Annualized Returns
Name 3-Month YTD 1-Year 3-Year 5-Year 10-Year Since Inception (%; Gross of fees) (01/01/1994) Lazard European Equity Select ADR - SMA -3.7 -11.1 -10.1 11.8 14.9 6.5 10.3 (%; Net of fees) Lazard European Equity Select ADR - SMA -4.4 -12.4 -12.8 8.5 11.5 3.4 7.1 MSCI European Index -4.1 -12.4 -11.3 13.6 17.1 5.6 10.2
Performance is presented gross and net of all fees. Net of fees performance has been calculated using a 3.0% fee assumption. Gross of fee performance is presented as supplementary information, as performance excludes transaction costs. Please refer to the disclosures for important additional details of this composite. The performance quoted represents past performance. Past performance does not guarantee future results.

		Lazard			MSCI Europe Index			S&P 500 Index
Number of Securities		35			517			501
Current Dividend Yield (%)		4.0			4.2			2.3
Average Weighted Market Cap ($ billions)		99.2			74.7			89.0
Turnover – Trailing 12 Months (%)		25.2			N/A			N/A

Characteristics

Equity	95.4
Cash and Equivalents	4.6
Finland	3.1
Nokia (Spon ADR)
France	17.1
Groupe Danone (Spon ADR)
Sanofi-Aventis (ADR)
Societe Generale (Spon ADR)
Suez (Spon ADR)
Total (Spon ADR)
Germany	11.4
Adidas (Spon ADR)
Allianz (Spon ADR)
Daimler (GRS)
E.ON (Spon ADR)
Siemens (Spon ADR)
Ireland	0.8
CRH (ADR)
Italy	4.4
Eni (Spon ADR)
Intesa Sanpaolo (Spon ADR)
Netherlands	5.3
Heineken (ADR)
TNT (ADR)

Spain	1.6
Banco Santander (Spon ADR)
Sweden	1.6
Ericsson Cl B (Spon ADR)
Switzerland	16.4
Nestle (Spon ADR)
Novartis (Spon ADR)
Roche Holdings (Spon ADR)
UBS (GRS)
Zurich Financial Services (Spon ADR)
United Kingdom	33.8
BAE Systems (Spon ADR)
BP (Spon ADR)
British American Tobacco (Spon ADR)
Diageo (Spon ADR)
GlaxoSmithKline (Spon ADR)
HSBC Holdings (Spon ADR)
Imperial Tobacco Group (Spon ADR)
Prudential (Spon ADR)
Royal Dutch Shell Cl A (ADR)
Tesco (Spon ADR)
Unilever (Spon ADR)
Vodafone Group (Spon ADR)

1. Portfolio characteristics are based upon a representative portfolio which represents the proposed investment for a fully discretionary account. Source: Lazard, FactSet.
2. The allocations mentioned are based upon a representative portfolio which represents the proposed investment for a fully discretionary account. Allocations are subject to change.
3. Non-Euro ex-U.K. represents Denmark, Norway, Sweden, and Switzerland.

International stock markets remained highly volatile through the second quarter and ultimately finished down for the period, marking a challenging first half of 2008 for international equity investors.

The rally that began in mid-March in the aftermath of the near collapse of U.S. investment bank Bear Stearns continued until mid-May. Global indices generated sizeable gains and almost eliminated their losses for the year, powered in particular by the surging energy and materials sectors. Investor optimism was, however, to prove misplaced. World equity markets fell heavily from mid-May to the end of the quarter, as a plethora of concerns weighed on investor sentiment. Chief among these worries was an oil price that climbed unchecked to breach $140 per barrel towards the end of June, contributing to concerns that the global economy may be entering a stagflationary period of lower growth and higher inflation. Eurozone consumer price inflation hit a 16-year high of 4.0%, as commodity prices continued to climb.

The financials sector remained in the eye of the storm as one of the worst-performing sectors, with a number of European banks compelled to undertake rights issues to repair balance sheets that had been badly damaged by subprime mortgage-backed trading. The energy sector advanced significantly on the back of higher oil and gas prices. The consumer staples sector failed to play its usual safe-haven role during market turbulence; a confluence of rising input costs, fears of a significant consumer slowdown, and questions concerning the previously popular notion that emerging markets had “decoupled” from the developed world, collectively conspired to challenge the valuation premium of these stocks to varying degrees.

The strategy’s underweight exposure to the strong-performing materials sector hurt relative returns over the quarter. Materials stocks, particularly mining companies, continued their positive run on the back of many commodities’ reaching new cycle highs, production bottlenecks and earnings upgrades.

Although overall stock selection within the energy sector had a small detrimental effect upon the strategy, our overweight position in the sector was helpful, as a number of oil stocks held within the strategy added value.

Our holdings in a French utilities company added value, as the benefits from its impending merger with another French utilities firm caused the share price to rise.

In the consumer staples sector, our position in a French food processing company detracted from returns following market worries over the possibility of slowing sales in emerging markets, and concerns that beleaguered Western consumers might be rejecting premium-brand consumer staples products in favor of cheaper, private-label alternatives.

In industrials, a British defense and aerospace company declined on news that the U.K. Serious Fraud Office’s investigation into alleged corruption associated with arms sales might be reopened.

In the information technology sector, a Finnish mobile phone handset manufacturer declined on news of slowing handset sales and a profit warning by a rival.

In the financials sector, not owning a number of U.K. banks assisted relative returns, as the U.K. banking sector focused on rebuilding weakened balance sheets. Elsewhere, a U.K. insurance company held within the strategy suffered on concerns of weakening in its Asian markets.

The global economy has had to wrestle with two major shocks since last August: the seizure of global credit markets and record oil prices. With inflationary pressures building around the globe, central bankers in the developed world are now torn between the need to stave off a serious contraction in economic growth and the requirement to maintain price stability. A number of economies are now seemingly experiencing significant corrections to their hitherto rampant domestic housing markets, with dramatic consequences for consumer sentiment in these markets.

Despite a disappointing quarter and a failure to exhibit traditional defensive qualities, we remain substantially overweight in the consumer staples sector. Elsewhere, we retain our underweight exposure to materials stocks.

4. The allocations and specific securities mentioned are based upon a representative portfolio which represents the proposed investment for a fully discretionary account. Allocations and security selection are subject to change. It should not be assumed that any of the referenced securities were or will be profitable, or that the investment decisions we make in the future will be profitable. All information provided in this list should not be considered a recommendation or solicitation to purchase or sell any particular security. Please note that cash is not viewed as a strategic asset class.
5. The allocations and specific securities mentioned are derived from a representative portfolio which represents the proposed investment for a fully discretionary account. Allocations and security selection are subject to change. The information provided should not be considered a recommendation or solicitation to purchase or sell any particular security. There is no assurance that any securities referenced herein will remain in the account’s portfolio or that securities sold have not been repurchased. The securities discussed may not represent the account’s entire portfolio. It should not be assumed that any of the referenced securities were, or will prove to be profitable, or that the investment decisions we make in the future will be profitable.

Foreign securities may be less liquid, more volatile, and less subject to governmental supervision than in the United States. The values of foreign securities are affected by changes in currency rates, application of foreign tax laws, changes in government administration, and economic and monetary policy.