Lazard 10Q 2021 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended June 30, 2021


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

For the transition period from to

001-32492

(Commission File Number)

LAZARD LTD

(Exact name of registrant as specified in its charter)

Bermuda	98-0437848
(State or Other Jurisdiction of Incorporation	(I.R.S. Employer Identification No.)
or Organization)

Clarendon House

2 Church Street

Hamilton HM11, Bermuda

(Address of principal executive offices)

Registrant’s telephone number: (441) 295-1422

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock	LAZ	New York Stock Exchange

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 ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If the Registrant is an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of July 23, 2021, there were 112,766,091 shares of the Registrant’s common stock outstanding (including 9,301,031 shares held by subsidiaries).

TABLE OF CONTENTS

When we use the terms “Lazard”, “we”, “us”, “our” and “the Company”, we mean Lazard Ltd, a company incorporated under the laws of Bermuda, and its subsidiaries, including Lazard Group LLC, a Delaware limited liability company (“Lazard Group”), that is the current holding company for our businesses. Lazard Ltd’s primary operating asset is its indirect ownership as of June 30, 2021 of all of the common membership interests in Lazard Group and its controlling interest in Lazard Group. When we use the term “common stock”, we mean Class A common stock of Lazard Ltd, the only class of common stock of Lazard outstanding.

		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		38

Item 3. Quantitative and Qualitative Disclosures About Market Risk		65

Item 4. Controls and Procedures		65

Part II. Other Information

Item 1. Legal Proceedings		66

Item 1A. Risk Factors		66

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		66

Item 3. Defaults Upon Senior Securities		67

Item 4. Mine Safety Disclosures		67

Item 5. Other Information		67

Item 6. Exhibits		68

Signatures		71

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements (Unaudited)

		Page

Condensed Consolidated Statements of Financial Condition as of June 30, 2021 and December 31, 2020		2

Condensed Consolidated Statements of Operations for the three month and six month periods ended June 30, 2021 and 2020		4

Condensed Consolidated Statements of Comprehensive Income for the three month and six month periods ended June 30, 2021 and 2020		5

Condensed Consolidated Statements of Cash Flows for the six month periods ended June 30, 2021 and 2020		6

Condensed Consolidated Statements of Changes in Stockholders’ Equity and Redeemable Noncontrolling Interests for the three month and six month periods ended June 30, 2021 and 2020		7

Notes to Condensed Consolidated Financial Statements		11

LAZARD LTD

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

JUNE 30, 2021 AND DECEMBER 31, 2020

(UNAUDITED)

(dollars in thousands, except for per share data)

	June 30,		December 31,
	2021		2020
ASSETS
Cash and cash equivalents	$	979,899	$	1,389,876
Deposits with banks and short-term investments		1,111,347		1,134,463
Restricted cash		614,291		44,488
Receivables (net of allowance for doubtful accounts of $36,244 and $36,649 at June 30, 2021 and December 31, 2020, respectively):
Fees		649,222		621,880
Customers and other		169,578		121,261
		818,800		743,141
Investments		867,707		658,532
Property (net of accumulated amortization and depreciation of $408,935 and $402,471 at June 30, 2021 and December 31, 2020, respectively)		252,002		257,587
Operating lease right-of-use assets		479,238		513,923
Goodwill and other intangible assets (net of accumulated amortization of $70,260 and $70,155 at June 30, 2021 and December 31, 2020, respectively)		380,867		384,071
Deferred tax assets		492,364		538,448
Other assets		410,285		307,332
Total Assets	$	6,406,800	$	5,971,861

See notes to condensed consolidated financial statements.

LAZARD LTD

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

JUNE 30, 2021 AND DECEMBER 31, 2020

(UNAUDITED)

(dollars in thousands, except for per share data)

	June 30,			December 31,
	2021			2020
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY
Liabilities:
Deposits and other customer payables	$	1,228,248		$	1,201,150
Accrued compensation and benefits		644,777			734,544
Operating lease liabilities		567,726			606,963
Tax receivable agreement obligation		211,236			221,451
Senior debt		1,683,984			1,682,741
Deferred tax liabilities		1,335			1,041
Other liabilities		562,639			524,538
Total Liabilities		4,899,945			4,972,428
Commitments and contingencies
Redeemable noncontrolling interests		575,000			-
STOCKHOLDERS’ EQUITY
Preferred stock, par value $.01 per share; 15,000,000 shares authorized:
Series A - 0 shares issued and outstanding		-			-
Series B - 0 shares issued and outstanding		-			-
Common stock:
Class A, par value $.01 per share (500,000,000 shares authorized; 112,766,091 shares issued at June 30, 2021 and December 31, 2020, including shares held by subsidiaries as indicated below)		1,128			1,128
Additional paid-in-capital		58,000			135,439
Retained earnings		1,348,121			1,295,386
Accumulated other comprehensive loss, net of tax		(226,648	)		(238,368	)
		1,180,601			1,193,585
Class A common stock held by subsidiaries, at cost (8,705,297 and 7,728,387 shares at June 30, 2021 and December 31, 2020, respectively)		(353,718	)		(281,813	)
Total Lazard Ltd Stockholders’ Equity		826,883			911,772
Noncontrolling interests		104,972			87,661
Total Stockholders’ Equity		931,855			999,433
Total Liabilities, Redeemable Noncontrolling Interests and Stockholders’ Equity	$	6,406,800		$	5,971,861

See notes to condensed consolidated financial statements.

LAZARD LTD

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTH AND SIX MONTH PERIODS ENDED JUNE 30, 2021 AND 2020

(UNAUDITED)

(dollars in thousands, except for per share data)

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2021		2020			2021		2020
REVENUE
Investment banking and other advisory fees	$	475,161	$	304,259		$	792,992	$	601,928
Asset management fees		346,465		245,291			673,415		514,509
Interest income		1,280		1,340			2,634		3,752
Other		20,358		41,374			54,127		30,232
Total revenue		843,264		592,264			1,523,168		1,150,421
Interest expense		20,127		19,972			39,924		40,115
Net revenue		823,137		572,292			1,483,244		1,110,306
OPERATING EXPENSES
Compensation and benefits		514,918		351,568			916,464		671,323
Occupancy and equipment		29,875		30,574			64,623		62,772
Marketing and business development		9,332		6,517			15,983		26,703
Technology and information services		35,774		32,629			69,444		63,987
Professional services		19,996		16,728			34,944		31,273
Fund administration and outsourced services		31,302		24,053			60,581		50,443
Amortization of intangible assets related to acquisitions		15		455			30		901
Other		15,664		13,903			20,624		22,942
Total operating expenses		656,876		476,427			1,182,693		930,344
OPERATING INCOME		166,261		95,865			300,551		179,962
Provision for income taxes		41,345		22,789			84,809		48,555
NET INCOME		124,916		73,076			215,742		131,407
LESS - NET INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTERESTS		1,738		(382	)		5,264		(6,073	)
NET INCOME ATTRIBUTABLE TO LAZARD LTD	$	123,178	$	73,458		$	210,478	$	137,480
ATTRIBUTABLE TO LAZARD LTD CLASS A COMMON STOCKHOLDERS:
WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING:
Basic		106,746,654		106,662,064			107,019,107		106,483,013
Diluted		113,603,478		111,487,749			114,712,885		112,803,964
NET INCOME PER SHARE OF COMMON STOCK:
Basic	$	1.14	$	0.68		$	1.94	$	1.27
Diluted	$	1.08	$	0.66		$	1.83	$	1.22

See notes to condensed consolidated financial statements.

LAZARD LTD

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE MONTH AND SIX MONTH PERIODS ENDED JUNE 30, 2021 AND 2020

(UNAUDITED)

(dollars in thousands)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
NET INCOME	$	124,916		$	73,076		$	215,742		$	131,407
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
Currency translation adjustments:
Currency translation adjustments before reclassification		5,502			22,384			(14,241	)		(28,362	)
Adjustment for items reclassified to earnings		23,579			-			23,579			-
Employee benefit plans:
Actuarial gain (loss) (net of tax (benefit) expense of $(373) and $(169) for the three months ended June 30, 2021 and 2020, respectively, and $389 and $1,657 for the six months ended June 30, 2021 and 2020, respectively)		(1,477	)		491			(412	)		9,579
Adjustment for items reclassified to earnings (net of tax expense of $483 and $338 for the three months ended June 30, 2021 and 2020, respectively, and $864 and $676 for the six months ended June 30, 2021 and 2020, respectively)		1,458			1,615			2,794			3,510
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX		29,062			24,490			11,720			(15,273	)
COMPREHENSIVE INCOME		153,978			97,566			227,462			116,134
LESS - COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTERESTS		1,737			(383	)		5,264			(6,073	)
COMPREHENSIVE INCOME ATTRIBUTABLE TO LAZARD LTD	$	152,241		$	97,949		$	222,198		$	122,207

See notes to condensed consolidated financial statements.

LAZARD LTD

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTH PERIODS ENDED JUNE 30, 2021 AND 2020

(UNAUDITED)

(dollars in thousands)

	Six Months Ended
	June 30,
	2021			2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	215,742		$	131,407
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization of property		18,938			17,314
Noncash lease expense		36,242			32,443
Currency translation adjustment reclassification		23,579			-
Amortization of deferred expenses and share-based incentive compensation		229,919			215,204
Amortization of intangible assets related to acquisitions		30			901
Deferred tax provision		43,641			23,410
(Increase) decrease in operating assets and increase (decrease) in operating liabilities:
Receivables-net		(83,982	)		1,891
Investments		(290,595	)		6,547
Other assets		(22,527	)		(167,985	)
Accrued compensation and benefits and other liabilities		(155,910	)		(261,436	)
Net cash provided by (used in) operating activities		15,077			(304	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property		(17,370	)		(24,897	)
Disposals of property		602			135
Net cash used in investing activities		(16,768	)		(24,762	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from:
Contributions from noncontrolling interests		316			25
LGAC IPO		575,000			-
Customer deposits		63,539			-
Payments for:
Customer deposits		-			(18,958	)
Distributions to noncontrolling interests		(2,737	)		(1,819	)
Payments under tax receivable agreement		(10,215	)		(25,454	)
Payments of LGAC IPO underwriting fees and other offering costs		(9,352	)		-
Purchase of Class A common stock		(233,745	)		(95,227	)
Class A common stock dividends		(98,964	)		(97,892	)
Settlement of share-based incentive compensation		(65,592	)		(71,052	)
Other financing activities		(17,435	)		(3,580	)
Net cash provided by (used in) financing activities		200,815			(313,957	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS AND RESTRICTED CASH		(62,414	)		(23,871	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH		136,710			(362,894	)
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH— January 1		2,568,827			2,455,559
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH— June 30	$	2,705,537		$	2,092,665

RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH WITHIN THE CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION:
	June 30,			December 31,
	2021			2020
Cash and cash equivalents	$	979,899		$	1,389,876
Deposits with banks and short-term investments		1,111,347			1,134,463
Restricted cash		614,291			44,488
TOTAL CASH AND CASH EQUIVALENTS AND RESTRICTED CASH	$	2,705,537		$	2,568,827

See notes to condensed consolidated financial statements.

LAZARD LTD

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE MONTH PERIOD ENDED JUNE 30, 2020

(UNAUDITED)

(dollars in thousands)

					Additional						Accumulated Other Comprehensive			Class A Common Stock						Total Lazard Ltd						Total
	Common Stock				Paid-In-			Retained			Income (Loss),			Held By Subsidiaries						Stockholders’			Noncontrolling			Stockholders’
	Shares		$		Capital			Earnings			Net of Tax			Shares			$			Equity			Interests			Equity
Balance - April 1, 2020		112,766,091	$	1,128	$	-		$	1,119,176		$	(333,412	)		8,235,358		$	(300,459	)	$	486,433		$	73,184		$	559,617
Comprehensive income (loss):
Net income (loss)									73,458												73,458			(382	)		73,076
Other comprehensive income (loss) - net of tax												24,491									24,491			(1	)		24,490
Amortization of share-based incentive compensation						67,386															67,386			1,158			68,544
Dividend equivalents						4,628			(5,146	)											(518	)		(1,186	)		(1,704	)
Class A common stock dividends ($0.47 per share)									(49,133	)											(49,133	)					(49,133	)
Delivery of Class A common stock in connection with share-based incentive compensation and related tax benefit of $636						(20,230	)								(449,667	)		16,541			(3,689	)					(3,689	)
Business acquisitions and related equity transactions:
Class A common stock issuable (including related amortization)						52															52						52
Delivery of Class A common stock						(19	)								(588	)		19			-						-
Dividend equivalents						457			(457	)											-						-
Distributions to noncontrolling interests, net																					-			(408	)		(408	)
Consolidated VIEs																					-			11,006			11,006
Other									2,117												2,117						2,117
Balance - June 30, 2020		112,766,091	$	1,128	$	52,274		$	1,140,015		$	(308,921	)		7,785,103		$	(283,899	)	$	600,597		$	83,371		$	683,968

See notes to condensed consolidated financial statements.

LAZARD LTD

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2020

(UNAUDITED)

(dollars in thousands)

					Additional						Accumulated Other Comprehensive			Class A Common Stock						Total Lazard Ltd						Total
	Common Stock				Paid-In-			Retained			Income (Loss),			Held By Subsidiaries						Stockholders’			Noncontrolling			Stockholders’
	Shares		$		Capital			Earnings			Net of Tax			Shares			$			Equity			Interests			Equity
Balance - January 1, 2020		112,766,091	$	1,128	$	41,020		$	1,193,570		$	(293,648	)		8,513,493		$	(332,079	)	$	609,991		$	71,583		$	681,574
Adjustment for cumulative effect on prior years from the adoption of new accounting guidance									(7,575	)											(7,575	)					(7,575	)
Balance, as adjusted January 1, 2020		112,766,091		1,128		41,020			1,185,995			(293,648	)		8,513,493			(332,079	)		602,416			71,583			673,999
Comprehensive income (loss):
Net income (loss)									137,480												137,480			(6,073	)		131,407
Other comprehensive loss - net of tax												(15,273	)								(15,273	)					(15,273	)
Amortization of share-based incentive compensation						138,136															138,136			2,569			140,705
Dividend equivalents						11,345			(12,540	)											(1,195	)		(2,372	)		(3,567	)
Class A common stock dividends ($0.94 per share)									(97,892	)											(97,892	)					(97,892	)
Purchase of Class A common stock															2,912,035			(95,227	)		(95,227	)					(95,227	)
Delivery of Class A common stock in connection with share-based incentive compensation and related tax benefit of $983						(138,556	)		(74,228	)					(3,619,213	)		142,715			(70,069	)					(70,069	)
Business acquisitions and related equity transactions:
Class A common stock issuable (including related amortization)						104															104						104
Delivery of Class A common stock						(692	)								(21,212	)		692			-						-
Dividend equivalents						917			(917	)											-						-
Distributions to noncontrolling interests, net																					-			(1,794	)		(1,794	)
Consolidated VIEs																					-			19,458			19,458
Other									2,117												2,117						2,117
Balance - June 30, 2020		112,766,091	$	1,128	$	52,274		$	1,140,015		$	(308,921	)		7,785,103		$	(283,899	)	$	600,597		$	83,371		$	683,968

See notes to condensed consolidated financial statements.

LAZARD LTD

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS

FOR THE THREE MONTH PERIOD ENDED JUNE 30, 2021

(UNAUDITED)

(dollars in thousands)

					Additional						Accumulated Other Comprehensive			Class A Common Stock						Total Lazard Ltd						Total			Redeemable
	Common Stock				Paid-In-			Retained			Income (Loss),			Held By Subsidiaries						Stockholders’			Noncontrolling			Stockholders’			Noncontrolling
	Shares		$		Capital			Earnings			Net of Tax			Shares			$			Equity			Interests			Equity			Interests
Balance - April 1, 2021		112,766,091	$	1,128	$	-		$	1,278,907		$	(255,711	)		6,675,269		$	(259,319	)	$	765,005		$	101,694		$	866,699		$	575,000
Comprehensive income (loss):
Net income									123,178												123,178			1,738			124,916
Other comprehensive income (loss) - net of tax												29,063									29,063			(1	)		29,062
Amortization of share-based incentive compensation						72,078															72,078			3,618			75,696
Dividend equivalents						4,104			(4,438	)											(334	)		(1,731	)		(2,065	)
Class A common stock dividends ($0.47 per share)									(49,523	)											(49,523	)					(49,523	)
Purchase of Class A common stock															2,430,000			(111,093	)		(111,093	)					(111,093	)
Delivery of Class A common stock in connection with share-based incentive compensation and related tax expense of $55						(12,259	)								(286,615	)		11,416			(843	)					(843	)
Business acquisitions and related equity transactions:
Delivery of Class A common stock						(5,278	)								(113,357	)		5,278			-						-
Dividend equivalents						3			(3	)											-						-
Distributions to noncontrolling interests, net																					-			(1,401	)		(1,401	)
Consolidated VIEs																					-			(264	)		(264	)
Contribution from redeemable noncontrolling interests, net																					-			-			-			671
Change in redemption value of redeemable noncontrolling interests						(648	)														(648	)		1,319			671			(671	)
Balance - June 30, 2021		112,766,091	$	1,128	$	58,000		$	1,348,121		$	(226,648	)		8,705,297		$	(353,718	)	$	826,883		$	104,972		$	931,855		$	575,000

See notes to condensed consolidated financial statements.

LAZARD LTD

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS

FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2021

(UNAUDITED)

(dollars in thousands)

					Additional						Accumulated Other Comprehensive			Class A Common Stock						Total Lazard Ltd						Total			Redeemable
	Common Stock				Paid-In-			Retained			Income (Loss),			Held By Subsidiaries						Stockholders’			Noncontrolling			Stockholders’			Noncontrolling
	Shares		$		Capital			Earnings			Net of Tax			Shares			$			Equity			Interests			Equity			Interests
Balance - January 1, 2021		112,766,091	$	1,128	$	135,439		$	1,295,386		$	(238,368	)		7,728,387		$	(281,813	)	$	911,772		$	87,661		$	999,433		$	-
Comprehensive income (loss):
Net income									210,478												210,478			5,264			215,742
Other comprehensive income (loss) - net of tax												11,720									11,720			-			11,720
Amortization of share-based incentive compensation						137,984															137,984			5,903			143,887
Dividend equivalents						9,963			(10,819	)											(856	)		(3,462	)		(4,318	)
Class A common stock dividends ($0.94 per share)									(98,964	)											(98,964	)					(98,964	)
Purchase of Class A common stock															5,329,541			(233,745	)		(233,745	)					(233,745	)
Delivery of Class A common stock in connection with share-based incentive compensation and related tax expense of $1,144						(145,081	)		(47,902	)					(3,340,667	)		126,247			(66,736	)					(66,736	)
Business acquisitions and related equity transactions:
Delivery of Class A common stock						(35,593	)								(1,011,964	)		35,593			-						-
Dividend equivalents						58			(58	)											-						-
Distributions to noncontrolling interests, net																					-			(2,421	)		(2,421	)
Consolidated VIEs																					-			7,511			7,511
Contribution from redeemable noncontrolling interests, net																					-			-			-			534,746
Change in redemption value of redeemable noncontrolling interests						(44,770	)														(44,770	)		4,516			(40,254	)		40,254
Balance - June 30, 2021		112,766,091	$	1,128	$	58,000		$	1,348,121		$	(226,648	)		8,705,297		$	(353,718	)	$	826,883		$	104,972		$	931,855		$	575,000

See notes to condensed consolidated financial statements.

LAZARD LTD

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars in thousands, except for per share data, unless otherwise noted)

1.	ORGANIZATION AND BASIS OF PRESENTATION

Organization

Lazard Ltd, a Bermuda holding company, and its subsidiaries (collectively referred to as “Lazard Ltd”, “Lazard”, “we” or the “Company”), including Lazard Ltd’s indirect investment in Lazard Group LLC, a Delaware limited liability company (collectively referred to, together with its subsidiaries, as “Lazard Group”), is one of the world’s preeminent financial advisory and asset management firms and has long specialized in crafting solutions to the complex financial and strategic challenges of our clients. We serve a diverse set of clients around the world, including corporations, governments, institutions, partnerships and individuals.

Lazard Ltd indirectly held 100% of all outstanding Lazard Group common membership interests as of June 30, 2021 and December 31, 2020. Lazard Ltd, through its control of the managing members of Lazard Group, controls Lazard Group, which is governed by an Amended and Restated Operating Agreement, dated as of February 4, 2019 (the “Operating Agreement”).

Lazard Ltd’s primary operating asset is its indirect ownership of the common membership interests of, and managing member interests in, Lazard Group, whose principal operating activities are included in 2 business segments:

•

Financial Advisory, which offers corporate, partnership, institutional, government, sovereign and individual clients across the globe a wide array of financial advisory services regarding mergers and acquisitions (“M&A”), restructurings, capital advisory, shareholder advisory, sovereign advisory, capital raising and other strategic advisory matters; and

•

Asset Management, which offers a broad range of global investment solutions and investment management services in equity and fixed income strategies, asset allocation strategies, alternative investments and private equity funds to corporations, public funds, sovereign entities, endowments and foundations, labor funds, financial intermediaries and private clients.

In addition, we record selected other activities in our Corporate segment, including management of cash, investments, deferred tax assets, outstanding indebtedness, certain contingent obligations, and assets and liabilities associated with (i) Lazard Group’s Paris-based subsidiary, Lazard Frères Banque SA (“LFB”) and (ii) a special purpose acquisition company sponsored by an affiliate of the Company, Lazard Growth Acquisition Corp. I (“LGAC”).

Basis of Presentation

The accompanying condensed consolidated financial statements of Lazard Ltd have been prepared pursuant to the rules and regulations of the United States 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 Ltd’s Annual Report on Form 10-K for the year ended December 31, 2020. The accompanying December 31, 2020 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 that are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented.

Preparing financial statements requires management to make estimates and assumptions that affect the amounts that are reported in the financial statements and the accompanying disclosures. For example, discretionary compensation and benefits expense for interim periods is accrued based on the year-to-date amount of revenue earned, and an assumed annual ratio of compensation and benefits expense to revenue, with the applicable amounts adjusted for certain items. 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, 2021 are not indicative of the results to be expected for any future interim or annual period.

LAZARD LTD

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

(UNAUDITED)

(dollars in thousands, except for per share data, unless otherwise noted)

The condensed consolidated financial statements include Lazard Ltd, 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”); the French limited liability companies Compagnie Financière Lazard Frères SAS (“CFLF”), along with its subsidiaries, LFB and Lazard Frères Gestion SAS (“LFG”), and Maison Lazard SAS and its subsidiaries; and Lazard & Co., Limited (“LCL”), through Lazard & Co., Holdings Limited (“LCH”), an English private limited company, together with their jointly owned affiliates and subsidiaries.

The Company’s policy is to consolidate entities in which it has a controlling financial interest. The Company consolidates:

•

Voting interest entities (“VOEs”) where the Company holds a majority of the voting interest in such VOEs, and

•

Variable interest entities (“VIEs”) where the Company is the primary beneficiary having the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses of, or receive benefits from, the VIE that could be potentially significant to the VIE (see Note 20).

When the Company does not have a controlling interest in an entity, but exerts significant influence over such entity’s operating and financial decisions, the Company either (i) applies the equity method of accounting in which it records a proportionate share of the entity’s net earnings or (ii) elects the option to measure its investment at fair value. Intercompany transactions and balances have been eliminated.

Lazard Growth Acquisition Corp. I

In February 2021, LGAC consummated its $575,000 initial public offering (the “LGAC IPO”). LGAC is a special purpose acquisition company, incorporated as a Cayman Islands exempted company for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (a “Business Combination”). LGACo 1 LLC, a Delaware series limited liability company and the Company’s subsidiary, is the sponsor of LGAC. The Company controls LGAC through the sponsor’s ownership of Class B founder shares of LGAC. As a result, both LGAC and the sponsor are consolidated in the Company’s financial statements.

The proceeds from the LGAC IPO of $575,000 are held in a trust account, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the funds in the trust account to the LGAC shareholders in connection with the redemption of LGAC’s Class A ordinary shares, subject to certain conditions. The cash held in the trust account is recorded in “Restricted Cash” on the condensed consolidated statements of financial condition.

Transaction costs, which consisted of a net underwriting fee of $8,500, $20,125 of non-cash deferred underwriting fees and $852 of other offering costs, were charged against the gross proceeds of the LGAC IPO as consistent with SEC Staff Accounting Bulletin (SAB) Topic 5.

“Redeemable noncontrolling interests” of $575,000 associated with the publicly held LGAC Class A ordinary shares are recorded on the Company’s condensed consolidated statements of financial condition as of June 30, 2021 at redemption value and classified as temporary equity in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity”. Changes in redemption value are recognized immediately as they occur and will adjust the carrying value of redeemable noncontrolling interests to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable noncontrolling interests shall be affected by charges to additional paid-in-capital.

The warrants exercisable for LGAC Class A ordinary shares that were issued in connection with the LGAC IPO (the “LGAC Warrants”) meet the definition of a liability under FASB ASC Topic 815 and are classified as derivative liabilities remeasured at fair value at each balance sheet date until exercised, with changes in fair value each period reported to earnings. See Note 7.

Restricted Cash

Restricted cash primarily represents LGAC deposits discussed above and other restricted cash deposits made by the Company, including those to satisfy the requirements of clearing organizations.

LAZARD LTD

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

(UNAUDITED)

(dollars in thousands, except for per share data, unless otherwise noted)

2.	RECENT ACCOUNTING DEVELOPMENTS

Simplifying the Accounting for Income Taxes—In December 2019, the FASB issued new guidance to simplify the accounting for income taxes. The amendments included the removal of certain exceptions and various improvements. These improvements are related to the accounting for franchise tax based on income, evaluation of step up in tax basis of goodwill, allocation of consolidated tax expense to standalone legal entities, recognition of enacted change in tax laws or rates, and other minor changes. The Company adopted the new guidance on January 1, 2021. The Company evaluated each of the amendments, and the adoption of the amendments did not have a material impact to the Company’s financial statements.

3.	REVENUE RECOGNITION

The Company disaggregates revenue based on its business segment results and believes that the following information provides a reasonable representation of how performance obligations relate to the nature, amount, timing and uncertainty of revenue and cash flows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Net Revenue:
Financial Advisory (a)	$	451,940	$	304,806	$	770,352	$	603,772

Asset Management:
Management Fees and Other (b)	$	330,969	$	254,100	$	645,482	$	535,107
Incentive Fees (c)		34,286		749		67,263		2,263
Total Asset Management	$	365,255	$	254,849	$	712,745	$	537,370

(a)

Financial Advisory is comprised of a wide array of financial advisory services regarding M&A advisory, restructuring, capital advisory, shareholder advisory, sovereign advisory, capital raising and other strategic advisory work for clients. The benefits of these advisory services are generally transferred to the Company’s clients over time, and consideration for these advisory services typically includes transaction completion, transaction announcement and retainer fees. Retainer fees are generally fixed and recognized over the period in which the advisory services are performed. However, transaction announcement and transaction completion fees are variable and subject to constraints, and they are typically not recognized until there is an announcement date or a completion date, respectively, due to the uncertainty associated with those events. Therefore, in any given period, advisory fees recognized for certain transactions will relate to services performed in prior periods. The advisory fees that may be unrecognized as of the end of a reporting period, primarily comprised of fees associated with transaction announcements and transaction completions, generally remain unrecognized due to the uncertainty associated with those events.

(b)

Management fees and other is primarily comprised of management services. The benefits of these management services are transferred to the Company’s clients over time. Consideration for these management services generally includes management fees, which are based on assets under management and recognized over the period in which the management services are performed. The selling or distribution of fund interests is a separate performance obligation within management fees and other, and the benefits of such services are transferred to the Company’s clients at the point in time that such fund interests are sold or distributed.

(c)

Incentive fees is primarily comprised of management services. The benefits of these management services are transferred to the Company’s clients over time. Consideration for these management services is generally variable and includes performance or incentive fees. The fees allocated to these management services that are unrecognized as of the end of the reporting period are generally amounts that are subject to constraints due to the uncertainty associated with performance targets and clawbacks.

In addition to the above, contracts with clients include trade-based commission income, which is recognized at the point in time of execution and presented within other revenue. Such income may be earned by providing trade facilitation, execution, clearance and settlement, custody, and trade administration services to clients.

LAZARD LTD

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

(UNAUDITED)

(dollars in thousands, except for per share data, unless otherwise noted)

With regard to the disclosure requirement for remaining performance obligations, the Company elected the practical expedients permitted in the guidance to (i) exclude contracts with a duration of one year or less; and (ii) exclude variable consideration, such as transaction completion and transaction announcement fees, that is allocated entirely to unsatisfied performance obligations. Excluded variable consideration typically relates to contracts with a duration of one year or less, and is generally constrained due to uncertainties. Therefore, when applying the practical expedients, amounts related to remaining performance obligations are not material to the Company’s financial statements.

4.	RECEIVABLES

The Company’s receivables represent fee receivables, amounts due from customers and other receivables. The fee receivables are generally due within 60 days from the date of invoice, except as related to certain Restructuring services and certain Capital Raising activities, specifically Private Capital Advisory services, which have fee receivables due upon specified contractual payment terms. For customer loans within customers and other receivables, the Company has elected to apply the practical expedient, in accordance with current expected credit losses (“CECL”) guidance, for financial assets with collateral maintenance provisions, which results in no expected credit losses given that these loans are maintained with collateral having a fair value in excess of the carrying amount of the loans as of June 30, 2021.

Receivables are stated net of an estimated allowance for doubtful accounts determined in accordance with the CECL model, for general credit risk of the overall portfolio and for specific accounts deemed uncollectible, which may include situations where a fee is in dispute.

For fee receivables, the allowance for doubtful accounts is determined together for all Financial Advisory fees, except for Private Capital Advisory given the different nature of the business, client composition and risk characteristics. In addition, a separate allowance for doubtful accounts is determined for all Asset Management fees. The allowance is measured by the application of an average charge-off rate, determined annually based on historical bad debt charge-off experience, to the fee receivable balance of the respective services, adjusted for specific allowance recognized based on current conditions of individual clients. The current factors are considered on a quarterly basis and include the aging of the receivables, the client’s ability to make payments, and the Company’s relationship with the client. In addition, the Company also performs a qualitative assessment on a quarterly basis to monitor economic factors and other uncertainties that may require additional adjustment to the expected credit loss allowance.

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

LAZARD LTD

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

(UNAUDITED)

(dollars in thousands, except for per share data, unless otherwise noted)

Activity in the allowance for doubtful accounts for the three month and six month periods ended June 30, 2021 and 2020 was as follows:

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2021			2020		2021			2020
Beginning Balance	$	35,002		$	31,287	$	36,649		$	27,130
Adjustment for adoption of new accounting guidance		-			-		-			7,575
Bad debt expense, net of reversals		2,169			9,444		2,544			8,917
Charge-offs, foreign currency translation and other adjustments		(927	)		228		(2,949	)		(2,663	)
Ending Balance *	$	36,244		$	40,959	$	36,244		$	40,959

*The allowance for doubtful accounts balances are substantially all related to M&A and Restructuring fee receivables that include recoverable expense receivables.

Bad debt expense, net of reversals represents the current period provision of expected credit losses and is included in “operating expenses—other” on the condensed consolidated statements of operations.

Of the Company’s fee receivables at June 30, 2021 and December 31, 2020, $100,902 and $90,521, respectively, represented financing receivables for our Private Capital Advisory fees. Based upon our historical loss experience, the credit quality of the counterparties, and the lack of uncollectible amounts, there was 0 allowance for doubtful accounts required at those dates related to such receivables.

At June 30, 2021 and December 31, 2020, customers and other receivables included $123,185 and $99,965, respectively, of customer loans, which are fully collateralized and closely monitored for counterparty creditworthiness, with such collateral having a fair value in excess of the carrying amount of the loans as of June 30, 2021 and December 31, 2020.

The aggregate carrying amount of all other receivables of $594,713 and $552,655 at June 30, 2021 and December 31, 2020, respectively, approximates fair value.

5.	INVESTMENTS

The Company’s investments and securities sold, not yet purchased, consist of the following at June 30, 2021 and December 31, 2020:

	June 30,		December 31,
	2021		2020
Debt	$	174,991	$	99,987
Equities		47,124		37,365
Funds:
Alternative investments (a)		40,670		34,264
Debt (a)		127,811		123,554
Equity (a)		437,105		325,795
Private equity		40,006		37,567
		645,592		521,180
Investments, at fair value	$	867,707	$	658,532
Securities sold, not yet purchased, at fair value (included in “other liabilities”)	$	3,295	$	1,176

(a)

Interests in alternative investment funds, debt funds and equity funds include investments with fair values of $15,955, $95,699 and $372,988, respectively, at June 30, 2021 and $11,128, $90,758 and $277,725, respectively, at December 31, 2020, held in order to satisfy the Company’s liability upon vesting of previously granted Lazard Fund Interests (“LFI”) and other similar

LAZARD LTD

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

(UNAUDITED)

(dollars in thousands, except for per share data, unless otherwise noted)

deferred compensation arrangements. LFI represent grants by the Company to eligible employees of actual or notional interests in a number of Lazard-managed funds, subject to service-based vesting conditions (see Notes 7 and 13).

Debt primarily consists of U.S. Treasury securities with original maturities of greater than three months and less than one year.

Equities primarily consist of seed investments invested in marketable equity securities of large-, mid- and small-cap domestic, international and global companies held within separately managed accounts related to our Asset Management business.

Alternative investment funds primarily consist of interests in various Lazard-managed hedge funds, funds of funds and mutual funds. Such amounts primarily consist of seed investments in funds related to our Asset Management business and amounts related to LFI discussed above.

Debt funds primarily consist of seed investments in funds related to our Asset Management business that invest in debt securities, amounts related to LFI discussed above and an investment in a Lazard-managed debt fund.

Equity funds primarily consist of seed investments in funds related to our Asset Management business that invest in equity securities, and amounts related to LFI discussed above.

Private equity investments include those owned by Lazard and those consolidated but not owned by Lazard. Private equity investments owned by Lazard are primarily comprised of investments in private equity funds. Such investments primarily include (i) Edgewater Growth Capital Partners III, L.P. (“EGCP III”), a fund primarily making equity and buyout investments in middle market companies and (ii) a fund targeting significant noncontrolling-stake investments in established private companies.

Private equity investments consolidated but not owned by Lazard relate to the economic interests that are owned by the management team and other investors in the Edgewater Funds (“Edgewater”).

During the three month and six month periods ended June 30, 2021 and 2020, the Company reported in “revenue-other” on its condensed consolidated statements of operations net unrealized investment gains and losses pertaining to “equity securities and trading debt securities” still held as of the reporting date as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Net unrealized investment gains (losses)	$	18,637	$	43,494	$	19,691	$	(938	)

6.	FAIR VALUE MEASUREMENTS

Fair Value Hierarchy of Investments and Certain Other Assets and Liabilities—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 (i) quoted prices for similar assets or liabilities in an active market, or quoted prices for identical or similar assets or liabilities in non-active markets, or (ii) inputs other than quoted prices that are directly observable or derived principally from, or corroborated by, market data.

Level 3.

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

The fair value of debt is classified as Level 1 when the fair values are based on unadjusted quoted prices in active markets.

LAZARD LTD

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

(UNAUDITED)

(dollars in thousands, except for per share data, unless otherwise noted)

The fair value of equities is classified as Level 1 or Level 3 as follows: marketable equity securities are classified as Level 1 and are valued based on the last trade price on the primary exchange for that security as provided by external pricing services; equity interests in private companies are generally classified as Level 3.

The fair value of investments in alternative investment funds, debt funds and equity funds is classified as Level 1 when the fair values are primarily based on the publicly reported closing price for the fund.

The fair value of investments in private equity funds is classified as Level 3 for certain investments that are valued based on the potential transaction value.

The fair value of securities sold, not yet purchased, is classified as Level 1 when the fair values are based on unadjusted quoted prices in active markets.

The fair value of derivatives entered into by the Company and classified as Level 1 is based on the listed market price of such instruments. The fair value of derivatives entered into by the Company and classified as Level 2 is based on the values of the related underlying assets, indices or reference rates as follows: the fair value of forward foreign currency exchange rate contracts is a function of the spot rate and the interest rate differential of the two currencies from the trade date to settlement date; the fair value of total return swaps is based on the change in fair value of the related underlying equity security, financial instrument or index and a specified notional holding; the fair value of interest rate swaps is based on the interest rate yield curve; and the fair value of derivative liabilities related to LFI and other similar deferred compensation arrangements is based on the value of the underlying investments, adjusted for forfeitures. The fair value of derivatives entered into by the Company and classified as Level 3 is based on a Black-Scholes valuation model that utilizes both observable and unobservable inputs. Unobservable inputs include model adjustments for valuation uncertainty. See Note 7.

Investments Measured at Net Asset Value (“NAV”)—As a practical expedient, the Company uses NAV or its equivalent to measure the fair value of certain investments. NAV is primarily determined based on information provided by external fund administrators. The Company’s investments valued at NAV as a practical expedient in (i) alternative investment funds, debt funds and equity funds are redeemable in the near term, and (ii) private equity funds are not redeemable in the near term as a result of redemption restrictions.

The following tables present, as of June 30, 2021 and December 31, 2020, the classification of (i) investments and certain other assets and liabilities measured at fair value on a recurring basis within the fair value hierarchy and (ii) investments measured at NAV or its equivalent as a practical expedient:

	June 30, 2021
	Level 1		Level 2		Level 3		NAV		Total
Assets:
Investments:
Debt	$	174,991	$	-	$	-	$	-	$	174,991
Equities		45,478		-		1,646		-		47,124
Funds:
Alternative investments		17,849		-		-		22,821		40,670
Debt		127,806		-		-		5		127,811
Equity		437,055		-		-		50		437,105
Private equity		-		-		2,628		37,378		40,006
Derivatives		-		1,065		-		-		1,065
Total	$	803,179	$	1,065	$	4,274	$	60,254	$	868,772
Liabilities:
Securities sold, not yet purchased	$	3,295	$	-	$	-	$	-	$	3,295
Derivatives		13,225		397,277		-		-		410,502
Total	$	16,520	$	397,277	$	-	$	-	$	413,797

LAZARD LTD

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

(UNAUDITED)

(dollars in thousands, except for per share data, unless otherwise noted)

	December 31, 2020
	Level 1		Level 2		Level 3		NAV		Total
Assets:
Investments:
Debt	$	99,987	$	-	$	-	$	-	$	99,987
Equities		35,694		-		1,671		-		37,365
Funds:
Alternative investments		17,411		-		-		16,853		34,264
Debt		123,549		-		-		5		123,554
Equity		325,749		-		-		46		325,795
Private equity		-		-		1,486		36,081		37,567
Derivatives		-		536		-		-		536
Total	$	602,390	$	536	$	3,157	$	52,985	$	659,068
Liabilities:
Securities sold, not yet purchased	$	1,176	$	-	$	-	$	-	$	1,176
Derivatives		-		314,485		-		-		314,485
Total	$	1,176	$	314,485	$	-	$	-	$	315,661

The following tables provide a summary of changes in fair value of the Company’s Level 3 assets and liabilities for the three month and six month periods ended June 30, 2021 and 2020:

	Three Months Ended June 30, 2021
	Beginning Balance		Net Unrealized/ Realized Gains/Losses Included In Earnings (a)		Purchases/ Acquisitions/ Issuances		Sales/ Dispositions/ Settlements/ Transfers (b)			Foreign Currency Translation Adjustments		Ending Balance
Assets:
Investments:
Equities	$	1,641	$	0	$	0	$	0		$	5	$	1,646
Private equity funds		1,472		1,152		0		0			4		2,628
Total Level 3 assets	$	3,113	$	1,152	$	0	$	0		$	9	$	4,274

Liabilities:
Derivatives	$	11,500	$	0	$	0	$	(11,500	)	$	0	$	0
Total Level 3 liabilities	$	11,500	$	0	$	0	$	(11,500	)	$	0	$	0

	Six Months Ended June 30, 2021
	Beginning Balance		Net Unrealized/ Realized Gains/Losses Included In Earnings (a)		Purchases/ Acquisitions/ Issuances		Sales/ Dispositions/ Settlements/ Transfers (b)			Foreign Currency Translation Adjustments			Ending Balance
Assets:
Investments:
Equities	$	1,671	$	1	$	0	$	0		$	(26	)	$	1,646
Private equity funds		1,486		1,152		0		0			(10	)		2,628
Total Level 3 assets	$	3,157	$	1,153	$	0	$	0		$	(36	)	$	4,274

Liabilities:
Derivatives	$	0	$	0	$	11,500	$	(11,500	)	$	0		$	0
Total Level 3 liabilities	$	0	$	0	$	11,500	$	(11,500	)	$	0		$	0

LAZARD LTD

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

(UNAUDITED)

(dollars in thousands, except for per share data, unless otherwise noted)

	Three Months Ended June 30, 2020
	Beginning Balance		Net Unrealized/ Realized Gains/Losses Included In Earnings (a)			Purchases/ Acquisitions		Sales/ Dispositions/ Settlements		Foreign Currency Translation Adjustments			Ending Balance
Assets:
Investments:
Equities	$	1,425	$	156		$	0	$	0	$	(1	)	$	1,580
Private equity funds		1,347		(335	)		0		0		0			1,012
Total Level 3 assets	$	2,772	$	(179	)	$	0	$	0	$	(1	)	$	2,592

	Six Months Ended June 30, 2020
	Beginning Balance		Net Unrealized/ Realized Gains/Losses Included In Earnings (a)			Purchases/ Acquisitions		Sales/ Dispositions/ Settlements		Foreign Currency Translation Adjustments			Ending Balance
Assets:
Investments:
Equities	$	1,600	$	57		$	0	$	0	$	(77	)	$	1,580
Private equity funds		1,371		(359	)		0		0		0			1,012
Total Level 3 assets	$	2,971	$	(302	)	$	0	$	0	$	(77	)	$	2,592

(a)	Earnings recorded in “other revenue” for investments in Level 3 assets for the three month and six month periods ended June 30, 2021 and 2020 include net unrealized gains (losses) of $1,152, $1,153, $(179) and $(302), respectively.

(b)	Transfers out of Level 3 derivatives during the three month period ended June 30, 2021 reflected transfers of derivative liabilities for LGAC Warrants to Level 1 principally due to a change in the inputs used to value these derivatives.

There were 0 other transfers into or out of Level 3 within the fair value hierarchy during the three month and six month periods ended June 30, 2021 and 2020.

The following tables present, at June 30, 2021 and December 31, 2020, certain investments that are valued using NAV or its equivalent as a practical expedient in determining fair value:

June 30, 2021

Investments Redeemable

Fair Value

Unfunded

Commitments

% of

Fair Value

Not

Redeemable

Redemption

Frequency

Redemption

Notice Period

Alternative investment funds:

Hedge funds

22,190

(a)

30-60 days

Other

631

(b)

<30-30 days

Debt funds

(c)

<30 days

Equity funds

(d)

<30-60 days

Private equity funds:

Equity growth

37,378

5,604

(e)

100%

(f)

Total

60,254

5,604

(a)	monthly (79%) and quarterly (21%)

(b)	daily (8%) and monthly (92%)

(c)	daily (100%)

(d)	monthly (38%) and annually (62%)

LAZARD LTD

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

(UNAUDITED)

(dollars in thousands, except for per share data, unless otherwise noted)

(e)	Unfunded commitments to private equity investments consolidated but not owned by Lazard of $9,225 are excluded. Such commitments are required to be funded by capital contributions from noncontrolling interest holders.

(f)	Distributions from each fund will be received as the underlying investments of the funds are liquidated.

December 31, 2020

Investments Redeemable

Fair Value

Unfunded

Commitments

% of

Fair Value

Not

Redeemable

Redemption

Frequency

Redemption

Notice Period

Alternative investment funds:

Hedge funds

16,216

(a)

30-60 days

Other

637

(b)

<30-30 days

Debt funds

(c)

<30 days

Equity funds

(d)

<30-60 days

Private equity funds:

Equity growth

36,081

5,865

(e)

100

(f)

Total

52,985

5,865

(a)	monthly (99%) and quarterly (1%)

(b)	daily (8%) and monthly (92%)

(c)	daily (100%)

(d)	monthly (39%) and annually (61%)

(e)	Unfunded commitments to private equity investments consolidated but not owned by Lazard of $10,022 are excluded. Such commitments are required to be funded by capital contributions from noncontrolling interest holders.

(f)	Distributions from each fund will be received as the underlying investments of the funds are liquidated.

Investment Capital Funding Commitments—At June 30, 2021, the Company’s maximum unfunded commitments for capital contributions to investment funds primarily arose from commitments to EGCP III, which amounted to $5,165. The investment period for EGCP III ended on October 12, 2016, after which point the Company’s obligation to fund capital contributions for new investments in EGCP III expired. The Company remains obligated until October 12, 2023 (or any earlier liquidation of EGCP III) to make capital contributions necessary to fund follow-on investments and to pay for fund expenses.

7.	DERIVATIVES

The table below presents the fair value of the Company’s derivative instruments reported within “other assets” and “other liabilities” and the fair value of the Company’s derivative liabilities relating to its obligations pertaining to LFI and other similar deferred compensation arrangements reported within “accrued compensation and benefits” (see Note 13) on the accompanying condensed consolidated statements of financial condition as of June 30, 2021 and December 31, 2020:

	June 30,		December 31,
	2021		2020
Derivative Assets:
Forward foreign currency exchange rate contracts	$	1,065	$	536
	$	1,065	$	536
Derivative Liabilities:
Forward foreign currency exchange rate contracts	$	528	$	333
Total return swaps and other (a)		1,688		2,752
LGAC Warrants		13,225		-
LFI and other similar deferred compensation arrangements		395,061		311,400
	$	410,502	$	314,485

LAZARD LTD

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

(UNAUDITED)

(dollars in thousands, except for per share data, unless otherwise noted)

(a)

For total return swaps and for contracts with the same counterparty under legally enforceable master netting agreements, (i) as of June 30, 2021 amounts represent the netting of gross derivative assets and liabilities of $367 and $9,716, respectively, and receivables for net cash collateral under such contracts of $7,661, and (ii) as of December 31, 2020 amounts represent the netting of gross derivative assets and liabilities of $152 and $9,797, respectively, and receivables for net cash collateral under such contracts of $6,893. Such amounts are recorded “net” by counterparty in “other assets” and “other liabilities”.

Net gains (losses) with respect to derivative instruments (included in “revenue-other”) and the Company’s derivative liabilities relating to its obligations pertaining to LFI and other similar deferred compensation arrangements (included in “compensation and benefits” expense) as reflected on the accompanying condensed consolidated statements of operations for the three month and six month periods ended June 30, 2021 and 2020, were as follows:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
Forward foreign currency exchange rate contracts	$	(1,719	)	$	(3,549	)	$	5,099		$	(1,777	)
LFI and other similar deferred compensation arrangements		(16,491	)		(23,803	)		(23,978	)		(4,166	)
LGAC Warrants		(1,725	)		-			(1,725	)		-
Total return swaps and other		(6,695	)		(11,808	)		(10,974	)		7,037
Total	$	(26,630	)	$	(39,160	)	$	(31,578	)	$	1,094

PROPERTY

At June 30, 2021 and December 31, 2020, property consisted of the following:

	Estimated Depreciable		June 30,		December 31,
	Life in Years		2021		2020
Buildings		33	$	150,532	$	155,434
Leasehold improvements	3-20			221,061		220,975
Furniture and equipment	3-10			243,270		240,825
Construction in progress				46,074		42,824
Total				660,937		660,058
Less - Accumulated depreciation and amortization				408,935		402,471
Property			$	252,002	$	257,587

9.	GOODWILL AND OTHER INTANGIBLE ASSETS

The components of goodwill and other intangible assets at June 30, 2021 and December 31, 2020 are presented below:

	June 30,		December 31,
	2021		2020
Goodwill	$	380,687	$	383,861
Other intangible assets (net of accumulated amortization)		180		210
	$	380,867	$	384,071

At June 30, 2021 and December 31, 2020, goodwill of $316,146 and $319,320, respectively, was attributable to the Company’s Financial Advisory segment and, at each such respective date, $64,541 of goodwill was attributable to the Company’s Asset Management segment.

LAZARD LTD

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

(UNAUDITED)

(dollars in thousands, except for per share data, unless otherwise noted)

Changes in the carrying amount of goodwill for the six month periods ended June 30, 2021 and 2020 are as follows:

	Six Months Ended
	June 30,
	2021			2020
Balance, January 1	$	383,861		$	371,773
Foreign currency translation adjustments		(3,174	)		(3,704	)
Balance, June 30	$	380,687		$	368,069

All changes in the carrying amount of goodwill for the six month periods ended June 30, 2021 and 2020 are attributable to the Company’s Financial Advisory segment.

The gross cost and accumulated amortization of other intangible assets as of June 30, 2021 and December 31, 2020, by major intangible asset category, are as follows:

	June 30, 2021						December 31, 2020
	Gross Cost		Accumulated Amortization		Net Carrying Amount		Gross Cost		Accumulated Amortization		Net Carrying Amount
Success/incentive fees	$	35,451	$	35,451	$	-	$	35,385	$	35,385	$	-
Management fees, customer relationships and non-compete agreements		34,989		34,809		180		34,980		34,770		210
	$	70,440	$	70,260	$	180	$	70,365	$	70,155	$	210

Amortization expense of intangible assets, included in “amortization of intangible assets related to acquisitions” in the condensed consolidated statements of operations, for the three month and six month periods ended June 30, 2021 was $15 and $30, respectively, and for the three month and six month periods ended June 30, 2020 was $455 and $901, respectively. Estimated future amortization expense is as follows:

Year Ending December 31,	Amortization Expense
2021 (July 1 through December 31)	$	30
2022		60
2023		60
2024		30
Total amortization expense	$	180

LAZARD LTD

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

(UNAUDITED)

(dollars in thousands, except for per share data, unless otherwise noted)

10.	SENIOR DEBT

Senior debt is comprised of the following as of June 30, 2021 and December 31, 2020:

							Outstanding as of
	Initial			Annual			June 30, 2021						December 31, 2020
	Principal Amount		Maturity Date	Interest Rate(a)			Principal		Unamortized Debt Costs		Carrying Value		Principal		Unamortized Debt Costs		Carrying Value
Lazard Group 2025 Senior Notes	$	400,000	2/13/25		3.75	%	$	400,000	$	1,712	$	398,288	$	400,000	$	1,948	$	398,052
Lazard Group 2027 Senior Notes		300,000	3/1/27		3.625	%		300,000		2,210		297,790		300,000		2,405		297,595
Lazard Group 2028 Senior Notes		500,000	9/19/28		4.50	%		500,000		6,142		493,858		500,000		6,568		493,432
Lazard Group 2029 Senior Notes		500,000	3/11/29		4.375	%		500,000		5,952		494,048		500,000		6,338		493,662
Total							$	1,700,000	$	16,016	$	1,683,984	$	1,700,000	$	17,259	$	1,682,741

(a)

The effective interest rates of Lazard Group’s 3.75% senior notes due February 13, 2025 (the “2025 Notes”), Lazard Group’s 3.625% senior notes due March 1, 2027 (the “2027 Notes”), Lazard Group’s 4.50% senior notes due September 19, 2028 (the “2028 Notes”) and Lazard Group’s 4.375% senior notes due March 11, 2029 (the “2029 Notes”) are 3.87%, 3.76%, 4.67% and 4.53%, respectively.

The Company’s senior debt at June 30, 2021 and December 31, 2020 is carried at their principal balances outstanding, net of unamortized debt costs. At those dates, the fair value of such senior debt was approximately $1,912,400 and $1,954,000, respectively. The fair value of the Company’s senior debt is based on market quotations. The Company’s senior debt would be categorized within Level 2 of the hierarchy of fair value measurements if carried at fair value.

On July 22, 2020, Lazard Group entered into an Amended and Restated Credit Agreement for a three-year, $200,000 senior revolving credit facility with a group of lenders, which expires in July 2023 (the “Amended and Restated Credit Agreement”). The Amended and Restated Credit Agreement amended and restated Lazard Group’s amended and restated credit agreement, dated September 25, 2015, in its entirety. Borrowings under the Amended and Restated Credit Agreement generally will bear interest at LIBOR plus an applicable margin for specific interest periods determined based on Lazard Group’s highest credit rating from an internationally recognized credit agency. The Amended and Restated Credit Agreement contains certain covenants, events of default and other customary provisions, including customary LIBOR-replacement mechanics. At June 30, 2021 and December 31, 2020, 0 amounts were outstanding under the Amended and Restated Credit Agreement.

As of June 30, 2021, the Company had approximately $213,000 in unused lines of credit available to it, including the credit facility provided under the Amended and Restated Credit Agreement and unused lines of credit available to LFB of approximately $12,000.

The Amended and Restated Credit Agreement and the indenture and the supplemental indentures relating to Lazard Group’s senior notes contain certain covenants, events of default and other customary provisions, including a customary make-whole provision in the event of early redemption, where applicable. As of June 30, 2021, the Company was in compliance with such provisions. All of the Company’s senior debt obligations are unsecured.

11.	COMMITMENTS AND CONTINGENCIES

Other Commitments—The Company has various other contractual commitments arising in the ordinary course of business. In addition, from time to time, LFB and LFNY may enter into underwriting commitments in which it will participate as an underwriter. At June 30, 2021, LFB and LFNY had 0 such underwriting commitments.

See Notes 6 and 14 for information regarding commitments relating to investment capital funding commitments and obligations to fund our pension plans, respectively.

LAZARD LTD

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

(UNAUDITED)

(dollars in thousands, except for per share data, unless otherwise noted)

In the opinion of management, the fulfillment of the commitments described herein will not have a material adverse effect on the Company’s condensed consolidated financial position or results of operations.

Legal—The Company is involved from time to time in judicial, governmental, regulatory and arbitration proceedings and inquiries concerning matters arising in connection with the conduct of our businesses, including proceedings initiated by former employees alleging wrongful termination. The Company reviews such matters on a case-by-case basis and establishes any required accrual if a loss is probable and the amount of such loss can be reasonably estimated. The Company experiences significant variation in its revenue and earnings on a quarterly basis. Accordingly, the results of any pending matter or matters could be significant when compared to the Company’s earnings in any particular fiscal quarter. The Company believes, however, based on currently available information, that the results of any pending matters, in the aggregate, will not have a material effect on its business or financial condition.

12.	STOCKHOLDERS’ EQUITY

Share Repurchase Program— Since 2019 and through the six month period ended June 30, 2021, the Board of Directors of Lazard authorized the repurchase of Lazard Ltd Class A common stock (“common stock”), the only class of common stock of Lazard outstanding, as set forth in the table below:

Date	Repurchase Authorization		Expiration
February 2019	$	300,000	December 31, 2020
October 2019	$	300,000	December 31, 2021
April 2021	$	300,000	December 31, 2022

The Company expects that the share repurchase program will continue to be used to offset a portion of the shares that have been or will be issued under the Lazard Ltd 2008 Incentive Compensation Plan (the “2008 Plan”) and the Lazard Ltd 2018 Incentive Compensation Plan, as amended (the “2018 Plan”). Pursuant to the share repurchase program, purchases have been made in the open market or through privately negotiated transactions. The rate at which the Company purchases shares in connection with the share repurchase program may vary from period to period due to a variety of factors. Purchases with respect to such program are set forth in the table below:

Six Months Ended June 30:

Number of

Purchased

Average

Price Per

2020

2,912,035

32.70

2021

5,329,541

43.86

During the six month periods ended June 30, 2021 and 2020, certain of our executive officers received common stock in connection with the vesting or settlement of previously-granted deferred equity incentive awards. The vesting or settlement of such equity awards gave rise to a tax payable by the executive officers, and, consistent with our past practice, the Company purchased shares of common stock from certain of our executive officers equal in value to all or a portion of the estimated amount of such tax. In addition, during the six month periods ended June 30, 2021 and 2020, the Company purchased shares of common stock from certain of our executive officers. The aggregate value of all such purchases during the six month periods ended June 30, 2021 and 2020 was approximately $18,600 and $10,000, respectively. Such shares of common stock are reported at cost.

As of June 30, 2021, a total of $366,255 of share repurchase authorization remained available under the Company’s share repurchase program, $66,255 of which will expire on December 31, 2021 and $300,000 of which will expire on December 31, 2022.

During the six month period ended June 30, 2021, the Company had in place trading plans under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), pursuant to which it effected stock repurchases in the open market.

Preferred Stock—Lazard Ltd has 15,000,000 authorized shares of preferred stock, par value $0.01 per share, inclusive of its Series A and Series B preferred stock. Series A and Series B preferred shares were issued in connection with certain prior year

LAZARD LTD

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

(UNAUDITED)

(dollars in thousands, except for per share data, unless otherwise noted)

business acquisitions and were each non-participating securities convertible into common stock, and had no voting or dividend rights. As of both June 30, 2021 and December 31, 2020, 0 shares of Series A or Series B preferred stock were outstanding.

Accumulated Other Comprehensive Income (Loss) (“AOCI”), Net of Tax—The tables below reflect the balances of each component of AOCI at June 30, 2021 and 2020 and activity during the three month and six month periods then ended:

	Three Months Ended June 30, 2021
	Currency Translation Adjustments			Employee Benefit Plans			Total AOCI			Amount Attributable to Noncontrolling Interests			Total Lazard Ltd AOCI
Balance, April 1, 2021	$	(87,467	)	$	(168,243	)	$	(255,710	)	$	1		$	(255,711	)
Activity:
Other comprehensive income (loss) before reclassifications		5,502			(1,477	)		4,025			(1	)		4,026
Adjustments for items reclassified to earnings, net of tax		23,579			1,458			25,037			-			25,037
Net other comprehensive income (loss)		29,081			(19	)		29,062			(1	)		29,063
Balance, June 30, 2021	$	(58,386	)	$	(168,262	)	$	(226,648	)	$	-		$	(226,648	)

	Six Months Ended June 30, 2021
	Currency Translation Adjustments			Employee Benefit Plans			Total AOCI			Amount Attributable to Noncontrolling Interests		Total Lazard Ltd AOCI
Balance, January 1, 2021	$	(67,724	)	$	(170,644	)	$	(238,368	)	$	-	$	(238,368	)
Activity:
Other comprehensive loss before reclassifications		(14,241	)		(412	)		(14,653	)		-		(14,653	)
Adjustments for items reclassified to earnings, net of tax		23,579			2,794			26,373			-		26,373
Net other comprehensive income		9,338			2,382			11,720			-		11,720
Balance, June 30, 2021	$	(58,386	)	$	(168,262	)	$	(226,648	)	$	-	$	(226,648	)

	Three Months Ended June 30, 2020
	Currency Translation Adjustments			Employee Benefit Plans			Total AOCI			Amount Attributable to Noncontrolling Interests			Total Lazard Ltd AOCI
Balance, April 1, 2020	$	(171,332	)	$	(162,081	)	$	(333,413	)	$	(1	)	$	(333,412	)
Activity:
Other comprehensive income (loss) before reclassifications		22,384			491			22,875			(1	)		22,876
Adjustments for items reclassified to earnings, net of tax		0			1,615			1,615			-			1,615
Net other comprehensive income (loss)		22,384			2,106			24,490			(1	)		24,491
Balance, June 30, 2020	$	(148,948	)	$	(159,975	)	$	(308,923	)	$	(2	)	$	(308,921	)

LAZARD LTD

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

(UNAUDITED)

(dollars in thousands, except for per share data, unless otherwise noted)

	Six Months Ended June 30, 2020
	Currency Translation Adjustments			Employee Benefit Plans			Total AOCI			Amount Attributable to Noncontrolling Interests			Total Lazard Ltd AOCI
Balance, January 1, 2020	$	(120,586	)	$	(173,064	)	$	(293,650	)	$	(2	)	$	(293,648	)
Activity:
Other comprehensive income (loss) before reclassifications		(28,362	)		9,579			(18,783	)		-			(18,783	)
Adjustments for items reclassified to earnings, net of tax		0			3,510			3,510			-			3,510
Net other comprehensive income (loss)		(28,362	)		13,089			(15,273	)		-			(15,273	)
Balance, June 30, 2020	$	(148,948	)	$	(159,975	)	$	(308,923	)	$	(2	)	$	(308,921	)

The table below reflects adjustments for items reclassified from AOCI, by component, for the three month and six month periods ended June 30, 2021 and 2020:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Currency translation losses (a)	$	23,579	$	-	$	23,579	$	-
Employee benefit plans:
Amortization relating to employee benefit plans (b)		1,941		1,953		3,658		4,186
Less - related income taxes		483		338		864		676
		1,458		1,615		2,794		3,510
Total reclassifications, net of tax	$	25,037	$	1,615	$	26,373	$	3,510

(a)	Represents currency translation losses reclassified to earnings from AOCI associated with restructuring and closing of certain of our offices. Such amounts are included in “revenue—other” on the condensed consolidated statements of operations.

(b)	Included in the computation of net periodic benefit cost (see Note 14). Such amounts are included in “operating expenses—other” on the condensed consolidated statements of operations.

Noncontrolling Interests—Noncontrolling interests principally represent (i) interests held in Edgewater’s management vehicles that the Company is deemed to control, but does not own, (ii) profits interest participation rights (see Note 13), (iii) LGAC interests (see Note 1) and (iv) consolidated VIE interests held by employees (see Note 20).

The tables below summarize net income (loss) attributable to noncontrolling interests for the three month and six month periods ended June 30, 2021 and 2020 and noncontrolling interests as of June 30, 2021 and December 31, 2020 in the Company’s condensed consolidated financial statements:

	Net Income (Loss) Attributable to Noncontrolling Interests
	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
Edgewater	$	1,874		$	(2,944	)	$	3,330		$	(4,347	)
Consolidated VIEs		2,420			2,561			4,688			(1,727	)
LGAC		(2,558	)		-			(2,758	)		-
Other		2			1			4			1
Total	$	1,738		$	(382	)	$	5,264		$	(6,073	)

LAZARD LTD

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

(UNAUDITED)

(dollars in thousands, except for per share data, unless otherwise noted)

	Noncontrolling Interests as of
	June 30,		December 31,
	2021		2020
Edgewater	$	46,281	$	45,352
Profits interest participation rights		4,197		1,776
Consolidated VIEs		52,716		40,517
LGAC		1,758		-
Other		20		16
Total	$	104,972	$	87,661

Dividends Declared, July 29, 2021—On July 29, 2021, the Board of Directors of Lazard declared a quarterly dividend of $0.47 per share on our common stock. The dividend is payable on August 20, 2021, to stockholders of record on August 9, 2021.

13.	INCENTIVE PLANS

Share-Based Incentive Plan Awards

A description of Lazard Ltd’s 2018 Plan, 2008 Plan and 2005 Equity Incentive Plan (the “2005 Plan”) and activity with respect thereto during the three month and six month periods ended June 30, 2021 and 2020 is presented below.

Shares Available Under the 2018 Plan, 2008 Plan and 2005 Plan

The 2018 Plan became effective on April 24, 2018 and was amended on April 29, 2021 to increase the aggregate number of shares authorized for issuance under the 2018 plan. The 2018 Plan replaced the 2008 Plan, which was terminated on April 24, 2018. The 2018 Plan originally authorized issuance of up to 30,000,000 shares of common stock, plus any shares of common stock that were subject to outstanding awards under the 2008 Plan as of March 14, 2018 that are forfeited, canceled or settled in cash following April 24, 2018, which was the date that the 2018 Plan was approved by our shareholders. The amendment that our shareholders approved on April 29, 2021 increased the shares of common stock available pursuant to the 2018 Plan by 20,000,000 shares, which is in addition to any shares of common stock that remain available under the original authorization. Such shares may be issued pursuant to the grant or exercise of stock options, stock appreciation rights, restricted stock units (“RSUs”), performance-based restricted stock units (“PRSUs”), profits interest participation rights, including performance-based restricted participation units (“PRPUs”), and other share-based awards.

The 2008 Plan authorized the issuance of shares of common stock pursuant to the grant or exercise of stock options, stock appreciation rights, RSUs, PRSUs and other share-based awards. Under the 2008 Plan, the maximum number of shares available was based on a formula that limited the aggregate number of shares that could, at any time, be subject to awards that were considered “outstanding” under the 2008 Plan to 30% of the then-outstanding shares of common stock. The 2008 Plan was terminated on April 24, 2018, and no additional awards have been or will be granted under the 2008 Plan after its termination, although outstanding awards granted under the 2008 Plan before its termination continue to be subject to its terms.

The 2005 Plan authorized the issuance of up to 25,000,000 shares of common stock pursuant to the grant or exercise of stock options, stock appreciation rights, RSUs and other share-based awards. The 2005 Plan expired in the second quarter of 2015, although outstanding deferred stock unit (“DSU”) awards granted under the 2005 Plan before its expiration continue to be subject to its terms.

LAZARD LTD

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

(UNAUDITED)

(dollars in thousands, except for per share data, unless otherwise noted)

The following reflects the amortization expense recorded with respect to share-based incentive plans within “compensation and benefits” expense (with respect to RSUs, PRSUs, restricted stock, profits interest participation rights, including PRPUs, and other share-based awards) and “professional services” expense (with respect to DSUs) within the Company’s accompanying condensed consolidated statements of operations for the three month and six month periods ended June 30, 2021 and 2020:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Share-based incentive awards:
RSUs	$	36,102	$	40,223	$	70,907	$	83,140
PRSUs		155		630		5,714		4,991
Restricted Stock		5,699		9,015		11,766		17,546
Profits interest participation rights		32,109		16,885		53,682		33,051
DSUs		1,631		1,791		1,818		1,977
Total	$	75,696	$	68,544	$	143,887	$	140,705

The ultimate amount of compensation and benefits expense relating to share-based awards is dependent upon the actual number of shares of common stock that vest. The Company periodically assesses the forfeiture rates used for such estimates, including as a result of any applicable performance conditions. A change in estimated forfeiture rates or performance results in a cumulative adjustment to compensation and benefits expense and also would cause the aggregate amount of compensation expense recognized in future periods to differ from the estimated unrecognized compensation expense described below.

The Company’s share-based incentive plans and awards are described below.

RSUs and DSUs

RSUs generally require future service as a condition for the delivery of the underlying shares of common stock (unless the recipient is then eligible for retirement under the Company’s retirement policy) and convert into shares of common stock on a one-for-one basis after the stipulated vesting periods. The grant date fair value of the RSUs, net of an estimated forfeiture rate, is amortized over the vesting periods or requisite service periods (generally, one-third after two years and the remaining two-thirds after the third year) and is adjusted for actual forfeitures over such period.

RSUs generally include a dividend participation right that provides that, during the applicable vesting period, each RSU is attributed additional RSUs equivalent to any dividends paid on common stock during such period. During the six month period ended June 30, 2021, dividend participation rights required the issuance of 220,811 RSUs and the associated charge to “retained earnings”, net of estimated forfeitures (with corresponding credits to “additional paid-in-capital”) was $9,132.

Non-executive members of the Board of Directors (“Non-Executive Directors”) receive approximately 55% of their annual compensation for service on the Board of Directors and its committees in the form of DSUs, which resulted in 30,764 DSUs being granted during the six month period ended June 30, 2021. Their remaining compensation is payable in cash, which they may elect to receive in the form of additional DSUs under the Directors’ Fee Deferral Unit Plan described below. DSUs are convertible into shares of common stock at the time of cessation of service to the Board of Directors. DSUs include a cash dividend participation right equivalent to dividends paid on common stock.

Lazard Ltd’s Directors’ Fee Deferral Unit Plan permits the Non-Executive Directors to elect to receive additional DSUs in lieu of some or all of their cash fees. The number of DSUs granted to a Non-Executive Director pursuant to this election will equal the value of cash fees that the applicable Non-Executive Director has elected to forego pursuant to such election, divided by the market value of a share of common stock on the date immediately preceding the date of the grant. During the six month period ended June 30, 2021, 8,317 DSUs had been granted pursuant to such Plan.

DSU awards are expensed at their fair value on their date of grant, inclusive of amounts related to the Directors’ Fee Deferral Unit Plan.

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(UNAUDITED)

(dollars in thousands, except for per share data, unless otherwise noted)

The following is a summary of activity relating to RSUs and DSUs during the six month period ended June 30, 2021:

	RSUs					DSUs
	Units			Weighted Average Grant Date Fair Value		Units			Weighted Average Grant Date Fair Value
Balance, January 1, 2021		9,266,344		$	42.96		478,800		$	36.36
Granted (including 220,811 RSUs relating to dividend participation)		2,903,430		$	43.11		39,081		$	46.51
Forfeited		(90,990	)	$	40.97		-			-
Settled		(3,735,389	)	$	47.42		(185,657	)		35.89
Balance, June 30, 2021		8,343,395		$	41.03		332,224		$	37.82

In connection with RSUs that settled during the six month period ended June 30, 2021, the Company satisfied its minimum statutory tax withholding requirements in lieu of delivering 1,352,483 shares of common stock during such six month period. Accordingly, 2,382,906 shares of common stock held by the Company were delivered during the six month period ended June 30, 2021.

As of June 30, 2021, estimated unrecognized RSU compensation expense was $142,097, with such expense expected to be recognized over a weighted average period of approximately 0.9 years subsequent to June 30, 2021.

Restricted Stock

The following is a summary of activity related to shares of restricted common stock associated with compensation arrangements during the six month period ended June 30, 2021:

	Restricted Shares			Weighted Average Grant Date Fair Value
Balance, January 1, 2021		1,144,959		$	41.09
Granted (including 19,202 relating to dividend participation)		434,323		$	43.27
Forfeited		(28,984	)	$	41.20
Settled		(501,877	)	$	42.91
Balance, June 30, 2021		1,048,421		$	41.12

In connection with shares of restricted common stock that settled during the six month period ended June 30, 2021, the Company satisfied its minimum statutory tax withholding requirements in lieu of delivering 175,849 shares of common stock during such six month period. Accordingly, 326,028 shares of common stock held by the Company were delivered during the six month period ended June 30, 2021.

Restricted stock awards granted in 2021 and 2020 generally include a dividend participation right that provides that during the applicable vesting period each restricted stock award is attributed additional shares of restricted common stock equivalent to any dividends paid on common stock during such period. During the six month period ended June 30, 2021, dividend participation rights required the issuance of 19,202 shares of restricted common stock and the associated charge to “retained earnings”, net of estimated forfeitures (with corresponding credits to “additional paid-in-capital”) was $831. With respect to awards granted prior to 2020, the restricted stock awards include a cash dividend participation right equivalent to dividends paid on common stock during the period, which will vest concurrently with the underlying restricted stock award.

At June 30, 2021, estimated unrecognized restricted stock expense was $22,309, with such expense to be recognized over a weighted average period of approximately 0.9 years subsequent to June 30, 2021.

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(UNAUDITED)

(dollars in thousands, except for per share data, unless otherwise noted)

PRSUs

PRSUs are RSUs that are subject to performance-based and service-based vesting conditions, and beginning with awards granted in February 2021, a market-based condition. The number of shares of common stock that a recipient will receive upon vesting of a PRSU will be calculated by reference to certain performance-based and, for awards granted in February 2021, market-based metrics that relate to Lazard Ltd’s performance over a three-year period. The target number of shares of common stock subject to each PRSU is one; however, based on the achievement of the performance criteria, the number of shares of common stock that may be received in connection with each PRSU generally can range from zero to two times the target number for awards granted prior to February 2021. For awards granted in February 2021, based on both the performance-based and market-based criteria, the number of shares of common stock can range from zero to 2.4 times the target number. PRSUs will vest on a single date approximately three years following the date of the grant, provided the applicable service and performance conditions are satisfied. PRSUs granted prior to February 2021 include dividend participation rights that provide that during vesting periods, the target number of PRSUs receive dividend equivalents at the same rate that dividends are paid on common stock during such periods. These dividend equivalents are credited as RSUs that are not subject to the performance-based vesting criteria but are otherwise subject to the same restrictions as the underlying PRSUs to which they relate. PRSUs granted in February 2021 include dividend participation rights that are subject to the same vesting restrictions (including performance criteria) as the underlying PRSUs to which they relate and are settled in cash at the same rate that dividends are paid on common stock.

The following is a summary of activity relating to PRSUs during the six month period ended June 30, 2021:

	PRSUs			Weighted Average Grant Date Fair Value
Balance, January 1, 2021		546,959		$	53.48
Granted		32,394		$	46.63
Settled		(546,959	)	$	53.48
Balance, June 30, 2021		32,394		$	46.63

In connection with certain PRSUs that settled during the six month period ended June 30, 2021, the Company satisfied its minimum statutory tax withholding requirements in lieu of delivering 100,882 shares of common stock during such six month period. Accordingly, 446,077 shares of common stock held by the Company were delivered during the six month period ended June 30, 2021.

Compensation expense recognized for PRSU awards is determined by multiplying the number of shares of common stock underlying such awards that, based on the Company’s estimate, are considered probable of vesting, by the grant date fair value. As of June 30, 2021, the total estimated unrecognized compensation expense was $1,662, and the Company expects to amortize such expense over a weighted-average period of approximately 1.4 years subsequent to June 30, 2021.

Profits Interest Participation Rights

Profits interest participation rights are equity incentive awards that, subject to certain conditions, may be exchanged for shares of common stock pursuant to the 2018 Plan. The Company granted profits interest participation rights subject to service-based and performance-based vesting criteria and other conditions, and beginning in February 2021, incremental market-based vesting criteria, which we refer to as performance-based restricted participation units (“PRPUs”), to certain of our executive officers. The Company also granted profits interest participation rights subject to service-based vesting criteria and other conditions, but not the performance-based and incremental market-based vesting criteria associated with PRPUs, to a limited number of other senior employees. Profits interest participation rights generally provide for vesting approximately three years following the grant date, so long as applicable conditions have been satisfied.

Profits interest participation rights are a class of membership interests in Lazard Group that are intended to qualify as “profits interests” for U.S. federal income tax purposes, and are recorded as noncontrolling interests within stockholders’ equity in the Company’s condensed consolidated statements of financial condition until they are exchanged into common stock, at which time there is a reclassification to additional paid-in-capital. The profits interest participation rights generally allow the recipient to realize value only to the extent that both (i) the service-based vesting conditions and, if applicable, the performance-based and incremental market-based conditions, are satisfied, and (ii) an amount of economic appreciation in the assets of Lazard Group occurs as necessary to

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(UNAUDITED)

(dollars in thousands, except for per share data, unless otherwise noted)

satisfy certain partnership tax rules (referred to as the "Minimum Value Condition") before the fifth anniversary of the grant date, otherwise the profits interest participation rights will be forfeited. Upon satisfaction of such conditions, profits interest participation rights that are in parity with the value of common stock will be exchanged on a one-for-one basis for shares of common stock. If forfeited based solely on failing to meet the Minimum Value Condition, the associated compensation expense would not be reversed. With regard to the profits interest participation rights granted in February 2019 and February 2020, the Minimum Value Condition was met during the year ended December 31, 2020 and during February 2021, respectively.

Like outstanding RSUs and similar awards, profits interest participation rights are subject to continued employment and other conditions and restrictions and are forfeited if those conditions and restrictions are not fulfilled. More specifically, vesting of profits interest participation rights are subject to compliance with restrictive covenants including non-compete, non-solicitation of clients, no hire of employees and confidentiality, which are similar to those applicable to PRSUs and RSUs. In addition, profits interest participation rights must satisfy the Minimum Value Condition.

The number of shares of common stock that a recipient will receive upon the exchange of a PRPU award is calculated by reference to applicable performance-based and, beginning with PRPUs granted in 2021, incremental market-based conditions and only result in value to the recipient to the extent the conditions are satisfied. The target number of shares of common stock subject to each PRPU is one. Based on the achievement of performance criteria, as determined by the Compensation Committee, the number of shares of common stock that may be received in connection with the PRPU awards granted in February 2019 and February 2020 will range from zero to two times the target number. For the PRPU awards granted in February 2021, subject to both performance-based and incremental market-based criteria, the number of shares will range from zero to 2.4 times the target number. Unless applicable conditions are satisfied during the three year performance period, and the Minimum Value Condition is satisfied within five years following the grant date, all PRPUs will be forfeited, and the recipients will not be entitled to any such awards.

In addition, the performance metrics applicable to the PRPU awards granted in February 2019 and February 2020 will be evaluated on an annual basis at the end of each fiscal year during the performance period, and, if Lazard Ltd has achieved a threshold level of performance with respect to the fiscal year, 25% of the target number of PRPUs will no longer be at risk of forfeiture based on the achievement of performance criteria. Profits interest participation rights are allocated income, subject to vesting and settled in cash, in respect of dividends paid on common stock.

The following is a summary of activity relating to profits interest participation rights, including PRPUs, during the six month period ended June 30, 2021:

	Profits Interest Participation Rights		Weighted Average Grant Date Fair Value
Balance, January 1, 2021		2,523,075	$	40.43
Granted		1,159,864	$	44.73
Balance, June 30, 2021 (a)		3,682,939	$	41.78

(a)

Table includes 1,561,120 PRPUs, which represents the target number of PRPUs granted as of June 30, 2021, including 510,342 PRPUs granted during the six month period ended June 30, 2021. The weighted average grant date fair values for PRPUs and other profits interest participation rights outstanding as of January 1, 2021 were $40.61 and $40.30, respectively. The weighted average grant date fair values for PRPUs and other profits interest participation rights granted during the six month period ended June 30, 2021 were $46.63 and $43.23, respectively. The weighted average grant date fair values for PRPUs and other profits interest participation rights outstanding as of June 30, 2021 were $42.58 and $41.20, respectively.

Compensation expense recognized for profits interest participation rights, including PRPUs, is determined by multiplying the number of shares of common stock underlying such awards that, based on the Company’s estimate, are considered probable of vesting, by the grant date fair value. As of June 30, 2021, the total estimated unrecognized compensation expense was $46,902. The Company expects to amortize such expense over a weighted-average period of approximately 0.7 years subsequent to June 30, 2021.

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(UNAUDITED)

(dollars in thousands, except for per share data, unless otherwise noted)

LFI and Other Similar Deferred Compensation Arrangements

In connection with LFI and other similar deferred compensation arrangements, granted to eligible employees, which generally require future service as a condition for vesting, the Company recorded a prepaid compensation asset and a corresponding compensation liability on the grant date based upon the fair value of the award. The prepaid asset is amortized on a straight-line basis over the applicable vesting periods or requisite service periods (which are generally similar to the comparable periods for RSUs) and is charged to “compensation and benefits” expense within the Company’s condensed consolidated statement of operations. LFI and similar deferred compensation arrangements that do not require future service are expensed immediately. The related compensation liability is accounted for at fair value as a derivative liability, which contemplates the impact of estimated forfeitures, and is adjusted for changes in fair value primarily related to changes in value of the underlying investments.

The following is a summary of activity relating to LFI and other similar deferred compensation arrangements during the six month period ended June 30, 2021:

	Prepaid Compensation Asset			Compensation Liability
Balance, January 1, 2021	$	101,631		$	311,400
Granted		161,892			161,892
Settled		-			(100,792	)
Forfeited		(1,100	)		(5,756	)
Amortization		(80,887	)		-
Change in fair value related to:
Change in fair value of underlying investments		-			23,978
Adjustment for estimated forfeitures		-			5,562
Other		3			(1,223	)
Balance, June 30, 2021	$	181,539		$	395,061

The amortization of the prepaid compensation asset will generally be recognized over a weighted average period of approximately 0.9 years subsequent to June 30, 2021.

The following is a summary of the impact of LFI and other similar deferred compensation arrangements on “compensation and benefits” expense within the accompanying condensed consolidated statements of operations for the three month and six month periods ended June 30, 2021 and 2020:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Amortization, net of forfeitures	$	51,770	$	43,177	$	81,793	$	69,425
Change in the fair value of underlying investments		16,491		23,803		23,978		4,166
Total	$	68,261	$	66,980	$	105,771	$	73,591

14.	EMPLOYEE BENEFIT PLANS

The Company provides retirement and other post-retirement benefits to certain of its employees through defined benefit pension plans (the “pension plans”). The Company also offers defined contribution plans to its employees. The pension plans generally provide benefits to participants based on average levels of compensation. Expenses related to the Company’s employee benefit plans are included in “compensation and benefits” expense for the service cost component, and “operating expenses—other” for the other components of benefit costs on the condensed consolidated statements of operations.

Employer Contributions to Pension Plans—The Company’s funding policy for its U.S. and non-U.S. pension plans is to fund when required or when applicable upon an agreement with the plans’ trustees. Management also evaluates from time to time whether to make voluntary contributions to the plans.

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(UNAUDITED)

(dollars in thousands, except for per share data, unless otherwise noted)

The following table summarizes the components of net periodic benefit cost (credit) related to the Company’s pension plans for the three month and six month periods ended June 30, 2021 and 2020:

	Pension Plans
	Three Months Ended June 30,
	2021			2020
Components of Net Periodic Benefit Cost (Credit):
Service cost	$	231		$	235
Interest cost		2,141			2,910
Expected return on plan assets		(6,597	)		(6,435	)
Amortization of:
Prior service cost		30			27
Net actuarial loss (gain)		1,911			1,926
Settlement loss		384			588
Net periodic benefit cost (credit)	$	(1,900	)	$	(749	)

	Pension Plans
	Six Months Ended June 30,
	2021			2020
Components of Net Periodic Benefit Cost (Credit):
Service cost	$	457		$	370
Interest cost		4,256			5,893
Expected return on plan assets		(13,131	)		(13,063	)
Amortization of:
Prior service cost		60			54
Net actuarial loss (gain)		3,598			4,132
Settlement loss		764			1,510
Net periodic benefit cost (credit)	$	(3,996	)	$	(1,104	)

15.	INCOME TAXES

Lazard Ltd, through its subsidiaries, is subject to U.S. federal income taxes on all of its U.S. operating income, as well as on the portion of non-U.S. income attributable to its U.S. subsidiaries. In addition, Lazard Ltd, through its subsidiaries, is subject to state and local taxes on its income apportioned to various state and local jurisdictions. Outside the U.S., Lazard Group operates principally through subsidiary corporations that are subject to local income taxes in foreign jurisdictions. Lazard Group is also subject to Unincorporated Business Tax (“UBT”) attributable to its operations apportioned to New York City.

The Company recorded income tax provisions of 41,345 and $84,809 for the three month and six month periods ended June 30, 2021, respectively, and $22,789 and $48,555 for the three month and six month periods ended June 30, 2020, respectively, representing effective tax rates of 24.9%, 28.2%, 23.8% and 27.0%, respectively. The difference between the U.S. federal statutory rate of 21.0% and the effective tax rates reflected above principally relates to (i) the tax impact of differences in the value of share based incentive compensation and other discrete items, (ii) foreign source income (loss) not subject to U.S. income taxes (including interest on intercompany financings), (iii) taxes payable to foreign jurisdictions that are not offset against U.S. income taxes, (iv) change in the U.S. federal valuation allowance affecting the provision for income taxes, (v) U.S. state and local taxes, which are incremental to the U.S. federal statutory tax rate, and (vi) impact of U.S. tax reform, including base erosion and anti-abuse tax.

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(UNAUDITED)

(dollars in thousands, except for per share data, unless otherwise noted)

16.	NET INCOME PER SHARE OF COMMON STOCK

The Company issued certain profits interest participation rights, including certain PRPUs, that the Company is required under U.S. GAAP to treat as participating securities and therefore the Company is required to utilize the “two-class” method of computing basic and diluted net income per share.

The Company’s basic and diluted net income per share calculations using the “two-class” method for the three month and six month periods ended June 30, 2021 and 2020 are presented below:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
Net income attributable to Lazard Ltd	$	123,178		$	73,458		$	210,478		$	137,480
Add - adjustment for earnings attributable to participating securities		(1,549	)		(1,349	)		(2,841	)		(2,362	)
Net income attributable to Lazard Ltd - basic		121,629			72,109			207,637			135,118
Add - adjustment for earnings attributable to participating securities		1,549			1,170			2,841			2,183
Net income attributable to Lazard Ltd - diluted	$	123,178		$	73,279		$	210,478		$	137,301
Weighted average number of shares of common stock outstanding		105,104,377			104,732,667			105,324,825			104,597,422
Add - adjustment for shares of common stock issuable on a non-contingent basis		1,642,277			1,929,397			1,694,282			1,885,591
Weighted average number of shares of common stock outstanding - basic		106,746,654			106,662,064			107,019,107			106,483,013
Add - dilutive effect, as applicable, of:
Weighted average number of incremental shares of common stock issuable from share-based incentive compensation		6,856,824			4,825,685			7,693,778			6,320,951
Weighted average number of shares of common stock outstanding - diluted		113,603,478			111,487,749			114,712,885			112,803,964
Net income attributable to Lazard Ltd per share of common stock:
Basic	$	1.14		$	0.68		$	1.94		$	1.27
Diluted	$	1.08		$	0.66		$	1.83		$	1.22

17.	RELATED PARTIES

Sponsored Funds

The Company serves as an investment advisor for certain affiliated investment companies and fund entities and receives management fees and, for the alternative investment funds, performance-based incentive fees for providing such services. Investment advisory fees relating to such services were $186,446 and $360,124 for the three month and six month periods ended June 30, 2021, respectively, and $118,573 and $254,528 for the three month and six month periods ended June 30, 2020, respectively, and are included in “asset management fees” on the condensed consolidated statements of operations. Of such amounts, $68,303 and $72,076 remained as receivables at June 30, 2021 and December 31, 2020, respectively, and are included in “fees receivable” on the condensed consolidated statements of financial condition.

Tax Receivable Agreement

The Second Amended and Restated Tax Receivable Agreement, dated as of October 26, 2015 (the “TRA”), between Lazard and LTBP Trust, a Delaware statutory trust (the “Trust”), provides for the payment by our subsidiaries to the Trust of (i) approximately 45% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we actually realize as a result of the increases in the tax basis of certain assets and of certain other tax benefits related to the TRA, and (ii) an amount that we

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(UNAUDITED)

(dollars in thousands, except for per share data, unless otherwise noted)

currently expect will equal 85% of the cash tax savings that may arise from tax benefits attributable to payments under the TRA. Our subsidiaries expect to benefit from the balance of cash savings, if any, in income tax that our subsidiaries realize from such tax benefits. Any amount paid by our subsidiaries to the Trust will generally be distributed pro rata to the owners of the Trust, who include certain of our executive officers.

For purposes of the TRA, cash savings in income and franchise tax will be computed by comparing our subsidiaries’ actual income and franchise tax liability to the amount of such taxes that our subsidiaries would have been required to pay had there been no increase in the tax basis of certain assets of Lazard Group and had our subsidiaries not entered into the TRA. The term of the TRA will continue until approximately 2033 or, if earlier, until all relevant tax benefits have been utilized or expired.

The amount of the TRA liability is an undiscounted amount based upon the current tax laws and structure of the Company and various assumptions regarding potential future operating profitability. The assumptions reflected in the estimate involve significant judgment and if our structure or income assumptions were to change, we could be required to accelerate payments under the TRA. As such, the actual amount and timing of payments under the TRA could differ materially from our estimates. Any changes in the amount of the estimated liability would be recorded as a non-compensation expense in the condensed consolidated statement of operations. Adjustments, if necessary, to the related deferred tax assets would be recorded through the “provision (benefit) for income taxes”.

The cumulative liability relating to our obligations under the TRA as of June 30, 2021 and December 31, 2020 was $211,236 and $221,451, respectively, and is recorded in “tax receivable agreement obligation” on the condensed consolidated statements of financial condition. The balance at June 30, 2021 reflects a payment made under the TRA in the six months ended June 30, 2021 of $10,215.

See Note 12 for information regarding related party transactions pertaining to shares repurchased from certain of our executive officers.

18.	REGULATORY AUTHORITIES

LFNY is a U.S. registered broker-dealer and is subject to the net capital requirements of Rule 15c3-1 under the Exchange Act. Under the basic method permitted by this rule, the minimum required net capital, as defined, is a specified fixed percentage (6 2/3%) of total aggregate indebtedness recorded in LFNY’s Financial and Operational Combined Uniform Single (“FOCUS”) report filed with the Financial Industry Regulatory Authority (“FINRA”), or $5, whichever is greater. In addition, the ratio of aggregate indebtedness (as defined) to net capital may not exceed 15:1. At June 30, 2021, LFNY’s regulatory net capital was $145,599, which exceeded the minimum requirement by $141,258. LFNY’s aggregate indebtedness to net capital ratio was 0.45:1 as of June 30, 2021.

Certain U.K. subsidiaries of the Company, including LCL, Lazard Fund Managers Limited and Lazard Asset Management Limited (collectively, the “U.K. Subsidiaries”) are regulated by the Financial Conduct Authority. At June 30, 2021, the aggregate regulatory net capital of the U.K. Subsidiaries was $168,980, which exceeded the minimum requirement by $145,509.

CFLF, under which asset management and commercial banking activities are carried out in France, is subject to regulation by the Autorité de Contrôle Prudentiel et de Résolution (“ACPR”) for its banking activities conducted through its subsidiary, LFB. LFB, as a registered bank, is engaged primarily in commercial and private banking services for clients and funds managed by LFG (asset management) and other clients, and asset-liability management. The investment services activities of the Paris group, exercised through LFB and other subsidiaries of CFLF, primarily LFG, also are subject to regulation and supervision by the Autorité des Marchés Financiers. At June 30, 2021, the consolidated regulatory net capital of CFLF was $150,047, which exceeded the minimum requirement set for regulatory capital levels by $81,204. In addition, pursuant to the consolidated supervision rules in the European Union, LFB, in particular, as a French credit institution, is required to be supervised by a regulatory body, either in the U.S. or in the European Union. During the third quarter of 2013, the Company and the ACPR agreed on terms for the consolidated supervision of LFB and certain other non-Financial Advisory European subsidiaries of the Company (referred to herein, on a combined basis, as the “combined European regulated group”) under such rules. Under this supervision, the combined European regulated group is required to comply with minimum requirements for regulatory net capital to be reported on a quarterly basis and satisfy periodic financial and other reporting obligations. At March 31, 2021, the regulatory net capital of the combined European regulated group was $176,304, which exceeded the minimum requirement set for regulatory capital levels by $59,073. Additionally, the combined European regulated group, together with our European Financial Advisory entities, is required to perform an annual risk assessment and provide

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(UNAUDITED)

(dollars in thousands, except for per share data, unless otherwise noted)

certain other information on a periodic basis, including financial reports and information relating to financial performance, balance sheet data and capital structure.

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, 2021, for those subsidiaries with regulatory capital requirements, their aggregate net capital was $232,926, which exceeded the minimum required capital by $203,719.

At June 30, 2021, each of these subsidiaries individually was in compliance with its regulatory capital requirements.

Any new or expanded rules and regulations that may be adopted in countries in which we operate (including regulations that have not yet been proposed) could affect us in other ways.

19.	SEGMENT INFORMATION

The Company’s reportable segments offer different products and services and are managed separately as different levels and types of expertise are required to effectively manage the segments’ transactions. Each segment is reviewed to determine the allocation of resources and to assess its performance. The Company’s principal operating activities are included in its Financial Advisory and Asset Management business segments as described in Note 1. In addition, as described in Note 1, 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, 2021 and 2020 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 records other revenue, interest income and interest expense among the various segments based on the segment in which the underlying asset or liability is reported.

Each segment’s operating expenses include (i) compensation and benefits expenses incurred directly in support of the businesses and (ii) other operating expenses, which include directly incurred expenses for occupancy and equipment, marketing and business development, technology and information services, professional services, fund administration and outsourced services and indirect support costs (including compensation and other operating expenses related thereto) for administrative services. Such administrative services include, but are not limited to, accounting, tax, human resources, legal, facilities management and senior management activities.

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(UNAUDITED)

(dollars in thousands, except for per share data, unless otherwise noted)

Management evaluates segment results based on net revenue and operating income (loss) and believes that the following information provides a reasonable representation of each segment’s contribution with respect to net revenue, operating income (loss) and total assets:

		Three Months Ended						Six Months Ended
		June 30,						June 30,
		2021			2020			2021			2020
Financial Advisory	Net Revenue	$	451,940		$	304,806		$	770,352		$	603,772
	Operating Expenses		369,083			251,015			627,130			497,862
	Operating Income	$	82,857		$	53,791		$	143,222		$	105,910
Asset Management	Net Revenue	$	365,255		$	254,849		$	712,745		$	537,370
	Operating Expenses		269,314			195,049			501,417			399,818
	Operating Income	$	95,941		$	59,800		$	211,328		$	137,552
Corporate	Net Revenue	$	5,942		$	12,637		$	147		$	(30,836	)
	Operating Expenses		18,479			30,363			54,146			32,664
	Operating Loss	$	(12,537	)	$	(17,726	)	$	(53,999	)	$	(63,500	)
Total	Net Revenue	$	823,137		$	572,292		$	1,483,244		$	1,110,306
	Operating Expenses		656,876			476,427			1,182,693			930,344
	Operating Income	$	166,261		$	95,865		$	300,551		$	179,962

	As Of
	June 30, 2021		December 31, 2020
Total Assets
Financial Advisory	$	1,196,078	$	1,181,783
Asset Management		958,946		958,588
Corporate		4,251,776		3,831,490
Total	$	6,406,800	$	5,971,861

20.	CONSOLIDATED VIEs

The Company’s consolidated VIEs as of June 30, 2021 and December 31, 2020 include certain funds that were established for the benefit of employees participating in the Company’s existing LFI deferred compensation arrangement. Lazard invests in these funds and is the investment manager and is therefore deemed to have both the power to direct the most significant activities of the funds and the right to receive benefits (or the obligation to absorb losses) that could potentially be significant to these funds. The Company’s consolidated VIE assets, except as it relates to $172,045 and $121,376 of LFI held by Lazard Group as of June 30, 2021 and December 31, 2020, respectively, can only be used to settle the obligations of the consolidated VIEs. The Company’s consolidated VIE assets and liabilities as reflected in the condensed consolidated statements of financial condition consist of the following at June 30, 2021 and December 31, 2020.

	June 30, 2021		December 31, 2020
ASSETS
Cash and cash equivalents	$	4,515	$	3,558
Customers and other receivables		10,383		160
Investments		219,670		158,370
Other assets		836		400
Total Assets	$	235,404	$	162,488

LIABILITIES
Deposits and other customer payables	$	10,346	$	104
Other liabilities		297		491
Total Liabilities	$	10,643	$	595

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with Lazard Ltd’s condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q (the “Form 10-Q”), as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) included in our Annual Report on Form 10-K for the year ended December 31, 2020 (the “Form 10-K”). All references to “2021,” “2020,” “second quarter,” “first half” or “the period” refer to, as the context requires, the three month and six month periods ended June 30, 2021 and 2020.

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

Management has included in Parts I and II of this Form 10-Q, including in its 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,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “target,” “goal” 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, business plans and initiatives and anticipated trends in our business. These statements, including with respect to the current COVID-19 pandemic, 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 Form 10-K under the caption “Risk Factors,” including the following:

•

a decline in general economic conditions or the global or regional financial markets;

•

a decline in our revenues, for example due to a decline in overall mergers and acquisitions (“M&A”) activity, our share of the M&A market or our assets under management (“AUM”);

•

losses caused by financial or other problems experienced by third parties;

•

losses due to unidentified or unanticipated risks;

•

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

•

competitive pressure on our businesses and on our ability to retain and attract employees at current compensation levels.

These risks and uncertainties are not exhaustive. Other sections of the Form 10-K and this Form 10-Q describe additional factors that could adversely affect our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for our management to predict all risks and uncertainties, nor can 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:

•

financial goals, including ratios of compensation and benefits expense to operating revenue;

•

ability to deploy surplus cash through dividends, share repurchases and debt repurchases;

•

ability to offset stockholder dilution through share repurchases;

•

possible or assumed future results of operations and operating cash flows;

•

strategies and investment policies;

•

financing plans and the availability of short-term borrowing;

•

competitive position;

•

future acquisitions, including the consideration to be paid and the timing of consummation;

•

potential growth opportunities available to our businesses;

•

potential impact of investments in our technology infrastructure and data science capabilities;

•

recruitment and retention of our managing directors and employees;

•

potential levels of compensation expense, including awarded compensation and benefits expense and adjusted compensation and benefits expense, and non-compensation expense;

•

potential operating performance, achievements, productivity improvements, efficiency and cost reduction efforts;

•

likelihood of success and impact of litigation;

•

expected tax rates, including effective tax rates;

•

changes in interest and tax rates;

•

availability of certain tax benefits, including certain potential deductions;

•

potential impact of certain events or circumstances on our financial statements and operations, including the ongoing COVID-19 pandemic;

•

changes in foreign currency exchange rates;

•

expectations with respect to the economy, the securities markets, the market for mergers, acquisitions, restructuring and other financial advisory activity, the market for asset management activity and other macroeconomic, regional and industry trends;

•

effects of competition on our business; and

•

impact of new or future legislation and regulation, including tax laws and regulations, on our business.

The Company is committed to providing timely and accurate information to the investing public, consistent with our legal and regulatory obligations. To that end, the Company uses its website, its twitter account (twitter.com/Lazard) and other social media sites to convey information about our businesses, including the anticipated release of quarterly financial results, quarterly financial, statistical and business-related information, and the posting of updates of AUM in our Asset Management business. Investors can link to Lazard Ltd, Lazard Group and their operating company websites through http://www.lazard.com. Our websites and social media sites and the information contained therein or connected thereto shall not be deemed to be incorporated into this Form 10-Q.

Business Summary

Lazard, one of the world’s preeminent financial advisory and asset management firms, operates from 41 cities across 26 countries in North America, Europe, Asia, Australia, Central and South America. With origins dating to 1848, we have long specialized in crafting solutions to the complex financial and strategic challenges of a diverse set of clients around the world, including corporations, governments, institutions, partnerships and individuals.

Our primary business purpose is to serve our clients. Our deep roots in business centers around the world form a global network of relationships with key decision-makers in corporations, governments and investing institutions. This network is both a competitive strength and a powerful resource for Lazard and our clients. As a firm that competes on the quality of our advice, we have two fundamental assets: our people and our reputation.

We operate in cyclical businesses across multiple geographies, industries and asset classes. In recent years, we have expanded our geographic reach, bolstered our industry expertise and continued to build in growth areas. Companies, government bodies and investors seek independent advice with a geographic perspective, deep understanding of capital structure, informed research and knowledge of global, regional and local economic conditions. We believe that our business model as an independent advisor will continue to create opportunities for us to attract new clients and key personnel.

Our principal sources of revenue are derived from activities in the following business segments:

•

Financial Advisory, which offers corporate, partnership, institutional, government, sovereign and individual clients across the globe a wide array of financial advisory services regarding M&A, restructurings, capital advisory, shareholder advisory, sovereign advisory, capital raising and other strategic advisory matters, and

•

Our consolidated net revenue was derived from the following segments:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
Financial Advisory		55	%		53	%		52	%		54	%
Asset Management		44			45			48			48
Corporate		1			2			-			(2	)
Total		100	%		100	%		100	%		100	%

We also invest our own capital from time to time, generally alongside capital of qualified institutional and individual investors in alternative investments or private equity investments, and, since 2005, we have engaged in a number of alternative investments and private equity activities, including, historically, investments through (i) Edgewater, our Chicago-based private equity firm and (ii) a fund targeting significant noncontrolling-stake investments in established private companies. We also make investments to seed our Asset Management strategies.

Business Environment and Outlook

Economic and global financial market conditions can materially affect our financial performance. As described above, our principal sources of revenue are derived from activities in our Financial Advisory and Asset Management business segments. As our Financial Advisory revenues are primarily dependent on the successful completion of merger, acquisition, restructuring, capital raising or similar transactions, and our Asset Management revenues are primarily driven by the levels of AUM, weak economic and global financial market conditions can result in a challenging business environment for M&A and capital-raising activity as well as our Asset Management business, but may provide opportunities for our restructuring business.

The global macroeconomic environment continues to strengthen. While the course of the coronavirus (“COVID-19”) pandemic remains uncertain, business conditions in most of the developed world continue to improve. Governments and central banks have taken extraordinary measures to support local economies and capital markets, but the macroeconomic outlook remains uncertain while significant health risks persist.

Our outlook with respect to our Financial Advisory and Asset Management businesses is described below.

•

Financial Advisory—During a very active M&A market we are focused on serving clients with our depth of expertise in capital structure, capital raising, debt negotiations and restructuring and exchange offers. Announced M&A transaction volumes have recovered due to liquid financial markets and a strong economic recovery. We still expect there to be elevated uncertainty in the near term due to the ongoing health crisis and a more stringent regulatory market. However, fiscal and monetary stimulus in developed countries and the rollout of vaccines globally have created heightened levels of optimism and CEO confidence. The global scale and breadth of our Financial Advisory business allows us to advise on a wide range of strategic and restructuring transactions across a variety of industries. In addition, we continue to invest in our Financial Advisory business by selectively hiring talented senior professionals and continuing to focus on our M&A, restructuring and other advisory services.

•

Asset Management—In the short to intermediate term, we normally would expect most investor demand to come through financial institutions, and from defined benefit and defined contribution plans in developed economies because of their sheer

scope and size. However, continued uncertainties in capital markets arising from the COVID-19 pandemic may negatively impact our business in a manner that we cannot predict. Over the longer term, and depending upon local and global market conditions, we would expect an increasing share of our AUM to come from the developing economies around the globe, as their retirement systems evolve and individual wealth is increasingly deployed in the financial markets. Given our diversified investment platform and our ability to provide investment solutions for a global mix of clients, we believe we are positioned to benefit from opportunities across the asset management industry despite the current challenges that markets have created for that industry. We are continually developing new investment strategies that extend our existing platforms and assessing potential product acquisitions or other inorganic growth opportunities. Among other efforts, we have been particularly focused on continuing to incorporate environmental, social and corporate governance (“ESG”) considerations, as appropriate, into our investment research and launching strategies that use ESG and sustainability factors to drive long-term investment returns. In addition to these new ESG and sustainable strategies, recent examples of growth initiatives include the following: various Quantitative Equity strategies, new convertible bond strategies, thematically oriented strategies and a new long/short credit strategy.

We operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge continuously, and it is not possible for our management to predict all risks and uncertainties, nor can we assess the impact of all potentially applicable factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. See Item 1A, “Risk Factors” in our Form 10-K. Furthermore, 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.

Overall, we continue to focus on the development of our business, including the generation of stable revenue growth, earnings growth and shareholder returns, the evaluation of potential growth opportunities, the investment in new technology to support the development of existing and new business opportunities, the prudent management of our costs and expenses, the efficient use of our assets and the return of capital to our shareholders.

Certain market data with respect to our Financial Advisory and Asset Management businesses is included below.

Financial Advisory

As reflected in the following table, which sets forth global M&A industry statistics, the value of all completed transactions, including the subset of completed transactions involving values greater than $500 million, increased in the first half of 2021 as compared to 2020. With respect to announced M&A transactions, the value and number of all transactions, including the subset of announced transactions involving values greater than $500 million, increased in the first half of 2021 as compared to 2020.

	Three Months Ended							Six Months Ended
	June 30,							June 30,
	2021		2020		% Incr / (Decr)			2021		2020		% Incr / (Decr)
	($ in billions)
Completed M&A Transactions:
All deals:
Value	$	996	$	911		9	%	$	2,069	$	1,623		27	%
Number		6,850		7,365		(7	)%		15,058		16,086		(6	)%
Deals Greater than $500 million:
Value	$	763	$	750		2	%	$	1,594	$	1,273		25	%
Number		318		220		45	%		630		489		29	%
Announced M&A Transactions:
All deals:
Value	$	1,557	$	475		228	%	$	2,999	$	1,141		163	%
Number		7,453		7,304		2	%		16,180		15,923		2	%
Deals Greater than $500 million:
Value	$	1,279	$	312		310	%	$	2,439	$	799		205	%
Number		449		171		163	%		912		395		131	%

Source: Dealogic as of July 7, 2021.

Global restructuring activity during the first half of 2021, as measured by the number of corporate defaults, decreased as compared to the first half of 2020. The number of defaulting issuers was 28 in the first half of 2021 according to Moody’s Investors Service, Inc., as compared to 114 in the first half of 2020.

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

Asset Management

Equity market indices for major markets at June 30, 2021 generally increased as compared to such indices at December 31, 2020 and March 31, 2021. The percentage change in major equity market indices at June 30, 2021, as compared to such indices at March 31, 2021, December 31, 2020 and at June 30, 2020, is shown in the table below.

	Percentage Changes June 30, 2021 vs.
	March 31, 2021			December 31, 2020			June 30, 2020
MSCI World Index		8	%		13	%		40	%
Euro Stoxx		5	%		17	%		29	%
MSCI Emerging Market		5	%		8	%		41	%
S&P 500		9	%		15	%		41	%

The fees that we receive for providing investment management and advisory services are primarily driven by the level of AUM and the nature of the AUM product mix. Accordingly, market movements, foreign currency exchange rate volatility and changes in our AUM product mix will impact the level of revenues we receive from our Asset Management business when comparing periodic results. A substantial portion of our AUM is invested in equities. Movements in AUM during the period generally reflect the changes in equity market indices.

Financial Statement Overview

Net Revenue

The majority of Lazard’s Financial Advisory net revenue historically has been earned from the successful completion of M&A transactions, restructuring, capital advisory services, shareholder advisory, sovereign advisory, capital raising and other strategic advisory matters. The main drivers of Financial Advisory net revenue are 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, and may also earn fees in connection with public and private securities offerings. Significant fluctuations in Financial Advisory net revenue can occur over the course of any given year, because a significant portion of such net revenue is earned upon the successful completion of a transaction, restructuring or capital raising activity, the timing of which is uncertain and is not subject to Lazard’s control.

Lazard’s Asset Management segment principally includes Lazard Asset Management LLC (together with its subsidiaries, “LAM”), Lazard Frères Gestion SAS (“LFG”) and Edgewater. Asset Management net revenue is derived from fees for investment management and advisory services provided to clients. As noted above, the main driver of Asset Management net revenue is the level and product mix of AUM, which is generally influenced by the performance of the global equity markets and, to a lesser extent, fixed income markets as well as Lazard’s investment performance, which impacts its ability to successfully attract and retain assets. As a result, fluctuations (including timing thereof) in financial markets and client asset inflows and outflows have a direct effect on Asset Management net revenue and operating income. Asset Management fees are generally based on the level of AUM measured daily, monthly or quarterly, and an increase or reduction in AUM, due to market price fluctuations, currency fluctuations, changes in product mix, or net client asset flows will result in a corresponding increase or decrease in management fees. The majority of our investment advisory contracts are generally terminable at any time or on notice of 30 days or less. Institutional and individual clients, and firms with which we have strategic alliances, can terminate their relationship with us, reduce the aggregate amount of AUM or shift their

funds to other types of accounts with different rate structures for a number of reasons, including investment performance, changes in prevailing interest rates and financial market performance. In addition, as Lazard’s AUM includes significant amounts of assets that are denominated in currencies other than U.S. Dollars, changes in the value of the U.S. Dollar relative to foreign currencies will impact the value of Lazard’s AUM and the overall amount of management fees generated by the AUM. Fees vary with the type of assets managed and the vehicle in which they are managed, with higher fees earned on equity assets and alternative investment funds, such as hedge funds and private equity funds, and lower fees earned on fixed income and cash management products.

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

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

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

Corporate segment net revenue consists primarily of investment gains and losses on the Company’s “seed investments” related to our Asset Management business and principal investments in private equity funds, net of hedging activities, as well as gains and losses on investments held in connection with Lazard Fund Interests (“LFI”) and interest income and interest expense. Corporate net revenue also can fluctuate due to changes in the fair value of debt and equity securities, as well as due to changes in interest and currency exchange rates and in the levels of cash, investments and indebtedness.

Corporate segment total assets represented 66% of Lazard’s consolidated total assets as of June 30, 2021, which are attributable to cash and cash equivalents, restricted cash associated with LGAC, investments in debt and equity securities, interests in alternative investment, debt, equity and private equity funds, deferred tax assets and certain other assets associated with LFB and LGAC.

Operating Expenses

The majority of Lazard’s operating expenses relate to compensation and benefits for managing directors and employees. Our compensation and benefits expense includes (i) salaries and benefits, (ii) amortization of the relevant portion of previously granted deferred incentive compensation awards, including (a) share-based incentive compensation under the Lazard Ltd 2018 Incentive Compensation Plan, as amended (the “2018 Plan”) and the Lazard Ltd 2008 Incentive Compensation Plan (the “2008 Plan”) and (b) LFI and other similar deferred compensation arrangements (see Note 13 of Notes to Condensed Consolidated Financial Statements), (iii) a provision for discretionary or guaranteed cash bonuses and profit pools and (iv) when applicable, severance payments. Compensation expense in any given period is dependent on many factors, including general economic and market conditions, our actual and forecasted operating and financial performance, staffing levels, estimated forfeiture rates, competitive pay conditions and the nature of revenues earned, as well as the mix between current and deferred compensation.

For interim periods, we use “adjusted compensation and benefits expense” and the ratio of “adjusted compensation and benefits expense” to “operating revenue,” both non-GAAP measures, for comparison of compensation and benefits expense between periods. For the reconciliations and calculations with respect to “adjusted compensation and benefits expense” and related ratios to “operating revenue,” see the table under “Consolidated Results of Operations” below.

We believe that “awarded compensation and benefits expense” and the ratio of “awarded compensation and benefits expense” to “operating revenue,” both non-GAAP measures, when presented in conjunction with accounting principles generally accepted in the United States of America (“U.S. GAAP”) measures, are appropriate measures to assess the annual cost of compensation and provide a meaningful and useful basis for comparison of compensation and benefits expense between present, historical and future years. “Awarded compensation and benefits expense” for a given year is calculated using “adjusted compensation and benefits expense,” also a non-GAAP measure, as modified by the following items:

•

we deduct amortization expense recorded for U.S. GAAP purposes in the fiscal year associated with deferred incentive compensation awards;

•

we add incentive compensation with respect to the fiscal year, which is comprised of:

(i)

the deferred incentive compensation awards granted in the year-end compensation process with respect to the fiscal year (e.g., deferred incentive compensation awards granted in 2021 related to the 2020 year-end compensation process), including performance-based restricted stock unit (“PRSU”) and performance-based restricted participation unit (“PRPU”) awards (based on the target payout level);

(ii)

the portion of investments in people (e.g., “sign-on” bonuses or retention awards) and other special deferred incentive compensation awards that is applicable to the fiscal year the award becomes effective; and

(iii)

amounts in excess of the target payout level for PRSU and PRPU awards at the end of their respective performance periods; and

•

we reduce the amounts in (i), (ii) and (iii) above by an estimate of future forfeitures with respect to such awards.

Compensation and benefits expense is the largest component of our operating expenses. We seek to maintain discipline with respect to compensation, including the rate at which we award deferred compensation. Our goal is to maintain a ratio of awarded compensation and benefits expense to operating revenue and a ratio of adjusted compensation and benefits expense to operating revenue over the cycle in the mid-to high-50s percentage range. While we have implemented policies and initiatives that we believe will assist us in maintaining ratios within this range, there can be no guarantee that we will continue to maintain such ratios, or that our policies or initiatives will not change, in the future. We may benefit from pressure on compensation costs within the financial services industry in future periods; however, increased competition for senior professionals, changes in the macroeconomic environment or the financial markets generally, lower operating revenue resulting from, for example, a decrease in M&A activity, our share of the M&A market or our AUM levels, changes in the mix of revenues from our businesses, investments in our businesses or various other factors could prevent us from achieving this goal.

Our operating expenses also include “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. Our occupancy costs represent a significant portion of our aggregate operating expenses and are subject to change from time to time, particularly as leases for real property expire and are renewed or replaced with new, long-term leases for the same or other real property.

We believe that “adjusted non-compensation expense”, a non-GAAP measure, when presented in conjunction with U.S. GAAP measures provides a meaningful and useful basis for our investors to assess our operating results. For calculations with respect to “adjusted non-compensation expense”, see the table under “Consolidated Results of Operations” below.

Our operating expenses also include “amortization of intangible assets related to acquisitions”.

Provision for Income Taxes

See “Critical Accounting Policies and Estimates—Income Taxes” below and Notes 15 and 17 of Notes to Condensed Consolidated Financial Statements for additional information regarding income taxes, our deferred tax assets and the tax receivable agreement obligation.

Noncontrolling Interests

Noncontrolling interests primarily consist of (i) amounts related to Edgewater’s management vehicles that the Company is deemed to control but not own, (ii) LGAC interests (see Note 1 of Notes to Condensed Consolidated Financial Statements), (iii) profits interest participation rights and (iv) consolidated VIE interests held by employees. See Notes 12 and 20 of Notes to Condensed Consolidated Financial Statements for information regarding the Company’s noncontrolling interests and consolidated VIEs.

Consolidated Results of Operations

Lazard’s condensed 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 stockholders’ equity. Foreign currency remeasurement gains and losses on transactions in non-functional currencies are included in the condensed consolidated statements of operations.

The condensed consolidated financial statements are prepared in conformity with U.S. GAAP. Selected financial data derived from the Company’s reported condensed consolidated results of operations is set forth below, followed by a more detailed discussion of both the consolidated and business segment results.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
	($ in thousands)
Net Revenue	$	823,137		$	572,292		$	1,483,244		$	1,110,306
Operating Expenses:
Compensation and benefits		514,918			351,568			916,464			671,323
Non-compensation		141,943			124,404			266,199			258,120
Amortization of intangible assets related to acquisitions		15			455			30			901
Total operating expenses		656,876			476,427			1,182,693			930,344
Operating Income		166,261			95,865			300,551			179,962
Provision for income taxes		41,345			22,789			84,809			48,555
Net Income		124,916			73,076			215,742			131,407
Less - Net Income (Loss) Attributable to Noncontrolling Interests		1,738			(382	)		5,264			(6,073	)
Net Income Attributable to Lazard Ltd	$	123,178		$	73,458		$	210,478		$	137,480
Operating Income, as a % of net revenue		20.2	%		16.8	%		20.3	%		16.2	%

The tables below describe the components of operating revenue, adjusted compensation and benefits expense, adjusted non-compensation expense, earnings from operations and related key ratios, which are non-GAAP measures used by the Company to manage its business. We believe such non-GAAP measures in conjunction with U.S. GAAP measures provide a meaningful and useful basis for comparison between present, historical and future periods, as described above.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
	($ in thousands)
Operating Revenue:
Net revenue	$	823,137		$	572,292		$	1,483,244		$	1,110,306
Adjustments:
Interest expense (a)		18,600			18,534			36,913			37,306
Distribution fees, reimbursable deal costs, bad debt expense and other (b)		(21,625	)		(21,936	)		(38,335	)		(38,320	)
(Revenue) loss related to noncontrolling interests (c)		(5,754	)		(2,173	)		(12,115	)		599
(Gains) losses on investments pertaining to LFI (d)		(16,491	)		(23,803	)		(23,978	)		(4,166	)
Losses associated with restructuring and closing of certain offices (e)		23,579			-			23,579			-
Operating revenue	$	821,446		$	542,914		$	1,469,308		$	1,105,725

(a)	Interest expense (excluding interest expense incurred by LFB) is added back in determining operating revenue because such expense relates to corporate financing activities and is not considered to be a cost directly related to the revenue of our business.

(b)	Represents certain distribution, introducer and management fees paid to third parties, reimbursable deal costs and bad debt expense relating to fees that are deemed uncollectible for which an equal amount is excluded for purposes of determining adjusted non-compensation expense.

(c)	Revenue or loss related to the consolidation of noncontrolling interests is excluded from operating revenue because the Company has no economic interest in such amount.

(d)	Represents changes in the fair value of investments held in connection with LFI and other similar deferred compensation arrangements for which a corresponding equal amount is excluded from compensation and benefits expense.

(e)	Represents losses related to the reclassification of currency translation adjustments to earnings from accumulated other comprehensive loss associated with restructuring and closing of certain of our offices in the three month and six month periods ended June 30, 2021.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
	($ in thousands)
Adjusted Compensation and Benefits Expense:
Total compensation and benefits expense	$	514,918		$	351,568		$	916,464		$	671,323
Adjustments:
Noncontrolling interests (a)		(2,380	)		(2,016	)		(4,338	)		(3,722	)
(Charges) credits pertaining to LFI (b)		(16,491	)		(23,803	)		(23,978	)		(4,166	)
Expenses associated with restructuring and closing of certain offices		(7,287	)		-			(13,910	)		-
Adjusted compensation and benefits expense	$	488,760		$	325,749		$	874,238		$	663,435
Adjusted compensation and benefits expense, as a % of operating revenue		59.5	%		60.0	%		59.5	%		60.0	%

(a)	Expenses related to the consolidation of noncontrolling interests are excluded because Lazard has no economic interest in such amounts.

(b)	Represents changes in fair value of the compensation liability recorded in connection with LFI and other similar deferred incentive compensation awards for which a corresponding equal amount is excluded from operating revenue.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
	($ in thousands)
Adjusted Non-Compensation Expense:
Total non-compensation expense	$	141,943		$	124,404		$	266,199		$	258,120
Adjustments:
Expenses relating to office space reorganization (a)		(1,237	)		(2,487	)		(2,653	)		(6,151	)
Distribution fees, reimbursable deal costs, bad debt expense and other (b)		(21,625	)		(21,936	)		(38,335	)		(38,320	)
Noncontrolling interests (c)		(1,837	)		(364	)		(2,516	)		(1,400	)
Credits (expenses) associated with restructuring and closing of certain offices		1,586			-			(1,385	)		-
Adjusted non-compensation expense	$	118,830		$	99,617		$	221,310		$	212,249
Adjusted non-compensation expense, as a % of operating revenue		14.5	%		18.3	%		15.1	%		19.2	%

(a)	Represents incremental rent expense, building depreciation and legal fees related to office space reorganization.

(b)	Represents certain distribution, introducer and management fees paid to third parties, reimbursable deal costs and bad debt expense relating to fees that are deemed uncollectible for which an equal amount is included for purposes of determining operating revenue.

(c)	Expenses related to the consolidation of noncontrolling interests are excluded because the Company has no economic interest in such amounts.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
	($ in thousands)
Earnings From Operations:
Operating revenue	$	821,446		$	542,914		$	1,469,308		$	1,105,725
Deduct:
Adjusted compensation and benefits expense		(488,760	)		(325,749	)		(874,238	)		(663,435	)
Adjusted non-compensation expense		(118,830	)		(99,617	)		(221,310	)		(212,249	)
Earnings from operations	$	213,856		$	117,548		$	373,760		$	230,041
Earnings from operations, as a % of operating revenue		26.0	%		21.7	%		25.4	%		20.8	%

Headcount information is set forth below:

	As of
	June 30, 2021		December 31, 2020		June 30, 2020
Headcount:
Managing Directors:
Financial Advisory		180		171		169
Asset Management		108		105		106
Corporate		22		21		22
Total Managing Directors		310		297		297
Other Business Segment Professionals and Support Staff:
Financial Advisory		1,336		1,384		1,319
Asset Management		1,033		1,012		970
Corporate		421		413		397
Total		3,100		3,106		2,983

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, the performance of equity markets 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, 2021 versus June 30, 2020

The Company reported net income attributable to Lazard Ltd of $123 million, as compared to net income attributable to Lazard Ltd of $73 million in the 2020 period.

Net revenue increased $251 million, or 44%, with operating revenue increasing $279 million, or 51%, as compared to the 2020 period. Fee revenue from investment banking and other advisory activities increased $171 million, or 56%, as compared to the 2020 period. Asset management fees, including incentive fees, increased $101 million, or 41%, as compared to the 2020 period. In the aggregate, interest income, other revenue and interest expense decreased $21 million, as compared to the 2020 period.

Compensation and benefits expense increased $163 million, or 46%, as compared to the 2020 period, primarily associated with increased operating revenue.

Adjusted compensation and benefits expense (which excludes certain items and which we believe allows for improved comparability between periods, as described above) was $489 million, an increase of $163 million, or 50%, as compared to $326 million in the 2020 period. The ratio of adjusted compensation and benefits expense to operating revenue was 59.5% for the 2021 period, as compared to 60.0% for the 2020 period.

Non-compensation expense increased $18 million, or 14%, as compared to the 2020 period. Adjusted non-compensation expense increased $19 million, or 19%, as compared to the 2020 period. The ratio of adjusted non-compensation expense to operating revenue was 14.5% for the 2021 period, as compared to 18.3% for the 2020 period.

Amortization of intangible assets related to acquisitions remained substantially the same as compared the 2020 period.

Operating income increased $70 million, or 73%, as compared to the 2020 period.

Earnings from operations increased $96 million, or 82%, as compared to the 2020 period, and, as a percentage of operating revenue, was 26.0%, as compared to 21.7% in the 2020 period.

The provision for income taxes reflects an effective tax rate of 24.9%, as compared to 23.8% for the 2020 period. The increase in the effective tax rate principally relates to changes in the geographic mix of earnings, partially offset by an increase in discrete benefits.

Net income (loss) attributable to noncontrolling interests reflects income of $2 million in the 2021 period as compared to a loss of $0.4 million in the 2020 period.

Six Months Ended June 30, 2021 versus June 30, 2020

The Company reported net income attributable to Lazard Ltd of $210 million, as compared to net income attributable to Lazard Ltd of $137 million in the 2020 period.

Net revenue increased $373 million, or 34%, with operating revenue increasing $364 million, or 33%, as compared to the 2020 period. Fee revenue from investment banking and other advisory activities increased $191 million, or 32%, as compared to the 2020 period. Asset management fees, including incentive fees, increased $159 million, or 31%, as compared to the 2020 period. In the aggregate, interest income, other revenue and interest expense increased $23 million, as compared to the 2020 period.

Compensation and benefits expense increased $245 million, or 37%, as compared to the 2020 period, primarily associated with increased operating revenue.

Adjusted compensation and benefits expense (which excludes certain items and which we believe allows for improved comparability between periods, as described above) was $874 million, an increase of $211 million, or 32%, as compared to $663

million in the 2020 period. The ratio of adjusted compensation and benefits expense to operating revenue was 59.5% for the 2021 period, as compared to 60.0% for the 2020 period.

Non-compensation expense increased $8 million, or 3%, as compared to the 2020 period. Adjusted non-compensation expense increased $9 million, or 4%, as compared to the 2020 period. The ratio of adjusted non-compensation expense to operating revenue was 15.1% for the 2021 period, as compared to 19.2% in the 2020 period.

Amortization of intangible assets related to acquisitions remained substantially the same as compared to the 2020 period.

Operating income increased $121 million, or 67%, as compared to the 2020 period.

Earnings from operations increased $144 million, or 62%, as compared to the 2020 period, and, as a percentage of operating revenue, was 25.4%, as compared to 20.8% in the 2020 period.

The provision for income taxes reflects an effective tax rate of 28.2%, as compared to 27.0% for the 2020 period. The increase in the effective tax rate principally relates to changes in the geographic mix of earnings and an increase in discrete charges.

Net income (loss) attributable to noncontrolling interests reflects income of $5 million as compared to a loss of $6 million in the 2020 period.

Business Segments

The following is a discussion of net revenue and operating income for the Company’s segments: Financial Advisory, Asset Management and Corporate. Each segment’s operating expenses include (i) compensation and benefits expenses that are incurred directly in support of the segment and (ii) other operating expenses, which include directly incurred expenses for occupancy and equipment, marketing and business development, technology and information services, professional services, fund administration and outsourcing, and indirect support costs (including compensation and benefits expense and other operating expenses related thereto) for administrative services. Such administrative services include, but are not limited to, accounting, tax, human resources, legal, information technology, facilities management and senior management activities. Such support costs are allocated to the relevant segments based on various statistical drivers such as revenue, headcount, square footage and other factors.

Financial Advisory

The following table summarizes the reported operating results attributable to the Financial Advisory segment:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
	($ in thousands)
Net Revenue	$	451,940		$	304,806		$	770,352		$	603,772
Operating Expenses		369,083			251,015			627,130			497,862
Operating Income	$	82,857		$	53,791		$	143,222		$	105,910
Operating Income, as a % of net revenue		18.3	%		17.6	%		18.6	%		17.5	%

Certain Lazard fee and transaction statistics for the Financial Advisory segment are set forth below:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
Lazard Statistics:
Number of clients with fees greater than $1 million:
Financial Advisory		96			58			169			110
Percentage of total Financial Advisory net revenue from top 10 clients		35	%		51	%		24	%		32	%
Number of M&A transactions completed with values greater than $500 million (a)		12			13			37			35

(a)	Source: Dealogic as of July 7, 2021.

The geographical distribution of Financial Advisory net revenue is set forth below in percentage terms and is based on the Lazard offices that generate Financial Advisory net revenue, which are located in the Americas (U.S., Canada, and Latin America), EMEA (primarily in the U.K., France, Germany, Italy and Spain) and the Asia Pacific region and therefore may not be reflective of the geography in which the clients are located.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
Americas		67	%		71	%		62	%		65	%
EMEA		33			27			37			33
Asia Pacific		-			2			1			2
Total		100	%		100	%		100	%		100	%

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, restructuring and other strategic advisory matters, depending on clients’ needs. This flexibility allows Lazard to better match its professionals with the counter-cyclical business cycles of mergers and acquisitions and restructurings. While Lazard measures revenue by practice area, Lazard does not separately measure the costs or profitability of M&A services as compared to restructuring or other services. Accordingly, Lazard measures performance in its Financial Advisory segment based on overall segment operating revenue and operating income margins.

Financial Advisory Results of Operations

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, 2021 versus June 30, 2020

Financial Advisory net revenue increased $147 million, or 48%, as compared to the 2020 period. The increase in Financial Advisory net revenue was primarily a result of an increase in the number of fees greater than $10 million as compared to the 2020 period.

Operating expenses increased $118 million, or 47%, as compared to the 2020 period, primarily due to increases in compensation and benefits expense associated with increased operating revenue.

Financial Advisory operating income was $83 million, an increase of $29 million, or 54%, as compared to operating income of $54 million in the 2020 period and, as a percentage of net revenue, was 18.3%, as compared to 17.6% in the 2020 period.

Six Months Ended June 30, 2021 versus June 30, 2020

Financial Advisory net revenue increased $167 million, or 28%, as compared to the 2020 period. The increase in Financial Advisory net revenue was primarily a result of an increase in the number of fees greater than $1 million as compared to the 2020 period.

Operating expenses increased $129 million, or 26%, as compared to the 2020 period, primarily due to increases in compensation and benefits expense associated with increased operating revenue.

Financial Advisory operating income was $143 million, an increase of $37 million, or 35%, as compared to operating income of $106 million in the 2020 period and, as a percentage of net revenue, was 18.6%, as compared to 17.5% in the 2020 period.

Asset Management

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

	As of
	June 30, 2021		December 31, 2020
	($ in millions)
AUM by Asset Class:
Equity:
Emerging Markets	$	32,363	$	33,254
Global		61,874		56,246
Local		53,917		48,672
Multi-Regional		76,405		71,560
Total Equity		224,559		209,732
Fixed Income:
Emerging Markets		13,213		13,651
Global		14,617		11,962
Local		5,788		5,600
Multi-Regional		13,532		12,571
Total Fixed Income		47,150		43,784
Alternative Investments		3,529		2,748
Private Equity		1,343		1,420
Cash Management		797		958
Total AUM	$	277,378	$	258,642

Total AUM at June 30, 2021 was $277 billion, an increase of $19 billion, or 7%, as compared to total AUM of $259 billion at December 31, 2020 due to market appreciation, partially offset by foreign exchange depreciation and net outflows. Average AUM for the three month and six month periods ended June 30, 2021 increased 32% and 25% as compared to the three month and six month periods ended June 30, 2020.

As of both June 30, 2021 and December 31, 2020, approximately 87% of our AUM was managed on behalf of institutional clients, including corporations, labor unions, public pension funds, insurance companies and banks, and through sub-advisory relationships, mutual fund sponsors, broker-dealers and registered advisors. As of both June 30, 2021 and December 31, 2020, approximately 13% of our AUM was managed on behalf of individual client relationships, which are principally with family offices and individuals.

As of June 30, 2021, AUM with foreign currency exposure represented approximately 67% of our total AUM, as compared to 69% at December 31, 2020. AUM with foreign currency exposure generally declines in value with the strengthening of the U.S. Dollar and increases in value as the U.S. Dollar weakens, with all other factors held constant.

The following is a summary of changes in AUM by asset class for the three month and six month periods ended June 30, 2021 and 2020:

	Three Months Ended June 30, 2021
	AUM Beginning Balance		Inflows (a)		Outflows (a)			Net Flows			Market Value Appreciation/ (Depreciation)		Foreign Exchange Appreciation/ (Depreciation)		AUM Ending Balance
	($ in millions)
Equity	$	215,459	$	6,257	$	(9,534	)	$	(3,277	)	$	11,524	$	853	$	224,559
Fixed Income		44,249		3,704		(1,767	)		1,937			615		349		47,150
Other		5,144		702		(190	)		512			3		10		5,669
Total	$	264,852	$	10,663	$	(11,491	)	$	(828	)	$	12,142	$	1,212	$	277,378

(a)

Inflows in the Equity asset class were primarily attributable to the Multi-Regional, Global and Emerging Markets platforms, and inflows in the Fixed Income asset class were primarily attributable to the Global and Multi-Regional platforms. Outflows in the Equity asset class were primarily attributable to the Multi-Regional, Emerging Markets and Global equity platforms, and outflows in the Fixed Income asset class were primarily attributable to the Global platform.

	Six Months Ended June 30, 2021
	AUM Beginning Balance		Inflows (a)		Outflows (a)			Net Flows			Market Value Appreciation/ (Depreciation)			Foreign Exchange Appreciation/ (Depreciation)			AUM Ending Balance
	($ in millions)
Equity	$	209,732	$	13,818	$	(20,861	)	$	(7,043	)	$	24,303		$	(2,433	)	$	224,559
Fixed Income		43,784		7,498		(3,713	)		3,785			482			(901	)		47,150
Other		5,126		1,402		(651	)		751			(163	)		(45	)		5,669
Total	$	258,642	$	22,718	$	(25,225	)	$	(2,507	)	$	24,622		$	(3,379	)	$	277,378

(a)

	Three Months Ended June 30, 2020
	AUM Beginning Balance		Inflows		Outflows			Net Flows			Market Value Appreciation/ (Depreciation)		Foreign Exchange Appreciation/ (Depreciation)		AUM Ending Balance
	($ in millions)
Equity	$	154,641	$	8,009	$	(14,040	)	$	(6,031	)	$	23,080	$	1,825	$	173,515
Fixed Income		34,321		2,199		(2,253	)		(54	)		2,026		591		36,884
Other		4,086		218		(101	)		117			73		29		4,305
Total	$	193,048	$	10,426	$	(16,394	)	$	(5,968	)	$	25,179	$	2,445	$	214,704

	Six Months Ended June 30, 2020
	AUM Beginning Balance		Inflows		Outflows			Net Flows			Market Value Appreciation/ (Depreciation)			Foreign Exchange Appreciation/ (Depreciation)			AUM Ending Balance
	($ in millions)
Equity	$	205,541	$	14,602	$	(24,438	)	$	(9,836	)	$	(19,003	)	$	(3,187	)	$	173,515
Fixed Income		38,263		4,641		(5,740	)		(1,099	)		629			(909	)		36,884
Other		4,435		468		(414	)		54			(134	)		(50	)		4,305
Total	$	248,239	$	19,711	$	(30,592	)	$	(10,881	)	$	(18,508	)	$	(4,146	)	$	214,704

As of July 23, 2021, AUM was $277.6 billion, a $0.2 billion increase since June 30, 2021. The increase in AUM was due to market appreciation of $2.5 billion, partially offset by foreign exchange depreciation of $1.3 billion and net outflows of $1.0 billion.

Average AUM for the three month and six month periods ended June 30, 2021 and 2020 for each significant asset class is set forth below. Average AUM generally represents the average of the monthly ending AUM balances for the period.

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
	($ in millions)
Average AUM by Asset Class:
Equity	$	223,617	$	168,465	$	217,807	$	174,434
Fixed Income		46,725		35,775		45,530		36,336
Alternative Investments		3,404		1,962		3,161		2,005
Private Equity		1,330		1,410		1,340		1,404
Cash Management		775		842		819		829
Total Average AUM	$	275,851	$	208,454	$	268,657	$	215,008

The following table summarizes the reported operating results attributable to the Asset Management segment:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
	($ in thousands)
Net Revenue	$	365,255		$	254,849		$	712,745		$	537,370
Operating Expenses		269,314			195,049			501,417			399,818
Operating Income	$	95,941		$	59,800		$	211,328		$	137,552
Operating Income, as a % of net revenue		26.3	%		23.5	%		29.6	%		25.6	%

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	H.S. junior Bad

Lazard (LAZ) 10-Q2021 Q2 Quarterly report

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