5.	*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 are classified as Level 1 when their respective fair values are based on unadjusted quoted prices in active markets and are classified as Level 2 when their fair values are primarily based on prices as provided by external pricing services.

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.

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

The fair values 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 values 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 6 of Notes to Condensed Consolidated Financial Statements.

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) in private equity funds are not redeemable in the near term as a result of redemption restrictions.

The following tables present, as of September 30, 2015 and December 31, 2014, 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:


	September 30, 2015
	Level 1		Level 2		Level 3		NAV (a)		Total
Assets:
Investments:
Debt	$	1,736	$	–	$	–	$	–	$	1,736
Equities		45,300		–		1,276		–		46,576
Funds:
Alternative investments		43,961		–		–		25,065		69,026
Debt		66,564		–		–		6		66,570
Equity		206,893		–		–		43		206,936
Private equity		–		–		25,191		96,026		121,217
Derivatives		–		12,210		–		–		12,210

Total	$	364,454	$	12,210	$	26,467	$	121,140	$	524,271

Liabilities:
Securities sold, not yet purchased	$	3,076	$	–	$	–	$	–	$	3,076
Derivatives		–		189,563		–		–		189,563

Total	$	3,076	$	189,563	$	–	$	–	$	192,639



	December 31, 2014 (b)
	Level 1		Level 2		Level 3		NAV (a)		Total
Assets:
Investments:
Debt	$	5,540	$	4,886	$	–	$	–	$	10,426
Equities		55,987		–		1,315		–		57,302
Funds:
Alternative investments		–		–		–		34,705		34,705
Debt		82,885		–		–		4		82,889
Equity		228,166		–		–		43		228,209
Private equity		–		–		–		114,470		114,470
Derivatives		–		2,355		–		–		2,355

Total	$	372,578	$	7,241	$	1,315	$	149,222	$	530,356

Liabilities:
Securities sold, not yet purchased	$	9,290	$	–	$	–	$	–	$	9,290
Derivatives		–		208,093		–		–		208,093

Total	$	9,290	$	208,093	$	–	$	–	$	217,383

(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 2 of Notes to Condensed Consolidated Financial Statements for additional information.

(b)	The table as of December 31, 2014 reflects 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 2 of Notes to Condensed Consolidated Financial Statements.

The following tables provide a summary of changes in fair value of the Company’s Level 3 assets for the three month and nine month periods ended September 30, 2015 and 2014:


	Three Months Ended September 30, 2015 (a)
	Beginning Balance		Net Unrealized/ Realized Gains (Losses) Included In Revenue- Other (b)		Purchases/ Acquisitions		Sales/ Dispositions		Foreign Currency Translation Adjustments			Ending Balance
	Beginning Balance				Purchases/ Acquisitions		Sales/ Dispositions		Foreign Currency Translation Adjustments			Ending Balance
Investments:
Equities	$	1,299	$	2	$	–	$	–	$	(25	)	$	1,276
Private equity funds		22,267		633		2,291		–		–			25,191

Total Level 3 Assets	$	23,566	$	635	$	2,291	$	–	$	(25	)	$	26,467


	Nine Months Ended September 30, 2015 (a)
	Beginning Balance		Net Unrealized/ Realized Gains (Losses) Included In Revenue- Other (b)		Purchases/ Acquisitions/ Transfers (c)		Sales/ Dispositions			Foreign Currency Translation Adjustments			Ending Balance
	Beginning Balance				Purchases/ Acquisitions/ Transfers (c)		Sales/ Dispositions			Foreign Currency Translation Adjustments			Ending Balance
Investments:
Equities	$	1,315	$	12	$	–	$	–		$	(51	)	$	1,276
Private equity funds		–		3,404		22,178		(391	)		–			25,191

Total Level 3 Assets	$	1,315	$	3,416	$	22,178	$	(391	)	$	(51	)	$	26,467


	Three Months Ended September 30, 2014 (a)
	Beginning Balance		Net Unrealized/ Realized Gains (Losses) Included In Revenue- Other (b)		Purchases/ Acquisitions		Sales/ Dispositions		Foreign Currency Translation Adjustments			Ending Balance
	Beginning Balance				Purchases/ Acquisitions		Sales/ Dispositions		Foreign Currency Translation Adjustments			Ending Balance
Investments:
Equities	$	1,370	$	–	$	–	$	–	$	(36	)	$	1,334

Total Level 3 Assets	$	1,370	$	–	$	–	$	–	$	(36	)	$	1,334


	Nine Months Ended September 30, 2014 (a)
	Beginning Balance		Net Unrealized/ Realized Gains (Losses) Included In Revenue- Other (b)		Purchases/ Acquisitions		Sales/ Dispositions		Foreign Currency Translation Adjustments			Ending Balance
	Beginning Balance				Purchases/ Acquisitions		Sales/ Dispositions		Foreign Currency Translation Adjustments			Ending Balance
Investments:
Equities	$	1,340	$	14	$	–	$	–	$	(20	)	$	1,334

Total Level 3 Assets	$	1,340	$	14	$	–	$	–	$	(20	)	$	1,334

(a)

The tables for the three month and nine month periods ended September 30, 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 2 of Notes to Condensed Consolidated Financial Statements.

(b)	Earnings for the three month and nine month periods ended September 30, 2015 and the three month and nine month periods ended September 30, 2014 include net unrealized gains (losses) of $635, $3,416, $0 and $14, respectively.

(c)	Certain investments that were valued at NAV as of December 31, 2014 of $19,255 were transferred to Level 3 from the NAV category in the nine months ended September 30, 2015 as these investments are valued based on a potential transaction value as of September 30, 2015.

There were no transfers between any of the Level 1, 2 and 3 categories in the fair value measurement hierarchy during the three month and nine month periods ended September 30, 2015 and 2014.

The following tables present, at September 30, 2015 and December 31, 2014, certain investments that are valued using NAV or its equivalent as a practical expedient in determining fair value:

September 30, 2015

% of
Fair Value
Not
Redeemable

Estimated Liquidation Period of
Investments Not Redeemable

Investments Redeemable

Fair Value

Unfunded
Commitments

%
Next
5 Years

%
5-10
Years

%
Thereafter

Redemption
Frequency

Redemption
Notice Period

Alternative investment funds:

Hedge funds

23,005

–

(a)

<30-60 days

Funds of funds

457

–

(b)

<30-90 days

Other

1,603

–

(c)

<30-60 days

Debt funds

–

(d)

30 days

Equity funds

–

(e)

<30-90 days

Private equity funds:

Equity growth

61,549

1,078

(f)

100%

25%

73%

Mezzanine debt

34,477

–

100%

–

100%

Total

121,140

1,078

(a)	weekly (22%), monthly (61%) and quarterly (17%)

(b)	monthly (98%) and quarterly (2%)

(c)	daily (19%) and monthly (81%)

(d)	daily (100%)

(e)	daily (17%), monthly (57%) and quarterly (26%)

(f)	Unfunded commitments to private equity investments consolidated but not owned by Lazard of $5,501 are excluded. Such commitments are required to be funded by capital contributions from noncontrolling interest holders.

December 31, 2014

% of
Fair Value
Not
Redeemable

Estimated Liquidation Period of
Investments Not Redeemable

Investments Redeemable

Fair Value

Unfunded
Commitments

%
Next
5 Years

%
5-10
Years

%
Thereafter

Redemption
Frequency

Redemption
Notice Period

Alternative investment funds:

Hedge funds

31,042

–

(a)

<30-60 days

Funds of funds

475

–

(b)

<30-90 days

Other

3,188

–

(c)

<30-60 days

Debt funds

–

(d)

30 days

Equity funds

–

(e)

30-90 days

Private equity funds:

Equity growth

75,578

18,676

(f)

100%

10%

63%

27%

Mezzanine debt

38,892

–

100%

–

100%

Total

149,222

18,676

(a)	weekly (15%), monthly (66%) and quarterly (19%)

(b)	monthly (98%) and quarterly (2%)

(c)	daily (11%), weekly (3%) and monthly (86%)

(d)	daily (100%)

(e)	daily (14%), monthly (58%) and quarterly (28%)

(f)	Unfunded commitments to private equity investments consolidated but not owned by Lazard of $6,888 are excluded. Such commitments are required to be funded by capital contributions from noncontrolling interest holders.

Investment Capital Funding Commitments—At September 30, 2015, the Company’s maximum unfunded commitments for capital contributions to investment funds arose primarily from commitments to EGCP III, which amounted to $9,672, through the earlier of October 12, 2016 (i.e., the end of the investment period) for investments and/or expenses (with a portion of the undrawn amount of such commitments as of that date remaining committed until October 12, 2023 in respect of “follow-on investments” and/or fund expenses) or the liquidation of the fund.