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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 June 30, 2008



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, a non-accelerated filer, or a smaller reporting company.
See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.



| |  |                            |  |                              |  | 
| |  | -------------------------- |  | ---------------------------- |  | 
| |  | Large Accelerated Filer   ̈ |  | Accelerated Filer   ̈         |  | 
| |  | Non-Accelerated Filer  x   |  | Smaller Reporting Company   ̈ |  | 



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



As of July 31, 2008, in addition to profit participation
interests, there were 121,651,367 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 their respective subsidiaries. Lazard Ltd has no material assets other than indirect
ownership as of June 30, 2008 of approximately 56.4% 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 |  | 27  
|                                                                                               | 
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                             |  | 55  
|                                                                                               | 
|Item 4. Controls and Procedures                                                                |  | 55  
|                                                                                               | 
|Part II. Other Information                                                                     |  |     
|                                                                                               | 
|Item 1. Legal Proceedings                                                                      |  | 56  
|                                                                                               | 
|Item 1A. Risk Factors                                                                          |  | 56  
|                                                                                               | 
|Item 2. Unregistered Sales of Equity Securities and Use of Proceeds                            |  | 56  
|                                                                                               | 
|Item 3. Defaults Upon Senior Securities                                                        |  | 56  
|                                                                                               | 
|Item 4. Submission of Matters to a Vote of Security Holders                                    |  | 56  
|                                                                                               | 
|Item 5. Other Information                                                                      |  | 56  
|                                                                                               | 
|Item 6. Exhibits                                                                               |  | 57  
|                                                                                               | 
|Signatures                                                                                     |  | 62  



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PART I. FINANCIAL INFORMATION



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



|                                                                                                                         |  |     
|------------------------------------------------------------------------------------------------------------------------ |  | ----
|                                                                                                                         |  | Page
|Condensed Consolidated Statements of Financial Condition as of June 30, 2008 and December 31,
2007                       |  | 2   
|Condensed Consolidated Statements of Income for the three month and six month periods ended June 30, 2008 and
2007       |  | 4   
|Condensed Consolidated Statements of Cash Flows for the six month periods ended June 30, 2008 and
2007                   |  | 5   
|Condensed Consolidated Statement of Changes in Members Equity (Deficiency) for the six month period ended June 30, 2008 |  | 6   
|Notes to Condensed Consolidated Financial Statements                                                                     |  | 7   



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LAZARD GROUP LLC



CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

JUNE 30, 2008 AND DECEMBER 31, 2007

(UNAUDITED)

(dollars in thousands)



|                                                                                                                                          |  |              |           |                  |   |          
|----------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | --------- | ---------------- | - | ---------
|                                                                                                                                          |  | June 30,2008 |           | December 31,2007
|                                                                                                                                          |  |             
|ASSETS                                                                                                                                    |  |              |           |                  |   |          
|Cash and cash equivalents                                                                                                                 |  | $            | 750,229   |                  | $ | 1,000,573
|Cash segregated for regulatory purposes or deposited with clearing organizations                                                          |  |              | 16,993    |                  |   | 24,585   
|                                                                                                                                          |  |             
|Receivablesnet:                                                                                                                          |  |              |           |                  |   |          
|Banks                                                                                                                                     |  |              | 824,157   |                  |   | 495,821  
|Fees                                                                                                                                      |  |              | 379,256   |                  |   | 520,883  
|Customers                                                                                                                                 |  |              | 97,482    |                  |   | 50,187   
|Related parties                                                                                                                           |  |              | 10,037    |                  |   | 30,378   
|                                                                                                                                          |  |              |           |                  |   |          
|                                                                                                                                          |  |              | 1,310,932 |                  |   | 1,097,269
|                                                                                                                                          |  |             
|Investments:                                                                                                                              |  |              |           |                  |   |          
|Debt                                                                                                                                      |  |              | 432,973   |                  |   | 585,433  
|Equities                                                                                                                                  |  |              | 204,688   |                  |   | 333,796  
|Other                                                                                                                                     |  |              | 260,874   |                  |   | 169,612  
|                                                                                                                                          |  |              |           |                  |   |          
|                                                                                                                                          |  |              | 898,535   |                  |   | 1,088,841
|                                                                                                                                          |  |             
|Property (net of accumulated amortization and depreciation of $228,578 and $208,153 at June 30, 2008 and December 31, 2007,
respectively) |  |              | 197,721   |                  |   | 185,509  
|Goodwill and other intangible assets                                                                                                      |  |              | 201,972   |                  |   | 187,909  
|Other assets                                                                                                                              |  |              | 224,128   |                  |   | 179,256  
|                                                                                                                                          |  |              |           |                  |   |          
|Total assets                                                                                                                              |  | $            | 3,600,510 |                  | $ | 3,763,942
|                                                                                                                                          |  |              |           |                  |   |          



See notes to condensed
consolidated financial statements.



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LAZARD GROUP LLC



CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION(Continued)

JUNE 30, 2008 AND DECEMBER 31, 2007

(UNAUDITED)

(dollars in thousands)



|                                                                                                                                                                                              |  |              |           |                  |   |           |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | --------- | ---------------- | - | --------- | -
|                                                                                                                                                                                              |  | June 30,2008 |           | December 31,2007 |  
|LIABILITIES, MINORITY INTEREST AND MEMBERS EQUITY (DEFICIENCY)                                                                                                                               |  |              |           |                  |   |           |  
|Liabilities:                                                                                                                                                                                  |  |              |           |                  |   |           |  
|Deposits and other customer payables                                                                                                                                                          |  | $            | 1,095,801 |                  | $ | 858,733   |  
|Accrued compensation and benefits                                                                                                                                                             |  |              | 109,649   |                  |   | 498,058   |  
|Senior debt                                                                                                                                                                                   |  |              | 1,150,000 |                  |   | 1,587,500 |  
|Capital lease obligations                                                                                                                                                                     |  |              | 31,559    |                  |   | 27,122    |  
|Related party payables                                                                                                                                                                        |  |              | 127,180   |                  |   | 54,805    |  
|Other liabilities                                                                                                                                                                             |  |              | 490,912   |                  |   | 562,276   |  
|Subordinated debt                                                                                                                                                                             |  |              | 150,000   |                  |   | 150,000   |  
|                                                                                                                                                                                              |  |              |           |                  |   |           |  
|Total liabilities                                                                                                                                                                             |  |              | 3,155,101 |                  |   | 3,738,494 |  
|Commitments and contingencies                                                                                                                                                                 |  |              |           |                  |   |           |  
|Minority interest                                                                                                                                                                             |  |              | 46,116    |                  |   | 51,755    |  
|                                                                                                                                                                                              |  |             
|MEMBERS EQUITY (DEFICIENCY)                                                                                                                                                                  |  |              |           |                  |   |           |  
|Members equity (deficiency) (net of 5,788,107 and 1,712,846 shares of Lazard Ltd Class A common stock,
at cost of $217,764 and $69,296 at June 30, 2008 and December 31, 2007, respectively) |  |              | 320,917   |                  |   | (81,980   | )
|Accumulated other comprehensive income, net of tax                                                                                                                                            |  |              | 78,376    |                  |   | 55,673    |  
|                                                                                                                                                                                              |  |              |           |                  |   |           |  
|Total members equity (deficiency)                                                                                                                                                            |  |              | 399,293   |                  |   | (26,307   | )
|                                                                                                                                                                                              |  |              |           |                  |   |           |  
|Total liabilities, minority interest and members equity (deficiency)                                                                                                                         |  | $            | 3,600,510 |                  | $ | 3,763,942 |  
|                                                                                                                                                                                              |  |              |           |                  |   |           |  



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 SIX MONTH PERIODS ENDED JUNE 30, 2008 AND 2007

(UNAUDITED)

(dollars in thousands)



|                                                          |  |                            |         |                          |          |      |   |         |      |  |         
|--------------------------------------------------------- |  | -------------------------- | ------- | ------------------------ | -------- | ---- | - | ------- | ---- |  | --------
|                                                          |  | Three Months EndedJune 30, |         | Six Months EndedJune 30,
|                                                          |  | 2008                       |         | 2007                     |          | 2008 |   |         | 2007
|REVENUE                                                   |  |                            |         |                          |          |      |   |         |      |  |         
|Investment banking and other advisory fees                |  | $                          | 279,431 |                          | $228,205 |      | $ | 476,155 |      |  | $443,288
|Money management fees                                     |  |                            | 165,699 |                          | 148,518  |      |   | 323,781 |      |  | 284,344 
|Interest income                                           |  |                            | 20,700  |                          | 18,037   |      |   | 43,090  |      |  | 40,250  
|Other                                                     |  |                            | 39,615  |                          | 55,845   |      |   | 8,623   |      |  | 83,038  
|                                                          |  |                            |         |                          |          |      |   |         |      |  |         
|Total revenue                                             |  |                            | 505,445 |                          | 450,605  |      |   | 851,649 |      |  | 850,920 
|Interest expense                                          |  |                            | 38,590  |                          | 29,433   |      |   | 77,286  |      |  | 60,678  
|                                                          |  |                            |         |                          |          |      |   |         |      |  |         
|Net revenue                                               |  |                            | 466,855 |                          | 421,172  |      |   | 774,363 |      |  | 790,242 
|                                                          |  |                            |         |                          |          |      |   |         |      |  |         
|OPERATING EXPENSES                                        |  |                            |         |                          |          |      |   |         |      |  |         
|Compensation and benefits                                 |  |                            | 280,021 |                          | 249,043  |      |   | 473,580 |      |  | 469,078 
|Occupancy and equipment                                   |  |                            | 22,277  |                          | 24,277   |      |   | 51,771  |      |  | 43,966  
|Marketing and business development                        |  |                            | 25,215  |                          | 16,955   |      |   | 45,672  |      |  | 33,348  
|Technology and information services                       |  |                            | 17,089  |                          | 14,161   |      |   | 33,330  |      |  | 26,767  
|Professional services                                     |  |                            | 15,356  |                          | 13,125   |      |   | 28,308  |      |  | 21,846  
|Fund administration and outsourced services               |  |                            | 6,573   |                          | 4,459    |      |   | 13,143  |      |  | 8,968   
|Amortization of intangible assets related to acquisitions |  |                            | 2,525   |                          |         |      |   | 3,745   |      |  |        
|Other                                                     |  |                            | 9,649   |                          | 9,522    |      |   | 18,867  |      |  | 18,371  
|                                                          |  |                            |         |                          |          |      |   |         |      |  |         
|Total operating expenses                                  |  |                            | 378,705 |                          | 331,542  |      |   | 668,416 |      |  | 622,344 
|                                                          |  |                            |         |                          |          |      |   |         |      |  |         
|OPERATING INCOME                                          |  |                            | 88,150  |                          | 89,630   |      |   | 105,947 |      |  | 167,898 
|                                                          |  |                            |         |                         
|Provision for income taxes                                |  |                            | 14,055  |                          | 17,125   |      |   | 18,392  |      |  | 30,196  
|                                                          |  |                            |         |                          |          |      |   |         |      |  |         
|INCOME BEFORE MINORITY INTEREST IN NET INCOME             |  |                            | 74,095  |                          | 72,505   |      |   | 87,555  |      |  | 137,702 
|Minority interest in net income                           |  |                            | 1,645   |                          | 3,725    |      |   | (1,609  | )    |  | 5,558   
|                                                          |  |                            |         |                          |          |      |   |         |      |  |         
|NET INCOME                                                |  | $                          | 72,450  |                          | $ 68,780 |      | $ | 89,164  |      |  | $132,144
|                                                          |  |                            |         |                          |          |      |   |         |      |  |         



See notes to condensed
consolidated financial statements.



4



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LAZARD GROUP LLC



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTH PERIODS ENDED JUNE 30, 2008 AND 2007

(UNAUDITED)

(dollars in thousands)



|                                                                                            |  |                          |           |   |      |   |          |  
|------------------------------------------------------------------------------------------- |  | ------------------------ | --------- | - | ---- | - | -------- | -
|                                                                                            |  | Six Months EndedJune 30, |          
|                                                                                            |  | 2008                     |           |   | 2007 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                       |  |                          |           |   |      |   |          |  
|Net income                                                                                  |  | $                        | 89,164    |   |      | $ | 132,144  |  
|Adjustments to reconcile net income to net cash provided by (used in) operating activities: |  |                          |           |   |      |   |          |  
|Non-cash charges (credits) included in net income:                                          |  |                          |           |   |      |   |          |  
|Depreciation and amortization of property                                                   |  |                          | 10,188    |   |      |   | 7,528    |  
|Amortization of deferred expenses, stock units and interest rate hedge                      |  |                          | 118,263   |   |      |   | 49,138   |  
|Amortization of intangible assets related to acquisitions                                   |  |                          | 3,745     |   |      |   |         |  
|Minority interest in net income                                                             |  |                          | (1,609    | ) |      |   | 5,558    |  
|(Increase) decrease in operating assets:                                                    |  |                          |           |   |      |   |          |  
|Cash segregated for regulatory purposes or deposited with clearing organizations            |  |                          | 8,982     |   |      |   | (15,375  | )
|Receivables-net                                                                             |  |                          | (158,087  | ) |      |   | 359,031  |  
|Investments                                                                                 |  |                          | 354,188   |   |      |   | (111,160 | )
|Other assets                                                                                |  |                          | (40,682   | ) |      |   | (25,417  | )
|Increase (decrease) in operating liabilities:                                               |  |                          |           |   |      |   |          |  
|Deposits and other payables                                                                 |  |                          | 235,171   |   |      |   | (414,259 | )
|Accrued compensation and benefits and other liabilities                                     |  |                          | (488,891  | ) |      |   | (276,522 | )
|                                                                                            |  |                          |           |   |      |   |          |  
|Net cash provided by (used in) operating activities                                         |  |                          | 130,432   |   |      |   | (289,334 | )
|                                                                                            |  |                          |           |   |      |   |          |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                       |  |                          |           |   |      |   |          |  
|Acquisition of equity method investments                                                    |  |                          | (74,855   | ) |      |   |         |  
|Additions to property                                                                       |  |                          | (9,593    | ) |      |   | (7,057   | )
|Disposals of property                                                                       |  |                          | 428       |   |      |   | 1,646    |  
|Purchases of available-for-sale securities                                                  |  |                          | (60,125   | ) |      |   |         |  
|Proceeds from available-for-sale securities                                                 |  |                          | 2,838     |   |      |   |         |  
|                                                                                            |  |                          |           |   |      |   |          |  
|Net cash used in investing activities                                                       |  |                          | (141,307  | ) |      |   | (5,411   | )
|                                                                                            |  |                          |           |   |      |   |          |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                       |  |                          |           |   |      |   |          |  
|Proceeds from:                                                                              |  |                          |           |   |      |   |          |  
|Short-term borrowings-net                                                                   |  |                          | 4,455     |   |      |   |         |  
|Senior debt, net of expenses                                                                |  |                          |          |   |      |   | 593,478  |  
|Issuance of common membership interests                                                     |  |                          | 437,500   |   |      |   |         |  
|Other financing activities                                                                  |  |                          | 309       |   |      |   | 138      |  
|Payments for:                                                                               |  |                          |           |   |      |   |          |  
|Short-term borrowings-net                                                                   |  |                          |          |   |      |   | (97      | )
|Senior debt                                                                                 |  |                          | (437,488  | ) |      |   | (96,000  | )
|Subordinated debt                                                                           |  |                          |          |   |      |   | (50,000  | )
|Capital lease obligations                                                                   |  |                          | (1,621    | ) |      |   | (645     | )
|Repurchase of common membership interests from members of LAZ-MD Holdings                   |  |                          |          |   |      |   | (3,773   | )
|Distributions to minority interests                                                         |  |                          | (4,026    | ) |      |   | (12,807  | )
|Repurchase of Lazard Ltd Class A common stock                                               |  |                          | (162,835  | ) |      |   |         |  
|Distributions to members                                                                    |  |                          | (72,420   | ) |      |   | (102,649 | )
|Settlement of vested RSUs and DSUs                                                          |  |                          | (3,114    | ) |      |   |         |  
|                                                                                            |  |                          |           |   |      |   |          |  
|Net cash provided by (used in) financing activities                                         |  |                          | (239,240  | ) |      |   | 327,645  |  
|                                                                                            |  |                          |           |   |      |   |          |  
|EFFECT OF EXCHANGE RATE CHANGES ON CASH                                                     |  |                          | (229      | ) |      |   | (2,854   | )
|                                                                                            |  |                          |           |   |      |   |          |  
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                        |  |                          | (250,344  | ) |      |   | 30,046   |  
|CASH AND CASH EQUIVALENTSJanuary 1                                                         |  |                          | 1,000,573 |   |      |   | 955,116  |  
|                                                                                            |  |                          |           |   |      |   |          |  
|CASH AND CASH EQUIVALENTSJune 30                                                           |  | $                        | 750,229   |   |      | $ | 985,162  |  
|                                                                                            |  |                          |           |   |      |   |          |  



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

EQUITY (DEFICIENCY)

FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2008

(UNAUDITED)

(dollars in thousands)



|                                                                                                                   |  |                             |          |   |                                                |   |        |                                   |  |   |          |  
|------------------------------------------------------------------------------------------------------------------ |  | --------------------------- | -------- | - | ---------------------------------------------- | - | ------ | --------------------------------- |  | - | -------- | -
|                                                                                                                   |  | MembersEquity (Deficiency) |          |   | AccumulatedOtherComprehensiveIncome,Net of Tax |   |        | Total MembersEquity (Deficiency) | 
|                                                                                                                   |  |                             |         
|                                                                                                                   |  |                             |         
|                                                                                                                   |  |                             |         
|BalanceJanuary 1, 2008                                                                                            |  | $                           | (81,980  | ) |                                                | $ | 55,673 |                                   |  | $ | (26,307  | )
|                                                                                                                   |  |                             |          |   |                                                |   |        |                                   |  |   |          |  
|Comprehensive income:                                                                                              |  |                             |          |   |                                                |   |        |                                   |  |   |          |  
|Net income                                                                                                         |  |                             | 89,164   |   |                                                |   |        |                                   |  |   | 89,164   |  
|Other comprehensive income (loss)net of tax:                                                                      |  |                             |          |   |                                                |   |        |                                   |  |   |          |  
|Currency translation adjustments                                                                                   |  |                             |          |   |                                                |   | 26,038 |                                   |  |   | 26,038   |  
|Amortization of interest rate hedge                                                                                |  |                             |          |   |                                                |   | 550    |                                   |  |   | 550      |  
|Available for sale securities:                                                                                     |  |                             |          |   |                                                |   |        |                                   |  |   |          |  
|Net unrealized loss                                                                                                |  |                             |          |   |                                                |   | (3,604 | )                                 |  |   | (3,604   | )
|Adjustment for items reclassified to earnings                                                                      |  |                             |          |   |                                                |   | 78     |                                   |  |   | 78       |  
|Employee benefit plans:                                                                                            |  |                             |          |   |                                                |   |        |                                   |  |   |          |  
|Adjustment for items reclassified to earnings                                                                      |  |                             |          |   |                                                |   | (452   | )                                 |  |   | (452     | )
|Net actuarial gain                                                                                                 |  |                             |          |   |                                                |   | 93     |                                   |  |   | 93       |  
|                                                                                                                   |  |                             |          |   |                                                |   |        |                                   |  |   |          |  
|Comprehensive income                                                                                               |  |                             |          |   |                                                |   |        |                                   |  |   | 111,867  |  
|                                                                                                                   |  |                             |          |   |                                                |   |        |                                   |  |   |          |  
|Amortization of stock units                                                                                        |  |                             | 112,330  |   |                                                |   |        |                                   |  |   | 112,330  |  
|Distributions to members                                                                                           |  |                             | (72,420  | ) |                                                |   |        |                                   |  |   | (72,420  | )
|Purchase of Lazard Ltds Class A common stock                                                                      |  |                             | (162,835 | ) |                                                |   |        |                                   |  |   | (162,835 | )
|Delivery of Lazard Ltds Class A common stock for settlement of vested RSUs and DSUs                               |  |                             | (3,114   | ) |                                                |   |        |                                   |  |   | (3,114   | )
|14,582,750 common membership interests issued in the settlement of the purchase contracts forming part of the ESUs |  |                             | 437,500  |   |                                                |   |        |                                   |  |   | 437,500  |  
|Other capital transactions                                                                                         |  |                             | 2,272    |   |                                                |   |        |                                   |  |   | 2,272    |  
|                                                                                                                   |  |                             |          |   |                                                |   |        |                                   |  |   |          |  
|BalanceJune 30, 2008(*)                                                                                           |  | $                           | 320,917  |   |                                                | $ | 78,376 |                                   |  | $ | 399,293  |  
|                                                                                                                   |  |                             |          |   |                                                |   |        |                                   |  |   |          |  



|(*) | Includes 107,068,617 and 121,651,367 common membership interests
at January 1, 2008 and June 30, 2008, respectively. Also includes profit participation interests and two managing member interests at each such date.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



See notes to condensed consolidated financial statements.



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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
|-- | ------------



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



Lazard Ltd, a Bermuda holding company, held
through its subsidiaries approximately 56.4% and 48.3% of all outstanding Lazard Group common membership interests as of June 30, 2008 and December 31, 2007, respectively. Lazard Ltd, through its control of the managing members of Lazard Group,
controls Lazard Group.



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



LAZ-MD Holdings LLC (LAZ-MD Holdings), an entity owned by Lazard Groups historical managing directors, held approximately 43.6% and
51.7% of the outstanding Lazard Group common membership interests as of June 30, 2008 and December 31, 2007, respectively. Subject to certain limitations, LAZ-MD Holdings interests in Lazard Group are exchangeable for Lazard Ltd Class A
common stock, par value $0.01 per share (Class A common stock).



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



| |  |  | Financial Advisory, which includes providing advice on mergers and acquisitions and strategic advisory matters, 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 its Corporate segment, including management of cash, certain investments and the commercial banking activities of Lazard Groups Paris-based Lazard Frères Banque SA (LFB). LFB is a registered bank
regulated by the Banque de France and its primary operations include asset and liability management for Lazard Groups Paris House through its money market desk and commercial banking operations, deposit taking and, to a lesser extent,
financing activities and custodial oversight over assets of various clients. The Company also allocates outstanding indebtedness to its Corporate segment.



2.    BASIS OF PRESENTATION



The accompanying condensed consolidated financial statements of Lazard Group 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, 2007
(the Form 10-K). The accompanying December 31, 2007 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



7



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##### Table of Contents

LAZARD GROUP LLC



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)

(dollars in thousands,
unless otherwise noted)



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 six month periods ended June 30, 2008 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 Lazard Groups principal operating subsidiaries: Lazard
Frères & Co. LLC (LFNY), a New York limited liability company, along with its subsidiaries, including Lazard Asset Management LLC and its subsidiaries (collectively referred to as LAM); its French limited
liability companies Compagnie Financière Lazard Frères SAS (CFLF) along with its subsidiaries, LFB and Lazard Freres Gestion SAS (LFG), and Maison Lazard SAS; and Lazard & Co., Limited
(LCL), through Lazard & Co., Holdings Limited, an English private limited company (LCH), together with their jointly owned affiliates and subsidiaries.



The Companys policy is to consolidate (i) all majority-owned subsidiaries in which it has a controlling financial
interest, (ii) variable interest entities 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 period.



3.    RECENT ACCOUNTING PRONOUNCEMENTS



In December 2007, the Financial Accounting Standards Board (the FASB) issued Statement of Financial Accounting Standards (SFAS)
No. 141 (revised 2007), Business Combinations (SFAS No. 141(R)). SFAS No. 141(R) replaces SFAS No. 141, Business Combinations (SFAS No. 141), and supersedes or amends
other related authoritative literature although it retains the fundamental requirements in SFAS No. 141 that the acquisition method of accounting (which SFAS No. 141 called the purchase method) be used for all business combinations
and for an acquirer to be identified for each business combination. SFAS No. 141(R) also establishes principles and requirements for how the acquirer: (a) recognizes and measures in its financial statements the identifiable assets acquired, the
liabilities assumed and any noncontrolling interest in the acquiree; (b) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and (c) determines what information to disclose to enable users of
the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141(R) will apply prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual
reporting period beginning on or after December 15, 2008. SFAS No. 141(R) also requires the acquirer to expense costs relating to any acquisitions that close after December 31, 2008.



In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS No.
157), which, among other things, defines fair value, establishes a framework for measuring fair value and enhances disclosure requirements about fair value measurements. SFAS No. 157 applies to those accounting pronouncements that require or
permit the use of fair value measurements for recognition or disclosure purposes and to those accounting pronouncements that require fair value measurements for other reasons such as the



8



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LAZARD GROUP LLC



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)

(dollars in thousands,
unless otherwise noted)



requirement to measure reporting units at fair value for annual goodwill impairment testing. In February 2008, the FASB issued FASB Staff Position
(FSP) 157-2 (FSP 157-2), which delays the effective date of SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a
recurring basis (at least annually), until fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. These nonfinancial items would include, for example, reporting units measured at fair value in a goodwill
impairment test as mentioned above and nonfinancial assets acquired and liabilities assumed in a business combination. Effective January 1, 2008, the Company adopted SFAS No. 157 for those assets and liabilities not subject to the delayed adoption
provision of FSP 157-2. The partial adoption of SFAS No. 157 did not have a material impact on the Companys condensed consolidated financial statements. For additional disclosures about fair value measurements, see Note 4 of Notes to Condensed
Consolidated Financial Statements. The Company does not anticipate that the adoption of the remaining provisions of SFAS No. 157 in the first quarter of 2009 (subject to the delayed adoption provision of FSP 157-2) would have a material impact 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 No. 159). SFAS No. 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. SFAS No. 159 became effective January 1, 2008 and did not have a material impact on the Companys consolidated financial statements.



In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial
Statementsan amendment of ARB No. 51 (SFAS No. 160). SFAS No. 160 amends Accounting Research Bulletin No. 51, Consolidated Financial Statements, to establish accounting and reporting standards for
the noncontrolling (minority) interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in
the consolidated financial statements. In addition, it also changes the way the consolidated income statement is presented by requiring consolidated net income to include amounts attributable to both the parent and the noncontrolling interest with
separate disclosure of each component on the face of the consolidated income statement. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008, and shall be applied
prospectively as of the beginning of the fiscal year in which it is initially applied except that the presentation and disclosure requirements shall be applied retrospectively for all periods presented. The Company has not yet determined the impact
that SFAS No. 160 will have on its consolidated financial statements.



In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activitiesan amendment of SFAS No. 133 (SFAS No. 161). SFAS No. 161 amends SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended (SFAS No. 133), to enhance the current disclosure framework in SFAS No. 133 for derivative instruments and hedging activities. Entities
will be required to provide enhanced disclosures about how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations, and how derivative
instruments and related hedged items affect an entitys financial position, financial performance and cash flows. SFAS No. 161 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after November 15,
2008. SFAS No. 161 encourages, but does not require, comparative disclosures for earlier periods upon initial adoption. The Company does not anticipate the adoption of SFAS No. 161 would have a material impact on its disclosures of derivative
instruments and hedging activities.



9



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##### Table of Contents

LAZARD GROUP LLC



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)

(dollars in thousands,
unless otherwise noted)



|4.    FAIR | VALUE MEASUREMENTS
|---------- | ------------------



Lazard accounts for its investments (other than equity method investments), securities sold not yet purchased and derivative instruments at fair value
based on various accounting guidance, including SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, (SFAS No. 115), SFAS No. 133 and applicable industry guidance, such as
broker-dealer accounting guidance. Lazard accounts for its equity method investments under Accounting Principles Board Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock.



The Companys investments and securities sold, not yet purchased consist
of the following at June 30, 2008 and December 31, 2007:



|                                                                     |  |              |         |                  |   |          
|-------------------------------------------------------------------- |  | ------------ | ------- | ---------------- | - | ---------
|                                                                     |  | June 30,2008 |         | December 31,2007
|Debt:                                                                |  |              |         |                  |   |          
|Bonds - Corporate                                                    |  | $            | 375,906 |                  | $ | 534,825  
|Non-U.S. Government and agency securities                            |  |              | 57,067  |                  |   | 50,608   
|                                                                     |  |              |         |                  |   |          
|                                                                     |  |              | 432,973 |                  |   | 585,433  
|                                                                     |  |              |         |                  |   |          
|Equities                                                             |  |              | 204,688 |                  |   | 333,796  
|                                                                     |  |              |         |                  |   |          
|Other:                                                               |  |              |         |                  |   |          
|Interest in LAM alternative asset management funds:                  |  |              |         |                  |   |          
|General partnership interests owned by Lazard                        |  |              | 42,886  |                  |   | 43,313   
|General partnership interests consolidated by Lazard                 |  |              | 45,879  |                  |   | 51,493   
|Private equity investments                                           |  |              | 96,055  |                  |   | 74,051   
|Equity method investments                                            |  |              | 76,054  |                  |   | 755      
|                                                                     |  |              |         |                  |   |          
|                                                                     |  |              | 260,874 |                  |   | 169,612  
|                                                                     |  |              |         |                  |   |          
|Total investments                                                    |  |              | 898,535 |                  |   | 1,088,841
|Less equity method investments                                       |  |              | 76,054  |                  |   | 755      
|                                                                     |  |              |         |                  |   |          
|Investments, at fair value                                           |  | $            | 822,481 |                  | $ | 1,088,086
|                                                                     |  |              |         |                  |   |          
|Securities sold, not yet purchased (included in other liabilities) |  | $            | 25,712  |                  | $ | 21,864   
|                                                                     |  |              |         |                  |   |          



Debt securities
primarily consist of investments of LFB which typically holds them long-term, as part of its asset-liability management program. Debt securities are accounted for as either trading or available-for-sale securities at June 30, 2008 and December 31,
2007 as follows:



|                                          |  |              |  |                 
|----------------------------------------- |  | ------------ |  | ----------------
|                                          |  | June 30,2008 |  | December 31,2007
|Trading securities:                       |  |              |  |                 
|Bonds - Corporate                         |  | $243,982     |  | $462,472        
|Non-U.S. Government and agency securities |  | 57,067       |  | 50,608          
|                                          |  |              |  |                 
|                                          |  | 301,049      |  | 513,080         
|Available-for-sale securities:            |  |              |  |                 
|Bonds - Corporate                         |  | 131,924      |  | 72,353          
|                                          |  |              |  |                 
|Total debt securities                     |  | $432,973     |  | $585,433        
|                                          |  |              |  |                 



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LAZARD GROUP LLC



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)

(dollars in thousands,
unless otherwise noted)



Equities principally represent the Companys investments in marketable equity securities either
held directly or indirectly through asset management funds and are either designated as trading securities under SFAS No. 115 or accounted for pursuant to broker-dealer accounting guidelines depending upon the entity in which such
equities are held.



Interests in LAM alternative asset
management funds represent (i) general partnership interests owned by Lazard in LAM-managed hedge funds and (ii) general partnership interests consolidated by Lazard pertaining to minority interests in LAM alternative asset management funds. Such
minority interests represent general partnership interests held directly by certain of our LAM managing directors or employees of the Company but controlled by Lazard. The associated minority interest 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 are comprised of investments in private equity funds and direct private equity interests.



Equity method investments include recent investments in Sapphire Industrials
Corp. (Sapphire) (see Note 9 of Notes to Condensed Consolidated Financial Statements) and Merchant Bankers Asociados, an Argentina-based financial advisory services firm with offices across Central and South America and the parent
company of MBA Banco de Inversiones.



The table below
represents the fair values of the Companys derivative assets and liabilities, which are comprised of interest rate swaps, foreign exchange rate contracts and equity swaps, and are reported within other assets and other
liabilities on the accompanying condensed consolidated statements of financial condition, respectively, as of June 30, 2008 and December 31, 2007:



|                             |  |              |  |                 
|---------------------------- |  | ------------ |  | ----------------
|                             |  | June 30,2008 |  | December 31,2007
|Total derivative assets      |  | $16,814      |  | $9,840          
|                             |  |              |  |                 
|Total derivative liabilities |  | $  3,664     |  | $4,488          
|                             |  |              |  |                 



In accordance with
SFAS No. 157, Lazard categorizes its investments and certain other assets and liabilities recorded at fair value into a three-level fair value hierarchy as follows:



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



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



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LAZARD GROUP LLC



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)

(dollars in thousands,
unless otherwise noted)



|Level 3. | Assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value
measurement. These inputs reflect managements own assumptions about the assumptions a market participant would use in pricing the asset or liability. Lazards Level 3 assets and liabilities primarily consist of private equity investments
that are valued, in the absence of observable market prices, initially 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 it is 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, Lazard
utilizes information derived from fund managers for the determination of such fair values.
|-------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The following table presents Lazards fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of June
30, 2008.



|                                                     |  |                                              |         |         |   |         |  |       |         |  |   |        
|---------------------------------------------------- |  | -------------------------------------------- | ------- | ------- | - | ------- |  | ----- | ------- |  | - | -------
|                                                     |  | Fair Value Measurements on a Recurring Basis
|                                                     |  | Level 1                                      |         | Level 2 |   | Level 3 |  | Total
|Assets:                                              |  |                                              |         |         |   |         |  |       |         |  |   |        
|Investments:                                         |  |                                              |         |         |   |         |  |       |         |  |   |        
|Debt                                                 |  | $                                            | 64,050  |         | $ | 368,923 |  | $     |        |  | $ | 432,973
|Equities                                             |  |                                              | 184,622 |         |   | 15,601  |  |       | 4,465   |  |   | 204,688
|Other (excluding equity method investments):         |  |                                              |         |         |   |         |  |       |         |  |   |        
|Interest in LAM alternative asset management funds:  |  |                                              |         |         |   |         |  |       |         |  |   |        
|General partnership interests owned by Lazard        |  |                                              |        |         |   | 42,886  |  |       |        |  |   | 42,886 
|General partnership interests consolidated by Lazard |  |                                              |        |         |   | 45,879  |  |       |        |  |   | 45,879 
|Private equity investments                           |  |                                              |        |         |   |        |  |       | 96,055  |  |   | 96,055 
|Derivatives                                          |  |                                              |        |         |   | 16,814  |  |       |        |  |   | 16,814 
|                                                     |  |                                              |         |         |   |         |  |       |         |  |   |        
|Total Assets                                         |  | $                                            | 248,672 |         | $ | 490,103 |  | $     | 100,520 |  | $ | 839,295
|                                                     |  |                                              |         |         |   |         |  |       |         |  |   |        
|Liabilities:                                         |  |                                              |         |         |   |         |  |       |         |  |   |        
|Securities sold not yet purchased                    |  | $                                            | 25,712  |         | $ |        |  | $     |        |  | $ | 25,712 
|Derivatives                                          |  |                                              |        |         |   | 3,664   |  |       |        |  |   | 3,664  
|                                                     |  |                                              |         |         |   |         |  |       |         |  |   |        
|Total Liabilities                                    |  | $                                            | 25,712  |         | $ | 3,664   |  | $     |        |  | $ | 29,376 
|                                                     |  |                                              |         |         |   |         |  |       |         |  |   |        



12



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LAZARD GROUP LLC



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)

(dollars in thousands,
unless otherwise noted)



The following table provides a summary of changes in fair value of Lazards Level 3 assets and
liabilities for the three month and six month periods ended June 30, 2008.



|                                 |  |                                                                              |        |                                                 |   |      |                                      |  |   |                                       |   |  |               |     |   |  |   |        
|-------------------------------- |  | ---------------------------------------------------------------------------- | ------ | ----------------------------------------------- | - | ---- | ------------------------------------ |  | - | ------------------------------------- | - |  | ------------- | --- | - |  | - | -------
|                                 |  | Level 3 Assets and LiabilitiesFor the Three Month Period Ended
June 30, 2008
|                                 |  | BeginningBalance                                                             |        | UnrealizedGains (Losses)Included InOtherRevenue |   |      | NetPurchases,IssuancesandSettlements |  |   | ForeignCurrencyTranslationAdjustments |   |  | EndingBalance
|                                 |  |                                                                              |        |                                                
|Level 3 Assets:                  |  |                                                                              |        |                                                 |   |      |                                      |  |   |                                       |   |  |               |     |   |  |   |        
|Investments:                     |  |                                                                              |        |                                                 |   |      |                                      |  |   |                                       |   |  |               |     |   |  |   |        
|Equities                         |  | $                                                                            | 4,553  |                                                 | $ | 170  |                                      |  | $ | (266                                  | ) |  | $             | 8   |   |  | $ | 4,465  
|Otherprivate equity investments |  |                                                                              | 89,473 |                                                 |   | (589 | )                                    |  |   | 7,244                                 |   |  |               | (73 | ) |  |   | 96,055 
|                                 |  |                                                                              |        |                                                 |   |      |                                      |  |   |                                       |   |  |               |     |   |  |   |        
|Total Level 3 Assets             |  | $                                                                            | 94,026 |                                                 | $ | (419 | )                                    |  | $ | 6,978                                 |   |  | $             | (65 | ) |  | $ | 100,520
|                                 |  |                                                                              |        |                                                 |   |      |                                      |  |   |                                       |   |  |               |     |   |  |   |        



|                                 |  |                                                                            |        |                                                 |   |       |                                      |  |   |                                       |   |               |   |       |  |   |        
|-------------------------------- |  | -------------------------------------------------------------------------- | ------ | ----------------------------------------------- | - | ----- | ------------------------------------ |  | - | ------------------------------------- | - | ------------- | - | ----- |  | - | -------
|                                 |  | Level 3 Assets and LiabilitiesFor the Six Month Period Ended
June 30, 2008
|                                 |  | BeginningBalance                                                           |        | UnrealizedGains (Losses)Included InOtherRevenue |   |       | NetPurchases,IssuancesandSettlements |  |   | ForeignCurrencyTranslationAdjustments |   | EndingBalance
|                                 |  |                                                                            |        |                                                
|Level 3 Assets:                  |  |                                                                            |        |                                                 |   |       |                                      |  |   |                                       |   |               |   |       |  |   |        
|Investments:                     |  |                                                                            |        |                                                 |   |       |                                      |  |   |                                       |   |               |   |       |  |   |        
|Equities                         |  | $                                                                          | 4,469  |                                                 | $ | (39   | )                                    |  | $ | (266                                  | ) |               | $ | 301   |  | $ | 4,465  
|Otherprivate equity investments |  |                                                                            | 74,051 |                                                 |   | 1,921 |                                      |  |   | 18,034                                |   |               |   | 2,049 |  |   | 96,055 
|                                 |  |                                                                            |        |                                                 |   |       |                                      |  |   |                                       |   |               |   |       |  |   |        
|Total Level 3 Assets             |  | $                                                                          | 78,520 |                                                 | $ | 1,882 |                                      |  | $ | 17,768                                |   |               | $ | 2,350 |  | $ | 100,520
|                                 |  |                                                                            |        |                                                 |   |       |                                      |  |   |                                       |   |               |   |       |  |   |        



There were no realized
gains or losses included in income during the three month and six month periods ended June 30, 2008 with respect to Level 3 assets and liabilities.



|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
|-- | ---------------------



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



13



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LAZARD GROUP LLC



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)

(dollars in thousands,
unless otherwise noted)



The aggregate non-contingent consideration relating to the GAHL and the CWC acquisitions (before
transaction costs) consisted of cash and Lazard Ltd stock and aggregated approximately $216,200 and $206,900 as of June 30, 2008 and December 31, 2007, respectively. At June 30, 2008 and December 31, 2007, 1,185,282 and 815,558 shares of Class
A common stock are issuable on a non-contingent basis, respectively. Additionally, at both June 30, 2008 and December 31, 2007, 12,155 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 dependent, in part, upon future prices of the Class A common stock. At June 30, 2008 and December 31, 2007, 960,263 and 1,329,987 shares of Class A common stock,
respectively, were contingently issuable and 24,452 shares of Series A preferred stock were contingently convertible into shares of Class A common stock as of each respective date, dependent upon the future performance of GAHL and CWC. A
substantial portion of any contingent consideration will represent goodwill, and would be recognized in the periods through March 31, 2012, when all of such contingencies should have been resolved. The operating results related to the acquisitions
described above are primarily included in the Companys Financial Advisory segment.



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



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 $62,100 and $52,800 at June 30, 2008 and December 31, 2007, respectively, to subsidiaries of Lazard Ltd, which corresponds to the increase in stockholders equity recorded by Lazard
Ltd for such acquisitions (see Note 13 of Notes to the Condensed Consolidated Financial Statements).



7.    GOODWILL AND OTHER INTANGIBLE ASSETS



The components of goodwill and other intangible assets at June 30, 2008 and December 31, 2007, which primarily pertain to the Companys Financial
Advisory segment, are described below.



|                                                          |  |              |         |                  |   |        
|--------------------------------------------------------- |  | ------------ | ------- | ---------------- | - | -------
|                                                          |  | June 30,2008 |         | December 31,2007
|Goodwill                                                  |  | $            | 196,254 |                  | $ | 178,446
|Other intangible assets (net of accumulated amortization) |  |              | 5,718   |                  |   | 9,463  
|                                                          |  |              |         |                  |   |        
|                                                          |  | $            | 201,972 |                  | $ | 187,909
|                                                          |  |              |         |                  |   |        



Changes in the
carrying amount of goodwill for the six month periods ended June 30, 2008 and 2007 are as follows:



|                                                            |  |                          |         |      |   |       
|----------------------------------------------------------- |  | ------------------------ | ------- | ---- | - | ------
|                                                            |  | Six Months EndedJune 30,
|                                                            |  | 2008                     |         | 2007
|Balance, January 1                                          |  | $                        | 178,446 |      | $ | 16,945
|Business acquisitions (additional contingent consideration) |  |                          | 9,282   |      |   |      
|Foreign currency translation adjustments                    |  |                          | 8,526   |      |   | 190   
|                                                            |  |                          |         |      |   |       
|Balance, June 30                                            |  | $                        | 196,254 |      | $ | 17,135
|                                                            |  |                          |         |      |   |       



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LAZARD GROUP LLC



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)

(dollars in thousands,
unless otherwise noted)



The gross cost and accumulated amortization as of June 30, 2008 and December 31, 2007, by major
intangible asset category, is as follows:



|                                                                   |  |               |        |                         |   |                   |  |           |       |                         |   |                   |  |   |        |  |   |      
|------------------------------------------------------------------ |  | ------------- | ------ | ----------------------- | - | ----------------- |  | --------- | ----- | ----------------------- | - | ----------------- |  | - | ------ |  | - | -----
|                                                                   |  | June 30, 2008 |        | December 31, 2007      
|                                                                   |  | GrossCost     |        | AccumulatedAmortization |   | NetCarryingAmount |  | GrossCost |       | AccumulatedAmortization |   | NetCarryingAmount
|Success fee contracts                                              |  | $             | 23,969 |                         | $ | 23,806            |  | $         | 163   |                         | $ | 23,969            |  | $ | 20,783 |  | $ | 3,186
|Management fees, customer relationships and non-compete agreements |  |               | 7,017  |                         |   | 1,462             |  |           | 5,555 |                         |   | 7,017             |  |   | 740    |  |   | 6,277
|                                                                   |  |               |        |                         |   |                   |  |           |       |                         |   |                   |  |   |        |  |   |      
|                                                                   |  | $             | 30,986 |                         | $ | 25,268            |  | $         | 5,718 |                         | $ | 30,986            |  | $ | 21,523 |  | $ | 9,463
|                                                                   |  |               |        |                         |   |                   |  |           |       |                         |   |                   |  |   |        |  |   |      



Amortization expense
of intangible assets for the three month and six month periods ended June 30, 2008 was $2,525 and $3,745, respectively. There was no such amortization expense in the three month and six month periods ended June 30, 2007. Estimated future
amortization expense is as follows:



|                                  |  |                     |      
|--------------------------------- |  | ------------------- | -----
|Year Ending December 31,          |  | AmortizationExpense
|2008 (July 1 through December 31) |  | $                   | 843  
|2009                              |  |                     | 1,272
|2010                              |  |                     | 1,127
|2011                              |  |                     | 903  
|2012                              |  |                     | 511  
|Thereafter                        |  |                     | 1,062
|                                  |  |                     |      
|Total amortization expense        |  | $                   | 5,718
|                                  |  |                     |      



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



Senior DebtSenior debt is comprised of the following as of June 30, 2008 and December 31, 2007:



|                                    |  |                 |         |              |              |                    |                  |   |                   |   |           |  |   |          
|----------------------------------- |  | --------------- | ------- | ------------ | ------------ | ------------------ | ---------------- | - | ----------------- | - | --------- |  | - | ---------
|                                    |  | PrincipalAmount |         | MaturityDate |              | AnnualInterestRate |                  |   | Outstanding As Of
|                                    |  |                 |         |              | June 30,2008 |                    | December 31,2007
|Lazard Group 7.125% Senior Notes(a) |  | $               | 550,000 |              | 2015         |                    | 7.125            | % |                   | $ | 550,000   |  | $ | 550,000  
|Lazard Group 6.12% Senior Notes (b) |  |                 | 437,500 |              | 2008-2035    |                    | 6.12             | % |                   |   |          |  |   | 437,500  
|Lazard Group 6.85% Senior Notes(c)  |  |                 | 600,000 |              | 2017         |                    | 6.85             | % |                   |   | 600,000   |  |   | 600,000  
|Lazard Group Credit Facility(d)     |  |                 | 150,000 |              | 2010         |                    | 4.50             | % |                   |   |          |  |   |         
|                                    |  |                 |         |              |              |                    |                  |   |                   |   |           |  |   |          
|Total                               |  |                 |         |              |              |                    |                  |   |                   | $ | 1,150,000 |  | $ | 1,587,500
|                                    |  |                 |         |              |              |                    |                  |   |                   |   |           |  |   |          



|(a) | Concurrent with Lazard Ltds equity public offering on May 10, 2005, Lazard Group issued, in a private placement, $550,000 aggregate principal amount of 7.125% senior notes due
May 15, 2015. On October 31, 2005, pursuant to an exchange offer, Lazard Group exchanged $546,000 in aggregate principal amount of its privately placed 7.125% senior notes for $546,000 in aggregate principal amount of its 7.125% senior notes that
were registered under the Securities Act of 1933, as amended (the 7.125% exchange notes). The 7.125% exchange notes are substantially identical to the privately placed 7.125% senior notes, except that the transfer restrictions applicable
to the privately placed 7.125% senior notes do not apply to the 7.125% exchange notes.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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LAZARD GROUP LLC



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)

(dollars in thousands,
unless otherwise noted)





| | In connection with the issuance of the Lazard Group 7.125% senior notes, on April 1, 2005, Lazard Group entered into an interest rate forward agreement with a bank for a notional
amount of $650,000 to ensure that the base rate (excluding market-driven credit spreads) on the Lazard Group 7.125% senior notes would be no greater than 4.5%. Lazard Group settled the interest rate forward agreement with the bank as of May 9, 2005,
which required a payment by Lazard Group of $13,004. Of this amount, in accordance with SFAS No. 133, $11,003 was deemed to be the effective portion of the hedge and has been recorded within accumulated other comprehensive
income, net of tax and is being amortized as a charge to interest expense over the ten year term of the Lazard Group 7.125% exchange notes.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | Concurrently with Lazard Ltds equity public offering on May 10, 2005, Lazard Ltd consummated an
initial offering of equity security units (the ESUs) in an aggregate offering amount of $287,500. In addition, on May 10, 2005, Lazard Ltd issued $150,000 aggregate principal amount of ESUs to Natixis, an affiliate of Caisse Nationale
des Caisses dEpargne. Each ESU was issued for $25 and consisted of (i) a purchase contract (the purchase contract) which obligated holders to purchase, and Lazard Ltd to sell, on May 15, 2008, a number of newly issued
shares of Class A common stock equal to a settlement rate (the settlement rate) based on the trading price of its Class A common stock during a period preceding that date and (ii) a 1/40, or 2.5%, ownership interest in a
6.12% senior note due 2035 of Lazard Group (the 6.12% Senior Notes).
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | The terms of the ESUs provided for a remarketing of the 6.12% Senior Notes which commenced on May 2, 2008 (the remarketing). In connection with the remarketing, on May
15, 2008 (i) $437,488 aggregate principal amount of the 6.12% Senior Notes was purchased by Lazard Group, (ii) the stated maturity of the 6.12% Senior Notes was reset to May 15, 2010 and (iii) the interest rate on the 6.12% Senior Notes was reset to
4.00% per annum. The $12 aggregate principal amount of the 6.12% Senior Notes remaining outstanding has been reclassified to other liabilities on the condensed consolidated statement of financial condition at June 30, 2008.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(c) | 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. On August 16, 2007, pursuant
to an exchange offer, Lazard Group exchanged $599,300 in aggregate principal amount of its privately placed 6.85% senior notes for $599,300 in aggregate principal amount of 6.85% senior notes that were registered under the Securities Act of 1933, as
amended (the 6.85% exchange notes). The 6.85% exchange notes are substantially identical to the privately placed 6.85% senior notes, except that the transfer restrictions applicable to the privately placed 6.85% senior notes do not apply
to the 6.85% exchange notes.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(d) | Lazard Group maintains a $150,000 senior revolving credit facility with a group of lenders. Interest rates under the credit facility vary and are based on either a Federal Funds
rate or a Eurodollar rate, in each case plus an applicable margin. As of June 30, 2008 and December 31, 2007, the annual interest rate for a loan accruing interest (based on the Federal Funds overnight rate), including the applicable margin, was
4.50% and 5.75%, respectively. At June 30, 2008 and December 31, 2007, no amounts were outstanding under the Lazard Group credit facility.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Subordinated DebtSubordinated debt at June 30, 2008 and December 31, 2007 amounted to $150,000 at both dates and arose in connection
with the termination of a strategic alliance transaction in Italy on May 15, 2006. The amount outstanding consists of an amended $150,000 subordinated convertible note that is convertible into a maximum of 2,631,570 shares of Lazard Ltd Class A
common stock at an effective conversion price of $57 per share. The $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. As of July 31, 2008, there have been no conversions of the $150,000
subordinated convertible note.



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LAZARD GROUP LLC



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)

(dollars in thousands,
unless otherwise noted)





As of June 30, 2008 and
December 31, 2007, the Company was 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.



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 June 30, 2008, aggregate approximately $25,300. These
managing directors have pledged their interests in LAZ-MD Holdings (which are exchangeable into shares of Class A common stock) and unsold shares of Class A common stock received in exchange for such interests to collateralize such guarantee, with
the value of such collateral exceeding the guarantee provided by Lazard.



In the normal course of business, LFB provides indemnifications to third parties to protect them in the event of non-performance by its clients. At June 30, 2008, LFB had $13,755 of such indemnifications and held
$10,368 of collateral/counter-guarantees to secure these commitments. The Company believes the likelihood of loss with respect to these indemnities is remote. Accordingly, no liability is recorded in the condensed consolidated statement of financial
condition.



Other CommitmentsIn the normal
course of business, LFB enters into commitments to extend credit, predominately at variable interest rates. The commitments have an expiration date and, once drawn upon, may require the counterparty to post collateral depending on the
counterpartys creditworthiness. Outstanding commitments at June 30, 2008 were $16,634. This amount may not represent future cash requirements as commitments may expire without being drawn upon.



On January 24, 2008, Sapphire, a newly organized special purpose acquisition
company formed by Lazard Funding Limited LLC (Lazard Funding), a wholly-owned subsidiary of Lazard Group, completed an initial public offering which, prior to offering costs, raised $800,000 through the sale of 80,000,000 units at an
offering price of $10.00 per unit (the Sapphire IPO). Each unit 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 $7.00.



Sapphire was formed for the purpose of effecting a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more operating businesses, primarily with general industrial companies in North America (collectively referred to as the Initial Business
Combination).



In connection with the formation of
Sapphire, Lazard Funding purchased from Sapphire 15,144,000 units (founders units) at a total cost of approximately $95. Each founders 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. On January 24, 2008, in connection with the Sapphire IPO, Lazard Funding purchased (i) 5,000,000 units in the Sapphire IPO at a purchase price equal to the public offering
price of $10.00 per unit (for an aggregate purchase price of $50,000), and (ii) an aggregate of 12,500,000 warrants from Sapphire at a price of $1.00 per warrant (for a total purchase price of $12,500). Furthermore, Lazard Funding entered into
an agreement with the underwriter to purchase, subsequent to the Sapphire IPO and prior to the closing of the Initial Business Combination, up to an additional $37,500 worth of Sapphire common shares in open market purchases.



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LAZARD GROUP LLC



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)

(dollars in thousands,
unless otherwise noted)



In connection with the Sapphire IPO, and pursuant to certain rights afforded LFCM Holdings LLC
(LFCM Holdings) under the business alliance agreement, dated as of May 10, 2005, between Lazard Group and LFCM Holdings (the business alliance agreement), Lazard Funding offered Corporate Partners II Limited, a private equity
fund formed by Lazard Group, the right, through the date of a public announcement of the Initial Business Combination, to purchase from Lazard Funding, at a cost of $10.00 per unit, up to 2,000,000 Sapphire units (for an aggregate purchase price of
up to $20,000).



Our investment in Sapphire is being accounted
for using the equity method of accounting and is included in investmentsother on the accompanying condensed consolidated statement of financial condition as of June 30, 2008.



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 any required 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 from Lazard Group on May 10, 2005. 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.



|10. | MEMBERS EQUITY (DEFICIENCY)
|--- | ----------------------------



Pursuant to Lazard Groups Operating Agreement, Lazard Group allocates and distributes to its members a substantial portion of its distributable
profits in three monthly installments, as soon as practicable after the end of each fiscal year. Such installment distributions usually begin in February. In addition, Lazard Group makes periodic distributions to its members to fund, among other
things, capital withdrawals and income tax advances made on behalf of its members.



At June 30, 2008 and 2007, Lazard Group common membership interests held by subsidiaries of Lazard Ltd amounted to 56.4% and 47.9%, respectively, and by LAZ-MD Holdings amounted to 43.6% and 52.1%, 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 six month periods ended June



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)



30, 2008 and 2007, Lazard Group distributed $10,832 and $10,098, respectively, to LAZ-MD Holdings and $9,863 and $9,259, 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 six month periods ended June 30, 2008 and 2007, Lazard Group made tax distributions of $51,725
and $83,292, respectively, including $26,727 and $46,739, respectively, paid to LAZ-MD Holdings and $24,998 and $36,553 respectively, paid to subsidiaries of Lazard Ltd.



As described in more detail in Note 8 of Notes to Condensed Consolidated Financial Statements, on May 15, 2008 the Company issued
14,582,750 common membership interests in connection with the settlement of the purchase contracts related to the ESUs.



A description of Lazard Ltds 2005 Equity Incentive Plan (the Equity Incentive Plan), and activity with respect thereto during the six
month periods ended June 30, 2008 and 2007, 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.



In addition to the shares available under the Equity Incentive Plan, additional shares of Class A common stock are available under Lazard Ltds 2008 Incentive Compensation Plan (the 2008 Plan), which
was approved by the stockholders of Lazard Ltd on May 6, 2008. The maximum number of shares available under the 2008 Plan is based on a formula that limits the aggregate number of shares that may, at any time, be subject to awards that are
considered outstanding under the 2008 Plan to 30% of the then-outstanding shares of Class A common stock of Lazard Ltd (treating, for this purpose, the then-outstanding exchangeable interests of LAZ-MD Holdings on a
fully-exchanged basis as described in the Equity Incentive Plan).



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 No. 123 (revised 2004), Share-Based Payment (SFAS No. 123R).
Expense relating to RSUs is charged to compensation and benefits expense within the condensed consolidated statements of income, and amounted to $56,708 and $112,330 for the three month and six month periods ended June 30, 2008,
respectively, and $24,059 and $47,993 for the three month and six month periods ended June 30, 2007, respectively. RSUs issued subsequent to December 31, 2005 generally include a dividend participation right that provides that during vesting
periods each RSU is attributed additional RSUs (or fractions thereof) equivalent to any ordinary quarterly dividends paid on Class A common stock during such period.



During the six-month period ended June 30, 2008, 458,643 RSUs vested. In connection therewith, and after considering the
withholding tax obligations pertaining thereto, 366,401 shares of Class A common stock held by Lazard Group were delivered.



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



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##### Table of Contents

LAZARD GROUP LLC



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)

(dollars in thousands,
unless otherwise noted)



Directors and its committees in the form of DSUs. Their remaining compensation is payable in cash, which they may elect to receive in the form of additional
DSUs under the Directors Fee Deferral Unit Plan. 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, totaled $500 and $534 during the three month and six month
periods ended June 30, 2008, respectively, and $358 and $373 during the three month and six month periods ended June 30, 2007, respectively.



The following is a summary of activity relating to RSUs and DSUs during the six month periods ended June 30, 2007 and 2008:



|                                                                    |  |            |   |      |                                     |       |       |        |   |                                     |   |      
|------------------------------------------------------------------- |  | ---------- | - | ---- | ----------------------------------- | ----- | ----- | ------ | - | ----------------------------------- | - | -----
|                                                                    |  | RSUs       |   | DSUs
|                                                                    |  | Units      |   |      | WeightedAverageGrant DateFair Value |       | Units |        |   | WeightedAverageGrant DateFair Value
|                                                                    |  |            |   |     
|Balance, January 1, 2007                                            |  | 4,009,382  |   |      | $                                   | 32.13 |       | 19,690 |   |                                     | $ | 35.71
|Granted (including 25,178 RSUs relating to dividend participation)  |  | 5,177,279  |   |      | $                                   | 50.19 |       | 13,721 |   |                                     | $ | 54.32
|Forfeited                                                           |  | (154,790   | ) |      | $                                   | 41.65 |       |        |   |                                     |   |      
|Vested/Converted                                                    |  | (95        | ) |      | $                                   | 45.68 |       |        |   |                                     |   |      
|                                                                    |  |            |   |      |                                     |       |       |        |   |                                     |   |      
|Balance, June 30, 2007                                              |  | 9,031,776  |   |      | $                                   | 42.36 |       | 33,411 |   |                                     | $ | 43.35
|                                                                    |  |            |   |      |                                     |       |       |        |   |                                     |   |      
|                                                                    |  |           
|                                                                    |  | RSUs       |   | DSUs
|                                                                    |  | Units      |   |      | WeightedAverageGrant DateFair Value |       | Units |        |   | WeightedAverageGrant DateFair Value
|                                                                    |  |            |   |     
|Balance, January 1, 2008                                            |  | 9,507,935  |   |      | $                                   | 42.35 |       | 35,310 |   |                                     | $ | 43.16
|Granted (including 100,934 RSUs relating to dividend participation) |  | 12,282,433 |   |      | $                                   | 37.31 |       | 28,192 |   |                                     | $ | 37.86
|Forfeited                                                           |  | (355,697   | ) |      | $                                   | 40.15 |       |        |   |                                     |   |      
|Vested/Converted                                                    |  | (458,643   | ) |      | $                                   | 31.79 |       | (5,839 | ) |                                     | $ | 38.28
|                                                                    |  |            |   |      |                                     |       |       |        |   |                                     |   |      
|Balance, June 30, 2008                                              |  | 20,976,028 |   |      | $                                   | 39.69 |       | 57,663 |   |                                     | $ | 41.06
|                                                                    |  |            |   |      |                                     |       |       |        |   |                                     |   |      



As of June 30, 2008,
unrecognized RSU compensation expense, adjusted for estimated forfeitures, was approximately $522,492, with such unrecognized compensation expense expected to be recognized over a weighted average period of approximately 2.6 years subsequent to June
30, 2008. 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



Through June 30, 2008, the Board of Directors of Lazard Ltd has authorized on a cumulative basis the repurchase of up to $500,000 in aggregate cost of its
Class A common stock and Lazard Group common



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##### Table of Contents

LAZARD GROUP LLC



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)

(dollars in thousands,
unless otherwise noted)



membership interests through December 31, 2009. The Company expects that the share repurchase program, with respect to the Class A common stock, will be used
primarily to offset a portion of the shares that have been or will be issued under the Equity Incentive Plan and the 2008 Plan. Class A common shares repurchased by Lazard Group are reported, at cost, as a reduction of members equity within
the condensed consolidated statements of financial condition. Purchases may be made in the open market or through privately negotiated transactions. During the six month period ended June 30, 2008, Lazard Group purchased 4,447,500 shares of Class A
common stock at an average price of $36.61 per share.



As of
June 30, 2008, $243,094 of the initial $500,000 remained available under the share 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.



Employer Contributions to Pension PlansThe
Company contributed approximately $16,000 (8.2 million British pounds) in each of the six month periods ended June 30, 2008 and 2007, respectively, in full satisfaction of its obligation to fund LCHs pension plans for the years ended December
31, 2008 and 2007, respectively. No other contributions to defined benefit plans were made by the Company during the six month periods ended June 30, 2008 and June 30, 2007.



The following tables summarize the components of net periodic benefit cost (credit) for the three month and six month
periods ended June 30, 2008 and 2007:



|                                                  |  |                                     |        |   |                        |   |                              |      |  |      |    |      |   |    |      |   |      |   |  |   |      |  
|------------------------------------------------- |  | ----------------------------------- | ------ | - | ---------------------- | - | ---------------------------- | ---- |  | ---- | -- | ---- | - | -- | ---- | - | ---- | - |  | - | ---- | -
|                                                  |  | Pension Plans                       |        |   | Pension PlanSupplement |   | Post-RetirementMedical Plans |     
|                                                  |  | For The Three Months Ended June 30, |       
|                                                  |  | 2008                                |        |   | 2007                   |   |                              | 2008 |  | 2007 |    | 2008 |   |    | 2007 |  
|Components of Net Periodic Benefit Cost (Credit): |  |                                     |        |   |                        |   |                              |      |  |      |    |      |   |    |      |   |      |   |  |   |      |  
|Service cost                                      |  |                                     |        |   |                        |   |                              |      |  |      |    |      |   |    |      | $ | 32   |   |  | $ | 39   |  
|Interest cost                                     |  | $                                   | 7,733  |   |                        | $ | 6,993                        |      |  | $    | 17 |      | $ | 14 |      |   | 99   |   |  |   | 107  |  
|Expected return on plan assets                    |  |                                     | (8,941 | ) |                        |   | (8,581                       | )    |  |      |    |      |   |    |      |   |      |   |  |   |      |  
|Amortization of:                                  |  |                                     |        |   |                        |   |                              |      |  |      |    |      |   |    |      |   |      |   |  |   |      |  
|Prior service credit                              |  |                                     |        |   |                        |   |                              |      |  |      |    |      |   |    |      |   | (345 | ) |  |   | (345 | )
|Net actuarial loss                                |  |                                     | 100    |   |                        |   | 92                           |      |  |      |    |      |   |    |      |   | 8    |   |  |   | 145  |  
|LCH post-retirement medical plan termination      |  |                                     |        |   |                        |   |                              |      |  |      |    |      |   |    |      |   | (198 | ) |  |   |      |  
|                                                  |  |                                     |        |   |                        |   |                              |      |  |      |    |      |   |    |      |   |      |   |  |   |      |  
|Net periodic benefit cost (credit)                |  | $                                   | (1,108 | ) |                        | $ | (1,496                       | )    |  | $    | 17 |      | $ | 14 |      | $ | (404 | ) |  | $ | (54  | )
|                                                  |  |                                     |        |   |                        |   |                              |      |  |      |    |      |   |    |      |   |      |   |  |   |      |  





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LAZARD GROUP LLC



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)

(dollars in thousands,
unless otherwise noted)



|                                                  |  |                                   |         |   |                        |   |                              |      |  |      |    |      |   |    |      |   |      |   |  |   |        |  
|------------------------------------------------- |  | --------------------------------- | ------- | - | ---------------------- | - | ---------------------------- | ---- |  | ---- | -- | ---- | - | -- | ---- | - | ---- | - |  | - | ------ | -
|                                                  |  | Pension Plans                     |         |   | Pension PlanSupplement |   | Post-RetirementMedical Plans |     
|                                                  |  | For The Six Months Ended June 30, |        
|                                                  |  | 2008                              |         |   | 2007                   |   |                              | 2008 |  | 2007 |    | 2008 |   |    | 2007 |  
|Components of Net Periodic Benefit Cost (Credit): |  |                                   |         |   |                        |   |                              |      |  |      |    |      |   |    |      |   |      |   |  |   |        |  
|Service cost                                      |  |                                   |         |   |                        |   |                              |      |  |      |    |      |   |    |      | $ | 58   |   |  | $ | 83     |  
|Interest cost                                     |  | $                                 | 15,505  |   |                        | $ | 13,701                       |      |  | $    | 33 |      | $ | 29 |      |   | 206  |   |  |   | 218    |  
|Expected return on plan assets                    |  |                                   | (17,915 | ) |                        |   | (16,810                      | )    |  |      |    |      |   |    |      |   |      |   |  |   |        |  
|Amortization of:                                  |  |                                   |         |   |                        |   |                              |      |  |      |    |      |   |    |      |   |      |   |  |   |        |  
|Prior service credit                              |  |                                   |         |   |                        |   |                              |      |  |      |    |      |   |    |      |   | (691 | ) |  |   | (691   | )
|Net actuarial loss                                |  |                                   | 195     |   |                        |   | 189                          |      |  |      |    |      |   |    |      |   | 44   |   |  |   | 292    |  
|LCH post-retirement medical plan termination      |  |                                   |         |   |                        |   |                              |      |  |      |    |      |   |    |      |   | (198 | ) |  |   | (1,587 | )
|                                                  |  |                                   |         |   |                        |   |                              |      |  |      |    |      |   |    |      |   |      |   |  |   |        |  
|Net periodic benefit cost (credit)                |  | $                                 | (2,215  | ) |                        | $ | (2,920                       | )    |  | $    | 33 |      | $ | 29 |      | $ | (581 | ) |  | $ | (1,685 | )
|                                                  |  |                                   |         |   |                        |   |                              |      |  |      |    |      |   |    |      |   |      |   |  |   |        |  



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



The Companys provision for income taxes for the three month and six month periods ended June 30, 2008 and for the three month and six month periods
ended June 30, 2007 was $14,055, $18,392, $17,125 and $30,196, respectively, representing effective tax rates on operating income of 15.9%, 17.4%, 19.1% and 18.0%, 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 Lazard Groups estimated effective tax rates is due to Lazard Group primarily operating in the U.S. as a limited liability company that is
treated as a partnership for U.S. federal income tax purposes. As a result, Lazard Groups income 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 are incremental to the U.S. federal statutory tax rate.



With few exceptions, the Company is no longer subject to income tax examination by foreign tax authorities for years prior to 2003 and by U.S. federal,
state and local tax authorities for years prior to 2004. 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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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 June 30, 2008 and December 31, 2007 are set forth below:



|                        |  |              |         |                  |   |       
|----------------------- |  | ------------ | ------- | ---------------- | - | ------
|                        |  | June 30,2008 |         | December 31,2007
|Receivables             |  |              |         |                  |   |       
|LFCM Holdings           |  | $            | 9,901   |                  | $ | 28,906
|LAZ-MD Holdings         |  |              | 60      |                  |   | 1,280 
|Lazard Ltd Subsidiaries |  |              | 76      |                  |   | 91    
|Other                   |  |              |         |                  |   | 101   
|                        |  |              |         |                  |   |       
|Total                   |  | $            | 10,037  |                  | $ | 30,378
|                        |  |              |         |                  |   |       
|Payables                |  |              |         |                  |   |       
|LFCM Holdings           |  | $            | 632     |                  | $ | 964   
|Lazard Ltd Subsidiaries |  |              | 125,936 |                  |   | 53,841
|Other                   |  |              | 612     |                  |   |       
|                        |  |              |         |                  |   |       
|Total                   |  | $            | 127,180 |                  | $ | 54,805
|                        |  |              |         |                  |   |       



LFCM Holdings



LFCM Holdings owns and operates the capital markets business
and fund management activities as well as other specified non-operating assets and liabilities that were transferred by Lazard Group (referred to as the separated businesses) in May, 2005 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 a master separation agreement, by and among Lazard Ltd, Lazard Group, LAZ-MD Holdings and LFCM Holdings, which
effected the separation and recapitalization that occurred in May, 2005, LFCM Holdings entered into an insurance matters agreement and a license agreement that addressed various business matters associated with the separation, as well as employee
benefits, administrative services, business alliance and lease indemnity agreements, all of which are described in the Companys Form 10-K.



For the three month and six month periods ended June 30, 2008, amounts recorded by Lazard Group relating to administrative and support services under the
administrative services agreement amounted to $967 and $1,939, respectively, and referral fees for underwriting and private placement transactions under the business alliance agreement amounted to $9,922 and $19,689 respectively. For the three month
and six month periods ended June 30, 2007, amounts recorded by Lazard Group relating to administrative and support services amounted to $852 and $1,791, respectively, and referral fees for underwriting and private placement transactions amounted to
$12,038 and $17,573, 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 in the three month period ended June 30, 2007. Such amount is included in the receivable from LFCM Holdings as of December 31, 2007 and was subsequently paid on April 30,
2008. As of both June 30, 2008 and December 31, 2007, LFCM Holdings owned approximately 17.5% of PG&C.



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LAZARD GROUP LLC



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)

(dollars in thousands,
unless otherwise noted)





With respect to the
lease indemnity agreement, the net present value of the receivable due from LFCM Holdings with respect to its indemnification for obligations relating to abandoned lease space in the U.K. at June 30, 2008 and December 31, 2007 was $5,561 and $7,037,
respectively. The balance is due based on a schedule of periodic payments through May 10, 2010.



The remaining receivables from LFCM Holdings and its subsidiaries as of June 30, 2008 and December 31, 2007 primarily include $983 and $5,312,
respectively, related to administrative and support services and reimbursement of expenses incurred on behalf of LFCM Holdings and $3,153 and $5,853, respectively, related to referral fees for underwriting and private placement transactions.



LAZ-MD Holdings



Lazard Group provides selected administrative and support services to LAZ-MD
Holdings through the administrative services agreement, 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 six month periods ended June 30, 2008 such charges amounted to $187 and $375, respectively. For the three month and six month periods ended June 30, 2007
such charges amounted to $50 and $100, respectively.



Lazard
Ltd Subsidiaries



As of June 30, 2008 and December 31,
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 $62,100 and $52,800, respectively (see Note 6 of Notes to Condensed Consolidated Financial Statements). In addition, as of June 30, 2008, Lazard Groups payables to subsidiaries of Lazard Ltd include interest-bearing loans, plus
accrued interest thereon of $63,417. For the three month and six month periods ended June 30, 2008, interest expense relating to Lazard Groups obligations to Lazard Ltd subsidiaries amounted to $417.



|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 in LFNYs Financial and Operational Combined Uniform Single Report
(FOCUS) report filed with the Financial Industry Regulatory Authority (FINRA), or $100, whichever is greater. At June 30, 2008, LFNYs regulatory net capital was $90,341 which exceeded the minimum requirement by $83,679.



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 June 30, 2008, the aggregate regulatory net capital of the U.K. Subsidiaries was
$232,832, which exceeded the minimum requirement by $190,791.



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



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##### Table of Contents

LAZARD GROUP LLC



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)

(dollars in thousands,
unless otherwise noted)



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 June 30, 2008, the consolidated regulatory net capital of CFLF was $236,980, which exceeded the minimum requirement set for
regulatory capital levels by $121,626.



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 June 30, 2008, for those subsidiaries with regulatory capital
requirements, their aggregate net capital was $69,467, which exceeded the minimum required capital by $53,773. At June 30, 2008, each of these subsidiaries individually was in compliance with its regulatory capital requirements.



Effective April 1, 2008, the Company became subject to supervision by the SEC
as a Supervised Investment Bank Holding Company (SIBHC). As a SIBHC, the Company is subject to group-wide supervision, which requires the Company to compute allowable capital and risk allowances on a consolidated basis. Reporting as a
SIBHC began in the second quarter of 2008.



|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. As described above, the Companys principal operating activities are included in
two business segments: Financial Advisory and Asset Management. In addition, the Company records selected other activities in its Corporate segment.



The Companys segment information for the three month and six month periods ended June 30, 2008 and 2007 is prepared using the following methodology:



| |  |  | Revenue and expenses directly associated with each segment are included in determining operating income.
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | Expenses not directly associated with specific segments are allocated based on the most relevant measures applicable, including headcount, square footage and other
factors.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Segment assets are based on those directly associated with each segment, and include an allocation of certain assets relating to various segments, based on the most
relevant measures applicable, including headcount, square footage and other factors.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Company allocates investment gains and losses, interest income and interest expense among the various segments based on the segment in which the
underlying asset or liability is reported.



Each segments
operating expenses include (i) compensation and benefits 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.



25



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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 EndedJune 30, |         |   | Six Months EndedJune 30, |  
|                   |  |                         |  | 2008                       |         |   | 2007                     |   |         | 2008 |  |   | 2007    |  
|Financial Advisory |  | Net Revenue             |  | $                          | 288,696 |   |                          | $ | 244,958 |      |  | $ | 500,959 |   |  | $ | 467,543 |  
|                   |  | Operating Expenses      |  |                            | 229,673 |   |                          |   | 191,564 |      |  |   | 404,433 |   |  |   | 364,562 |  
|                   |  |                         |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|                   |  | Operating Income        |  | $                          | 59,023  |   |                          | $ | 53,394  |      |  | $ | 96,526  |   |  | $ | 102,981 |  
|                   |  |                         |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|                   |  |                         |  |                            |        
|Asset Management   |  | Net Revenue             |  | $                          | 180,372 |   |                          | $ | 165,246 |      |  | $ | 345,403 |   |  | $ | 313,774 |  
|                   |  | Operating Expenses      |  |                            | 142,292 |   |                          |   | 122,021 |      |  |   | 256,935 |   |  |   | 233,033 |  
|                   |  |                         |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|                   |  | Operating Income        |  | $                          | 38,080  |   |                          | $ | 43,225  |      |  | $ | 88,468  |   |  | $ | 80,741  |  
|                   |  |                         |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|                   |  |                         |  |                            |        
|Corporate          |  | Net Revenue             |  | $                          | (2,213  | ) |                          | $ | 10,968  |      |  | $ | (71,999 | ) |  | $ | 8,925   |  
|                   |  | Operating Expenses      |  |                            | 6,740   |   |                          |   | 17,957  |      |  |   | 7,048   |   |  |   | 24,749  |  
|                   |  |                         |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|                   |  | Operating Income (Loss) |  | $                          | (8,953  | ) |                          | $ | (6,989  | )    |  | $ | (79,047 | ) |  | $ | (15,824 | )
|                   |  |                         |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|                   |  |                         |  |                            |        
|Total              |  | Net Revenue             |  | $                          | 466,855 |   |                          | $ | 421,172 |      |  | $ | 774,363 |   |  | $ | 790,242 |  
|                   |  | Operating Expenses      |  |                            | 378,705 |   |                          |   | 331,542 |      |  |   | 668,416 |   |  |   | 622,344 |  
|                   |  |                         |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|                   |  | Operating Income        |  | $                          | 88,150  |   |                          | $ | 89,630  |      |  | $ | 105,947 |   |  | $ | 167,898 |  
|                   |  |                         |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  

|                   |  |   |           |  |   |           |  |               |  |                  |  | 
|------------------ |  | - | --------- |  | - | --------- |  | ------------- |  | ---------------- |  | 
|                   |  |   |           |  |   |           |  | As of        
|                   |  |   |           |  |   |           |  | June 30, 2008 |  | December 31,2007
|Total Assets:      |  |   |           |  |   |           |  |               |  |                 
|Financial Advisory |  | $ | 687,820   |  | $ | 811,752  
|Asset Management   |  |   | 469,322   |  |   | 580,716  
|Corporate          |  |   | 2,443,368 |  |   | 2,371,474
|                   |  |   |           |  |   |           |  |               |  |                  |  | 
|Total              |  | $ | 3,600,510 |  | $ | 3,763,942
|                   |  |   |           |  |   |           |  |               |  |                  |  | 



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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, 2007 (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,
| | - |  | -------------------------------



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



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



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



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##### Table of Contents

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



| |  |  | 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, acquisitions and strategic advisory activity, the market for asset management
activity and other industry trends,
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



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 third 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) and strategic advisory matters, 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 its Corporate segment, including management of cash, certain investments and the commercial banking activities of Lazard Groups Paris-based Lazard Frères Banque SA (LFB). LFB is a registered bank
regulated by the Banque de France and its primary operations include asset and liability management for Lazard Groups Paris House through its money market desk and commercial banking operations, deposit taking and, to a lesser extent,
financing activities and custodial oversight over assets of various clients. The Company also allocates outstanding indebtedness to its Corporate segment.



Lazard has a long history of making alternative investments with its own capital, usually alongside capital of qualified institutional and individual
investors. At the time of Lazard Ltds equity public offering and as a part of the separation, we transferred to LFCM Holdings LLC (LFCM Holdings) all of our alternative investment activities, except for Fonds Partenaires Gestion
(FPG), our private equity business in France. We also transferred to LFCM Holdings principal investments by Lazard Group in the funds managed by the separated businesses, subject to certain options by us to reacquire such investments,
while we retained our investment in our French private equity funds. Since 2005, consistent with our obligations to LFCM Holdings, we have engaged in a number of alternative investments and private equity activities.



28



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We continue to explore and discuss opportunities to expand the scope of our alternative investment and
private equity activities in Europe, the United States and elsewhere. These opportunities could include internal growth of new funds and direct investments by us, partnerships or strategic relationships and investments with third parties and
acquisitions of existing funds or management companies.



At the
time of Lazard Ltds equity public offering, and as part of the separation, we also transferred substantially all of our capital markets activities to LFCM Holdings, other than those activities undertaken by LFB, which is regulated by the
Commission Bancaire. LFB continues to engage in underwritten offerings of securities in France and we expect that it may expand its scope to include placements elsewhere in Europe.



On August 13, 2007, Lazard Group acquired Goldsmith, Agio, Helms & Lynner, LLC (GAHL), a Minneapolis-based
investment bank specializing in financial advisory services to mid-sized private companies. On July 31, 2007, Lazard Ltd acquired Carnegie, Wylie & Company (Holdings) PTY LTD (CWC) and concurrently sold such investment to Lazard
Group. See Note 6 of Notes to Condensed Consolidated Financial Statements for additional information relating to the acquisitions of GAHL and CWC.



As disclosed in our Form 10-K, Lazard and Natixis entered into a cooperation arrangement in April, 2004 (and expanded such arrangement in March, 2005) to
place and underwrite securities on the French equity primary capital markets and cooperate in their respective origination, syndication and placement activities. This arrangement expired on May 10, 2008, and its general terms have since been
extended for a three month period. We are currently discussing with Natixis the possible extension of our cooperation arrangements for a longer period.



For the three month and six month periods ended June 30, 2008 and 2007, the Companys consolidated net revenue was derived from the following
business segments:



|                   |  |                            |   |  |                          |   |  |      |   |  |      |  
|------------------ |  | -------------------------- | - |  | ------------------------ | - |  | ---- | - |  | ---- | -
|                   |  | Three Months EndedJune 30, |   |  | Six Months EndedJune 30, |  
|                   |  | 2008                       |   |  | 2007                     |   |  | 2008 |   |  | 2007 |  
|Financial Advisory |  | 62                         | % |  | 58                       | % |  | 65   | % |  | 59   | %
|Asset Management   |  | 38                         |   |  | 39                       |   |  | 44   |   |  | 40   |  
|Corporate          |  |                           |   |  | 3                        |   |  | (9   | ) |  | 1    |  
|                   |  |                            |   |  |                          |   |  |      |   |  |      |  
|Total              |  | 100                        | % |  | 100                      | % |  | 100  | % |  | 100  | %
|                   |  |                            |   |  |                          |   |  |      |   |  |      |  



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.



29



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Financial Advisory



Global M&A activity for the three month and six month periods ended June 30, 2008 generally decreased versus the
corresponding prior year periods for both global and trans-atlantic completed and announced transactions, as evidenced by the following industry statistics regarding the volume of transactions:



|                            |  |                             |     |      |                           |               |  |     |      |  |      |       |               |   |       |  |     |   
|--------------------------- |  | --------------------------- | --- | ---- | ------------------------- | ------------- |  | --- | ---- |  | ---- | ----- | ------------- | - | ----- |  | --- | --
|                            |  | Three Months Ended June 30, |     |      | Six Months Ended June 30, |              
|                            |  | 2008                        |     | 2007 |                           | %Incr /(Decr) |  |     | 2008 |  | 2007 |       | %Incr /(Decr) |  
|                            |  | ($ in billions)             |    
|Completed M&A Transactions: |  |                             |     |      |                           |               |  |     |      |  |      |       |               |   |       |  |     |   
|Global                      |  | $                           | 537 |      | $                         | 950           |  | (43 | )%   |  | $    | 1,305 |               | $ | 1,823 |  | (28 | )%
|Trans-Atlantic              |  |                             | 64  |      |                           | 78            |  | (18 | )%   |  |      | 109   |               |   | 133   |  | (18 | )%
|                            |  |                             |     |      |                           |              
|Announced M&A Transactions: |  |                             |     |      |                           |               |  |     |      |  |      |       |               |   |       |  |     |   
|Global                      |  |                             | 828 |      |                           | 1,374         |  | (40 | )%   |  |      | 1,341 |               |   | 2,347 |  | (43 | )%
|Trans-Atlantic              |  |                             | 157 |      |                           | 131           |  | 20  | %    |  |      | 199   |               |   | 214   |  | (7  | )%



|Source: | Thomson Financial as ofJuly 17, 2008
|------- | ------------------------------------



While overall M&A industry statistics regarding the number and size of announced transactions generally declined in the first half of 2008 and the
industry outlook for 2008 remains unclear, we believe that we are reasonably well positioned, due to the varied experience of our teams, the investments we have made in our business, and the diversity of our products, even in the current
environment.



Activity in financial restructuring during the
six month period ended June 30, 2008 increased with the amount of corporate debt defaults, according to Moodys Investors Service, Inc, amounting to $18 billion, significantly higher than the $3 billion recorded for the
corresponding period in 2007. Moodys is expecting further increases in the default rates this year, with higher levels in the U.S. than in Europe. We expect that our Financial Restructuring practice will benefit from the increase in the level
of corporate defaults, as well as from advising companies during this period of volatility on matters relating to debt and financing restructuring and other on and off balance sheet assignments.



Asset Management



As shown in the table below, global market indices at June 30, 2008
decreased significantly as compared to such indices at December 31, 2007 and June 30, 2007 principally as a result of mixed corporate earnings and continued volatility in the equity and credit markets.



|                             |  |                                     |    |  |               |   
|---------------------------- |  | ----------------------------------- | -- |  | ------------- | --
|                             |  | Percentage Change June 30, 2008 vs. |   
|                             |  | December 31, 2007                   |    |  | June 30, 2007 |   
|MSCI World Index             |  | (12                                 | )% |  | (13           | )%
|CAC 40                       |  | (21                                 | )  |  | (27           | ) 
|DAX                          |  | (20                                 | )  |  | (20           | ) 
|FTSE 100                     |  | (13                                 | )  |  | (15           | ) 
|TOPIX 100                    |  | (10                                 | )  |  | (25           | ) 
|MSCI Emerging Market         |  | (13                                 | )  |  | 3             |   
|Dow Jones Industrial Average |  | (15                                 | )  |  | (15           | ) 
|NASDAQ                       |  | (14                                 | )  |  | (12           | ) 
|S&P 500                      |  | (13                                 | )  |  | (15           | ) 



Market depreciation
reflected in Lazards AUM during the six month and twelve month periods ended June 30, 2008 generally corresponds to the changes in global market indices.



30



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Financial Statement Overview



Net Revenue



The majority of Lazards Financial Advisory net revenue is earned from the successful completion of mergers, acquisitions, strategic advisory
matters, 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 the form of referral fees for referring to LFCM Holdings opportunities for underwriting and distribution of securities. The referral fees
received from LFCM Holdings is generally half of the revenue recorded by LFCM Holdings in respect of such activities.



Lazards Asset Management segment principally includes Lazard Asset Management LLC and its subsidiaries (collectively referred to as
LAM), Lazard Frères Gestion SAS (LFG) and 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 certain 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 amounts earned at LFB, and investment gains and losses on debt securities at LFB, LAM-managed equity funds and principal investments in equities and alternative investment funds managed by Lazard
Alternative Investments Holding LLC (LAI). Interest expense related to the financing transactions associated with the equity public offering is included in Corporate net revenue. Corporate net revenue can fluctuate due to changes in the
fair value of investments classified as trading, and with respect to available-for-sale, when realized, as well as changes in interest and currency exchange rates and in the levels of cash, investments and indebtedness. Total assets in Corporate
represented 68% of Lazards consolidated total assets as of June 30, 2008, principally attributable to assets associated with LFB and, to a lesser extent, investments in LAM-managed funds, other securities and cash.



31



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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. Also, as noted above, Corporate net revenue is subject to fluctuations due to changes in fair market value of investments, interest and currency exchange rates.



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.



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 various LAM-related
general partnerships (LAM GPs) 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.



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



32



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A discussion of the Companys consolidated results of operations for the three month and six month
periods ended June 30, 2008 and 2007 is set forth below, followed by a more detailed discussion of business segment results.



|                                              |  |                            |         |                          |   |         |  |   |         |   |  |   |        
|--------------------------------------------- |  | -------------------------- | ------- | ------------------------ | - | ------- |  | - | ------- | - |  | - | -------
|                                              |  | Three Months EndedJune 30, |         | Six Months EndedJune 30,
|                                              |  | 2008                       |         | 2007                     |   | 2008    |  |   | 2007   
|                                              |  | ($ in thousands)          
|Revenue                                       |  |                            |         |                          |   |         |  |   |         |   |  |   |        
|Investment banking and other advisory fees    |  | $                          | 279,431 |                          | $ | 228,205 |  | $ | 476,155 |   |  | $ | 443,288
|Money management fees                         |  |                            | 165,699 |                          |   | 148,518 |  |   | 323,781 |   |  |   | 284,344
|Interest income                               |  |                            | 20,700  |                          |   | 18,037  |  |   | 43,090  |   |  |   | 40,250 
|Other                                         |  |                            | 39,615  |                          |   | 55,845  |  |   | 8,623   |   |  |   | 83,038 
|                                              |  |                            |         |                          |   |         |  |   |         |   |  |   |        
|Total revenue                                 |  |                            | 505,445 |                          |   | 450,605 |  |   | 851,649 |   |  |   | 850,920
|Interest expense                              |  |                            | 38,590  |                          |   | 29,433  |  |   | 77,286  |   |  |   | 60,678 
|                                              |  |                            |         |                          |   |         |  |   |         |   |  |   |        
|Net revenue                                   |  |                            | 466,855 |                          |   | 421,172 |  |   | 774,363 |   |  |   | 790,242
|                                              |  |                            |         |                          |   |         |  |   |         |   |  |   |        
|Operating Expenses                            |  |                            |         |                          |   |         |  |   |         |   |  |   |        
|Compensation and benefits                     |  |                            | 280,021 |                          |   | 249,043 |  |   | 473,580 |   |  |   | 469,078
|Non-compensation expense (*)                  |  |                            | 98,684  |                          |   | 82,499  |  |   | 194,836 |   |  |   | 153,266
|                                              |  |                            |         |                          |   |         |  |   |         |   |  |   |        
|Total operating expenses                      |  |                            | 378,705 |                          |   | 331,542 |  |   | 668,416 |   |  |   | 622,344
|                                              |  |                            |         |                          |   |         |  |   |         |   |  |   |        
|Operating Income                              |  |                            | 88,150  |                          |   | 89,630  |  |   | 105,947 |   |  |   | 167,898
|Provision for income taxes                    |  |                            | 14,055  |                          |   | 17,125  |  |   | 18,392  |   |  |   | 30,196 
|                                              |  |                            |         |                          |   |         |  |   |         |   |  |   |        
|Income Before Minority Interest in Net Income |  |                            | 74,095  |                          |   | 72,505  |  |   | 87,555  |   |  |   | 137,702
|Minority interest in net income               |  |                            | 1,645   |                          |   | 3,725   |  |   | (1,609  | ) |  |   | 5,558  
|                                              |  |                            |         |                          |   |         |  |   |         |   |  |   |        
|Net Income                                    |  | $                          | 72,450  |                          | $ | 68,780  |  | $ | 89,164  |   |  | $ | 132,144
|                                              |  |                            |         |                          |   |         |  |   |         |   |  |   |        



|(*) | Including, in the three month and six month periods ended June 30, 2008, amortization of intangible assets relating to acquisitions of $2,525 and $3,745, respectively, with no such
amortization in the prior year periods.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|                                                                        |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|----------------------------------------------------------------------- |  | -------------------------- | ------- | - | ------------------------ | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                                        |  | Three Months EndedJune 30, |         |   | Six Months EndedJune 30, |  
|                                                                        |  | 2008                       |         |   | 2007                     |   |         | 2008 |  |   | 2007    |  
|                                                                        |  | ($ in thousands)           |        
|Total revenue                                                           |  | $                          | 505,445 |   |                          | $ | 450,605 |      |  | $ | 851,649 |   |  | $ | 850,920 |  
|Add (deduct):                                                           |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|LFB interest expense (a)                                                |  |                            | (9,963  | ) |                          |   | (7,652  | )    |  |   | (18,864 | ) |  |   | (18,067 | )
|(Revenue) loss related to consolidation of LAM general partnerships (b) |  |                            | (1,643  | ) |                          |   | (3,724  | )    |  |   | 1,610   |   |  |   | (5,555  | )
|                                                                        |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Operating revenue                                                       |  | $                          | 493,839 |   |                          | $ | 439,229 |      |  | $ | 834,395 |   |  | $ | 827,298 |  
|                                                                        |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  



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

|(b) | LAM general partnership revenue (loss) is excluded because we do not deem such amounts as operating in nature as it is directly offset by a charge (credit) to minority interest in
net income for the corresponding amount.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Certain key ratios, statistics and headcount information for the three month and six month periods ended
June 30, 2008 and 2007 are set forth below:



|                                            |  |                            |   |  |                          |   |  |      |   |  |      |  
|------------------------------------------- |  | -------------------------- | - |  | ------------------------ | - |  | ---- | - |  | ---- | -
|                                            |  | Three Months EndedJune 30, |   |  | Six Months EndedJune 30, |  
|                                            |  | 2008                       |   |  | 2007                     |   |  | 2008 |   |  | 2007 |  
|As a % of Net Revenue, By Revenue Category: |  |                            |   |  |                          |   |  |      |   |  |      |  
|Investment banking and other advisory fees  |  | 60                         | % |  | 54                       | % |  | 61   | % |  | 56   | %
|Money management fees                       |  | 36                         |   |  | 35                       |   |  | 42   |   |  | 36   |  
|Interest income                             |  | 4                          |   |  | 4                        |   |  | 6    |   |  | 5    |  
|Other                                       |  | 8                          |   |  | 13                       |   |  | 1    |   |  | 11   |  
|Interest expense                            |  | (8                         | ) |  | (6                       | ) |  | (10  | ) |  | (8   | )
|                                            |  |                            |   |  |                          |   |  |      |   |  |      |  
|Net Revenue                                 |  | 100                        | % |  | 100                      | % |  | 100  | % |  | 100  | %
|                                            |  |                            |   |  |                          |   |  |      |   |  |      |  
|As a % of Net Revenue:                      |  |                            |   |  |                          |   |  |      |   |  |      |  
|Operating Income                            |  | 19                         | % |  | 21                       | % |  | 14   | % |  | 21   | %
|                                            |  |                            |   |  |                          |   |  |      |   |  |      |  
|                                            |  |                           
|                                            |  | As of June 30,             |   |  |                          |  
|                                            |  | 2008                       |   |  | 2007                     |   |  |      |   |  |      |  
|                                            |  |                            |   | 
|Headcount:                                  |  |                            |   |  |                          |   |  |      |   |  |      |  
|Managing Directors:                         |  |                            |   |  |                          |   |  |      |   |  |      |  
|Financial Advisory                          |  | 152                        |   |  | 139                      |   |  |      |   |  |      |  
|Asset Management                            |  | 55                         |   |  | 48                       |   |  |      |   |  |      |  
|Corporate                                   |  | 8                          |   |  | 8                        |   |  |      |   |  |      |  
|Limited Managing Directors                  |  | 5                          |   |  | 5                        |   |  |      |   |  |      |  
|Other Employees:                            |  |                            |   |  |                          |   |  |      |   |  |      |  
|Business segment professionals              |  | 988                        |   |  | 780                      |   |  |      |   |  |      |  
|All other professionals and support staff   |  | 1,270                      |   |  | 1,253                    |   |  |      |   |  |      |  
|                                            |  |                            |   |  |                          |   |  |      |   |  |      |  
|Total                                       |  | 2,478                      |   |  | 2,233                    |   |  |      |   |  |      |  
|                                            |  |                            |   |  |                          |   |  |      |   |  |      |  



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 June 30, 2008 versus June 30, 2007



Net income for the three month period ended June 30, 2008 increased $4 million, or 5%, as compared to the corresponding period in 2007. As described
above, the Company acquired GAHL and CWC during the third quarter of 2007. Accordingly, our results for the three month period ended June 30, 2008 include the results of such acquired businesses.



Net revenue increased $46 million, or 11%, for the three month period ended
June 30, 2008, compared to the corresponding period in 2007, with operating revenue increasing $55 million, or 12%, compared to the 2007 period. Despite a general decline in overall industry transactions, our fees from investment banking and
other advisory activities increased by $51 million, or 22%, versus the corresponding period in 2007, reflecting an increase in our number of transactions with fees greater than $1 million. Money management fees, including incentive fees, increased
$17 million, or 12%, as compared to the corresponding period in the prior year principally as the result of a change in mix of investment products and levels of management fees on certain



34



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products, as well as a $4 billion, or 3%, increase in average AUM for the three month period ended June 30, 2008 versus the corresponding period in
2007. Interest income increased $3 million, or 15%. Other revenue decreased $16 million, or 29%, in the three month period ended June 30, 2008 versus the corresponding period in 2007. The decline was principally attributable to a $9 million
gain recorded in the corresponding 2007 period in connection with the Companys interest in the net proceeds from the sale by LFCM Holdings of a portion of its ownership interest in Panmure Gordon & Co. plc (PG&C) (see Note
13 of Notes to Condensed Consolidated Financial Statements), and reductions in referral fees earned from activities with LFCM Holdings and in revenue recorded from LAM GPs. Interest expense for the three month period ended June 30, 2008
increased $9 million, or 31%, as a result of higher average amounts of outstanding senior and subordinated indebtedness and by increased interest on average customer deposits in LFB.



Compensation and benefits expense increased $31 million, or 12%, for the three month period ended June 30, 2008,
reflecting an increase in operating revenue, amortization of an increased amount of Restricted Stock Units (RSUs) and additional compensation associated with the strategic headcount growth of managing directors and business segment
professionals. Compensation and benefits expense represented 56.7% of operating revenue, the same as in the corresponding 2007 period.



Non-compensation expense in the three month period ended June 30, 2008 increased $16 million, or 20%, and was 19.5% of operating revenue for the
second quarter of 2008, compared to 18.8% of operating revenue for the second quarter of 2007, with such percentage of operating revenue excluding in the 2008 period the effect of $2.5 million in amortization of intangibles related to the GAHL and
CWC acquisitions completed in the second half of 2007. Factors contributing to the quarter-over-quarter increase include (i) the impact of new offices and operating expenses related to companies acquired in the second half of 2007, (ii) increased
business development expenses for travel and market related data and AUM growth, and (iii) the continued impact of the weakened U.S. dollar. Such increased costs in the 2008 period were partially offset by a net reduction in the provision for
costs associated with leases on abandoned space.



Operating
income for the three month period ended June 30, 2008 decreased $1 million, or 2%, versus the corresponding period in 2007, and as a percentage of net revenue, was 19% and 21% in the 2008 and 2007 periods, respectively. Operating income in the
2008 period benefited by approximately $4 million from the strengthening of foreign currencies against the U.S. dollar.



The provision for income taxes for the three month period ended June 30, 2008 decreased $3 million, versus the prior year period. The Companys
effective tax rate was 15.9% for the three month period ended June 30, 2008 as compared to 19.1% for the corresponding period in 2007.



Minority interest in net income for the three month period ended June 30, 2008 decreased $2 million, or 56%, versus the corresponding 2007 period and
in the 2008 period includes a $2 million charge related to various LAM-related general partnerships held directly by certain of our LAM managing directors, as compared to a $4 million charge recorded in the corresponding period in 2007.



Six Months Ended June 30, 2008 versus June 30, 2007



Net income for the six month period ended June 30, 2008 decreased $43
million, or 33%, as compared to the corresponding period in 2007. As described above, the Company acquired GAHL and CWC during the third quarter of 2007. Accordingly, results for the six month period ended June 30, 2008 include the results of
such acquired businesses.



Net revenue decreased $16 million,
or 2%, for the six month period ended June 30, 2008, compared to the corresponding period in 2007, with operating revenue increasing $7 million, or 1% compared to the corresponding 2007 period. Despite the general decline in overall industry
transactions, our fees from investment banking and other advisory activities increased by $33 million, or 7%, versus the corresponding 2007 period, reflecting an increase in our number of strategic advisory assignments and completed M&A
transactions. Money management fees, including incentive fees, increased $39 million, or 14%, as compared to the prior year period



35



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principally as the result of a $13 billion, or 11%, increase in average AUM for the six month period ended June 30, 2008 versus the corresponding 2007
period, as well as a change in the mix of investment products and levels of management fees on certain products. Interest income increased $3 million, or 7%. Other revenue decreased $74 million, or 90%, in the six month period ended
June 30, 2008 versus the corresponding period in 2007. The decline was principally attributable to broad-based illiquidity in the credit markets and volatility in the equity markets which adversely impacted investment income during the first
quarter of 2008 related to (i) LFBs corporate debt portfolio, held as an integral part of its asset-liability management program and (ii) the Companys investment in corporate equities to seed Asset Management products and for
temporary investments. In addition, the 2007 period included a $9 million gain recorded in connection with the Companys interest 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). Another contributing factor to the decrease was a $7 million reduction in revenue from LAM GPs. Interest expense for the six month period ended June 30, 2008 increased $17
million, or 27%, as a result of higher average amounts of senior and subordinated indebtedness outstanding in the 2008 period.



Compensation and benefits expense increased $5 million, or 1%, for the six month period ended June 30, 2008, reflecting an increase in operating
revenue, amortization of an increased amount of RSUs and additional compensation associated with the strategic headcount growth of managing directors and business segment professionals. Compensation and benefits expense represented 56.7% of
operating revenue, the same as in the corresponding 2007 period.



Non-compensation expense in the six month period ended June 30, 2008 increased $42 million, or 27%, and was 22.9% of operating revenue for the first half of 2008, compared 18.5% of operating revenue for the first half of 2007, with
such percentage of operating revenue excluding in the 2008 period the effect of $3.7 million in amortization of intangibles related to the GAHL and CWC acquisitions completed in the second half of 2007. Factors contributing to the increases include
(i) the impact of new offices and operating expenses related to companies acquired in the second half of 2007, (ii) increased business development expenses for travel, market related data and AUM growth, and (iii) the continued impact of the
weakened U.S. dollar.



Operating income for the six month
period ended June 30, 2008 decreased $62 million, or 37%, versus the corresponding period in 2007, and as a percentage of net revenue was 14% and 21% in the 2008 and 2007 periods, respectively. Operating income in the 2008 period benefited $9
million from the strengthening of foreign currencies against the U.S. dollar.



The provision for income taxes for the six month period ended June 30, 2008 decreased $12 million, versus the prior year period due principally to lower levels of income in the 2008 period. The Companys
effective tax rate was 17.4% for the six month period ended June 30, 2008 as compared to 18.0% for the corresponding period in 2007.



Minority interest in net income for the six month period ended June 30, 2008 increased $7 million, or 129%, versus the 2007 period and in the 2008
period includes a $1 million credit related to various LAM-related general partnerships held directly by certain of our LAM managing directors, as compared to a $6 million charge recorded in the corresponding period in 2007.



Business Segments



The following is a discussion of net revenue and operating income for the Companys business segmentsFinancial
Advisory, Asset Management and Corporate. Each segments operating expenses include (i) compensation and benefits expenses that are incurred directly in support of the segment and (ii) other operating expenses, which include directly
incurred expenses for occupancy and equipment, marketing and business development, technology and information services, professional services, fund administration and outsourcing and indirect support costs (including compensation and benefits
expense and other operating



36



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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.



Financial Advisory



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



|                                                                                                                         |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|------------------------------------------------------------------------------------------------------------------------ |  | -------------------------- | ------- | - | ------------------------ | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                                                                                         |  | Three Months EndedJune 30, |         |   | Six Months EndedJune 30, |  
|                                                                                                                         |  | 2008                       |         |   | 2007                     |   |         | 2008 |  |   | 2007    |  
|                                                                                                                         |  | ($ in thousands)           |        
|M&A and Strategic Advisory                                                                                               |  | $                          | 225,108 |   |                          | $ | 164,318 |      |  | $ | 391,092 |   |  | $ | 360,386 |  
|Financial Restructuring                                                                                                  |  |                            | 32,666  |   |                          |   | 29,073  |      |  |   | 48,204  |   |  |   | 38,693  |  
|Corporate Finance and Other                                                                                              |  |                            | 30,922  |   |                          |   | 51,567  |      |  |   | 61,663  |   |  |   | 68,464  |  
|                                                                                                                         |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Net Revenue                                                                                                              |  |                            | 288,696 |   |                          |   | 244,958 |      |  |   | 500,959 |   |  |   | 467,543 |  
|Operating Expenses (a)                                                                                                   |  |                            | 229,673 |   |                          |   | 191,564 |      |  |   | 404,433 |   |  |   | 364,562 |  
|                                                                                                                         |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Operating Income                                                                                                         |  | $                          | 59,023  |   |                          | $ | 53,394  |      |  | $ | 96,526  |   |  | $ | 102,981 |  
|                                                                                                                         |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Operating Income, Excluding Amortization of Intangible Assets Related To Acquisitions (b)                                |  | $                          | 61,266  |   |                          | $ | 53,394  |      |  | $ | 99,708  |   |  | $ | 102,981 |  
|                                                                                                                         |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Operating Income as a Percentage of Net Revenue                                                                          |  |                            | 20      | % |                          |   | 22      | %    |  |   | 19      | % |  |   | 22      | %
|                                                                                                                         |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Operating Income as a Percentage of Net Revenue, Excluding Amortization of Intangible Assets Related To Acquisitions (b) |  |                            | 21      | % |                          |   | 22      | %    |  |   | 20      | % |  |   | 22      | %
|                                                                                                                         |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|                                                                                                                         |  |                            |        
|                                                                                                                         |  | As of June 30,             |         |   |                          |   |         |      | 
|                                                                                                                         |  | 2008                       |         |   | 2007                     |   |         |      |  |   |         |  
|Headcount (c):                                                                                                           |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Managing Directors                                                                                                       |  |                            | 152     |   |                          |   | 139     |      |  |   |         |   |  |   |         |  
|Limited Managing Directors                                                                                               |  |                            | 4       |   |                          |   | 2       |      |  |   |         |   |  |   |         |  
|Other Employees:                                                                                                         |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Business segment professionals                                                                                           |  |                            | 639     |   |                          |   | 467     |      |  |   |         |   |  |   |         |  
|All other professionals and support staff                                                                                |  |                            | 259     |   |                          |   | 248     |      |  |   |         |   |  |   |         |  
|                                                                                                                         |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Total                                                                                                                    |  |                            | 1,054   |   |                          |   | 856     |      |  |   |         |   |  |   |         |  
|                                                                                                                         |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  



|(a) | Includes indirect support costs (including compensation and benefits expense and other operating expenses related thereto) and, in the three and six month periods ended June 30,
2008, amortization of intangible assets related to the acquisitions of GAHL and CWC of $2,243 and $3,182, respectively.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) | Excludes, in the 2008 periods, the amortization of intangible assets related to the acquisitions of GAHL and CWC as described in (a) above.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------

|(c) | Includes, in the 2008 period, an aggregate of five managing directors, 99 business segment professionals and 39 other professionals and support staff applicable to GAHL and CWC. In
addition, the periods exclude headcount related to indirect support functions, with such headcount being included in the Corporate segment.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Net revenue trends in Financial Advisory for M&A and Strategic Advisory and Financial Restructuring
are generally correlated to the volume of completed industry-wide merger and acquisition transactions and restructurings occurring subsequent to corporate debt defaults, respectively. However, deviations from this relationship can occur in any given
year for a number of reasons. For instance, material variances in the level of merger and acquisition activity in a particular geography where Lazard has significant market share or the number of its strategic 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:



|                                                                   |  |                          |   |  |      |  
|------------------------------------------------------------------ |  | ------------------------ | - |  | ---- | -
|                                                                   |  | Six Months EndedJune 30, |  
|                                                                   |  | 2008                     |   |  | 2007 |  
|Lazard Statistics:                                                 |  |                          |   |  |      |  
|Number of Clients:                                                 |  |                          |   |  |      |  
|Total                                                              |  | 432                      |   |  | 344  |  
|With Fees Greater than $1 million                                  |  | 122                      |   |  | 105  |  
|Percentage of Total Financial Advisory Revenue from Top 10 Clients |  | 28                       | % |  | 25   | %
|Number of M&A Transactions Completed Greater than $1 billion (a)   |  | 23                       |   |  | 21   |  



|(a) | Source: Thomson Financial as of July 17, 2008
|--- | ---------------------------------------------



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 2008 periods, includes the impact of the acquisition of CWC).



|              |  |                            |   |  |                          |   |  |      |   |  |      |  
|------------- |  | -------------------------- | - |  | ------------------------ | - |  | ---- | - |  | ---- | -
|              |  | Three MonthsEnded June 30, |   |  | Six MonthsEnded June 30, |  
|              |  | 2008                       |   |  | 2007                     |   |  | 2008 |   |  | 2007 |  
|United States |  | 56                         | % |  | 59                       | % |  | 53   | % |  | 52   | %
|Europe        |  | 38                         |   |  | 37                       |   |  | 39   |   |  | 45   |  
|Rest of World |  | 6                          |   |  | 4                        |   |  | 8    |   |  | 3    |  
|              |  |                            |   |  |                          |   |  |      |   |  |      |  
|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 M&A, strategic advisory matters and financial restructuring transactions, depending on clients needs. This flexibility allows Lazard to better match its professionals with the counter-cyclical business cycles of mergers and
acquisitions and 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.



38



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Operating Results



Financial Advisory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 June 30, 2008 versus June 30, 2007



In the 2008 period, Financial Advisory net revenue increased $44 million, or 18%, as compared to the corresponding 2007 period, with M&A and Strategic Advisory revenue increasing $61 million, or 37%, and
Financial Restructuring revenue increasing $4 million, or 12%, while Corporate Finance and Other net revenue decreased $21 million, or 40%.



The increase in M&A and Strategic Advisory revenue in 2008 resulted from an increase in the number of completed M&A transactions greater than $1
billion in which we advised and in average fees per transaction. Clients which, in the aggregate, represented a significant portion of our M&A and Strategic Advisory revenue for the 2008 period included Bear Stearns, Eiffage, Eurotunnel, H&R
Block, Louis Dreyfus SAS, Quanex, Resolution plc, Trane, Trico Marine Services, and Zinifex.



Financial Restructuring revenue is derived from various activities including bankruptcy assignments, global debt and financing restructurings and advice on complex on and off balance sheet assignments, such as retiree
health care obligations. The increase in revenue was the result of an increase in the number of assignments in the 2008 period as compared to the corresponding 2007 period. Notable restructuring assignments completed in the second quarter of 2008
include advising Plastech Engineered Products, Movie Gallery, IAP Worldwide Services and Weston Presidio. We continue our work on a number of other restructuring assignments, including assignments for LandSource Communities Development LLC,
Technical Olympic USA (TOUSA), Tropicana Casino & Resorts, Wellman Inc., the UAW, BLB Management Services, Centro Properties Limited, Inmobiliaria Colonial, Journal Register Company, Tarragon Corporation, Vertis Inc. and WCI Communities Inc.



Corporate Finance and Other net revenue decreased versus the
2007 period reflecting a decrease in the value of fund closings by our Private Fund Advisory Group and public offerings advised by our Equity Capital Markets Group. During the 2008 period, our Equity Capital Markets Group transaction assignments
included Eurotunnel, Equitable Resources, Renesola and others on their follow-on equity offerings. Our Alternative Capital Finance Group served as a placement agent on a number of Private Investment in Public Equity transactions (PIPES)
and Registered Direct Offerings (RDs). During the 2008 period, notable assignments for PIPES included Trico Marine and China Cablecom and for RDs included Dendreon Corporation and Pacific Ethanol.



Operating expenses for the three month period ended June 30, 2008 increased
$38 million, or 20%, versus the corresponding 2007 period primarily due to increased compensation associated with higher operating revenue, amortization of an increased amount of RSUs and increased costs from the strategic headcount growth of senior
bankers during 2007. Also contributing to the increase were expenses related to companies acquired in the second half of 2007 and other new offices, including the amortization of intangible assets associated with the GAHL and CWC acquisitions, as
well as increases in business development expenses for travel and market related data, and the continued impact of the weakened U.S. dollar.



Financial Advisory operating income for the 2008 period increased $6 million, or 11%, versus the corresponding 2007 period. Operating income represented
20% and 22% of segment net revenues for the 2008 and 2007 periods, respectively.



39



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##### Table of Contents

Six Months Ended June 30, 2008 versus June 30, 2007



In the 2008 period, Financial Advisory net revenue increased
$33 million, or 7%, as compared to the corresponding 2007 period, with M&A and Strategic Advisory revenue increasing $31 million, or 9%, and Financial Restructuring revenue increasing $10 million, or 25%, while Corporate Finance
and Other net revenue decreased $7 million, or 10%.



The
increase in M&A and Strategic Advisory revenue in 2008 resulted from an increase in the number of completed M&A transactions greater than $1 billion in which we advised and from fees earned for strategic advisory assignments. The increase in
Financial Restructuring revenue was the result of an increase in the number of assignments and higher average fees per transaction in the 2008 period as compared to the corresponding 2007 period. Corporate Finance and Other net revenue decreased
versus the corresponding 2007 period as a result of decreases in the second quarter of 2008 in the values of fund closings by our Private Fund Advisory Group and public offerings advised by our Equity Capital Markets Group.



Operating expenses for the six month period ended June 30, 2008 increased $40
million, or 11%, versus the corresponding 2007 period primarily due to operating expenses related to companies acquired in the second half of 2007 and other new offices, including the impact of related headcount and amortization of intangible assets
associated with the GAHL and CWC acquisitions. Also contributing to the increase was higher compensation costs related to increased operating revenue as well as amortization of an increased amount of RSUs and increased costs from the strategic
headcount growth of senior bankers during 2007, as well as increases in business development expenses for travel and market related data, and the continued impact of the weakened U.S. dollar.



Financial Advisory operating income for the 2008 period decreased $6 million,
or 6%, versus the corresponding 2007 period. Operating income represented 19% and 22% of segment net revenues for the 2008 and 2007 periods, respectively.



Asset Management



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



|                                        |  |                 |         |                  |   |        
|--------------------------------------- |  | --------------- | ------- | ---------------- | - | -------
|                                        |  | As of          
|                                        |  | June 30,2008    |         | December 31,2007
|                                        |  | ($ in millions)
|AUM:                                    |  |                 |         |                  |   |        
|International Equities                  |  | $               | 42,324  |                  | $ | 50,535 
|Global Equities                         |  |                 | 48,303  |                  |   | 47,814 
|U.S. Equities                           |  |                 | 18,623  |                  |   | 20,927 
|                                        |  |                 |         |                  |   |        
|Total Equities                          |  |                 | 109,250 |                  |   | 119,276
|                                        |  |                 |         |                  |   |        
|European and International Fixed Income |  |                 | 10,754  |                  |   | 10,255 
|Global Fixed Income                     |  |                 | 1,926   |                  |   | 2,161  
|U.S. Fixed Income                       |  |                 | 1,950   |                  |   | 1,817  
|                                        |  |                 |         |                  |   |        
|Total Fixed Income                      |  |                 | 14,630  |                  |   | 14,233 
|                                        |  |                 |         |                  |   |        
|Alternative Investments                 |  |                 | 4,420   |                  |   | 3,577  
|Private Equity(a)                       |  |                 | 1,661   |                  |   | 1,401  
|Cash Management                         |  |                 | 4,178   |                  |   | 2,926  
|                                        |  |                 |         |                  |   |        
|Total AUM                               |  | $               | 134,139 |                  | $ | 141,413
|                                        |  |                 |         |                  |   |        



|(a) | Includes $1.2 billion and $1.0 billion as of June 30, 2008 and December 31, 2007, respectively, held by an investment company for which Lazard may earn carried interests.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------





40



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##### Table of Contents

Average AUM for the three month and six month periods ended June 30, 2008 and 2007 is set forth below.
Average AUM is based on an average of quarterly ending balances for the respective periods.



|            |  |                            |         |                          |   |         |  |      |         |  |   |        
|----------- |  | -------------------------- | ------- | ------------------------ | - | ------- |  | ---- | ------- |  | - | -------
|            |  | Three Months EndedJune 30, |         | Six Months EndedJune 30,
|            |  | 2008                       |         | 2007                     |   | 2008    |  | 2007
|            |  | ($ in millions)           
|Average AUM |  | $                          | 134,166 |                          | $ | 130,101 |  | $    | 136,582 |  | $ | 123,547
|            |  |                            |         |                          |   |         |  |      |         |  |   |        



The following is a
summary of changes in AUM for the three month and six month periods ended June 30, 2008 and 2007.



|                                   |  |                            |         |                          |      |   |         |  |   |         |   |  |   |        
|---------------------------------- |  | -------------------------- | ------- | ------------------------ | ---- | - | ------- |  | - | ------- | - |  | - | -------
|                                   |  | Three Months EndedJune 30, |         | Six Months EndedJune 30,
|                                   |  | 2008                       |         |                          | 2007 |   | 2008    |  |   | 2007   
|                                   |  | ($ in millions)           
|AUMBeginning of Period            |  | $                          | 134,193 |                          |      | $ | 124,852 |  | $ | 141,413 |   |  | $ | 110,437
|Net Flows                          |  |                            | 2,550   |                          |      |   | 2,627   |  |   | 4,265   |   |  |   | 14,191 
|Market Appreciation (Depreciation) |  |                            | (2,567  | )                        |      |   | 7,680   |  |   | (12,572 | ) |  |   | 10,388 
|Foreign Currency Adjustments       |  |                            | (37     | )                        |      |   | 191     |  |   | 1,033   |   |  |   | 334    
|                                   |  |                            |         |                          |      |   |         |  |   |         |   |  |   |        
|AUMEnd of Period                  |  | $                          | 134,139 |                          |      | $ | 135,350 |  | $ | 134,139 |   |  | $ | 135,350
|                                   |  |                            |         |                          |      |   |         |  |   |         |   |  |   |        



Total AUM at June 30,
2008 decreased $7 billion, or 5%, versus that at December 31, 2007, with average AUM for the three and six month periods ended June 30, 2008 increasing 3% and 11%, respectively, versus the average AUM for the corresponding periods in 2007.
International, Global and U.S. equities represented 32%, 36% and 14% of total AUM at June 30, 2008, respectively, versus 36%, 34% and 15% of total AUM at December 31, 2007, respectively. During the six month period ended June 30, 2008, of the total
$7 billion decrease in AUM, net inflows and the positive impact of changes in foreign currency exchange rates partially offset the decrease from market depreciation.



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



|                                                                                                                                         |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|---------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------- | ------- | - | ------------------------ | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                                                                                                         |  | Three MonthsEnded June 30, |         |   | Six MonthsEnded June 30, |  
|                                                                                                                                         |  | 2008                       |         |   | 2007                     |   |         | 2008 |  |   | 2007    |  
|                                                                                                                                         |  | ($ in thousands)           |        
|Management Fees                                                                                                                          |  | $                          | 157,108 |   |                          | $ | 142,230 |      |  | $ | 315,117 |   |  | $ | 272,869 |  
|Incentive Fees                                                                                                                           |  |                            | 8,429   |   |                          |   | 5,752   |      |  |   | 8,429   |   |  |   | 10,758  |  
|Other Income                                                                                                                             |  |                            | 13,192  |   |                          |   | 13,540  |      |  |   | 23,467  |   |  |   | 24,592  |  
|                                                                                                                                         |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Sub-total                                                                                                                                |  |                            | 178,729 |   |                          |   | 161,522 |      |  |   | 347,013 |   |  |   | 308,219 |  
|LAM GP-Related Revenue (Loss)                                                                                                            |  |                            | 1,643   |   |                          |   | 3,724   |      |  |   | (1,610  | ) |  |   | 5,555   |  
|                                                                                                                                         |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Net Revenue                                                                                                                              |  |                            | 180,372 |   |                          |   | 165,246 |      |  |   | 345,403 |   |  |   | 313,774 |  
|Operating Expenses(a)                                                                                                                    |  |                            | 142,292 |   |                          |   | 122,021 |      |  |   | 256,935 |   |  |   | 233,033 |  
|                                                                                                                                         |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Operating Income                                                                                                                         |  |                            | 38,080  |   |                          |   | 43,225  |      |  |   | 88,468  |   |  |   | 80,741  |  
|Add (Deduct):                                                                                                                            |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|LAM GP-Related (Revenue) Loss                                                                                                            |  |                            | (1,643  | ) |                          |   | (3,724  | )    |  |   | 1,610   |   |  |   | (5,555  | )
|Amortization of Intangible Assets                                                                                                        |  |                            | 282     |   |                          |   |        |      |  |   | 563     |   |  |   |        |  
|                                                                                                                                         |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Operating Income, excluding LAM GP-Related Revenue (Loss) (b) and Amortization of
Intangible Assets                                      |  | $                          | 36,719  |   |                          | $ | 39,501  |      |  | $ | 90,641  |   |  | $ | 75,186  |  
|                                                                                                                                         |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Operating Income as a Percentage of Net Revenue                                                                                          |  |                            | 21      | % |                          |   | 26      | %    |  |   | 26      | % |  |   | 26      | %
|                                                                                                                                         |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Operating Income, as a Percentage of Net Revenue, each excluding LAM GP-Related Revenue (Loss) (b) and
Amortization of Intangible Assets |  |                            | 21      | % |                          |   | 24      | %    |  |   | 26      | % |  |   | 24      | %
|                                                                                                                                         |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  



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|                                                    |  |                |  |     
|--------------------------------------------------- |  | -------------- |  | ----
|                                                    |  | As of June 30,
|                                                    |  | 2008           |  | 2007
|Headcount (c):                                      |  |                |  |     
|Managing Directors                                  |  | 55             |  | 48  
|Limited Managing Directors                          |  | 1              |  | 3   
|Other Employees:                                    |  |                |  |     
|Business segment professionals                      |  | 341            |  | 305 
|All other professionals and support staff functions |  | 367            |  | 369 
|                                                    |  |                |  |     
|Total                                               |  | 764            |  | 725 
|                                                    |  |                |  |     



|(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 (loss) since such amounts are directly offset by
a charge (credit) to minority interest which is not a charge (credit) to operating income.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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



Effective August 11, 2008, LAM will outsource a portion of its operations to
State Street Corporation (State Street), a leading provider of investment operations outsourcing. Among other things, we believe that outsourcing will benefit LAM by allowing us to focus investments on our core strengths of portfolio
management and client service, and improve our global processing, scalability and cost structure. Beginning after the effective date approximately 70 current LAM employees will become employed by State Street. Accordingly, immediately following the
outsourcing, LAMs compensation costs will decrease, while its non-compensation costs will increase. Further, we do not anticipate any significant upfront costs associated with this transaction.



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



|              |  |                            |   |  |                          |   |  |      |   |  |      |  
|------------- |  | -------------------------- | - |  | ------------------------ | - |  | ---- | - |  | ---- | -
|              |  | Three Months EndedJune 30, |   |  | Six Months EndedJune 30, |  
|              |  | 2008                       |   |  | 2007                     |   |  | 2008 |   |  | 2007 |  
|United States |  | 50                         | % |  | 53                       | % |  | 52   | % |  | 53   | %
|Europe        |  | 39                         |   |  | 36                       |   |  | 37   |   |  | 38   |  
|Rest of World |  | 11                         |   |  | 11                       |   |  | 11   |   |  | 9    |  
|              |  |                            |   |  |                          |   |  |      |   |  |      |  
|Total         |  | 100                        | % |  | 100                      | % |  | 100  | % |  | 100  | %
|              |  |                            |   |  |                          |   |  |      |   |  |      |  



Operating
Results



Asset Managements quarterly 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 June 30, 2008 versus June 30, 2007



Asset Management net revenue grew $15 million, or 9%, versus the
corresponding 2007 period. Management fees for the 2008 period increased $15 million, or 10%, versus the corresponding 2007 period driven by the impact of a change in the mix of investment products and levels of management fees on certain products,
as well as a $4 billion, or 3%, increase in average AUM in the 2008 period. Incentive fees grew $3 million, or 47%, in the 2008 period as compared to the corresponding 2007 period. Other income decreased $2 million, or 14%, versus the corresponding
2007 period, principally as a result of lower LAM GP-related revenue.



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Operating expenses for the 2008 period increased $20 million, or 17%, versus the corresponding 2007
period, principally due to increased business development expenses for travel, market related data and AUM growth as well as for amortization of an increased amount of RSUs, and additional compensation related to headcount growth.



Asset Management operating income declined $5 million, or 12%, in the 2008
period, as compared to the corresponding 2007 period. Operating income as a percentage of segment net revenue was 21% for the 2008 period versus 26% for the corresponding 2007 period. Excluding LAM GP-related revenue (loss) and amortization of
intangible assets, operating income was $37 million, or 21% of segment net revenue, as compared to 24% for the 2007 period.



Six Months Ended June 30, 2008 versus June 30, 2007



Asset Management net revenue grew $31 million, or 10%, versus the corresponding 2007 period. Management fees for the 2008 period increased $42 million, or
15%, versus the corresponding 2007 period driven by an 11% increase in average AUM as well as the impact of a change in the mix of investment products and levels of management fees on certain products. Incentive fees declined $2 million, or 22%, for
the 2008 period, as compared to the corresponding 2007 period. Other income decreased $8 million, or 27%, versus the corresponding 2007 period, principally as a result of lower LAM GP-related revenue.



Operating expenses for the 2008 period increased $24 million, or 10%, versus
the corresponding 2007 period, principally due to increased business development expenses for travel, market related data and AUM growth as well as for amortization of an increased amount of RSUs and additional compensation related to headcount
growth.



Asset Management operating income grew $8 million, or
10%, in the 2008 period, as compared to the corresponding 2007 period and as a percentage of segment net revenue was 26% for both the 2008 and 2007 periods. Excluding LAM GP-related revenue (loss) and amortization of intangible assets, operating
income was $91 million, or 26%, of segment net revenue excluding LAM GP-related revenue (loss), as compared to 24% for the 2007 period.



Corporate



The following table summarizes the results of the Corporate segment:



|                        |  |                    |         |   |                  |   |         |      |  |   |         |   |  |   |         |   |  |  |  |  |  |  |  | 
|----------------------- |  | ------------------ | ------- | - | ---------------- | - | ------- | ---- |  | - | ------- | - |  | - | ------- | - |  |  |  |  |  |  |  | 
|                        |  | Three Months Ended |         |   | Six Months Ended |  
|                        |  | June 30,           |         |   | June 30,         |  
|                        |  | 2008               |         |   | 2007             |   |         | 2008 |  |   | 2007    |  
|                        |  | ($ in thousands)   |        
|Interest Income         |  | $                  | 17,491  |   |                  | $ | 12,376  |      |  | $ | 32,890  |   |  | $ | 28,013  |  
|Interest Expense        |  |                    | (38,120 | ) |                  |   | (27,088 | )    |  |   | (76,648 | ) |  |   | (55,431 | )
|                        |  |                    |         |   |                  |   |         |      |  |   |         |   |  |   |         |   |  |  |  |  |  |  |  | 
|Net Interest Expense    |  |                    | (20,629 | ) |                  |   | (14,712 | )    |  |   | (43,758 | ) |  |   | (27,418 | )
|Other Revenue (Expense) |  |                    | 18,416  |   |                  |   | 25,680  |      |  |   | (28,241 | ) |  |   | 36,343  |  
|                        |  |                    |         |   |                  |   |         |      |  |   |         |   |  |   |         |  
|Net Revenue (Expense)   |  |                    | (2,213  | ) |                  |   | 10,968  |      |  |   | (71,999 | ) |  |   | 8,925   |  
|Operating Expenses      |  |                    | 6,740   |   |                  |   | 17,957  |      |  |   | 7,048   |   |  |   | 24,749  |  
|                        |  |                    |         |   |                  |   |         |      |  |   |         |   |  |   |         |  
|Operating Loss          |  | $                  | (8,953  | ) |                  | $ | (6,989  | )    |  | $ | (79,047 | ) |  | $ | (15,824 | )
|                        |  |                    |         |   |                  |   |         |      |  |   |         |   |  |   |         |  



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|                                          |  |  |  |  |  |                |  |      |  |  |  |  |  |  |  | 
|----------------------------------------- |  |  |  |  |  | -------------- |  | ---- |  |  |  |  |  |  |  | 
|                                          |  |  | 
|                                          |  |  |  |  |  | As of June 30,
|                                          |  |  |  |  |  | 2008           |  | 2007
|                                          |  |  |  | 
|Headcount (a):                            |  |  |  |  |  |                |  |     
|Managing Directors                        |  |  |  |  |  | 8              |  | 8   
|Limited Managing Directors                |  |  |  |  |  |               |  |    
|Other Employees:                          |  |  |  |  |  |                |  |     
|Business segment professionals            |  |  |  |  |  | 8              |  | 8   
|All other professionals and support staff |  |  |  |  |  | 644            |  | 636 
|                                          |  |  |  |  |  |                |  |     
|Total                                     |  |  |  |  |  | 660            |  | 652 
|                                          |  |  |  |  |  |                |  |     



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



Corporate Results of Operations



Three Months Ended June 30, 2008 versus June 30, 2007



Net interest expense in the three month period ended June 30, 2008 increased $6 million, or 40%, versus the corresponding period in 2007 principally as a
result of the June 2007 issuance of $600 million aggregate principal amount of 6.85% senior notes, partially offset by the reduction in interest expense related to the Companys May, 2008 repurchase of $437 million aggregate principal amount of
its 6.12% Senior Notes in connection with the remarketing of such Notes, as well as the repayment of certain senior and subordinated notes in June 2007.



Other revenue declined $7 million, or 28%, in the three month period ended June 30, 2008 versus the corresponding period in 2007. The decline was
principally attributable to a $9 million gain recorded in the 2007 period in connection with the Companys interest 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), partially offset by higher net investment gains in the 2008 period, including net gains in (i) LFBs corporate debt portfolio, held as an integral part of its asset-liability management program
and (ii) the Companys investment in corporate equities to seed Asset Management products and for temporary investments. During the three month period ended June 30, 2008, LFBs debt portfolio was more closely aligned with our
long-term hold strategy, thereby reducing its volatility.



Operating expenses in the 2008 period decreased $11 million, or 62%, versus the 2007 period, principally due to reduced compensation and benefits expenses related to a lower level of Corporate revenue and a higher level of indirect support
costs allocated to the business segments.



Six Months Ended
June 30, 2008 versus June 30, 2007



Net interest expense
in the six month period ended June 30, 2008 increased $16 million, or 60%, versus the corresponding period in 2007 principally as a result of the June 2007 issuance of $600 million aggregate principal amount of 6.85% senior notes, partially offset
by the reduction in interest expense related to the Companys May, 2008 purchase of $437 million aggregate principal amount of its 6.12% Senior Notes in connection with the remarketing of such Notes and by the repayment of certain senior and
subordinated notes in June, 2007.



Other revenue declined $65
million in the six month period ended June 30, 2008 versus the corresponding period in 2007, due to broad-based illiquidity in the credit markets and volatility in the equity markets during the first quarter of 2008 which adversely impacted
investment income related to LFBs portfolio of debt securities of corporate issuers and the Corporate portfolio of equity securities to seed new Asset Management products and



44



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for temporary investments, as well as a $9 million gain recorded in the 2007 period in connection with the Companys interest 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).



Operating expenses in the 2008 period decreased $18 million, or 72%, versus the 2007 period, principally due to reductions in compensation and benefits
related to lower incentive compensation as a result of the lower level of Corporate revenue and a higher level of indirect support costs allocated to the business segments.



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. M&A, Strategic Advisory and Asset Management fees are generally collected within 60 days of billing, while restructuring fee collections
may extend beyond 60 days, particularly those that involve bankruptcies with court-ordered holdbacks. Fees from our private fund advisory activities are generally collected over a four year period from billing and typically include an interest
component.



Lazard Group traditionally makes payments of
incentive compensation during the first four months of each calendar year with respect to the prior years results.



Summary of Cash Flows:



|                                                                       |  |                          |         |   |      |   |        |  
|---------------------------------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------ | -
|                                                                       |  | Six Months EndedJune 30, |        
|                                                                       |  | 2008                     |         |   | 2007 |  
|                                                                       |  | ($ in millions)          |        
|Cash Provided By (Used In):                                            |  |                          |         |   |      |   |        |  
|Operating activities:                                                  |  |                          |         |   |      |   |        |  
|Net income                                                             |  | $                        | 89.2    |   |      | $ | 132.1  |  
|Noncash charges (a)                                                    |  |                          | 130.6   |   |      |   | 62.2   |  
|Other operating activities (b)                                         |  |                          | (89.4   | ) |      |   | (483.6 | )
|                                                                       |  |                          |         |   |      |   |        |  
|Net cash provided by (used in) operating activities                    |  |                          | 130.4   |   |      |   | (289.3 | )
|                                                                       |  |                          |         |   |      |   |        |  
|Investing activities (c)                                               |  |                          | (141.3  | ) |      |   | (5.4   | )
|Financing activities (d)                                               |  |                          | (239.2  | ) |      |   | 327.6  |  
|Effect of exchange rate changes                                        |  |                          | (.2     | ) |      |   | (2.8   | )
|                                                                       |  |                          |         |   |      |   |        |  
|Net Increase (Decrease) in Cash and Cash Equivalents                   |  |                          | (250.3  | ) |      |   | 30.1   |  
|Cash and Cash Equivalents:                                             |  |                          |         |   |      |   |        |  
|Beginning of Period                                                    |  |                          | 1,000.5 |   |      |   | 955.1  |  
|                                                                       |  |                          |         |   |      |   |        |  
|End of Period                                                          |  | $                        | 750.2   |   |      | $ | 985.2  |  
|                                                                       |  |                          |         |   |      |   |        |  
|(a) Consists
of the following:                                         |  |                          |         |   |      |   |        |  
|                                                                       |  |                         
|Depreciation and amortization of property                              |  | $                        | 10.2    |   |      | $ | 7.5    |  
|Amortization of deferred expenses, stock units and interest rate hedge |  |                          | 118.3   |   |      |   | 49.1   |  
|Amortization of intangible assets related to acquisitions              |  |                          | 3.7     |   |      |   |       |  
|Minority interest in net income                                        |  |                          | (1.6    | ) |      |   | 5.6    |  
|                                                                       |  |                          |         |   |      |   |        |  
|                                                                       |  | $                        | 130.6   |   |      | $ | 62.2   |  
|                                                                       |  |                          |         |   |      |   |        |  



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



(c) Principally
relates to the acquisition of our equity method investment in Sapphire Industrials Corp. (Sapphire) (see Note 9 of Notes to Condensed Consolidated Financial Statements), purchases of available-for-sale securities by LFB and our equity
method investment in Merchant Bankers Asociados, an Argentina-based financial advisory services firm with offices across Central and South America and the parent company of MBA Banco de Inversiones.



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(d) Primarily includes distributions to members, activity related to borrowings, and repurchases of
Lazard Group common membership interests from members of LAZ-MD Holdings and, in the 2008 period, repurchases of Class A common stock, the Companys purchase of $437 million aggregate principal amount of its 6.12% Senior Notes in connection
with the remarketing and the concurrent settlement of the purchase contract component of the equity security units (ESUs), which resulted in Lazard Group issuing 14,582,750 common membership interests for aggregate proceeds of $437
million.



Liquidity and Capital Resources



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



Operating Activities



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



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



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 June 30, 2008, Lazard had approximately $227 million in unused lines of credit available to it, including $65
million of unused lines of credit available to LFB.



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. These credit lines include a $150 million senior
revolving credit facility with a group of lenders that expires in May, 2010. As of June 30, 2008, 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 which, among other things, limit 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.



46



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Financing Agreements



Over the past several years, Lazard has entered into several financing agreements designed to strengthen both its capital
base and liquidity, the most significant of which are described below. Each of these agreements is discussed in more detail in our consolidated financial statements and related notes included in the Form 10-K. The table below sets forth our
corporate indebtedness as of June 30, 2008 and December 31, 2007.



|                                   |  |                 |  |                   |         |                       |   |                    |  |   |        |  
|---------------------------------- |  | --------------- |  | ----------------- | ------- | --------------------- | - | ------------------ |  | - | ------ | -
|                                   |  | MaturityDate    |  | As ofJune 30,2008 |         | As ofDecember 31,2007 |   | Increase(Decrease) | 
|                                   |  |                 |  |                  
|                                   |  | ($ in millions) | 
|Senior Debt:                       |  |                 |  |                   |         |                       |   |                    |  |   |        |  
|6.85%                              |  | 2017            |  | $                 | 600.0   |                       | $ | 600.0              |  | $ |       |  
|7.125%                             |  | 2015            |  |                   | 550.0   |                       |   | 550.0              |  |   |       |  
|6.12%(a)                           |  | 2008 - 2035     |  |                   |        |                       |   | 437.5              |  |   | (437.5 | )
|Subordinated Debt:                 |  |                 |  |                   |         |                       |   |                    |  |   |        |  
|3.25%(b)                           |  | 2016            |  |                   | 150.0   |                       |   | 150.0              |  |   |       |  
|                                   |  |                 |  |                   |         |                       |   |                    |  |   |        |  
|Total Senior and Subordinated Debt |  |                 |  | $                 | 1,300.0 |                       | $ | 1,737.5            |  | $ | (437.5 | )
|                                   |  |                 |  |                   |         |                       |   |                    |  |   |        |  



|(a) | In connection with the remarketing under the terms of the ESUs, on May 15, 2008 (i) $437.5 million aggregate principal amount of the 6.12% Senior Notes were purchased by Lazard
Group, (ii) the stated maturity of the 6.12% Senior Notes was reset to May 15, 2010 and (iii) the interest rate on the 6.12% Senior Notes was reset to 4.00% per annum. See Note 8 of Notes to Condensed Consolidated Financial Statements.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | Convertible into shares of Lazard Ltd Class A common stock at an effective conversion price of $57 per share. One third in principal amount will each generally be convertible
after July 1, 2008, July 1, 2009, and July 1, 2010, with no principal amounts convertible after June 30, 2011. See Note 8 of Notes to Condensed Consolidated Financial Statements.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



As of June 30, 2008, Lazard was in compliance with all of its obligations
under its various borrowing arrangements.



Regulatory Capital



We actively monitor our regulatory capital base. Our
principal subsidiaries are subject to regulatory requirements in their respective jurisdictions to ensure their general financial soundness and liquidity, which require, among other things, that we comply with certain minimum capital requirements,
record-keeping, reporting procedures, relationships with customers, experience and training requirements for employees and certain other requirements and procedures. These regulatory requirements may restrict the flow of funds to affiliates. See
Note 14 of Notes to Condensed Consolidated Financial Statements for further information. These regulations differ in the U.S., the U.K., France and other countries in which we operate. Our capital structure is designed to provide each of our
subsidiaries with capital and liquidity consistent with its business and regulatory requirements. For a discussion of regulations relating to us, see Item 1-BusinessRegulation included in the Form 10-K.



47



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##### Table of Contents

Contractual Obligations



The following table sets forth information relating to Lazards contractual obligations for future payments as of June 30, 2008:



|                                                           |  |                                               |            |                 |   |           |  |           |         |                  |   |          |  |   |           
|---------------------------------------------------------- |  | --------------------------------------------- | ---------- | --------------- | - | --------- |  | --------- | ------- | ---------------- | - | -------- |  | - | ----------
|                                                           |  | Contractual Obligations Payment Due by Period
|                                                           |  | Total                                         |            | Less than1 Year |   | 1-3 Years |  | 3-5 Years |         | More than 5Years
|                                                           |  | ($ in thousands)                             
|Senior and Subordinated Debt (including interest) (a)      |  | $                                             | 1,985,651  |                 | $ | 85,163    |  | $         | 170,325 |                  |   | $170,325 |  | $ | 1,559,838 
|Operating Leases (exclusive of $63,123 of sublease income) |  |                                               | 566,795    |                 |   | 57,804    |  |           | 127,078 |                  |   | 89,817   |  |   | 292,096   
|Capital Leases (including interest)                        |  |                                               | 41,866     |                 |   | 5,346     |  |           | 8,279   |                  |   | 7,323    |  |   | 20,918    
|Investment Commitments:LAI-managed funds (b)               |  |                                               | 72,830     |                 |   | 35,330    |  |           | 37,500  |                  |   |         |  |   |          
|Other                                                      |  |                                               | 13,496     |                 |   | 12,387    |  |           | 474     |                  |   | 597      |  |   | 38        
|                                                           |  |                                               |            |                 |   |           |  |           |         |                  |   |          |  |   |           
|Total (c)                                                  |  |                                               | $2,680,638 |                 | $ | 196,030   |  | $         | 343,656 |                  | $ | 268,062  |  |   | $1,872,890
|                                                           |  |                                               |            |                 |   |           |  |           |         |                  |   |          |  |   |           



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

|(b) | See Note 9 of Notes to Consolidated Financial Statements included in the Form 10-K.
|--- | -----------------------------------------------------------------------------------

|(c) | The table above excludes contingent obligations and any possible payments for uncertain tax positions given the inability to estimate the timing of the latter payments. See Notes 4
and 16 of Notes to Consolidated Financial Statements included in the Form 10-K regarding information in connection with LAM equity units and Lazards uncertain tax positions.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Critical Accounting Policies and Estimates



Managements discussion and analysis of our consolidated financial
condition and results of operations are based upon our condensed 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 2 of Notes to Condensed Consolidated Financial Statements. The preparation of Lazards condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, Lazard evaluates its estimates, including those related to revenue recognition, compensation liabilities, income taxes, investing
activities and goodwill. Lazard bases these estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.



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



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



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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 certain 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 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 addition,
as a result of the adoption of Financial Accounting Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN No. 48) on January 1, 2007, a higher standard must be met
before tax benefits can be recognized in the Companys consolidated financial statements. 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. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized
and, when necessary, valuation allowances are established. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences become deductible. Management
considers the level of historical taxable income, scheduled reversals of deferred taxes, projected future taxable income and tax planning strategies that can be implemented by the Company in making this assessment. If actual results differ from
these estimates or Lazard adjusts these estimates in future periods, Lazard may need to adjust its valuation allowance, which could materially impact Lazards consolidated financial position and results of operations.



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.



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Valuation of
Investments



Investments consist principally of debt
securities, equities, investments in alternative asset management funds and other private equity investments. These investments are carried at fair value on the condensed consolidated statements of financial condition, with any increases or
decreases in fair value reflected (i) in earnings, to the extent held by our broker-dealer subsidiaries or designated as trading securities under Statement of Financial Accounting Standards (SFAS) No. 115,Accounting
for Certain Investments in Debt and Equity Securities(SFAS No. 115), within our non broker-dealer subsidiaries, and (ii) in accumulated other comprehensive income, to the extent designated as
available-for-sale securities under SFAS No. 115 until such time they are realized and reclassified to earnings. Gains and losses on investment positions held, which arise from sales or changes in the fair value of the investments,
are not predictable and can cause periodic fluctuations in net income or accumulated other comprehensive income.



Debt securities are primarily investments of LFB which typically holds them long-term as part of its asset-liability management program.



Equities principally represent the Companys investments in marketable
equity securities either held directly or indirectly through asset management funds, and are either designated as trading securities under SFAS No. 115 or accounted for pursuant to broker-dealer accounting guidelines depending upon
the entity in which such equities are held.



Interests in LAM
alternative asset management funds principally represent general partnership interests in LAM-managed hedge funds. The fair value of such interests 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 $46 million at June 30, 2008 and $51 million at December 31, 2007, 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 2.7% at June 30, 2008 and 2.0% of total assets at December 31, 2007, respectively, are comprised
of investments in private equity funds and direct private equity interests that are valued, in the absence of observable market prices, initially 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 it is
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, Lazard utilizes information derived from fund managers for the determination of such fair values.



See Note 4 of Notes to Condensed Consolidated Financial Statements for additional information regarding investments and certain other
assets and liabilities measured at fair value, including a discussion of the inputs utilized by Lazard in measuring fair value and the levels of fair value within which such measurements fall, pursuant to the disclosure requirements of SFAS No. 157,
Fair Value Measurements (SFAS No. 157), which the Company adopted on January 1, 2008.



Goodwill



In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, goodwill has an indefinite life and is tested for impairment
annually or more frequently if circumstances indicate impairment may have



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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. Lazards assumptions and estimates are used in projecting future earnings as part of the valuation, and actual results could differ from those estimates.



See Note 7 of Notes to Condensed Consolidated Financial Statements for
additional information regarding goodwill.



Consolidation
of VIEs



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



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



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



Lazard is involved with various entities in
the normal course of business that are VIEs and holds variable interests in such VIEs. Transactions associated with these entities primarily include investment management, real estate and private equity investments. Those VIEs for which Lazard was
determined to be the primary beneficiary were consolidated in accordance with FIN 46R. Those VIEs included company sponsored venture capital investment vehicles established in connection with Lazards compensation plans. In connection with the
separation, Lazard Group transferred its general partnership interests in those VIEs to a subsidiary of LFCM Holdings. Lazard Group has determined that it is no longer the primary beneficiary with respect to those VIEs and, as a result, the Company
no longer consolidates such VIEs.



Risk Management



The Company encounters risk as part of the normal course of business and
therefore we have designed 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 at both an entity and on a consolidated basis. Management within each of Lazards operating locations are principally responsible for managing the risks within its
respective businesses on a day-to day basis.



Market and
Credit Risks



Lazard is subject to credit and market
risks and therefore has established procedures to assess such risks, as well as specific interest rate and currency risk, and has established limits related to various positions.



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.





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At June 30, 2008, $655 million, or 75%, of the $873 million of investments (net of securities sold not
yet purchased of $26 million classified as other liabilities) represented investments in debt securities held by LFB and Corporate investments in equity securities that are either held directly or indirectly through asset management
funds, non-publicly traded funds or through general partnership interests in LAM-managed funds, and are therefore subject to market risks. These investments are monitored daily by management. Included in the amount above was $433 million of debt
securities (representing approximately 66% of investments subject to market risk), substantially all of which were in LFBs portfolio, consisting primarily of corporate bonds (93% of which carried investment grade ratings at June 30, 2008), and
secondarily, non-U.S. government securities. These securities are typically held long-term as part of LFBs asset-liability management program.



The remaining 25% of the investments at June 30, 2008 represent (i) private equity and equity method investments that are generally not subject to
short-term market fluctuations, and (ii) general partnership interests in LAM alternative asset management funds held directly by certain of our managing directors and employees but which are controlled and consolidated by the Company, and
therefore the associated risk remains with the minority interest holders.



At December 31, 2007, $941 million, or 88%, of the $1,067 million of investments (net of securities sold not yet purchased of $22 million) represented investments in debt securities held by LFB and Corporate
investments in equity securities that are either held directly or indirectly through asset management funds, non-publicly traded funds or through general partnership interests in LAM-managed funds, and are therefore subject to market risks. Included
in this amount was $585 million of debt securities (representing approximately 62% of investments subject to market risk), substantially all of which were in LFBs portfolio, consisting primarily of corporate bonds (84% of which held investment
grade ratings at December 31, 2007), and secondarily, non-U.S. government securities.



The remaining 12% of the investments at December 31, 2007 represent (i) private equity and equity method investments that are generally not subject to short-term market fluctuations and (ii) general
partnership interests in LAM alternative asset management funds held directly by certain of our managing directors and employees but which are controlled and consolidated by the Company, and therefore the associated risk remains with the minority
interest holders.



At June 30, 2008 and December 31, 2007,
derivative contracts related primarily to interest rate swaps and equity and exchange rate contracts and are recorded at fair value. Derivative assets amounted to $17 million and $10 million at June 30, 2008 and December 31, 2007, respectively, with
derivative liabilities amounting to $4 million each at such respective dates.



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 as of June 30, 2008:



| |  |  | LFBs credit spread risk, as measured by a 100 +/ basis point change in credit spreads totaled $(16) million and $17 million, respectively.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | LFBs interest rate risk as measured by a 100 +/ basis point change in interest rates totaled $1 million.
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | Foreign currency risk associated with LFBs open positions, in aggregate, as measured by a 200 +/- basis point change against the U.S. dollar, totaled
approximately $7 thousand.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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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 June 30, 2008, total receivables amounted to $1.3 billion, net of an allowance for bad debts of $19 million. As of that date, inter-bank lending, financial advisory and asset management fee, customer and related party receivables comprised 63%,
29%, 7% and 1% of total receivables, respectively. At December 31, 2007, total receivables amounted to $1.1 billion, net of allowance for bad debts of $13 million. As of that date, inter-bank lending, financial advisory and asset management fee,
customer and related party receivables comprised 45%, 47%, 5% and 3% 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 June 30, 2008, LFB had no exposure to an individual counterparty that exceeded $39 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 June 30, 2008, Lazard estimates that
operating income relating to cash and short-term investments and corporate indebtedness would change by approximately $9 million, on an annual basis, in the event interest rates were to increase or decrease by 1%.



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 business continuity and disaster
recovery programs that manages its capabilities to provide services in the case of a disruption. We purchase insurance programs designed to protect the Company against accidental loss and losses, which may significantly affect our financial
objectives, personnel, property, or our ability to continue to meet our responsibilities to our various stakeholder groups.



Recent Accounting Pronouncements



In December 2007, the Financial Accounting Standards Board (the FASB) issued SFAS No. 141 (revised 2007), Business
Combinations (SFAS No. 141(R)). SFAS No. 141(R) replaces SFAS No. 141, Business Combinations (SFAS No. 141), and supersedes or amends other related authoritative literature
although it retains the fundamental requirements in SFAS No. 141 that the acquisition method of accounting (which SFAS No. 141 called the purchase method) be used for all business combinations and for an acquirer to be identified
for each business combination. SFAS No. 141(R) also establishes principles and requirements for how the acquirer: (a) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any
noncontrolling interest in the acquiree; (b) recognizes and measures the goodwill acquired in



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the business combination or a gain from a bargain purchase; and (c) determines what information to disclose to enable users of the financial statements to
evaluate the nature and financial effects of the business combination. SFAS No. 141(R) will apply prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning
on or after December 15, 2008. SFAS No. 141(R) also requires the acquirer to expense costs relating to any acquisitions that close after December 31, 2008.



In September 2006, the FASB issued SFAS No. 157, which, among other things, defines fair value, establishes a framework for measuring
fair value and enhances disclosure requirements about fair value measurements. SFAS No. 157 applies to those accounting pronouncements that require or permit the use of fair value measurements for recognition or disclosure purposes and to those
accounting pronouncements that require fair value measurements for other reasons such as the requirement to measure reporting units at fair value for annual goodwill impairment testing. In February 2008, the FASB issued FASB Staff Position
(FSP) 157-2 (FSP 157-2) which delays the effective date of SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a
recurring basis (at least annually), until fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. These nonfinancial items would include, for example, reporting units measured at fair value in a goodwill
impairment test as mentioned above and nonfinancial assets acquired and liabilities assumed in a business combination. Effective January 1, 2008, the Company adopted SFAS No. 157 for those assets and liabilities not subject to the delayed adoption
provision of FSP 157-2. The partial adoption of SFAS No. 157 did not have a material impact on the Companys condensed consolidated financial statements. For additional disclosures about fair value measurements, see Note 4 of Notes to Condensed
Consolidated Financial Statements. The Company does not anticipate that the adoption of the remaining provisions of SFAS No. 157 in the first quarter of 2009 (subject to the delayed adoption provision of FSP 157-2) would have a material impact 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 No. 159). SFAS No. 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. SFAS No. 159 became effective January 1, 2008 and did not have a material impact on the Companys consolidated financial statements.



In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial
Statementsan amendment of ARB No. 51 (SFAS No. 160). SFAS No. 160 amends Accounting Research Bulletin No. 51, Consolidated Financial Statements, to establish accounting and reporting standards for
the noncontrolling (minority) interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in
the consolidated financial statements. In addition, it also changes the way the consolidated income statement is presented by requiring consolidated net income to include amounts attributable to both the parent and the noncontrolling interest with
separate disclosure of each component on the face of the consolidated income statement. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008, and shall be applied
prospectively as of the beginning of the fiscal year in which it is initially applied except that the presentation and disclosure requirements shall be applied retrospectively for all periods presented. The Company has not yet determined the impact
that SFAS No. 160 will have on its consolidated financial statements.



In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activitiesan amendment of SFAS No. 133 (SFAS No. 161). SFAS No. 161 amends SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended (SFAS No. 133), to enhance the current disclosure framework in SFAS No. 133 for derivative instruments and hedging activities. Entities
will be required to provide



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enhanced disclosures about how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for under
SFAS No. 133 and its related interpretations, and how derivative instruments and related hedged items affect an entitys financial position, financial performance and cash flows. SFAS No. 161 is effective for fiscal years, and interim periods
within those fiscal years, beginning on or after November 15, 2008. SFAS No. 161 encourages, but does not require, comparative disclosures for earlier periods upon initial adoption. The Company does not anticipate the adoption of SFAS No. 161 would
have a material impact on its disclosures of derivative instruments and hedging activities.



|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 quarterly 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 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 any
required 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 the Companys financial condition but might be material to the Companys operating results or cash flows for any particular period, depending upon the operating results for such period.



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 from Lazard Group on May 10,
2005. 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 the Company 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, 2007.



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



There were no material changes from the risk factors previously disclosed in the Companys Form 10-K.



|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 Lazard Group
LLCs Registration Statement (File No. 333-126751) on Form S-4 filed on July 21, 2005).                    
|     | 
|3.3  |  | Operating Agreement of Lazard Group LLC, dated as of May 10, 2005 (incorporated by reference to Exhibit 10.2 to Lazard Ltds Quarterly Report (File No. 001-32492) on Form 10-Q filed on
June 16, 2005).                                                                                            
|     | 
|3.4  |  | Amendment No. 1 to the Operating Agreement of Lazard Group LLC, dated as of December 19, 2005 (incorporated by reference to Exhibit 3.01 to Lazard Group LLCs Current Report on Form
8-K (File No. 333-126751) filed on December 19, 2005).                                                        
|     | 
|3.5  |  | Amendment No. 2 dated as of May 7, 2008, to the Operating Agreement of Lazard Group LLC dated as of May 10, 2005 (incorporated by reference to Exhibit 3.1 to the Registrants Current Report
on Form 8-K (File No. 333-126751) filed on May 8, 2008).                                              
|     | 
|4.1  |  | Indenture, dated as of May 10, 2005, by and between Lazard Group LLC and The Bank of New York, as Trustee (incorporated by reference to Exhibit 4.1 to Lazard Group LLCs Registration
Statement (File No. 333-126751) on Form S-4 filed on July 21, 2005).                                         
|     | 
|4.2  |  | First Supplemental Indenture, dated as of May 10, 2005, by and between Lazard Group LLC and The Bank of New York, as Trustee (incorporated by reference to Exhibit 4.2 to Lazard Group LLCs
Registration Statement (File No. 333-126751) on Form S-4 filed on July 21, 2005).                      
|     | 
|4.3  |  | Second Supplemental Indenture, dated as of May 10, 2005, by and between Lazard Group LLC and The Bank of New York, as Trustee (incorporated by reference to Exhibit 10.37 to Lazard Group
LLCs Registration Statement (File No. 333-126751) on Form S-4 filed on July 21, 2005).                   
|     | 
|4.4  |  | Amended and Restated Third Supplemental Indenture, dated as of May 15, 2008, by and among Lazard Group LLC and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.01 to
Lazard Group LLCs Current Report on Form 8-K (Commission File No. 333-126751) filed on May 16, 2008).
|     | 
|4.5  |  | Form of Senior Note (included in Exhibit 4.4).                                                                                                                                                                                                                                                      
|     | 
|4.6  |  | $546 million 7.125% Senior Notes Due 2015, issued by Lazard Group LLC (incorporated by reference to Exhibit 4.5 to Lazard Group LLCs Quarterly Report (File No. 333-126751) on Form 10-Q
filed on November 10, 2005).                                                                              
|     | 
|4.7  |  | Fourth Supplemental Indenture, dated as of June 21, 2007, between Lazard Group LLC and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.1 to the Registrants Current
Report on Form 8-K (File No. 333-126751) filed on June 22, 2007).                                     
|     | 
|10.1 |  | Master Separation Agreement, dated as of May 10, 2005, by and among Lazard Ltd, Lazard Group LLC, LAZ-MD Holdings LLC and LFCM Holdings LLC (incorporated by reference to Exhibit 2.1 to Lazard
Ltds Quarterly Report (File No. 001-32492) on Form 10-Q filed on June 16, 2005).                   



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|      |  |                                                                                                                                                                                                                                                                                                                                                
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.2  |  | Amendment No. 1, dated as of November 6, 2006, to the Master Separation Agreement, dated as of May 10, 2005, by and among the Lazard Ltd, Lazard Group LLC and LAZ-MD Holdings LLC (incorporated
by reference to Exhibit 10.2 to the Registrants Quarterly Report (File No. 333-126751) on Form 10-Q filed on November 7, 2006).              
|      | 
|10.3  |  | Second Amendment dated as of May 7, 2008, to the Master Separation Agreement dated as of May 10, 2005, as amended, by and among Lazard Ltd, Lazard Group LLC and LAZ-MD Holdings LLC (incorporated
by reference to Exhibit 2.1 to the Registrants Current Report on Form 8-K (File No. 333-126751) filed on May 8, 2008).                     
|      | 
|10.4  |  | Class B-1 and Class C Members Transaction Agreement (incorporated by reference to Exhibit 2.2 to Lazard Ltds Registration Statement (File No. 333-121407) on Form S-1 filed on December 17,
2004).                                                                                                                                            
|      | 
|10.5  |  | Amended and Restated Stockholders Agreement, dated as of November 6, 2006, by and among LAZ-MD Holdings LLC, Lazard Ltd and certain members of LAZ-MD Holdings LLC (incorporated by
reference to Exhibit 10.4 to the Registrants Quarterly Report (File No. 333-126751) on Form 10-Q filed on November 7, 2006).                             
|      | 
|10.6  |  | First Amendment dated as of May 7, 2008, to the Amended and Restated Stockholders Agreement dated as of November 6, 2006, between LAZ- MD Holdings LLC and Lazard Ltd (incorporated by
reference to Exhibit 10.6 to the Registrants Quarterly Report (File No. 333-126751) on Form 10-Q filed on May 9, 2008).                               
|      | 
|10.7  |  | Employee Benefits Agreement, dated as of May 10, 2005, by and among Lazard Ltd, Lazard Group LLC, LAZ-MD Holdings LLC and LFCM Holdings LLC (incorporated by reference to Exhibit 10.4 to Lazard
Ltds Quarterly Report (File No. 001-32492) on Form 10-Q filed on June 16, 2005).                                                             
|      | 
|10.8  |  | Insurance Matters Agreement, dated as of May 10, 2005, by and between Lazard Group LLC and LFCM Holdings LLC (incorporated by reference to Exhibit 10.5 to Lazard Ltds Quarterly Report
(File No. 001-32492) on Form 10-Q filed on June 16, 2005).                                                                                            
|      | 
|10.9  |  | License Agreement, dated as of May 10, 2005, by and among Lazard Strategic Coordination Company, LLC, Lazard Frères & Co. LLC, Lazard Frères S.A.S., Lazard & Co. Holdings
Limited and LFCM Holdings LLC (incorporated by reference to Exhibit 10.6 to Lazard Ltds Quarterly Report (File No. 001-32492) on Form 10-Q filed on June 16, 2005).
|      | 
|10.10 |  | Administrative Services Agreement, dated as of May 10, 2005, by and among LAZ-MD Holdings LLC, LFCM Holdings LLC and Lazard Group LLC (incorporated by reference to Exhibit 10.7 to Lazard
Ltds Quarterly Report (File No. 001-32492) on Form 10-Q filed on June 16, 2005).                                                                   
|      | 
|10.11 |  | Business Alliance Agreement, dated as of May 10, 2005, by and between Lazard Group LLC and LFCM Holdings LLC (incorporated by reference to Exhibit 10.8 to Lazard Ltds Quarterly Report
(File No. 001-32492) on Form 10-Q filed on June 16, 2005).                                                                                            
|      | 
|10.12 |  | 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).                                                                



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|       |  |                                                                                                                                                                                                                                                                                                                                                                        
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.13  |  | Amended and Restated Operating Agreement of Lazard Strategic Coordination Company LLC, dated as of January 1, 2002 (incorporated by reference to Exhibit 10.16 to Lazard Ltds Registration
Statement (File No. 333-121407) on Form S-1/A filed on February 11, 2005).                                                                                                 
|       | 
|10.14  |  | Lease, dated as of January 27, 1994, by and between Rockefeller Center Properties and Lazard Frères & Co. LLC (incorporated by reference to Exhibit 10.19 to Lazard Ltds
Registration Statement (File No. 333-121407) on Form S-1/A filed on February 11, 2005).                                                                                                      
|       | 
|10.15  |  | Lease with an Option to Purchase, dated as of July 11, 1990, by and between Sicomibail and Finabail and SCI du 121 Boulevard Hausmann (English translation) (incorporated by reference to Exhibit
10.20 to Lazard Ltds Registration Statement (File No. 333-121407) on Form S-1/A filed on February 11, 2005).                                                        
|       | 
|10.16  |  | Occupational Lease, dated as of August 9, 2002, Burford (Stratton) Nominee 1 Limited, Burford (Stratton) Nominee 2 Limited, Burford (Stratton) Limited, Lazard & Co., Limited and Lazard LLC
(incorporated by reference to Exhibit 10.21 to Lazard Ltds Registration Statement (File No. 333-121407) on Form S-1/A filed on February 11, 2005).                       
|       | 
|10.17* |  | Lazard Ltds 2005 Equity Incentive Plan (incorporated by reference to Exhibit 10.21 to Lazard Ltds Registration Statement (File No. 333-121407) on Form S-1/A filed on May 2, 2005).                                                                                                                                                                                  
|       | 
|10.18* |  | Lazard Ltds 2008 Incentive Compensation Plan (incorporated by reference to Annex B to Lazard Ltds Definitive Proxy Statement on Schedule 14A (File No. 001-32492) filed
on March 24, 2008).                                                                                                                                                                          
|       | 
|10.19* |  | Lazard Ltds 2005 Bonus Plan (incorporated by reference to Exhibit 10.23 to Lazard Ltds Registration Statement (File No. 333-121407) on Form S-1/A filed on March 21,
2005).                                                                                                                                                                                          
|       | 
|10.20* |  | Amended and Restated Agreement Relating to Retention and Noncompetition and Other Covenants, dated as of January 29, 2008, by and among Lazard Ltd, Lazard Group LLC and Bruce Wasserstein
(incorporated by reference to Exhibit 10.1 to Lazard Group LLCs Current Report on Form 8-K (File No. 333-126751) filed on February 1, 2008).                               
|       | 
|10.21* |  | Agreement Relating to Reorganization of Lazard, dated as of May 10, 2005, by and among Lazard LLC and Bruce Wasserstein (incorporated by reference to Exhibit 10.24 to Lazard Ltds Quarterly
Report (File No. 001-32492) on Form 10-Q filed on June 16, 2005).                                                                                                        
|       | 
|10.22* |  | Amended and Restated Agreement Relating to Retention and Noncompetition and Other Covenants, dated as of May 7, 2008, by and among Lazard Ltd, Lazard Group LLC and Steven J. Golub (incorporated
by reference to Exhibit 10.1 to the Registrants Current Report (File No. 333-126751) on Form 8-K filed on May 8, 2008).                                             
|       | 
|10.23* |  | 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).    
|       | 
|10.24* |  | Form of First Amendment dated as of May 7, 2008, to Agreement Relating to Retention and Noncompetition and Other Covenants dated as of May 4, 2005, for each of Michael J. Castellano,
Scott D. Hoffman and Charles G. Ward, III (incorporated by reference to Exhibit 10.2 to the Registrants Current Report on Form 8-K (File No. 333-126751) filed on May 8, 2008).
|       | 
|10.25* |  | 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).                                                                                                                                               



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|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.26* |  | Amended and Restated Letter Agreement, effective as of January 1, 2004, between Vernon E. Jordan, Jr. and Lazard Frères & Co. LLC (incorporated by reference to Exhibit 10.28
to Lazard Ltds Quarterly Report (File No. 001-32492) on Form 10-Q filed on June 16, 2005).                                                                                                                                                                                                  
|       | 
|10.27* |  | 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).                                           
|       | 
|10.28  |  | 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).                                                                                                                                                                                                        
|       | 
|10.29  |  | 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).                                                                                                                                                             
|       | 
|10.30  |  | 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).                                                                                                                                                                                                                                                   
|       | 
|10.31  |  | 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).                                                        
|       | 
|10.32  |  | 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).
|       | 
|10.33  |  | 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).     
|       | 
|10.34  |  | 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).    
|       | 
|10.35* |  | Description of Non-Executive Director Compensation (incorporated by reference to Exhibit 10.33 to Lazard Ltds Quarterly Report (File No. 001-32492) on Form 10-Q for the quarter ended
June 30, 2005).                                                                                                                                                                                                                                                                    



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|       |  |                                                                                                                                                                                                                                                                                         
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.36* |  | 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).                                                        
|       | 
|10.37* |  | Form of Agreement evidencing a grant of Restricted Stock Units to Executive Officers under the Lazard Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to Lazard Ltds
Current Report on Form 8-K (File No. 001-32492) filed on January 26, 2006).                      
|       | 
|10.38  |  | 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).                 
|       | 
|10.39  |  | 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).        
|       | 
|10.40  |  | 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).                                              
|       | 
|10.41* |  | 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).                                                                                                           
|       | 
|10.42* |  | 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: August 1,
2008



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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