Lazard Annual Report 2016

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FY2016 Annual Report · Lazard

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Financial Highlights

($mm, except per share data)

Net Revenue

Operating Revenue1,3

Net Income, As Adjusted2,3

Net Income Per Share (Diluted), As Adjusted2,3

2016

$2,333

2,344

410

$3.09

2015

$2,354

2,380

480

$3.60

2014

$2,300

2,340

428

$3.20

OPERATING REVENUE1,3 ($mm)

2016 NET REVENUE BY BUSINESS4

2,500

$2,340

$2,380

$2,344

2,000

$1,971

$2,034

1,500

1,000

500

2012

2013

2014

2015

2016

Financial
Advisory

Asset
Management

55% 45%

2016 NET REVENUE BY GEOGRAPHY

59% 34%

United
States

Europe

Rest of World

1 Excludes gains/losses related to the changes in the fair value of investments
held in connection with Lazard Fund Interests and other similar deferred
compensation arrangements for which a corresponding equal amount is
excluded from compensation and beneﬁts expense, revenues related to
non-controlling interests, and interest expense primarily related to corporate
ﬁnancing activities. For 2016, excludes a gain on the acquisition of MBA
Lazard (which resulted from the increase in the fair value of the Company’s
investment in MBA Lazard prior to the acquisition). For 2015, includes an
adjustment to revenue relating to the Company’s disposal of the Australian
private equity business for the recognition of an obligation which was
previously recognized for U.S. GAAP.

2 For 2016, excludes (i) acquisition-related costs, primarily reﬂecting changes
in fair value of contingent consideration associated with certain business
acquisitions, (ii) a gain on the acquisition of MBA Lazard (which resulted
from the increase in the fair value of the Company’s investment in MBA
Lazard prior to the acquisition), (iii) charges pertaining to the redemption
of the remaining balance of the 6.85% senior notes due 2017 (the “2017
Notes”), and (iv) a valuation allowance associated with changes in certain
New York City UBT tax laws. For 2015, excludes gain related to the partial
extinguishment of our tax receivable agreement (“TRA”) obligation, net of

applicable tax expense, charges pertaining to the redemption of a signiﬁcant
portion of the 2017 Notes, and recognition of deferred tax assets, net of the
related provision for TRA. In addition, 2015 includes an adjustment relating
to the Company’s disposal of the Australian private equity business for the
recognition of an obligation which was previously recognized for U.S. GAAP.
For 2014, adjusted to reﬂect the full conversion of outstanding exchangeable
interests held by members of LAZ-MD Holdings.

3 A non-U.S. GAAP measure. Lazard believes that presenting results and

measures on an adjusted basis in conjunction with U.S. GAAP measures
provides the most meaningful basis for comparison of its operating results
across periods. Non-U.S. GAAP measures are not meant to be considered
in isolation or as a substitute for the corresponding U.S. GAAP measures,
and should be read only in conjunction with our consolidated ﬁnancial
statements prepared in accordance with U.S. GAAP. A reconciliation of the
U.S. GAAP measures to the adjusted measures is presented on Schedule A
in this Annual Report.

4 Excludes Corporate, which includes investment income from certain

investments, interest income related to cash, and interest expense related
to outstanding borrowings.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)
(cid:95)

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

For the fiscal year ended December 31, 2016
OR

(cid:133)

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
(State or Other Jurisdiction of Incorporation
or Organization)

98-0437848
(I.R.S. Employer Identification No.)

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
Class A Common Stock, par value $0.01 per share

Name of each exchange on which registered
New York Stock Exchange

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

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:95) No (cid:133)
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes (cid:133) No (cid:95)
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 (cid:95) No (cid:133)

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes (cid:95) No (cid:133)

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not
contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated
by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (cid:95)

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller

reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):

Large accelerated filer (cid:95)

Accelerated filer (cid:133)

Non-accelerated filer (cid:133)
Smaller reporting company (cid:133)
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes (cid:133) No (cid:95)
The aggregate market value of the common stock held by non-affiliates of the Registrant as of June 30, 2016 was approximately

$3,588,095,855.

As of January 31, 2017, there were 129,766,091 shares of the Registrant’s Class A common stock outstanding (including 8,080,055 shares

held by subsidiaries).

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s proxy statement for its 2017 annual general meeting of shareholders are incorporated by reference in this

Form 10-K in response to Part III Items 10, 11, 12, 13 and 14.

[THIS PAGE INTENTIONALLY LEFT BLANK]

LAZARD LTD

ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2016

INDEX

Form 10-K Item Number

PART I

Item 1. Business ..........................................................................................................................................

Executive Officers of the Registrant .............................................................................................

Item 1A. Risk Factors ....................................................................................................................................

Item 1B. Unresolved Staff Comments ...........................................................................................................

Item 2. Properties ........................................................................................................................................

Item 3. Legal Proceedings ...........................................................................................................................

Item 4. Mine Safety Disclosures .................................................................................................................

PART II

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

Item 6. Selected Financial Data ...................................................................................................................

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ..........

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

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

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure .........

Item 9A. Controls and Procedures .................................................................................................................

Item 9B. Other Information ...........................................................................................................................

PART III

Item 10. Directors, Executive Officers and Corporate Governance ..............................................................

Item 11. Executive Compensation ................................................................................................................

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder

Matters ............................................................................................................................................

Item 13. Certain Relationships and Related Transactions, and Director Independence ..............................

Item 14. Principal Accounting Fees and Services .........................................................................................

PART IV

Item 15. Exhibits and Financial Statement Schedules ..................................................................................

Index to Financial Statements and Financial Statement Schedule Items 15(a)(1) and 15(a)(2) ......

SIGNATURES .................................................................................................................................................

Page
No.

131

132

133

134

135

F-1

II-1

[THIS PAGE INTENTIONALLY LEFT BLANK]

Part I

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 December 31, 2016 of all of the common membership interests in
Lazard Group and its controlling interest in Lazard Group.

Item 1.

Business

Lazard is one of the world’s preeminent financial advisory and asset management firms. 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. Founded in 1848 in New
Orleans, we currently operate from 42 cities in key business and financial centers across 27 countries throughout
North America, Europe, Asia, Australia, the Middle East, and Central and South America.

Principal Business Lines

We focus primarily on two business segments: Financial Advisory and Asset Management. We believe that

the mix of our activities across business segments, geographic regions, industries and investment strategies helps to
diversify and stabilize our revenue stream.

Financial Advisory

Our Financial Advisory business 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”) and other strategic matters, restructurings, capital structure, capital raising, corporate preparedness and
various other financial matters. We focus on solving our clients’ most complex issues, providing advice to key
decision-makers, senior management, boards of directors and business owners, as well as governments and
governmental agencies, in transactions that typically are of significant strategic and financial importance to them.

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

While we strive to earn repeat business from our clients, we operate in a highly competitive environment in

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

For the years ended December 31, 2016, 2015 and 2014, our Financial Advisory segment net revenue totaled

$1.301 billion, $1.280 billion and $1.207 billion, respectively, accounting for approximately 56%, 54% and 53%,
respectively, of our consolidated net revenue for such years. We earned $1 million or more from 276 clients, 268
clients and 281 clients for the years ended December 31, 2016, 2015 and 2014, respectively. For the years ended
December 31, 2016, 2015 and 2014, the ten largest fee paying clients constituted approximately 23%, 17% and
15%, respectively, of our Financial Advisory segment net revenue, with no client individually contributing more
than 10% of segment net revenue during any of these years. For the years ended December 31, 2016, 2015 and

2014, our Financial Advisory segment reported operating income of $284 million, $274 million and $229 million,
respectively. At December 31, 2016, 2015 and 2014, our Financial Advisory segment had total assets of $907
million, $763 million and $786 million, respectively.

We believe that we have been pioneers in offering financial advisory services on an international basis, with
the establishment of our New York, Paris and London offices dating back to the nineteenth century. We maintain a
major local presence in the United States (the “U.S.”), the United Kingdom (the “U.K.”) and France, including a
network of regional branch offices in the U.S., as well as a presence in Argentina, Australia, Belgium, Brazil,
Canada, Chile, China, Colombia, Germany, Hong Kong, India, Italy, Japan, the Netherlands, Panama, Peru,
Singapore, Spain, Sweden, Switzerland and the Middle East region.

In addition to seeking business centered in the regions described above, we historically have focused in

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

Our Financial Advisory business has made certain business acquisitions and entered into other strategic
business relationships. For example, in 2012, we integrated our Brazilian operations based in São Paulo, and
established a Lazard Africa initiative to leverage our sovereign and corporate expertise in this rapidly growing
region for our clients in both developed and developing countries. In 2014, we acquired certain securities sales and
trading assets that facilitate the execution of exchange offers and other transactions related to financial advice
provided by our Capital Advisory and Convertible Securities practice groups, and we took other steps that have
enabled us to act as an underwriter in public offerings and other distributions of securities in order to buttress our
Financial Advisory business. In 2015, we established a Lazard Central and Eastern Europe initiative to provide
financial advisory services to businesses and governments in the region, as well as to our clients outside the region
that are active in the region. In 2016, we expanded our North American Financial Advisory business through the
acquisition of an independent financial advisory firm based in Canada, and we acquired the portion of MBA Lazard
that we did not previously own, thereby fully integrating our Latin American operations.

Services Offered

We advise clients on a wide range of strategic and financial issues. When we advise clients on the potential

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

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

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

When we assist clients in connection with their capital structure, we typically review and analyze structural

alternatives, assist in long-term capital planning and advise and assist with respect to rating agency discussions and
relationships, among other things.

When we assist clients in connection with corporate preparedness matters, our services may include reviewing

and analyzing the business and financial condition of the company and assisting in the evaluation of defense
measures and strategic alternatives potentially available to the company.

When we assist clients in raising private or public market financing, our services include assisting clients in

connection with securing, refinancing or restructuring bank loans or other debt, including convertible securities,
originating and executing, or participating in, public underwritings and private placements of equity, debt and
convertible securities, and originating and executing private placements of partnership and similar interests in
alternative investment funds such as leveraged buyout, mezzanine or real estate focused funds.

We are at the forefront of providing independent advice to governments and governmental agencies
challenged by the current economic environment. Lazard’s Sovereign Advisory Group has advised a number of
countries and institutions with respect to sovereign debt and other financial matters.

Staffing

We staff each of our assignments with a team of quality professionals who have appropriate product and
industry expertise. We pride ourselves on, and we believe we differentiate ourselves from our competitors by, being
able to offer a high level of attention from senior personnel to our clients and organizing ourselves in such a way
that managing directors who are responsible for securing and maintaining client relationships also actively
participate in providing related advice and services. Our managing directors have significant experience, and many
of them are able to use this experience to advise on M&A, financings, restructurings, capital structure, corporate
preparedness and other transactions or financial matters, depending on our clients’ needs. Many of our managing
directors and senior employees come from diverse backgrounds, such as senior leadership positions in corporations,
government, law and strategic consulting, which we believe enhances our ability to offer sophisticated advice and
customized solutions to our clients. As of December 31, 2016, our Financial Advisory segment had 149 managing
directors and 869 other professionals (which includes directors, vice presidents, associates and analysts).

Industries Served

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

(cid:120)

consumer;

financial institutions;

health care and life sciences;

industrial;

power and energy/infrastructure;

(cid:120)

real estate; and

technology, media and telecommunications.

These groups are managed locally in each relevant geographic region and are coordinated globally, which

allows us to bring local industry-specific knowledge to bear on behalf of our clients on a global basis. We believe
that this enhances the scope and the quality of the advice that we can offer, which improves our ability to market our
capabilities to clients.

In addition to our Mergers and Acquisitions and Restructuring practices, we also maintain specialties in the

following distinct practice areas within our Financial Advisory business:

(cid:120)

government and sovereign advisory;

capital structure and debt advisory;

corporate preparedness and defense advisory;

fund-raising for alternative investment funds; and

corporate finance and other services, including private placements, underwritten offerings related to our
Financial Advisory business and transactions involving the exchange or issuance of convertible
securities.

We endeavor to coordinate the activities of the professionals in these areas with our Mergers and Acquisitions

industry specialists in order to offer clients customized teams of cross-functional expertise spanning both industry
and practice area expertise.

Strategy

Our focus in our Financial Advisory business is on:

(cid:120)

investing in our intellectual capital through senior professionals who we believe have strong client
relationships and industry expertise;

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

developing new client relationships;

expanding the breadth and depth of our industry expertise and selectively adding or reinforcing practice
areas, such as our Capital Structure Advisory, Corporate Preparedness and Sovereign Advisory groups;

coordinating our industry specialty activities on a global basis and increasing the integration of our
industry experts in Mergers and Acquisitions with our other professionals;

selectively bolstering our existing presence in certain local markets;

broadening our geographic presence by adding new offices; and

deploying our intellectual capital, strong client relationships and other assets to generate new revenue
streams, including, for example, revenue that may be generated by acting as an underwriter in public
offerings and other distributions of securities related to the activities of our Financial Advisory business.

In addition to the investments made as part of this strategy, we believe that our Financial Advisory business

may benefit from external market factors, including:

(cid:120)

demand for independent, unbiased financial advice;

recapitalization and related activities in developed and emerging markets;

relatively low interest rates and high corporate cash balances;

(cid:120)

favorable levels of cross-border M&A and large capitalization M&A, two of our areas of historical
specialization; and

possible M&A activity that may result from potential tax, regulatory and similar reform in certain
regions, including the U.S.

Going forward, our strategic emphasis in our Financial Advisory business is to leverage the investments we

have made to grow our business and drive our productivity. We continue to seek to opportunistically attract
outstanding individuals to our business. We routinely reassess our strategic position and may in the future seek
opportunities to further enhance our competitive position.

Asset Management

Our Asset Management business offers a broad range of global investment solutions and investment
management services in equity and fixed income strategies, alternative investments and private equity funds to
corporations, public funds, sovereign entities, endowments and foundations, labor funds, financial intermediaries
and private clients. Our goal in our Asset Management business is to produce superior risk-adjusted investment
returns and provide customized investment solutions for our clients. Many of our equity investment strategies share
an investment philosophy that centers on fundamental security selection with a focus on analyzing, among other
things, a company’s financial position, outlook, opportunities and risks, together with its valuation.

As of December 31, 2016, total assets under management (“AUM”) were $198 billion, of which

approximately 82% was invested in equities, 16% in fixed income, 1% in alternative investments and 1% in private
equity funds. As of the same date, within the equity asset class, approximately 28% of our AUM was invested in
multi-regional (i.e., non-U.S. and regional non-U.S.) investment strategies, 21% in emerging markets strategies,
15% in global investment strategies and 18% in local investment strategies. Within the fixed income asset class,
approximately 8% of our AUM was invested in emerging markets strategies, 4% in multi-regional (i.e., non-U.S.
and regional non-U.S.) investment strategies, 2% in global investment strategies and 2% in local investment
strategies. Our top ten clients accounted for 21%, 21% and 24% of our total AUM at December 31, 2016, 2015 and
2014, respectively, with no client individually contributing more than 10% of our Asset Management segment net
revenue during any of the respective years. Approximately 88% of our AUM as of December 31, 2016 was managed
on behalf of institutional clients, including corporations, labor unions, public pension funds, insurance companies
and banks, and through sub-advisory relationships, mutual fund sponsors, broker-dealers and registered advisors,
and approximately 12% of our AUM was managed on behalf of individual client relationships, which are principally
with family offices and high-net worth individuals.

The charts below illustrate the mix of our AUM as of December 31, 2016, measured by broad product strategy

and by office location.

AUM BY PRODUCT

Emerging Markets
Fixed Income
8%
Alternative Investments
1%
Multi-Regional
Fixed Income
4%

Local/Multi-
Regional Equity
46%

Private Equity 1%

Emerging Markets
Equity
21%
Global/Local
Fixed Income
4%

Global Equity
15%

AUM BY OFFICE LOCATION

Asia
2%

Australia
6%

Japan
4%

Germany
7%

U.K.
11%

France
9%

North America
61%

For the years ended December 31, 2016, 2015 and 2014, our Asset Management segment net revenue totaled

$1.051 billion, $1.111 billion and $1.135 billion, respectively, accounting for approximately 45%, 47% and 49%,
respectively, of our consolidated net revenue for such years. For the years ended December 31, 2016, 2015 and
2014, our Asset Management segment reported operating income of $282 million, $374 million and $385 million,
respectively. At December 31, 2016, 2015 and 2014, our Asset Management segment had total assets of $646
million, $640 million and $588 million, respectively.

Our Asset Management business maintains offices in New York, Bordeaux, Boston, Brussels, Chicago,

Dubai, Dublin, Frankfurt, Hamburg, Hong Kong, London, Lyon, Milan, Montreal, Nantes, Paris, San Francisco,
Seoul, Singapore, Sydney, Tokyo, Toronto and Zurich. These operations, with 92 managing directors and 392
professionals as of December 31, 2016, provide our Asset Management business with both a global presence and a
local identity.

Primary distinguishing features of these operations include:

(cid:120)

a global footprint with global research, global mandates and global clients;

a broad-based team of investment professionals, including focused, in-house investment analysts across
all products and platforms, many of whom have substantial industry or sector specific expertise; and

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

Our Investment Philosophy, Process and Research. Our investment philosophy is generally based upon a

fundamental security selection approach to investing. Across many of our products, we apply three key principles to
investment portfolios:

(cid:120)

select securities, not markets;

evaluate a company’s financial position, outlook, opportunities and risks, together with its valuation;
and

manage risk.

In searching for investment opportunities, many of our investment professionals follow an investment process

that incorporates several interconnected components that may include:

(cid:120)

analytical analysis and screening;

accounting analysis;

fundamental analysis;

security selection and portfolio construction; and

risk management.

In our Asset Management business, we conduct investment research on a global basis to develop market,

industry and company specific insights and evaluate investment opportunities. Many of our global equity analysts,
located in our worldwide offices, are organized around six global industry sectors:

(cid:120)

consumer goods;

financial services;

health care;

industrials;

power and energy; and

technology, media and telecommunications.

Investment Strategies. Our Asset Management business provides equity, fixed income, cash management

and alternative investment strategies to our clients, paying close attention to our clients’ varying and expanding
investment needs. We offer the following product platform of investment strategies:

Multi-Regional

Pan-European
Large Capitalization
Small Capitalization
Quantitative

Eurozone
Large Capitalization
Small Capitalization

Continental European
Small Cap
Multi Cap
Eurozone
Euro-Trend (Thematic)

Asian
Asia Ex-Japan
Quantitative

Europe, Australasia
and Far East
Large Capitalization
Small Capitalization
Multi-Capitalization
Quantitative

Pan-European
Core Fixed Income
High Yield
Cash Management
Duration Overlay

Eurozone
Fixed Income
Cash Management
Corporate Bonds

Local

Emerging Markets

U.S.
Large Capitalization
Mid Capitalization
Small/Mid Capitalization
Small Capitalization
Multi-Capitalization
Real Estate

Other
U.K. (Large Capitalization)
U.K. (Small Capitalization)
U.K. Quantitative
Australia
France (Large Capitalization)
France (Small Capitalization)
Japan
Korea

Global
Large Capitalization
Small Capitalization
Quantitative
Multi Strategies
Managed Volatility

Latin America
Latin America

Middle East North
Africa
Middle East North
Africa

Global
Emerging Debt
Emerging Corporates

U.S.
Core Fixed Income
High Yield
Short Duration
Municipals
Cash Management

Non-U.S.
U.K. Fixed Income

European
Long/Short Equity

U.S.
U.S. (Long/Short)

Global
Emerging Income
Emerging Debt

Non-U.S.
Japan (Long/Short)

Equity

Global

Global
Large Capitalization
Small Capitalization
Thematic
Convertibles
Listed Infrastructure
Quantitative
Trend
Real Estate
Multi Strategies
Managed Volatility
Real Assets
Multi-Factor

Global Ex
Global Ex-U.K.
Global Ex-Japan
Global Ex-Australia

Fixed Income and
Cash Management

Global
Core Fixed Income
High Yield
Short Duration

Alternative

Global
Fund of Hedge Funds
Fund of Closed-End
Funds (Long and
Long/Short)

Convertible
Long/Short Equity
Arbitrage/Relative

Value
Multi Asset
Commodities

In addition to the primary investment strategies listed above, we also provide other asset management services

to our clients, including asset allocation advisory services and locally customized investment solutions. In many
cases, we also offer both diversified and more concentrated versions of our products. These products are generally
offered on a separate account basis, as well as through pooled vehicles.

Distribution. We distribute our products through a broad array of marketing channels on a global basis.
Marketing, sales and client service efforts are organized through a global market delivery and service network, with
distribution professionals located in cities including New York, Bordeaux, Boston, Brussels, Chicago, Dubai,
Frankfurt, Hamburg, Hong Kong, London, Lyon, Milan, Montreal, Nantes, Paris, San Francisco, Seoul, Singapore,
Sydney, Tokyo, Toronto and Zurich. We have developed a well-established presence in the institutional asset

management arena, managing assets for corporations, labor unions, sovereign wealth funds and public pension funds
around the world. In addition, we manage assets for insurance companies, savings and trust banks, endowments,
foundations and charities.

We also have become a leading firm in managing mutual funds and separately managed accounts for many of

the world’s largest broker-dealers, insurance companies, registered advisors and other financial intermediaries.

Strategy

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

(cid:120)

focused on enhancing our investment performance;

improved our investment management platform by adding a number of senior investment professionals
(including portfolio managers and analysts);

continued to strengthen our marketing and consultant relations capabilities, including by expanding our
marketing resources;

expanded our product platform, including through the addition of long/short equity strategies, a real
asset strategy, a commodities team and an equity team focused on Middle East and North African
markets; and

continued to expand the geographic reach of our Asset Management business, including through
opening offices in Dubai, Singapore and Dublin.

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

Alternative Investments

Since 2005, we have been engaged in selected alternative investments and private equity activities. In 2009,
we established a private equity business with The Edgewater Funds (“Edgewater”), a Chicago-based private equity
firm, through the acquisition of Edgewater’s management vehicles. As of December 31, 2016, Edgewater had
approximately $1 billion of AUM and unfunded fee-earning commitments.

Historically, Lazard also has made selected investments with its own capital, often alongside capital of

qualified institutional and individual investors in connection with Lazard’s selected alternative investments and
private equity activities. These investments typically have been organized in funds that make substantial or
controlling investments in private or public companies, generally through privately negotiated transactions and with
a view to divest within two to seven years. While potentially risky and frequently illiquid, such investments, when
successful, can yield investors substantial returns on capital and generate attractive management and performance
fees for the sponsor of such funds.

Employees

We believe that our people are our most important asset, and it is their reputation, talent, integrity and
dedication that underpin our success. As of December 31, 2016, we employed 2,781 people, which included 149
managing directors and 869 other professionals in our Financial Advisory segment and 92 managing directors and

403 other professionals in our Asset Management segment. We strive to maintain a work environment that fosters
professionalism, excellence, diversity, collaboration and cooperation among our employees worldwide. We
generally utilize an evaluation process at the end of each year to measure performance, determine compensation and
provide guidance on opportunities for improved performance. Generally, our employees are not subject to any
collective bargaining agreements, except that our employees in certain of our offices, including France and Italy, are
covered by national, industry-wide collective bargaining agreements. We believe that we have good relations with
our employees.

Competition

The financial services industry, and all of the businesses in which we compete, are intensely competitive, and

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

While our competitors vary by country in our Financial Advisory business, we believe our primary

competitors in securing engagements are Bank of America Merrill Lynch, Barclays, Centerview Partners, Citigroup,
Credit Suisse, Deutsche Bank, Evercore Partners, Goldman Sachs, Greenhill, JPMorgan Chase, Morgan Stanley,
Rothschild and UBS. In our Restructuring practice, we believe our primary competitors are Centerview Partners,
Evercore Partners, Houlihan Lokey, PJT Partners, Moelis & Company and Rothschild.

We believe that our primary global competitors in our Asset Management business include, in the case of

Lazard Asset Management LLC and its subsidiaries (“LAM”), Aberdeen, Alliance Bernstein, Capital
Management & Research, Fidelity, Franklin Templeton, Invesco, JP Morgan Asset Management, Lord Abbett,
MFS, Neuberger Berman and Schroders and, in the case of Lazard Frères Gestion SAS (“LFG”), private banks with
offices in France as well as large institutional banks and fund managers. We face competition in private equity both
in the pursuit of outside investors for our private equity funds and the acquisition of investments in attractive
portfolio companies. We compete with hundreds of other funds, many of which are subsidiaries of, or otherwise
affiliated with, large financial service providers.

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

Many of our competitors are large, consolidated financial institutions that have the ability to offer a wider

range of products than we offer, including loans, deposit taking, insurance and brokerage services. Many of these
firms also offer more extensive asset management and investment banking services, which may enhance their
competitive position. They also may have the ability to support investment banking and securities products with
commercial banking, insurance and other financial services revenue in an effort to gain market share, which could
result in pricing pressure in our businesses. At the same time, demand for independent financial advice has increased
and has created opportunities for new entrants, including a number of boutique financial advisory firms. These
boutique firms frequently compete, among other factors, on the basis of their independent financial advice, and their
activities also could result in pricing and other competitive pressure in our businesses.

See Item 1A, “Risk Factors—The financial services industry, and all of the businesses in which we compete,

are intensely competitive” below.

Regulation

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

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

Our principal U.S. broker-dealer subsidiary, Lazard Frères & Co. LLC (“LFNY”), through which we conduct

most of our U.S. Financial Advisory business, is currently registered as a broker-dealer with the SEC and FINRA,
and as a broker-dealer in all 50 U.S. states, the District of Columbia and Puerto Rico. As such, LFNY is subject to
regulations governing most aspects of the securities business, including minimum capital retention requirements,
record-keeping and reporting procedures, relationships with customers, experience and training requirements for
certain employees, and business procedures with firms that are not members of certain regulatory bodies. In
addition, LFNY is a member organization of the New York Stock Exchange LLC and the NYSE MKT LLC and is
subject to various rules and regulations that have been promulgated by these securities exchanges. Lazard Asset
Management Securities LLC, a subsidiary of LAM, is registered as a broker-dealer with the SEC and FINRA and in
all 50 U.S. states, the District of Columbia and Puerto Rico. Lazard Middle Market LLC is registered as a broker-
dealer with the SEC and FINRA, and as a broker-dealer in various U.S. states and territories.

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

Certain U.K. subsidiaries of Lazard Group, including Lazard & Co., Limited (“LCL”), Lazard Fund Managers
Limited and Lazard Asset Management Limited, which we refer to in this Annual Report on Form 10-K (this “Form
10-K”) as the “U.K. subsidiaries,” are authorized and regulated by the Financial Conduct Authority (the “FCA”),
and are subject to various rules and regulations made by the FCA under the authorities conferred upon it by the
Financial Services and Markets Act 2000, as amended by the Financial Services Act 2012. LCL has obtained the
appropriate European investment services rights to provide cross-border services into a number of other members of
the European Economic Area.

We also have other subsidiaries that are registered as broker-dealers (or have similar non-U.S. registration) in

various jurisdictions.

Certain of our Asset Management subsidiaries are registered as investment advisors with the SEC. As a
registered investment advisor, each is subject to the requirements of the Investment Advisers Act of 1940, as
amended (the “Investment Advisers Act”), and the SEC’s regulations thereunder. Such requirements relate to,
among other things, the relationship between an advisor and its advisory clients, as well as general anti-fraud
prohibitions. LAM serves as an advisor to several mutual funds which are registered under the Investment Company
Act of 1940, as amended (the “Investment Company Act”). The Investment Company Act regulates, among other
things, the relationship between a mutual fund and its investment advisor (and other service providers) and prohibits
or severely restricts principal transactions between an advisor and its advisory clients, imposes record-keeping and
reporting requirements, disclosure requirements, limitations on trades where a single broker acts as the agent for
both the buyer and seller, and limitations on affiliated transactions and joint transactions. Lazard Asset Management
Securities LLC, a subsidiary of LAM, serves as an underwriter or distributor for mutual funds and hedge funds
managed by LAM, and as an introducing broker to Pershing LLC for unmanaged accounts of LAM’s private clients.

Compagnie Financière Lazard Frères SAS (“CFLF”), our French subsidiary 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 our Paris-based banking
subsidiary, Lazard Frères Banque SA (“LFB”). The investment services activities of the Paris group, exercised
through LFB and other subsidiaries of CFLF, primarily LFG (asset management), also are subject to regulation and
supervision by the Autorité des Marchés Financiers. 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. In 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. Additionally, the combined European regulated group, together with our European Financial Advisory
entities, is required to perform an annual risk assessment and provide certain other information on a periodic basis,
including financial reports and information relating to financial performance, balance sheet data and capital
structure.

As a result of certain changes effected by the Dodd-Frank Wall Street Reform and Consumer Protection Act
(the “Dodd-Frank Act”) related to the regulation of over-the-counter swaps and other derivative instruments, LAM
and certain of its subsidiaries have registered with the U.S. Commodity Futures Trading Commission (the “CFTC”)
and the National Futures Association (the “NFA”), and are subject to certain aspects of the U.S. Commodity
Exchange Act and the regulations thereunder, and to the rules of the NFA. The CFTC and the NFA have authority
over the laws, rules and regulations related to commodities (including the over-the-counter swaps and derivatives
markets), and regulate our relationship with clients who trade in these instruments. The U.S. Commodity Exchange
Act and the regulations thereunder also impose additional record-keeping and reporting requirements and disclosure
requirements on LAM and its subsidiaries.

In addition, the Central Bank of Ireland, the Japanese Ministry of Finance and Financial Services Agency, the

Korean Financial Supervisory Commission, the Securities and Futures Commission of Hong Kong, the Monetary
Authority of Singapore, the Australian Securities & Investments Commission, the Dubai Financial Services
Authority, the Swiss Financial Market Supervisory Authority and the German Federal Financial Supervisory
Authority, among others, regulate relevant operating subsidiaries of the Company and also have capital standards
and other requirements comparable to the rules of the SEC. Our business is also subject to regulation by other non-
U.S. governmental and regulatory bodies and self-regulatory authorities in other countries where we operate.

Regulators are empowered to conduct periodic examinations and initiate administrative proceedings that can

result, among other things, in censure, fine, the issuance of cease-and-desist orders or the suspension or expulsion or
other disciplining of a broker-dealer or investment advisor or its directors, officers or employees.

We are also subject to various anti-bribery, anti-money laundering and counter-terrorist financing laws, rules

and regulations in the jurisdictions in which we operate. The U.S. Foreign Corrupt Practices Act, for example,
generally prohibits offering, promising or giving, or authorizing others to give, anything of value, either directly or
indirectly, to a non-U.S. government official in order to influence official action or otherwise gain an unfair business
advantage, such as to obtain or retain business. Similar rules and regulations exist in other jurisdictions in which we
operate. In addition, we are required to comply with economic sanctions and embargo programs administered by the
U.S. Treasury’s Office of Foreign Assets Control and by similar governmental agencies and other authorities
worldwide. Violations of any of these laws, rules, regulations and programs can give rise to administrative, civil or
criminal penalties.

The U.S. and other governments and institutions have taken actions, and may continue to take further actions,

that affect the global financial markets. Such further actions could include expanding current or enacting new
standards, requirements and rules that may be applicable to us and our subsidiaries. The effect of any such expanded
or new standards, requirements and rules is uncertain and could have adverse consequences to our business and
results of operations. See Item 1A, “Risk Factors—Other Business Risks—Extensive regulation of our businesses
limits our activities and results in ongoing exposure to the potential for significant penalties, including fines or
limitations on our ability to conduct our businesses.”

Executive Officers of the Registrant

Set forth below are the name, age, present title, principal occupation and certain biographical information for

each of our executive officers as of February 17, 2017, all of whom have been appointed by, and serve at the
pleasure of, our board of directors.

Kenneth M. Jacobs, 58

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

Matthieu Bucaille, 57

Mr. Bucaille has served as Chief Financial Officer of Lazard Ltd and Lazard Group since April 2011.
Mr. Bucaille has served as a Managing Director of Lazard since 1998 and served as the Deputy Chief Executive
Officer of LFB in Paris from October 2009 until December 2011. Mr. Bucaille joined Lazard in 1989 from the First
Boston Corporation in New York.

Ashish Bhutani, 56

Mr. Bhutani has served as a member of the Board of Directors of Lazard Ltd and Lazard Group since March

2010. Mr. Bhutani is a Vice Chairman and a Managing Director of Lazard and has been the Chief Executive Officer
of LAM since March 2004. Mr. Bhutani previously served as Head of New Products and Strategic Planning for
LAM from June 2003 to March 2004. Prior to joining Lazard, he was Co-Chief Executive Officer, North America,
of Dresdner Kleinwort Wasserstein from 2001 to the end of 2002, and was a member of its Global Corporate and
Markets Board, and a member of its Global Executive Committee. Mr. Bhutani worked at Wasserstein Perella
Group (the predecessor to Dresdner Kleinwort Wasserstein) from 1989 to 2001, serving as Deputy Chairman of
Wasserstein Perella Group and Chief Executive Officer of Wasserstein Perella Securities from 1994 to 2001.
Mr. Bhutani began his career at Salomon Brothers in 1985, where he was a Vice President in Fixed Income.
Mr. Bhutani is a member of the Board of Directors of four registered investment companies, which are part of the
Lazard fund complex.

Scott D. Hoffman, 54

Mr. Hoffman has served as General Counsel of Lazard Ltd since May 2005. Mr. Hoffman has served as a

Managing Director of Lazard since January 1999 and General Counsel of Lazard Group since January 2001.
Mr. Hoffman previously served as Vice President and Assistant General Counsel from February 1994 to December
1997 and as a Director from January 1998 to December 1998. Prior to joining Lazard, Mr. Hoffman was an attorney
at Cravath, Swaine & Moore LLP. Mr. Hoffman is a member of the Board of Trustees of the New York University
School of Law.

Alexander F. Stern, 50

Mr. Stern has served as Chief Operating Officer of Lazard Ltd and Lazard Group since November 2008.

Mr. Stern has served as a Managing Director of Lazard since January 2002, as Chief Executive Officer, Financial
Advisory, since April 2015, and as Global Head of Strategy since February 2006. Mr. Stern previously served as a
Vice President in Lazard’s Financial Advisory business from January 1998 to December 2000 and as a Director
from January 2001 to December 2001. Mr. Stern initially joined Lazard in 1994 and previously held various
positions with Patricof & Co. Ventures and IBM.

Where You Can Find Additional Information

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

Our public website is http://www.lazard.com and the investor relations SEC filings section of our public

website is located at http://www.lazard.com/InvestorRelations/SEC-Filings.aspx. We will make available free of
charge, on or through the investor relations section of our website, our annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K, proxy statements and Forms 3, 4 and 5 filed on behalf of
directors and executive officers and any amendments to those reports filed or furnished pursuant to the Exchange
Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Also
posted on our website, and available in print upon request of any Lazard Ltd shareholder to the Investor Relations
Department, are charters for the Company’s Audit Committee, Compensation Committee and Nominating &
Governance Committee. Copies of these charters and our Corporate Governance Guidelines and Code of Business
Conduct and Ethics governing our directors, officers and employees are also posted on the investor relations section
of our website in the corporate governance subsection.

ITEM 1A. RISK FACTORS

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

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

As a financial services firm, our businesses are materially affected by conditions in the global financial
markets and economic conditions throughout the world. Unfavorable economic and market conditions can adversely
affect our financial performance in both the Financial Advisory and Asset Management businesses. The future
market and economic climate may deteriorate because of many factors, such as a general slowing of economic
growth globally or regionally, periods of volatility in securities markets, volatility and tightening of liquidity in
credit markets, volatility or significant realignments in currency markets, increases in interest rates, inflation,
corporate or sovereign defaults, natural disasters, terrorism or political uncertainty.

In recent years, regional and global capital markets and economies have experienced periods of significant
disruption and volatility. If these conditions continue or if current conditions materially worsen, our business may be
adversely affected, which may have a material impact on our business and results of operations.

For example, revenue generated by our Financial Advisory business is directly related to the volume and value

of the transactions in which we are involved. During periods of unfavorable or uncertain market or economic
conditions, the volume and value of M&A transactions may decrease, thereby reducing the demand for our Financial
Advisory services and increasing price competition among financial services companies seeking such engagements.
Our results of operations would be adversely affected by any such reduction in the volume or value of M&A
transactions. In addition, our profitability would be adversely affected due to our fixed costs and the possibility that
we would be unable to reduce our variable costs without reducing revenue or within a timeframe sufficient to offset
any decreases in revenue relating to changes in market and economic conditions.

Within our Financial Advisory business, we have typically seen that, during periods of economic strength and
growth, our Mergers and Acquisitions practice historically has been more active and our Restructuring practice has
been less active. Conversely, during periods of economic weakness and contraction, we typically have seen that our
Restructuring practice has been more active and our Mergers and Acquisitions practice has been less active. As a
result, revenue from our Restructuring practice has tended to correlate negatively to our revenue from our Mergers
and Acquisitions practice over the course of business cycles. These trends are cyclical in nature and subject to
periodic reversal. However, these trends do not cancel out the impact of economic conditions in our Financial
Advisory business, which may be adversely affected by a downturn in economic conditions leading to decreased
Mergers and Acquisitions practice activity, notwithstanding improvements in our Restructuring practice. Moreover,
revenue improvements in our Mergers and Acquisitions practice in strong economic conditions could be offset in
whole or in part by any related revenue declines in our Restructuring practice. While we generally have experienced
a counter-cyclical relationship between our Mergers and Acquisitions practice and our Restructuring practice, this
relationship may not continue in the future, and there is no certainty that strength in one practice will offset
weakness in the other.

Our Asset Management business also would be expected to generate lower revenue in a market or general

economic downturn. Under our Asset Management business’s arrangements, investment advisory fees we receive
typically are based on the market value of AUM. Accordingly, a decline in the prices of securities, or in specific
geographic markets or sectors that constitute a significant portion of our AUM (e.g., our emerging markets
strategies), would be expected to cause our revenue and income to decline by causing:

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the value of our AUM to decrease, which would result in lower investment advisory fees;

some of our clients to withdraw funds from our Asset Management business due to the uncertainty or
volatility in the market, or in favor of investments they perceive as offering greater opportunity or lower
risk, which would also result in lower investment advisory fees;

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

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

If our Asset Management revenue declines without a commensurate reduction in our expenses, our net income

would be reduced. In addition, in the event of a market or general economic downturn, our alternative investment
and private equity practices also may be impacted by a difficult fund raising environment and reduced exit
opportunities in which to realize the value of their investments. Fluctuations in foreign currency exchange rates may
also affect the levels of our AUM and our investment advisory fees. See “Fluctuations in foreign currency exchange
rates could reduce our stockholders’ equity and net income or negatively impact the portfolios of our Asset
Management clients and may affect the levels of our AUM” below.

Due to the nature of our business, financial results could differ significantly from period to period,

which may make it difficult for us to achieve steady earnings growth on a quarterly basis.

We experience significant fluctuations in quarterly revenue and profits. These fluctuations generally can be

attributed to the fact that we earn a substantial portion of our Financial Advisory revenue upon the successful
completion of a transaction or a restructuring, the timing of which is uncertain and is not subject to our control. As a
result, our Financial Advisory business is highly dependent on market conditions and the decisions and actions of
our clients, interested third parties and governmental authorities. For example, a client or counterparty could delay
or terminate an acquisition transaction because of a failure to agree upon final terms, failure to obtain necessary
regulatory consents or board of directors, or acquirer’s or stockholder approval, failure to secure necessary
financing, adverse market conditions or because the seller’s business is experiencing unexpected operating or
financial problems. Anticipated bidders for assets of a client during a restructuring transaction may not materialize
or our client may not be able to restructure its operations or indebtedness, for example, due to a failure to reach
agreement with its principal creditors. In addition, a bankruptcy court may deny our right to collect a “success” or
“completion” fee. In these circumstances, other than in engagements where we receive monthly retainers, we often

do not receive any advisory fees other than the reimbursement of certain expenses, despite the fact that we devote
resources to these transactions. Accordingly, the failure of one or more transactions to close either as anticipated or
at all could cause significant fluctuations in quarterly revenue and profits and could materially adversely affect our
business, financial condition and results of operations. For more information, see “Management’s Discussion and
Analysis of Financial Condition and Results of Operations”.

In addition, our Asset Management revenue is particularly sensitive to fluctuations in our AUM. Asset

Management fees are predominantly based on average AUM as of the end of a quarter or month. As a result, a
reduction in AUM at the end of a quarter or month (as a result of market depreciation, withdrawals, fluctuations in
foreign currency exchange rates or otherwise) will result in a decrease in management fees. Similarly, the timing of
flows, contributions and withdrawals are often out of our control and may be inconsistent from quarter to quarter.
Incentive fees are driven by investment performance (either absolute performance or relative to an established
benchmark), which is directly impacted by market movements, and may therefore fluctuate from period to period.

As a result of quarterly fluctuations, it may be difficult for us to achieve steady revenue and earnings growth

on a quarterly basis.

Our ability to retain our managing directors and other key professional employees is critical to the

success of our business, including maintaining compensation levels at an appropriate level of costs, and
failure to do so may materially adversely affect our results of operations and financial position.

Our people are our most important asset. We must retain the services of our managing directors and other key

professional employees, and strategically recruit and hire new talented employees, to obtain and successfully
execute the Financial Advisory and Asset Management engagements that generate substantially all of our revenue.

In general, our industry continues to experience change and be subject to significant competitive pressures
with respect to the retention of top talent, which makes it more difficult for us to retain professionals. Loss of key
employees may occur due to perceived opportunity for promotion, compensation levels, work environment or other
individual reasons, some of which may be beyond our control. If any of our managing directors and other key
professional employees were to retire, join an existing competitor, form a competing company or otherwise leave us,
some of our clients could eventually choose to use the services of that competitor or some other competitor instead
of our services. In any such event, our investment banking fees, asset management fees or AUM could decline. The
employment arrangements, non-competition agreements and retention agreements we have or will enter into with
our managing directors and other key professional employees may not sufficiently prevent our managing directors
and other key professional employees from resigning from practice or competing against us. In addition, these
arrangements and agreements have a limited duration and expire after a certain period of time. We continue to be
subject to intense competition in the financial services industry regarding the recruitment and retention of key
professionals, and have experienced departures from and added to our professional ranks as a result.

Certain changes to our employee compensation arrangements may result in increased compensation and

benefits expense. In addition, any changes to the mix of cash and deferred incentive compensation granted to our
employees may affect certain financial measures applicable to our business, including ratios of compensation and
benefits expense to revenue, and may result in the issuance of increased levels of Lazard Ltd’s Class A common
stock, par value $0.01 per share (“Class A common stock”), to our employees upon vesting of restricted stock units
(“RSUs”), performance-based restricted stock units (“PRSUs”) or restricted stock awards in a particular year. Our
compensation levels, results of operations and financial position may be significantly affected by many factors,
including general economic and market conditions, our operating and financial performance, staffing levels and
competitive pay conditions.

The financial services industry, and all of the businesses in which we compete, are intensely competitive.

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

A number of factors increase the competitive risks of our Financial Advisory and Asset Management

businesses:

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there are relatively few barriers to entry impeding the launch of new asset management and financial
advisory firms, including a relatively low cost of entering these businesses, and the successful efforts of
new entrants into our lines of business, including major banks and other financial institutions, have
resulted in increased competition;

other industry participants will from time to time seek to recruit our employees away from us in order to
compete in our lines of business; and

certain of our Financial Advisory practices and Asset Management products are newly established and
relatively small.

In addition, many of our competitors have the ability to offer a wide range of products, from loans, deposit-
taking and insurance to brokerage, asset management and investment banking services, which may enhance their
competitive position. They may also have the ability to support investment banking, including financial advisory
services, with commercial banking, insurance and other financial services in an effort to gain market share, which
could result in pricing pressure in our businesses.

Competitive pressure could adversely affect our ability to attract new or retain existing clients, make
successful investments, retain our people or maintain AUM, any of which would adversely affect our revenue and
earnings.

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

We historically have earned a substantial portion of our revenue from advisory fees paid to us by our Financial

Advisory clients, which usually are payable upon the successful completion of a particular transaction or
restructuring. For example, for the year ended December 31, 2016, Financial Advisory services accounted for
approximately 56% of our consolidated net revenue. We expect that we will continue to rely on Financial Advisory
fees for a substantial portion of our revenue for the foreseeable future, and a decline in our advisory engagements or
the market for advisory services would adversely affect our business, financial condition and results of operations.

In addition, we operate in a highly competitive environment where typically there are no long-term contracted

sources of revenue. Each revenue-generating engagement typically is separately awarded and negotiated.
Furthermore, many businesses do not routinely engage in transactions requiring our services and, as a consequence,
our fee paying engagements with many clients are not likely to be predictable. We also lose clients each year,
including as a result of the sale or merger of a client, a change in a client’s senior management and competition from
other financial advisors and financial institutions. As a result, our engagements with clients are constantly changing
and our Financial Advisory fees could decline quickly due to the factors discussed above.

If the number of debt defaults, bankruptcies or other factors affecting demand for our Restructuring

services declines, our Restructuring revenue could suffer.

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

Potential underwriting and trading activities may expose us to risk.

In 2014, we took steps that have enabled us to act as an underwriter in public offerings and other distributions

of securities in order to buttress our Financial Advisory business. If we act as an underwriter, we may incur losses
and be subject to reputational harm to the extent that, for any reason, we are unable to sell securities we purchased as
an underwriter at the anticipated price levels. In addition, if we act as an underwriter, we may also be subject to
liability for material misstatements or omissions in prospectuses and other offering documents relating to offerings
we underwrite. In such cases, any indemnification provisions in the applicable underwriting agreement may not be
available to us or may not be sufficient to protect us against losses arising from such liability. Operational risk in
connection with any offering we underwrite could arise in the form of errors, deficiencies or noncompliance and
also could expose us to risk. In addition, indemnification provisions in our agreement with our clearing organization,
customer trading and other activities may expose us to off-balance sheet credit risk. Securities may have to be
purchased or sold at prevailing market prices in the event a customer fails to settle a trade on its original terms. We
seek to manage the risks associated with underwriting and customer trading activities through screening, internal
review and trading procedures and processes, but such procedures and processes may not be effective in all cases.

Our investment style in our Asset Management business, including the mix of asset classes and
investment strategies comprising our AUM, may underperform or generate less demand than other
investment approaches, which may result in significant client or asset departures, or a reduction in AUM.

Even when securities prices are rising generally, performance can be affected by investment style and mix of

asset classes. For example, many of the equity investment strategies in our Asset Management business share a
common investment orientation towards relative value investing. We believe this style tends to outperform the
market in some market environments and underperform it in others. In particular, a prolonged growth environment
may cause some of our investment strategies to go out of favor with some clients, advisors, consultants or third-
party intermediaries. In addition, all of our investment strategies are actively managed strategies which seek to
outperform relative to a benchmark or generate an absolute return. Management fees for actively managed
strategies tend to be higher than those charged for passively managed strategies. The perception that actively
managed strategies have, on average, underperformed relative to passively managed strategies over time, combined
with greater pressure on clients to acquire asset management services at lower costs, has contributed to increased
trends toward passively managed investment strategies. This, in turn may adversely affect demand for our strategies
or result in fee pressure on our business overall. In combination with poor performance relative to peers, changes in
personnel, extensive periods in particular market environments or other difficulties, the underperformance of our
investment style may result in significant client or asset departures or a reduction in AUM.

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

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

(cid:120)

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

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

third-party financial intermediaries, rating services, advisors or consultants may rate our products
poorly, which may result in client withdrawals and reduced asset flows; or

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

Over certain time periods, we may have a higher concentration of assets in certain strategies. To the extent
that this is the case, underperformance, changes in investment personnel or other changes in these strategies may

result in a withdrawal of assets. If a significant amount of clients withdraw from these strategies for any reason, our
revenues would decline and our operating results would be adversely affected.

Because many of our Asset Management clients can remove the assets we manage on short notice, we

may experience unexpected declines in revenue and profitability.

Our investment advisory contracts are generally terminable upon very short notice. Institutional and individual

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

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

Access to clients through intermediaries is important to our Asset Management business, and

reductions in referrals from such intermediaries or poor reviews of our products or our organization by such
intermediaries could materially reduce our revenue and impair our ability to attract new clients.

Our ability to market our Asset Management services relies in part on receiving mandates from the client base

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

Our Asset Management business relies on non-affiliated third-party service providers.

Our Asset Management business has entered into service agreements with third-party service providers for
client order management and the execution and settlement of client securities transactions. This business faces the
risk of operational failure of any of our clearing agents, the exchanges, clearing houses or other intermediaries we
use to facilitate our securities transactions. We oversee and manage these relationships. Poor oversight and control
or inferior performance or service on the part of the service provider could result in loss of customers and violations
of applicable rules and regulations. Any such failure could adversely affect our ability to effect transactions and to
manage our exposure to risk.

Fluctuations in foreign currency exchange rates could reduce our stockholders’ equity and net income

or negatively impact the portfolios of our Asset Management clients and may affect the levels of our AUM.

We are exposed to fluctuations in foreign currencies, including through advisory fees paid to our Financial

Advisory business and management fees paid to our Asset Management business. Our financial statements are
denominated in U.S. Dollars and, for the year ended December 31, 2016, we received approximately 36% of our
consolidated net revenue in other currencies, predominantly in euros, British Pounds and Australian Dollars. In
addition, we pay a significant amount of our expenses in such other currencies. The exchange rates of these
currencies versus the U.S. Dollar affect the carrying value of our assets and liabilities as well as our revenues,

expenses and net income. We do not generally hedge such foreign currency exchange rate exposure arising in our
subsidiaries outside of the U.S. Fluctuations in foreign currency exchange rates may also make period to period
comparisons of our results of operations difficult.

Fluctuations in foreign currency exchange rates also can impact the portfolios of our Asset Management
clients. Client portfolios are invested in securities across the globe, although most portfolios are funded in a single
base currency. Foreign currency exchange rate fluctuations can adversely impact investment performance for a
client’s portfolio and also may affect the levels of our AUM. As our AUM include significant assets that are
denominated in currencies other than U.S. Dollars, an increase in the value of the U.S. Dollar relative to non-U.S.
currencies, with all other factors held constant, generally would result in a decrease in the dollar value of our AUM,
which, in turn, would result in lower U.S. Dollar-denominated revenue in our Asset Management business. As of
December 31, 2016, AUM with foreign currency exposure represented approximately 70% of our total AUM.

See Note 13 of Notes to Consolidated Financial Statements for additional information regarding the impact on

stockholders’ equity from currency translation adjustments and Note 2 of Notes to Consolidated Financial
Statements for additional information regarding the impact on operating results from currency transaction
adjustments.

Our results of operations may be affected by fluctuations in the fair value of positions held in our

investment portfolios.

We invest capital in various types of equity and debt securities in order to seed equity, debt and alternative
investment funds, and for general corporate purposes. Such investments are subject to market fluctuations due to
changes in the market prices of securities, interest rates or other market factors, such as liquidity. While we may
seek to hedge the market risk for some of these investments, an effective hedge may not be available, and if
available, may not be fully effective. These investments are adjusted for accounting purposes to fair value at the end
of each quarter regardless of our intended holding period, with any related gains or losses reflected in our results of
operations, and therefore may increase the volatility of our earnings, even though such gains or losses may not be
realized.

We have investments, primarily through our private equity businesses, in relatively high-risk, illiquid
assets, and we may lose some or all of the principal amount of these investments or fail to realize any profits
from these investments for a considerable period of time.

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

Our revenue from our private equity business is derived primarily from management fees, which are
calculated as a percentage of committed capital or invested capital depending on the stage of each respective fund.
Transaction and advisory fees are also earned. Incentive fees are earned if investments are profitable over a specified
threshold. Our ability to form new alternative investment funds is subject to a number of uncertainties, including
past performance of our funds, market or economic conditions, competition from other fund managers and the
ability to negotiate terms with major investors.

Extensive regulation of our businesses limits our activities and results in ongoing exposure to the

potential for significant penalties, including fines or limitations on our ability to conduct our businesses.

The financial services industry is subject to extensive regulation. We are subject to regulation by

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

We face the risk of significant intervention by regulatory authorities, including extended investigation and
surveillance activity, adoption of costly or restrictive new regulations and judicial or administrative proceedings that
may result in substantial penalties. Among other things, we could be fined or be prohibited from engaging in some
of our business activities. In addition, the regulatory environment in which we operate is subject to modification and
further regulation. Such changes may increase the expenses that we incur without necessarily leading to
commensurate increases in operating revenue and income. Certain laws and regulations within the U.S. and
externally include extraterritorial application that may lead to overlapping or conflicting legal and regulatory
burdens with additional risks and implementation expenses. New laws or regulations or changes in the enforcement
of existing laws or regulations applicable to us and our clients also may adversely affect our business, and our ability
to function in this environment will depend on our ability to constantly monitor and react to these changes.

The U.S. and other governments and institutions have taken actions, and may continue to take further actions,
in response to disruption and volatility in the global financial markets. Such further actions could include expanding
current or enacting new standards, requirements and rules that may be applicable to us and our subsidiaries. The
effect of any such expanded or new standards, requirements and rules is uncertain and could have adverse
consequences to our business and results of operations. For example, in July 2010, the Dodd-Frank Act was signed
into law, bringing sweeping changes in the regulation of financial institutions. Rulemaking under the Dodd-Frank
Act is still ongoing and the final scope and interpretations of those rules, and their impact on our business, though
still not fully known, could have implications for the manner in which we conduct our business and, consequently,
its profitability. In recent years, changes include requiring that certain financial instruments be cleared by a
regulated clearing organization and the new requirement to deliver margin payments for certain derivative
transactions. These changes will require adjustments to our operational processes as a result, which may impact
certain strategies and businesses. While we continue to examine the requirements of the Dodd-Frank Act and related
regulations, as well as new regulations that may become applicable to us in the U.S. and in the European Union (see
“Business—Regulation”), and previously announced actual or potential regulations that may be modified, we are not
able to predict the ultimate effect on us. In addition, several states and municipalities in the United States have
adopted “pay-to-play” rules, which could limit our ability to charge fees in connection with certain of our Private
Capital Advisory (which we historically referred to as Private Fund Advisory) engagements, and could therefore
affect the profitability of that portion of our business.

The regulatory environment in which our clients operate may also impact our business. For example, changes

in antitrust laws or the enforcement of antitrust laws could affect the level of M&A activity and changes in state
laws may limit investment activities of state pension plans. In addition, existing tax laws and regulations are under
review in the U.S. and in many other jurisdictions in which we and our clients operate. Actual and proposed changes
to these laws and regulations may reduce the level of M&A activity, including cross-border M&A activity.

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

Specific regulatory changes also may have a direct impact on the revenue of our Asset Management business.
In addition to regulatory scrutiny and potential fines and sanctions, regulators continue to examine different aspects
of the asset management industry. For example, the use of “soft dollars,” where a portion of commissions paid to
broker-dealers in connection with the execution of trades also pays for research and other services provided to
advisors, has been reexamined by different regulatory bodies and may in the future be limited or modified. In
particular, the enactment of the Markets in Financial Instruments Directive II (“MiFID II”), regulates the use of soft
dollars for certain parts of our business. Although a substantial portion of the research relied on by our Asset
Management business in the investment decision-making process is generated internally by our investment analysts,
external research, including external research paid for with soft dollars, is important to the process. This external
research generally is used for information gathering or verification purposes, and includes broker-provided research,
as well as third-party provided databases and research services. The ultimate impact of MiFID II on our use of soft
dollars is uncertain, although it may reduce our ability to utilize commissions to pay for research services and other
soft dollar services. This would require changes to our operational processes and may result in increased costs
allocated to research services. For the year ended December 31, 2016, our Asset Management business obtained
research and other services through third-party soft dollar arrangements, the total cost of which we estimate to be
approximately $23 million.

In addition, new regulations affecting the asset management business, including those regarding the
management of U.S. mutual funds, hedge funds, UCITs funds and the use of certain investment products may
impact our Asset Management business and result in increased costs. For example, the European Union has
adopted updated directives on the coordination of laws, regulations and administrative provisions relating to
undertakings for collective investment in transferable securities (“UCITS V”) with respect to various subjects.
Among other things, UCITS V establishes remunerations policies which may impact the structure of
compensation for certain portfolio managers and other personnel within the Company. UCITS V also
establishes certain regulations governing oversight and independence of depository functions. While these
rules have already been implemented, they could further impact our personnel or result in changes to our
operations, resulting in increased costs to the business. In addition, many regulators around the world, including
those in the U.S., continue to adopt disclosure requirements impacting the asset management business, as well as
changes to the laws, rules and regulations relating to recordkeeping and reporting obligations.

Legislators and regulators around the world continue to explore changes to, and additional oversight of, the

financial industry generally. The impact of the potential changes on us are uncertain and may result in an increase in
costs or a reduction of revenue associated with our businesses.

See “Business—Regulation” above for a further discussion of the regulatory environment in which we

conduct our businesses.

The financial services industry faces substantial litigation and regulatory risks, and we may face
damage to our professional reputation and legal liability if our services are not regarded as satisfactory or if
conflicts of interest should arise.

As a financial services firm, we depend to a large extent on our relationships with our clients and our
reputation for integrity and high-caliber professional services to attract and retain clients. As a result, if a client is
not satisfied with our services, such dissatisfaction may be more damaging to our business than to other types of
businesses. Moreover, our role as advisor to our clients on important transactions involves complex analysis and the
exercise of professional judgment, including, if appropriate, rendering “fairness opinions” in connection with
mergers and other transactions. Our role as advisor to our sovereign and government clients in particular may
occasionally result in increased publicity of our involvement with, and our advice to, such clients.

In recent years, the volume of claims and amount of damages claimed in litigation and regulatory proceedings

against financial advisors has been increasing. The activities of our Financial Advisory business may subject us to
the risk of significant legal actions by our clients and third parties, including our clients’ stockholders, under
securities or other laws. Such legal actions may include allegations relating to aiding and abetting breaches of
fiduciary duties and to materially false or misleading statements made in connection with securities and other
transactions. We may also be exposed to potential liability for the fairness opinions and other advice provided to
participants in corporate transactions. In our Asset Management business, we make investment decisions on behalf

of our clients which could result in substantial losses. Many of our business activities may subject us to the risk of
legal actions alleging negligence, misconduct, breach of fiduciary duty or breach of contract.

We increasingly confront actual and potential conflicts of interest relating to our Financial Advisory business,

as well as to the fact that we have both a Financial Advisory business and an Asset Management business. It is
possible that actual, potential or perceived conflicts of interest could give rise to client dissatisfaction, litigation or
regulatory enforcement actions. Appropriately identifying and managing actual or perceived conflicts of interest is
complex and difficult, and our reputation could be damaged if we fail, or appear to fail, to deal appropriately with
one or more potential or actual conflicts of interest. We have adopted various policies, controls and procedures to
address or limit actual or perceived conflicts of interest. However, these policies, controls and procedures may not
be adhered to by our employees or be effective in reducing the applicable risks. Any failure of, or failure to adhere
to, these policies, controls and procedures may result in regulatory sanctions or client litigation.

Our Financial Advisory engagements typically include broad indemnities from our clients and provisions
designed to limit our exposure to legal claims relating to our services, but these provisions may not protect us or
may not be available or adhered to in all cases. We also are subject to claims arising from disputes with employees
for alleged wrongful termination, discrimination or harassment, among other things. These risks often may be
difficult to assess or quantify, and their existence and magnitude often remain unknown for substantial periods of
time.

We may incur significant legal expenses in defending against litigation or regulatory action against us.
Substantial legal liability or significant regulatory action against us could materially adversely affect our business,
financial condition or results of operations and cause significant reputational harm to us, which could seriously harm
our business.

Employee misconduct, which is difficult to detect and deter, could harm us by impairing our ability to

attract and retain clients and subjecting us to significant legal liability and reputational harm.

There have been a number of highly publicized cases involving fraud or other misconduct by employees in the

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

In recent years, the U.S. Department of Justice and the SEC have also devoted greater resources to the
enforcement of the Foreign Corrupt Practices Act. In addition, the United Kingdom, France and other jurisdictions
have expanded the reach of their anti-bribery laws. While we have developed and implemented policies and
procedures designed to ensure compliance with anti-bribery and other laws, such policies and procedures may not be
effective in all instances to prevent violations. Any determination that we have violated these laws could subject us
to, among other things, civil and criminal penalties, material fines, profit disgorgement, injunction against future
conduct, securities litigation and reputational damage, any one of which could adversely affect our business,
financial position and results of operations.

A failure in or breach of our information systems or infrastructure, or those of third parties with which
we do business, including as a result of cyber attacks, could disrupt our businesses, lead to reputational harm
and legal liability or otherwise impact our ability to operate our business.

Our operations rely on the secure processing, storage and transmission of confidential and other information
involving our computer systems, hardware, software and networks, which we refer to as information systems, and
involving the information systems of third parties with which we do business. Such information systems, which
frequently include “cloud”-based networks and services, may be subject to unauthorized access, computer viruses or
other malicious code or other events that could have a security impact, and there can be no assurance that we will
not suffer material losses relating to cyber attacks on, or other security breaches involving, our information systems,
despite taking protective measures to prevent such breaches. The increased use of mobile technologies can heighten
these and other operational risks. If a successful cyber attack or other security breach were to occur, our confidential
or proprietary information, or the confidential or proprietary information of our clients or their counterparties, that is
stored in, or transmitted through, such information systems could be compromised or misappropriated. Any such
cyber attack or other security breach, or any disruption of or failure in the physical or logical infrastructure or
operating systems that support such information systems or our businesses, could significantly impact our ability to
operate our businesses and could result in reputational damage, legal liability, the loss of clients or business
opportunities and financial losses that are either not insured against or not fully covered through any insurance
maintained by us. As cyber threats continue to evolve, we may also be required to expend additional resources on
information security and compliance costs in order to continue to modify or enhance our protective measures or to
investigate and remediate any information security vulnerabilities or other exposures.

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

growth.

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

Particularly in our Asset Management business, we rely heavily on our financial, accounting, trading,

compliance and other data processing systems, and those of our third party vendors or service providers who support
these functions. We expect that we will need to review whether to continue to upgrade and expand the capabilities of
these systems in the future to avoid disruption of, or constraints on, our operations. However, if any of these systems
do not operate properly or are disabled, including for reasons beyond our control, we could suffer financial loss, a
disruption of our businesses, liability to clients, regulatory intervention or reputational damage. The inability of our
systems (or those of our vendors or service providers) to accommodate an increasing volume of transactions also
could constrain our ability to expand our businesses. In addition, errors resulting from these issues or from human
error when conducting a trade or other transaction could expose us to significant risk.

In addition, if we were to experience a local or regional disaster or other business continuity problem, such as
a pandemic or other man-made or natural disaster, our continued success will depend, in part, on the availability of
our personnel and office facilities and the proper functioning of our computer, telecommunications, transaction
processing and other related systems and operations, as well as those of third parties on whom we rely. Such events
could lead us to experience operational challenges, and our inability to successfully recover could materially disrupt
our businesses and cause material financial loss, regulatory actions, reputational harm or legal liability.

For additional information regarding operational risks with respect to our businesses, see “Management’s

Discussion and Analysis of Financial Condition and Results of Operations—Operational Risk” below.

The soundness of third parties, including our clients, as well as financial, governmental and other

institutions, could adversely affect us.

We have exposure to many different industries, institutions, products and counterparties, and we routinely
execute transactions with counterparties in the financial services industry, including brokers and dealers, commercial

banks, investment banks, mutual and hedge funds and other institutions. Many of these transactions expose us to
credit risk in the event of default of our counterparty or client. In addition, our credit risk may be exacerbated when
the collateral held by us, if any, cannot be fully realized or is liquidated at prices not sufficient to recover the full
amount of the loan or derivative exposure due to us.

Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act

could materially adversely affect our business.

We have documented and tested our internal control procedures in order to satisfy the requirements of
Section 404 of the Sarbanes-Oxley Act, which requires annual management assessments of the effectiveness of our
internal controls over financial reporting and a report by our independent auditors regarding our internal control over
financial reporting. We are in compliance with Section 404 of the Sarbanes-Oxley Act as of December 31, 2016.
However, if we fail to maintain the adequacy of our internal controls, as such standards are modified, supplemented
or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have
effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act.
Failure to maintain an effective internal control environment could materially adversely affect our business.

We may pursue acquisitions, joint ventures, cooperation agreements or other growth or geographic

expansion strategies that may result in additional risks and uncertainties in our business and could present
unforeseen integration obstacles or costs.

We routinely assess our strategic position and may in the future seek acquisitions or other transactions or
growth strategies to further enhance our competitive position. We have in the past pursued joint ventures and other
transactions aimed at expanding the geography and scope of our operations. We expect to continue to explore
acquisitions, growth strategies and partnership or strategic alliance opportunities that we believe to be attractive.

Acquisitions, growth strategies and joint ventures involve a number of risks and present financial, managerial

and operational challenges. These risks and challenges include potential disruption of our ongoing business and
distraction of management, difficulty integrating personnel and financial and other systems, difficulty hiring
additional management and other critical personnel, and other challenges arising from the increased scope,
geographic diversity and complexity of our operations.

To the extent that we pursue business opportunities outside of the United States, including through
acquisitions, joint ventures or other geographic expansion of our existing businesses, we may become subject to
political, economic, legal, operational, regulatory and other risks that are inherent in operating in a foreign country,
including risks of potential price, capital and currency exchange controls, licensing requirements and other
regulatory restrictions, as well as the risk of hostile actions against or affecting our business or people. Our ability to
remain in compliance with local laws in a particular foreign jurisdiction could adversely affect our businesses and
our reputation.

In addition, our clients may react unfavorably to our acquisition, growth and joint venture strategies, we may
not realize any anticipated benefits from such strategies, we may be exposed to additional liabilities of any acquired
business or joint venture, we may be exposed to litigation in connection with an acquisition or joint venture
transaction, and we may not be able to renew on similar terms (or at all) previously successful joint ventures or
similar arrangements, any of which could materially adversely affect our revenue, financial position and results of
operations.

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

As of December 31, 2016, Lazard Group and its subsidiaries had approximately $1.2 billion in debt (including
capital lease obligations) outstanding, of which $500 million, $400 million and $300 million relate to Lazard Group
senior notes that mature in 2020, 2025 and 2027, respectively. This debt has certain mandated payment obligations,
which may constrain our ability to operate our business. If we decide to redeem or retire this debt before maturity,

we may be required to pay a significant premium to do so, which may adversely impact our earnings and affect our
financial position. In addition, in the future we may need to incur debt or issue equity in order to fund our working
capital requirements or refinance existing indebtedness, as well as to make acquisitions and other investments. The
amount of our debt obligations may impair our ability to raise debt or issue equity for financing purposes. Our
access to funds also may be impaired if regulatory authorities take significant action against us, or if we discover
that any of our employees had engaged in serious unauthorized or illegal activity. In addition, our borrowing costs
and our access to the debt capital markets depend significantly on our credit ratings. These ratings are assigned by
rating agencies, which may reduce or withdraw their ratings or place us on “credit watch” with negative implications
at any time.

Our share price may decline due to the large number of our common shares eligible for future sale.

As of December 31, 2016, Lazard Ltd’s authorized and unissued shares of Class A common stock include
approximately 15.2 million shares of our Class A common stock underlying RSUs, PRSUs, deferred stock units
(“DSUs”) and restricted stock awards that have been granted pursuant to Lazard Ltd’s 2008 Incentive Compensation
Plan (the “2008 Plan”). RSUs and restricted stock awards generally require future service, among other
requirements, as a condition for the delivery of the underlying shares of our Class A common stock (unless the
recipient is then eligible for retirement under the Company’s retirement policy) and convert into Class A common
stock on a one-for-one basis after the stipulated vesting periods. Such vesting events generally occur in the first
quarter of each year, at which point a large number of our shares of Class A common stock immediately become
available for sale. PRSUs generally require future service and satisfaction of performance-based vesting criteria as a
condition for the delivery of the underlying shares of Class A common stock, and the number of such shares that
may be received in connection with each PRSU generally may range from zero to two times the target number.

We have generally withheld a portion of the Class A common stock issued to our employees upon vesting of
RSUs or delivery of restricted stock to comply with minimum statutory tax withholding requirements. In addition,
we have historically repurchased in the open market and through privately negotiated transactions a significant
number of shares of our Class A common stock. If we were to cease to or were unable to repurchase shares of our
Class A common stock, the number of shares outstanding would increase over time, diluting the ownership of our
existing stockholders.

Furthermore, we cannot predict whether, when and how many shares of our Class A common stock will be

sold into the market and the effect, if any, that the possibility of market sales of shares of our Class A common
stock, the actual sale of such shares or the availability of such shares will have on the market price of our Class A
common stock or our ability to raise capital through the issuance of equity securities from time to time. There are
generally no restrictions on the sale of vested shares of Class A common stock held by our employees other than
prohibitions on sales during internal “blackout” periods imposed by us at points between quarterly earnings releases.

Lazard Ltd is a holding company and, accordingly, depends upon distributions from Lazard Group to

pay dividends and taxes and other expenses.

Lazard Ltd is a holding company and has no independent means of generating significant revenue. We control

Lazard Group through our indirect control of both of the managing members of Lazard Group. Our subsidiaries
incur income taxes on net taxable income of Lazard Group in their respective tax jurisdictions. We intend to
continue to cause Lazard Group to make distributions to our subsidiaries in an amount sufficient to cover all
applicable taxes payable by us and dividends, if any, declared by us. To the extent that our subsidiaries need funds to
pay taxes on their share of Lazard Group’s net taxable income, or if Lazard Ltd needs funds for any other purpose,
and Lazard Group is restricted from making such distributions under applicable law or regulation, or is otherwise
unable to provide such funds, it could materially adversely affect our business, financial condition or results of
operations.

Lazard Group is a holding company and therefore depends on its subsidiaries to make distributions to

Lazard Group to enable it to service its obligations under its indebtedness.

Lazard Group depends on its subsidiaries, which conduct the operations of its businesses, for distributions,

dividends and other payments to generate the funds necessary to meet its financial obligations, including payments

of principal and interest on its indebtedness. However, none of Lazard Group’s subsidiaries is obligated to make
funds available to it for servicing such financial obligations. The earnings from, or other available assets of, Lazard
Group’s subsidiaries may not be sufficient to pay dividends or make distributions or loans to enable Lazard Group to
make payments with respect to its financial obligations when such payments are due. In addition, even if such
earnings were sufficient, the agreements governing the current and future obligations of Lazard Group’s
subsidiaries, regulatory requirements with respect to our broker-dealer and other regulated subsidiaries, foreign
exchange controls and a variety of other factors may impede our subsidiaries’ ability to provide Lazard Group with
sufficient dividends, distributions or loans to fund its financial obligations, when due.

In the event of a change or adverse interpretation of relevant income tax law, regulation or treaty, or a

failure to qualify for treaty benefits, our overall tax rate may be substantially higher than the rate used for
purposes of our consolidated financial statements.

Our effective tax rate is based upon the application of currently applicable income tax laws, regulations and
treaties, current judicial and administrative interpretations of those income tax laws, regulations and treaties, and
upon our non-U.S. subsidiaries’ ability to qualify for benefits, including reduced withholding tax rates, among other
things, under those treaties, and that a portion of their income is not subject to U.S. tax as effectively connected
income. Those income tax laws, regulations and treaties, and the administrative and judicial interpretations of them,
are subject to change at any time, and any such change may be retroactive.

U.S. and foreign governments, institutions (including the European Union and the Organization of

Economically Developed Countries) and tax officials are actively reviewing many laws, regulations, and treaties that
currently govern the taxation of multinational companies. Any changes to such laws, regulations and treaties that
impact us could materially adversely affect our business, financial condition or results of operations. Furthermore,
U.S. lawmakers are considering several U.S. tax reform proposals. No proposed legislation in respect of
comprehensive tax reform has been filed. The details of the tax reform proposals under consideration, and the
likelihood that any of the proposals will be enacted, is uncertain. We are examining many aspects of the current
proposals and their potential impact on the Company. We are currently unable to predict the ultimate outcome of
any of these proposals and therefore our potential actions with respect to them.

In addition, the eligibility of our non-U.S. subsidiaries for treaty benefits generally depends upon, among
other things, at least 50% of the principal class of shares in such subsidiaries being “ultimately owned” by U.S.
citizens and persons who are “qualified residents” for purposes of the treaty. It is possible that this requirement may
not be met, and even if it is met, we may not be able to document that fact to the satisfaction of the U.S. Internal
Revenue Service (“IRS”). If our non-U.S. subsidiaries are not treated as eligible for treaty benefits, such subsidiaries
will be subject to additional U.S. taxes, including “branch profits tax” on their “effectively connected earnings and
profits” (as determined for U.S. federal income tax purposes) at a rate of 30% rather than a treaty rate of 5%.

Moreover, on October 13, 2016, the Treasury Department issued final and temporary regulations addressing

the U.S. income tax treatment of debt between related parties, which may limit the deduction of interest in respect of
such debt that is issued after April 4, 2016. These regulations could increase our effective tax rate in future periods;
however, any such increases should only affect periods beginning after 2024.

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

and our application of related policies and methods.

Our tax returns are subject to audit by federal, local and foreign tax authorities. These authorities may
successfully challenge certain tax positions or deductions taken by our subsidiaries. For example, tax authorities
may contest intercompany allocations of fee income, management charges or interest charges among affiliates in
different tax jurisdictions. While we believe that we have provided the appropriate required reserves (see Note 2 of
Notes to Consolidated Financial Statements), it is possible that a tax authority may disagree with all, or a portion, of
the tax benefits claimed. If a tax authority were to successfully challenge our positions, it could result in significant
additional tax costs or payments under the tax receivable agreement described below.

Uncertainty regarding the outcome of future arrangements between the European Union and the

United Kingdom may adversely affect our business.

The Company has a significant presence in many European Union countries, including the United Kingdom.

In June 2016, the U.K. voted in favor of a referendum to leave the European Union, and in February 2017 the U.K.’s
House of Commons voted to approve the initiation of formal exit discussions with the European Union. At the time
that the U.K. ultimately leaves the European Union, the commercial, regulatory and legal environment that would
exist, and to which the Company’s U.K. operations would be subject, would be impacted by the nature of
arrangements that are yet to be determined between the U.K and the European Union. These arrangements are hard
to predict, and uncertainty regarding their outcome may continue for a significant period of time. The Company
currently does not believe that any of the potential arrangements that are likely to be agreed would have a material
adverse impact on the Company’s business. These potential arrangements may, however, result in certain changes in
the way that we conduct our businesses, which could result in increased costs. In addition, the result of the
referendum and the uncertainty it produced has impacted geopolitical perspectives and macroeconomic factors
including interest rates, foreign currency exchange rates and equity markets, and it has increased volatility in many
of the markets in which we operate. If these conditions continue or if current conditions worsen, our businesses may
be adversely affected, which may impact our financial position and results of operations. See “Difficult market
conditions can adversely affect our business in many ways, including by reducing the volume of transactions
involving our Financial Advisory business and reducing the value or performance of the assets we manage in our
Asset Management business, which, in each case, could materially reduce our revenue or income and adversely
affect our financial position” above.

Our subsidiaries may be required to make payments under the Amended and Restated Tax Receivable

Agreement. The IRS may challenge the tax benefits that give rise to such payments and, under certain
circumstances, our subsidiaries may have made or could make payments under the Amended and Restated
Tax Receivable Agreement in excess of our subsidiaries’ cash tax savings.

As further discussed in “Management’s Discussion and Analysis of Financial Condition and Results of

Operations—Critical Accounting Policies and Estimates—Income Taxes” and Note 18 of Notes to Consolidated
Financial Statements, the Second Amended and Restated Tax Receivable Agreement, dated as of October 26, 2015
(the “Amended and Restated Tax Receivable Agreement”), between Lazard and LTBP Trust, a Delaware statutory
trust (the “Trust”), provides for the payment by our subsidiaries to the Trust of a significant portion of the cash
savings, if any, in U.S. federal, state and local income tax or franchise tax that we actually realize as a result of
certain tax benefits that are subject to the Amended and Restated Tax Receivable Agreement. Any amount paid by
our subsidiaries to the Trust will generally be distributed to the owners of the Trust, including our executive officers,
in proportion to their beneficial interests in the Trust. If the IRS successfully challenges the tax benefits described
above, under certain circumstances, our subsidiaries may have made or could make payments under the Amended
and Restated Tax Receivable Agreement in excess of our subsidiaries’ cash tax savings.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

We have made statements under the captions “Business,” “Risk Factors,” “Management’s Discussion and

Analysis of Financial Condition and Results of Operations” and in other sections of this Form 10-K that are
forward-looking statements. In some cases, you can identify these statements by forward-looking words such as
“may,” “might,” “will,” “should,” “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 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,
the numerous risks and uncertainties outlined in “Risk Factors,” including the following:

(cid:120)

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

a decline in our revenues, for example due to a decline in overall M&A activity, our share of the M&A
market or our 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 this Form 10-K 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-K to conform our prior statements to actual results or
revised expectations and we do not intend to do so.

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

(cid:120)

financial goals, including the ratio of awarded 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;

(cid:120)

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;

changes in foreign currency exchange rates;

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

effects of competition on our business; and

impact of future legislation and regulation on our business.

The Company is committed to providing timely and accurate information to the investing public, consistent

with our legal and regulatory obligations. To that end, the Company uses its websites, 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 various mutual funds, hedge funds and other investment products managed by 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-K.

Item 1B.

Unresolved Staff Comments

There are no unresolved written comments that were received from the SEC staff 180 days or more before

December 31, 2016 relating to our periodic or current reports under the Exchange Act.

Item 2.

Properties

The following table lists the properties used for the entire Lazard organization as of December 31, 2016. As a

general matter, one or both of our Financial Advisory and Asset Management segments (as well as our Corporate
segment) uses the following properties. Our London and other offices sublease 71,207 and 25,000 square feet,
respectively, to third parties. We remain fully liable for the subleased space to the extent that the subtenants fail to
perform their obligations under the subleases for any reason.

Location
New York City .....................

Other North America ...........

Paris .....................................

London .................................

Other Europe ........................

Asia, Australia and Other.....

Square Footage
413,375 square feet of
leased space
192,007 square feet of
leased space
148,502 square feet of
owned and leased space
142,371 square feet of
leased space
108,301 square feet of
leased space
103,772 square feet of
leased space

Principal office located at 30 Rockefeller Plaza

Offices

Boston, Charlotte, Chicago, Houston, Los Angeles,
Minneapolis, San Francisco and Toronto
Principal office located at 121 Boulevard Haussmann

Principal office located at 50 Stratton Street

Amsterdam, Bordeaux, Brussels, Frankfurt, Hamburg,
Lyon, Madrid, Milan, Nantes, Stockholm and Zurich
Beijing, Bogota, Buenos Aires, Dubai, Hong Kong,
Lima, Melbourne, Mumbai, Panama City, Perth,
Riyadh, Santiago, São Paulo, Seoul, Singapore,
Sydney and Tokyo

Item 3.

Legal Proceedings

The Company is involved from time to time in judicial, regulatory and arbitration proceedings and inquiries

concerning matters arising in connection with the conduct of our businesses, including proceedings initiated by
former employees alleging wrongful termination. The Company reviews such matters on a case-by-case basis and
establishes any required 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.

Item 4.

Mine Safety Disclosures

Not applicable.

Part II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities

Our Class A common stock is traded on The New York Stock Exchange under the symbol “LAZ.” The

following table sets forth, for the fiscal quarters indicated, the high and low sales prices per share of our Class A
common stock, as reported in the consolidated transaction reporting system, and the quarterly dividends declared
during 2016 and 2015.

Price Ranges of, and Dividends Declared on, Our Common Stock

2016
Fourth quarter ...................................................... $
Third quarter ....................................................... $
Second quarter ..................................................... $
First quarter ......................................................... $
2015
Fourth quarter ...................................................... $
Third quarter ....................................................... $
Second quarter ..................................................... $
First quarter ......................................................... $

Sales Price

Dividends
per Share of

High

Low

Common Stock

44.07 $
38.19 $
39.77 $
44.90 $

49.57 $
59.82 $
58.85 $
53.45 $

33.48 $
28.85 $
26.21 $
29.26 $

41.19 $
41.26 $
52.19 $
43.12 $

0.38
0.38
0.38
1.55

0.35
0.35
0.35
1.30

As of February 3, 2017, there were approximately 32 holders of record of our Class A common stock. This

does not include the number of shareholders that hold shares in “street-name” through banks or broker-dealers.

On February 3, 2017, the last reported sales price for our Class A common stock on the New York Stock

Exchange was $43.47 per share.

On February 1, 2017, the Board of Directors of Lazard declared a quarterly dividend of $0.38 per share, and a
special dividend of $1.20 per share, on our Class A common stock. The quarterly dividend and the special dividend
are payable on February 24, 2017, to stockholders of record on February 13, 2017.

Share Repurchases in the Fourth Quarter of 2016

The following table sets forth information regarding Lazard’s purchases of its Class A common stock on a

monthly basis during the fourth quarter of 2016. Share repurchases are recorded on a trade date basis.

Total
Number
of Shares
Purchased

Period
October 1 – October 31, 2016
Share Repurchase Program (1) ..................................... 742,393 $
Employee Transactions (2) ...........................................
4,735 $
November 1 – November 30, 2016
Share Repurchase Program (1) ..................................... 899,413 $
- $
Employee Transactions (2) ...........................................
December 1 – December 31, 2016
Share Repurchase Program (1) ..................................... 253,215 $
Employee Transactions (2) ...........................................
11,729 $
Total
Share Repurchase Program (1) ..................................... 1,895,021 $
16,464 $
Employee Transactions (2) ...........................................

Total
Number
of Shares
Purchased
as Part of
Publicly
Announced
Plans or
Programs

Average
Price Paid
per Share

Approximate
Dollar Value of
Shares that May
Yet Be Purchased
Under the Plans or
Programs
(cid:3)(cid:3)

(cid:3)(cid:3)

(cid:3)
35.28 742,393 $ 164.3 million
-
-
36.64

38.71 899,413 $ 365.5 million
-
- (cid:3)(cid:3) (cid:3)(cid:3)

(cid:3)

40.85 253,215 $ 355.1 million
-
-
40.74

37.65 1,895,021 $ 355.1 million
-
- (cid:3)(cid:3) (cid:3)(cid:3)
39.56

(cid:3)

(1) During the years ended December 31, 2016, 2015, and 2014, the Board of Directors of Lazard authorized the

repurchase of Class A common stock as set forth in the table below.

Date
April 2014 ................................................................... $
February 2015 ............................................................. $
January 2016 ............................................................... $
April 2016 ................................................................... $
November 2016 ........................................................... $

Expiration

200,000 December 31, 2015
150,000 December 31, 2016
200,000 December 31, 2017
113,182 December 31, 2017
236,000 December 31, 2018

Repurchase
Authorization

A significant portion of the Company’s purchases under the share repurchase program are used to offset a
portion of the shares that have been or will be issued under the 2008 Plan. Purchases under the share
repurchase program may be 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 quarter
to quarter due to a variety of factors. Amounts shown in this line item include repurchases of Class A common
stock and exclude the shares of Class A common stock withheld by the Company to meet the minimum
statutory tax withholding requirements as described below.

(2) Under the terms of the 2008 Plan, upon the vesting of RSUs, PRSUs, DSUs and delivery of restricted Class A
common stock, shares of Class A common stock may be withheld by the Company to meet the minimum
statutory tax withholding requirements. During the three month period ended December 31, 2016, the
Company satisfied such obligations in lieu of issuing (i) 4,753 shares of Class A common stock upon the
vesting of 12,835 RSUs and (ii) 8,042 shares of Class A common stock upon the vesting of 17,596 shares of
restricted Class A common stock.

During the year ended December 31, 2016, the Company had in place trading plans under Rule 10b5-1 of the

Securities Exchange Act of 1934, pursuant to which it effected stock repurchases in the open market.

Equity Compensation Plan Information

See Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder

Matters—Equity Compensation Plan Information.”

Stock Performance

The stock performance graph below compares the performance of an investment in our Class A common
stock, from December 31, 2011 through December 31, 2016, with that of the S&P 500 Index and the S&P Financial
Index. The graph assumes $100 was invested at the close of business on December 31, 2011 in each of our Class A
common stock, the S&P 500 Index and the S&P Financial Index. It also assumes that dividends were reinvested on
the date of payment without payment of any commissions. The performance shown in the graph represents past
performance and should not be considered an indication of future performance.

Other Matters

None.

Item 6.

Selected Financial Data

The following table sets forth selected consolidated financial data for the Company for all years presented.

The consolidated statements of financial condition and operations data as of and for each of the years in the

five-year period ended December 31, 2016 have been derived from Lazard Ltd’s consolidated financial statements.
The audited consolidated statements of financial condition as of December 31, 2016 and 2015 and audited
consolidated statements of operations for each of the years in the three year period ended December 31, 2016 are
included in this Form 10-K. The audited consolidated statements of financial condition as of December 31, 2014,
2013 and 2012, and the audited consolidated statements of operations for the years ended December 31, 2013 and
2012, are not included in this Form 10-K. Historical results should not be considered an indication of results for any
future period.

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

Selected Consolidated Financial Data

Consolidated Statements of Operations Data
Net Revenue:

2016

(cid:3)

(cid:3)(cid:3)

2015

As Of Or For The Year Ended December 31,
2014
(dollars in thousands, except for per share amounts)
(cid:3)

2013

2012

Financial Advisory (a) ........................................ $
Asset Management (b) ........................................
Corporate (c) .......................................................
Net Revenue ..............................................................
Compensation and Benefits (d) .................................
Other Operating Expenses (e) ...................................
Total Operating Expenses .........................................
Operating Income (Loss) .......................................... $
Net Income ................................................................ $
Net Income Attributable to Lazard Ltd ..................... $
Net Income Per Share of
Class A Common Stock:

(cid:3) (cid:3)(cid:3)

Basic ................................................................... $
Diluted ................................................................ $

Dividends Declared Per Share of Class
A Common Stock ................................................... $
Consolidated Statements of Financial
Condition Data
Total Assets (f).......................................................... $
Total Debt (g)............................................................ $
Total Lazard Ltd Stockholders’ Equity ..................... $
Total Stockholders’ Equity ....................................... $
Other Data
Assets Under Management:

(cid:3) (cid:3)(cid:3)

1,301,044 $
1,051,316
(18,989)
2,333,371
1,340,543
475,367
1,815,910
517,461 $
393,692 $
387,698 $

1,279,628 $
1,111,105
(37,125)
2,353,608
1,319,746
1,050,482
2,370,228
(16,620) $
992,932 $
986,373 $

1,206,734 $
1,134,595
(40,882)
2,300,447
1,313,606
467,376
1,780,982
519,465 $
434,063 $
427,277 $

980,577 $ 1,049,090
896,260
(32,902)
1,912,448
1,351,129
437,434
1,788,563
123,885
92,785
84,309

1,039,130
(34,355 )
1,985,352
1,278,534
490,011
1,768,545
216,807 $
165,114 $
160,212 $

(cid:3) (cid:3) (cid:3)(cid:3)

3.11 $
2.92 $

(cid:3) (cid:3) (cid:3)(cid:3)

7.87 $
7.40 $

(cid:3) (cid:3)(cid:3) (cid:3)(cid:3)
3.49 $
3.20 $

(cid:3)(cid:3)(cid:3)(cid:3)(cid:3) (cid:3)(cid:3)
1.33 $
1.21 $

2.69 $

2.35 $

1.20 $

1.00 $

(cid:3)
0.72
0.65

1.16

(cid:3) (cid:3) (cid:3)(cid:3)

4,556,508 $
1,195,805 $
1,235,987 $
1,293,813 $

4,477,774 $
998,386 $
1,313,455 $
1,367,306 $

(cid:3) (cid:3) (cid:3)(cid:3)

(cid:3)(cid:3)(cid:3)(cid:3)(cid:3) (cid:3)(cid:3)

(cid:3) (cid:3)(cid:3) (cid:3)(cid:3)

(cid:3)
3,325,329 $ 3,002,553 $ 2,980,413
1,053,458 $ 1,055,600 $ 1,088,233
569,656
651,540
(cid:3)

706,744 $
770,057 $
(cid:3) (cid:3)(cid:3) (cid:3)(cid:3)

560,209 $
629,998 $
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3) (cid:3)(cid:3)

As of December 31 ............................................. $197,910,000 $186,380,000 $197,103,000 $ 186,924,000 $ 167,060,000
Average During Year .......................................... $194,808,000 $195,987,000 $196,037,000 $ 173,702,000 $ 155,549,000
2,513

Total Headcount, As of December 31 .......................

2,403

2,523

2,781

2,610

Notes (in thousands of dollars):
(a) Financial Advisory net revenue consists of the following:

2016
M&A and Other Advisory ................................................. $ 1,030,891 $ 1,104,146 $ 1,010,830 $ 768,790 $ 792,928
73,403
Capital Raising ...................................................................
866,331
182,759
201,722
Financial Advisory Net Revenue ........................... $ 1,301,044 $ 1,279,628 $ 1,206,734 $ 980,577 $ 1,049,090

78,916
Total Strategic Advisory .............................................. 1,099,322 1,173,777 1,091,973 847,706
114,761 132,871

Restructuring ......................................................................

105,851

81,143

69,631

68,431

2012

For The Year Ended December 31,
2013
2014
2015

(b) Asset Management net revenue consists of the following:

2016
Management Fees .............................................................. $ 966,797 $ 1,000,018 $ 1,018,772 $ 903,956 $ 806,044
43,661
Incentive Fees ....................................................................
46,555
Other Income .....................................................................
Asset Management Net Revenue ................................. $ 1,051,316 $ 1,111,105 $ 1,134,595 $ 1,039,130 $ 896,260

51,866
63,957

25,075
86,012

78,342
56,832

15,590
68,929

2012

For The Year Ended December 31,
2013
2014
2015

(c)

(d)

“Corporate” includes interest expense (net of interest income), investment income (losses) from certain
investments and net revenue earned by LFB through its commercial banking operations.
Includes (i) in 2013, charges of $51,399 relating to the acceleration of unrecognized amortization expense
pertaining to previously granted deferred incentive compensation, severance and benefit payments and other
compensation-related costs, all relating to the cost saving initiatives announced by the Company in October

(e)

2012, and $12,203 related to incentive compensation expense related to private equity transactions for which
revenue may be recognized in the future and (ii) in 2012, charges of $21,754 recorded in the first quarter
pertaining to severance costs and benefit payments associated with staff reductions, including the acceleration
of unrecognized amortization expense of deferred incentive compensation previously granted to individuals
being terminated, and $99,987 recorded in the fourth quarter relating to the acceleration of unrecognized
amortization expense pertaining to previously granted deferred incentive compensation, severance and benefit
payments and other compensation-related costs relating to the cost saving initiatives announced by the
Company in October 2012.
Includes (i) in 2016, non-compensation costs of $30,067 due to the change in fair value of the contingent
consideration associated with the Edgewater business acquisition, (ii) in 2015, non-compensation costs of
$547,691 relating to the provision pursuant to the tax receivable agreement; $60,219 relating to the
redemption of a significant portion of the Company’s 6.85% senior notes maturing on June 15, 2017 and
$1,114 of expenses relating to the partial extinguishment of the tax receivable obligation, (iii) in 2014, non-
compensation costs of $18,307 relating to the provision pursuant to tax receivable agreement, (iv) in 2013,
non-compensation costs of $1,249 relating to the provision pursuant to the tax receivable agreement, $13,304
relating to the cost saving initiatives announced by the Company in October 2012 and $54,087 related to the
refinancing of the Company’s 7.125% senior notes maturing on May 15, 2015, and (v) in 2012, non-
compensation costs of $2,905 recorded in the first quarter associated with staff reductions and $2,589 recorded
in the fourth quarter relating to the cost saving initiatives announced by the Company in October 2012.

(f) Reflects the retrospective application of new guidance adopted by the Company on classification of debt

issuance costs. See Note 3 of Notes to Consolidated Financial Statements.

(g) Represents the aggregate amount reflected in the Company’s consolidated statements of financial condition

relating to senior debt and capital lease obligations and reflects the retrospective application of new guidance
adopted by the Company on classification of debt issuance costs. See Note 3 of Notes to Consolidated
Financial Statements.

Item 7.

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

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

Business Summary

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:

(cid:120)

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”) and other strategic matters, restructurings, capital structure, capital raising,
corporate preparedness and various other financial matters, and

Asset Management, which offers a broad range of global investment solutions and investment
management services in equity and fixed income 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 and assets and liabilities associated with Lazard Group’s
Paris-based subsidiary, Lazard Frères Banque SA (“LFB”).

Our consolidated net revenue was derived from the following segments:

Financial Advisory ............................................................
Asset Management ............................................................
Corporate ...........................................................................
Total ..................................................................................

56%
45
(1)
100%

54 % (cid:3)(cid:3)
47 (cid:3)(cid:3)
(1 ) (cid:3)(cid:3)
100 % (cid:3)(cid:3)

53%
49
(2)
100%

Year Ended December 31,
2015

(cid:3)(cid:3)

2016

2014

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 (see Note 12 of Notes to Consolidated Financial Statements), (ii)
a mezzanine fund, which invests in mezzanine debt of a diversified selection of small-to mid-cap European
companies and (iii) 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 assets under management (“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.

Equity market indices for developed and emerging markets at December 31, 2016 increased as compared to

such indices at December 31, 2015. In the global M&A markets during 2016, the value and number of all completed
M&A transactions decreased as compared to the same period in the prior year, as did the subset of such transactions
involving values greater than $500 million. During the same time, the value and number of all announced M&A
transactions, including the subset of such transactions involving values greater than $500 million, also decreased.
During 2016, global restructuring activity, as measured by the number of corporate defaults, increased as compared
to 2015, primarily due to a higher level of defaults in the energy sector.

Entering 2017, volatile market conditions continue. On an ongoing basis, regional macroeconomic and
geopolitical factors, including any potential regional tax or regulatory reform, may impact our business. However,
corporate cash balances remain high, and interest rates remain low for companies with strong credit ratings.
Although market volatility may continue and may affect our business in 2017, the longer-term trends appear to
remain favorable for both of our businesses.

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

(cid:120)

Financial Advisory – The fundamentals for continued M&A activity appear to remain in place. Demand
continues for expert, independent strategic advice that can be levered across geographies and our range
of advisory capabilities. The global scale and breadth of our Financial Advisory business allows us to
advise on large, complex cross-border transactions across a variety of industries. In addition, we believe
our businesses throughout the emerging markets position us for growth in these markets, while
enhancing our relationships with, and the services that we can provide to, clients in other economies. In
the third quarter of 2016, we expanded our North American Financial Advisory business through the
acquisition of an independent financial advisory firm based in Canada. In addition, in October 2016, we
acquired the portion of MBA Lazard that we did not previously own, thereby fully integrating our Latin
American operations. We believe that these transactions have augmented the strength of our Financial
Advisory business throughout the Americas.

Asset Management – In the short to intermediate term, we expect most investor demand will come from
defined benefit and defined contribution plans in the developed economies because of their sheer scope
and size. Over the longer term, we expect an increasing share of our AUM to come from the developing
economies in Asia, Latin America and the Middle East, as their retirement systems evolve and
individual wealth is increasingly deployed in the financial markets. Our global footprint is already well
established in the developed economies and we expect our business in the developing economies will
continue to expand. Given our globally diversified platform and our ability to provide investment
solutions for a global mix of clients, we believe we are positioned to benefit from growth that may occur
in the asset management industry. We are continually developing and seeding new investment strategies
that extend our existing platforms. Recent examples of growth initiatives include the following
investment strategies: European Long/Short Equity, various Quantitative Equity strategies, various
Multi-Asset strategies, a Real Assets strategy and Middle East North African Equities.

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 this 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 prudent management of our costs and expenses, the efficient
use of our assets and the return of capital to our shareholders.

Certain 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 and number of

all completed transactions, including completed transactions with values greater than $500 million, decreased in
2016 as compared to 2015. With respect to announced M&A transactions, the value and number of all transactions,
including announced transactions with values greater than $500 million, also decreased in 2016 as compared to
2015.

Year Ended December 31,

2016

2015
($ in billions)

%
Incr / (Decr)

Completed M&A Transactions:

All deals:

Value ...................................................................... $
Number ...................................................................

3,685 $
35,788

4,095
39,922

Deals Greater than $500 million:

Value ...................................................................... $
Number ...................................................................

2,824 $
1,118

3,145
1,257

Announced M&A Transactions:

All deals:

Value ...................................................................... $
Number ...................................................................

3,838 $
37,148

4,661
40,376

Deals Greater than $500 million:

Value ...................................................................... $
Number ...................................................................

2,896 $
1,216

3,671
1,314

(10)%
(10)%

(10)%
(11)%

(18)%
(8)%

(21)%
(7)%

Source: Dealogic as of January 6, 2017.

Global restructuring activity during 2016, as measured by the number of corporate defaults, increased as
compared to 2015. The number of defaulting issuers increased to 142 in 2016, according to Moody’s Investors
Service, Inc., as compared to 108 in 2015, primarily due to a higher level of defaults in the energy sector.

Net revenue trends in Financial Advisory for M&A and Other Advisory and Restructuring 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. For example, our M&A and Other
Advisory revenue, which includes Sovereign and Capital Structure Advisory revenue, decreased 7% in 2016 as

compared to 2015. The industry statistics for global M&A transactions described above reflect a 10% decrease in
the value and number of all completed transactions in 2016 as compared to 2015. For M&A deals with values
greater than $500 million, the value and number of completed transactions in 2016 decreased 10% and 11%,
respectively, as compared to 2015.

Asset Management

The percentage change in major equity market indices (i) at December 31, 2016, as compared to such indices
at December 31, 2015, and (ii) at December 31, 2015, as compared to such indices at December 31, 2014, is shown
in the table below.

Percentage Changes
December 31,

2016 vs. 2015

2015 vs. 2014

MSCI World Index ...............................................................................
Euro Stoxx ............................................................................................
MSCI Emerging Market .......................................................................
S&P 500 ...............................................................................................

5 %
1 %
9 %
10 %

(3)%
4%
(17)%
(1)%

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. Our AUM at
December 31, 2016 increased 6% versus AUM at December 31, 2015, due to market appreciation and net inflows,
partially offset by adverse foreign exchange movements. Average AUM for 2016 decreased 1% as compared to
average AUM in 2015.

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, strategic advisory matters, restructuring and capital structure advisory services,
capital raising and similar transactions. 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. 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 a 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, principal investments in private equity funds and “equity
method” investments, 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 investments classified as “trading”, as well as due to changes in interest and currency
exchange rates and in the levels of cash, investments and indebtedness.

Although Corporate segment net revenue during 2016 is not significant compared to Lazard’s net revenue,

total assets in the Corporate segment represented 66% of Lazard’s consolidated total assets as of December 31,
2016, which are attributable to cash and cash equivalents, investments in debt and equity securities, interests in
alternative investment, debt, equity and private equity funds, deferred tax assets and certain assets associated with
LFB. LFB, as a registered bank, is engaged primarily in commercial and private banking services for clients and
funds managed by LFG and other clients, and asset-liability management.

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 2008 Incentive Compensation Plan (the “2008 Plan”), and (b) LFI and other
similar deferred compensation arrangements (see Note 14 of Notes to 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.

We believe that “awarded compensation and benefits expense” and the ratio of “awarded compensation and

benefits expense” to “operating revenue,” both non-U.S. GAAP measures, are the most appropriate measures to
assess the annual cost of compensation and provide the most meaningful 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-U.S. GAAP measure, as
modified by the following items:

(cid:120)

we deduct amortization expense recorded for accounting principles generally accepted in the
United States of America (“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)

(ii)

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 2017 related to
the 2016 year-end compensation process), including PRSU awards (based on the target payout
level);

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 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; and

we adjust for year-end foreign exchange fluctuations.

We also use “adjusted compensation and benefits expense” and the ratio of “adjusted compensation and

benefits expense” to “operating revenue,” both non-U.S. 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 “awarded compensation and benefits expense” and related ratios to “operating revenue,”
see the table under “Consolidated Results of Operations” below.

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
attain 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,
which compares to 55.8% and 56.5%, respectively, for the year ended December 31, 2016. While we have
implemented initiatives that we believe will assist us in continuing to attain a ratio within this range, there can be no
guarantee that such a ratio will be attained, 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 or various other factors could
prevent us from attaining 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. In 2016 and 2015, non-compensation expense included
expenses related to the redemption of the Company’s 6.85% senior notes due 2017 (the “2017 Notes”) (see Note 11
of Notes to Consolidated Financial Statements).

We believe that “adjusted non-compensation expense,” a non-U.S. GAAP measure, provides a more
meaningful 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 our “provision pursuant to the tax receivable agreement” and

“amortization and other acquisition-related costs”. “Amortization and other acquisition-related costs” include the
change in fair value of the contingent consideration associated with certain business acquisitions and pertain
primarily to the acquisition of Edgewater.

Provision for 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 (see Note 16 of Notes to Consolidated Financial Statements for
additional information).

In the second quarter of 2015, we released substantially all of our valuation allowance related to deferred tax

assets. When we are able to use the deferred tax assets in future periods to reduce our income taxes, we will be
required to pay a significant portion of the tax savings pursuant to our tax receivable agreement. We therefore also
recognized a related liability under the tax receivable agreement. In addition, in the third quarter of 2015, we
purchased a portion of our obligation relating to the tax receivable agreement, which had the effect of reducing such
liability.

See “Critical Accounting Policies and Estimates—Income Taxes” below and Notes 16 and 18 of Notes to

Consolidated Financial Statements for additional information regarding income taxes, our deferred tax assets, the
valuation allowance release in 2015 and the tax receivable agreement obligation.

Noncontrolling Interests

Noncontrolling interests primarily consist of amounts related to Edgewater’s management vehicles that the

Company is deemed to control but not own and, through May 2014, the amount attributable to LAZ-MD Holdings
LLC’s (“LAZ-MD Holdings”) ownership interest in the net income of Lazard Group. See Note 13 of Notes to
Consolidated Financial Statements for information regarding the Company’s noncontrolling interests. In May 2014,

the remaining Lazard Group common membership interests held by LAZ-MD Holdings were exchanged for shares
of the Company’s Class A common stock. Following the exchange, Lazard Group became a wholly-owned indirect
subsidiary of Lazard Ltd, and the sole issued and outstanding share of the Company’s Class B common stock was
automatically converted into one share of the Company’s Class A common stock pursuant to the provisions of the
Company’s bye-laws, resulting in only one outstanding class of common stock. See Note 1 of Notes to Consolidated
Financial Statements.

Consolidated Results of Operations

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

A portion of our net revenue is derived from transactions that are denominated in currencies other than the

U.S. dollar. Since the middle of 2014, the value of the U.S. dollar has strengthened against many other major
currencies. As a result, net revenue for the years ended December 31, 2016 and 2015 was negatively impacted in
comparison to the prior year period, with the effects mainly in 2015. The majority of the negative impact was offset
by the positive impact of the exchange rate movements on our operating expenses denominated in currencies other
than the U.S. dollar.

The consolidated financial statements are prepared in conformity with U.S. GAAP. Selected financial data

from the Company’s reported consolidated results of operations is set forth below, followed by a more detailed
discussion of both the consolidated and business segment results.

Year Ended December 31,
2015
($ in thousands)
Net Revenue .................................................................................... $ 2,333,371 $ 2,353,608
Operating Expenses:

2016

(cid:3)(cid:3)

Compensation and benefits ........................................................
Non-compensation .....................................................................
Amortization and other acquisition-related costs .......................
Provision pursuant to tax receivable agreement .........................
Total operating expenses .......................................................
Operating Income (Loss) ................................................................
Provision (benefit) for income taxes ..........................................
Net Income ......................................................................................
Less - Net Income Attributable to Noncontrolling Interests .........
Net Income Attributable to Lazard Ltd .......................................... $
Operating Income (Loss), as a % of net revenue ...........................

1,340,543
440,120
35,247
—
1,815,910
517,461
123,769
393,692
5,994
387,698 $
22.2%

1,319,746
496,970
5,821
547,691
2,370,228
(16,620 )
(1,009,552 )
992,932
6,559
986,373

$
(1.0 )%

2014

$ 2,300,447

1,313,606
442,682
6,387
18,307
1,780,982
519,465
85,402
434,063
6,786
427,277
22.6%

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

2016

Year Ended December 31,
2015
($ in thousands)

(cid:3)(cid:3)

2014

Operating Revenue:
Net revenue ...................................................................................... $
Adjustments:

Interest expense (a) .....................................................................
Revenue related to noncontrolling interests (b) ..........................
Private equity revenue adjustment (c) ........................................
Gain on acquisition of MBA Lazard (d) .....................................
(Gains) losses on investments pertaining to LFI (e) ...................
Operating revenue ............................................................................ $

2,333,371 $

2,353,608 $ 2,300,447

47,568
(20,614)
-
(12,668)
(3,318)
2,344,339 $

50,492
(15,592 )
(12,203 )
-
3,827

62,051
(14,956)
-
-
(7,326)
2,380,132 $ 2,340,216

(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) Revenue related to the consolidation of noncontrolling interests is excluded from operating revenue because

the Company has no economic interest in such amount.

transaction with the management team of the disposed business. Revenue of $24,388 relating to the disposal
of the business (which primarily represents the realization of carried interest at fair value) is adjusted for the
recognition of an obligation of $12,203 with the management of the disposed business, which obligation was
previously recognized for U.S. GAAP purposes.

(d) Represents a gain on the acquisition of MBA Lazard (which resulted from the increase in the fair value of the

Company’s investment in MBA Lazard prior to the acquisition).

(e) 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.

2016

Year Ended December 31,
2015
($ in thousands)

(cid:3)(cid:3)

2014

Compensation and Benefits Expense:
Total compensation and benefits expense ........................................ $ 1,340,543 $ 1,319,746
Adjustments:

(4,776 )
3,827
1,318,797

(11,900)
(3,318)
1,325,325

Noncontrolling interests (a) ........................................................
(Charges) credits pertaining to LFI (b) .......................................
Adjusted compensation and benefits expense ..................................
Deduct - amortization of deferred incentive compensation
awards ...........................................................................................
Total adjusted cash compensation and benefits expense (c) ............
Add:
336,086
Year-end deferred incentive compensation awards (d) ...............
26,398
Sign-on and other special incentive awards (e) ..........................
(27,186 )
Deduct - adjustments for estimated forfeitures (f) ...........................
Other adjustments (g) ......................................................................
(4,232 )
Awarded compensation and benefits expense ................................. $ 1,309,154 $ 1,329,112
Adjusted compensation and benefits expense, as
a % of operating revenue ..............................................................
Awarded compensation and benefits expense, as
a % of operating revenue ..............................................................(cid:3)

342,449
29,779
(27,917)
(8,079)

(352,403)
972,922

(320,751 )
998,046

55.8%(cid:3)

56.5%

$ 1,313,606

(4,567)
(7,326)
1,301,713

(299,230)
1,002,483

325,210
14,248
(25,459)
(11,172)
$ 1,305,310

55.4 %

55.8 % (cid:3)(cid:3)

55.6%

55.8%

(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.
Includes base salaries and benefits of $574,566, $584,098 and $569,596 for 2016, 2015 and 2014,
respectively, and cash incentive compensation of $398,356, $413,948 and $432,887 for the respective years.

(c)

(d) Deferred incentive compensation awards applicable to the relevant year-end compensation process (e.g.,

deferred incentive compensation awards granted in 2017, 2016 and 2015 related to the 2016, 2015 and 2014
year-end compensation processes, respectively).

(e) Represents deferred incentive compensation awards that are granted outside the year-end compensation

process, and includes grants to new hires, retention awards and performance units earned under PRSU grants.

(f) An estimate, based on historical experience and future expectations, for future forfeitures of the deferred

portion of such awards in order to present awarded compensation and benefits expense on a similar basis to
that under U.S. GAAP, which also considers estimated forfeitures.

(g) Represents an adjustment to the year-end foreign exchange “spot” rate from the full year average rate for year-

end incentive compensation awards.

Adjusted Non-Compensation Expense:
Total non-compensation expense ..................................................... $
Adjustments:

Noncontrolling interests (a) ........................................................
Charges pertaining to senior debt refinancing (b) ......................
Expense related to partial extinguishment of tax
receivable obligation ...............................................................
Professional fees related to acquisitions .....................................
Adjusted non-compensation expense ............................................... $
Adjusted non-compensation expense, as
a % of operating revenue .............................................................

2016

Year Ended December 31,
2015
($ in thousands)

(cid:3)(cid:3)

2014

440,120 $

496,970

442,682

(1,892)
(3,148)

(1,490 )
(60,219 )

(1,913)
-

-
(1,367)
433,713 $

(1,114 )

434,147

440,769

18.5%

18.2 %

18.8%

(a) Expenses related to the consolidation of noncontrolling interests are excluded because the Company has no

economic interest in such amounts.

(b) Charges pertaining to (i) the redemption of the remaining balance of the Company’s 2017 Notes in 2016 and
(ii) the redemption of a significant portion of the Company’s 2017 Notes in 2015 are excluded because of the
non-operating nature of such transactions. See “—Liquidity and Capital Resources—Financing Activities.”

2016

Year Ended December 31,
2015
($ in thousands)

(cid:3)(cid:3)

2014

Earnings From Operations:
Operating revenue ............................................................................ $ 2,344,339 $ 2,380,132 (cid:3)(cid:3)$ 2,340,216
Deduct:

(cid:3)(cid:3)

Adjusted compensation and benefits expense ............................
Adjusted non-compensation expense .........................................
Earnings from operations ................................................................. $
Earnings from operations, as a % of operating
revenue ..........................................................................................

(1,325,325)
(433,713)
585,301 $

(1,318,797 ) (cid:3)(cid:3) (1,301,713)
(440,769)
597,734

(434,147 ) (cid:3)(cid:3)
627,188 (cid:3)(cid:3)$

25.0%

26.4 % (cid:3)(cid:3)

25.5%

Headcount information is set forth below:

Headcount:

Managing Directors:

2016

As of December 31,
2015

2014

Financial Advisory .................................................................
Asset Management .................................................................
Corporate ...............................................................................
Total Managing Directors ......................................................

Other Employees:

Business segment professionals .............................................
All other professionals and support staff ...............................
Total .......................................................................................

149
92
20
261

1,276
1,244
2,781

139
90
18
247

1,173
1,190
2,610

139
81
16
236

1,139
1,148
2,523

Operating Results

Year Ended December 31, 2016 versus December 31, 2015

The Company reported net income attributable to Lazard Ltd of $388 million, as compared to net income of

$986 million in 2015. The changes in the Company’s operating results during these periods are described below.

Net revenue decreased $20 million, or 1%, with operating revenue decreasing $36 million, or 2%, as

compared to 2015. Fee revenue from investment banking and other advisory activities increased $22 million, or 2%,
primarily due to an increase in Restructuring revenue, which generally reflected a higher level of activity in the U.S.
energy sector in 2016. This increase was partially offset by a decrease in M&A and Other Advisory fees, which
primarily reflected a lower level of closings, and a decrease in the average transaction fee with respect to completed
transactions involving fees greater than $1 million, as compared to 2015. Asset Management fees, including
incentive fees, decreased $38 million, or 4%, as compared to 2015, due primarily to a decrease in average AUM, a
change in the mix of AUM and a decrease in incentive fees. In the aggregate, interest income, other revenue and
interest expense decreased $4 million as compared to 2015, primarily due to a $24 million gain in 2015 on the
disposal of the Company’s Australian private equity business (which relates primarily to the realization of carried
interest at fair value), partially offset by, in 2016, (i) the gain on the acquisition of MBA Lazard (which resulted
from the increase in the fair value of the Company’s investment in MBA Lazard prior to the acquisition) and (ii)
higher gains attributable to investments held in connection with LFI.

Compensation and benefits expense increased $21 million, or 2%, as compared to 2015, primarily due to

higher amortization expense.

Adjusted compensation and benefits expense (which excludes certain items and which we believe allows for

improved comparability between periods, as described above) was $1.325 billion, an increase of $6 million as
compared to $1.319 billion in 2015. The ratio of adjusted compensation and benefits expense to operating revenue
was 56.5% for 2016, as compared to 55.4% for 2015. Awarded compensation and benefits expense in 2016 was
$1.309 billion, a decrease of $20 million, or 2%, when compared to $1.329 billion in 2015. The ratio of awarded
compensation and benefits expense to operating revenue was 55.8% for each of 2016 and 2015. The year-end
deferred incentive compensation awarded for 2016 was $342 million, representing a $6 million, or 2%, increase
compared to 2015. As described above, when analyzing compensation and benefits expense on a full-year basis, we
believe that awarded compensation and benefits expense provides the most meaningful basis for comparison of
compensation and benefits expense between present, historical and future years.

Non-compensation expense decreased $57 million, or 11%, as compared to 2015, primarily due to charges of
$3 million and $60 million related to the redemption of the Company’s 2017 Notes in 2016 and 2015, respectively.
Adjusted non-compensation expense, which excludes such charges, as well as non-compensation costs relating to
noncontrolling interests, remained substantially unchanged as compared to 2015. The ratio of adjusted non-
compensation expense to operating revenue was 18.5%, as compared to 18.2% in 2015.

Amortization and other acquisition-related costs increased $29 million as compared to 2015, primarily due to

the change in fair value of the contingent consideration associated with the Edgewater business acquisition.

As a result of the possible utilization of certain deferred tax assets that are subject to the tax receivable
agreement, including the impact of the partial extinguishment of our tax receivable agreement obligation in the third
quarter of 2015, the provision pursuant to the tax receivable agreement in 2015 was $548 million (see Note 18 of
Notes to Consolidated Financial Statements for additional information).

Operating income increased $534 million as compared to 2015. In 2016, operating income included (i) a
charge relating to the redemption of the remaining balance of the Company’s 2017 Notes and (ii) amortization and
other acquisition-related costs. In 2015, operating income included (i) a charge relating to the redemption of a
significant portion of the Company’s 2017 Notes and (ii) the impact of the provision pursuant to the tax receivable
agreement described above.

Earnings from operations decreased $42 million, or 7%, as compared to 2015. In 2016, earnings from
operations excluded (i) a charge relating to the redemption of the remaining balance of the Company’s 2017 Notes
and (ii) amortization and other acquisition-related costs. In 2015, earnings from operations excluded (i) the charge
related to the redemption of a significant portion of the Company’s 2017 Notes and (ii) the impact of the provision
pursuant to the tax receivable agreement described above. Earnings from operations, as a percentage of operating
revenue, was 25.0%, as compared to 26.4% in 2015.

The provision for income taxes reflects an effective tax rate of 23.9%, as compared to 6,074.3% for 2015. The

unusually high effective tax rate in 2015 was primarily driven by (i) the reduction of operating income in 2015 as a
result of the provision pursuant to the tax receivable agreement, and (ii) the release of substantially all of our
valuation allowance related to deferred tax assets in 2015. See Notes 16 and 18 of Notes to Consolidated Financial
Statements and “Critical Accounting Policies—Income Taxes” below.

Net income attributable to noncontrolling interests remained substantially unchanged as compared to 2015.

Year Ended December 31, 2015 versus December 31, 2014

The Company reported net income attributable to Lazard Ltd of $986 million, as compared to net income of

$427 million in 2014. The changes in the Company’s operating results during these years are described below.

Net revenue increased $53 million, or 2%, with operating revenue increasing $40 million, or 2%, as compared
to 2014. Fee revenue from investment banking and other advisory activities increased $75 million, or 6%, primarily
due to increases in M&A and Other Advisory fees. The increase in M&A and Other Advisory fee revenue was
primarily due to an increase in the average transaction fee with respect to completed transactions involving fees
greater than $1 million as compared to 2014. Asset management fees, including incentive fees, decreased
$44 million, or 4%, as compared to 2014, due to a decrease in management fees from slightly lower average AUM,
a slight change in the mix of assets and a decrease in incentive fees relating to traditional investment products. In the
aggregate, interest income, other revenue and interest expense increased $23 million as compared to 2014, primarily
due to a $24 million gain on the disposal of the Company’s Australian private equity business (which primarily
related to the realization of carried interest at fair value), partially offset by lower investment gains from LFI.
Interest expense was lower due to the refinancing of the 2017 Notes.

Compensation and benefits expense increased $6 million as compared to 2014, primarily driven by an increase

in operating revenue.

Adjusted compensation and benefits expense (which excludes certain items and which we believe allows for
improved comparability between years, as described above) was $1.319 billion, an increase of $17 million, or 1%,
as compared to $1.302 billion in 2014. The ratio of adjusted compensation and benefits expense to operating
revenue was 55.4% for 2015, as compared to 55.6% for 2014. Awarded compensation and benefits expense in 2015
was $1.329 billion, an increase of $24 million, or 2%, when compared to $1.305 billion in 2014. The ratio of
awarded compensation and benefits expense to operating revenue was 55.8% for 2015 and 2014. The year-end

deferred incentive compensation awarded for 2015 was $336 million, representing an $11 million, or 3%, increase
compared to 2014. As described above, when analyzing compensation and benefits expense on a full-year basis, we
believe that awarded compensation and benefits expense provides the most meaningful basis for comparison of
compensation and benefits expense between present, historical and future years.

Non-compensation expense increased $54 million, or 12%, as compared to 2014, primarily due to a charge of

$60 million related to the redemption of a significant portion of the Company’s 2017 Notes. Adjusted non-
compensation expense, which excludes such charge, as well as non-compensation costs relating to noncontrolling
interests, decreased $7 million, or 2%, as compared to 2014. The ratio of adjusted non-compensation expense to
operating revenue was 18.2%, as compared to 18.8% in 2014.

Amortization of intangible assets remained substantially unchanged as compared to 2014.

As a result of the possible utilization of certain deferred tax assets that are subject to the tax receivable
agreement, including the impact of the partial extinguishment of our tax receivable agreement obligation in the third
quarter of 2015, the provision pursuant to the tax receivable agreement was $548 million in 2015, as compared to
$18 million in 2014 (see Note 16 of Notes to Consolidated Financial Statements for additional information).

Operating income, which included the charge relating to the redemption of a significant portion of the
Company’s 2017 Notes, as well as the impact of the provision pursuant to the tax receivable agreement described
above, decreased $536 million as compared to 2014.

Earnings from operations, which excluded the charge related to the redemption of a significant portion of the

Company’s 2017 Notes, as well as the impact of the provision pursuant to the tax receivable agreement described
above, increased $29 million, or 5%, as compared to 2014, and, as a percentage of operating revenue, was 26.4%, as
compared to 25.5% in 2014.

The provision for income taxes reflected an effective tax rate of 6,074.3%, as compared to 16.4% for 2014.

The increase in the effective tax rate in 2015 as compared to 2014 was primarily driven by (i) the negative impact on
“operating income (loss)” as a result of the provision pursuant to the tax receivable agreement described above, and
(ii) the provision (benefit) for income taxes, which was impacted by the recognition of deferred tax assets of $1,255
million and deferred tax expense of approximately $161 million relating to the partial extinguishment of the tax
receivable agreement obligation in the third quarter. See Note 16 of Notes to Consolidated Financial Statements.

Net income attributable to noncontrolling interests remained substantially unchanged as compared to 2014.

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:

2016

Year Ended December 31,
2015
($ in thousands)
M&A and Other Advisory ............................................................... $ 1,030,891 $ 1,104,146
69,631
Capital Raising.................................................................................
1,173,777
Total Strategic Advisory ............................................................
105,851
Restructuring ...................................................................................
1,279,628
Net Revenue ..........................................................................
1,005,837
Operating Expenses .........................................................................
273,791
Operating Income ............................................................................ $
Operating Income, as a % of net revenue ........................................

68,431
1,099,322
201,722
1,301,044
1,017,055
283,989 $

21.8%

21.4 % (cid:3)(cid:3)

(cid:3)(cid:3)

$ 1,010,830
81,143
1,091,973
114,761
1,206,734
977,681
229,053

19.0%

2014

Certain Lazard fee and transaction statistics are set forth below:

Lazard Statistics:
Number of clients with fees greater than $1 million:

Total Financial Advisory ............................................................
M&A and Other Advisory ..........................................................

Percentage of total Financial Advisory net revenue
from top 10 clients (a) ...................................................................
Number of M&A transactions completed with
values greater than $500 million (b) .............................................

Year Ended December 31,
2015

(cid:3)(cid:3)

2014

2016

276
217

23%

268
223

17 %

84 (cid:3)(cid:3)

281
228

15%

(a) No individual client constituted more than 10% of our Financial Advisory segment net revenue in the years

ended December 31, 2016, 2015 or 2014.

(b) Source: Dealogic as of January 6, 2017.

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 U.S., Europe
(primarily in the U.K., France, Italy, Spain and Germany) and the rest of the world (primarily in Australia) and
therefore may not be reflective of the geography in which the clients are located.

North America .................................................................................
Europe ..............................................................................................
Rest of World ...................................................................................
Total .................................................................................................

59%
37
4
100%

Year Ended December 31,
2015

2016

(cid:3)(cid:3)
54 %
38
8
100 % (cid:3)(cid:3)

2014

54%
39
7
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, strategic advisory matters and restructuring transactions,
depending on clients’ needs. This flexibility allows Lazard to better match its professionals with the counter-cyclical
business cycles of mergers and acquisitions and restructurings. While Lazard measures revenue by practice area,
Lazard does not separately measure the costs or profitability of M&A services as compared to restructuring services.
Accordingly, Lazard measures performance in its Financial Advisory segment based on overall segment operating
revenue and operating income margins.

Financial Advisory Results of Operations

Year Ended December 31, 2016 versus December 31, 2015

Financial Advisory net revenue increased $21 million, or 2%, as compared to 2015. Total Strategic Advisory

net revenue, representing fees from our M&A and Other Advisory and Capital Raising businesses, decreased
$75 million, or 6%, and Restructuring revenue increased $96 million, or 91%, as compared to 2015.

M&A and Other Advisory revenue decreased $73 million, or 7%, and Capital Raising revenue decreased
$1 million, or 2%, as compared to 2015. The decrease in M&A and Other Advisory fee revenue primarily reflected a
lower level of closings, and a decrease in the average transaction fee with respect to completed transactions
involving fees greater than $1 million, as compared to 2015. Clients which in the aggregate represented a significant
portion of our M&A and Other Advisory revenue in 2016 included Anheuser-Busch InBev, ARM Holdings,
Columbia Pipeline Group, Pepco, Starwood Hotels & Resorts, Tyco and Xerox.

Restructuring revenue in 2016 primarily reflected a higher level of activity in the U.S. energy sector in 2016.

Clients which in the aggregate represented a significant portion of our Restructuring revenue in 2016 included
Pacific Exploration & Production, Peabody Energy, Seventy Seven Energy, The Official Committee of Unsecured
Creditors of Energy Future Holdings and Vantage Drilling.

Operating expenses increased $11 million, or 1%, as compared to 2015, primarily due to an increase in

amortization of deferred incentive compensation and, in 2016, amortization and other acquisition-related costs.

Financial Advisory operating income was $284 million, an increase of $10 million, or 4%, as compared to

operating income of $274 million in 2015 and, as a percentage of net revenue, was 21.8%, as compared to 21.4% in
2015.

Year Ended December 31, 2015 versus December 31, 2014

Financial Advisory net revenue increased $73 million, or 6%, as compared to 2014. Total Strategic Advisory

net revenue, representing fees from our M&A and Other Advisory and Capital Raising businesses, increased
$82 million, or 7%, and Restructuring revenue decreased $9 million, or 8%, as compared to 2014.

M&A and Other Advisory revenue increased $93 million, or 9%, while Capital Raising revenue decreased

$12 million, or 14%, as compared to 2014. The increase in M&A and Other Advisory revenue was primarily due to
an increase in the average transaction fee with respect to completed transactions involving fees greater than $1
million as compared to 2014. Our major clients, which in the aggregate represented a significant portion of our
M&A and Other Advisory revenue in 2015, included AT&T, D.E. Master Blenders 1753, General Electric
Company, GlaxoSmithKline, Heinz, Pfizer, Reynolds American, RockTenn, Rockwood, Toll Holdings, UCB and
Ukraine Ministry of Finance.

Restructuring revenue in 2015 was generally in line with the continued industry-wide low level of corporate

restructuring activity. Our major clients, which in the aggregate represented a significant portion of our
Restructuring revenue in 2015, included Chassix, Dendreon, Hercules Offshore, Millennium Health and
RadioShack.

Operating expenses increased $28 million, or 3%, as compared to 2014, primarily due to an increase in

compensation and benefits expense.

Financial Advisory operating income was $274 million, an increase of $45 million, or 20%, as compared to

operating income of $229 million in 2014 and, as a percentage of net revenue, was 21.4%, as compared to 19.0% in
2014.

Asset Management

The following table shows the composition of AUM for the Asset Management segment (see Item 1,

“Business—Principal Business Lines—Asset Management—Investment Strategies”):

2016

As of December 31,
2015 (a)
(cid:3)(cid:3)
($ in millions)

2014 (a)

AUM by Asset Class:
Equity:

Emerging Markets ...................................................................... $
Global .........................................................................................
Local ...........................................................................................
Multi-Regional ...........................................................................
Total Equity ..........................................................................

Fixed Income:

Emerging Markets ......................................................................
Global .........................................................................................
Local ...........................................................................................
Multi-Regional ...........................................................................
Total Fixed Income ...............................................................
Alternative Investments ................................................................
Private Equity ................................................................................
Cash Management .........................................................................

Total AUM ............................................................................ $

41,363 $
30,567
36,243
54,668
162,841

15,580
3,483
4,245
7,847
31,155
2,422
1,253
239
197,910 $

36,203 $
30,867
32,646
51,779
151,495
(cid:3)(cid:3)
14,378
3,533
4,016
8,460
30,387
3,297
858
343
186,380 $

48,459
33,095
32,907
46,451
160,912

14,227
3,222
3,710
9,951
31,110
3,799
1,091
191
197,103

(a) Certain prior period amounts have been reclassified to conform to the current period presentation.

Total AUM at December 31, 2016 was $198 billion, an increase of $12 billion, or 6%, as compared to total

AUM of $186 billion at December 31, 2015, due to market appreciation and net inflows, partially offset by adverse
foreign exchange movements. Average AUM for the year ended December 31, 2016 decreased $1 billion, or 1%, as
compared to 2015.

As of December 31, 2016, approximately 88% 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, compared to approximately
89% as of December 31, 2015, and, as of December 31, 2016, approximately 12% of our AUM was managed on
behalf of individual client relationships, which are principally with family offices and individuals, compared to
approximately 11% at December 31, 2015.

As of December 31, 2016, AUM with foreign currency exposure represented approximately 70% of our total

AUM, as compared to 72% at December 31, 2015. 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 table is a summary of changes in AUM by asset class for the years ended December 31, 2016,

2015 and 2014:

Year Ended December 31, 2016

AUM
Beginning
Balance

Inflows

Outflows

Equity........................................... $ 151,495 $ 31,722 $(30,931) $
(6,522)
Fixed Income ............................... 30,387
Other ............................................
(1,613)
4,498
Total ............................................. $ 186,380 $ 39,226 $(39,066) $

6,354
1,150

Net
Flows
($ in millions)
791 $
(168)
(463)
160 $

Market Value
Appreciation/
(Depreciation)

Foreign
Exchange
Appreciation/
(Depreciation)

AUM
Ending
Balance

13,568 $
1,396
22
14,986 $

(3,013) $162,841
(460) 31,155
3,914
(143)
(3,616) $197,910

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

Year Ended December 31, 2015

AUM
Beginning
Balance

Inflows

Outflows

Market Value
Appreciation/
(Depreciation)

Foreign
Exchange
Appreciation/
(Depreciation)

AUM
Ending
Balance

Net
Flows
($ in millions)

Equity........................................... $ 160,912 $ 30,261 $(31,660) $ (1,399) $
(6,139)
2,790
Fixed Income ............................... 31,110
(485)
Other ............................................
(1,965)
5,081
906 $
Total ............................................. $ 197,103 $ 40,670 $(39,764) $

8,929
1,480

1,051 $
(606 )
29
474 $

(9,069) $151,495
(2,907) 30,387
4,498
(12,103) $186,380

(127)

Year Ended December 31, 2014

AUM
Beginning
Balance

Inflows

Outflows

Market Value
Appreciation/
(Depreciation)

Foreign
Exchange
Appreciation/
(Depreciation)

Net
Flows
($ in millions)

AUM
Ending
Balance

Equity........................................... $ 154,062 $ 31,067 $(25,419) $ 5,648 $
6,351
Fixed Income ............................... 26,874 10,535
Other ............................................
(724)
1,126
Total ............................................. $ 186,924 $ 42,728 $(31,453) $ 11,275 $

(4,184)
(1,850)

5,988

10,465 $
824
57
11,346 $

(9,263) $160,912
(2,939) 31,110
5,081
(12,442) $197,103

(240)

As of February 16, 2017, AUM was $209.0 billion, an $11.1 billion increase since December 31, 2016. The

increase in AUM was due to market appreciation of $7.7 billion, net inflows of $0.8 billion and foreign exchange
appreciation of $2.6 billion.

Average AUM for the years ended December 31, 2016, 2015 and 2014 for each significant asset class is set
forth below. Average AUM generally represents the average of the monthly ending AUM balances for the period.

2016

Year Ended December 31,
2015
($ in millions)

(cid:3)(cid:3)

2014

Average AUM by Asset Class:

Equity ......................................................................................... $
Fixed Income ..............................................................................
Alternative Investments ..............................................................
Private Equity .............................................................................
Cash Management ......................................................................

Total Average AUM ............................................................. $

158,747 $
31,516
3,273
948
324
194,808 $

159,216 $
32,137
3,547
934
153
195,987 $

160,455
29,843
4,408
1,130
201
196,037

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

Revenue:

Management Fees ....................................................................... $
Incentive Fees .............................................................................
Other Income ..............................................................................
Net Revenue ..........................................................................
Operating Expenses .........................................................................
Operating Income ............................................................................ $
Operating Income, as a % of net revenue ........................................

2016

Year Ended December 31,
2015
($ in thousands)

(cid:3)(cid:3)

2014

(cid:3)(cid:3)

966,797 $ 1,000,018 (cid:3)(cid:3)$ 1,018,772
51,866
15,590
63,957
68,929
1,111,105 (cid:3)(cid:3) 1,134,595
1,051,316
749,345
769,737
385,250
281,579 $

25,075 (cid:3)(cid:3)
86,012 (cid:3)(cid:3)

736,798 (cid:3)(cid:3)
374,307 (cid:3)(cid:3)$
33.7 % (cid:3)(cid:3)

26.8%

34.0%

Our top ten clients accounted for 21%, 21% and 24% of our total AUM at December 31, 2016, 2015 and
2014, respectively, and no individual client constituted more than 10% of our Asset Management segment net
revenue during any of the respective years.

The geographical distribution of Asset Management net revenue is set forth below in percentage terms, and is
based on the Lazard offices that manage and distribute the respective AUM amounts. Such geographical distribution
may not be reflective of the geography of the investment products or clients.

60%
29
11
100%

Year Ended December 31,
2015

2016

(cid:3)(cid:3)
59 % (cid:3)(cid:3)
29 (cid:3)(cid:3)
12 (cid:3)(cid:3)
100 % (cid:3)(cid:3)

2014

62%
29
9
100%

Asset Management Results of Operations

Year Ended December 31, 2016 versus December 31, 2015

Asset Management net revenue decreased $60 million, or 5%, as compared to 2015. Management fees
decreased $33 million, or 3%, as compared to 2015, primarily due to lower average AUM and a change in the mix
of AUM. Incentive fees decreased $9 million, or 38%, as compared to 2015. Other revenue decreased $17 million,
or 20%, as compared to 2015, principally due to a $24 million gain in 2015 on the disposal of the Company’s
Australian private equity business (which relates primarily to the realization of carried interest at fair value).

Operating expenses increased $33 million, or 4%, as compared to 2015, primarily due to the change in the fair

value of the contingent consideration associated with the Edgewater business acquisition.

Asset Management operating income was $282 million, a decrease of $93 million, or 25%, as compared to

operating income of $374 million in 2015 and, as a percentage of net revenue, was 26.8%, as compared to 33.7% in
2015.

Year Ended December 31, 2015 versus December 31, 2014

Asset Management net revenue decreased $23 million, or 2%, as compared to 2014. Management fees

decreased $19 million, or 2%, as compared to 2014, primarily due to slightly lower average AUM and a slight
change in the mix of assets. Incentive fees decreased $27 million, or 52%, as compared to 2014, primarily due to
incentive fees related to traditional investment products. Other revenue increased $22 million, or 34%, as compared
to 2014, primarily due to a $24 million gain on disposal of the Company’s Australian private equity business (which
related primarily to the realization of carried interest at fair value).

Operating expenses decreased $13 million, or 2%, as compared to 2014, primarily due to decreases in (i)

compensation and benefits expense related to a decrease in discretionary compensation and (ii) non-compensation
expense related to fund administration and outsourced services.

Asset Management operating income was $374 million, a decrease of $11 million as compared to operating

income of $385 million in 2014 and, as a percentage of net revenue, was 33.7%, as compared to 34.0% in 2014.

Corporate

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

Interest Income ................................................................................ $
Interest Expense ...............................................................................
Net Interest (Expense) ................................................................
Other Revenue (Expense) ................................................................
Net Revenue (Expense) ..............................................................
Operating Expenses (a) ....................................................................
Operating Income (Loss) ................................................................. $

2016

Year Ended December 31,
2015
($ in thousands)

(cid:3)(cid:3)

2014

3,384 $
(49,458)
(46,074)
27,085
(18,989)
29,118
(48,107) $

3,155 $
(50,968 )
(47,813 )
10,688
(37,125 )
627,593
(664,718 ) $

3,954
(62,565)
(58,611)
17,729
(40,882)
53,956
(94,838)

(a)

Includes, (i) in 2016, $3,148 relating to the redemption of the remaining portion of the Company’s 2017
Notes, (ii) in 2015, (a) $60,219 relating to the redemption of a significant portion of the Company’s 2017
Notes and (b) $547,691 relating to the provision pursuant to the tax receivable agreement, and (iii) in 2014,
$18,307 relating to the provision pursuant to the tax receivable agreement.

Corporate Results of Operations

Year Ended December 31, 2016 versus December 31, 2015

Net interest expense decreased $2 million, or 4%, as compared to 2015

Other revenue increased $16 million as compared to 2015, primarily due to the gain on the acquisition of
MBA Lazard (which resulted from the increase in the fair value of the Company’s investment in MBA Lazard prior
to the acquisition) as well as gains attributable to investments held in connection with LFI.

Operating expenses decreased $598 million as compared to 2015. Operating expenses included, in 2016, a
charge of $3 million relating to the redemption of the remaining portion of the Company’s 2017 Notes, and, in 2015,
(i) a charge of $60 million related to the redemption of a significant portion of the Company’s 2017 Notes and (ii) a

charge of $548 million related to the provision pursuant to the tax receivable agreement (see Note 18 of Notes to
Consolidated Financial Statements). Excluding the impact of such charges, operating expenses increased $6 million
compared to 2015, primarily due to an increase in amortization of deferred incentive compensation, including an
increase in amortization pertaining to LFI.

Year Ended December 31, 2015 versus December 31, 2014

Net interest expense decreased $11 million, or 18%, as compared to 2014, primarily due to the redemption of
$450 million of the 2017 Notes and the issuance of $400 million aggregate principal amount of 3.75% senior notes
due 2025 (the “2025 Notes”).

Other revenue decreased $7 million, or 40%, as compared to 2014, primarily due to investment losses

recorded in connection with LFI.

Operating expenses increased $574 million as compared to 2014, including (i) in 2015, a charge of $60
million related to the redemption of a significant portion of the Company’s 2017 Notes and (ii) in 2015 and 2014,
charges of $548 million and $18 million, respectively, relating to the provision pursuant to the tax receivable
agreement (see Note 14 of Notes to Consolidated Financial Statements). Excluding the impact of such charges,
operating expenses decreased $16 million, or 45%, compared to 2014, primarily due to decreased compensation and
benefits expense.

Cash Flows

The Company’s cash flows are influenced primarily by the timing of the receipt of Financial Advisory and

Asset Management fees, the timing of distributions to shareholders, payments of incentive compensation to
managing directors and employees and purchases of Class A common stock. Cash flows also were affected (i) in
2016, by the issuance of the 2027 Notes and the redemption of the remaining balance of the 2017 Notes, and (ii) in
2015, by the redemption of $450 million of the 2017 Notes and the issuance of the 2025 Notes. M&A and Other
Advisory and Asset Management fees are generally collected within 60 days of billing, while Restructuring fee
collections may extend beyond 60 days, particularly those that involve bankruptcies with court-ordered holdbacks.
Fees from our Private Capital Advisory (which we historically referred to as Private Fund Advisory) activities are
generally collected over a four-year period from billing and typically include an interest component.

The Company makes cash payments for, or in respect of, a significant portion of its incentive compensation
during the first three months of each calendar year with respect to the prior year’s results. In addition, during 2014,
the Company made cash payments, including severance payments associated with certain staff reductions. The
Company also paid a special dividend in 2016 and 2015.

Summary of Cash Flows:

Cash Provided By (Used In):

Operating activities:
Net income ................................................................................. $
Adjustments to reconcile net income to net cash provided by
operating activities (a) ................................................................
Other operating activities (b) ......................................................
Net cash provided by operating activities .............................
Investing activities ......................................................................
Financing activities (c) ...............................................................
Effect of exchange rate changes .................................................
Net Increase in Cash and Cash Equivalents ................................
Cash and Cash Equivalents:

2016

Year Ended December 31,
2015
($ in millions)

(cid:3)(cid:3)

2014

393.7 $

992.9 $

434.1

464.4
(256.8)
601.3
(37.6)
(487.0)
(50.0)
26.7

(158.2 )
52.6
887.3
(26.0 )
(746.8 )
(49.0 )
65.5

370.6
(68.7)
736.0
(20.1)
(435.4)
(55.4)
225.1

Beginning of Period ..................................................................
End of Period ............................................................................ $

1,132.1
1,158.8 $

1,066.6
1,132.1 $

841.5
1,066.6

(a) Consists of the following:

Depreciation and amortization of property ....................................... $
Amortization of deferred expenses and stock units ..........................
Deferred tax provision (benefit)........................................................
Amortization and other acquisition-related costs ..............................
Provision pursuant to tax receivable agreement................................
Gain on acquisition of portion of business already owned ...............
Gain on disposal of subsidiaries .......................................................
Loss on extinguishment of debt ........................................................
Total .................................................................................................. $

2016

Year Ended December 31,
2015
($ in millions)

(cid:3)(cid:3)

2014

33.3 $
341.8
63.7
35.2
-
(12.7)
-
3.1
464.4 $

32.8 $
320.5
(1,100.8 )
5.8
547.7

(24.4 )
60.2
(158.2 ) $

34.5
295.8
15.6
6.4
18.3
-
-
-
370.6

Includes net changes in operating assets and liabilities.

(b)
(c) Consists primarily of purchases of shares of Class A common stock, tax withholdings related to the settlement
of vested restricted stock units (“RSUs”), vested restricted stock awards and vested performance-based
restricted stock units (“PRSUs”), Class A common stock dividends and distributions to noncontrolling interest
holders, activity relating to borrowings (including, in 2016 and 2015, the redemption of the Company’s 2017
Notes and issuance of the 2027 Notes and the 2025 Notes), in 2016, payments made under the tax receivable
agreement, and in 2015, payments made relating to the partial extinguishment of our obligations under the tax
receivable agreement.

Liquidity and Capital Resources

The Company’s liquidity and capital resources are derived from operating activities, financing activities and

equity offerings.

Operating Activities

Net revenue, operating income and cash receipts fluctuate significantly between periods. In the case of
Financial Advisory, fee receipts are generally dependent upon the successful completion of client transactions, the
occurrence and timing of which is irregular and not subject to Lazard’s control.

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

Liquidity is also affected by the level of deposits and other customer payables, principally at LFB. To the

extent that such deposits and other customer payables rise or fall, this has a corresponding impact on liquidity held
at LFB, with the majority of such amounts generally being recorded in “deposits with banks and short-term
investments”, or in “investments” for interest-bearing deposits having original maturities of greater than three
months. In the year ended December 31, 2016, as reflected on the consolidated statements of financial condition,
“deposits and other customer payables” decreased as compared to December 31, 2015. In the same period, interest-
bearing deposits recorded in “investments” also decreased, this being partially offset by an increase in “deposits with
banks and short-term investments”.

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

We regularly monitor our liquidity position, including cash levels, credit lines, principal investment

commitments, interest and principal payments on debt, capital expenditures, dividend payments, purchases of shares
of Class A common stock and matters relating to liquidity and to compliance with regulatory net capital
requirements. At December 31, 2016, Lazard had approximately $1.2 billion of cash, with such amount including
approximately $464 million held at Lazard’s operations outside the U.S. Since Lazard provides for U.S. income
taxes on substantially all of its unrepatriated foreign earnings, we expect that no material amount of additional U.S.
income taxes would be recognized upon receipt of dividends or distributions of such earnings from our foreign
operations.

We maintain lines of credit in excess of anticipated liquidity requirements. As of December 31, 2016, Lazard
had approximately $179 million in unused lines of credit available to it, including a $150 million, five-year, senior
revolving credit facility with a group of lenders that expires in September 2020 (the “Amended and Restated Credit
Agreement”) (see “—Financing Activities” below) and unused lines of credit available to LFB of approximately
$21 million (at December 31, 2016 exchange rates).

The Amended and Restated Credit Agreement contains customary terms and conditions, including limitations

on consolidations, mergers, indebtedness and certain payments, as well as financial condition covenants relating to
leverage and interest coverage ratios. Lazard Group’s obligations under the Amended and Restated Credit
Agreement may be accelerated upon customary events of default, including non-payment of principal or interest,
breaches of covenants, cross-defaults to other material debt, a change in control and specified bankruptcy events.

Financing Activities

The table below sets forth our corporate indebtedness as of December 31, 2016 and 2015. The agreements
with respect to this indebtedness are discussed in more detail in our consolidated financial statements and related
notes included elsewhere in this Form 10-K. The table, as of December 31, 2015, reflects the retrospective
application of new disclosure guidance on debt issuance costs. See Note 3 of Notes to Consolidated Financial
Statements.

Outstanding as of

Senior Debt

Maturity
Date

Principal

December 31, 2016
Unamortized
Debt Costs

December 31, 2015
Unamortized
Debt Costs

Carrying
Value

Lazard Group 2017 Senior Notes .............
Lazard Group 2020 Senior Notes .............
Lazard Group 2025 Senior Notes .............
Lazard Group 2027 Senior Notes .............

2017 $
2020
2025
2027

- $
500.0
400.0
300.0
$1,200.0 $

Principal

Carrying
Value
($ in millions)
- $

- $
3.6
3.8
4.0

98.4 $
496.4 500.0
396.2 400.0
-
296.0
11.4 $1,188.6 $ 998.4 $

0.2 $
98.2
4.5 495.5
4.3 395.7
-
9.0 $ 989.4

During November 2016, Lazard Group completed an offering of the 2027 Notes. Lazard Group used a portion
of the net proceeds of the 2027 Notes to redeem or otherwise retire the remaining $98 million of 2017 Notes, which,
including the recognition of unamortized issuance costs, resulted in a loss on debt extinguishment in connection with
the redemption of such 2017 Notes of approximately $3 million.

During February 2015, Lazard Group completed an offering of the 2025 Notes. Lazard Group used the net

proceeds of the 2025 Notes, together with cash on hand, to redeem or otherwise retire $450 million of the 2017
Notes, which, including the recognition of unamortized issuance costs, resulted in a loss on debt extinguishment in
connection with the redemption of such 2017 Notes of approximately $60 million.

Lazard’s annual cash flow generated from operations historically has been sufficient to enable it to meet its

annual obligations. We believe that our cash flows from operating activities, along with the use of our credit lines as
needed, should be sufficient for us to fund our current obligations for the next 12 months.

As long as the lenders’ commitments remain in effect, any loan pursuant to the Amended and Restated Credit
Agreement remains outstanding and unpaid or any other amount is due to the lending bank group, the Amended and
Restated Credit Agreement includes financial covenants that require that Lazard Group not permit (i) its
Consolidated Leverage Ratio (as defined in the Amended and Restated Credit Agreement) for the 12-month period
ending on the last day of any fiscal quarter to be greater than 3.25 to 1.00 or (ii) its Consolidated Interest Coverage
Ratio (as defined in the Amended and Restated Credit Agreement) for the 12-month period ending on the last day of
any fiscal quarter to be less than 3.00 to 1.00. For the 12-month period ended December 31, 2016, Lazard Group
was in compliance with such ratios, with its Consolidated Leverage Ratio being 1.32 to 1.00 and its Consolidated
Interest Coverage Ratio being 19.68 to 1.00. In any event, no amounts were outstanding under the Amended and
Restated Credit Agreement as of December 31, 2016.

In addition, the Amended and Restated Credit Agreement, indenture and supplemental indentures relating to
Lazard Group’s senior notes contain certain other covenants (none of which relate to financial condition), events of
default and other customary provisions. At December 31, 2016, the Company was in compliance with all of these
provisions. We may, to the extent required and subject to restrictions contained in our financing arrangements, use
other financing sources, which may cause us to be subject to additional restrictions or covenants.

See Note 11 of Notes to Consolidated Financial Statements for additional information regarding senior debt.

Stockholders’ Equity

At December 31, 2016, total stockholders’ equity was $1,294 million, as compared to $1,367 million and

$770 million at December 31, 2015 and 2014, respectively, including $1,236 million, $1,313 million and

$707 million attributable to Lazard Ltd on the respective dates. The net activity in stockholders’ equity during the
years ended December 31, 2016 and 2015 is reflected in the table below:

(cid:3)
(cid:3)(cid:3)
(cid:3)(cid:3)
Stockholders’ Equity - Beginning of Year ............................................ $
Increase (decrease) due to:

Net income .......................................................................................
Other comprehensive loss ................................................................
Amortization of share-based incentive compensation ......................
Purchase of Class A common stock .................................................
Settlement of share-based incentive compensation (a) ....................
Class A common stock dividends ....................................................
Class A common stock issuable related to business acquisitions .....
Distributions to noncontrolling interests, net ...................................
Other - net ........................................................................................
Stockholders’ Equity - End of year ....................................................... $

Year Ended December 31,

2016

2015

($ in millions)
1,367 $

394
(80 )
261
(300 )
(56 )
(336 )
38
(2 )
8
1,294 $

770

993
(34)
227
(173)
(107)
(291)
-
(16)
(2)
1,367

(a) The tax withholding portion of share-based compensation is settled in cash, not shares.

The Board of Directors of Lazard has issued a series of authorizations to repurchase Class A common stock,

which help offset the dilutive effect of our share-based incentive compensation plans. During a given year the
Company intends to repurchase at least as many shares as it expects to ultimately issue pursuant to such
compensation plans in respect of year-end incentive compensation attributable to the prior year. The rate at which
the Company purchases shares in connection with this annual objective may vary from quarter to quarter due to a
variety of factors. Purchases with respect to such program are set forth in the table below:

Year Ended December 31:
2014 ...................................................................................................................
2015 ...................................................................................................................
2016 ...................................................................................................................

Number of
Shares
4,114,206 $
3,438,789 $
8,551,271 $

Average
Price Per
Share

46.83
50.24
35.11

On November 1, 2016, the Board of Directors of Lazard authorized the repurchase of up to $236 million of

additional shares of Class A common stock, which authorization will expire on December 31, 2018. As of
December 31, 2016, a total of $355 million of share repurchase authorization remained available under the
Company’s share repurchase program, $119 million of which will expire on December 31, 2017 and $236 million of
which will expire on December 31, 2018.

During the year ended December 31, 2016, the Company had in place trading plans under Rule 10b5-1 of the

Securities Exchange Act of 1934, pursuant to which it effected stock repurchases in the open market.

The Company plans to continue to deploy excess cash and may do so in a variety of ways, which may include

repurchasing outstanding shares of Class A common stock, paying dividends to stockholders and repurchasing its
outstanding debt.

See Notes 13 and 14 of Notes to Consolidated Financial Statements for additional information regarding

Lazard’s stockholders’ equity and incentive plans, respectively.

Regulatory Capital

We actively monitor our regulatory capital base. Our principal subsidiaries are subject to regulatory

requirements in their respective jurisdictions to ensure their general financial soundness and liquidity, which require,
among other things, that we comply with certain minimum capital requirements, record-keeping, reporting
procedures, relationships with customers, experience and training requirements for employees and certain other
requirements and procedures. These regulatory requirements may restrict the flow of funds to and from affiliates.
See Note 19 of Notes to Consolidated Financial Statements for further information. These regulations differ in the
U.S., the U.K., France and other countries in which we operate. Our capital structure is designed to provide each of
our subsidiaries with capital and liquidity consistent with its business and regulatory requirements. For a discussion
of regulations relating to us, see Item 1, “Business—Regulation” included in this Form 10-K and Note 19 of Notes
to Consolidated Financial Statements.

Contractual Obligations

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

2016:

Contractual Obligations Payment Due by Period

Total

Less than
1 Year

1-3 Years 3-5 Years
($ in thousands)

More than
5 Years

Senior debt (including interest) (a) .......................... $1,524,076 $ 45,222 $ 94,250 $ 573,000 $ 811,604
Operating leases (exclusive of $45,643 of
489,575
committed sublease income) .................................
-
Capital leases (including interest) ............................
-
Investment capital funding commitments (b) ..........
Total (c) ................................................................... $2,368,774 $ 137,683 $ 232,912 $ 697,000 $1,301,179

75,996 138,592 123,995
5
-

828,158
7,357
9,183

7,282
9,183

70
-

(a) See Note 11 of Notes to Consolidated Financial Statements.
(b) Unfunded commitments to private equity investments consolidated but not owned by Lazard of $6,886 are

excluded. Such commitments are required to be funded by capital contributions from noncontrolling interest
holders. See Note 6 of Notes to Consolidated Financial Statements. These amounts are generally due on
demand and therefore are presented in the “less than 1 year” category.

the timing of the amounts of any such payments. The table above also excludes any possible payments for
uncertain tax positions and payments pursuant to the Company’s tax receivable agreement, given that the
actual amount and timing of payments under the tax receivable agreement could differ materially from our
estimates. At December 31, 2016, a tax receivable agreement obligation of $513,610 was recorded on the
consolidated statements of financial condition, of which the Company currently expects that approximately
$700 will be paid within the next 12 months. See “Critical Accounting Policies and Estimates—Income
Taxes” below. See also Notes 12, 14, 15, 16 and 18 of Notes to Consolidated Financial Statements regarding
information in connection with commitments, incentive plans, employee benefit plans, income taxes and tax
receivable agreement obligations, respectively.

Effect of Inflation

We do not believe inflation will significantly affect our compensation costs as they are substantially variable

in nature. However, the rate of inflation may affect certain of our other expenses, such as information technology
and occupancy costs. To the extent inflation results in rising interest rates and has other effects upon the securities
markets or general macroeconomic conditions, it may adversely affect our financial position and results of
operations by reducing AUM, net revenue or otherwise. See Item 1A, “Risk Factors—Other Business Risks—
Difficult market conditions can adversely affect our business in many ways, including by reducing the volume of the
transactions involving our Financial Advisory business and reducing the value or performance of the assets we
manage in our Asset Management business, which, in each case, could materially reduce our revenue or income and
adversely affect our financial position.”

Critical Accounting Policies and Estimates

Management’s discussion and analysis of our consolidated financial condition and results of operations is

based upon our consolidated financial statements, which have been prepared in conformity with U.S. GAAP. The
preparation of Lazard’s consolidated financial statements requires us to make estimates and assumptions that affect
the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and
liabilities. On an ongoing basis, Lazard evaluates its estimates, including those related to revenue recognition,
income taxes (including the impact on the tax receivable agreement obligation), investing activities and goodwill.
Lazard bases these estimates on historical experience and various other assumptions that it believes to be reasonable
under the circumstances, the results of which form the basis for making judgments, including judgments regarding
the carrying values of assets and liabilities, that are not readily apparent from other sources. Actual results may
differ from these estimates.

Lazard believes that the critical accounting policies set forth below comprise the most significant estimates

and judgments used in the preparation of its consolidated financial statements.

Revenue Recognition

Lazard generates substantially all of its net revenue from providing Financial Advisory and Asset

Management services to clients. Lazard recognizes revenue when the following criteria are met:

(cid:120)

there is persuasive evidence of an arrangement with a client;

the agreed-upon services have been provided;

fees are fixed or determinable; and

collection is reasonably assured.

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. See “Financial Statement
Overview” for a description of our revenue recognition policies on such fees.

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

With respect to fees receivable from Financial Advisory activities, such receivables are generally deemed past

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

Income Taxes

As part of the process of preparing our consolidated financial statements, we estimate our income taxes for
each of our tax-paying entities in its respective jurisdictions. In addition to estimating actual current tax liabilities for
these jurisdictions, we also must account for the tax effects of differences between the financial reporting and tax
reporting of items, such as basis adjustments, compensation and benefits expense, and depreciation and
amortization. Differences which are temporary in nature result in deferred tax assets and liabilities. Significant

judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities, any
valuation allowance recorded against our deferred tax assets and our unrecognized tax benefits.

We recognize a deferred tax asset if it is more likely than not (defined as a likelihood of greater than 50%) that

a tax benefit will be accepted by a taxing authority. The measurement of deferred tax assets and liabilities is based
upon currently enacted tax rates in the applicable jurisdictions. At December 31, 2016, on a consolidated basis, we
recorded gross deferred tax assets of approximately $1.23 billion with such amount partially offset by a valuation
allowance of approximately $70 million (as described below).

Subsequent to the initial recognition of deferred tax assets, we also must continually assess the likelihood that
such deferred tax assets will be realized. If we determine that we may not fully derive the benefit from a deferred tax
asset, we consider whether it would be appropriate to apply a valuation allowance against the applicable deferred tax
asset, taking into account all available information. The ultimate realization of a deferred tax asset for a particular
entity depends, among other things, on the generation of taxable income by such entity in the applicable jurisdiction.

We consider multiple possible sources of taxable income when assessing a valuation allowance against a

deferred tax asset, including:

(cid:120)

future reversals of existing taxable temporary differences;

future taxable income exclusive of reversing temporary differences and carryforwards;

taxable income in prior carryback years; and

tax-planning strategies.

The assessment regarding whether a valuation allowance is required or should be adjusted also considers all

available information, including the following:

(cid:120)

nature, frequency, magnitude and duration of any past losses and current operating results;

duration of statutory carryforward periods;

historical experience with tax attributes expiring unused; and

near-term and medium-term financial outlook.

The weight we give to any particular item is, in part, dependent upon the degree to which it can be objectively
verified. We give greater weight to the recent results of operations of a relevant entity. Pre-tax operating losses on a
three year cumulative basis or lack of sustainable profitability are considered objectively verifiable evidence and
will generally outweigh a projection of future taxable income.

Certain of our tax-paying entities have individually experienced losses on a cumulative three year basis or

have tax attributes that may expire unused. In addition, one of our tax paying entities has recorded a valuation
allowance on substantially all of its deferred tax assets due to the combined effect of operating losses in certain
subsidiaries of that entity as well as foreign taxes that together substantially offset any U.S. tax liability. Taking into
account all available information, we cannot determine that it is more likely than not that deferred tax assets held by
these entities will be realized. Consequently, we have recorded valuation allowances on $70 million of deferred tax
assets held by these entities as of December 31, 2016.

As of December 31, 2014, the Company had a valuation allowance on substantially all of our deferred tax
assets at that time. Certain of our tax-paying entities at which we have historically recorded significant valuation
allowances were profitable on a cumulative basis for the three year period ended June 30, 2015. In assessing our
valuation allowance as of June 30, 2015, we considered all available information, including the magnitude of recent
and current operating results, the relatively long duration of statutory carryforward periods, our historical experience
utilizing tax attributes prior to their expiration dates, the historical volatility of operating results of these entities and
our assessment regarding the sustainability of their profitability. At that time, we concluded that there was a
sufficient history of sustained profitability at these entities that it was more likely than not that these entities would

be able to realize deferred tax assets. Accordingly, during the period ended June 30, 2015, we released substantially
all of the valuation allowance against the deferred tax assets held by these entities.

As a result, during the year ended December 31, 2015, we recorded a deferred tax benefit of approximately

$878 million. We also recorded a separate deferred tax benefit of $378 million that reflected the tax deductibility of
payments under the tax receivable agreement. In addition, we recorded a deferred tax expense of approximately
$161 million relating to the reduction of a deferred tax asset as a result of the partial extinguishment of our tax
receivable agreement obligation. See “—Amended and Restated Tax Receivable Agreement” below for more
information regarding our accrual under the tax receivable agreement in the second quarter of 2015 and the partial
extinguishment of our tax receivable agreement obligation in the third quarter of 2015.

As a result of the release of our valuation allowance during 2015, our effective tax rate in the 2016 period is

significantly higher than our effective tax rate for the year ended December 31, 2014. We do not expect that this
increase in our effective tax rate resulting from the reduction in the valuation allowance will impact the amount of
cash income taxes we will be required to pay to taxing authorities. However, as described below, payments under
the Amended and Restated Tax Receivable Agreement may be required.

We record tax positions taken or expected to be taken in a tax return based upon our estimates regarding the

amount that is more likely than not to be realized or paid, including in connection with the resolution of any related
appeals or other legal processes. Accordingly, we recognize liabilities for certain unrecognized tax benefits based on
the amounts that are more likely than not to be settled with the relevant taxing authority. Such liabilities are
evaluated periodically as new information becomes available and any changes in the amounts of such liabilities are
recorded as adjustments to “income tax expense.” Liabilities for unrecognized tax benefits involve significant
judgment and the ultimate resolution of such matters may be materially different from our estimates.

In addition to the discussion above regarding deferred tax assets and associated valuation allowances, as well

as unrecognized tax benefit liability estimates, other factors affect our provision for income taxes, including changes
in the geographic mix of our business, the level of our annual pre-tax income, transfer pricing and intercompany
transactions.

See Item 1A, “Risk Factors” and Note 16 of Notes to Consolidated Financial Statements for additional

information related to income taxes.

Amended and Restated Tax Receivable Agreement

During the period ended June 30, 2015, we released substantially all of our valuation allowance against
deferred tax assets. As a result, we accrued a corresponding liability during the period ended June 30, 2015 for
amounts relating to the Second Amended and Restated Tax Receivable Agreement, dated as of October 26, 2015
(the “Amended and Restated Tax Receivable Agreement”), between Lazard and LTBP Trust (the “Trust”). In
addition, in the third quarter of 2015, we purchased a portion of our obligation relating to the Amended and Restated
Tax Receivable Agreement, which had the effect of reducing such liability. See Note 18 of Notes to Consolidated
Financial Statements for additional information regarding the Amended and Restated Tax Receivable Agreement.

The amount of the Amended and Restated Tax Receivable Agreement liability is an undiscounted amount
based upon currently enacted tax laws, the current structure of the Company and various assumptions regarding
potential future operating profitability. The assumptions reflected in the estimate involve significant judgment. As
such, the actual amount and timing of payments under the Amended and Restated Tax Receivable Agreement 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 consolidated statement of operations. Adjustments, if necessary, to the related
deferred tax assets would be recorded through income tax expense.

The cumulative liability relating to our obligations under the Amended and Restated Tax Receivable
Agreement recorded as of December 31, 2016 and 2015 was $514 million and $524 million, respectively, and is
recorded in “tax receivable agreement obligation” on the consolidated statements of financial condition.

Investments

Investments consist primarily of interest-bearing deposits, debt and equity securities, interests in alternative

investment, debt, equity and private equity funds and investments accounted for under the equity method of
accounting.

These investments, with the exception of interest-bearing deposits and equity method investments, are carried
at fair value on the consolidated statements of financial condition, and any increases or decreases in the fair value of
these investments are reflected in earnings. The fair value of investments is generally based upon market prices or
the net asset value (“NAV”) or its equivalent for investments in funds. See Note 6 of Notes to Consolidated
Financial Statements for additional information on the measurement of the fair value of investments.

Lazard is subject to market and credit risk on investments held. As such, gains and losses on investment

positions held, which arise from sales or changes in the fair value of the investments, are not predictable and can
cause periodic fluctuations in net income.

Data relating to investments is set forth below:

(cid:3)

December 31,

2016

2015

($ in thousands)

Seed investments by asset class:

Equities (a) ........................................................................... $
Fixed income .......................................................................
Alternative investments .......................................................
Total seed investments ..............................................................
Other investments owned:

Private equity (b) .................................................................
Interest-bearing deposits (c).................................................
Fixed income and other .......................................................
Total other investments owned .................................................
Subtotal .....................................................................................
Add:

99,669 $
16,406
18,172
134,247

96,089
456
22,908
119,453
253,700

Equity method (d) ................................................................
Private equity consolidated, not owned (e) ..........................
LFI (f) ..................................................................................
Total investments ...................................................................... $

222
26,332
179,168
459,422 $

85,419
15,419
56,505
157,343

83,729
54,885
21,872
160,486
317,829

8,917
16,490
198,675
541,911

(a) At December 31, 2016 and 2015, seed investments in directly owned equity securities were invested as follows:

(cid:3)

Percentage invested in:

December 31,

2016

2015

Financials ...............................................................
Consumer ...............................................................
Industrial .................................................................
Technology .............................................................
Other .......................................................................
Total ..................................................................

30%
28
13
12
17
100%

33 %
30
13
9
15
100 %

(b) Private equity investments include investments related to certain legacy businesses and co-investments in

private equity funds managed by our Asset Management business. Co-investments owned were $34 million
and $30 million as of December 31, 2016 and 2015, respectively.

many other countries and regions throughout the world. In the normal course of asset and liability
management activities, the Company attempts to minimize negative interest rates on its cash investments.

Interest-bearing deposits generally provide positive yields when held to maturity, while also generally
allowing immediate penalty-free withdrawal at any time (with less or no interest earned in such case).

(d) Represents investments accounted for under the equity method of accounting.
(e) Represents private equity investments that are consolidated but owned by noncontrolling interests, and

therefore do not subject the Company to market or credit risk. The applicable noncontrolling interests are
presented within “stockholders’ equity” on the consolidated statements of financial condition.

(f) Composed of investments held in connection with LFI and other similar deferred compensation arrangements.
The market risk associated with such investments is equally offset by the market risk associated with the
derivative liability with respect to awards expected to vest. The Company is subject to market risk associated
with any portion of such investments that employees may forfeit. See “—Risk Management—Risks Related to
Derivatives” for risk management information relating to derivatives.

At December 31, 2016 and 2015, total investments with a fair value of $459 million and $478 million,
respectively, included $130 million and $123 million, respectively, or 28% and 26%, respectively, of investments
that were classified using NAV or its equivalent as a practical expedient. See Notes 5 and 6 of Notes to Consolidated
Financial Statements for additional information regarding investments measured at fair value, including the levels of
fair value within which such measurements of fair value fall.

As of December 31, 2016 and 2015, the Company held seed investments of approximately $134 million and

$157 million, respectively. Seed investments held in entities in which the Company maintained a controlling interest
were $41 million in six entities as of December 31, 2016, as compared to $60 million in twelve entities as of
December 31, 2015.

During the year ended December 31, 2016, the Company did not consolidate or deconsolidate any seed

investment entities. As such, 100% of the recorded balance of seed investments as of December 31, 2016
represented the Company’s economic interest in the seed investments. See “—Consolidation of Variable Interest
Entities” below for more information on the Company’s policy regarding the consolidation of seed investment
entities.

For additional information regarding risks associated with our investments, see “Risk Management—
Investments” below as well as Item 1A, “Risk Factors—Other Business Risks—Our results of operations may be
affected by fluctuations in the fair value of positions held in our investment portfolios”.

Assets Under Management

AUM primarily consists of debt and equity instruments, which have a value that is readily available based on

either prices quoted on a recognized exchange or prices provided by external pricing services.

Prices of equity and debt securities and other instruments that comprise our AUM are provided by well-
recognized, independent, third-party vendors. Such third-party vendors rely on prices provided by external pricing
services which are obtained from recognized exchanges or markets, or, for certain fixed income securities, from an
evaluated bid or other similarly sourced price.

Either directly, or through our third-party vendors, we perform a variety of regular due diligence procedures

on our pricing service providers. Those procedures include oversight by our internal operations group, review of the
pricing service providers’ internal control frameworks, review of the pricing service providers’ valuation
methodologies, reconciliation to client custodial account values and comparison of significant pricing differences.

Goodwill

In accordance with current accounting guidance, goodwill has an indefinite life and is tested for impairment

annually, as of November 1, or more frequently if circumstances indicate impairment may have occurred. The
Company performs a qualitative evaluation about whether it is more likely than not that the fair value of a reporting
unit is less than its carrying amount in lieu of actually calculating the fair value of the reporting unit. See Note 9 of
Notes to Consolidated Financial Statements for additional information regarding goodwill.

Consolidation of Variable Interest Entities

The consolidated financial statements include the accounts of Lazard Group and entities in which it has a

controlling interest. Lazard determines whether it has a controlling interest in an entity by first evaluating whether
the entity is a voting interest entity (“VOE”) or a variable interest entity (“VIE”) under U.S. GAAP.

(cid:120)

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

Variable Interest Entities. VIEs are entities that lack one or more of the characteristics of a VOE. If
Lazard has a variable interest, or a combination of variable interests, in a VIE, it is required to analyze
whether it needs to consolidate such VIE. Lazard is required to consolidate a VIE if we are the primary
beneficiary having (i) the power to direct the activities of the VIE that most significantly impact the
VIE’s economic performance and (ii) the obligation to absorb losses of, or receive benefits from, the
VIE that could be potentially significant to the VIE.

Lazard’s involvement with various entities that are VOEs or VIEs primarily arises from investment
management contracts with fund entities in our Asset Management business. Lazard is not required to consolidate
such entities because, with the exception of certain seed investments, as discussed below, we do not hold more than
an inconsequential equity interest in such entities and we do not hold other variable interests (including our
investment management agreements, which do not meet the definition of variable interests) in such entities.

Lazard makes seed investments in certain entities that are considered VOEs and often require consolidation as

a result of our investment. The impact of seed investment entities that require consolidation on the consolidated
financial statements, including any consolidation or deconsolidation of such entities, is not material to our financial
statements. Our exposure to loss from entities in which we have made seed investments is limited to the extent of
our investment in, or investment commitment to, such entities. See “Critical Accounting Policies and Estimates—
Investments” above for more information regarding our investments.

Generally, when the Company initially invests to seed an investment entity, the Company is the majority
owner of the entity. Our majority ownership in seed investment entities represents a controlling interest, except
when we are the general partner in such entities and the third-party investors have the right to replace the general
partner. To the extent material, we consolidate seed investment entities in which we own a controlling interest, and
we would deconsolidate any such entity when we no longer have a controlling interest in such entity.

Risk Management

Investments

The Company has investments in a variety of asset classes, primarily debt and equity securities, and interests
in alternative investments, debt, equity and private equity funds. The Company makes investments primarily to seed
strategies in our Asset Management business or to reduce exposure arising from LFI and other similar deferred
compensation arrangements. The Company measures its net economic exposure to market and other risks arising
from investments that it owns, excluding (i) investments held in connection with LFI and other similar deferred
compensation arrangements, (ii) investments in funds owned entirely by the noncontrolling interest holders of
certain acquired entities and (iii) interest-bearing deposits over 90 days that allow daily withdrawals without
principal penalties.

Risk sensitivities include the effects of economic hedging. For equity market price risk, investment portfolios
and their corresponding hedges are beta-adjusted to the All-Country World equity index. Fair value and sensitivity
measurements presented herein are based on various portfolio exposures at a particular point in time and may not be
representative of future results. Risk exposures may change as a result of ongoing portfolio activities and changing
market conditions, among other things.

Equity Market Price Risk—At December 31, 2016 and 2015, the Company’s exposure to equity market price

risk in its investment portfolio, which primarily relates to investments in equity securities, equity funds and hedge
funds, was approximately $110 million and $129 million, respectively. The Company hedges market exposure
arising from a significant portion of our equity investment portfolios by entering into total return swaps. The
Company estimates that a hypothetical 10% adverse change in market prices would result in a net decrease of
approximately $1.0 million and $1.8 million in the carrying value of such investments as of December 31, 2016 and
2015, respectively, including the effect of the hedging transactions.

Interest Rate/Credit Spread Risk—At December 31, 2016 and 2015, the Company’s exposure to interest rate

and credit spread risk in its investment portfolio related to investments in debt securities or funds which invest
primarily in debt securities was $53 million and $50 million, respectively. The Company hedges market exposure
arising from a portion of our debt investment portfolios by entering into total return swaps. The Company estimates
that a hypothetical 100 basis point adverse change in interest rates or credit spreads would result in a decrease of
approximately $0.9 million and $0.8 million in the carrying value of such investments as of December 31, 2016 and
2015, respectively, including the effect of the hedging transactions.

Foreign Exchange Rate Risk—At both December 31, 2016 and 2015, the Company’s exposure to foreign

exchange rate risk in its investment portfolio, which primarily relates to investments in foreign currency
denominated equity and debt securities, was $64 million. A significant portion of the Company’s foreign currency
exposure related to our equity and debt investment portfolios is hedged through the aforementioned total return
swaps. The Company estimates that a 10% adverse change in foreign exchange rates versus the U.S. dollar would
result in a decrease of approximately $1.7 million and $1.0 million in the carrying value of such investments as of
December 31, 2016 and 2015, respectively, including the effect of the hedging transactions.

Private Equity—The Company invests in private equity primarily as a part of its co-investment activities and
in connection with certain legacy businesses. At December 31, 2016 and 2015, the Company’s exposure to changes
in fair value of such investments was approximately $96 million and $84 million, respectively. The Company
estimates that a hypothetical 10% adverse change in fair value would result in a decrease of approximately $9.6
million and $8.4 million in the carrying value of such investments as of December 31, 2016 and 2015, respectively.

Risks Related to Receivables

We maintain an allowance for doubtful accounts to provide coverage for probable losses from our receivables.

We determine the adequacy of the allowance by estimating the probability of loss based on our analysis of the
client’s creditworthiness, among other things, and specifically provide for exposures where we determine the
receivables are impaired. At December 31, 2016, total receivables amounted to $638 million, net of an allowance for
doubtful accounts of $16 million. As of that date, Financial Advisory and Asset Management fees and customer
receivables comprised 88% and 12% of total receivables, respectively. At December 31, 2015, total receivables
amounted to $497 million, net of an allowance for doubtful accounts of $13 million. As of that date, Financial
Advisory and Asset Management fees and customer receivables comprised 85% and 15% of total receivables,
respectively. At December 31, 2016 and 2015, the Company had receivables past due or deemed uncollectible of
approximately $22 million and $20 million, respectively. See also “Critical Accounting Policies and Estimates—
Revenue Recognition” above and Note 4 of Notes to Consolidated Financial Statements for additional information
regarding receivables.

LFB engages in lending activities, including commitments to extend credit (primarily for clients of LFG). At

December 31, 2016 and 2015, customer receivables included $51 million and $38 million of LFB loans,
respectively, with such loans being fully collateralized and closely monitored for counterparty creditworthiness.

Credit Concentrations

To reduce the exposure to concentrations of credit, the Company monitors large exposures to individual

counterparties.

Risks Related to Derivatives

Lazard enters into forward foreign currency exchange contracts and interest rate swaps to hedge exposures to
currency exchange rates and interest rates and uses total return swap contracts on various equity and debt indices to
hedge a portion of its market exposure with respect to certain seed investments related to our Asset Management
business. Derivative contracts are recorded at fair value. Derivative assets amounted to $2 million and $1 million at
December 31, 2016 and 2015, respectively, and derivative liabilities, excluding the derivative liability arising from
the Company’s obligation pertaining to LFI and other similar deferred compensation arrangements, amounted to
$12 million and $2 million at such respective dates.

The Company also records derivative liabilities relating to its obligations pertaining to LFI awards and other

similar deferred compensation arrangements, the fair value of which is based on the value of the underlying
investments, adjusted for estimated forfeitures. Changes in the fair value of the derivative liabilities are equally
offset by the changes in the fair value of investments which are expected to be delivered upon settlement of LFI
awards. Derivative liabilities relating to LFI amounted to $170 million and $194 million at December 31, 2016 and
2015, respectively.

Risks Related to Cash and Cash Equivalents and Corporate Indebtedness

A significant portion of the Company’s indebtedness has fixed interest rates, while its cash and cash

equivalents generally have market interest rates. Based on account balances as of December 31, 2016, Lazard
estimates that its annual operating income relating to cash and cash equivalents would increase by approximately
$12 million in the event interest rates were to increase by 1% and decrease by approximately $12 million if rates
were to decrease by 1%.

As of December 31, 2016, the Company’s cash and cash equivalents totaled approximately $1.2 billion.
Substantially all of the Company’s cash and cash equivalents were invested in (i) highly liquid institutional money
market funds (a significant majority of which were invested solely in U.S. Government or agency money market
funds), (ii) in short-term interest bearing and non-interest bearing accounts at a number of leading banks throughout
the world, and (iii) in short-term certificates of deposit from such banks. Cash and cash equivalents are constantly
monitored. On a regular basis, management reviews its investment profile as well as the credit profile of its list of
depositor banks in order to adjust any deposit or investment thresholds as necessary.

Operational Risk

Operational risk is inherent in all our business and may, for example, manifest itself in the form of errors,
breaches in the system of internal controls, employee misconduct, business interruptions, fraud, including fraud
perpetrated by third parties, or legal actions due to operating deficiencies or noncompliance. The Company
maintains a framework including policies and a system of internal controls designed to monitor and manage
operational risk and provide management with timely and accurate information. Management within each of the
operating companies is primarily responsible for its operational risk programs. The Company has in place business
continuity and disaster recovery programs that manage its capabilities to provide services in the case of a disruption.
We purchase insurance policies designed to help protect the Company against accidental loss and losses that may
significantly affect our financial objectives, personnel, property or our ability to continue to meet our responsibilities
to our various stakeholder groups. See Item 1A, “Risk Factors” above for more information regarding operational
risk in our business.

Recent Accounting Developments

For a discussion of recently issued accounting developments and their impact or potential impact on Lazard’s

consolidated financial statements, see Note 3 of Notes to Consolidated Financial Statements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Risk Management

Quantitative and qualitative disclosures about market risk are included under the caption “Management’s

Discussion and Analysis of Financial Condition and Results of Operations—Risk Management.”

Item 8.

Financial Statements and Supplementary Data

Index to Consolidated Financial Statements

Management’s Report On Internal Control Over Financial Reporting ....................................................

Reports of Independent Registered Public Accounting Firm ...................................................................

Consolidated Statements of Financial Condition as of December 31, 2016 and 2015 .............................

Consolidated Statements of Operations for the years ended December 31, 2016, 2015 and 2014 ..........

Consolidated Statements of Comprehensive Income for the years ended December 31, 2016, 2015

and 2014 ..............................................................................................................................................

Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015 and 2014 .........

Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31,

2016, 2015 and 2014 ...........................................................................................................................

Notes to Consolidated Financial Statements ............................................................................................

Page

Supplemental Financial Information

Quarterly Results .....................................................................................................................................

131

Financial Statement Schedules

Schedule I—Condensed Financial Information of Registrant (Parent Company Only)

Condensed Statements of Financial Condition as of December 31, 2016 and 2015 ................................

Condensed Statements of Operations for the years ended December 31, 2016, 2015 and 2014 .............

Condensed Statements of Comprehensive Income for the years ended December 31, 2016, 2015

and 2014 ..............................................................................................................................................

Condensed Statements of Cash Flows for the years ended December 31, 2016, 2015 and 2014 ............

Notes to Condensed Financial Statements ...............................................................................................

F-2

F-3

F-4

F-5

F-6

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management of Lazard Ltd and its subsidiaries (the “Company”) is responsible for establishing and

maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process
designed under the supervision of the Company’s principal executive and principal financial officers to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s
consolidated financial statements for external purposes in accordance with U.S. generally accepted accounting
principles.

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

(cid:120)

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

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

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

Management assessed the effectiveness of the Company’s internal control over financial reporting as of

December 31, 2016. In making this assessment, management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013).
Based on management’s assessment and those criteria, management concluded that the Company maintained
effective internal control over financial reporting as of December 31, 2016.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls
may become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.

The Company’s independent registered public accounting firm, Deloitte & Touche LLP, audited the

Company’s internal control over financial reporting as of December 31, 2016, as stated in their report which appears
under “Report of Independent Registered Public Accounting Firm.”

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Lazard Ltd:

We have audited the internal control over financial reporting of Lazard Ltd and subsidiaries (the “Company”)
as of December 31, 2016, based on criteria established in Internal Control—Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is
responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting, included in the accompanying “Management’s Report On
Internal Control Over Financial Reporting”. Our responsibility is to express an opinion on the Company’s internal
control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board

(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the
company’s principal executive and principal financial officers, or persons performing similar functions, and effected
by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of
collusion or improper management override of controls, material misstatements due to error or fraud may not be
prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal
control over financial reporting to future periods are subject to the risk that the controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial

reporting as of December 31, 2016, based on the criteria established in Internal Control—Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated financial statements and financial statement schedule as listed in the Index at Item
8 as of and for the year ended December 31, 2016 of the Company, and our report dated February 24, 2017,
expressed an unqualified opinion on those consolidated financial statements and financial statement schedule.

/s/ Deloitte & Touche LLP
New York, New York
February 24, 2017

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Lazard Ltd:

We have audited the accompanying consolidated statements of financial condition of Lazard Ltd and

subsidiaries (the “Company”) as of December 31, 2016 and 2015, and the related consolidated statements of
operations, comprehensive income, cash flows, and changes in stockholders’ equity for each of the three years in the
period ended December 31, 2016. Our audits also included the financial statement schedule listed in the Index at
Item 8. These consolidated financial statements and financial statement schedule are the responsibility of the
Company’s management. Our responsibility is to express an opinion on the consolidated financial statements and
financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight

Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial

position of Lazard Ltd and subsidiaries as of December 31, 2016 and 2015, and the results of their operations and
their cash flows for each of the three years in the period ended December 31, 2016, in conformity with accounting
principles generally accepted in the United States of America. Also, in our opinion, such financial statement
schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly,
in all material respects, the information set forth therein.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board

(United States), the Company’s internal control over financial reporting as of December 31, 2016, based on the
criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated February 24, 2017, expressed an unqualified
opinion on the Company’s internal control over financial reporting.

/s/ Deloitte & Touche LLP
New York, New York
February 24, 2017

LAZARD LTD

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 2016 and 2015
(dollars in thousands, except for per share data)

ASSETS
Cash and cash equivalents ................................................................................. $
Deposits with banks and short-term investments ...............................................
Cash deposited with clearing organizations and other segregated cash .............
Receivables (net of allowance for doubtful accounts of $16,386 and $12,882
at December 31, 2016 and 2015, respectively):

Fees ..............................................................................................................
Customers and other .....................................................................................

Investments ........................................................................................................
Property (net of accumulated amortization and depreciation of $286,001
and $265,506 at December 31, 2016 and 2015, respectively) ........................
Goodwill and other intangible assets (net of accumulated amortization
of $60,080 and $57,561 at December 31, 2016 and 2015, respectively) ........
Deferred tax assets .............................................................................................
Other assets ........................................................................................................
Total Assets............................................................................................. $

See notes to consolidated financial statements.

December 31,

2016

2015

1,158,785 $
419,668
29,030

1,132,083
389,861
34,948

564,291
73,991
638,282
459,422

423,817
73,396
497,213
541,911

209,021

207,165

382,024
1,075,777
184,499
4,556,508 $

326,976
1,130,595
217,022
4,477,774

LAZARD LTD

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 2016 and 2015
(dollars in thousands, except for per share data)

(cid:3)

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:

December 31,

2016

2015

Deposits and other customer payables ......................................................... $
Accrued compensation and benefits .............................................................
Senior debt ...................................................................................................
Tax receivable agreement obligation ............................................................
Deferred tax liabilities ..................................................................................
Capital lease obligations ...............................................................................
Other liabilities .............................................................................................
Total Liabilities .......................................................................................

472,283 $
541,588
1,188,600
513,610
9,168
7,205
530,241
3,262,695

506,665
570,409
989,358
523,962
11,104
9,028
499,942
3,110,468

Commitments and contingencies
STOCKHOLDERS’ EQUITY

Preferred stock, par value $.01 per share; 15,000,000 shares authorized:

Series A - 0 and 7,921 shares issued and outstanding at December 31,
2016 and 2015, respectively.................................................................
Series B - no shares issued and outstanding ............................................

Common stock:

Class A, par value $.01 per share (500,000,000 shares authorized;
129,766,091 shares issued at December 31, 2016 and 2015,
including shares held by subsidiaries as indicated below) ...................
Additional paid-in-capital .............................................................................
Retained earnings .........................................................................................
Accumulated other comprehensive loss, net of tax ......................................

Class A common stock held by subsidiaries, at cost (7,628,786 and
4,253,381 shares at December 31, 2016 and 2015, respectively) ..............
Total Lazard Ltd Stockholders’ Equity ...................................................
Noncontrolling interests ...............................................................................
Total Stockholders’ Equity .....................................................................
Total Liabilities and Stockholders’ Equity ............................................. $

-
-

1,298
688,231
1,134,186
(314,222 )
1,509,493

(273,506 )
1,235,987
57,826
1,293,813
4,556,508 $

1,298
600,034
1,123,728
(234,356)
1,490,704

(177,249)
1,313,455
53,851
1,367,306
4,477,774

See notes to consolidated financial statements.

LAZARD LTD

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(dollars in thousands, except for per share data)

REVENUE

Investment banking and other advisory fees .............................$
Asset management fees .............................................................
Interest income ..........................................................................
Other ..........................................................................................
Total revenue .......................................................................
Interest expense .........................................................................
Net revenue ..........................................................................

OPERATING EXPENSES

Compensation and benefits .......................................................
Occupancy and equipment ........................................................
Marketing and business development .......................................
Technology and information services .......................................
Professional services .................................................................
Fund administration and outsourced services ............................
Amortization and other acquisition-related costs ......................
Provision pursuant to tax receivable agreement ........................
Other ..........................................................................................
Total operating expenses ......................................................
OPERATING INCOME (LOSS).................................................
Provision (benefit) for income taxes .........................................
NET INCOME ..............................................................................
LESS - NET INCOME ATTRIBUTABLE TO
NONCONTROLLING INTERESTS .......................................
NET INCOME ATTRIBUTABLE TO LAZARD LTD ............$
ATTRIBUTABLE TO LAZARD LTD CLASS A
COMMON STOCKHOLDERS:

WEIGHTED AVERAGE SHARES OF
COMMON STOCK OUTSTANDING:

2016

Year Ended December 31,
2015

(cid:3)(cid:3)

2014

1,298,364 $
998,887
5,233
81,179
2,383,663
50,292
2,333,371

1,340,543
109,305
83,202
97,461
45,512
63,421
35,247
-
41,219
1,815,910
517,461
123,769
393,692

1,276,096 (cid:3)(cid:3)$
1,036,821
5,286 (cid:3)(cid:3)
86,564
2,404,767 (cid:3)(cid:3)
51,159
2,353,608 (cid:3)(cid:3)

1,319,746 (cid:3)(cid:3)
109,867
81,541 (cid:3)(cid:3)
95,528
49,529 (cid:3)(cid:3)
61,363
5,821 (cid:3)(cid:3)
547,691
99,142 (cid:3)(cid:3)
2,370,228
(16,620 ) (cid:3)(cid:3)
(1,009,552 )
992,932 (cid:3)(cid:3)

1,201,424
1,080,842
5,360
75,391
2,363,017
62,570
2,300,447

1,313,606
111,550
88,029
91,120
46,543
65,457
6,387
18,307
39,983
1,780,982
519,465
85,402
434,063

5,994
387,698 $

6,559
986,373 (cid:3)(cid:3)$

6,786
427,277

(cid:3)(cid:3)

Basic ....................................................................................
Diluted .................................................................................

124,770,401 125,366,272 122,351,836
132,633,630 133,244,546 (cid:3)(cid:3) 133,813,123

NET INCOME PER SHARE OF COMMON
STOCK:

Basic ....................................................................................$
Diluted .................................................................................$

3.11 $
2.92 $

7.87 (cid:3)(cid:3)$
7.40 $

DIVIDENDS DECLARED PER SHARE OF
COMMON STOCK .............................................................$

2.69 $

2.35 (cid:3)(cid:3)$

3.49
3.20

1.20

See notes to consolidated financial statements.

LAZARD LTD

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(dollars in thousands)

NET INCOME
OTHER COMPREHENSIVE INCOME (LOSS), NET
OF TAX:

Currency translation adjustments .............................................
Employee benefit plans:

Actuarial gain (loss) (net of tax expense (benefit) of
$(5,205), $5,644 and $(9,045) for the years ended
December 31, 2016, 2015 and 2014, respectively) .............
Adjustment for items reclassified to earnings (net of tax
expense of $1,757, $1,507 and $1,923 for the years ended
December 31, 2016, 2015, and 2014, respectively) ............
OTHER COMPREHENSIVE LOSS, NET OF TAX ...............
COMPREHENSIVE INCOME ..................................................
LESS - COMPREHENSIVE INCOME ATTRIBUTABLE
TO NONCONTROLLING INTERESTS ...............................
COMPREHENSIVE INCOME ATTRIBUTABLE TO
LAZARD LTD .......................................................................... $

Year Ended December 31,
2015

(cid:3)(cid:3)

2016

2014

393,692 $

992,932 $

434,063

(57,920)

(cid:3)(cid:3)
(51,182 )
(cid:3)(cid:3)

(49,971)

(24,473)

11,283

(21,983)

2,526
(79,867)
313,825

6,309 (cid:3)(cid:3)
(33,590 )
959,342 (cid:3)(cid:3)

4,749
(67,205)
366,858

5,993

6,559

6,785

307,832 $

952,783 (cid:3)(cid:3)$

360,073

See notes to consolidated financial statements.

LAZARD LTD

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(dollars in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ...................................................................................................................................... $

Adjustments to reconcile net income to net cash provided by (used in)
operating activities:

Depreciation and amortization of property .......................................................................
Amortization of deferred expenses and share-based incentive compensation ...................
Amortization and other acquisition-related costs..............................................................
Deferred tax provision (benefit) .......................................................................................
Provision pursuant to tax receivable agreement ...............................................................
Loss on extinguishment of debt .......................................................................................
Gain on acquisition of portion of business already owned................................................
Gain on disposal of subsidiaries .......................................................................................

(Increase) decrease in operating assets:

Deposits with banks and short-term investments ..............................................................
Cash deposited with clearing organizations and other segregated cash............................
Receivables-net ................................................................................................................
Investments ......................................................................................................................
Other assets ......................................................................................................................

Increase (decrease) in operating liabilities:

Deposits and other payables .............................................................................................
Accrued compensation and benefits and other liabilities ..................................................
Net cash provided by operating activities .................................................................

CASH FLOWS FROM INVESTING ACTIVITIES:

Additions to property ...............................................................................................................
Disposals of property ...............................................................................................................
Net cash used in investing activities .........................................................................

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from:

Contributions from noncontrolling interests .....................................................................
Issuance of senior debt, net of expenses ...........................................................................
Excess tax benefits from share-based incentive compensation .........................................
Other financing activities .................................................................................................

Payments for:

Senior debt .......................................................................................................................
Capital lease obligations ..................................................................................................
Distributions to noncontrolling interests ..........................................................................
Payments under tax receivable agreement ........................................................................
Partial extinguishment of tax receivable agreement obligation .........................................
Purchase of Class A common stock .................................................................................
Class A common stock dividends ....................................................................................
Settlement of vested share-based incentive compensation ................................................
Other financing activities .................................................................................................
Net cash used in financing activities .........................................................................
EFFECT OF EXCHANGE RATE CHANGES ON CASH ........................................................
NET INCREASE IN CASH AND CASH EQUIVALENTS .......................................................
CASH AND CASH EQUIVALENTS—January 1 ......................................................................
CASH AND CASH EQUIVALENTS—December 31 ................................................................. $

(cid:3)(cid:3)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest ................................................................................................................................... $
Income taxes, net of refunds ................................................................................................... $

(cid:3)(cid:3) (cid:3) (cid:3)(cid:3)

2016

Year Ended December 31,
2015

(cid:3)(cid:3)

2014

393,692 $

992,932 (cid:3)(cid:3) $

434,063

33,264
341,825
35,247
63,660
-
3,148

(12,668 )

(44,278 )
5,767
(156,129 )
71,552
(55,611 )

(17,095 )
(61,087 )
601,287

(38,749 )
1,096
(37,653 )

93
296,757
4,071
24,484

(101,441 )
(1,619 )
(2,111 )
(10,086 )
-
(300,217 )
(336,138 )
(56,078 )
(4,667 )
(486,952 )
(49,980 )
26,702
1,132,083
1,158,785 $

32,785 (cid:3)(cid:3)
320,472

5,821 (cid:3)(cid:3)
(1,100,785 )
547,691 (cid:3)(cid:3)
60,219

- (cid:3)(cid:3)
(24,388 )
(cid:3)(cid:3)
(207,373 )
6,909 (cid:3)(cid:3)
33,145
64,159 (cid:3)(cid:3)
(90,138 )
(cid:3)(cid:3)

225,008

20,839 (cid:3)(cid:3)

887,296

(cid:3)(cid:3)
(26,629 )
677 (cid:3)(cid:3)
(25,952 )
(cid:3)(cid:3)

275 (cid:3)(cid:3)

396,272

13,300 (cid:3)(cid:3)

-
(cid:3)(cid:3)
(509,098 )
(1,826 ) (cid:3)(cid:3)
(16,296 )
(1,276 ) (cid:3)(cid:3)
(42,222 )
(172,772 ) (cid:3)(cid:3)
(290,684 )
(120,116 ) (cid:3)(cid:3)
(2,361 )
(746,804 ) (cid:3)(cid:3)
(49,037 )
65,503 (cid:3)(cid:3)

1,066,580
1,132,083 (cid:3)(cid:3) $

34,464
295,830
6,387
15,628
18,307
-
-
-

8,544
15,656
(76,200 )
(159,107 )
(111,588 )

74,801
179,232
736,017

(22,184 )
2,085
(20,099 )

1,532
-
5,149
-

-
(2,171 )
(13,458 )
-
-
(192,657 )
(146,241 )
(85,442 )
(2,081 )
(435,369 )
(55,451 )
225,098
841,482
1,066,580

(cid:3) (cid:3)(cid:3) (cid:3) (cid:3)(cid:3)

(cid:3)(cid:3) (cid:3)(cid:3)

(cid:3)

46,262 $
72,420 $

45,359 $
60,716 $

60,414
49,235

See notes to consolidated financial statements.

LAZARD LTD

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(dollars in thousands)

Balance - January 1, 2014 .................................. 7,921 $
Comprehensive income (loss):

- 129,056,082 $1,291 $ 737,899 $ 203,236 $

(133,004 ) 8,317,065 $

Series A
Preferred Stock
Shares

(cid:3)(cid:3)

(cid:3)

(cid:3)(cid:3)

Common Stock
$

Shares (*)

Additional

Accumulated
Other
Comprehensive
Paid-In- Retained Income (Loss),
Capital

Earnings

Net of Tax

Class A
Common Stock
Held By Subsidiaries

Total
Lazard Ltd

Total

Stockholders’ Noncontrolling Stockholders’
Interests

Equity

$
(249,213) $

427,277

(67,204 )

206,195
17,536

(19,617)
(146,241)

4,114,206

(192,657)

560,209 $

69,789 $

629,998

427,277
(67,204)

6,786
(1)

434,063
(67,205)

206,195
(2,081)
(146,241)
(192,657)

Net income.....................................................
Other comprehensive loss - net of tax ............

Amortization of share-based incentive
compensation .....................................................
Dividend-equivalents ............................................
Class A common stock dividends .........................
Purchase of Class A common stock ......................
Delivery of Class A common stock in
connection with share-based incentive
compensation and related tax benefit
of $4,783 ...........................................................
Class A common stock issued in exchange for
Lazard Group common membership interests ...
Business acquisitions and related equity
transactions:

Delivery of Class A common stock ...............
Class A common stock issuable
(including related amortization) .................
Distributions to noncontrolling interests, net .......
Adjustments relating to noncontrolling
interests ............................................................
Balance - December 31, 2014 ............................. 7,921 $

(258,798)

(4,923,252)

178,139

(80,659)

710,009

(7 )

(2,488)

570

(57,274)

2,488

- 129,766,091 $1,298 $ 702,800 $ 464,655 $

(200,766 ) 7,450,745 $

(261,243) $

1,893

(558 )

570
-

(11,926)

570
(11,926)

1,335
706,744 $

(1,335)
63,313 $

-
770,057

LAZARD LTD

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(dollars in thousands)

Series A
Preferred Stock
Shares

Additional

Common Stock
$

Shares (*)

Paid-In- Retained
Earnings
Capital

Accumulated
Other
Comprehensive
Income (Loss),
Net of Tax

Class A
Common Stock
Held By Subsidiaries

Total
Lazard Ltd

Total

Stockholders’ Noncontrolling Stockholders’
Interests

Equity

Balance - January 1, 2015 .................................. 7,921 $
Comprehensive income (loss):

Net income.....................................................
Other comprehensive loss - net of tax ............

Amortization of share-based incentive
compensation .....................................................
Dividend-equivalents ............................................
Class A common stock dividends .........................
Purchase of Class A common stock ......................
Delivery of Class A common stock in
connection with share-based incentive
compensation and related tax benefit
of $13,138 .........................................................
Business acquisitions and related equity
transactions:

- 129,766,091 $1,298 $ 702,800 $ 464,655 $

(200,766 ) 7,450,745 $

(261,243) $

706,744 $

63,313 $

770,057

986,373

(33,590 )

226,723
34,255

(36,616)
(290,684)

3,438,789

(172,772)

986,373
(33,590)

226,723
(2,361)
(290,684)
(172,772)

6,559

992,932
(33,590)

226,723
(2,361)
(290,684)
(172,772)

(362,417)

(6,608,837)

255,439

(106,978)

Delivery of Class A common stock ...............
Distributions to noncontrolling interests, net ........
Balance - December 31, 2015 ............................. 7,921 $

(1,327)

(27,316)

- 129,766,091 $1,298 $ 600,034 $1,123,728 $

(234,356 ) 4,253,381 $

1,327

-
-
(177,249) $ 1,313,455 $

-
(16,021)
(16,021)
53,851 $ 1,367,306

LAZARD LTD

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(dollars in thousands)

Series A
Preferred Stock
Shares

(cid:3)(cid:3)

(cid:3)

(cid:3)(cid:3)

Additional

Common Stock
$

Shares (*)

Paid-In- Retained
Earnings
Capital

Accumulated
Other
Comprehensive
Income (Loss), Held By Subsidiaries

Class A
Common Stock

Net of Tax

Total
Lazard Ltd

Total

Stockholders’ Noncontrolling Stockholders’
Interests

Equity

Balance - January 1, 2016 .................................. 7,921 $
Comprehensive income (loss):

Net income.....................................................
Other comprehensive loss - net of tax ............

Settlement of Series A preferred stock ................. (7,921)
Amortization of share-based incentive
compensation .....................................................
Dividend-equivalents ............................................
Class A common stock dividends .........................
Purchase of Class A common stock ......................
Delivery of Class A common stock in
connection with share-based incentive
compensation and related tax benefit
of $448 ..............................................................
Business acquisitions and related equity
transactions:

- 129,766,091 $1,298 $ 600,034 $1,123,728 $

(234,356 ) 4,253,381 $

(177,249) $ 1,313,455 $

53,851 $ 1,367,306

387,698

(79,866 )

261,462
37,284

(41,102)
(336,138)

8,551,271

(300,217)

387,698
(79,866)
-

261,462
(3,818)
(336,138)
(300,217)

5,994
(1)

393,692
(79,867)
-

261,462
(3,818)
(336,138)
(300,217)

(224,201)

(4,235,455)

168,571

(55,630)

Class A common stock issuable
(including related amortization) ..................
Delivery of Class A common stock
and related tax benefit of $1,074 .................
Distributions to noncontrolling interests, net ........
Other ....................................................................
Balance - December 31, 2016 .............................

37,861

(33,768)

9,559

(940,411)

- $

- 129,766,091 $1,298 $ 688,231 $1,134,186 $

(314,222 ) 7,628,786 $

37,861

35,389

1,621
-
9,559
(273,506) $ 1,235,987 $

(2,018)

1,621
(2,018)
9,559
57,826 $ 1,293,813

(*)

Includes 129,766,091 shares of the Company’s Class A common stock issued at December 31, 2014, 2015 and 2016, respectively.

See notes to consolidated financial statements.

LAZARD LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except for per share data, unless otherwise noted)

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
December 31, 2016 and 2015. 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 October 26, 2015,
as amended (the “Operating Agreement”). LAZ-MD Holdings LLC (“LAZ-MD Holdings”), an entity formerly
owned by Lazard Group’s current and former managing directors, held approximately 0.5% of the outstanding
Lazard Group common membership interests as of January 1, 2014. As of January 1, 2014, LAZ-MD Holdings was
also the sole owner of the one issued and outstanding share of Lazard Ltd’s Class B common stock (the “Class B
common stock”). In May 2014, the remaining outstanding Lazard Group common membership interests held by
LAZ-MD Holdings were exchanged for shares of the Company’s Class A common stock, par value $0.01 per share
(“Class A common stock”), and the sole issued and outstanding share of the Company’s Class B common stock was
automatically converted into one share of the Company’s Class A common stock pursuant to the provisions of the
Company’s bye-laws, resulting in only one outstanding class of common stock (the “Final Exchange of LAZ-MD
Interests”). Following the Final Exchange of LAZ-MD Interests, Lazard Group became a wholly-owned indirect
subsidiary of Lazard Ltd.

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 two business
segments:

(cid:120)

Basis of Presentation

The consolidated financial statements are prepared in conformity with accounting principles generally
accepted in the United States of America (“U.S. GAAP”). The Company’s policy is to consolidate entities in which
it has a controlling financial interest. The Company consolidates:

(cid:120)

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

LAZARD LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except for per share data, unless otherwise noted)

obligation to absorb losses of, or receive benefits from, the VIE that could be potentially significant to
the VIE.

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 at fair value.
Intercompany transactions and balances have been eliminated.

The 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.

Certain prior period amounts have been reclassified to conform to the current period presentation as a result of

the adoption of the new guidance on classification of debt issuance costs and the impact of such guidance on the
consolidated statements of financial condition.

SIGNIFICANT ACCOUNTING POLICIES

The accounting policies below relate to reported amounts and disclosures in the consolidated financial

statements.

Foreign Currency Translation—The consolidated financial statements are presented in U.S. Dollars. Many

of the Company’s non-U.S. subsidiaries have a functional currency (i.e., the currency in which operational activities
are primarily conducted) that is other than the U.S. Dollar, generally the currency of the country in which such
subsidiaries are domiciled. Such subsidiaries’ assets and liabilities are translated into U.S. Dollars at year-end
exchange rates, while revenue and expenses are translated at average exchange rates during the year based on the
daily closing exchange rates. Adjustments that result from translating amounts from a subsidiary’s functional
currency to U.S. Dollars are reported in “accumulated other comprehensive income (loss), net of tax” (“AOCI”).
Foreign currency remeasurement gains and losses on transactions in non-functional currencies are included on the
consolidated statements of operations. Foreign currency remeasurement gains (losses), net of hedge transactions (see
Note 7) amounted to $(1,153), $1,589 and $131, respectively, for the years ended December 31, 2016, 2015 and
2014, and are included in “revenue-other” on the respective consolidated statements of operations.

Use of Estimates—The preparation of consolidated financial statements in conformity with U.S. GAAP
requires the use of management’s estimates. In preparing the consolidated financial statements, management makes
estimates and assumptions regarding:

(cid:120)

valuations of assets and liabilities requiring fair value estimates including, but not limited to,
investments, derivatives, securities sold, not yet purchased and assumptions used to value pension and
other post-retirement plans;

the adequacy of the allowance for doubtful accounts;

the realization of deferred tax assets and adequacy of tax reserves for uncertain tax positions;

the measurement of our tax receivable agreement obligation;

the outcome of litigation;

the carrying amount of goodwill and other intangible assets;

the amortization period of intangible assets;

LAZARD LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except for per share data, unless otherwise noted)

(cid:120)

the valuation of shares issued or issuable that contain transfer restrictions;

the vesting of share-based and other deferred compensation plan awards; and

other matters that affect the reported amounts and disclosure of contingencies in the consolidated
financial statements.

Estimates, by their nature, are based on judgment and available information. Therefore, actual results could

differ from those estimates and could have a material impact on the consolidated financial statements.

Cash and Cash Equivalents—The Company defines cash equivalents as short-term, highly liquid securities

and cash deposits with original maturities of 90 days or less when purchased.

Deposits with Banks and Short-Term Investments—Represents LFB’s short-term deposits, including with

the Banque de France and amounts placed by LFB in short-term, highly liquid securities, such as French government
securities, with original maturities of 90 days or less when purchased. The level of these deposits and investments
may be driven by the level of LFB customer and bank-related interest-bearing time and demand deposits (which can
fluctuate significantly on a daily basis) and by changes in asset allocation.

Cash Deposited with Clearing Organizations and Other Segregated Cash—Primarily represents restricted

cash deposits made by the Company, including those to satisfy the requirements of clearing organizations.

Allowance for Doubtful Accounts—We maintain an allowance for bad debts to provide for estimated losses

relating to fees and customer receivables. We determine the adequacy of the allowance by estimating the probability
of loss based on management’s analysis of the client’s creditworthiness and specifically reserve against exposures
where we determine the receivables may be impaired, which may include situations where a fee is in dispute or
litigation has commenced.

With respect to fees receivable from Financial Advisory activities, such receivables are generally deemed past

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

See Note 4 for additional information regarding receivables.

Investments—Investments in debt and marketable equity securities held either directly, or indirectly through

asset management funds, at the Company’s broker-dealer subsidiaries are accounted for at fair value, with any
increase or decrease in fair value recorded in earnings. Such amounts are reflected in “revenue-other” in the
consolidated statements of operations.

Investments in debt and marketable equity securities held at the Company’s non broker-dealer subsidiaries are

considered “trading” securities and are accounted for at fair value, with any increase or decrease in fair value
reflected in “revenue-other” in the consolidated statements of operations.

LAZARD LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except for per share data, unless otherwise noted)

Investments also include interests in alternative investment funds and private equity funds, each accounted for

at fair value, as well as investments accounted for under the equity method of accounting. Any increases or
decreases in the carrying value of those investments accounted for at fair value and the Company’s share of net
income or losses pertaining to its equity method investments are reflected in “revenue-other” in the consolidated
statements of operations.

Dividend income is reflected in “revenue-other” on the consolidated statements of operations. Interest income

includes accretion or amortization of any discount or premium arising at acquisition of the related debt security.
Securities transactions and the related revenue and expenses are recorded on a “trade date” basis.

See Notes 5 and 6 for additional information regarding the Company’s investments.

Property-net—Property is stated at cost or, in the case of property under capital leases, the present value of
the future minimum lease payments, less accumulated depreciation and amortization. Buildings represent owned
property and amounts recorded pursuant to capital leases (see Notes 8 and 12), with the related obligations recorded
as capital lease obligations. Such buildings are depreciated on a straight-line basis over their estimated useful lives.
Leasehold improvements are capitalized and are amortized over the lesser of the economic useful life of the
improvement or the term of the lease. Depreciation of furniture and equipment, including computer hardware and
software, is determined on a straight-line basis using estimated useful lives. Depreciation and amortization expense
aggregating $33,264, $32,785 and $34,464 for the years ended December 31, 2016, 2015 and 2014, respectively, is
included on the respective consolidated statements of operations in “occupancy and equipment” or “technology and
information services”, depending on the nature of the underlying asset. Repairs and maintenance are expensed as
incurred.

Goodwill and Other Intangible Assets—As goodwill has an indefinite life, it is required to be tested for

impairment annually or more frequently if circumstances indicate impairment may have occurred. The Company
performs a qualitative evaluation about whether it is more likely than not that the fair value of a reporting unit is less
than its carrying amount in lieu of actually calculating the fair value of the reporting unit.

The Company completed its annual goodwill review as of November 1, 2016, and determined that no

impairment existed.

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

See Note 9 with respect to goodwill and other intangible assets.

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

The Company enters into forward foreign currency exchange rate contracts, interest rate swaps, interest rate

futures, total return swap contracts on various equity and debt indices and other derivative contracts to economically
hedge exposures to fluctuations in currency exchange rates, interest rates and equity and debt prices. The Company

LAZARD LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except for per share data, unless otherwise noted)

reports its derivative instruments separately as assets and liabilities unless a legal right of set-off exists under a
master netting agreement enforceable by law. The Company’s derivative instruments are recorded at their fair value,
and are included in “other assets” and “other liabilities” on the consolidated statements of financial condition. Gains
and losses on the Company’s derivative instruments not designated as economic hedging instruments are included in
“interest income” and “interest expense”, respectively, or “revenue-other”, depending on the nature of the
underlying item, in the consolidated statements of operations.

In addition to the derivative instruments described above, the Company records derivative liabilities relating to

its obligations pertaining to Lazard Fund Interests (“LFI”) and other similar deferred compensation arrangements,
the fair value of which is based on the value of the underlying investments, adjusted for estimated forfeitures, and is
included in “accrued compensation and benefits” in the consolidated statements of financial condition. Changes in
the fair value of the derivative liabilities are included in “compensation and benefits” in the consolidated statements
of operations, the impact of which equally offsets the changes in the fair value of investments which are currently
expected to be delivered upon settlement of LFI and other similar deferred compensation arrangements, which are
reported in “revenue-other” in the consolidated statements of operations. For information regarding LFI and other
similar deferred compensation arrangements, see Notes 5, 7 and 14.

Deposits and Other Customer Payables—Principally relates to LFB customer-related demand deposits, both

interest-bearing and non-interest bearing.

Securities Sold, Not Yet Purchased—Securities sold, not yet purchased represents liabilities for securities

sold for which payment has been received and the obligations to deliver such securities are included within “other
liabilities” in the consolidated statements of financial condition. These securities are accounted for at fair value, with
any increase or decrease in fair value recorded in earnings in accordance with standard securities industry practices.
Such gains and losses are reflected in “revenue-other” in the consolidated statements of operations.

Contingent Consideration Liabilities —The contingent consideration liabilities of businesses acquired in a

business combination are initially recorded at the estimated fair value and any change in the fair value is recognized
in “amortization and other acquisition-related costs” in the consolidated statements of operations. The contingent
consideration liability is included in “other liabilities” on the consolidated statements of financial condition.

Fair Value of Financial Assets and Liabilities—The majority of the Company’s financial assets and

liabilities are recorded at fair value or at amounts that approximate fair value. Such assets and liabilities include cash
and cash equivalents, deposits with banks and short-term investments, cash deposited with clearing organizations
and other segregated cash, receivables, investments (excluding investments accounted for at amortized cost, interest-
bearing deposits or using the equity method of accounting), derivative instruments, deposits and other customer
payables.

Revenue Recognition

Investment Banking and Other Advisory Fees—Fees for M&A and Other Advisory services and

Restructuring advisory services are recorded when (i) there is persuasive evidence of an arrangement with a client,
(ii) fees are fixed or determinable, (iii) the agreed-upon services have been completed and delivered to the client or
the transaction or events contemplated in the engagement letter are determined to be substantially completed, which
is generally the date the related transactions are consummated and (iv) collection is reasonably assured. Expenses
that are directly related to such transactions and billable to clients are deferred to match revenue recognition.
“Investment banking and other advisory fees” on the Company’s consolidated statements of operations are presented
net of client reimbursements of expenses. The amount of expenses reimbursed by clients for the years ended
December 31, 2016, 2015 and 2014 are $16,998, $19,358 and $20,407, respectively.

Asset Management Fees—Asset Management fees are derived from fees for investment management and
advisory services provided to clients. Revenue is recorded on an accrual basis primarily based on a percentage of
client assets managed. Fees vary with the type of assets managed, with higher fees earned on equity assets,

LAZARD LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except for per share data, unless otherwise noted)

alternative investment (such as hedge funds) and private equity funds, and lower fees earned on fixed income and
money market products.

In addition, 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 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 generally are 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 interests 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.

Receivables relating to asset management and incentive fees are reported in “fees receivable” on the

consolidated statements of financial condition.

Soft Dollar Arrangements—The Company’s Asset Management business obtains research and other services
through “soft dollar” arrangements. Consistent with the “soft dollar” safe harbor established by Section 28(e) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Asset Management business does not have
any contractual obligation or arrangement requiring it to pay for research and other services obtained through soft
dollar arrangements with brokers. Instead, the provider is obligated to pay for the services. Consequently, the
Company does not incur any liability and does not accrue any expenses in connection with any research or other
services obtained by the Asset Management business pursuant to such soft dollar arrangements. For the year ended
December 31, 2016, the Company obtained research and other services through soft dollar arrangements valued at
approximately $23,000. If the use of soft dollars is limited or prohibited in the future by regulation, we may have to
bear the costs of such research and other services.

Equity-Based Incentive Compensation Awards—Equity-based incentive compensation awards that do not

require future service are expensed immediately. Equity-based compensation awards that require future service are
amortized over the applicable vesting period, or requisite service period, based on the fair value of the Company’s
Class A common stock on the date of grant. Compensation expense recognized for equity-based incentive
compensation is determined based on the number of awards that in the Company’s estimate are considered probable
of vesting (including as a result of any applicable performance conditions). Equity-based incentive compensation is
recognized in “compensation and benefits” expense.

Cost Saving Initiatives and Staff Reductions—Charges associated with management-approved cost saving

plans or staff reductions can include severance costs, charges to vacate facilities and contract cancellation costs.
Severance costs are generally accrued on the date that employees are notified of their benefits and other costs are
generally accrued as the Company ceases to use facilities or cancels contracts. The Company records severance-
related liabilities in “accrued compensation and benefits” and other types of liabilities in “other liabilities” in the
consolidated statements of financial condition.

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

LAZARD LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except for per share data, unless otherwise noted)

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.

Deferred income taxes reflect the net tax effects of temporary differences between the financial reporting and

tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when
such differences are expected to reverse. Such temporary differences are reflected as deferred tax assets and deferred
tax liabilities on the consolidated statements of financial condition. A deferred tax asset is recognized if it is more
likely than not (defined as a likelihood of greater than 50%) that a tax benefit will be accepted by a taxing authority.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not

that some portion or all of the deferred tax assets will be realized and, when necessary, a valuation allowance is
established. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable
income during the periods in which temporary differences become deductible. Management considers the following
possible sources of taxable income when assessing the realization of deferred tax assets:

(cid:120)

future reversals of existing taxable temporary differences;

future taxable income exclusive of reversing temporary differences and carryforwards;

taxable income in prior carryback years; and

tax-planning strategies.

The assessment regarding whether a valuation allowance is required or should be adjusted also considers all

available information, including the following:

(cid:120)

nature, frequency, magnitude and duration of any past losses and current operating results;

duration of statutory carryforward periods;

historical experience with tax attributes expiring unused; and

near-term and medium-term financial outlook.

The Company records tax positions taken or expected to be taken in a tax return based upon the Company’s
estimates regarding the amount that is more likely than not to be realized or paid, including in connection with the
resolution of any related appeals or other legal processes. Accordingly, the Company recognizes liabilities for
certain unrecognized tax benefits based on the amounts that are more likely than not to be settled with the relevant
taxing authority.

The Company recognizes interest and/or penalties related to unrecognized tax benefits in “provision (benefit)

for income taxes”. See Note 16 for additional information relating to income taxes.

RECENT ACCOUNTING DEVELOPMENTS

Fair Value Measurement—In May 2015, the FASB issued updated guidance for the classification and

disclosure of certain investments using the net asset value (“NAV”) as a practical expedient to measure the fair
value of the investment. The guidance removes the requirement to categorize within the fair value hierarchy all
investments for which fair value is measured using NAV as a practical expedient. The new guidance is effective for
financial statements issued for fiscal years beginning after December 15, 2015. The new guidance is to be applied on
a retrospective basis. The Company elected to early adopt this guidance in the quarter ended September 30, 2015
and has removed investments that are measured at NAV as a practical expedient from the fair value hierarchy in all
periods presented in the consolidated financial statements and related disclosures.

LAZARD LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except for per share data, unless otherwise noted)

Interest—Imputation of Interest—In April 2015, the FASB issued updated guidance which requires a
company to classify debt issuance costs related to a recognized debt liability in the balance sheet as a direct
deduction from the carrying amount of that debt liability, consistent with debt discounts. The new guidance is
effective for financial statements issued for fiscal years beginning after December 15, 2015 and is to be applied on a
retrospective basis. The adoption of this guidance by the Company in the first quarter of 2016 resulted in a
reclassification as of December 31, 2015 of $8,992 from “other assets” to “senior debt” on our consolidated
financial statements and related disclosures.

Amendments to the Consolidation Analysis—In February 2015, the FASB issued updated guidance for the

consolidation of certain legal entities. The updated guidance eliminates the deferral of certain consolidation
standards for entities considered to be investment companies and modifies the evaluation of whether limited
partnerships and similar legal entities are VIEs or VOEs. The new guidance is effective for annual reporting periods
beginning after December 15, 2015. The Company adopted this guidance using the modified retrospective method
with an effective date of January 1, 2016. The adoption of this guidance did not have a material impact on our
consolidated financial statements or related disclosures. In October 2016, the FASB issued updated consolidation
guidance specific to interests held through related parties that are under common control. The new guidance
requires an entity to consider those interests on a proportionate basis. The Company adopted this guidance
retrospectively with an effective date of January 1, 2016, as it is required to coincide with the adoption of the
February 2015 guidance. The adoption of this guidance did not have a material impact on our consolidated financial
statements or related disclosures.

Intangibles—Goodwill and Other—Internal-Use Software: Customers Accounting for Fees Paid in a Cloud
Computing Arrangement—In April 2015, the FASB issued updated guidance providing clarification on whether a
cloud computing arrangement that contains a software license should be accounted for as internal-use software. The
new guidance is effective for annual and interim periods beginning after December 15, 2015. The adoption of this
guidance by the Company in the first quarter of 2016 did not have a material impact on our consolidated financial
statements.

Compensation—Stock Compensation: Improvements to Employee Share-Based Payment Accounting—In
March 2016, the FASB issued new guidance regarding equity-based incentive compensation. The new guidance
includes several amendments which affect various aspects of the accounting for equity-based incentive
compensation transactions, including the income tax consequences, classification of awards as either equity or
liabilities, and classification on the statement of cash flows. The new guidance is effective for annual and interim
periods beginning after December 15, 2016. The Company expects that the prospective impact of this new guidance
will result in an increase or a decrease to the provision for income taxes for the delivery of stock under share-based
payment arrangements, which will likely cause volatility in the effective tax rate and could be material to the
consolidated statements of operations and the classification of cash flows in future periods. Additionally, upon
adoption of the new guidance, the Company expects that deferred tax assets of $93,634 will be recorded for
previously unrecognized excess tax benefits outstanding in the period ended December 31, 2016, with an offsetting
adjustment to retained earnings.

Revenue from Contracts with Customers—In May 2014, the Financial Accounting Standards Board (the
“FASB”) issued comprehensive new revenue recognition guidance. The guidance requires a company to recognize
revenue when it transfers promised services to customers in an amount that reflects the consideration to which the
company expects to be entitled in exchange for those services and requires enhanced disclosures. The guidance also
changes the accounting for certain contract costs, including whether they may be offset against revenue in the
consolidated statements of operations. On July 9, 2015, the FASB approved the deferral of the effective date of the
new revenue guidance by one year to annual reporting periods beginning after December 15, 2017, with early
adoption being permitted for annual periods beginning after December 15, 2016. The guidance may be adopted
using a full retrospective approach or a modified cumulative effect approach. During 2016, the FASB issued
additional clarifications for certain aspects of the new revenue recognition guidance. The Company currently
expects to adopt the revenue recognition guidance in the first quarter of 2018. The Company’s implementation
efforts include the identification of revenue within the scope of the guidance and the evaluation of revenue

LAZARD LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except for per share data, unless otherwise noted)

contracts. The Company also continues to evaluate both the timing of revenue recognition and the presentation of
certain contract costs.

Classification of Certain Cash Receipts and Cash Payments—In August and November 2016, the FASB
issued updated guidance which clarifies how a company should classify certain cash receipts and cash payments on
the statement of cash flows and clarifies that restricted cash should be included in the total of cash and cash
equivalents on the statement of cash flows. The new guidance for both updates is effective for annual and interim
periods beginning after December 15, 2017 and early adoption is permitted. The new guidance is to be applied on a
retrospective basis. The Company is currently evaluating the new guidance.

Clarifying the Definition of a Business—In January 2017, the FASB issued updated guidance to clarify the

definition of a business within the context of business combinations. The updated guidance requires that when
substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable
asset or a group of similar identifiable assets, the set is not a business. This updated guidance is expected to reduce
the number of transactions that need to be further evaluated as business combinations. If further evaluation is
necessary, the updated guidance will require that a business set include, at a minimum, an input and a substantive
process that together significantly contribute to the ability to create output. The updated guidance will remove the
evaluation of whether a market participant could replace missing elements. The new guidance is effective for
annual and interim periods beginning after December 15, 2017 and is to be applied on a prospective basis. The
Company is currently evaluating the new guidance.

Leases—In February 2016, the FASB issued updated guidance for leases. The guidance requires a lessee to

(i) recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in
the statement of financial condition, (ii) recognize a single lease cost, calculated so that the cost of the lease is
allocated over the lease term on a generally straight-line basis, and (iii) classify all cash payments within operating
activities in the statement of cash flows. The new guidance is effective for annual and interim periods beginning
after December 15, 2018, with early adoption permitted. The new guidance is to be applied on a modified
retrospective basis. The Company is currently evaluating the new guidance.

Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments—In June
2016, the FASB issued new guidance regarding the measurement of credit losses on financial instruments. The new
guidance replaces the incurred loss impairment methodology in the current guidance with a methodology that
reflects expected credit losses and requires consideration of a broader range of reasonable and supportable
information to determine credit loss estimates. The new guidance is effective for annual and interim periods
beginning after December 15, 2019 with early adoption permitted for fiscal years beginning after December 15,
2018. The Company is currently evaluating the new guidance.

Intangibles—Goodwill and Other: Simplifying the Test for Goodwill Impairment—In January 2017, the
FASB issued updated guidance which eliminated Step 2 from the goodwill impairment test. Step 2 is the process of
measuring a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the
carrying amount of that goodwill. The new guidance requires entities to measure a goodwill impairment loss as the
amount by which a reporting unit’s carrying value exceeds its fair value, limited to the carrying amount of goodwill.
The FASB also eliminated the requirements for entities that have reporting units with zero or negative carrying
amounts to perform a qualitative assessment for the goodwill impairment test. Instead, those entities would be
required to disclose the amount of goodwill allocated to each reporting unit with a zero or negative carrying amount.
The new guidance is effective for interim or annual goodwill impairment tests performed in fiscal years beginning
after December 15, 2019, with early adoption permitted. The Company is currently evaluating the new guidance.(cid:3)

RECEIVABLES

The Company’s receivables represent fee receivables, amounts due from customers and other receivables.

LAZARD LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except for per share data, unless otherwise noted)

Receivables are stated net of an estimated allowance for doubtful accounts, for past due amounts and for

specific accounts deemed uncollectible, which may include situations where a fee is in dispute.

Activity in the allowance for doubtful accounts for the years ended December 31, 2016, 2015 and 2014 was as

follows:

Beginning Balance................................................................. $
Bad debt expense, net of recoveries ......................................
Charge-offs, foreign currency translation and other
adjustments .........................................................................
Ending Balance ...................................................................... $

Year Ended December 31,
2015

(cid:3)(cid:3)

2014

2016

12,882 $
10,055

23,540 $
3,125 (cid:3)(cid:3)

28,777
12,246

(6,551)
16,386 $

(13,783 )
12,882 (cid:3)(cid:3)$

(17,483)
23,540

Bad debt expense, net of recoveries is included in “investment banking and other advisory fees” on the

consolidated statements of operations.

At December 31, 2016 and 2015, the Company had receivables past due or deemed uncollectible of $22,212

and $19,923, respectively.

Of the Company’s fee receivables at December 31, 2016 and 2015, $76,133 and $81,774, respectively,
represented interest-bearing financing receivables. Based upon our historical loss experience, the credit quality of
the counterparties, and the lack of past due or uncollectible amounts, there was no allowance for doubtful accounts
required at those dates related to such receivables.

The aggregate carrying amount of our non-interest bearing receivables of $562,149 and $415,439 at

December 31, 2016 and 2015, respectively, approximates fair value.

INVESTMENTS

The Company’s investments and securities sold, not yet purchased, consist of the following at December 31,

2016 and 2015:

LAZARD LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except for per share data, unless otherwise noted)

(cid:3)

Interest-bearing deposits .................................................................................... $
Debt ...................................................................................................................
Equities ..............................................................................................................
Funds:

Alternative investments (a) ..........................................................................
Debt (a) .........................................................................................................
Equity (a) ......................................................................................................
Private equity................................................................................................

Equity method ....................................................................................................
Total investments ...............................................................................................
Less:

Interest-bearing deposits...............................................................................
Equity method ..............................................................................................
Investments, at fair value ................................................................................... $
Securities sold, not yet purchased, at fair value
(included in “other liabilities”) ....................................................................... $

December 31,

2016

2015

456 $
-
41,017

32,441
74,597
188,268
122,421
417,727
222
459,422

456
222
458,744 $

54,885
535
44,834

67,600
67,134
197,787
100,219
432,740
8,917
541,911

54,885
8,917
478,109

4,482 $

3,239

(a)

Interests in alternative investment funds, debt funds and equity funds include investments with fair values of
$13,080, $37,869 and $128,219, respectively, at December 31, 2016 and $10,996, $31,598 and $156,081,
respectively, at December 31, 2015, held in order to satisfy the Company’s liability upon vesting of previously
granted LFI and other similar 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 14).

Interest-bearing deposits have original maturities of greater than three months but equal to or less than one

year and are carried at cost that approximates fair value due to their short-term maturities.

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.

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.

LAZARD LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except for per share data, unless otherwise noted)

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, (ii) until the fourth quarter of 2015, Lazard
Australia Corporate Opportunities Fund 2 (“COF2”), an Australian fund targeting Australian mid-market
investments, (iii) a mezzanine fund, which invests in mezzanine debt of a diversified selection of small- to mid-cap
European companies, and (iv) a fund targeting significant noncontrolling-stake investments in established private
companies. The Company disposed of its private equity business in Australia in the second quarter of 2015 in a
transaction with the management of the disposed business. Revenue of $24,388 relating to the disposal of the
business primarily represents the realization of carried interest at fair value and is included in “revenue-other” on the
consolidated statements of operations for the year ended December 31, 2015.

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 years ended December 31, 2016, 2015 and 2014, the Company reported in “revenue-other” on its
consolidated statements of operations net unrealized investment gains and losses pertaining to “trading” securities
still held as of the reporting date as follows:

Net unrealized investment gains (losses) ......................................... $

2016

Year Ended December 31,
2015
(19,681 ) (cid:3)(cid:3) $

(cid:3)(cid:3)

11,816 $

2014

(8,568)

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 Company’s investments in debt securities and securities sold, not yet purchased are classified as Level 1

when their respective fair values are based on unadjusted quoted prices in active markets.

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 securities 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.

LAZARD LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except for per share data, unless otherwise noted)

The fair value of the contingent consideration liability is classified as Level 3 and the estimated fair value of

the liability is remeasured at each reporting period. The inputs used to derive the fair value of the contingent
consideration include the application of probabilities when assessing certain performance thresholds for the relevant
periods. Any change in the fair value is recognized in “amortization and other acquisition-related costs” in the
consolidated statement of operations. Our business acquisitions may involve the potential payment of contingent
consideration upon the achievement of certain performance thresholds. The contingent consideration liability is
initially recorded at the estimated fair value of the contingent payments on the acquisition date and is included in
“other liabilities” on the consolidated statements of financial condition. See Note 12.

The fair value of derivatives entered into by the Company are classified as Level 2 and are 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. See Note 7.

Investments Measured at Net Asset Value—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 December 31, 2016 and 2015, 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:

Level 1

Level 2

Level 3

NAV (a)

Total

December 31, 2016

Assets:
Investments:

Debt ..................................................................... $
Equities ................................................................
Funds:

- $

39,509

- $
-

- $
1,508

- $
-

-
41,017

Alternative investments .................................
25,316
74,591
Debt................................................................
Equity ............................................................. 188,229
-
Private equity .................................................
-
Derivatives ................................................................
Total .................................................................... $ 327,645 $

-
-
-
-
1,993
1,993 $

7,125
32,441
-
74,597
6
-
-
39 188,268
- 122,421 122,421
1,993
-
-
1,508 $ 129,591 $ 460,737

Liabilities:
Securities sold, not yet purchased ............................. $
Contingent consideration liability .............................
Derivatives ................................................................
Total .................................................................... $

- $

4,482 $
-
- 182,223

- $
22,608
-
4,482 $ 182,223 $ 22,608 $

- $

4,482
22,608
- 182,223
- $ 209,313

LAZARD LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except for per share data, unless otherwise noted)

Level 1

Level 2

December 31, 2015
Level 3

NAV (a)

Total

Assets:
Investments:

Debt ..................................................................... $
Equities ................................................................
Funds:

535 $
43,558

- $
-

- $
1,276

- $
-

535
44,834

45,135
Alternative investments .................................
Debt................................................................
67,128
Equity ............................................................. 197,745
-
Private equity .................................................
-
Derivatives ................................................................
Total .................................................................... $ 354,101 $

-
-
-
-
1,048
1,048 $

67,600
- 22,465
-
67,134
6
42 197,787
-
- 100,219 100,219
1,048
-
-
1,276 $ 122,732 $ 479,157

Liabilities:
Securities sold, not yet purchased ............................. $
Derivatives ................................................................
Total .................................................................... $

3,239 $

- $
- 195,689
3,239 $ 195,689 $

- $
-
- $

- $
3,239
- 195,689
- $ 198,928

(a) Represents certain investments measured at NAV or its equivalent as a practical expedient in determining fair
value. In accordance with current accounting guidance, these investments have not been classified in the fair
value hierarchy. See Note 3 for additional information.

The following tables provide a summary of changes in fair value of the Company’s Level 3 assets and

liabilities for the years ended December 31, 2016, 2015 and 2014:

Year Ended December 31, 2016

Net Unrealized/
Realized
Gains/Losses
Included In
Earnings (a)

Beginning
Balance

Sales/(cid:3)
Dispositions/
Settlements (cid:3)(cid:3)

Foreign
Currency
Translation
Adjustments

Ending
Balance

Purchases/
Acquisitions

Assets:
Investments:

Equities ....................................................... $ 1,276 $
Total Level 3 Assets ................................... $ 1,276 $

248 $
248 $

- $
- $

(16) $ 1,508
(16) $ 1,508

Liabilities:

Contingent consideration liability .............. $
Total Level 3 Liabilities ............................. $

- $
- $

32,725 $
32,725 $

19,950 $ (30,067 ) $
19,950 $ (30,067 ) $

- $22,608
- $22,608

Year Ended December 31, 2015 (b)

Net Unrealized/

Assets:
Investments:

Beginning
Balance

Foreign
Realized
Currency
Gains /Losses
Translation Ending
Included In
Earnings (a) Acquisitions Dispositions Adjustments Balance

Purchases/

Sales/

Equities ....................................................... $ 1,315 $
Total Level 3 Assets ................................... $ 1,315 $

14 $
14 $

- $
- $

(53) $ 1,276
(53) $ 1,276

LAZARD LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except for per share data, unless otherwise noted)

Year Ended December 31, 2014 (b)

Net Unrealized/
Realized
Gains/Losses
Included In
Earnings (a)

Beginning
Balance

Foreign
Currency
Translation
Adjustments

Sales/
Dispositions

Ending
Balance

Purchases/
Acquisitions

Assets:
Investments:

Equities ....................................................... $ 1,340 $
Total Level 3 Assets ................................... $ 1,340 $

19 $
19 $

- $
- $

(1 ) $
(1 ) $

(43) $ 1,315
(43) $ 1,315

(a) Earnings recorded in “other revenue” for investments in equities for the years ended December 31, 2016, 2015
and 2014 include net unrealized gains of $243, $14 and $19, respectively. Earnings recorded in “amortization
and other acquisition-related costs” for the contingent consideration liability for the year ended December 31,
2016 include unrealized losses of $2,658 and realized losses of $30,067 due to the change in the fair value of
contingent consideration associated with the Edgewater business acquisition.

(b) The tables for the years ended December 31, 2015 and 2014 reflect the retrospective application of new
disclosure guidance adopted by the Company for investments using NAV or its equivalent as a practical
expedient when measuring fair value. See Note 3.

There were no transfers between any of the Level 1, 2 and 3 categories in the fair value measurement

hierarchy during the years ended December 31, 2016 and 2015.

Financial Instruments Not Measured at Fair Value—The tables below present the carrying value, fair value

and fair value hierarchy category of certain financial instruments as of December 31, 2016 and 2015 that are not
measured at fair value in the Company’s consolidated statement of financial condition, and excludes certain
financial instruments such as equity method investments.

December 31, 2016
Fair Value Measurements Using:
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)

Significant
Observable
Inputs
(Level 2)

Fair Value

Significant
Unobservable
Inputs
(Level 3)

Carrying
Value

419,668

Financial Assets:
Cash and cash equivalents ......................... $ 1,158,785 $ 1,158,785 $ 1,158,785 $
Deposits with banks and short-term
investments .............................................
Cash deposited with clearing
organizations and other segregated
cash .........................................................
Interest-bearing financing receivables .......
Interest-bearing deposits (included
within investments) .................................
Financial Liabilities:
Deposits and other customer payables ....... $
472,283 $
Senior debt ................................................. 1,188,600 1,204,171

29,030
-

29,030
78,072

29,030
76,133

472,283 $

419,668

472,283 $

419,668

456

- $

-
-

-
78,072

-
-

- $
- 1,204,171

LAZARD LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except for per share data, unless otherwise noted)

(cid:3)

Carrying
Value

December 31, 2015
Fair Value Measurements Using:
Quoted
Prices
in Active
Markets for
Identical
Assets
(Level 1)

Significant
Observable
Inputs
(Level 2)

Fair Value

Significant
Unobservable
Inputs
(Level 3)

389,861

Financial Assets:
Cash and cash equivalents ......................... $ 1,132,083 $ 1,132,083 $ 1,132,083 $
Deposits with banks and short-term
investments ................................................
Cash deposited with clearing
organizations and other segregated
cash .........................................................
Interest-bearing financing receivables .......
Interest-bearing deposits (included
within investments) .................................
Financial Liabilities:
Deposits and other customer payables ....... $
Senior debt .................................................

506,665 $
993,999

506,665 $
989,358

506,665 $
-

34,948
-

34,948
82,573

34,948
81,774

389,861

54,885

- $

-
-

- $
993,999

-
82,573

-
-

Cash and cash equivalents are carried at either cost or amortized cost that approximates fair value due to their

short-term maturities.

The carrying value of deposits with banks and short-term investments, and cash deposited with clearing
organizations and other segregated cash, approximates fair value because of the relatively short period of time
between their origination and expected maturity.

Fair values of interest-bearing financing receivables were generally determined by discounting both principal

and interest cash flows expected to be collected, using a discount rate approximating current market interest rates for
comparable financial instruments and based on unobservable inputs.

The carrying value of deposits and other customer payables and investments accounted for at amortized cost,

such as interest-bearing deposits, approximate fair value due to their short-term nature.

The Company’s senior debt is carried at historical amounts. The fair value of the Company’s senior debt is

based on market quotations.

LAZARD LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except for per share data, unless otherwise noted)

The following tables present, at December 31, 2016 and 2015, certain investments that are valued using NAV

or its equivalent as a practical expedient in determining fair value:

December 31, 2016
Estimated Liquidation Period of
Investments Not Redeemable

Investments
Redeemable

Fair Value

Unfunded
Commitments

% of
Fair Value
Not
Redeemable

%
Next
5 Years

%
5-10
Years

%
Thereafter

Redemption
Frequency

Redemption
Notice Period

Alternative investment funds:(cid:3)
Hedge funds ................... $
Funds of funds ...............
Other ..............................
Debt funds ............................
Equity funds .........................
Private equity funds:

6,190 $
492
443
6
39

-
-
-
-
-

Equity growth ................ 90,824
Mezzanine debt .............. 31,597
Total ..................................... $ 129,591 $

9,183 (f)
-
9,183

NA
NA
NA
NA
NA

100%
100%

12%
-

33%
-

NA
NA
NA
NA
NA

55 %
100 %

(a) <30-60 days
(b) <30-90 days
(c) <30-60 days
(d)
30 days
(e) <30-90 days

NA
NA

(a) weekly (73%), monthly (2%) and quarterly (25%)
(b) monthly (98%) and quarterly (2%)
daily (7%) and monthly (93%)
(c)
daily (100%)
(d)
daily (19%), monthly (50%) and quarterly (31%)
(e)
(f) Unfunded commitments to private equity investments consolidated but not owned by Lazard of $6,886 are

excluded. Such commitments are required to be funded by capital contributions from noncontrolling interest
holders.

December 31, 2015
Estimated Liquidation Period of
Investments Not Redeemable

Investments
Redeemable

Fair Value

Unfunded
Commitments

% of
Fair Value
Not
Redeemable

%
Next
5 Years

%
5-10
Years

%
Thereafter

Redemption
Frequency

Redemption
Notice Period

Alternative investment funds:(cid:3)

Hedge funds ................... $ 20,410 $
465
Funds of funds ...............
1,590
Other ..............................
6
Debt funds ............................
Equity funds .........................
42
Private equity funds:

Equity growth ................ 67,895
Mezzanine debt .............. 32,324
Total ..................................... $ 122,732 $

-
-
-
-
-

10,242 (f)

-
10,242

NA
NA
NA
NA
NA

100%
100%

18%
-

39%
-

NA
NA
NA
NA
NA

43 %
100 %

(a) <30-60 days
(b) <30-90 days
(c) <30-60 days
(d)
30 days
(e) <30-90 days

NA
NA

(a) weekly (23%), monthly (69%) and quarterly (8%)
(b) monthly (98%) and quarterly (2%)
(c)
(d)
(e)
(f) Unfunded commitments to private equity investments consolidated but not owned by Lazard of $5,501 are

daily (20%) and monthly (80%)
daily (100%)
daily (18%), monthly (54%) and quarterly (28%)

excluded. Such commitments are required to be funded by capital contributions from noncontrolling interest
holders.

LAZARD LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except for per share data, unless otherwise noted)

Investment Capital Funding Commitments—At December 31, 2016, the Company’s maximum unfunded

commitments for capital contributions to investment funds primarily arose from commitments to EGCP III, which
amounted to $8,613. 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.

DERIVATIVES

The table below presents the fair values 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 14) on the accompanying consolidated statements of financial condition as of December 31,
2016 and 2015:

Derivative Assets:

Forward foreign currency exchange rate contracts ....................................... $
Total return swaps and other (a) ...................................................................
$

Derivative Liabilities:

Forward foreign currency exchange rate contracts ....................................... $
Total return swaps and other (a) ...................................................................
LFI and other similar deferred compensation arrangements ........................
$

December 31,

2016

2015

1,993
-
1,993

2,792
9,043
170,388
182,223

1,015
33
1,048

1,584
531
193,574
195,689

(a) For total return swaps, amounts represent the netting of gross derivative assets and liabilities of $357 and

$9,400 as of December 31, 2016, respectively, and $460 and $958 as of December 31, 2015, respectively, for
contracts with the same counterparty under legally enforceable master netting agreements. Such amounts are
recorded “net” in “other assets”, with receivables for net cash collateral under such contracts of $16,996 and
$9,636 as of December 31, 2016 and 2015, respectively.

Net gains (losses) with respect to derivative instruments (predominantly reflected 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 consolidated
statements of operations for the years ended December 31, 2016, 2015 and 2014, were as follows:

Forward foreign currency exchange rate contracts .......................... $
LFI and other similar deferred compensation arrangements ............
Total return swaps and other ............................................................
Total ................................................................................................. $

(2,253) $
(3,318)
(4,636)
(10,207) $

15,773 $
3,827 (cid:3)(cid:3)
3,860
23,460 (cid:3)(cid:3) $

22,959
(7,326)
(5,211)
10,422

Year Ended December 31,
2015

(cid:3)(cid:3)

2014

2016

100

LAZARD LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except for per share data, unless otherwise noted)

PROPERTY

At December 31, 2016 and 2015, property consists of the following:

Estimated
Depreciable
Life in Years

December 31,

2016

2015

Buildings ....................................................................
Leasehold improvements ...........................................
Furniture and equipment ............................................
Construction in progress ............................................
Total ......................................................................
Less - Accumulated depreciation and amortization ...
Property ......................................................................

33 $ 132,821 $ 137,181
3-20 175,810 167,838
3-10 172,353 160,553
7,099
14,038
495,022 472,671
286,001 265,506
$ 209,021 $ 207,165

GOODWILL AND OTHER INTANGIBLE ASSETS

The components of goodwill and other intangible assets at December 31, 2016 and 2015 are presented below:

December 31,(cid:3)

(cid:3)(cid:3)

2016

2015

Goodwill ...................................................................... $ 373,117 $ 320,761
Other intangible assets (net of accumulated
amortization) .............................................................

8,907

6,215
$ 382,024 $ 326,976

At December 31, 2016 and 2015, goodwill of $308,576 and $256,220, 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.

Changes in the carrying amount of goodwill for the years ended December 31, 2016, 2015 and 2014 are as

follows:

Year Ended December 31,
2015

2016

2014

Balance, January 1 ........................................... $ 320,761 $ 335,402 $ 345,453
Business acquisitions (see Note 12) ................. 54,631
3,232
Foreign currency translation adjustments ........
(2,275) (14,641) (13,283 )
Balance, December 31 ..................................... $ 373,117 $ 320,761 (cid:3)$ 335,402

- (cid:3)

All changes in the carrying amount of goodwill for the years ended December 31, 2016, 2015 and 2014 are

attributable to the Company’s Financial Advisory segment.

The Company evaluates goodwill for impairment annually or more frequently if circumstances indicate that

impairment may have occurred. Pursuant to the Company’s goodwill impairment review for the years ended
December 31, 2016, 2015 and 2014, the Company determined that no impairment existed.

101

LAZARD LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except for per share data, unless otherwise noted)

The gross cost and accumulated amortization of other intangible assets as of December 31, 2016 and 2015, by

major intangible asset category, are as follows:

December 31, 2016

December 31, 2015

Success/performance fees ................................ $ 35,259 $
Management fees, customer relationships
and non-compete agreements ........................ 33,728
$ 68,987 $

Gross
Cost

Accumulated
Amortization

Net
Carrying
Amount

Gross
Cost

26,984 $ 8,275 $ 30,740 $

Accumulated
Amortization

Net
Carrying
Amount
25,192 $ 5,548

33,096
632 33,036
60,080 $ 8,907 $ 63,776 $

32,369
667
57,561 $ 6,215

Amortization expense of intangible assets, included in “amortization and other acquisition-related costs” in the

consolidated statements of operations, for the years ended December 31, 2016, 2015 and 2014 was $2,522, $5,821
and $6,387, respectively. Estimated future amortization expense is as follows:

Year Ending December 31,
2017 ................................................................................ (cid:3) $
2018 ................................................................................ (cid:3)
2019 ................................................................................ (cid:3)
2020 ................................................................................ (cid:3)
Total amortization expense ............................................. (cid:3) $

(cid:3)

Amortization
Expense (a)
7,376
1,406
73
52
8,907

(a) Approximately 24% of intangible asset amortization is attributable to a noncontrolling interest.

10. OTHER ASSETS AND OTHER LIABILITIES

The following table sets forth the Company’s other assets, by type, as of December 31, 2016 and 2015:

Current tax receivables and other taxes ................................................. $
Prepaid compensation (see Note 14) .....................................................
Other advances and prepayments ..........................................................
Other ......................................................................................................
Total ...................................................................................................... $

December 31,

2016

2015

31,767 $
49,650
35,706
67,376
184,499 $

30,679
75,703
53,354
57,286
217,022

The following table sets forth the Company’s other liabilities, by type, as of December 31, 2016 and 2015:

102

LAZARD LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except for per share data, unless otherwise noted)

Accrued expenses .................................................................................. $
Current income taxes and other taxes ....................................................
Employee benefit-related liabilities .......................................................
Deferred lease incentives .......................................................................
Unclaimed funds at LFB .......................................................................
Abandoned leased space (principally in the U.K.) ................................
Deferred revenue ...................................................................................
Contingent consideration liability .........................................................
Securities sold, not yet purchased ..........................................................
Other ......................................................................................................
Total ...................................................................................................... $

December 31,

2016
124,721 $
99,278
84,703
84,287
24,997
4,973
35,717
22,608
4,482
44,475
530,241 $

2015
128,496
109,438
81,687
83,566
26,022
8,760
30,178
-
3,239
28,556
499,942

11. SENIOR DEBT

Senior debt is comprised of the following as of December 31, 2016 and 2015:

Outstanding as of

Initial
Principal
Amount

Maturity
Date

Annual
Interest
Rate(b)

December 31, 2016
Unamortized
Debt Costs

Carrying
Value

Principal

December 31, 2015
Unamortized
Debt Costs

Carrying
Value

Principal

Lazard Group 2017
Senior Notes (a) ... 600,000 6/15/17 6.85% $
Lazard Group 2020
Senior Notes......... 500,000 11/14/20 4.25%
Lazard Group 2025
Senior Notes (a) ... 400,000 2/13/25 3.75%
Lazard Group 2027
Senior Notes (a) ... 300,000 3/1/27 3.625%

Total ..................

- $

- $ 98,350 $

159 $ 98,191

500,000

3,569

496,431 500,000

4,491 495,509

400,000

3,833

396,167 400,000

4,342 395,658

300,000
$1,200,000 $

3,998
-
296,002
11,400 $1,188,600 $998,350 $

-
8,992 $989,358

(a) During November 2016, Lazard Group completed an offering of $300,000 aggregate principal amount of
3.625% senior notes due 2027 (the “2027 Notes”). Interest on the 2027 Notes is payable semi-annually on
March 1 and September 1 of each year, beginning March 1, 2017. Lazard Group used a portion of the net
proceeds of the 2027 Notes to redeem or otherwise retire all $98,350 of the 6.85% senior notes due June 2017
(the “2017 Notes”), which, including the recognition of unamortized issuance costs, resulted in a loss on debt
extinguishment of $3,148. Such loss on debt extinguishment was recorded in “operating expenses—other” on
the consolidated statement of operations for the year ended December 31, 2016.

During February 2015, Lazard Group completed an offering of $400,000 aggregate principal amount of 3.75%
senior notes due 2025 (the “2025 Notes”). Interest on the 2025 Notes is payable semi-annually on March 1
and September 1 of each year. Lazard Group used the net proceeds of the 2025 Notes, together with cash on
hand, to redeem or otherwise retire $450,000 of the 2017 Notes, which, including the recognition of
unamortized issuance costs, resulted in a loss on debt extinguishment of $60,219. Such loss on debt
extinguishment was recorded in “operating expenses—other” on the consolidated statement of operations for
the year ended December 31, 2015.

(b) The effective interest rates of Lazard Group’s 4.25% senior notes due November 14, 2020 (the “2020 Notes”),

the 2025 Notes and the 2027 Notes are 4.43%, 3.87% and 3.76%, respectively.

103

LAZARD LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except for per share data, unless otherwise noted)

The table, as of December 31, 2015, reflects the retrospective application of new guidance adopted by the

Company for debt issuance costs. See Note 3.

On September 25, 2015, Lazard Group entered into an Amended and Restated Credit Agreement for a five-

year $150,000 senior revolving credit facility with a group of lenders (the “Amended and Restated Credit
Agreement”), which expires in September 2020. The Amended and Restated Credit Agreement amended and
restated the previous credit agreement dated September 25, 2012. 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. At
December 31, 2016 and 2015, no amounts were outstanding under the Amended and Restated Credit Agreement or
the prior revolving credit facility, respectively.

The Amended and Restated Credit Agreement, 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 December 31, 2016, the
Company was in compliance with such provisions. All of the Company’s senior debt obligations are unsecured.

Debt maturities relating to senior borrowings outstanding at December 31, 2016 for each of the five years in

the period ending December 31, 2021 and thereafter are set forth in the table below.

Year Ending December 31,
2017............................................................................................................... $
2018...............................................................................................................
2019...............................................................................................................
2020...............................................................................................................
2021...............................................................................................................
Thereafter ......................................................................................................

Total ......................................................................................................... $

-
-
-
500,000
-
700,000
1,200,000

The Company’s senior debt at December 31, 2016 and 2015 is carried at historical amounts. See Note 6 for

information regarding the fair value and fair value hierarchy category of the Company’s senior debt.

As of December 31, 2016, the Company had approximately $179,000 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 $21,000 (at December 31, 2016 exchange rates).

12. COMMITMENTS AND CONTINGENCIES

Leases—The Company leases office space and equipment under non-cancelable lease agreements, which

expire on various dates through 2033.

Operating lease agreements, in addition to base rentals, generally are subject to escalation provisions based on

certain costs incurred by the landlord. For the years ended December 31, 2016, 2015 and 2014, aggregate rental
expense relating to operating leases amounted to $76,704, $79,549 and $80,773, respectively, and is included in
“occupancy and equipment” or “technology and information services” on the consolidated statements of operations,
depending on the nature of the underlying asset. The Company also subleases office space under agreements which
expire on various dates through 2022. Sublease income from such agreements was $7,858, $9,587 and $11,751 for
the years ended December 31, 2016, 2015 and 2014, respectively, which includes sublease income of $1,281 and
$3,097, respectively, from an affiliate of LMDC Holdings LLC (“LMDC Holdings”) for the years ended December
2015 and 2014.

104

LAZARD LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except for per share data, unless otherwise noted)

Capital lease obligations recorded under sale/leaseback transactions are payable through 2017 at a weighted

average interest rate of approximately 6.1%. Such obligations are collateralized primarily by certain buildings with a
net book value of approximately $13,538 and $15,121 at December 31, 2016 and 2015, respectively. The net book
value of all assets recorded under capital leases aggregated $13,628 and $15,273 at December 31, 2016 and 2015,
respectively.

At December 31, 2016, minimum rental commitments under non-cancelable leases, net of sublease income,

are approximately as follows:

Minimum Rental Commitments

(cid:3)
Year Ending December 31,
2017........................................................................................... $
2018...........................................................................................
2019...........................................................................................
2020...........................................................................................
2021...........................................................................................
Thereafter ..................................................................................
Total minimum lease payments .................................................
Less amount representing interest .............................................
Present value of capital lease commitments .............................. $
Less sublease proceeds ..............................................................
Net lease payments ....................................................................

Capital

Operating

75,996
73,224
65,368
62,516
61,479
489,575
828,158

7,282 $
38
32
5
-
-
7,357
152
7,205

45,643
782,515

With respect to abandoned leased facilities in the U.K., at December 31, 2016 and 2015, the Company has
recognized liabilities of $2,819 and $6,155, respectively, which are included in “other liabilities” on the consolidated
statements of financial condition. Payments toward the liabilities continue through the remaining term of the leases.
Such liabilities are based on the discounted future commitment, net of expected sublease income.

Guarantees—In the normal course of business, LFB provides indemnifications to third parties to protect them
in the event of non-performance by its clients. At December 31, 2016, LFB had $3,340 of such indemnifications and
held $3,259 of collateral/counter-guarantees to secure these commitments. The Company believes the likelihood of
loss with respect to these indemnities is remote. Accordingly, no liability is recorded in the consolidated statement
of financial condition.

Certain Business Transactions—On July 15, 2009, the Company established a private equity business with

Edgewater. Edgewater manages funds primarily focused on buy-out and growth equity investments in middle
market companies. The acquisition was structured as a purchase by Lazard Group of interests in a holding company
that in turn owns interests in the general partner and management company entities of the current Edgewater private
equity funds (the “Edgewater Acquisition”). Following the Edgewater Acquisition, Edgewater’s leadership team
retained a substantial economic interest in such entities.

The aggregate fair value of the consideration recognized by the Company at the acquisition date was $61,624.

Such consideration consisted of (i) a one-time cash payment, (ii) 1,142,857 shares of Class A common stock (the
“Initial Shares”) and (iii) up to 1,142,857 additional shares of Class A common stock (the “Earnout Shares”) that
were subject to earnout criteria and payable over time. As of December 31, 2016 and 2015, 2,285,714 and 1,371,992
shares, respectively, have been earned and settled because applicable performance thresholds have been satisfied. As
of December 31, 2016, the delivery of 913,722 shares of Class A common stock resulted in a non-cash tax benefit of
approximately $12,000 recorded in deferred tax assets.

Other Business Acquisitions—For businesses acquired in 2016, consideration consisted of (i) one-time cash
payments, 60,817 shares of Class A common stock subject to non-compete provisions and non-contingent interests
exchangeable into 206,612 shares of Class A common stock, and (ii) up to 816,492 additional shares of Class A

105

LAZARD LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except for per share data, unless otherwise noted)

common stock that are subject to certain performance thresholds. As of December 31, 2016, none of the contingent
shares had been earned.

For a business acquired in 2012, at December 31, 2012, 170,988 shares of Class A common stock (including
dividend equivalent shares) were issuable on a non-contingent basis. Such shares were delivered in the first quarter
of 2013. During the second quarter of 2015, the achievement of certain performance thresholds related to the
acquired business were satisfied, resulting in the issuance of 27,316 shares of Class A common stock.

Other Commitments—The Company has various other contractual commitments arising in the ordinary

course of business. In addition, from time to time, each of LFB and LFNY may enter into underwriting
commitments in which it will participate as an underwriter. At December 31, 2016, LFB and LFNY had no such
underwriting commitments.

See Notes 6 and 15 for information regarding commitments relating to investment capital funding

commitments and obligations to fund our pension plans, respectively.

In the opinion of management, the fulfillment of the commitments described herein will not have a material

adverse effect on the Company’s consolidated financial position or results of operations.

Legal—The Company is involved from time to time in judicial, regulatory and arbitration proceedings and

inquiries concerning matters arising in connection with the conduct of our businesses, including proceedings
initiated by former employees alleging wrongful termination. The Company reviews such matters on a case-by-case
basis and establishes any required 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.

13. STOCKHOLDERS’ EQUITY

Exchange of Lazard Group Common Membership Interests—During the year ended December 31, 2014,
Lazard Ltd issued 710,009 shares of Class A common stock in connection with the exchanges of a like number of
Lazard Group common membership interests (received from members of LAZ-MD Holdings in exchange for a like
number of LAZ-MD Holdings exchangeable interests). See Note 1 for a discussion of the Final Exchange of LAZ-
MD Interests.

Share Repurchase Program—During the years ended December 31, 2016, 2015 and 2014, the Board of

Directors of Lazard authorized the repurchase of Class A common stock as set forth in the table below.

Date
April 2014 ............................................................................. $
February 2015 ....................................................................... $
January 2016 ......................................................................... $
April 2016 ............................................................................. $
November 2016 ..................................................................... $

Repurchase
Authorization

Expiration

200,000 December 31, 2015
150,000 December 31, 2016
200,000 December 31, 2017
113,182 December 31, 2017
236,000 December 31, 2018

The Company expects that the share repurchase program will primarily 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”).
Pursuant to the share repurchase program, purchases have been made in the open market or through privately

106

LAZARD LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except for per share data, unless otherwise noted)

negotiated transactions. The rate at which the Company purchases shares in connection with the share repurchase
program may vary from quarter to quarter due to a variety of factors. Purchases with respect to such program are set
forth in the table below:

Years Ended December 31:
2014 ...................................................................................................................
2015 ...................................................................................................................
2016 ...................................................................................................................

Number of
Shares
Purchased

Average
Price Per
Share

4,114,206 $
3,438,789 $
8,551,271 $

46.83
50.24
35.11

There were 7,628,786 and 4,253,381 shares of Class A common stock held by our subsidiaries at December
31, 2016 and 2015, respectively. Such shares of Class A common stock are reported, at cost, as “Class A common
stock held by subsidiaries” on the accompanying consolidated statements of financial condition.

During 2016, 2015 and 2014, certain of our executive officers received Class A common stock in connection

with the vesting of previously-granted deferred equity incentive awards. The vesting 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
Class A common stock from the executive officers equal in value to the estimated amount of such tax. In addition,
during the years ended December 31, 2016 and 2014, the Company purchased shares of Class A common stock
from an executive officer. The aggregate value of such purchases in 2016, 2015 and 2014 was approximately
$4,900, $17,700 and $6,800, respectively.

The shares purchased in the year ended December 31, 2014 included 1,000,000 shares purchased from Natixis

S.A. on June 26, 2014 for $50,340 in connection with the sale by Natixis S.A. of its entire investment in the
Company’s Class A common stock. The purchase transaction closed on July 1, 2014.

As of December 31, 2016, a total of $355,125 of share repurchase authorization remained available under the
Company’s share repurchase program, $119,125 of which will expire on December 31, 2017 and $236,000 of which
will expire on December 31, 2018.

During the year ended December 31, 2016, the Company had in place trading plans under Rule 10b5-1 of the

Securities Exchange Act of 1934, 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 business acquisitions and were each non-participating securities convertible into
Class A common stock, and had no voting or dividend rights. As of December 31, 2016, no shares of Series A or
Series B preferred stock were outstanding. As of December 31, 2015, 7,921 shares of Series A preferred stock were
outstanding, and no shares of Series B preferred stock were outstanding. At December 31, 2015, no shares of Series
A preferred stock were convertible into shares of Class A common stock on a contingent or a non-contingent basis.

107

LAZARD LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except for per share data, unless otherwise noted)

Accumulated Other Comprehensive Income (Loss), Net of Tax—The tables below reflect the balances of

each component of AOCI at December 31, 2016, 2015 and 2014 and activity during the years then ended:

Currency
Translation
Adjustments

Employee
Benefit
Plans

Total
AOCI

Amount
Attributable to
Noncontrolling
Interests

Total
Lazard Ltd
AOCI

Balance, January 1, 2016 ......................................... $ (97,284) $(137,073) $(234,357) $
Activity January 1 to December 31, 2016:
Other comprehensive loss before
reclassifications ...............................................
Adjustments for items reclassified to earnings,
net of tax ..........................................................
Net other comprehensive loss .............................

2,526
(79,867)
Balance, December 31, 2016 ................................... $ (155,204) $(159,020) $(314,224) $

-
(57,920)

2,526
(21,947)

(82,393)

(57,920)

(24,473)

(1 ) $(234,356)

(1 )

(82,392)

2,526
-
(1 )
(79,866)
(2 ) $(314,222)

Currency
Translation
Adjustments

Employee
Benefit
Plans

Total
AOCI

Amount
Attributable to
Noncontrolling
Interests

Total
Lazard Ltd
AOCI

Balance, January 1, 2015 ......................................... $ (46,102) $(154,665) $(200,767) $
Activity January 1 to December 31, 2015:
Other comprehensive loss before
reclassifications ...............................................
Adjustments for items reclassified to earnings,
net of tax ..........................................................
Net other comprehensive income (loss) .............

6,309
(33,590)
Balance, December 31, 2015 ................................... $ (97,284) $(137,073) $(234,357) $

-
(51,182)

6,309
17,592

(39,899)

(51,182)

11,283

(1 ) $(200,766)

(39,899)

-
-

6,309
(33,590)
(1 ) $(234,356)

Currency
Translation
Adjustments (cid:3)

Employee
Benefit
Plans

(cid:3)

Total
AOCI

Amount
Attributable to
Noncontrolling
Interests

(cid:3)(cid:3)

Total
Lazard Ltd
AOCI

3,869 $(137,431) $(133,562) $

Balance, January 1, 2014 ......................................... $
Activity January 1 to December 31, 2014:
Other comprehensive income (loss) before
reclassifications .....................................................
Adjustments for items reclassified to earnings,
4,749
net of tax ...............................................................
Net other comprehensive income (loss) ...................
(67,205)
Balance, December 31, 2014 ................................... $ (46,102) $(154,665) $(200,767) $

-
(49,971)

4,749
(17,234)

(71,954)

(49,971)

(21,983)

(558 ) $(133,004)

557

(72,511)

-
557

4,749
(67,762)
(1 ) $(200,766)

The table below reflects adjustments for items reclassified out of AOCI, by component, for the years ended

December 31, 2016, 2015 and 2014:

Amortization relating to employee benefit plans (a)........................ $
Less - related income taxes ..............................................................
Total reclassifications, net of tax ..................................................... $

4,283 $
1,757
2,526 $

7,816 $
1,507 (cid:3)(cid:3)
6,309 $

6,672
1,923
4,749

Year Ended December 31,
2015

(cid:3)(cid:3)

2014

2016

108

LAZARD LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except for per share data, unless otherwise noted)

(a)

Included in the computation of net periodic benefit cost (see Note 15). Such amounts are included in
“compensation and benefits” expense on the consolidated statements of operations.

Noncontrolling Interests—Noncontrolling interests principally represent interests held in (i) Edgewater’s

management vehicles that the Company is deemed to control, but does not own and (ii) Lazard Group by LAZ-MD
Holdings until May 2014. Following the Final Exchange of LAZ-MD Interests, Lazard Group became a wholly-
owned indirect subsidiary of Lazard Ltd.

The tables below summarize net income attributable to noncontrolling interests for the years ended December

31, 2016, 2015 and 2014 and noncontrolling interests as of December 31, 2016 and 2015 in the Company’s
consolidated financial statements:

Net Income
Attributable to Noncontrolling Interests
Year Ended December 31,
2015

(cid:3)(cid:3)

2014

2016

Edgewater ........................................................................................ $
LAZ-MD Holdings ..........................................................................
Other ................................................................................................
Total ................................................................................................. (cid:3) $

5,992 $
-
2
5,994 $

6,557 (cid:3)(cid:3) $
- (cid:3)(cid:3)
2
6,559 $

6,153
631
2
6,786

Noncontrolling Interests
as of December 31,

2016

2015

Edgewater .......................................................................................................... $
Other ..................................................................................................................
Total ................................................................................................................... $

57,238 $
588
57,826 $

53,132
719
53,851

Dividends Declared, February 1, 2017— On February 1, 2017, the Board of Directors of Lazard declared a

quarterly dividend of $0.38 per share, and a special dividend of $1.20 per share, on our Class A common stock. The
quarterly dividend and the special dividend are payable on February 24, 2017, to stockholders of record on February
13, 2017.

14.

INCENTIVE PLANS

Share-Based Incentive Plan Awards

A description of Lazard Ltd’s 2008 Plan and 2005 Equity Incentive Plan (the “2005 Plan”) and activity with

respect thereto during the years ended December 31, 2016, 2015 and 2014, is presented below.

Shares Available Under the 2008 Plan and 2005 Plan

The 2008 Plan authorizes the issuance of shares of Class A common stock pursuant to the grant or exercise of

stock options, stock appreciation rights, restricted stock units (“RSUs”), performance-based restricted stock units
(“PRSUs”) and other equity-based awards. Under the 2008 Plan, the maximum number of shares available is based
on a formula that limits the aggregate number of shares that may, at any time, be subject to awards that are
considered “outstanding” under the 2008 Plan to 30% of the then-outstanding shares of Class A common stock.

The 2005 Plan authorized the issuance of up to 25,000,000 shares of Class A common stock pursuant to the

grant or exercise of stock options, stock appreciation rights, RSUs and other equity-based awards. Each RSU or
similar award granted under the 2005 Plan represents a contingent right to receive one share of Class A common
stock, at no cost to the recipient. The fair value of such awards is generally determined based on the closing market

109

LAZARD LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except for per share data, unless otherwise noted)

price of Class A common stock at the date of grant. The 2005 Plan expired in the second quarter of 2015, although
unvested awards granted under the 2005 Plan remain outstanding and continue to be subject to its terms.

The following reflects the amortization expense recorded with respect to share-based incentive plans within

“compensation and benefits” expense (with respect to RSUs, PRSUs and restricted stock awards) and “professional
services” expense (with respect to deferred stock units (“DSUs”)) within the Company’s accompanying consolidated
statements of operations:

Share-based incentive awards:

RSUs .......................................................................................... $
PRSUs ........................................................................................
Restricted Stock..........................................................................
DSUs ..........................................................................................
Total ........................................................................................... $

171,188 $
43,018
45,536
1,720
261,462 $

166,395 $
36,529
22,342
1,457
226,723 $

169,916
18,428
16,110
1,741
206,195

Year Ended December 31,
2015

(cid:3)(cid:3)

2014

2016

The ultimate amount of compensation and benefits expense relating to share-based awards is dependent upon

the actual number of shares of Class A 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 previously recorded 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.

For purposes of calculating diluted net income per share, RSUs, DSUs and restricted stock awards are
included in the diluted weighted average shares of Class A common stock outstanding using the “treasury stock”
method. PRSUs are included in the diluted weighted average shares of Class A common stock outstanding to the
extent the performance conditions are met at the end of the reporting period, also using the “treasury stock” method.

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 Class A
common stock (unless the recipient is then eligible for retirement under the Company’s retirement policy) and
convert into shares of Class A common stock on a one-for-one basis after the stipulated vesting periods. PRSUs,
which are RSUs that are also subject to service-based vesting conditions, have additional performance conditions,
and are described below. 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 vesting periods each RSU is

attributed additional RSUs (or fractions thereof) equivalent to any dividends paid on Class A common stock during
such period. During the years ended December 31, 2016, 2015 and 2014, issuances of RSUs pertaining to such
dividend participation rights and respective charges to “retained earnings”, net of estimated forfeitures (with
corresponding credits to “additional paid-in-capital”), consisted of the following:

Number of RSUs issued ...................................................................
Charges to retained earnings, net of estimated forfeitures ............... $

110

2016
1,085,354
37,284 $

Year Ended December 31,
2015
693,714
34,255 $

(cid:3)(cid:3)

2014
375,954
17,536

LAZARD LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except for per share data, unless otherwise noted)

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 38,771, 23,961 and 26,360 DSUs granted in connection with annual compensation during the years ended
December 31, 2016, 2015 and 2014, respectively. Their remaining compensation is payable in cash, which they may
elect to receive in the form of additional DSUs under the Directors’ Fee Deferral Unit Plan described below. DSUs
are convertible into shares of Class A common stock at the time of cessation of service to the Board of Directors
and, for purposes of calculating diluted net income per share, are included in the diluted weighted average shares of
Class A common stock outstanding using the “treasury stock” method. DSUs include a cash dividend participation
right equivalent to dividends paid on Class A common stock.

The Company’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 Class A common stock on the date
immediately preceding the date of the grant. During the years ended December 31, 2016, 2015 and 2014, 10,043,
2,482 and 8,433 DSUs, respectively, 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.

The following is a summary of activity relating to RSUs and DSUs during the three-year period ended

December 31, 2016:

RSUs

DSUs

Weighted
Average
Grant Date
Fair Value

Units

34.51 251,434 $

Weighted
Average
Grant Date
Fair Value
32.02

Balance, January 1, 2014 ........................................... 16,630,009 $
Granted (including 375,954 RSUs relating to
dividend participation) ............................................ 3,825,737 $
Forfeited ....................................................................
(344,345) $
Vested ........................................................................ (6,582,285) $
Balance, December 31, 2014 ..................................... 13,529,116 $
Granted (including 693,714 RSUs relating to
dividend participation) ............................................ 4,296,386 $
(469,776) $
Forfeited ....................................................................
Vested ........................................................................ (7,756,068) $
Balance, December 31, 2015 ..................................... 9,599,658 $
Granted (including 1,085,354 RSUs relating to
dividend participation) ............................................ 6,878,306 $
Forfeited ....................................................................
(239,432) $
Vested ........................................................................ (4,540,394) $
Balance, December 31, 2016 ..................................... 11,698,138 $

34,793 $
42.59
-
34.52
-
37.80
35.19 286,227 $

26,443 $
48.57
-
43.54
31.12
-
44.06 312,670 $

48,814 $
34.86
-
39.53
39.16
(84,759 ) $
40.65 276,725 $

50.04
-
-
34.21

55.11
-
-
35.98

35.23
-
35.30
36.05

In connection with RSUs that vested during the years ended December 31, 2016, 2015 and 2014, the
Company satisfied its minimum statutory tax withholding requirements in lieu of delivering 1,421,396, 2,249,935
and 1,896,930 shares of Class A common stock during such respective years. Accordingly, 3,118,998, 5,506,133
and 4,685,355 shares of Class A common stock held by the Company were delivered during the years ended
December 31, 2016, 2015 and 2014, respectively.

111

LAZARD LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except for per share data, unless otherwise noted)

As of December 31, 2016, estimated unrecognized RSU compensation expense was approximately $141,947,
with such expense expected to be recognized over a weighted average period of approximately 0.8 years subsequent
to December 31, 2016.

Restricted Stock

The following is a summary of activity related to shares of restricted Class A common stock associated with

compensation arrangements during the three-year period ended December 31, 2016:

Restricted
Shares
575,054 $
Balance, January 1, 2014 ..........................................................
449,911 $
Granted ......................................................................................
(13,336) $
Forfeited ....................................................................................
(281,802) $
Vested .......................................................................................
729,827 $
Balance, December 31, 2014.....................................................
576,886 $
Granted ......................................................................................
(45,851) $
Forfeited ....................................................................................
(547,124) $
Vested .......................................................................................
Balance, December 31, 2015.....................................................
713,738 $
Granted ...................................................................................... 1,795,258 $
(34,051) $
Forfeited ....................................................................................
Vested .......................................................................................
(819,872) $
Balance, December 31, 2016..................................................... 1,655,073 $

Weighted
Average
Grant Date
Fair Value

32.72
45.52
41.65
37.42
38.63
50.88
50.17
39.50
47.12
36.76
40.48
37.16
40.95

In connection with shares of restricted Class A common stock that vested during the years ended

December 31, 2016, 2015 and 2014, the Company satisfied its minimum statutory tax withholding requirements in
lieu of delivering 141,026, 108,833 and 43,905 shares of Class A common stock during such respective years.
Accordingly, 678,846, 438,291 and 237,897 shares of Class A common stock held by the Company were delivered
during the years ended December 31, 2016, 2015 and 2014, respectively.

The restricted stock awards include a cash dividend participation right equivalent to any dividends paid on

Class A common stock during the period, which will vest concurrently with the underlying restricted stock award.
At December 31, 2016, estimated unrecognized restricted stock expense was approximately $32,154, with such
expense to be recognized over a weighted average period of approximately 0.9 years subsequent to December 31,
2016.

PRSUs

PRSUs are RSUs that are subject to both performance-based and service-based vesting conditions. The
number of shares of Class A common stock that a recipient will receive upon vesting of a PRSU will be calculated
by reference to certain performance metrics that relate to the Company’s performance over a three-year period. The
target number of shares of Class A common stock subject to each PRSU is one; however, based on the achievement
of the performance criteria, the number of shares of Class A common stock that may be received in connection with
each PRSU generally can range from zero to two times the target number (with the exception of the PRSUs granted
in 2013, for which (i) the performance period ended on December 31, 2014 and (ii) the number of shares of Class A
common stock that vested was equal to approximately 2.2 times the target number). PRSUs will vest on a single date
three years following the date of the grant provided the applicable service and performance conditions are satisfied.
However, PRSUs granted in 2013 vested 33% in March 2015 and 67% in March 2016. In addition, the performance
metrics applicable to each PRSU will be evaluated on an annual basis at the end of each fiscal year during the
performance period and, if the Company has achieved a threshold level of performance with respect to the fiscal

112

LAZARD LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except for per share data, unless otherwise noted)

year, 25% of the target number of shares of Class A common stock subject to each PRSU will no longer be at risk of
forfeiture based on the achievement of performance criteria. PRSUs include dividend participation rights that
provide that during vesting periods the target number of PRSUs (or, following the relevant performance period, the
actual number of shares of Class A common stock that are no longer subject to performance conditions) receive
dividend equivalents at the same rate that dividends are paid on Class A common stock during such period. 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.

The following is a summary of activity relating to PRSUs during the three-year period ended December 31,

2016:

Weighted
Average
Grant Date
Fair Value

PRSUs

448,128 $
Balance, January 1, 2014 ..........................................................
360,783 $
Granted (a) ................................................................................
Performance units earned (b) ....................................................
538,237 $
Balance, December 31, 2014..................................................... 1,347,148 $
368,389 $
Granted (a) ................................................................................
Vested .......................................................................................
(696,499) $
Balance, December 31, 2015..................................................... 1,019,038 $
627,956 $
Granted (a) ................................................................................
360,783 $
Performance units earned (b) ....................................................
Vested .......................................................................................
(417,021) $
Balance, December 31, 2016..................................................... 1,590,756 $

36.11
44.46
34.72
37.79
52.85
35.96
44.49
32.91
41.20
38.43
40.76

(a) Represents PRSU awards granted during the relevant year at the target payout level.
(b) Represents shares of Class A common stock earned during the fiscal year under the performance criteria of

previously-granted PRSU awards in excess of the target payout level of such awards.

In connection with certain PRSUs that vested during the years ended December 31, 2016 and 2015, the
Company satisfied its minimum statutory tax withholding requirements in lieu of issuing 64,169 and 32,086 shares
of Class A common stock during such respective years. Accordingly, 352,852 and 664,413 shares of Class A
common stock held by the Company were delivered during the years ended December 31, 2016 and 2015,
respectively.

Compensation expense recognized for PRSU awards is determined by multiplying the number of shares of

Class A 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 December 31, 2016, the total estimated unrecognized compensation
expense was approximately $12,588, and the Company expects to amortize such expense over a weighted-average
period of approximately 0.7 years subsequent to December 31, 2016.

LFI and Other Similar Deferred Compensation Arrangements

Commencing in February 2011, the Company granted LFI to eligible employees. In connection with LFI and
other similar deferred compensation arrangements, 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 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

113

LAZARD LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except for per share data, unless otherwise noted)

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 years ended December 31, 2016 and 2015:

Prepaid
Compensation
Asset

Compensation
Liability

Balance, January 1, 2016 ....................................................................... $
Granted .............................................................................................
Settled ..............................................................................................
Forfeited ...........................................................................................
Amortization ....................................................................................
Change in fair value related to:

Increase in fair value of underlying
investments ..............................................................................
Adjustment for estimated forfeitures ..........................................
Other ................................................................................................
Balance, December 31, 2016 ................................................................. $

75,703 $
52,121
-
(2,942 )
(73,340 )

193,574
52,121
(77,457)
(5,380)
-

-
-
(1,892 )
49,650 $

3,318
4,671
(459)
170,388

Prepaid
Compensation
Asset

Compensation
Liability

Balance, January 1, 2015 ....................................................................... $
Granted .............................................................................................
Settled ..............................................................................................
Forfeited ...........................................................................................
Amortization ....................................................................................
Change in fair value related to:

Decrease in fair value of underlying
investments ..............................................................................
Adjustment for estimated forfeitures ..........................................
Other ................................................................................................
Balance, December 31, 2015 ................................................................. $

73,278 $
89,817
-
(4,099 )
(82,736 )

207,306
89,817
(96,223)
(8,052)
-

-
-
(557 )
75,703 $

(3,827)
6,780
(2,227)
193,574

The amortization of the prepaid compensation asset will generally be recognized over a weighted average

period of approximately 0.8 years subsequent to December 31, 2016.

The following is a summary of the impact of LFI and other similar deferred compensation arrangements on

“compensation and benefits” expense within the accompanying consolidated statements of operations for the years
ended December 31, 2016, 2015 and 2014:

Year Ended Ended December 31,
2015

(cid:3)(cid:3)

2014

2016

Amortization, net of forfeitures ............................................. $
Change in the fair value of underlying investments ..............
Total ...................................................................................... $

75,573 $
3,318
78,891 $

85,563 $
(3,827 ) (cid:3)(cid:3)
81,736 $

82,359
7,326
89,685

114

LAZARD LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except for per share data, unless otherwise noted)

Incentive Awards Granted In February 2017

In February 2017, the Company granted approximately $342,000 of deferred incentive compensation awards

(including PRSUs valued at the target payout level) to eligible employees. These grants included: RSUs or shares of
restricted Class A common stock; deferred incentive compensation awards that allow eligible employees the choice
of receiving a portion of their award in a combination of (i) LFI and (ii) additional RSUs or shares of restricted
Class A common stock; deferred cash awards; and a portion of fund managers’ year-end incentive compensation
that is reinvested in certain asset management funds.

The RSUs, restricted Class A common stock and LFI granted each provide for one-third vesting on or around

March 1, 2019 and the remaining two-thirds vesting on or around March 2, 2020. The PRSUs granted provide for
vesting on or around March 2, 2020, provided that the applicable service and performance conditions are satisfied,
and will convert into Class A common stock within a range equal to zero to two times the target number of shares of
Class A common stock subject to the awards. Compensation expense with respect to such incentive awards will
generally be recognized over the vesting period, with such compensation expense to be recognized over a weighted
average period of approximately 2.7 years.

15. 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”) and, in the U.S., a partially funded contributory post-retirement
plan covering qualifying U.S. employees (the “medical plan” and together with the pension plans, the “post-
retirement plans”). The Company also offers defined contribution plans to its employees. The post-retirement 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 on the consolidated
statements of operations.

Medical Plan—The medical plan was previously amended such that effective January 1, 2005 the plan limited

post-retirement medical coverage to then former and current employees of the Company that were hired prior to
January 1, 2005 and attained the age of 55 on or prior to December 31, 2005, and their dependents. Effective
December 31, 2016, the Company will cease offering the medical plan.

In October 2016, the Company paid participants in the medical plan $2,936 in the aggregate to settle in full the

Company’s obligations under the medical plan. The settlement of such obligations resulted in the recognition of a
gain of $1,788 that is recorded as a reduction to compensation and benefits expense in the consolidated statements of
operations for the year ended December 31, 2016.

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 (the “Trustees”).
Management also evaluates from time to time whether to make voluntary contributions to the plans.

The Company does not expect to make a contribution to the U.S. and U.K. pension plans during the year

ending December 31, 2017. The Company expects to contribute approximately $10,000 to the other non-U.S.
pension plans during the year ending December 31, 2017.

115

LAZARD LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except for per share data, unless otherwise noted)

The following table summarizes the changes in the benefit obligations, the fair value of the assets, the funded

status and amounts recognized in the consolidated statements of financial condition for the post-retirement plans.
The Company uses December 31 as the measurement date for its post-retirement plans.

Change in benefit obligation
Benefit obligation at beginning of year .............................. $
Service cost .........................................................................
Interest cost .........................................................................
Actuarial (gain) loss ............................................................
Benefits paid .......................................................................
Foreign currency translation and other adjustments ...........
Benefit obligation at end of year .........................................
Change in plan assets
Fair value of plan assets at beginning of year .....................
Actual return on plan assets ................................................
Employer contributions.......................................................
Benefits paid .......................................................................
Foreign currency translation and other adjustments ...........
Fair value of plan assets at end of year ...............................
Funded (deficit) at end of year ............................................ $
Amounts recognized in the consolidated statements
of financial condition at December 31, 2016 and
2015 consist of:

Prepaid pension asset (included in “other assets”) ....... $
Accrued benefit liability (included in “other
liabilities”) ..................................................................
Net amount recognized ....................................................... $
Amounts recognized in AOCI (excluding tax
benefits of $33,864 and $30,416 at December
31, 2016 and 2015, respectively) consist of:

Pension Plans

Medical Plan

2016

2015

2016

2015

694,187 $
1,235
19,871
135,164
(31,904)
(99,732)
718,821

656,084
119,287
11,343
(29,384)
(111,211)
646,119
(72,702) $

764,169 $
1,530
24,600
(22,395)
(33,253)
(40,464)
694,187

672,576
9,873
39,301
(32,321)
(33,345)
656,084
(38,103) $

4,750 $
11
167
(1,639 )
(3,289 )

5,514
27
179
(694)
(276)

4,750

3,289
(3,289 )

276
(276)

-
- $

-
(4,750)

822 $

20,785

(73,524)
(72,702) $

(58,888) $
(38,103) $

- $
- $

(4,750)
(4,750)

Actuarial net loss (gain) ................................................ $
Prior service cost ...........................................................
Net amount recognized ....................................................... $

192,855 $
30
192,885 $

165,462 $
2,362
167,824 $

- $
-
- $

(335)
-
(335)

The following table summarizes the fair value of plan assets, the accumulated benefit obligation and the

projected benefit obligation at December 31, 2016 and 2015:

U.S. Pension Plans
As Of December 31,
2015

2016

Non-U.S. Pension Plans
As Of December 31,
2015

2016

As Of December 31,
2015

2016

Total

Fair value of plan assets .................................... $ 22,161 $ 23,195 $623,958 $632,889 $ 646,119 $656,084
Accumulated benefit obligation ........................ $ 33,868 $ 32,900 $684,953 $661,287 $ 718,821 $694,187
Projected benefit obligation .............................. $ 33,868 $ 32,900 $684,953 $661,287 $ 718,821 $694,187

116

LAZARD LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except for per share data, unless otherwise noted)

The following table summarizes the components of net periodic benefit cost (credit), the return on the
Company’s post-retirement plan assets, benefits paid, contributions and other amounts recognized in AOCI for the
years ended December 31, 2016, 2015 and 2014:

Pension Plans
For The Year Ended
December 31,
2015

2016

Medical Plan
For The Year Ended
December 31,
2015

2014

2016

Components of Net Periodic Benefit Cost
(Credit):

Service cost ................................................. $
Interest cost ................................................. 19,871
Expected return on plan assets .................... (27,337) (28,301) (32,607)
Amortization of:

1,235 $ 1,530 $

30,041

24,600

971 $

11 $
167

27 $

179

33
194

Prior service cost ....................................
Net actuarial loss (gain) .........................
Settlement gain ............................................
Net periodic benefit cost (credit) ...................... $

2,369
3,888

2,376
5,440

2,841
4,360

(185 )
(1,788 )
26 $ 5,645 $ 5,606 $ (1,795 ) $

Actual return on plan assets .............................. $119,287 $ 9,873 $ 91,829
Employer contributions..................................... $ 11,343 $ 39,301 $ 7,648 $ 3,289 $
Benefits paid ..................................................... $ 29,384 $ 32,321 $ 28,877 $ 3,289 $
Other changes in plan assets and benefit
obligations recognized in AOCI
(excluding tax expense (benefit)
of $(3,448), $7,151 and $(7,119) during
the years ended December 31, 2016,
2015 and 2014, respectively):

Net actuarial (gain) loss ......................... $ 51,626 $ (4,650) $ 41,082 $ (1,638 ) $
Reclassification of prior service
(cost) credit to earnings .......................
Reclassification of actuarial gain
(loss) to earnings .................................
Currency translation and other
adjustments ......................................... (20,309) (11,582) (10,485)
Total recognized in AOCI ................................. $ 25,060 $ (24,048) $ 23,396 $
Net amount recognized in total periodic
benefit cost and AOCI ................................... $ 25,086 $ (18,403) $ 29,002 $ (1,460 ) $

(5,440)

(2,376)

(4,360)

(2,841)

(2,369)

(3,888)

1,973

335 $

(529)

206 $

(302)

276 $
276 $

221
221

(695 ) $

428

529

(695 ) $

957

(489 ) $

655

The amounts in AOCI on the consolidated statement of financial condition as of December 31, 2016 that are

expected to be recognized as components of net periodic benefit cost (credit) for the year ending December 31, 2017
are as follows:

Prior service cost......................................................................................................................... $
Net actuarial loss (gain) .............................................................................................................. $

30
5,291

Pension
Plans

117

LAZARD LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except for per share data, unless otherwise noted)

The assumptions used to develop actuarial present value of the projected benefit obligation and net periodic

pension cost as of or for the years ended December 31, 2016, 2015 and 2014 are set forth below:

Weighted average assumptions used to
determine benefit obligations:

Discount rate ..............................................

2.5%

3.5%

3.4%

3.9 %

3.7%

Pension Plans
December 31,
2015

2016

2014

2016

Medical Plan
December 31,
2015

2014

Weighted average assumptions used to
determine net periodic benefit cost:

Discount rate ..............................................
Expected long-term rate of return on
plan assets ................................................

Healthcare cost trend rates used to
determine net periodic benefit cost:

Initial ..........................................................
Ultimate ......................................................
Year ultimate trend rate achieved ...............

1.9%

2.6%

2.0%

3.9 %

3.7 %

4.3%

4.6%

4.3%

5.1%

6.5 %
5.0 %

7.0 %
5.0 %

7.5%
5.0%

2019

Generally, the Company determined the discount rates for its defined benefit plans by utilizing indices for
long-term, high-quality bonds and ensuring that the discount rate does not exceed the yield reported for those indices
after adjustment for the duration of the plans’ liabilities.

In selecting the expected long-term rate of return on plan assets, the Company considered the average rate of

earnings expected on the funds invested or to be invested to provide for the benefits of the plan, giving consideration
to expected returns on different asset classes held by the plans in light of prevailing economic conditions as well as
historical returns. This basis is consistent for all years presented.

The assumed cost of healthcare has an effect on the amounts reported for the Company’s medical plan. A 1%

change in the assumed healthcare cost trend rate would increase (decrease) our cost and obligation as follows:

Cost............................................................................ $
Obligation .................................................................. $

- $
- $

28 $
661 $

- $
- $

(20)
(433)

1% Increase

1% Decrease

2016

2015

2016

2015

Expected Benefit Payments—The following table summarizes the expected benefit payments for the
Company’s pension plans for each of the next five fiscal years and in the aggregate for the five fiscal years
thereafter:

2017............................................................................................................... $
2018...............................................................................................................
2019...............................................................................................................
2020...............................................................................................................
2021...............................................................................................................
2022-2026 .....................................................................................................

Pension
Plans

21,014
23,284
24,307
24,239
25,587
143,220

118

Total

- $
-
-

23,341
63,431
29,287

- $
-
-

24,278
-
23,062
331,054
- 320,560
174,110
6,129
-
618
-
-
- $ 349,751 $ 646,119

Total

- $
-
-

19,172
56,247
25,901

1,193
-
525
337,011
- 325,312
217,144
6,247
-
- $ 332,084 $ 656,668

LAZARD LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except for per share data, unless otherwise noted)

Plan Assets—The following tables present the categorization of our pension plans’ assets as of December 31,

2016 and 2015, measured at fair value, into a fair value hierarchy and investments measured at NAV or its
equivalent as a practical expedient in accordance with fair value measurement disclosure requirements:

Assets:

Level 1

As of December 31, 2016
Level 3

NAV (a)

Level 2

Cash .............................................................. $
Debt ..............................................................
Equities .........................................................
Funds:

23,341 $
63,431
29,287

Alternative investments ..........................
Debt.........................................................
Equity .......................................................
Derivative ......................................................
Total .............................................................. $ 295,750 $

1,216
10,494
167,981
-

- $
-
-

-
-
-
618
618 $

Assets:

Level 1

As of December 31, 2015
Level 3

NAV (a)

Level 2

19,172 $
56,247
25,901

Alternative investments ..........................
Debt.........................................................
Equity .......................................................

668
11,699
210,897

Total .............................................................. $ 324,584 $

- $
-
-

-
-
-
- $

Liabilities:

Derivatives .................................................... $
Total .............................................................. $

- $
- $

584 $
584 $

- $
- $

584
584

Included in equity funds are $97,933 and $70,444 as of December 31, 2016 and 2015, respectively, that are

invested in funds managed by LAM.

Consistent with the plans’ investment strategies, at December 31, 2016 and 2015, the Company’s U.S. pension

plan had 53% and 50%, respectively, of the plans’ assets invested in equity funds in Level 1 and measured at NAV
or its equivalent as a practical expedient and 47% and 50%, respectively, invested in Level 1 debt funds. The
Company’s non-U.S. pension plans at December 31, 2016 and 2015 had 31% and 37%, respectively, of the plans’
assets invested in equities and equity funds that are primarily Level 1 assets; 62% and 60%, respectively, of the
plans’ assets invested in debt and debt funds that are Level 1 assets and measured at NAV or its equivalent as a
practical expedient, and 7% and 3%, respectively, of the plans’ assets invested in cash, which is a Level 1 asset, or
in alternative investment funds that are primarily measured at NAV.

119

LAZARD LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except for per share data, unless otherwise noted)

Investment Policies and Strategies—The primary investment goal is to ensure that the pension plans remain
well funded, taking account of the likely future risks to investment returns and contributions. As a result, a portfolio
of assets is maintained with appropriate liquidity and diversification that can be expected to generate long-term
future returns that minimize the long-term costs of the pension plans without exposing the plans to an unacceptable
risk of under-funding. The Company’s likely future ability to pay such contributions as are required to maintain the
funded status of the plans over a reasonable time period is considered when determining the level of risk that is
appropriate. The fair value of plan investments classified as Level 1 assets are based on market quotes. The fair
value of plan investments measured at NAV or its equivalent as a practical expedient is determined based on
information provided by external fund administrators and such investments are redeemable in the near term.

Defined Contribution Plans—Pursuant to certain matching contributions, the Company contributes to
employer sponsored defined contribution plans. Such contributions amounted to $14,454, $12,493 and $11,904 for
the years ended December 31, 2016, 2015 and 2014, respectively, which are included in “compensation and
benefits” expense on the consolidated statements of operations.

16.

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 UBT attributable to its operations apportioned to New
York City.

Substantially all of Lazard’s operations outside the U.S. are conducted in “pass-through” entities for U.S.

income tax purposes. The Company provides for U.S. income taxes on a current basis for those earnings. The
repatriation of prior earnings attributable to “non-pass-through” entities would not result in the recognition of a
material amount of additional U.S. income taxes.

The components of the Company’s provision (benefit) for income taxes for the years ended December 31,

2016, 2015 and 2014, and a reconciliation of the U.S. federal statutory income tax rate to the Company’s effective
tax rates for such years, are shown below.

Year Ended December 31,
2015

2016

2014

Current:

Federal .................................................................. $
Foreign ..................................................................
State and local (primarily UBT) ...........................
Total current ...............................................................
Deferred:

1,766 $
54,253
4,090
60,109

8,177 $
78,086
4,970
91,233

3,112
61,143
5,519
69,774

2,766
Federal ..................................................................
9,239
Foreign ..................................................................
3,623
State and local .......................................................
Total deferred .............................................................
15,628
Total ........................................................................... $ 123,769 $(1,009,552 ) $ 85,402

(988,900 )
50,602
(3,960 )
1,354
(107,925 )
11,704
63,660 (1,100,785 )

120

LAZARD LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except for per share data, unless otherwise noted)

Year Ended December 31,
2015

2016

2014

U.S. federal statutory income tax rate ........................
Income of noncontrolling interests .............................
Foreign source income not subject to U.S.
income tax ...............................................................
Foreign taxes ..............................................................
State and local taxes ...................................................
Change in U.S. federal valuation allowance ..............
Other, net ....................................................................
Effective income tax rate (a) ......................................

35.0%
(0.3)

(9.3)
(0.1)
3.0
(3.6)
(0.8)
23.9%

35.0 %
13.8

35.0 %
(0.5 )

419.4
(361.6 )
522.2
5477.0
(31.5 )
6074.3 %

(12.4 )
8.2
1.8
(18.7 )
3.0
16.4 %

(a) For the year ended December 31, 2015, the effective tax rate on “operating income (loss)” includes (i) the

significant effect of the release of substantially all of our valuation allowance on deferred tax assets and the
recognition of deferred tax assets associated with the recording of the tax receivable agreement obligation, as
described below, and (ii) the negative impact on “operating income (loss)” as a result of the provision
pursuant to the tax receivable agreement.

See Note 20 regarding “operating income (loss)” by geographic region.

Deferred income taxes are provided for the effects of temporary differences between the tax basis of an asset

or liability and its reported amount in the consolidated statements of financial condition. These temporary
differences result in taxable or deductible amounts in future years. Details of the Company’s deferred tax assets and
liabilities are as follows:

Deferred Tax Assets:

Basis adjustments (a) .................................................................................... $
Compensation and benefits ..........................................................................
Net operating loss and tax credit carryforwards ...........................................
Depreciation and amortization .....................................................................
Other .............................................................................................................
Gross deferred tax assets ..............................................................................
Valuation allowance .....................................................................................
Deferred tax assets (net of valuation allowance) ..........................................

Deferred Tax Liabilities:

Depreciation and amortization .....................................................................
Compensation and benefits ..........................................................................
Goodwill .......................................................................................................
Other .............................................................................................................
Deferred tax liabilities ..................................................................................
Net deferred tax assets ............................................................................ $

December 31,

2016

2015

692,430
197,750
285,694
850
53,895
1,230,619
(69,593 )
1,161,026

26,539
5,447
27,932
34,499
94,417
1,066,609

727,696
204,780
309,811
840
36,154
1,279,281
(89,251)
1,190,030

17,629
9,332
15,208
28,370
70,539
1,119,491

(a) The basis adjustments recorded as of December 31, 2016 and 2015 are primarily the result of additional basis
from acquisitions of interests, including the impact of recording the tax receivable agreement obligation
during the year ended December 31, 2015.

121

LAZARD LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except for per share data, unless otherwise noted)

valuation allowance as of June 30, 2015, we considered all available information, including the magnitude of recent
and current operating results, the relatively long duration of statutory carryforward periods, our historical experience
utilizing tax attributes prior to their expiration dates, the historical volatility of operating results of these entities and
our assessment regarding the sustainability of their profitability. At that time, we concluded that there was a
sufficient history of sustained profitability at these entities that it was more likely than not that these entities would
be able to realize deferred tax assets. Accordingly, during the period ended June 30, 2015, we released substantially
all of the valuation allowance against the deferred tax assets held by these entities.

As a result, during the year ended December 31, 2015, we recorded a deferred tax benefit of approximately

$878,000. In addition, included in basis adjustments, we also recorded (i) a separate deferred tax benefit of
approximately $378,000 that reflected the tax deductibility of payments under the tax receivable agreement and (ii) a
deferred tax expense of approximately $161,000 relating to the reduction of a deferred tax asset as a result of the
partial extinguishment of our tax receivable agreement obligation. See Note 18 for more information regarding our
accrual under the tax receivable agreement in the second quarter of 2015 and the partial extinguishment of our tax
receivable agreement obligation in the third quarter of 2015.

Certain of our tax-paying entities have individually experienced losses on a cumulative three year basis or

have tax attributes that may expire unused. In addition, one of our tax paying entities has recorded a valuation
allowance on substantially all of its deferred tax assets due to the combined effect of operating losses in certain
subsidiaries of that entity as well as foreign taxes that together substantially offset any U.S. tax liability. Taking into
account all available information, we cannot determine that it is more likely than not that deferred tax assets held by
these entities will be realized. Consequently, we have recorded valuation allowances on $69,593 and $89,251 of
deferred tax assets held by these entities as of December 31, 2016 and 2015, respectively.

Changes in the deferred tax assets valuation allowance for the years ended December 31, 2016, 2015 and 2014

was as follows:

Beginning Balance................................................................. $
Credited to provision for income taxes ..................................
Charged (credited) to other comprehensive income and
other (a) ..............................................................................
Ending Balance ...................................................................... $

Year Ended December 31,
2015

2014

2016

89,251 $ 1,044,152 $ 1,225,305
(203,051)
(954,487 )
(15,981)

(3,677)
69,593 $

(414 )

21,898
89,251 $ 1,044,152

(a)

2016 includes acquisition-related deferred tax assets offset by a valuation allowance in the amount of $2,271.

The Company had net operating loss and tax credit carryforwards for which related deferred tax assets of

$285,694 were recorded at December 31, 2016 primarily relating to:

(i)

indefinite-lived carryforwards (subject to various limitations) of approximately $16,546, in Australia,
Hong Kong, Singapore and Spain; and

(ii)

certain carryforwards of approximately $235,986 in the U.S., which begin expiring in 2029.

As a result of certain realization requirements regarding share-based incentive plan awards, certain deferred

tax assets pertaining to tax deductions related to equity compensation in excess of compensation recognized for
financial reporting that would otherwise have been recognized at December 31, 2016 and 2015 of $93,634 and
$111,587, respectively, are not included in the deferred tax assets and liabilities table above. The impact of such
excess tax deductions will be included in deferred tax assets upon adoption of new accounting guidance (see Note
3).

122

LAZARD LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except for per share data, unless otherwise noted)

With few exceptions, the Company is no longer subject to income tax examination by foreign tax authorities

and by U.S. federal, state and local tax authorities for years prior to 2012. While we are under examination in
various tax jurisdictions with respect to certain open years, the Company does not expect that the result of any final
determination related to these examinations will have a material impact on its financial statements. Developments
with respect to such examinations are monitored on an ongoing basis and adjustments to tax liabilities are made as
appropriate.

A reconciliation of the beginning to the ending amount of gross unrecognized tax benefits (excluding interest

and penalties) for the years ended December 31, 2016, 2015 and 2014 is as follows:

Balance, January 1 (excluding interest and penalties
of $13,083, $13,004 and $12,200, respectively) ................. $
Increases in gross unrecognized tax benefits relating
to tax positions taken during:

Year Ended December 31,
2015

2014

2016

77,280 $

68,224 $

62,905

Prior years ........................................................................
Current year .....................................................................

5,891
18,438

-
22,212

2,837
18,698

Decreases in gross unrecognized tax benefits
relating to:

Tax positions taken during prior years .............................
Settlements with tax authorities .......................................
Lapse of the applicable statute of limitations ...................

(5,316)
(1,706)
(16,191)

(621 )
-
(12,535 )

(3,191)
-
(13,025)

Balance, December 31 (excluding interest and penalties
of $15,392, $13,083 and $13,004,
respectively) ....................................................................... $

78,396 $

77,280 $

68,224

Additional information with respect to unrecognized tax benefits is as follows:

Unrecognized tax benefits at the end of the year that,
if recognized, would favorably affect the effective
tax rate (includes interest and penalties of $15,392,
$13,083 and $13,004, respectively) .................................... $
Unrecognized tax benefits that, if recognized, would not
affect the effective tax rate ................................................. $
Interest and penalties recognized in current income
tax expense (after giving effect to the reversal of
interest and penalties of $3,143, $3,865 and
$3,177, respectively) .......................................................... $

Year Ended December 31,
2015

2014

2016

81,564 $

74,785 $

40,353

12,224 $

15,578 $

40,875

2,309 $

79 $

804

The Company anticipates that it is reasonably possible that approximately $23,000 of unrecognized tax
benefits, including interest and penalties recorded at December 31, 2016, may be recognized within 12 months as a
result of the lapse of the statute of limitations in various tax jurisdictions.

123

LAZARD LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except for per share data, unless otherwise noted)

17. NET INCOME PER SHARE OF CLASS A COMMON STOCK

The Company’s basic and diluted net income per share calculations for the years ended December 31, 2016,

2015 and 2014 are computed as described below.

Basic Net Income Per Share

Numerator—utilizes net income attributable to Lazard Ltd for the respective years, plus applicable

adjustments to such net income associated with the inclusion of shares of Class A common stock issuable on a non-
contingent basis.

Denominator—utilizes the weighted average number of shares of Class A common stock outstanding for the

respective years, plus applicable adjustments to such shares associated with shares of Class A common stock
issuable on a non-contingent basis.

Diluted Net Income Per Share

Numerator—utilizes net income attributable to Lazard Ltd for the respective years as in the basic net income

per share calculation described above, plus, to the extent applicable and dilutive, (i) changes in net income
attributable to noncontrolling interests resulting from assumed Class A common stock issuances in connection with
share-based incentive compensation and, in 2014, on an “as-if-exchanged” basis, amounts applicable to LAZ-MD
Holdings exchangeable interests and (ii) income tax related to (i) above.

Denominator —utilizes the weighted average number of shares of Class A common stock outstanding for the

respective years as in the basic net income per share calculation described above, plus, to the extent dilutive, the
incremental number of shares of Class A common stock required to settle share-based incentive compensation and,
in 2014, LAZ-MD Holdings exchangeable interests, using the “treasury stock” method or the “as-if-exchanged”
basis, as applicable.

124

LAZARD LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(dollars in thousands, except for per share data, unless otherwise noted)

The calculations of the Company’s basic and diluted net income per share and weighted average shares

outstanding for the years ended December 31, 2016, 2015 and 2014 are presented below:

Year Ended December 31,
2015
986,373 (cid:3)(cid:3) $

2016
387,698 $

(cid:3)(cid:3)

2014
427,277

-
387,698 $

Net income attributable to Lazard Ltd - basic .................................. $
Add - dilutive effect, as applicable, of:
Adjustments to net income relating to interest expense and
changes to net income attributable to noncontrolling interests
resulting from assumed Class A common stock issuances in
connection with share-based incentive compensation, and,
in 2014, exchangable interests, net of tax .....................................
Net income attributable to Lazard Ltd - diluted ............................... $
Weighted average number of shares of Class A common stock
outstanding .................................................................................... 124,635,160 125,294,261 (cid:3)(cid:3) 121,942,939
Add - adjustment for shares of Class A common stock issuable on
a non-contingent basis ..................................................................
Weighted average number of shares of Class A common stock
outstanding - basic ........................................................................ 124,770,401 125,366,272 (cid:3)(cid:3) 122,351,836
Add - dilutive effect, as applicable, of:
Weighted average number of incremental shares of Class A
common stock issuable from share-based incentive
compensation and in 2014, exchangable interests ........................
Weighted average number of shares of Class A common stock
outstanding - diluted ..................................................................... 132,633,630 133,244,546 (cid:3)(cid:3) 133,813,123
Net income attributable to Lazard Ltd per share of Class A
common stock:

- (cid:3)(cid:3)
986,373 (cid:3)(cid:3) $

7,878,274 (cid:3)(cid:3) 11,461,287

581
427,858

7,863,229

135,241

72,011 (cid:3)(cid:3)

408,897

(cid:3)(cid:3)

Basic ........................................................................................... $

Diluted ........................................................................................ $

3.11 $

2.92 $

(cid:3)(cid:3)
7.87 (cid:3)(cid:3) $
7.40 (cid:3)(cid:3) $

3.49

3.20

18. RELATED PARTIES