ | 739,707   |  | $         | 353,926 |                  | $ | 276,373 |  | $ | 1,874,463
|                                                                                 |  |                                               |           |                 |   |           |  |           |         |                  |   |         |  |   |          

---

|(a) | Includes $437.5 million relating to Lazard Group Notes issued in connection with the issuance of the ESUs, for which the maturity date of the debt component can vary based on a
remarketing of the Lazard Group Notes, and will mature (1) in the event of a successful remarketing, on any date no earlier than May 15, 2010 and no later than May 15, 2035, as we may elect, (2) in the event of a failed
remarketing, on May 15, 2008 and (3) otherwise on May 15, 2035. While the Company currently expects a successful remarketing of the Lazard Group Notes, for purposes of the table above, a maturity in 2008, the earliest possible date,
was assumed to be the maturity date of the Lazard Group Notes. See Notes 2 and 8 of Notes to Condensed Consolidated Financial Statements.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) | The Amended $150 million Subordinated Convertible Note matures on September 30, 2016, has a fixed interest rate of 3.25% per annum and is convertible into shares of Class A common
stock at an effective conversion price of $57 per share. One-third in principal amount will generally be convertible after July 1, 2008, an additional one-third after July 1, 2009 and the last one-third after July 1, 2010, and no principal amount
will be convertible after June 30, 2011. For purposes of the table above, the Amended $150 million Subordinated Convertible Note was considered to remain outstanding until its maturity date, with no assumed conversions into Class A common stock
prior thereto. See Note 7 of Notes to Condensed Consolidated Financial Statements.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(c) | Pursuant to the business alliance agreement, Lazard Group has commitments to fund certain investment funds managed by Lazard Alternative Investments Holdings LLC
(LAI). Amounts in the table above relate to (1) obligations related to Corporate Partners II Limited, a private equity fund formed in February 2005, with $1 billion of institutional capital commitments and a $100 million
capital commitment from Lazard Group, the principal portion of which may require funding at any time through 2010. As of September 30, 2007, Lazard
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | Group contributed approximately $16.0 million of its capital commitment, with Lazards remaining commitment of approximately $84.0 million as of
September 30, 2007 estimated to be funded in the amounts of $50.7 million, $26.9 million, and $6.4 million in the twelve month periods ending September 30, 2008, 2009 and 2010, respectively; and (2) obligations related to Lazard Senior
Housing Partners LP, a private equity fund which closed during 2006, with $201 million of capital commitments from institutional investors, including $10 million from Lazard Group, the principal portion of which will require funding at any time
through 2008. As of September 30, 2007, Lazard Group contributed approximately $8.3 million of its capital commitment, with Lazards remaining commitment of approximately $1.7 million as of September 30, 2007 estimated to be funded in the
twelve month period ending September 30, 2009.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(d) | Primarily represents a capital commitment through 2017 of approximately $43 million to a mezzanine fund in which the Company has invested approximately $17 million as of September
30, 2007, with Lazards remaining commitment of approximately $26 million required to be funded when called upon (for purposes of the table above such remaining commitment is being reflected as Less than 1 year). See Note 9 of Notes
to Condensed Consolidated Financial Statements.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(e) | The Company has agreements relating to future minimum payments to certain managing directors, senior advisors and employees incurred for the purpose of recruiting and retaining
these senior professionals.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(f) | The table above does not include:
|--- | ---------------------------------

| | (1) | any contingent obligations relating to the LAM equity rights;
| | --- | -------------------------------------------------------------

| | (2) | any potential payment related to the IXIS cooperation arrangement (the level of this contingent payment to IXIS would depend, among other things, on the level of revenue generated
by the cooperation activities, and the potential payment is limited, as of September 30, 2007, to a maximum of approximately 3 million (subject to further reduction in certain circumstances) which would only occur if the cooperation activities
generate no revenue over the course of the remaining initial period of such activities, the cooperation agreement is not renewed and Lazard Ltds Class A common stock price fails to sustain certain price levels);
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | the contingent limited partner capital commitment as described in Note 7 of Notes to Consolidated Financial Statements included in the Form 10-K;
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------

| | (4) | the lending commitments and indemnifications provided by LFB to third parties as described in Note 12 of Notes to Consolidated Financial Statements included in the Form 10-K;
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (5) | the 2008 pension fund obligation of approximately $16.1 million as described in Note 14 of Notes to Consolidated Financial Statements included in the Form 10-K;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (6) | any contingent obligation related to the guarantees described in Note 9 of Notes to Condensed Consolidated Financial Statements;
| | --- | --------------------------------------------------------------------------------------------------------------------------------

| | (7) | commitments related to the business acquisitions and joint venture investment as described in Note 6 of Notes to Condensed Consolidated Financial Statements; and
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (8) | contingent commitments related to the Sapphire Industrials Corp. IPO as described in Note 16 of Notes to Condensed Consolidated Financial Statements.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------



In addition the table above does not include any recognition of the May,
2008 settlement of the purchase contracts component of the ESUs which require the holders to purchase an aggregate of $437.5 million of Lazard Ltds Class A common stock for cash or exchange of outstanding debt, depending on the success of the
remarketing of such debtsee (a) above. This obligation is collateralized by the entire $437.5 million principal amount of Lazard Group Notes outstanding. See Note 2 of Notes to Condensed Consolidated Financial Statements. Also, the table above
does not include any possible payments for uncertain tax positions. See Note 12 of Notes to Condensed Consolidated Financial Statements.



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 U.S. GAAP pursuant to the rules and regulations of the SEC regarding interim financial reporting as discussed in Note 1 of Notes to Condensed Consolidated Financial Statements. The preparation
of Lazards consolidated financial



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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.



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.
| | - |  | -----------------------



Lazards clients generally enter into agreements with Lazard that vary in duration depending on the nature of the service provided. Lazard typically
bills clients for the full amounts due under the applicable agreements on or after the dates on which the specified service has been provided. Generally, payments are collected within 60 days of billing (or over longer periods of time with respect
to billings related to restructurings and our private fund advisory activities).



The Company also earns performance-based incentive fees on various investment products, including alternative investment funds such as hedge funds, private equity funds, and traditional products. 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 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 future period net appreciation before any incentive fees can be earned.



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.



Lazard assesses whether collection is probable based on a number of factors,
including past transaction history with the client and an assessment of the clients current creditworthiness. If, in Lazards judgment, collection of a fee is not probable, Lazard will not recognize revenue until the uncertainty is
removed. In rare cases, an allowance for doubtful accounts may be established, for example, if a fee is in dispute or litigation has commenced.



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 on long-term investments and depreciation. These temporary differences result in deferred tax assets and liabilities, which are included within Lazards consolidated statements of financial condition. In
assessing the realizability of deferred tax



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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. 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. 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.



In July 2006, the Financial Accounting Standards Board (the FASB) issued Interpretation No. 48 Accounting for
Uncertainty in Income Taxesan interpretation of FASB Statement No. 109 (FIN 48), which became effective beginning in 2007 and clarifies the more likely than not criteria included in FASB Statement No. 109
Accounting for Income Taxes, that must be met prior to recognition of the financial statement benefit of a tax position taken in a tax return. FIN 48 also requires the recognition of a liability for differences between tax
positions taken in a tax return and amounts recognized in the financial statements. Management applies the more likely than not criteria included in FIN 48 when estimating its income taxes in each of the jurisdictions in which it operates. See Note
12 of Notes to Condensed Consolidated Financial Statements herein regarding the adoption of FIN 48.



In addition, in order to determine its quarterly tax rate, Lazard is required to estimate full year pre-tax income and the related annual income tax
expense in each jurisdiction. Tax exposures 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 measurement of current and deferred income taxes.



Valuation of Investments



Long-term investments consist principally of investments in alternative asset management funds and other private equity investments. These
investments are carried at fair value on the consolidated statements of financial condition, with unrealized gains and losses reflected net on the consolidated statements of income. Gains and losses on positions held in long-term investments, which
arise from sales or changes in the fair value of the investments, are not predictable and can cause periodic fluctuations in net income.



See Note 4 of Notes to Condensed Consolidated Financial Statements for additional information regarding long-term investments.



Interests in LAM alternative asset management funds principally represent
general partnership interests in LAM-managed hedge funds. The fair value of such investments reflects the pro rata value of the ownership of the underlying securities in the funds, the fair market value of which is determined through quoted market
values of the underlying securities as provided by external pricing sources.



Minority interests in LAM alternative asset management funds represent general partnership interests held directly by certain of our LAM managing directors or employees of the Company but controlled and consolidated
by Lazard. The associated minority interest amounting to approximately $48 million and $47 million at September 30, 2007 and December 31, 2006, respectively, is included in minority interest on the condensed consolidated
statements of financial condition (see Note 5 of Notes to Condensed Consolidated Financial Statements).



Private equity investments, which represent approximately 1.8% and 1.1% of total assets at September 30, 2007 and December 31, 2006, respectively, are
primarily comprised of investments in private equity funds and direct private equity interests that are valued, in the absence of observable market prices, using the following



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valuation methodology. Investments are initially carried at cost, which is subsequently adjusted for additional capital raising transactions such as the
issuance of new member interests or through a sale of existing equity to a third party or other events that are indicative of fair value. In the absence of third party transactions, the carrying value of such investments may be adjusted if
determined that the expected realizable value of the investment differs from the carrying value. In reaching that determination, consideration is given to many factors including, but not limited to, the operating cash flows and financial performance
of the investee, trends within sectors and/or regions, underlying business models, expected exit timing and strategy, and any specific rights or terms associated with the investment, such as conversion features, liquidation preferences or
restrictions. With respect to the majority of private equity investments, we rely on the third party fund managers for estimates of such fair values.



Investments in equity securities are primarily comprised of investments in non-publicly-traded asset management funds that invest in marketable equity
securities.



Goodwill



In accordance with Statement of Financial Accounting Standards
(SFAS) No. 142, Goodwill and Other Intangible Assets, goodwill 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 valuation techniques, including a discounted cash flow model. Lazard uses its best judgment and information available to it at the
time to perform this review. Because Lazards assumptions and estimates are used in projecting future earnings as part of the valuation, actual results could differ from those estimates.



Consolidation of VIEs



The consolidated financial statements include the accounts of Lazard Group
and all other entities in which we are the primary beneficiary or control. Lazard determines whether it has a controlling financial 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. Voting interest entities
are consolidated in accordance with Accounting Research Bulletin (ARB) No. 51, Consolidated Financial Statements, as amended by SFAS No. 94, Consolidated Financial Statements. ARB No. 51 states that
the usual condition for a controlling financial interest in an entity is ownership of a majority voting interest. SFAS No. 94 amends ARB No. 51 to require consolidation of all majority-owned subsidiaries unless control is temporary or does not rest
with the majority owner. SFAS No. 94 also requires consolidation of a majority-owned subsidiary even if it has non-homogeneous operations, a large minority interest, or a foreign location. Accordingly, Lazard consolidates voting interest entities in
which it has the majority of the voting interest in accordance with ARB No. 51 and SFAS No. 94.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Variable Interest Entities.    VIEs are entities that lack one or more of the characteristics of a voting interest entity. A controlling
financial interest in a VIE is present when an enterprise has a variable interest, or a combination of variable interests, that will absorb a majority of the VIEs expected losses, receive a majority of the VIEs expected residual returns,
or both. The enterprise with a controlling financial interest, known as the primary beneficiary, consolidates the VIE.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Lazard determines whether it is the primary beneficiary of a VIE by first performing a qualitative analysis of the VIE that includes, among other
factors, its capital structure, contractual terms, and related party relationships. Where qualitative analysis is not conclusive, Lazard performs a quantitative analysis. For purposes of allocating a VIEs expected losses and expected residual



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returns to the VIEs variable interest holders, Lazard calculates its share of the VIEs expected losses and expected residual returns using a cash
flows model that allocates those expected losses and residual returns to it, based on contractual arrangements and/or Lazards position in the capital structure of the VIE under various scenarios. Lazard would reconsider its assessment of
whether it is the primary beneficiary if there are changes to any of the variables used in determining the primary beneficiary. Those variables may include changes to financial arrangements, contractual terms, capital structure and related party
relationships.



In accordance with FASB Interpretation No.
46R, the assets, liabilities and results of operations of the VIE are included in the consolidated financial statements of Lazard if it is determined that we are the primary beneficiary. Any third party interest in these consolidated entities is
reflected as minority interest in our consolidated financial statements.



Risk Management



We encounter risk as part of
the normal course of our business and we design risk management processes to help manage 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 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.



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.



At September 30, 2007, approximately 68% of the $765 million of securities owned, at fair value, were in LFBs portfolio, substantially all of which
were fixed-income securities, 87% of which were rated investment grade credit quality. Such securities are typically held long-term, as part of LFBs asset-liability management program. The remaining 32% of securities owned, at fair value,
represent the Companys investment in marketable equity securities held both directly or indirectly through asset management funds, and are therefore subject to market risk which is monitored daily by management. At December 31, 2006,
approximately 95% of the $579 million of securities owned, at fair value, were in LFBs portfolio, substantially all of which were fixed-income securities, 88% of which were rated investment grade credit quality. The remaining 5% of securities
owned, at fair value, represent the Companys investment in marketable equity securities.



At September 30, 2007 and December 31, 2006, derivative contracts related to LFBs operations, primarily interest rate swaps, were recorded at fair value. Derivative assets amounted to $10 million and $7 million,
respectively, with derivative liabilities amounting to $6 million and $2 million, respectively.



The primary market risks associated with LFBs securities portfolio, foreign exchange, hedging and lending activities are sensitivity to changes in
the general level of credit spreads and interest rate and foreign currency risks. 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. The following sensitivity metrics provide the resultant effects on Lazards operating income:



| |  |  | LFBs credit spread risk, as measured by a 50 +/- basis point change in credit spreads totaled $(11) million and $11 million, respectively, as of
September 30, 2007.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | LFBs interest rate risk as measured by a 100 +/- basis point change in interest rates totaled $330 thousand and $(420) thousand, respectively, as of
September 30, 2007.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Foreign currency risk associated with LFBs open positions, in aggregate, as measured by a 2% +/- change against the U.S. dollar, totaled approximately $20
thousand and $(20) thousand, respectively, as of September 30, 2007.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



With respect to long-term investments, the Company holds positions in marketable equity securities on an indirect basis through its holdings in general
partnership interests in LAM alternative asset management funds and through other non-publicly-traded funds. As of September 30, 2007, approximately 39% of the $189 million held in long-term investments represent indirect holdings in marketable
equity securities that subject Lazard to market risk and are monitored by management daily. As of December 31, 2006, approximately 13% of the $99 million held in long-term investments represent indirect holdings in marketable equity 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, in our judgment, the receivables are impaired. At September 30, 2007, total receivables amounted to $1,022 million, net of an allowance for bad debts of $15 million. As of that date, inter-bank lending, financial advisory and asset management
fee, customer and related party receivables comprised 46%, 42%, 10% and 2% of total receivables, respectively. At December 31, 2006, total receivables amounted to $1,235 million, net of allowance for bad debts of $11 million. As of that date,
inter-bank lending, financial advisory and asset management fee, customer and related party receivables comprised 58%, 34%, 6% and 2% of total receivables, respectively. The M&A and asset management fee receivables collection periods generally
are within 60 days of invoice. However, as discussed above, the collection period for restructuring transactions may extend beyond 60 days, and fee receivables from our private fund advisory activities are generally collected over a four
year period.



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 September 30, 2007 the Company had no exposure to an individual counterparty that exceeded $46 million, in the
aggregate, excluding inter-bank counterparties.



Risks
Related to Short-Term Investments and Corporate Indebtedness



A significant portion of the Companys liabilities has fixed interest rates or maximum interest rates, while its cash and short-term investments generally have floating interest rates. Based on account balances as of September 30,
2007, Lazard estimates that operating income relating to cash and short-term investments and corporate indebtedness would change by approximately $10 million, on an annual basis, in the event interest rates were to increase or decrease by 1%.



Operational Risks



Operational risk is inherent in 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 a business continuity and disaster recovery programs that manages its



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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 Standards



In September 2006, the FASB issued SFAS No. 157 Fair Value Measurements (SFAS 157). SFAS 157 defines fair value,
establishes a framework for measuring fair value, and enhances disclosures about fair value measurements. This Statement applies to other accounting pronouncements that require the use of fair value measurements. SFAS 157 is effective for interim
and annual financial statements issued for fiscal years beginning after November 15, 2007. We are currently assessing the impact of adopting SFAS 157 on the Companys consolidated financial statements.



In February 2007, the FASB issued SFAS No. 159 The
Fair Value Option for Financial Assets and Financial LiabilitiesIncluding an amendment of FASB Statement No. 115 (SFAS 159). SFAS 159 permits an entity to elect to measure various financial instruments and certain other
items at fair value. It provides entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement
requires that a business entity report unrealized gains and losses, on items for which the fair value option has been elected, in earnings at each subsequent reporting date. SFAS 159 is effective as of the beginning of the first annual period
beginning after November 15, 2007. We are currently assessing the impact of adopting SFAS 159 on the Companys consolidated financial statements.



|Item 3. | 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.



|Item 4. | 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 the end of the period covered by this report. 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
quarterly report, 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.



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PART II. OTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------



Our businesses, as well as the financial services industry generally, are subject to extensive regulation throughout the world. We are involved in a
number of judicial, regulatory and arbitration proceedings and inquiries concerning matters arising in connection with the conduct of our businesses. We believe, based on currently available information, that the results of such proceedings, in the
aggregate, will not have a material adverse effect on our financial condition but might be material to our operating results or cash flows for any particular period, depending upon the operating results for such period.



In 2004, we received a request for information from the NASD as part of an
industry investigation relating to gifts and gratuities, which was focused primarily on Lazards former Capital Markets business, which business was transferred to LFCM Holdings as a part of the separation. In addition, we received requests for
information from the NASD, SEC and the U.S. Attorneys Office for the District of Massachusetts seeking information concerning gifts and entertainment involving an unaffiliated mutual fund company, which are also focused on that same business.
In the course of an internal review of these matters, there were resignations or discipline of certain individuals associated with Lazards former Capital Markets business. These investigations are continuing and we cannot predict their
potential outcomes, which outcomes, if any, could include the consequences discussed under the caption Regulation in our Annual Report on Form 10-K for the year ended December 31, 2006.



|Item 1A. | Risk Factors
|-------- | ------------



Except as discussed below, there were no material changes from the risk factors previously disclosed in the registrants Annual Report on Form 10-K
for the year ended December 31, 2006.



On June 14, 2007, the
Chairman and the Ranking Republican Member of the United States Senate Committee on Finance introduced legislation that would tax as corporations those publicly traded partnerships that directly or indirectly derive any income from investment
adviser or asset management services. This new legislation, if enacted in its proposed form, would be effective as of June 14, 2007, and, under a transition rule, it would apply to Lazard Ltd in respect of Lazard Ltds taxable year beginning
January 1, 2013. This new legislation, if enacted in its proposed form, may impact Lazard Ltds U.S. tax liability. At this time we are unable to predict with any degree of certainty the impact, if any, this proposed legislation will have on
our effective tax rate in 2013 and thereafter.



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



Not applicable.



|Item 3. | Defaults Upon Senior Securities
|------- | -------------------------------



None.



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



None.



|Item 5. | Other Information
|------- | -----------------



None.



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|Item 6. | 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 the 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 the Lazard Group LLCs Current Report on
Form 8-K (File No. 333-126751) filed on December 19, 2005).                                                                                                        
|    | 
|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 |  | Registration Rights Agreement, dated as of May 10, 2005, by and between Lazard Group LLC, Citigroup Global Markets Inc. and J.P. Morgan Securities Inc., as representatives for the Initial
Purchasers (incorporated by reference to Exhibit 4.3 to Lazard Group LLCs Registration Statement (File No. 333-126751) on Form S-4 filed on July 21, 2005).
|    | 
|4.4 |  | 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).                                                                       
|    | 
|4.5 |  | Third Supplemental Indenture, dated as of December 19, 2005, by and among Lazard Group LLC, The Bank of New York, as trustee, and for purposes of consent, Lazard Group Finance LLC (incorporated
by reference to Exhibit 4.02 to Lazard Group LLCs Current Report on Form 8-K (Commission File No. 333-126751) filed on December 19, 2005).           
|    | 
|4.6 |  | Purchase Contract Agreement, dated as of May 10, 2005, by and between Lazard Ltd and The Bank of New York, as Purchase Contract Agent (incorporated by reference to Exhibit 4.4 to Lazard
Ltds Quarterly Report (File No. 001-32492) on Form 10-Q filed on June 16, 2005).                                                                             
|    | 
|4.7 |  | Pledge Agreement, dated as of May 10, 2005, by and among Lazard Ltd, The Bank of New York, as Collateral Agent, Custodial Agent and Securities Intermediary and The Bank of New York, as
Purchase Contract Agent (incorporated by reference to Exhibit 4.5 to Lazard Ltds Quarterly Report (File No. 001-32492) on Form 10-Q filed on June 16, 2005).  
|    | 
|4.8 |  | Pledge Agreement, dated as of May 10, 2005, by and among Lazard Group Finance LLC, The Bank of New York, as Collateral Agent, Custodial Agent and Securities Intermediary and The Bank of New
York, as Trustee (incorporated by reference to Exhibit 4.6 to Lazard Ltds Quarterly Report (File No. 001-32492) on Form 10-Q filed on June 16, 2005).    
|    | 
|4.9 |  | Form of Normal Equity Security Units Certificate (included in Exhibit 4.6).                                                                                                                                                                                                                                                                             



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|     |  |                                                                                                                                                                                                                                                                                                                                                             
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.10 |  | Form of Stripped Equity Security Units Certificate (included in Exhibit 4.6).                                                                                                                                                                                                                                                                               
|     | 
|4.11 |  | Form of Senior Note (included in Exhibit 4.5).                                                                                                                                                                                                                                                                                                              
|     | 
|4.12 |  | $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).                                                                                                                                      
|     | 
|4.13 |  | 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).                                                                                             
|     | 
|4.14 |  | Registration Rights Agreement, dated as of June 21, 2007, among Lazard Group LLC, Goldman, Sachs & Co., Citigroup Global Markets Inc. and J.P. Morgan Securities Inc., as representatives for
the Initial Purchasers (incorporated by reference to Exhibit 4.2 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 |  | 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).                                                                                                                                                         
|     | 
|10.4 |  | 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).                                          
|     | 
|10.5 |  | 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).                                                                          
|10.6 |  | 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).                                                                                                         
|     | 
|10.7 |  | 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).             
|     | 
|10.8 |  | 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).                                                                                
|     | 
|10.9 |  | 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).                                                                                                         



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|       |  |                                                                                                                                                                                                                                                                                                                                                                    
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.10  |  | First Amended and Restated Limited Liability Company Agreement of Lazard Asset Management LLC, dated as of January 10, 2003 (incorporated by reference to Exhibit 10.10 to Lazard Ltds
Registration Statement (File No. 333-121407) on Form S-1/A filed on February 11, 2005).                                                                                    
|       | 
|10.11  |  | 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).                                                                                             
|       | 
|10.12  |  | 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).                                                                                                  
|       | 
|10.13  |  | 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).                                                    
|       | 
|10.14  |  | Occupational Lease, dated as of August 9, 2002, 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).                   
|       | 
|10.15* |  | 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).                                                                                                                                                                              
|       | 
|10.16* |  | 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).                                                                                                                                                                                      
|       | 
|10.17* |  | Agreement Relating to Retention and Noncompetition and Other Covenants, dated as of May 4, 2005, by and among Lazard Ltd, Lazard Group LLC and Bruce Wasserstein (incorporated by reference
to Exhibit 10.23 to Lazard Ltds Quarterly Report (File No. 001-32492) on Form 10-Q filed on June 16, 2005).                                                           
|       | 
|10.18* |  | 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).                                                                                                    
|       | 
|10.19* |  | Agreement Relating to Retention and Noncompetition and Other Covenants, dated as of May 4, 2005, by and among Lazard Ltd, Lazard Group LLC and Steven J. Golub (incorporated by reference to
Exhibit 10.25 to Lazard Ltds Quarterly Report (File No. 001-32492) on Form 10-Q filed on June 16, 2005).                                                             
|       | 
|10.20* |  | 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).
|       | 
|10.21* |  | 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).                                                                                                                                           
|       | 
|10.22* |  | 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).                                                                                          



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|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.23* |  | 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).                                           
|       | 
|10.24  |  | 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).                                                                                                                                                                                                        
|       | 
|10.25  |  | 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).                                                                                                                                                             
|       | 
|10.26  |  | 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).                                                                                                                                                                                                                                                   
|       | 
|10.27  |  | 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).                                                        
|       | 
|10.28  |  | 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).
|       | 
|10.29  |  | 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).     
|       | 
|10.30  |  | 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).    
|       | 
|10.31* |  | 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).                                                                                                                                                                                                                                                                    
|       | 
|10.32* |  | 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).                                                                                                                                                                                                                                           
|       | 
|10.33* |  | 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).                                                                                                                                                                                                         



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|       |  |                                                                                                                                                                                                                                                                                         
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.34  |  | 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).                 
|       | 
|10.35  |  | 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).        
|       | 
|10.36  |  | 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).                                              
|       | 
|10.37* |  | 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).                                                                                                           
|       | 
|10.38* |  | 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).
|       | 
|12.1   |  | Computation of Ratio of Earnings to Fixed Charges.                                                                                                                                                                                                                                      
|       | 
|31.1   |  | Rule 13a-14(a) Certification of Bruce Wasserstein.                                                                                                                                                                                                                                      
|       | 
|31.2   |  | Rule 13a-14(a) Certification of Michael J. Castellano.                                                                                                                                                                                                                                  
|       | 
|32.1   |  | Section 1350 Certification for Bruce Wasserstein.                                                                                                                                                                                                                                       
|       | 
|32.2   |  | Section 1350 Certification for Michael J. Castellano.                                                                                                                                                                                                                                   

---

* Management contract or compensatory plan or
arrangement



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SIGNATURES



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



Date: November 5, 2007



LAZARD GROUP LLCBy:

/s/    Bruce WassersteinName: Bruce Wasserstein Title:   Chairman
and Chief Executive OfficerBy:

/s/    Michael J. CastellanoName: Michael J. Castellano Title:   Chief
Financial Officer




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