Lazard Ltd Reports Record Nine-Month and Third-Quarter 2007 Results

Highlights Record nine-month and third-quarter net income of $200.1 million and $83.6 million, respectively, both on a fully exchanged basis(a), a 33% increase over nine-months 2006 and a 139% increase over third-quarter 2006 Record nine-month and quarterly operating revenue(b) of $1,397.2 million and $569.5 million, increases of 29% and 79% over the respective 2006 periods Increased Financial Advisory operating revenue by 26% to a record $847.5 million for the first nine months and by 103% to a record quarter of $379.8 million Record M&A nine-month and quarterly revenue of $655.8 million and $295.4 million, with 20% and 93% increases over the respective 2006 periods Asset Management operating revenue increased to record levels with $486.1 million, a 30% increase, for the first nine months and $177.5 million, a 42% increase, for the third quarter, including record management fees of $430.3 million and $157.4 million in the respective periods Achieved net inflows in AUM of $17.5 billion for the first nine months and $3.3 billion in the third quarter Completed Financial Advisory strategic acquisitions in Australia and the US middle market Lazard Ltd (NYSE: LAZ) today announced financial results for the nine months and third quarter ended September 30, 2007. Net income on a fully exchanged basis(a) increased 33% to a record $200.1 million for the first nine months of 2007 from $150.4 million for the first nine months of 2006. Net income per common share (diluted) increased 19% to a record $1.72 for the first nine months of 2007 compared to $1.45 for the first nine months of 2006, reflecting the 13% increase in the weighted average number of shares for the 2007 nine-month period. The increase in shares is primarily due to the issuance of 8.1 million common shares in the December 2006 equity offering and the dilutive effects of the equity securities units and of a convertible note issued in May 2006. Operating income(c) increased 35% to a record $286.0 million for the first nine months of 2007, compared to $212.0 million for the same period in 2006. Operating revenue(b) increased 29% to a record $1,397.2 million for the first nine months of 2007 compared to $1,079.6 million for the first nine months of 2006, resulting primarily from an increase in completed transactions and other advisory assignments in Financial Advisory in the third quarter, the inclusion of the strategic acquisitions in Australia and the US middle market, and continued growth in Lazard’s Asset Management business. Financial Advisory operating revenue increased 26% to a record $847.5 million for the first nine months of 2007, compared to $671.3 million for the first nine months of 2006. This includes a 20% increase in M&A operating revenue to a record $655.8 million in the 2007 nine-month period. Asset Management operating revenue increased 30% during the first nine months of 2007 to a record of $486.1 million, compared to $373.9 million in the first nine months of 2006. For the third quarter of 2007, net income on a fully exchanged basis increased 139% to $83.6 million, or $0.73 per common share (diluted), a record third quarter, compared to $35.0 million, or $0.34 per common share (diluted) for the third quarter of 2006. Operating income increased 141% to a quarterly record of $118.6 million for the third quarter of 2007, compared to $49.2 million for the third quarter of 2006. Operating revenue for the third quarter of 2007 increased 79% to a quarterly record of $569.5 million compared to $317.6 million for the third quarter of 2006, also resulting primarily from an increase in completed transactions in Financial Advisory and other advisory assignments in the third quarter, the inclusion of the firm’s strategic acquisitions in Australia and the US middle market, and continued growth in Lazard’s Asset Management business. Financial Advisory operating revenue in the third quarter of 2007 increased 103% to a quarterly record of $379.8 million, compared to $187.1 million in the third quarter of 2006. This includes a 93% increase in M&A operating revenue to a quarterly record of $295.4 million. Asset Management operating revenue increased 42% to a record quarter of $177.5 million, compared to $124.9 million in the third quarter of 2006. Lazard believes that results assuming full exchange of outstanding exchangeable interests provide the most meaningful basis for comparison among present, historical and future periods. Before exchange of exchangeable interests, net income increased 70% to a record $95.9 million, or $1.72 per common share (diluted) for the first nine months of 2007, compared to $56.4 million or $1.45 per common share (diluted) for the first nine months of 2006. The 70% increase exceeded the 33% increase in net income on a fully exchanged basis as the minority interest declined as a result of the secondary component of the December 2006 equity offering. Before exchange of exchangeable interests, net income increased 206% to a quarterly record of $40.3 million for the 2007 third quarter, or $0.73 per common share (diluted), compared to $13.2 million, or $0.34 per common share (diluted) for the 2006 third quarter. "Our Financial Advisory and Asset Management businesses each achieved record outcomes,” said Bruce Wasserstein, Chairman and Chief Executive Officer of Lazard Ltd. "The results underscore our differentiated strategy and simple business model. We are an intellectual capital business focused on providing premium advice and asset management. Our diversity by geography, industry and client base contributes to our success, as does the breadth of our advisory practice. For example, we advised the UAW in its negotiations with the automakers regarding retiree health care obligations. As we pointed out last quarter, we have limited exposure to the volatile credit market environment. We are not in the sub-prime business, are not a public hedge fund nor do we have any SIVs. We don’t have a significant principal trading book or hanging bridge loans. We believe our exposure to a softening of leveraged buyouts is limited.” "During the past six months we have invested in both our businesses, through acquisitions, hiring of talent, opening of offices, bolstering key industry sectors and investing in new asset products,” said Mr. Wasserstein. "We successfully completed and integrated acquisitions in the US Middle Market and in Australia. Through our cooperation agreements with Raiffeisen and MBA, and our joint venture with Signatura, we have broadened our financial advisory presence in Eastern Europe and Latin America. We have strengthened our technology offering through a new office in Boston, and have reinforced our international and UK investment banking business leadership by hiring Ken Costa, former Chairman of Europe Investment Banking for UBS. We expect to continue to invest toward growth across the firm.” "Our results were exceptional across the board,” said Steven J. Golub, Lazard’s Vice Chairman. "In the first half of this year, we reported that we expected completions for our Financial Advisory backlog to be weighted toward the second half of the year. Our results for this quarter support this statement, as our Financial Advisory business achieved a quarterly record and a record for the first nine months. Therefore, because of the impact of timing of completions of transactions, among other reasons, our results are measured best on an annual basis. In addition, our Asset Management business continued to grow, with $3.3 billion of net asset inflows in the quarter and a record AUM of $142.1 billion at September 30, 2007.” "During the third quarter, Lazard advised on many of the most intellectually challenging and complex transactions of the time,” added Mr. Golub. "These included TXU’s $45.0 billion sale to an investor group led by KKR and TPG, Mellon Financial’s $16.5 billion merger with The Bank of New York, KeySpan’s $11.8 billion sale to National Grid, Chicago Board of Trade’s $11.1 billion merger with the Chicago Mercantile Exchange, Alinta’s A$9.2 billion sale to a consortium of Babcock & Brown and Singapore Power, Dollar General’s $7.3 billion sale to KKR, Microsoft’s $6.0 billion acquisition of aQuantive, Nestlé’s $5.5 billion acquisition of Gerber and its $2.5 billion acquisition of the medical nutrition business of Novartis and the $3.8 billion spin-off of WABCO from American Standard.” "We also continue to advise on other major transactions, such as Acciona in its agreement with Enel concerning their €43.7 billion transaction with respect to Endesa, Gaz de France’s €37.8 billion merger with Suez, Groupe Danone’s €12.3 billion offer for Royal Numico and its $7.2 billion sale of its Biscuits and Cereal Products business to Kraft Foods, Coles Group’s A$18.0 billion sale to Wesfarmers, Resolution plc on offers received of about £5 billion to acquire its business, and Penn National Gaming’s $8.9 billion sale to funds affiliated with Fortress and Centerbridge,” added Mr. Golub. "We remain focused on controlling costs, are investing for growth, and remain confident that our business model will continue to yield long-term attractive results,” added Mr. Golub. 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. As such, Lazard management believes that annual results are the most meaningful. Net Revenue Financial Advisory Lazard’s Financial Advisory business encompasses general strategic and transaction-specific advice to public and private companies, governments and other parties, and includes Financial Restructuring as well as various corporate finance services. Some of our assignments and, therefore, related revenue, are not reflected in publicly available statistical information. For the first nine months of 2007, Financial Advisory operating revenue increased 26% to a record $847.5 million, compared to $671.3 million for the first nine months of 2006. Financial Advisory operating revenue increased 103% to a record $379.8 million in the third quarter of 2007, compared to $187.1 million in the third quarter of 2006. M&A M&A operating revenue increased 20% to $655.8 million and 93% to $295.4 for the first nine months and third quarter of 2007, respectively, both record levels, compared with $545.1 million and $153.2 million for the corresponding 2006 periods. Lazard advised on the following M&A transactions, which were completed in the third quarter of 2007, including: TXU’s $45.0 billion sale to an investor group led by KKR and TPG Mellon Financial’s $16.5 billion merger with The Bank of New York KeySpan’s $11.8 billion sale to National Grid Chicago Board of Trade’s Special Transaction Committee in its $11.1 billion merger with the Chicago Mercantile Exchange Alinta’s A$9.2 billion sale to a consortium of Babcock & Brown and Singapore Power Dollar General’s $7.3 billion sale to KKR Microsoft’s $6.0 billion acquisition of aQuantive Nestlé’s $5.5 billion acquisition of Gerber and its $2.5 billion acquisition of the medical nutrition business of Novartis American Standard’s $3.8 billion spin-off of WABCO First Choice Holidays’ £1.7 billion merger with TUI Travel Arrow International’s $2.0 billion sale to Teleflex Caisse d’Epargne’s €1.3 billion strategic partnership in real estate with Nexity Carlyle Group’s €1.0 billion combination of Zodiac’s Marine division with WaterPik Barclays Private Equity’s €800 million sale of TUJA to Adecco Royal Bank of Scotland’s £452 million sale of Bank of America’s London HQ at Canary Wharf Air Liquide’s €550 million acquisition of Lurgi Ameristar Casinos’ $675 million acquisition of Resorts East Chicago Groupama’s €486 million sale of the Gan Tower (La Defense business district) to Fonciere des Regions BlueScope Steel’s A$700 acquisition of the steel and metal merchandising division of Smorgon Steel America First Apartment Investors’ $532 million sale to an affiliate of Sentinel Real Estate IXEurope’s £254 million sale to Equinix Eckes in the sale of its spirits division to Oaktree Louis Dreyfus Group's reorganization of family shareholdings MF Global in its separation from Man Group Pending, announced M&A transactions on which Lazard has advised or continued to advise since September 30, 2007, include: Acciona in its agreement with Enel concerning their €43.7 billion transaction with respect to Endesa Gaz de France’s €37.8 billion merger with Suez Groupe Danone’s €12.3 billion offer for Royal Numico and its $7.2 billion sale of its Biscuits and Cereal Products business to Kraft Foods Coles Group’s A$18.0 billion sale to Wesfarmers Resolution plc on offers received of about £5 billion to acquire its business Penn National Gaming’s $8.9 billion sale to funds affiliated with Fortress and Centerbridge Florida Rock’s $4.6 billion sale to Vulcan Materials PPG’s €2.2 billion offer for SigmaKalon Group Sempra Energy’s $2.7 billion commodity marketing joint venture with Royal Bank of Scotland Royal Bank of Scotland’s £1.0 billion sale of Citigroup Tower France Telecom’s €1.4 billion acquisition of One GmbH with Mid Europa Partners American Standard’s $1.8 billion sale of its Bath and Kitchen business to Bain Capital France Telecom’s €1.3 billion sale of Orange mobile and internet operations in the Netherlands to Deutsche Telekom ITT’s $1.7 billion acquisition of EDO Catalina Marketing’s Special Committee in its $1.7 billion sale to Hellman & Friedman Minnesota Steel’s sale to Essar and Essar’s $1.7 billion investment in an integrated steel plant Aldabra’s $1.6 billion acquisition of paper and packaging assets from Boise Cascade Medco Health Solution’s $1.5 billion acquisition of PolyMedica American Express’ $1.1 billion sale of American Express Bank to Standard Chartered Veolia Environnement’s $788 million acquisition of Thermal North America Telent’s £398 million sale to Co-Investment No. 5 LP (Pension Corporation) IBM’s SEK 5.2 billion acquisition of Telelogic Hearst’s $600 million acquisition of the public minority stake in Hearst-Argyle Television InBev’s €419 million sale of 90% of Immobrew (Belgian and Dutch real estate) to Cofinimmo Lattelecom’s $570 million sale to the Blackstone Group Schneider Electric’s €425 million sale of MGE UPS Systems operations in small systems to Eaton Infineon Technologies’ €367 million acquisition of the mobility products business of LSI Eiffage S.A. in its defense against an approach by Sacyr Advent and The Carlyle Group’s sale of HT Troplast to Arcapita L’Oreal USA’s acquisition of Maly’s West Emap in its review of its strategic options Financial Restructuring Financial Restructuring operating revenue was $94.9 million for the first nine months of 2007, compared to $50.2 million for the first nine months of 2006, and was $56.2 million for the 2007 third quarter, compared to $15.6 million for the third quarter of 2006. Notable announced assignments since the second quarter of 2007 include: Movie Gallery, Tarragon Corporation and Technical Olympic USA. Restructuring assignments completed in the third quarter of 2007 include Tower Automotive, Northwest Airlines Creditors Committee, Sons of Gwalia and InSight Health Services. In addition, third quarter revenue included our contingent fee in connection with the Eurotunnel restructuring. We are continuing our work on a number of other Restructuring assignments, including those involving Collins & Aikman, Calpine’s Unsecured Creditors Committee, an ad hoc committee of second lien holders in connection with Dura Automotive’s Chapter 11 filing and the UAW in connection with its ongoing contract discussions with GM, Ford and Chrysler over their retiree health care obligations and in connection with Delphi's bankruptcy. Corporate Finance and Other Corporate Finance and Other operating revenue was $96.8 million for the first nine months of 2007, compared to $76.0 million for the first nine months of 2006, and was $28.3 million for the 2007 third quarter compared to $18.3 million for the third quarter of 2006. These increases were primarily driven by the fact that we advised on a number of recent capital markets transactions, including Special Purpose Acquisition Corporation transactions (SPACs) for Hicks Acquisition Co. and Alternative Asset Management Acquisition Corp. Lazard’s Equity Capital Markets group advised First Solar on its secondary equity offering, and E-House China Holdings on its IPO, among others. Our Alternative Capital Finance Group also has served as placement agent on a number of Private Investments in Public Equity (PIPEs) and Registered Direct Offerings (RDs). Notable transactions during the third quarter included a PIPE for Via Pharmaceuticals and an RD for CombinatoRx. We also advised Euromedica on its private placement of equity and convertible bonds. Asset Management Asset Management operating revenue increased 30% to $486.1 million and 42% to $177.5 for the first nine months and third quarter of 2007, respectively, both record levels, compared with $373.9 million and $124.9 million for the corresponding 2006 periods. Management fees increased 31% to a record $430.3 million and 40% to a record $157.4 million for the first nine months and third quarter of 2007, respectively, compared with $328.7 million and $112.7 million for the corresponding 2006 periods. Average AUM rose 44% for the third quarter of 2007 to $138.7 billion from $96.6 billion for the third quarter of 2006. AUM at the end of the third quarter of 2007 were $142.1 billion, representing a 29% increase over the level of AUM at year-end 2006, due principally to net asset inflows of $17.5 billion and market appreciation of $13.1 billion for the first nine months of 2007. With net asset inflows in the third quarter of $3.3 billion, Lazard has now achieved net asset inflows in seven of the last eight quarters. Incentive fees were $18.1 million and $7.3 million for the first nine months and third quarter of 2007, respectively, compared with $17.4 million and $3.4 million for the comparable 2006 periods. Incentive fees are recorded on the measurement date, which for most of Lazard’s funds that are subject to incentive fees fall in the fourth quarter. Expenses Compensation and Benefits The ratio of compensation and benefits expense to operating revenue measured 56.7% for the first nine months and third quarter of 2007, compared to 57.0% for the comparable 2006 periods. Compensation and benefits expense increased 29% to $792.2 million and 79% to $323.2 million for the first nine months and third quarter of 2007, respectively, compared with $615.3 million and $181.0 million for the respective 2006 periods, reflecting increases in operating revenue in the respective periods. Non-Compensation Non-compensation expenses, excluding $18.2 million in amortization of intangibles related to acquisitions completed during the third quarter, were $236.2 million or 16.9% of operating revenue and $82.1 million or 14.4% of operating revenue for the first nine months and third quarter of 2007, respectively, compared to $193.4 million or 17.9% of operating revenue and $67.3 million or 21.2% of operating revenue for the comparable 2006 periods. The increase reflects one-time VAT and other recoveries in the first nine months of 2006, as well as increases in 2007 in expenses related to (i) increased business activity, including fund administration and services associated with the growth in AUM, (ii) investments in our businesses including recruitment costs, travel and other market development costs, and (iii) the impact of the strengthening of the Euro, Pound and other currencies against the U.S. Dollar. In addition, the first nine months of 2007 includes a $4 million provision for occupancy and equipment costs relating to leases on abandoned space, which was recorded in the second quarter of 2007. The percentage of non-compensation expenses to operating revenue can vary from quarter to quarter due to quarterly fluctuation in revenues, among other things. Accordingly, the results in a particular quarter may not be indicative of future results. Lazard management believes that annual results are the most meaningful basis for comparison. Provision for Income Taxes The provision for income taxes on a U.S. GAAP basis was $65.7 million and $28.3 million for the first nine months and third quarter of 2007, respectively, compared with a provision for income taxes of $44.8 million and $10.2 million for the corresponding 2006 periods. The effective tax rates for the first nine months and third quarter of 2007 were 23.0% and 23.9% respectively, compared to 21.1% and 20.6% for the corresponding 2006 periods. On a fully exchanged basis, the effective tax rate for the first nine months and third quarter of 2007 and 2006 was 28% in each period. Minority Interest Minority interest expense, assuming full exchange of minority interests, was $8.1 million and $2.5 million for the first nine months and third quarter of 2007, respectively, representing the LAM general partnership interests held by certain of our managing directors. In the corresponding 2006 periods, minority interest expense was $3.1 million and a $0.6 million, respectively. Minority interest expense on a US GAAP basis also includes the minority interest attributable to the exchangeable interests held by LAZ-MD Holdings LLC. Such minority interest expense increased due to the significant increase in operating income in the third quarter, offset in part as the decrease in the ownership interest represented by the exchangeable interests declined to 52% in the first nine months and third quarter of 2007 compared to 62% in the corresponding 2006 periods, as a result of the primary and secondary offering of the Company’s common stock in December 2006. Strategic Business Developments During the third quarter of 2007, Lazard continued to execute on transactions as part of its five-year strategy to enhance the firm’s financial advisory capabilities in geographies and markets where it anticipates significant growth opportunities. On July 31, Lazard completed its acquisition of Carnegie, Wylie & Company, one of Australia’s leading independent financial advisory firms. We have integrated the acquisition with our existing Australian business, and it is operating as Lazard Carnegie Wylie. Located in Melbourne, Sydney and Brisbane, the firm provides mergers and acquisitions advisory services, and manages a private equity fund. On August 13, Lazard completed the acquisition of Goldsmith Agio Helms, a specialist investment bank focused on financial advisory for U.S. mid-sized private companies. As a result, Lazard added to its geographic footprint, especially in Minneapolis, Los Angeles and Chicago, and through this new growth initiative, Lazard Middle Market will provide access for Lazard’s current Financial Advisory clients to mid-sized, U.S. private companies. In September 2007, Lazard expanded into two new markets by opening offices in Boston, as part of its global technology expansion, and Zurich, as part of the firm’s commitment to expand its European Financial Advisory business. Also in September 2007, the firm announced it had hired Ken Costa, Chairman of Lazard International, to lead the firm’s UK Investment Banking business alongside William Rucker, CEO of Lazard in London. Mr. Costa joined the firm from UBS, where he was Chairman of Investment Banking for Europe, the Middle East and Africa. During the third quarter, Lazard has activated its cooperation agreement with Raiffeisen, to jointly pursue financial advisory assignments in Russia, and Central and Eastern Europe. Lazard’s nine-month and third-quarter 2007 results include $46 million in revenues related to the recent acquisitions of Carnegie Wylie and Goldsmith Agio Helms. However, principally as a result of purchase accounting adjustments, the acquisitions did not significantly impact the firm’s fully diluted net income per share for both the nine-month period in 2007 and the third quarter of 2007. Non-GAAP Information Lazard discloses certain non-GAAP financial information, which management believes provides the most meaningful basis for comparison among present, historical and future periods. The following are non-GAAP measures used in the accompanying financial information: Net income assuming full exchange of exchangeable interests (or fully exchanged basis) Operating Revenue Minority interest assuming full exchange of exchangeable interests Additional financial, statistical and business-related information is included in a financial supplement. This earnings release, the financial supplement and selected transaction information will be available today on our website at www.lazard.com. Lazard, one of the world's preeminent financial advisory and asset management firms, operates from 35 cities across 17 countries in North America, Europe, Asia, Australia and South America. With origins dating back to 1848, the firm provides advice on mergers and acquisitions, restructuring and capital raising, as well as asset management services to corporations, partnerships, institutions, governments, and individuals. For more information on Lazard, please visit www.lazard.com. Cautionary Note Regarding Forward-Looking Statements This press release contains "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 are not historical facts but instead represent only our belief regarding future results, many of which, by their nature, are inherently uncertain and outside of our control. 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 these forward-looking statements. These factors include, but are not limited to, those discussed in our Annual Report on Form 10-K under Item 1A "Risk Factors,” and also disclosed from time to time in reports on Forms 10-Q and 8-K 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. Lazard Ltd is committed to providing timely and accurate information to the investing public, consistent with our legal and regulatory obligations. To that end, Lazard and its operating companies use their websites to convey information about their 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 in various hedge funds and mutual funds and other investment products managed by Lazard Asset Management LLC and its subsidiaries. Monthly updates of these funds will be 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. LAZ-G (a)   On a fully exchanged basis, which refers to the full conversion of all outstanding exchangeable interests held by the members of LAZ-MD Holdings and is a non-GAAP measure.   (b) Operating revenue excludes interest expense relating to financing activities and revenue relating to the consolidation of General Partnerships of Lazard Asset Management (LAM), each of which are included in net revenue.   (c) Operating income is after interest expense and before income taxes and minority interests. LAZARD LTD OPERATING REVENUE (unaudited)   Three Months Ended September 30,   Nine Months Ended September 30,     Increase /     Increase / 2007 2006 (Decrease) 2007 2006 (Decrease) ($ in thousands) Financial Advisory     M&A $295,401 $153,215 $142,186 93% $655,787 $545,054 $110,733 20% Financial Restructuring 56,161 15,562 40,599 261% 94,854 50,202 44,652 89% Corporate Finance and Other 28,255 18,291 9,964 54% 96,809 76,013 20,796 27% Total 379,817 187,068 192,749 103% 847,450 671,269 176,181 26%   Asset Management Management Fees 157,424 112,726 44,698 40% 430,293 328,734 101,559 31% Incentive Fees 7,315 3,423 3,892 114% 18,073 17,362 711 4% Other Revenue 12,798 8,720 4,078 47% 37,737 27,809 9,928 36% Total 177,537 124,869 52,668 42% 486,103 373,905 112,198 30%   Corporate 12,164 5,668 6,496 - 63,688 34,394 29,294 -   Operating Revenue* 569,518 317,605 251,913 79% 1,397,241 1,079,568 317,673 29%   LAM GP Related Revenue 2,521 600 1,921 - 8,076 3,137 4,939 - Other Interest Expense (29,991) (20,693) (9,298) - (72,711) (62,027) (10,684) -   Net Revenue $542,048 $297,512 $244,536 82% $1,332,606 $1,020,678 $311,928 31%   * Operating revenue excludes interest expense relating to financing activities and revenue relating to the consolidation of LAM General Partnerships, each of which are included in net revenue. LAZARD LTD UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME         Three Months Ended Nine Months Ended Ended September 30, Ended September 30, 2007 2006 2007 2006 ($ in thousands, except per share data)   Total revenue (a) $ 577,601 $ 323,422 $ 1,423,391 $ 1,094,434 LFB interest expense   (8,083 )   (5,817 )   (26,150 )   (14,866 ) Operating revenue 569,518 317,605 1,397,241 1,079,568 LAM GP related revenue 2,521 600 8,076 3,137 Other interest expense   (29,991 )   (20,693 )   (72,711 )   (62,027 ) Net revenue 542,048 297,512 1,332,606 1,020,678 Operating expenses: Compensation and benefits 323,152 180,982 792,236 615,269   Occupancy and equipment 21,462 18,257 65,436 55,710 Marketing and business development 16,898 13,852 50,264 41,702 Technology and information services 15,204 11,943 41,971 35,914 Professional services 13,166 14,316 35,695 34,366 Fund administration and outsourced services 6,074 3,703 15,042 10,831 Amortization of intangible assets (b) 18,156 - 18,156 - Other   9,350     5,266     27,789     14,884   Total non-compensation expense   100,310     67,337     254,353     193,407   Operating expenses   423,462     248,319     1,046,589     808,676     Operating income 118,586 49,193 286,017 212,002   Provision for income taxes   28,284     10,153     65,658     44,827   Income before minority interest in net income 90,302 39,040 220,359 167,175 Minority interest in net income (excluding LAZ-MD) 2,523 604 8,081 3,144 Minority interest in net income (LAZ-MD only)   47,512     25,278     116,361     107,642   Net income $ 40,267   $ 13,158   $ 95,917   $ 56,389     Net income assuming full exchange of exchangeable interests (c) $ 83,565   $ 34,983   $ 200,113   $ 150,376     Weighted average shares outstanding (d): Basic 51,078,444 37,388,185 51,318,879 37,457,275 Diluted 116,344,656 41,577,615 61,879,027 41,747,068 Net income per share: Basic $ 0.79 $ 0.35 $ 1.87 $ 1.51 Diluted $ 0.73 $ 0.34 $ 1.72 $ 1.45                   Weighted average shares outstanding, assuming full exchange of exchangeable interests (d): Basic 106,641,641 99,486,633 107,230,445 99,562,490 Diluted 116,344,656 103,676,063 117,790,593 104,305,340 Net income per share - assuming full exchange of exchangeable interests: Basic $ 0.78 $ 0.35 $ 1.87 $ 1.51 Diluted $ 0.73 $ 0.34 $ 1.72 $ 1.45   (a) Excluding LAM General Partnership related revenue   (b) For the three and nine month periods ended September 30, 2007, includes amortization expense related to the $30,987 of intangible assets recorded during the quarter ended September 30, 2007, as a result of the acquisition of Goldsmith Agio Helms & Lynner, LLC ("GAHL") and Carnegie, Wylie & Company ("CWC").   (c) Represents a reversal of the minority interests related to LAZ-MD Holdings’ ownership of Lazard Group common membership interests net of an adjustment for Lazard Ltd entity-level taxes to effect a full exchange of interests as of January 1, 2006 (see "Reconciliation of US GAAP to Full Exchange Results").   (d) See "Reconciliation of Shares Outstanding and Basic & Diluted Net Income Per Share". LAZARD LTD SELECTED QUARTERLY OPERATING RESULTS (unaudited)   Three Months Ended               Pro Forma(a) Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31, 2007 2007 2007 2006 2006 2006 2006 2005 ($ in thousands, except per share data) Financial Advisory M&A $ 295,401 $ 164,318 $ 196,068 $ 247,483 $ 153,215 $ 197,856 $ 193,983 $ 182,984 Financial Restructuring 56,161 29,073 9,620 20,423 15,562 21,047 13,593 23,037 Corporate Finance and Other   28,255   51,619   16,935   34,260   18,291   43,149   14,573   32,216 Total 379,817 245,010 222,623 302,166 187,068 262,052 222,149 238,237   Asset Management Management Fees 157,424 142,230 130,639 121,589 112,726 112,203 103,805 98,366 Incentive Fees 7,315 5,752 5,006 42,009 3,423 7,456 6,483 33,977 Other Revenue   12,798   13,666   11,272   10,961   8,720   10,159   8,930   7,170 Total 177,537 161,648 146,917 174,559 124,869 129,818 119,218 139,513   Corporate   12,164   32,868   18,657   14,774   5,668   18,970   9,756   9,965   Operating revenue (b) $ 569,518 $ 439,526 $ 388,197 $ 491,499 $ 317,605 $ 410,840 $ 351,123 $ 387,715     Operating income (c) $ 118,586 $ 89,163 $ 78,268 $ 115,207 $ 49,193 $ 84,693 $ 78,116 $ 77,084     Net income $ 40,267 $ 29,296 $ 26,354 $ 36,596 $ 13,158 $ 23,545 $ 19,686 $ 21,743     Net income per share Basic $ 0.79 $ 0.57 $ 0.51 $ 0.88 $ 0.35 $ 0.63 $ 0.52 $ 0.58 Diluted $ 0.73 $ 0.52 $ 0.47 $ 0.78 $ 0.34 $ 0.59 $ 0.51 $ 0.57                                       Net income assuming full exchange of exchangeable interests $ 83,565 $ 61,515 $ 55,033 $ 85,817 $ 34,983 $ 62,939 $ 52,454 $ 57,261   Net income per share - assuming full exchange of exchangeable interests Basic $ 0.78 $ 0.57 $ 0.51 $ 0.84 $ 0.35 $ 0.63 $ 0.53 $ 0.57 Diluted $ 0.73 $ 0.53 $ 0.47 $ 0.78 $ 0.34 $ 0.60 $ 0.51 $ 0.57   (a) The unaudited pro forma selected quarterly operating results for December 31, 2005 present Lazard’s historical financial information adjusted to reflect the separation and recapitalization transactions, including its initial public offering and the additional financing transactions, assuming they had been completed as of January 1, 2005.   (b) Operating revenue excludes interest expense relating to financing activities and revenue/(loss) relating to the consolidation of LAM General Partnerships, each of which are included in net revenue.   (c) Operating income is after interest expense and before income taxes and minority interests. LAZARD LTD UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL CONDITION ($ in thousands)     September 30,   December 31, 2007 2006* ASSETS Cash and cash equivalents $ 959,122 $ 969,483 Cash segregated for regulatory purposes or deposited with clearing organizations 29,946 16,023 Securities owned - at fair value ** 765,168 579,335 Receivables 1,021,726 1,234,896 Goodwill and other intangible assets 184,292 16,945 Other assets   547,142     391,983     Total assets $ 3,507,396   $ 3,208,665   LIABILITIES & STOCKHOLDERS' DEFICIENCY Liabilities Deposits and other customer payables $ 914,039 $ 1,195,014 Accrued compensation and benefits 341,670 437,738 Other liabilities 534,403 473,712 Senior notes: Underlying equity security units 437,500 437,500 Others 1,155,351 649,557 Subordinated loans   150,000     200,000   Total liabilities 3,532,963 3,393,521   Commitments and contingencies Minority interest 48,972 55,497   Stockholders' deficiency Preferred stock, par value $.01 per share: Series A - - Series B - - Common stock, par value $.01 per share: Class A 517 516 Class B - - Additional paid-in capital (249,602 ) (396,792 ) Accumulated other comprehensive income, net of tax 52,187 32,494 Retained earnings   194,563     127,608   (2,335 ) (236,174 ) Less: Class A common stock held by a subsidiary, at cost   (72,204 )   (4,179 ) Total stockholders' deficiency   (74,539 )   (240,353 )   Total liabilities, minority interest and stockholders' deficiency $ 3,507,396   $ 3,208,665   * Certain prior year amounts have been reclassified to conform to current year presentation.   **At September 30, 2007 and December 31, 2006, 29% and 1%, respectively, of securities owned - at fair value represent corporate investments primarily in equity securities. LAZARD LTD RECONCILIATION OF SHARES OUTSTANDING AND BASIC & DILUTED NET INCOME PER SHARE         BEFORE FULL EXCHANGE   Three Months Ended September 30, Nine Months Ended September 30,   2007   2006   2007   2006 ($ in thousands, except per share data) Basic Numerator: Net income $ 40,267 $ 13,158 $ 95,917 $ 56,389 Add (deduct) - net income associated with Class A common shares issuable on a non-contingent basis (a)   173   -   173   - Basic net income $ 40,440 $ 13,158 $ 96,090 $ 56,389 Denominator: Weighted average shares outstanding (a)   51,078,444   37,388,185   51,318,879   37,457,275   Basic net income per share $ 0.79 $ 0.35 $ 1.87 $ 1.51     Diluted Numerator: Basic net income $ 40,440 $ 13,158 $ 96,090 $ 56,389 Add (deduct) - dilutive effect of adjustments to income for: Interest expense on convertible notes, net of tax 460 - 1,385 - Minority interest in net income resulting from assumed share issuances (see incremental issuable shares in the denominator calculation below) and Ltd level income tax effect   43,542   880   9,007   3,938 Diluted net income $ 84,442 $ 14,038 $ 106,482 $ 60,327   Denominator: Weighted average shares outstanding 51,078,444 37,388,185 51,318,879 37,457,275 Add - dilutive effect of incremental issuable shares: Equity security units 4,091,143 3,219,113 5,395,017 3,481,668 Restricted stock units 2,368,298 970,317 2,329,560 808,125 Convertible notes (b) 2,631,570 - 2,631,570 - Exchangeable interests (c) 55,563,197 - - - Series A and Series B convertible preferred stock (d)   612,004   -   204,001   - Diluted weighted average shares outstanding   116,344,656   41,577,615   61,879,027   41,747,068   Diluted net income per share $ 0.73 $ 0.34 $ 1.72 $ 1.45   (a) For the three and nine month periods ended September 30, 2007, includes 425,509 and 141,836 weighted average shares, respectively related to 815,558 shares of Class A common stock that are issuable on a non-contingent basis with respect to the acquisition of GAHL. (b) For the three and nine month periods ended September 30, 2006, the shares assumed issued from convertible notes were not dilutive. (c) For the nine month period ended September 30, 2007 and for the three and nine month periods ended September 30, 2006, the LAZ-MD exchangeable interests were not dilutive, consequently, the effect of their conversion to shares of Class A common stock has been excluded from diluted earnings per share during such period. (d) For the three and nine month periods ended September 30, 2007, includes 9,724 shares of Series A convertible preferred stock and 277 shares of Series B convertible preferred stock that will be convertible into Class A common stock on a non-contingent basis with respect to the acquisition of CWC. The rate of conversion into Class A common stock will be dependant, in part, on the future value of the Class A common stock and currency exchange rates, therefore, the shares are excluded from the basic net income per share calculation but included in the diluted net income per share calculation. - - - - LAZARD LTD RECONCILIATION OF SHARES OUTSTANDING AND BASIC & DILUTED NET INCOME PER SHARE           ASSUMING FULL EXCHANGE OF EXCHANGEABLE INTERESTS AS OF JANUARY 1, 2006   Three Months Ended September 30, Nine Months Ended September 30,   2007   2006   2007   2006 ($ in thousands, except per share data) Basic Numerator: Net income $ 83,565 $ 34,983 $ 200,113 $ 150,376 Denominator: Weighted average shares outstanding (a)   106,641,641   99,486,633   107,230,445   99,562,490   Basic net income per share $ 0.78 $ 0.35 $ 1.87 $ 1.51   Diluted Numerator: Net income $ 83,565 $ 34,983 $ 200,113 $ 150,376 Add dilutive effect of adjustments to income for: Interest expense on convertible debt, net of tax   877   -   2,633   458 Diluted net income $ 84,442 $ 34,983 $ 202,746 $ 150,834   Denominator: Weighted average shares outstanding 106,641,641 99,486,633 107,230,445 99,562,490 Add - dilutive effect of incremental issuable shares: Equity security units 4,091,143 3,219,113 5,395,017 3,481,668 Restricted stock units 2,368,298 970,317 2,329,560 808,125 Convertible notes (b) 2,631,570 - 2,631,570 453,057 Series A and Series B convertible preferred stock (c)   612,004   -   204,001   - Diluted weighted average shares outstanding   116,344,656   103,676,063   117,790,593   104,305,340   Diluted net income per share $ 0.73 $ 0.34 $ 1.72 $ 1.45   (a) For the three and nine month periods ended September 30, 2007, includes 425,509 and 141,836 weighted average shares, respectively related to 815,558 shares of Class A common stock that are issuable on a non-contingent basis with respect to the acquisition of GAHL. (b) For the three month period ended September 30, 2006, the shares assumed issued from convertible notes were not dilutive. (c) For the three and nine month periods ended September 30, 2007, includes 9,724 shares of Series A convertible preferred stock and 277 shares of Series B convertible preferred stock that will be convertible into Class A common stock on a non-contingent basis with respect to the acquisition of CWC. The rate of conversion into Class A common stock will be dependant, in part, on the future value of the Class A common stock and currency exchange rates, therefore, the shares are excluded from the basic net income per share calculation but included in the diluted net income per share calculation. RECONCILIATION OF US GAAP TO FULL EXCHANGE RESULTS           Three Months Ended September 30, Nine Months Ended September 30,   2007     2006     2007     2006   ($ in thousands) Net income - US GAAP $ 40,267 $ 13,158 $ 95,917 $ 56,389 Provision for income taxes (d) (4,214 ) (3,453 ) (12,165 ) (13,655 ) Minority interest in net income (LAZ-MD only) (e)   47,512     25,278     116,361     107,642   Net income assuming full exchange of exchangeable interests $ 83,565   $ 34,983   $ 200,113   $ 150,376     (d) Represents an adjustment to the Lazard Ltd tax provision to effect a full exchange of LAZ-MD Holdings’ ownership of Lazard Group common membership interests at an effective rate of 28.0% of operating income less LAM GP related revenue. (e) Represents a reversal of the minority interests related to LAZ-MD Holdings’ ownership of Lazard Group common membership interests to effect a full exchange of interests as of January 1, 2006. LAZARD LTD ASSETS UNDER MANAGEMENT ("AUM")           As of September 30, June 30, March 31, December 31, September 30,   2007   2007     2007   2006   2006 ($ in millions) Equities $ 120,602 $ 114,805 $ 105,483 $ 92,194 $ 81,786 Fixed Income 13,956 13,232 12,587 11,823 11,113 Alternative Investments 3,609 3,581 3,292 3,457 3,653 Private Equity 1,117 1,100 936 883 854 Cash   2,800   2,632     2,554   2,080   1,928 Total AUM $ 142,084 $ 135,350   $ 124,852 $ 110,437 $ 99,334       Three Months Ended September 30, Nine Months Ended September 30, 2007 2006 2007 2006 ($ in millions) ($ in millions) AUM - Beginning of Period $ 135,350 $ 93,901 $ 110,437 $ 88,234   Net Flows 3,295 1,693 17,485 983 Market Appreciation 2,733 3,792 13,122 9,337 Foreign Currency Adjustments   706   (52 )   1,040   780   AUM - End of Period $ 142,084 $ 99,334   $ 142,084 $ 99,334   Average AUM * $ 138,717 $ 96,618   $ 128,181 $ 94,151       * Average AUM is based on an average of quarterly ending balances for the respective periods. LAZARD LTD SCHEDULE OF INCOME TAX PROVISION         Three Months Nine Months Ended Ended September 30, Ended September 30,   2007 2006 2007 2006 Lazard Ltd Consolidated Effective Tax Rate ($ in thousands)   Operating Income Lazard Group Allocable to LAZ-MD Holdings (weighted average ownership of 51.8% and 52.0% and 62.3% and 62.4% for the three and nine month periods ended September 30, 2007 and 2006, respectively) $ 61,440 $ 30,691 $ 148,917 $ 132,517   Allocable to Lazard Ltd (weighted average ownership of 48.2% and 48.0% and 37.7% and 37.6% for the three and nine month periods ended September 30, 2007 and 2006, respectively)   57,130     18,539     137,551     80,005   Total Lazard Group operating income 118,570 49,230 286,468 212,522 Lazard Ltd and its wholly owned subsidiaries   16     (37 )   (451 )   (520 ) Total Lazard Ltd consolidated operating income $ 118,586   $ 49,193   $ 286,017   $ 212,002     Provision for income taxes Lazard Group (effective tax rates of 20.6% and 19.0% for the three and nine month periods ended September 30, 2007 and 16.4% and 17.3% for the three and nine month periods ended September 30, 2006, respectively) Allocable to LAZ-MD Holdings $ 12,624 $ 5,036 $ 28,356 $ 22,901 Allocable to Lazard Ltd   11,744     3,045     26,208     13,826   Total Lazard Group provision for income taxes 24,368 8,081 54,564 36,727 Tax adjustment for Lazard Ltd entity-level (a)   3,916     2,072     11,094     8,100   Lazard Ltd consolidated provision for income taxes $ 28,284   $ 10,153   $ 65,658   $ 44,827     Lazard Ltd consolidated effective tax rate   23.9 %   20.6 %   23.0 %   21.1 %   Lazard Ltd Fully Exchanged Tax Rate   Operating Income Lazard Ltd consolidated operating income 118,586 49,193 286,017 212,002 Less: LAM GP related loss/(revenue) allocable to Lazard Ltd   (2,521 )   (600 )   (8,076 )   (3,137 ) Operating income excluding LAM GP related revenue $ 116,065   $ 48,593   $ 277,941   $ 208,865     Provision for income taxes Lazard Ltd consolidated provision for income taxes $ 28,284 $ 10,153 $ 65,658 $ 44,827 Tax adjustment for full exchange (b)   4,214     3,453     12,165     13,655   Total fully exchanged provision for income taxes $ 32,498   $ 13,606   $ 77,823   $ 58,482     Lazard Ltd fully exchanged tax rate   28.0 %   28.0 %   28.0 %   28.0 %   (a) Represents an adjustment to the Lazard Ltd tax provision for the three and nine month periods ended September 30, 2007 from $11,744 to $15,660 and $26,208 to $37,302 and for the three and nine month periods ended September 30, 2006 from $3,045 to $5,117 and $13,826 to $21,926 to reflect an effective tax rate of 28.0% of Lazard Ltd's share of operating income less its share of LAM GP related revenue, respectively.   (b) Represents an adjustment to the Lazard Ltd tax provision to effect a full exchange of LAZ-MD Holdings’ ownership of Lazard Group common membership interests at an effective rate of 28.0% of operating income less LAM GP related revenue.