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Form N-CSRS LAZARD GLOBAL TOTAL RETU For: Jun 30

September 6, 2016 4:09 PM EDT

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

 

FORM N-CSR

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES

 

Investment Company Act file number     811-21511

 

Lazard Global Total Return and Income Fund, Inc.
(Exact name of registrant as specified in charter)

 

30 Rockefeller Plaza

New York, New York 10112

  (Address of principal executive offices) (Zip code)  

 

Nathan A. Paul, Esq.

Lazard Asset Management LLC

30 Rockefeller Plaza

New York, New York 10112
(Name and address of agent for service)

 

Registrant’s telephone number, including area code:     (212) 632-6000

 

Date of fiscal year end: 12/31
   
Date of reporting period: 6/30/16
 

ITEM 1. REPORTS TO STOCKHOLDERS.

 

Lazard Global Total Return
and Income Fund, Inc.

 

Semi-Annual Report

June 30, 2016

 

 

PRIVACY NOTICE

 

FACTS What does Lazard do with your personal information?
Why? Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do.
What?

The types of personal information we collect and share depend on the product or service you have with us. This information can include:

 

• Social Security number and credit history

 

• Assets and income

 

• Account transactions

 

When you are no longer our customer, we continue to share your information as described in this notice.

How? All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons Lazard chooses to share; and whether you can limit this sharing.

 

Reasons we can share your personal information Does Lazard share? Can you limit
this sharing?
For our everyday business purposes — such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus Yes No
For our marketing purposes — to offer our products and services to you No We do not share
For joint marketing with other financial companies No We do not share
For our affiliates’ everyday business purposes — information about your transactions and experiences Yes No
For our affiliates’ everyday business purposes — information about your creditworthiness No We do not share
For nonaffiliates to market to you No We do not share
Questions? Call 800-823-6300 or go to http://www.LazardNet.com
 
Who we are  
Who is providing this notice? Lazard Asset Management LLC, Lazard Alternatives, LLC, Lazard Asset Management (Canada), Inc., Lazard Asset Management Securities LLC on their own behalf and on behalf of the funds they manage.
What we do  
How does Lazard protect my personal information? To protect your personal information from unauthorized access and use, we use security measures that comply with federal and applicable state laws. These measures include computer safeguards and secured files and buildings.
How does Lazard collect my personal information?

We collect your personal information, for example, when you:

 

• Open an account

 

• Seek advice about your investments

 

• Direct us to buy securities

 

• Direct us to sell your securities

 

• Enter into an investment advisory contract

 

We also collect your personal information from others, such as credit bureaus, affiliates, or other companies.

Why can’t I limit all sharing?

Federal law gives you the right to limit only:

 

• Sharing for affiliates’ everyday business purposes—information about your creditworthiness

 

• Affiliates from using your information to market to you

 

• Sharing for nonaffiliates to market to you

 

• State laws and individual companies may give you additional rights to limit sharing.

Definitions  
Affiliates Companies related by common ownership or control. They can be financial and nonfinancial companies.

Our affiliates may include financial companies whose names include “Lazard”.
Nonaffiliates Companies not related by common ownership or control. They can be financial and nonfinancial companies.

Lazard does not share information with nonaffiliates so they can market to you.
Joint marketing A formal agreement between nonaffiliated financial companies that together market financial products or services to you.

Lazard does not jointly market.
 

Lazard Global Total Return and Income Fund, Inc.

 

 

Table of Contents Page
Investment Overview 2
Portfolio of Investments 8
Notes to Portfolio of Investments 13
Statements of  
Assets and Liabilities 14
Operations 15
Changes in Net Assets 16
Cash Flows 17
Financial Highlights 18
Notes to Financial Statements 19
Proxy Voting Results 28
Dividend Reinvestment Plan 29
Board of Directors and Officers Information 30
Other Information 32
 

Lazard Global Total Return and Income Fund, Inc.

Investment Overview

 

 

Dear Stockholders,

 

We are pleased to present this report for Lazard Global Total Return and Income Fund, Inc. (“LGI” or the “Fund”), for the six month period ended June 30, 2016. LGI is a diversified, closed-end management investment company that began trading on the New York Stock Exchange (“NYSE”) on April 28, 2004. Its ticker symbol is “LGI.”

 

We believe that the Fund has provided investors with an attractive yield and diversification, backed by the extensive experience, commitment, and professional management of Lazard Asset Management LLC (the “Investment Manager” or “Lazard”).

 

Portfolio Update (as of June 30, 2016)

 

For the six months ended June 30, 2016, the Fund’s NAV returned 3.7%, outperforming the 0.7% return of its benchmark, the MSCI World® Index (the “Index”). Over the last twelve months, the Fund’s NAV performance of -6.7% underperformed the Index return of -2.8%. Due to weaker performance between 2013-2015, the Fund’s NAV performance over longer time periods and since inception has also lagged the benchmark. The since inception annualized return was 5.1% versus 5.8% for the Index. Shares of LGI ended the first six month period of 2016 with a market price of $13.08, representing a 14.6% discount to the Fund’s NAV per share of $15.31.

 

The Fund’s net assets were $147.1 million as of June 30, 2016, with total leveraged assets (net assets plus line of credit outstanding and net notional value of forward currency contracts) of $198.3 million, representing a 25.8% leverage rate. This leverage rate was higher than that at the end of the fourth quarter of 2015 (20.1%), but below the maximum permitted leverage rate of 33⅓%.

 

Within the global equity portfolio, stock selection in the consumer staples, health care and industrials sectors, and within the US and the UK contributed positively to performance in the first half of 2016. A higher-than-benchmark exposure to the energy sector also added value. In contrast, stock selection in the financials sector and within Japan detracted from performance.

Performance for the smaller, short duration1 emerging markets currency and debt portion of the Fund was favorable in the first six months of 2016, helped by a strong rally at the end of the period. While the emerging markets currency and debt portion of the Fund was a meaningful negative contributor to performance between 2013-2015, it has still contributed positively to performance since the Fund’s inception.

 

As of June 30, 2016, 75.7% of the Fund’s total leveraged assets consisted of global equities, 24.2% consisted of emerging market currency and debt instruments, and 0.1% consisted of cash and other assets.

 

Declaration of Distributions

 

Pursuant to LGI’s Level Distribution Policy, the Fund declares, monthly, a distribution equal to 6.25% (on an annualized basis) of the Fund’s NAV on the last business day of the previous year. The current monthly distribution rate per share is $0.07948, representing a distribution yield of 7.3% based on the Fund’s market price of $13.08 as of the close of trading on the NYSE on June 30, 2016. It is currently estimated that, of the $0.47688 distributed per share for the year-to-date, approximately $0.30997 may represent a return of capital.

 

Additional Information

 

Please note that available on www.LazardNet.com are frequent updates on the Fund’s performance, press releases, distribution information, and a monthly fact sheet that provides information about the Fund’s major holdings, sector weightings, regional exposures, and other characteristics, including the notices required by Section 19(a) of the Investment Company Act of 1940, as amended (the “1940 Act”). You may also reach Lazard by phone at 1-800-823-6300.

 

On behalf of Lazard, we thank you for your investment in Lazard Global Total Return and Income Fund, Inc. and look forward to continuing to serve your investment needs in the future.


 

2

 

Lazard Global Total Return and Income Fund, Inc.

Investment Overview (continued)

 

 

Message from the Portfolio Managers

 

Global Equity Portfolio

(75.7% of total leveraged assets)

 

The Fund’s global equity portfolio is invested primarily in equity securities of large, well-known global companies with, we believe, strong financial productivity at attractive valuations. Examples include Assa Abloy, a Swedish lock manufacturer, and the world’s largest lock manufacturer by sales volume; Novo Nordisk, a global healthcare company, headquartered in Denmark; and Unilever, an Anglo-Dutch multinational consumer goods company, co-headquartered in the Netherlands and United Kingdom.

 

Companies held in the global equity portfolio are all based in developed-market regions around the world. As of June 30, 2016, 51.1% of the portfolio’s stocks were based in North America, 25.8% were based in continental Europe (not including the United Kingdom), 14.8% were from the United Kingdom, 4.5% were from Japan, and 3.8% were from the rest of Asia (not including Japan) and Australia. The global equity portfolio is similarly well diversified across a number of industry sectors. The top two sectors, by weight, as of June 30, 2016, were consumer staples (17.3%), which includes food and staples retailing, food beverage and tobacco, and household and personal products; and health care (17.1%). Other sectors in the portfolio include information technology, financials, energy, industrials, consumer discretionary, telecom, utilities, and materials. The average dividend yield on the securities held in the global equity portfolio was approximately 3.3% as of June 30, 2016.

 

Global Equity Markets Review

In the first half of 2016, global financial markets experienced appreciable volatility as investors traded largely on short-term risk assessments of macro events. Global stocks closed modestly lower in a bifurcated first quarter, as markets sold off sharply to begin 2016 on concerns about global growth and fluctuations in currencies and commodities. However, world equities stabilized mid-first quarter and rebounded substantially into the end of the quarter on central bank stimulus. Economic data continued to incrementally improve, helping global equity markets to close slightly higher at the end of the six-month period. The muted gain for the first half of 2016 belied volatility, as

stocks oscillated from losses to gains. Investors weighed signs of global economic stability, speculation that the US Federal Reserve (the “Fed”) would hold off on raising interest rates, and pledges from other central banks to step in if conditions deteriorated against disappointing corporate earnings, fear of higher US interest rates, and political and economic uncertainty in Europe. Indices were unsettled heading into the end of the six-month period, which was marked by meetings of the Fed and the Bank of Japan, as well as the United Kingdom’s referendum on European Union membership. By and large, the results of the central bank meetings at the end of the June were as expected. The United Kingdom’s affirmative vote to leave the European Union (the so-called “Brexit”) was not widely anticipated, and the market headed sharply lower on the resulting political turmoil in the UK, economic uncertainty for all of Europe, and the impact on global markets. The pound and euro fell, while the US dollar and Japanese yen rose. Bond yields declined globally. Equities bounced back at the end of June, as central banks pledged additional measures to support the markets in the wake of the Brexit vote and the initial shock eased. UK stocks closed up in local currency terms, but continental European equities remained stagnant. Japanese stocks were among the worst performers, due largely to the potentially negative impact of a higher yen. US equities closed the six month period in positive territory. In emerging markets, Latin America and Asia (excluding China) outperformed on the prospect of lower rates for longer, muted ties to the UK economy, and better growth prospects.

 

What Helped and Hurt LGI

Stock selection and an overweight position in the consumer staples sector and within the US contributed positively to performance in the first half of the year. Shares of Reynolds American, a US tobacco company, climbed as revenue exceeded estimates, guidance met expectations and management raised the dividend. Additionally during the period it was reported that British American Tobacco may be interested in the company. We like Reynolds American on its compounding earnings growth. Returns are high and improving and the company is positioned to benefit from significant industry changes. Stock selection in the health care sector also helped performance. Shares


 

3

 

Lazard Global Total Return and Income Fund, Inc.

Investment Overview (continued)

 

 

of pharmaceutical company Pfizer rose after the company reported strong quarterly earnings, management raised its guidance for 2016, driven by currency exchange rate tailwinds and stronger revenues and the company announced that it had terminated its proposed $160 billion acquisition of Allergan. We expect Pfizer to continue to drive value in both its innovative and established products groups, and we believe that the company has several attractive late-stage commercial opportunities and the financial strength and flexibility to pursue further business development opportunities. Stock selection within the industrial sector and within the UK, and a higher-than-benchmark exposure to the energy sector also added value over this time period.

 

In contrast, stock selection in the financials sector and within Japan detracted from performance. Shares of Mitsubishi UFJ Financial Group, a diversified Japanese bank, declined on concerns over the Bank of Japan’s negative interest rate policy. We continue to hold Mitsubishi as it trades below half of book value and as we believe stable domestic loan demand can offset rate effects. Stable credit conditions in Japan and defensive overseas businesses keep credit costs low.

 

Emerging Market Currency and Debt Portfolio

(24.2% of total leveraged assets)

 

The Fund also seeks income through investing in primarily high-yielding, short-duration emerging market forward currency contracts and local currency debt instruments. As of June 30, 2016, this portfolio consisted of forward currency contracts (58.7%) and sovereign debt obligations (41.3%). The average duration of the emerging market currency and debt portfolio increased meaningfully over the last six months, with the June 30, 2016 duration at approximately 23 months, compared to 9 months at the end of 2015. The average yield decreased from 11.6%2 on December 31, 2015 to 7.3% on June 30, 2016.

 

Emerging Market Currency and Debt Market Review

Emerging markets local currency and debt markets, though volatile, were generally stronger during the period. Two-way volatility due to changing expectations for the Fed and Brexit were offset by positive developments, including rising commodity prices and the global search for yield. Emerging markets local

market performance was disparate with Brazil rising by 15% and Russia up over 7%, while Argentina and Colombia rallied by 5% each. Conversely, Poland (-5%) and Mexico (-4%) lagged, while Nigeria effected a -30% devaluation of the naira.

 

Emerging markets currencies have been buffeted by a series of factors over the past several years that have weighed on performance. We believe many of these factors were one-off drivers that led to the sharp depreciation seen in many currencies. The end of a predominantly multi-decade easing cycle around the world, the decline in emerging markets growth premium, both in absolute terms and relative to developed markets, and sharp outflows from locally-denominated emerging markets assets are very unlikely to recur in our view.

 

What Helped and What Hurt LGI

Russia contributed positively in the period. We are positioned in Russia due to high yield, a rising current account surplus owing to massive import compression, and shrinking capital outflows. Russia also benefitted from oil’s 25% rally in the second quarter. In Uruguay, the peso has been supported by the country’s central bank, which has used the stronger currency as a tool to fight inflation that has risen sharply over that past year from 7.5% to 11%. Colombia and Brazil both added value. Stronger oil in the former and lack of central bank intervention in the latter, combined with tight monetary policy, fueled the second quarter’s solid gains. Zambia benefitted from stronger copper prices and high-yield debt, both of which attracted portfolio inflow.

 

Conversely, Mexico detracted from performance, as its ample liquidity and low hedging costs (interest rates) caused the peso to underperform during periods of emerging markets sell-offs (May), while its high level of foreign investor presence and indirect exposure to oil caused it to lag rallies (April/June). The Asian region also detracted due to a contraction in manufacturing amid the market’s expectation of a Fed rate hike in June, which weighed on Asian (and emerging markets) currencies in May, while low yields undercut performance amid June’s rally. South Korea and the Philippines accounted for most of the region’s detraction.


 

4

 

Lazard Global Total Return and Income Fund, Inc.

Investment Overview (continued)

 

 

Notes to Investment Overview:

 

1 A measure of the average cash weighted term-to-maturity of the investment holdings. Duration is a measure of the price sensitivity of a bond to interest rate movements. Duration for a forward currency contract is equal to its term-to-maturity.

 

2 The total quoted yield does not account for the implicit cost of borrowing on the forward currency contracts, which would reduce the yield shown.

 

Total returns reflect reinvestment of all dividends and distributions. Past performance is not indicative, or a guarantee, of future results. Return for a period of less than one year is not annualized.

 

The performance data of the Index and other market data have been prepared from sources and data that the Investment Manager believes to be reliable, but no representation is made as to their accuracy. The Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. The Index is unmanaged, has no fees or costs and is not available for investment.

 

The views of the Fund’s Investment Manager and the securities described in this report are as of June 30, 2016; these views and portfolio holdings may have changed subsequent to this date. Nothing herein should be construed as a recommendation to buy, sell, or hold a particular security. There is no assurance that the securities discussed herein will remain in the Fund at the time you receive this report, or that securities sold will not have been repurchased. The specific securities discussed may, in aggregate, represent only a small percentage of the Fund’s holdings. It should not be assumed that securities identified and discussed were, or will be, profitable, or that the investment decisions made in the future will be profitable, or equal the investment performance of the securities discussed herein.

 

The views and opinions expressed are provided for general information only, and do not constitute specific tax, legal, or investment advice to, or recommendations for, any person. There can be no guarantee as to the accuracy of any outlooks for markets, sectors and securities as discussed herein.

 

5

 

 

Lazard Global Total Return and Income Fund, Inc.

Investment Overview (continued)

 

 

Comparison of Changes in Value of $10,000 Investment in
LGI and MSCI World Index* (unaudited)

 

 

     Value at
6/30/16
 
LGI at Market Price  $14,896 
LGI at Net Asset Value   14,009 
MSCI World Index   15,428 
        

 

Average Annual Total Returns*

Periods Ended June 30, 2016

(unaudited)

 

   One
Year
  Five
Years
  Ten
Years
Market Price  -7.86%  3.76%  4.07%
Net Asset Value  -6.74%  4.02%  3.43%
MSCI World Index  -2.78%  6.63%  4.43%

 

 
* Total returns reflect reinvestment of all dividends and distributions. The performance quoted represents past performance. Current performance may be lower or higher than the performance quoted. Past performance is not indicative, or a guarantee, of future results; the investment return, market price and net asset value of the Fund will fluctuate, so that an investor’s shares in the Fund, when sold, may be worth more or less than their original cost. The returns do not reflect the deduction of taxes that a stockholder would pay on the Fund’s distributions or on the sale of Fund shares.
   
  Performance results do not include adjustments made for financial reporting purposes in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and may differ from amounts reported in the financial highlights.
   
  The performance data of the Index has been prepared from sources and data that the Investment Manager believes to be reliable, but no representation is made as to its accuracy. The Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. The Index is unmanaged, has no fees or costs and is not available for investment.

 

6

 

Lazard Global Total Return and Income Fund, Inc.

Investment Overview (concluded)

 

 

  Ten Largest Equity Holdings
June 30, 2016 (unaudited)
         
            
  Security  Value   Percentage of
Net Assets
 
  Reynolds American, Inc.  $5,932,300    4.0%  
  International Business Machines Corp.   5,837,459    4.0   
  Assa Abloy AB ADR   5,334,600    3.6   
  Pfizer, Inc.   5,273,261    3.6   
  Cisco Systems, Inc.   5,098,213    3.5   
  Novo Nordisk A/S Sponsored ADR   4,920,870    3.3   
  British American Tobacco PLC Sponsored ADR   4,881,396    3.3   
  Chevron Corp.   4,822,180    3.3   
  Apple, Inc.   4,799,120    3.3   
  Unilever PLC Sponsored ADR   4,747,881    3.2   

 

 

  Portfolio Holdings Presented by Sector
June 30, 2016 (unaudited)
       
          
  Sector  Percentage of
Total Investments
 
  Consumer Discretionary   2.9%    
  Consumer Staples   15.0     
  Energy   11.8     
  Financials   13.3     
  Health Care   14.7     
  Industrials   10.4     
  Information Technology   14.3     
  Materials   0.6     
  Telecommunication Services   2.7     
  Utilities   0.7     
  Sovereign Debt   13.5     
  Short-Term Investment   0.1     
  Total Investments   100.0%    
            

 

7

 

Lazard Global Total Return and Income Fund, Inc.

Portfolio of Investments

June 30, 2016 (unaudited)

 

Description  Shares   Fair
Value
 
Common Stocks—101.9%          
Australia—0.8%          
BHP Billiton, Ltd. Sponsored ADR   38,500   $1,099,560 
Denmark—3.3%          
Novo Nordisk A/S Sponsored ADR   91,500    4,920,870 
Finland—1.5%          
Sampo Oyj, A Shares ADR   109,500    2,227,778 
France—6.0%          
Engie SA Sponsored ADR   75,981    1,231,652 
Sanofi ADR   105,200    4,402,620 
TOTAL SA Sponsored ADR   64,834    3,118,515 
         8,752,787 
Germany—5.1%          
Bayerische Motoren Werke AG ADR   124,900    3,065,046 
SAP SE Sponsored ADR   59,300    4,448,686 
         7,513,732 
Italy—1.6%          
Eni SpA Sponsored ADR   74,250    2,401,987 
Japan—4.5%          
Canon, Inc. Sponsored ADR   44,700    1,278,867 
Mitsubishi UFJ Financial Group, Inc. Sponsored ADR   712,600    3,156,818 
Sumitomo Mitsui Financial Group, Inc. Sponsored ADR   393,600    2,251,392 
         6,687,077 
Singapore—3.2%          
Singapore Telecommunications, Ltd. ADR   151,100    4,647,836 
Sweden—3.6%          
Assa Abloy AB ADR   523,000    5,334,600 
Switzerland—5.1%          
Novartis AG Sponsored ADR   38,700    3,193,137 
UBS Group AG   158,359    2,052,333 
Zurich Insurance Group AG ADR   92,500    2,273,095 
         7,518,565 
United Kingdom—15.1%          
BP PLC Sponsored ADR   105,591    3,749,536 
British American Tobacco PLC Sponsored ADR   37,700    4,881,396 
GlaxoSmithKline PLC Sponsored ADR   80,200    3,475,868 
HSBC Holdings PLC Sponsored ADR   124,399    3,894,933 
Unilever PLC Sponsored ADR   99,100    4,747,881 
Wm Morrison Supermarkets PLC ADR   120,300    1,501,344 
         22,250,958 
Description  Shares   Fair
Value
 
United States—52.1%          
American Express Co.   43,800   $2,661,288 
Apple, Inc.   50,200    4,799,120 
Chevron Corp.   46,000    4,822,180 
Cisco Systems, Inc.   177,700    5,098,213 
Citigroup, Inc.   106,400    4,510,296 
ConocoPhillips   53,100    2,315,160 
Emerson Electric Co.   67,600    3,526,016 
Halliburton Co.   89,900    4,071,571 
Honeywell International, Inc.   37,200    4,327,104 
Intel Corp.   104,100    3,414,480 
International Business Machines Corp.   38,460    5,837,459 
Joy Global, Inc.   66,400    1,403,696 
Merck & Co., Inc.   75,300    4,338,033 
PepsiCo, Inc.   41,100    4,354,134 
Pfizer, Inc.   149,766    5,273,261 
Reynolds American, Inc.   110,000    5,932,300 
United Technologies Corp.   33,400    3,425,170 
Viacom, Inc., Class B   46,800    1,940,796 
Wal-Mart Stores, Inc.   62,800    4,585,656 
         76,635,933 
Total Common Stocks
(Cost $146,578,235)
        149,991,683 
           
Description  Principal
Amount
(000) (a)
   Fair
Value
 
Foreign Government Obligations—16.0%          
Brazil—2.1%          
Brazil NTN-B:          
6.00%, 08/15/16   503   $453,409 
6.00%, 08/15/18   850    761,798 
6.00%, 08/15/20   2,113    1,883,802 
         3,099,009 
Colombia—1.0%          
Colombian Titulos De Tesoreria:          
7.00%, 05/04/22   3,240,000    1,103,223 
10.00%, 07/24/24   951,000    377,717 
         1,480,940 
Hungary—0.7%          
Hungary Government Bond,
3.00%, 06/26/24
   306,500    1,080,681 
Indonesia—0.9%          
Indonesia Government Bond,
7.875%, 04/15/19
   16,553,000    1,269,742 


 

The accompanying notes are an integral part of these financial statements.

 

8

 

Lazard Global Total Return and Income Fund, Inc.

Portfolio of Investments (continued)

June 30, 2016 (unaudited)

 

Description  Principal
Amount
(000) (a)
   Fair
Value
 
Malaysia—1.1%          
Malaysia Government Bond,
3.80%, 08/17/23
   6,450   $1,605,900 
Mexico—2.9%          
Mexican Bonos:          
6.50%, 06/10/21   17,440    995,840 
5.75%, 03/05/26   13,620    735,848 
Mexican Udibonos,
2.50%, 12/10/20
   44,838    2,482,320 
         4,214,008 
Poland—1.6%          
Poland Government Bond,
2.00%, 04/25/21
   9,380    2,366,720 
Romania—0.7%          
Romania Government Bond,
4.75%, 02/24/25
   3,680    990,436 
Russia—1.6%          
Russia Government Bond - OFZ,
7.50%, 02/27/19
   155,160    2,343,696 
South Africa—2.9%          
Republic of South Africa:          
7.25%, 01/15/20   26,370    1,742,827 
6.75%, 03/31/21   15,980    1,020,224 
10.50%, 12/21/26   5,220    394,333 
8.50%, 01/31/37   19,000    1,172,320 
         4,329,704 
Turkey—0.5%          
Turkey Government Bond,
10.40%, 03/27/19
   2,010    725,983 
Total Foreign Government Obligations
(Cost $24,310,318)
        23,506,819 

 

Description  Shares   Fair
Value
 
Short-Term Investment—0.1%          
State Street Institutional Treasury Money Market Fund, Premier Class, 0.14% (7 day yield)
(Cost $91,090)
   91,090   $91,090 
Total Investments—118.0%
(Cost $170,979,643) (b), (c)
       $173,589,592 
Liabilities in Excess of Cash and Other Assets—(18.0)%        (26,502,938)
Net Assets—100.0%       $147,086,654 


 

The accompanying notes are an integral part of these financial statements.

 

9

 

Lazard Global Total Return and Income Fund, Inc.

Portfolio of Investments (continued)

June 30, 2016 (unaudited)

 

Forward Currency Contracts open at June 30, 2016:

 

Currency     Currency        Settlement  Unrealized   Unrealized 
Purchased  Quantity  Sold  Quantity  Counterparty  Date  Appreciation   Depreciation 
ARS  7,152,470  USD  481,000  BNP  07/06/16  $   $5,850 
ARS  1,869,600  USD  123,000  BNP  07/29/16       311 
ARS  10,671,190  USD  706,000  BNP  08/05/16       8,309 
ARS  5,162,840  USD  337,000  BNP  08/29/16       3,537 
ARS  12,106,770  USD  839,000  CIT  07/27/16       43,675 
ARS  2,272,250  USD  149,000  CIT  07/29/16   112     
BRL  2,519,678  USD  686,000  CIT  09/21/16   80,111     
BRL  2,329,799  USD  630,272  JPM  09/21/16   78,106     
CLP  603,910,500  USD  870,000  SCB  07/08/16   42,170     
CLP  499,605,470  USD  733,000  SCB  07/22/16   20,651     
CNY  14,481,194  USD  2,219,000  HSB  07/13/16       39,955 
CNY  1,142,050  USD  175,000  SCB  07/13/16       3,151 
COP  1,710,013,000  USD  578,000  BNP  07/06/16   7,313     
COP  2,195,181,000  USD  738,000  SCB  07/06/16   13,379     
COP  1,425,717,000  USD  471,000  SCB  07/22/16   15,211     
COP  3,218,218,500  USD  1,085,000  SCB  07/22/16   12,505     
COP  3,482,671,000  USD  1,174,000  SCB  09/06/16   3,204     
DOP  85,772,000  USD  1,865,826  CIT  07/01/16   1,796     
DOP  21,900,000  USD  481,530  CIT  08/01/16       6,631 
DOP  5,203,520  USD  112,000  CIT  08/08/16   658     
DOP  16,344,300  USD  355,156  CIT  08/08/16       1,296 
DOP  30,682,000  USD  664,688  CIT  08/29/16       3,566 
DOP  13,880,430  USD  304,395  CIT  09/06/16       5,795 
DOP  85,772,000  USD  1,847,340  CIT  09/30/16       11,255 
EGP  5,986,920  USD  604,739  BNP  11/30/16       26,060 
EGP  6,288,400  USD  632,000  BNP  11/30/16       24,180 
EGP  7,148,700  USD  676,000  BNP  02/24/17       18,477 
EUR  530,000  USD  588,577  CIT  09/30/16   1,473     
HUF  244,713,235  USD  873,414  JPM  08/01/16       13,366 
IDR  3,254,720,000  USD  224,000  CIT  03/22/17   12,646     
IDR  10,632,400,000  USD  760,000  CIT  03/22/17   13,067     
IDR  9,446,280,000  USD  669,000  CIT  05/02/17   12,506     
IDR  7,183,120,000  USD  508,000  HSB  05/09/17   9,406     
IDR  7,951,725,000  USD  604,234  SCB  07/11/16       2,908 
ILS  4,090,310  USD  1,056,000  BNP  07/18/16   4,067     
ILS  4,874,797  USD  1,253,000  BNP  07/18/16   10,379     
ILS  4,549,254  EUR  1,051,000  JPM  07/28/16   11,907     
INR  83,910,800  USD  1,240,000  JPM  07/13/16   1,481     
INR  155,521,570  USD  2,284,730  JPM  07/25/16   11,452     
JPY  248,877,565  USD  2,421,316  CIT  07/06/16       11,159 
KRW  954,569,700  USD  831,000  CIT  07/08/16       2,306 
KRW  903,726,800  USD  766,000  CIT  07/29/16   18,397     
KRW  657,899,200  USD  560,000  CIT  08/17/16   10,910     
KZT  239,400,000  USD  700,000  HSB  07/29/16       864 
KZT  256,200,000  USD  700,000  HSB  03/29/17       15,315 
MXN  15,017,450  USD  802,000  CIT  07/25/16   17,883     
MYR  2,619,990  USD  645,000  BNP  07/27/16   3,922     

 

The accompanying notes are an integral part of these financial statements.

 

10

 

Lazard Global Total Return and Income Fund, Inc.

Portfolio of Investments (continued)

June 30, 2016 (unaudited)

 

Forward Currency Contracts open at June 30, 2016 (continued):

 

Currency     Currency        Settlement  Unrealized   Unrealized 
Purchased  Quantity  Sold  Quantity  Counterparty  Date  Appreciation   Depreciation 
MYR  2,629,410  USD  659,000  CIT  07/27/16  $   $7,745 
MYR  2,340,582  USD  569,000  SCB  07/05/16   11,573     
MYR  2,505,974  USD  609,000  SCB  07/29/16   11,600     
PHP  67,851,960  USD  1,452,000  HSB  07/25/16       11,269 
PHP  50,618,480  USD  1,067,000  HSB  08/04/16   7,341     
PLN  83,150  USD  21,000  JPM  07/18/16   69     
RON  2,690,619  EUR  593,000  JPM  07/13/16   1,887     
RON  5,768,930  EUR  1,279,000  JPM  07/13/16       4,339 
RUB  21,388,950  USD  330,000  CIT  07/01/16   4,483     
RUB  88,819,139  USD  1,317,000  CIT  07/01/16   71,966     
RUB  47,589,300  USD  726,000  CIT  07/27/16   13,891     
RUB  90,173,888  USD  1,385,000  CIT  07/27/16   16,971     
THB  12,538,680  USD  354,000  CIT  09/12/16   2,399     
THB  23,687,280  USD  668,000  CIT  09/12/16   5,286     
THB  26,276,254  USD  745,828  CIT  09/12/16   1,047     
THB  49,585,275  USD  1,395,000  SCB  09/12/16   14,409     
TRY  6,526,632  USD  2,199,000  CIT  07/01/16   69,949     
TRY  1,544,007  USD  526,000  JPM  07/01/16   10,766     
TRY  8,000,569  USD  2,718,000  JPM  08/29/16   25,424     
UGX  2,521,950,000  USD  741,750  BRC  07/07/16       1,273 
UGX  2,521,950,000  USD  719,529  BRC  09/07/16   2,735     
UGX  1,292,896,000  USD  352,000  CIT  12/23/16   4,448     
UGX  1,276,740,000  USD  369,000  JPM  07/25/16   3,134     
UGX  3,563,700,000  USD  1,050,000  JPM  07/25/16       11,280 
USD  480,032  ARS  475,150  BNP  07/06/16   4,881     
USD  680,829  EGP  657,523  BNP  02/24/17   23,306     
USD  739,575  UGX  740,478  BRC  07/07/16       903 
USD  1,704,425  RUB  1,723,449  CIT  07/01/16       19,024 
USD  1,878,493  DOP  1,867,621  CIT  07/01/16   10,872     
USD  586,833  MYR  580,573  CIT  07/05/16   6,259     
USD  700,738  JPY  754,357  CIT  07/06/16       53,619 
USD  769,000  JPY  827,509  CIT  07/06/16       58,509 
USD  810,000  JPY  828,290  CIT  07/06/16       18,290 
USD  1,744,000  MXN  1,778,508  CIT  07/25/16       34,508 
USD  1,030,904  THB  1,029,685  CIT  09/12/16   1,219     
USD  624,000  BRL  814,501  CIT  09/21/16       190,501 
USD  2,429,328  JPY  2,418,069  CIT  10/06/16   11,259     
USD  548,452  EGP  523,492  CIT  11/30/16   24,960     
USD  349,000  PHP  341,697  HSB  07/25/16   7,303     
USD  688,000  EGP  663,007  HSB  11/30/16   24,993     
USD  2,779,117  TRY  2,805,715  JPM  07/01/16       26,598 
USD  2,364,000  PLN  2,373,568  JPM  07/18/16       9,568 
USD  785,000  PHP  790,409  JPM  07/25/16       5,409 
USD  1,073,000  MXN  1,087,494  JPM  07/25/16       14,494 
USD  1,903,000  HUF  1,931,698  JPM  08/01/16       28,698 
USD  4,270,331  ZAR  4,313,694  JPM  08/22/16       43,363 
USD  1,664,790  EUR  1,669,582  JPM  09/01/16       4,793 

 

The accompanying notes are an integral part of these financial statements.

 

11

 

Lazard Global Total Return and Income Fund, Inc.

Portfolio of Investments (concluded)

June 30, 2016 (unaudited)

 

Forward Currency Contracts open at June 30, 2016 (concluded):

 

Currency     Currency        Settlement  Unrealized   Unrealized 
Purchased  Quantity  Sold  Quantity  Counterparty  Date  Appreciation   Depreciation 
USD  1,006,340  RON  979,518  JPM  04/13/17  $26,822   $ 
USD  1,332,831  COP  1,336,692  SCB  07/06/16       3,861 
USD  599,000  IDR  601,326  SCB  07/11/16       2,326 
USD  726,000  CNY  719,100  SCB  07/13/16   6,900     
USD  904,000  CNY  901,462  SCB  07/13/16   2,538     
USD  820,000  IDR  814,135  SCB  08/11/16   5,865     
USD  1,698,000  BRL  2,299,189  UBS  01/20/17       601,189 
UYU  14,276,100  USD  460,000  HSB  07/14/16   5,292     
UYU  28,353,180  USD  879,932  HSB  07/14/16   44,166     
UYU  18,424,000  USD  560,000  JPM  07/21/16   38,707     
UYU  17,399,200  USD  560,000  JPM  07/27/16   3,975     
UYU  12,189,920  USD  376,000  JPM  08/15/16   16,388     
ZAR  34,657,805  USD  2,275,000  CIT  10/03/16   35,851     
Total gross unrealized appreciation/depreciation on Forward Currency Contracts  $995,646   $1,399,525 

 

Currency Abbreviations:               Counterparty Abbreviations:
ARS  — Argentinian Peso   IDR — Indonesian Rupiah   PLN — Polish Zloty   BNP  — BNP Paribas SA
BRL — Brazilian Real   ILS — Israeli Shekel   RON  — New Romanian Leu   BRC — Barclays Bank PLC
CLP — Chilean Peso   INR — Indian Rupee   RUB — Russian Ruble   CIT — Citibank NA
CNY — Chinese Renminbi   JPY — Japanese Yen   THB — Thai Baht   HSB — HSBC Bank USA NA
COP — Colombian Peso   KRW  — South Korean Won   TRY — New Turkish Lira   JPM — JPMorgan Chase Bank NA
DOP — Dominican Republic Peso   KZT — Kazakhstan Tenge   UGX — Ugandan Shilling   SCB — Standard Chartered Bank
EGP — Egyptian Pound   MXN — Mexican New Peso   USD — United States Dollar   UBS — UBS AG
EUR — Euro   MYR — Malaysian Ringgit   UYU — Uruguayan Peso      
HUF — Hungarian Forint   PHP — Philippine Peso   ZAR — South African Rand      

 

The accompanying notes are an integral part of these financial statements.

 

12

 

Lazard Global Total Return and Income Fund, Inc.

Notes to Portfolio of Investments

June 30, 2016 (unaudited)

 

(a) Principal amount denominated in respective country’s currency.
(b) For federal income tax purposes, the aggregate cost was $170,979,643, aggregate gross unrealized appreciation was $31,396,616, aggregate gross unrealized depreciation was $28,786,667 and the net unrealized appreciation was $2,609,949.
(c) The Fund, at all times, maintains portfolio securities in sufficient amount to cover its obligations related to investments in forward currency contracts.

 

Security Abbreviations:

ADR — American Depositary Receipt
NTN-B  — Brazil Sovereign “Nota do Tesouro Nacional” Series B

 

Portfolio holdings by industry* (as a percentage of net assets):
Aerospace & Defense   5.3%  
Automobiles   2.1   
Banks   9.4   
Beverages   3.0   
Building Products   3.6   
Capital Markets   1.4   
Communications Equipment   3.5   
Consumer Finance   1.8   
Diversified Telecommunication Services   3.2   
Electrical Equipment   2.4   
Energy Equipment & Services   2.8   
Food & Staples Retailing   4.1   
Insurance   3.1   
IT Services   4.0   
Machinery   1.0   
Media   1.3   
Metals & Mining   0.7   
Multi-Utilities   0.8   
Oil, Gas & Consumable Fuels   11.1   
Personal Products   3.2   
Pharmaceuticals   17.4   
Semiconductors & Semiconductor Equipment   2.3   
Software   3.0   
Technology Hardware, Storage & Peripherals   4.1   
Tobacco   7.3   
Subtotal   101.9   
Foreign Government Obligations   16.0   
Short-Term Investment   0.1   
Total Investments   118.0%  

 

* Industry classifications may be different than those used for compliance monitoring purposes.

 

The accompanying notes are an integral part of these financial statements.

 

13

 

Lazard Global Total Return and Income Fund, Inc.

Statement of Assets and Liabilities

June 30, 2016 (unaudited)

 

ASSETS     
Investments in securities, at fair value (cost $170,979,643)  $173,589,592 
Foreign currency, at fair value (cost $269,726)   284,536 
Dividends and interest receivable   913,597 
Gross unrealized appreciation on forward currency contracts   995,646 
Total assets   175,783,371 
      
LIABILITIES     
Management fees payable   134,716 
Line of credit outstanding   27,071,000 
Gross unrealized depreciation on forward currency contracts   1,399,525 
Other accrued expenses and payables   91,476 
Total liabilities   28,696,717 
Net assets  $147,086,654 
      
NET ASSETS     
Paid in capital (Note 2(f))  $146,789,409 
Undistributed (distributions in excess of) net investment income (loss) (Note 2(f))   35,385 
Accumulated net realized gain (loss)   (1,969,672)
Net unrealized appreciation (depreciation) on:     
Investments   2,609,949 
Foreign currency translations and forward currency contracts   (378,417)
Net assets  $147,086,654 
      
Shares of common stock outstanding*   9,605,237 
Net asset value per share  $15.31 
Market value per share  $13.08 

 

* $0.001 par value, 500,000,000 shares authorized for the Fund.

 

The accompanying notes are an integral part of these financial statements.

 

14

 

Lazard Global Total Return and Income Fund, Inc.

Statement of Operations

For the Six Months Ended June 30, 2016 (unaudited)

 

INVESTMENT INCOME     
 
Income:     
Dividends (net of foreign withholding taxes of $148,682)  $2,945,982 
Interest (net of foreign withholding taxes of $19,046)   579,241 
Total investment income   3,525,223 
 
Expenses:     
Management fees (Note 3)   771,520 
Professional services   77,578 
Administration fees   35,186 
Shareholders’ reports   30,014 
Custodian fees   27,265 
Shareholders’ services   22,063 
Shareholders’ meeting   13,396 
Directors’ fees and expenses   5,216 
Other   30,467 
Total expenses before interest expense   1,012,705 
Interest expense   108,941 
Total expenses   1,121,646 
Net investment income (loss)   2,403,577 
      
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCY TRANSACTIONS AND FORWARD CURRENCY CONTRACTS     
Net realized gain (loss) on:     
Investments   22,716 
Foreign currency transactions and forward currency contracts   (278,170)
Total net realized gain (loss) on investments, foreign currency transactions and forward currency contracts   (255,454)
Net change in unrealized appreciation (depreciation) on:     
Investments   2,057,236 
Foreign currency translations and forward currency contracts   870,259 
Total net change in unrealized appreciation (depreciation) on investments, foreign currency translations and forward currency contracts   2,927,495 
Net realized and unrealized gain (loss) on investments, foreign currency transactions and forward currency contracts   2,672,041 
Net increase (decrease) in net assets resulting from operations  $5,075,618 

 

The accompanying notes are an integral part of these financial statements.

 

15

 

Lazard Global Total Return and Income Fund, Inc.

Statements of Changes in Net Assets

 

 

   Six Months Ended     
   June 30, 2016  Year Ended
   (unaudited)  December 31, 2015
INCREASE (DECREASE) IN NET ASSETS              
               
Operations:              
Net investment income (loss)    $2,403,577     $3,782,934 
Net realized gain (loss) on investments, foreign currency transactions and forward currency contracts     (255,454)     (5,120,683)
Net change in unrealized appreciation (depreciation) on investments, foreign currency translations and forward currency contracts     2,927,495      (12,558,926)
Net increase (decrease) in net assets resulting from operations     5,075,618      (13,896,675)
               
Distributions to Stockholders (Note 2(f)):              
From net investment income     (1,603,210)      
Return of capital     (2,977,335)     (10,698,697)
Net increase (decrease) in net assets resulting from distributions     (4,580,545)     (10,698,697)
Total increase (decrease) in net assets     495,073      (24,595,372)
Net assets at beginning of period     146,591,581      171,186,953 
Net assets at end of period*    $147,086,654     $146,591,581 
*Includes undistributed (distributions in excess of) net investment income (loss) of (Note 2(f))    $35,385     $(764,982)
 
Transactions in Capital Shares:              
Common shares outstanding at beginning of period     9,605,237      9,605,237 
Common shares outstanding at end of period     9,605,237      9,605,237 

 

The accompanying notes are an integral part of these financial statements.

 

16

 

Lazard Global Total Return and Income Fund, Inc.

Statement of Cash Flows

For the Six Months Ended June 30, 2016 (unaudited)

 

INCREASE (DECREASE) IN CASH AND FOREIGN CURRENCY     
      
Cash flows from operating activities:     
Net increase (decrease) in net assets resulting from operations  $5,075,618 
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:     
Increase (Decrease) in dividends and interest receivable   (265,620)
Accretion of bond discount and amortization of bond premium   (30,261)
Inflation index adjustment   (15,526)
Increase (Decrease) in other accrued expenses and payables   (61,453)
Net realized gain (loss) on investments, foreign currency transactions and forward currency contracts   255,454 
Net change in unrealized appreciation (depreciation) on investments, foreign currency translations and forward currency contracts   (2,927,495)
Purchases of long-term investments   (18,212,363)
Proceeds from disposition of long-term investments   8,236,618 
Proceeds from disposition of short-term investments, net   194,128 
Net cash provided by (used in) operating activities   (7,750,900)
 
Cash flows from financing activities:     
Cash distributions paid (Note 2(f))   (4,580,545)
Gross drawdowns in line of credit balance   14,671,000 
Gross paydowns in line of credit balance   (2,000,000)
Net cash provided by (used in) financing activities   8,090,455 
 
Effect of exchange rate changes on cash   (236,056)
Net increase (decrease) in cash and foreign currency   103,499 
 
Cash and foreign currency:     
Beginning balance   181,037 
Ending balance  $284,536 
 
Supplemental disclosure of cash flow information:     
Cash paid during the period for interest  $(123,820)

 

The accompanying notes are an integral part of these financial statements.

 

17

 

Lazard Global Total Return and Income Fund, Inc.

Financial Highlights

Selected data for a share of common stock outstanding throughout each period

 

   Six Months                    
   Ended  Year Ended 
   6/30/16†  12/31/15   12/31/14   12/31/13   12/31/12   12/31/11 
Net asset value, beginning of period    $15.26   $17.82   $19.95   $17.42   $15.49   $16.83 
Income (loss) from investment operations:                                
Net investment income (loss)     0.25    0.39    0.37    0.39    0.41    0.44 
Net realized and unrealized gain (loss)     0.28    (1.84)   (1.25)   3.23    2.70    (0.73)
Total from investment operations     0.53    (1.45)   (0.88)   3.62    3.11    (0.29)
Less distributions from (Note 2(f)):                                
Net investment income     (0.17)       (0.08)   (1.06)   (0.59)   (0.78)
Net realized gains             (1.13)       (0.30)   (0.16)
Return of capital     (0.31)   (1.11)   (0.04)   (0.03)   (0.29)   (0.11)
Total distributions     (0.48)   (1.11)   (1.25)   (1.09)   (1.18)   (1.05)
Net asset value, end of period    $15.31   $15.26   $17.82   $19.95   $17.42   $15.49 
Market value, end of period    $13.08   $13.08   $15.81   $17.62   $15.09   $13.39 
                                 
Total Return based upon (a):                                
Net asset value     3.67%   –8.58%   –4.69%   21.31%   20.69%   –1.85%
Market value     3.96%   –10.78%   –3.63%   24.61%   22.06%   –4.48%
                                 
Ratios and Supplemental Data:                                
Net assets, end of period (in thousands)    $147,087   $146,592   $171,187   $191,577   $167,302   $148,822 
Ratios to average net assets (b):                                
Total expenses     1.60%   1.46%   1.51%   1.52%   1.59%   1.54%
Net investment income (loss)     3.44%   2.30%   1.89%   2.07%   2.51%   2.73%
Portfolio turnover rate     5%   16%   10%   35%   17%   33%
Asset coverage per $1,000 of loan outstanding (c)    $6,433   $11,180   $13,013   $14,253   $12,574   $8,364 
Bank borrowing outstanding (in thousands)    $27,071   $14,400   $14,250   $14,455   $14,455   $20,210 

 

Unaudited.
(a) Total return based on per share market price assumes the purchase of common shares at the closing market price on the business day immediately preceding the first day, and sales of common shares at the closing market price on the last day, of each period indicated; dividends and distributions are assumed to be reinvested in accordance with the Fund’s Dividend Reinvestment Plan. The total return based on net asset value, or NAV, assumes the purchase of common shares at the “net asset value, beginning of period” and sales of common shares at the “net asset value, end of period”, for each of the periods indicated; distributions are assumed to be reinvested at NAV. Past performance is not indicative, or a guarantee, of future results; the investment return, market price and net asset value of the Fund will fluctuate, so that an investor’s shares in the Fund, when sold, may be worth more or less than their original cost. The returns do not reflect the deduction of taxes that a stockholder would pay on the Fund’s distributions or on the sale of Fund shares. Return for a period of less than one year is not annualized.
(b) Annualized for a period of less than one year.
(c) Calculated as the sum of the Fund’s Net Assets and Line of Credit outstanding, as both figures are shown on the Fund’s Statement of Assets and Liabilities, then dividing that sum by the Line of Credit outstanding and multiplying the result by 1,000.

 

The accompanying notes are an integral part of these financial statements.

 

18

 

Lazard Global Total Return and Income Fund, Inc.

Notes to Financial Statements

June 30, 2016 (unaudited)

 

1. Organization

 

Lazard Global Total Return and Income Fund, Inc. (the “Fund”) was incorporated in Maryland on January 27, 2004 and is registered under the 1940 Act, as a diversified, closed-end management investment company. The Fund trades on the NYSE under the ticker symbol LGI and commenced operations on April 28, 2004. The Fund’s investment objective is total return, consisting of capital appreciation and income.

 

2. Significant Accounting Policies

 

The accompanying financial statements are presented in conformity with GAAP. The Fund is an investment company and therefore applies specialized accounting guidance in Accounting Standards Codification Topic 946. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of the financial statements:

 

(a) Valuation of Investments—Market values for securities listed on the NYSE, NASDAQ national market or other US or foreign exchanges or markets are generally based on the last reported sales price on the exchange or market on which the security is principally traded on each valuation date; securities not traded on the valuation date are valued at the most recent quoted bid price. The Fund values NASDAQ-traded securities at the NASDAQ Official Closing Price, which may not be the last reported sales price in certain instances. Forward currency contracts generally are valued using quotations from an independent pricing service. Investments in money market funds are valued at the fund’s net asset value (“NAV”) per share.

 

Bonds and other fixed-income securities that are not exchange-traded are valued on the basis of prices provided by independent pricing services which are based on, among other things, trading in securities with similar characteristics, brokers’ quotations and/or a matrix system which considers such factors as other security prices, yields and maturities.

 

The Valuation Committee of the Investment Manager, which meets periodically under the direction of the Board of Directors (the “Board”), may evaluate a variety of factors to determine the fair value of securities for which market quotations are determined not to be readily available or reliable. These factors include, but are not limited to, the type of security, the value of comparable securities, observations from financial institutions and relevant news events. Input from the Investment Manager’s portfolio managers/analysts also will be considered.

If a significant event materially affecting the value of securities occurs between the close of the exchange or market on which the security is principally traded and the time when the Fund’s NAV is calculated, or when current market quotations otherwise are determined not to be readily available or reliable (including restricted or other illiquid securities such as certain derivative instruments), such securities will be valued at their fair value as determined by, or in accordance with procedures approved by, the Board. Non-US securities may trade on days when the Fund is not open for business, thus affecting the value of the Fund’s assets on days when Fund stockholders may not be able to buy or sell Fund shares.

 

The effect of using fair value pricing is that the NAV of the Fund will reflect the affected securities’ values as determined in the judgment of the Board or its designee instead of being determined by the market. Using a fair value pricing methodology to price securities may result in a value that is different from the most recent closing price of a security and from the prices used by other investment companies to calculate their portfolios’ NAVs.

 

(b) Portfolio Securities Transactions and Investment Income—Portfolio securities transactions are accounted for on trade date. Realized gain (loss) on sales of investments are recorded on a specific identification basis. Dividend income is recorded on the ex-dividend date except for certain dividends from non-US securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Fund. Interest income is accrued daily. The Fund amortizes premiums and accretes discounts on fixed-income securities using the effective yield method.

 

The Fund may be subject to taxes imposed by non-US countries in which it invests. Such taxes are generally based upon income earned or capital gains (realized or unrealized). The Fund accrues and applies such taxes to net investment income, net realized gains and net unrealized gains concurrent with the recognition of income earned or capital gains (realized and unrealized) from the applicable portfolio securities.

 

As a result of several court cases in certain countries across the European Union, the Fund has filed additional tax reclaims for previously withheld taxes on dividends earned in those countries. These additional filings are subject to various administrative proceedings by the local jurisdictions’ tax authorities within the European Union, as well as a number of related judicial proceedings. Uncertainty exists as to the ultimate resolution of these proceedings, the likelihood of receipt of these claims, and the potential timing of payment, and accordingly no amounts are reflected


 

19

 

Lazard Global Total Return and Income Fund, Inc.

Notes to Financial Statements (continued)

June 30, 2016 (unaudited)

 

in the financial statements. Such amounts, if and when recorded, could result in an increase in the Fund’s NAV per share.

 

(c) Leveraging—The Fund uses leverage to invest Fund assets in currency investments, primarily using forward currency contracts and by borrowing under a credit facility with State Street Bank and Trust Company (“State Street”), up to a maximum of 33⅓% of the Fund’s total leveraged assets. If the assets of the Fund decline due to market conditions such that this 33⅓% threshold will be exceeded, leverage risk will increase.

 

If the Fund is able to realize a higher return on the leveraged portion of its investment portfolio than the cost of such leverage together with other related expenses, the effect of the leverage will be to cause the Fund to realize a higher net return than if the Fund were not so leveraged. There is no assurance that any leveraging strategy the Fund employs will be successful.

 

Using leverage is a speculative investment technique and involves certain risks. These include higher volatility of NAV, the likelihood of more volatility in the market value of the Fund’s common stocks and, with respect to borrowings, the possibility either that the Fund’s return will fall if the interest rate on any borrowings rises, or that income will fluctuate because the interest rate of borrowings varies.

 

If the market value of the Fund’s leveraged currency investments declines, the leverage will result in a greater decrease in NAV, or less of an increase in NAV, than if the Fund were not leveraged. To the extent that the Fund is required or elects to prepay any borrowings, the Fund may need to liquidate investments to fund such prepayments. Liquidation at times of adverse economic conditions may result in capital losses and may reduce returns.

 

(d) Foreign Currency Translation and Forward Currency Contracts—The accounting records of the Fund are maintained in US dollars. Portfolio securities and other assets and liabilities denominated in a foreign currency are translated daily into US dollars at the prevailing rates of exchange. Purchases and sales of securities, income receipts and expense payments are translated into US dollars at the prevailing exchange rates on the respective transaction dates.

 

The Fund does not isolate the portion of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in their market prices. Such fluctuations are included in net realized and unrealized gain (loss) on investments. Net realized gain (loss) on foreign currency transactions and forward currency contracts represents net foreign currency gain (loss)

from forward currency contracts, disposition of foreign currencies, currency gain (loss) realized between the trade and settlement dates on securities transactions, and the difference between the amount of dividends, interest and foreign withholding taxes recorded on the Fund’s accounting records and the US dollar equivalent amounts actually received or paid. Net change in unrealized appreciation (depreciation) on foreign currency translations reflects the impact of changes in exchange rates on the value of assets and liabilities, other than investments in securities, during the period.

 

A forward currency contract is an agreement between two parties to buy or sell currency at a set price on a future date. Upon entering into these contracts, risks may arise from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of the foreign currency relative to the US dollar.

 

The US dollar value of forward currency contracts is determined using quotations provided by an independent pricing service. Daily fluctuations in the value of such contracts are recorded as unrealized appreciation (depreciation) on forward currency contracts. When the contract is closed, the Fund records a realized gain (loss) equal to the difference between the value at the time it was opened and the value at the time it was closed.

 

(e) Federal Income Taxes—The Fund’s policy is to continue to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code (the “Code”) and to distribute all of its taxable income, including any net realized capital gains, to stockholders. Therefore, no federal income tax provision is required.

 

At December 31, 2015, the Fund had unused realized capital loss carryovers which, for federal income tax purposes, could be used to offset future realized capital gains with no expiration date as follows:

 

 Short-Term  Long-Term 
 $126,507  $1,536,127 

 

Under current tax law, certain late year losses, as defined by the Code, within the taxable year may be deferred and treated as occurring on the first day of the following tax year. For the tax year ended December 31, 2015, the Fund elected to defer such losses as follows:

 

     Late Year  
  Post October Capital  Ordinary Loss  
  Loss Deferral  Deferral  
  $51,305  $507,843  

 

Management has analyzed the Fund’s tax positions, and has concluded that no liability for unrecognized tax bene-


 

20

 

Lazard Global Total Return and Income Fund, Inc.

Notes to Financial Statements (continued)

June 30, 2016 (unaudited)

 

fits should be recorded related to uncertain tax positions taken on returns filed for open tax years (2012-2014), or expected to be taken in the Fund’s 2015 tax returns.

 

(f) Dividends and Distributions—The Fund intends to declare and to pay dividends monthly from net investment income. Distributions to stockholders are recorded on the ex-dividend date. During any particular year, net realized gains from investment transactions in excess of available capital loss carryforwards would be taxable to the Fund, if not distributed. The Fund intends to declare and distribute these amounts, at least annually, to stockholders; however, to avoid taxation, a second distribution may be required.

 

Income and capital gains distributions are determined in accordance with federal income tax regulations which may differ from GAAP. These book/tax differences, which may result in distribution reclassifications, are primarily due to differing treatments of foreign currency and fixed-income transactions and wash sales. The book/tax differences relating to stockholder distributions may result in reclassifications among certain capital accounts.

 

The Fund has implemented a level distribution policy to seek to maintain a stable monthly distribution, subject to oversight of the Fund’s Board. Under the Fund’s level distribution policy, the Fund intends to make regular monthly distributions at a fixed rate per share. If for any monthly distribution, net investment income and net realized short-term capital gain were less than the amount of the distribution, the difference would generally be distributed from the Fund’s assets. In addition, in order to make such distributions, the Fund might have to sell a portion of its investment portfolio at a time when independent investment judgment might not dictate such actions.

 

In July 2010, the Investment Manager, on behalf of itself and the Fund, received an exemptive order from the Securities and Exchange Commission (the “SEC”) facilitating the implementation of a distribution policy that may include multiple long-term capital gains distributions (“Managed Distribution Policy”). As a result, the Fund may, subject to the determination of its Board, implement a Managed Distribution Policy.

 

Concurrent with the monthly distributions paid from January 2016 through June 2016, the Fund issued notices pursuant to Section 19(a) of the 1940 Act (the “Section 19(a) Notices”) each stating that the Fund had currently estimated that it had distributed more than its net investment income and realized capital gains. Based on these estimates, it is possible that some or all of the amounts distributed may represent a return of capital. The Section 19(a) Notices may also be viewed at www.LazardNet.com.

The actual amounts and sources of distributions shown on the Section 19(a) Notices are only estimates and are not provided for tax reporting purposes. The actual amounts and sources of the cumulative distributions for tax reporting purposes will depend upon the Fund’s investment experience during the year and may be subject to changes based on tax regulations. The Fund will send stockholders a Form 1099-DIV for the calendar year explaining how to report these distributions for federal income tax purposes.

 

(g) Estimates—The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets resulting from operations during the reporting period. Actual results could differ from those estimates.

 

(h) Net Asset Value—NAV per share for the Fund is determined each day the NYSE is open for trading as of the close of regular trading on the NYSE (generally 4:00 p.m. Eastern time). The Fund will not treat an intraday unscheduled disruption in NYSE trading as a closure of the NYSE, and will price its shares as of 4:00 p.m., if the particular disruption directly affects only the NYSE. NAV per share is determined by dividing the value of the total assets of the Fund, less all liabilities, by the total number of Fund shares outstanding.

 

3. Investment Management Agreement

 

The Fund has entered into a management agreement (the “Management Agreement”) with the Investment Manager. Pursuant to the Management Agreement, the Investment Manager regularly provides the Fund with investment research, advice and supervision and furnishes continuously an investment program for the Fund consistent with its investment objective and policies, including the purchase, retention and disposition of securities.

 

The Fund has agreed to pay the Investment Manager an annual investment management fee of 0.85% of the Fund’s average daily “Total Leveraged Assets” (the Fund’s total assets including Financial Leverage (defined below)) for the services and facilities provided by the Investment Manager, payable on a monthly basis. For the period ended June 30, 2016, the effective management fee, as a percentage of the Fund’s average net assets, was 1.10%.

 

The fee paid to the Investment Manager will be higher when the Investment Manager uses Currency Commitments (defined below) and Borrowings (defined below) (“Financial Leverage”) to make Currency Investments (defined below), rather than by reducing the percentage of


 

21

 

Lazard Global Total Return and Income Fund, Inc.

Notes to Financial Statements (continued)

June 30, 2016 (unaudited)

 

“Net Assets” (the Fund’s assets without taking into account Financial Leverage) invested in Global Equity Investments for the purposes of making Currency Investments. “Global Equity Investments” refers to investments in the Fund’s global equity strategy consisting of equity securities of companies with market capitalizations of $5 billion or greater domiciled in those countries that comprise the Index. “Currency Investments” refers to investments in the Fund’s emerging income strategy, consisting of emerging market currencies (primarily by entering into forward currency contracts), or instruments whose value is derived from the performance of an underlying emerging market currency, but also may invest in debt obligations, including government, government agency and corporate obligations and structured notes denominated in emerging market currencies. “Currency Commitments” are the aggregate financial exposures created by forward currency contracts in excess of that represented in the Fund’s Net Assets, and “Borrowings” refers to the borrowings under the Fund’s credit facility. Assuming Financial Leverage in the amount of 33⅓% of the Fund’s Total Leveraged Assets, the annual fee payable to the Investment Manager would be 1.28% of Net Assets (i.e., not including amounts attributable to Financial Leverage).

 

The following is an example of this calculation of the Investment Manager’s fee, using very simple illustrations. If the Fund had assets of $1,000, it could invest $1,000 in Global Equity Investments and enter into $500 in forward currency contracts (because the Fund would not have to pay money at the time it enters into the currency contracts). Similarly, the Fund could invest $1,000 in Global Equity Investments, borrow $500 and invest the $500 in foreign currency denominated bonds. In either case, the Investment Manager’s fee would be calculated based on $1,500 of assets, because the fee is calculated based on Total Leveraged Assets (Net Assets plus Financial Leverage). In our example, the Financial Leverage is in the form of either the forward currency contracts (Currency Commitments) or investments from Borrowings. The amount of the Financial Leverage outstanding, and therefore the amount of Total Leveraged Assets on which the Investment Manager’s fee is based, fluctuates daily based on changes in value of the Fund’s portfolio holdings, including changes in value of the currency involved in the forward currency contracts and foreign currency denominated bonds acquired with the proceeds of Borrowings. However, the Investment Manager’s fee will be the same regardless of whether Currency Investments are made with Currency Commitments or with Borrowings (without taking into account the cost of Borrowings).

This method of calculating the Investment Manager’s fee is different than the way closed-end investment companies typically calculate management fees. Traditionally, closed end investment companies calculate management fees based on Net Assets plus Borrowings (excluding Financial Leverage obtained through Currency Commitments). The Investment Manager’s fee is different because the Fund’s leverage strategy is different than the leverage strategy employed by many other closed-end investment companies. Although the Fund may employ Borrowings in making Currency Investments, the Fund’s leverage strategy relies primarily on Currency Commitments, rather than relying exclusively on borrowing money and/or issuing preferred stock, as is the strategy employed by most closed-end investment companies. The Investment Manager’s fee would be lower if its fee were calculated only on Net Assets plus Borrowings, because the Investment Manager would not earn fees on Currency Investments made with Currency Commitments (forward currency contracts). Using the example above, where the Fund has assets of $1,000 and invests $1,000 in Global Equity Investments and $500 in forward currency contracts, the following table illustrates how the Investment Manager’s fee would be different if it did not earn management fees on these types of Currency Investments. A discussion of the most recent review and approval by the Fund’s Board of the Management Agreement (including the method of calculating the Investment Manager’s fee) is included under “Other Information—Board Consideration of Management Agreement”.

 

   Fund’s management  Typical
   fee based on  management
   Total Leveraged  fee formula,
   Assets (includes  calculated excluding
   Currency  Currency
Beginning assets of $1,000  Commitments)  Commitments
Global Equity Investments
(Net Assets)
            $1,000                       $1,000            
Currency Commitments  $500   $500 
Assets used to calculate management fee  $1,500   $1,000 
Management fee (0.85%)  $12.75   $8.50 

 

Investment Manager Fee Conflict Risk—The fee paid to the Investment Manager for investment management services will be higher when the Fund uses Financial Leverage, whether through forward currency contracts or Borrowings, because the fee paid will be calculated on the basis of the Fund’s assets including this Financial Leverage. Consequently, the Investment Manager may have a financial interest for the Fund to utilize such Financial Leverage, which may create a conflict of interest between the Investment Manager and the stockholders of the Fund.


 

22

 

Lazard Global Total Return and Income Fund, Inc.

Notes to Financial Statements (continued)

June 30, 2016 (unaudited)

 

The Fund has implemented procedures to monitor this potential conflict.

 

4. Administration Agreement

 

The Fund has entered into an administration agreement with State Street to provide certain administrative services. The Fund bears the cost of such services at a fixed annual rate of $42,500, plus 0.02% of average daily net assets up to $1 billion and 0.01% of average daily net assets over $1 billion.

 

5. Directors’ Compensation

 

Certain Directors of the Fund are officers of the Investment Manager. Each Director who is not an affiliated person of the Investment Manager or any of its affiliates is paid by the Fund, The Lazard Funds, Inc., Lazard Retirement Series, Inc. and Lazard World Dividend & Income Fund, Inc. (collectively with the Fund, the “Lazard Fund Complex”), each a registered management investment company advised by the Investment Manager: (1) an annual retainer of $190,000, (2) an additional annual fee of $20,000 to the lead Independent Director (an “Independent Director” is a Director who is not an “interested person” (as defined in the 1940 Act) of the Fund), and (3) an additional annual fee of $10,000 to the Audit Committee Chair. The Independent Directors may be paid additional compensation for participation on ad hoc committees or other work performed on behalf of the Board. The Independent Directors also are reimbursed for travel and other out-of-pocket expenses for attending Board and committee meetings. The Directors do not receive benefits from the Fund pursuant to any pension, retirement or similar arrangement. Independent Directors’ fees are allocated among the portfolios in the Lazard Fund Complex at a rate of $5,000 per portfolio with the remainder allocated based upon each portfolio’s proportionate share of combined net assets. The Statement of Operations shows the Independent Directors’ fees and expenses paid by the Fund.

 

6. Securities Transactions and Transactions with Affiliates

 

Purchases and sales of portfolio securities (excluding short-term investments) for the period ended June 30, 2016 were $18,212,363 and $8,236,618, respectively.

 

For the period ended June 30, 2016, the Fund did not engage in any cross-trades in accordance with Rule 17a-7 under the 1940 Act, and no brokerage commissions were paid to affiliates of the Investment Manager or other affiliates of the Fund for portfolio transactions executed on behalf of the Fund.

 

7. Line of Credit

 

The Fund has a $30 million Line of Credit Agreement (the “Agreement”) with State Street primarily to borrow to invest

Fund assets in Currency Investments. The Fund may borrow the lesser of $30 million or 33⅓% of its Total Leveraged Assets. Interest on borrowings was payable at the higher of the Federal Funds rate or the reserve adjusted LIBOR rate plus 0.85%, on an annualized basis. Under the Agreement, the Fund has agreed to pay a 0.15% per annum fee on the unused portion of the commitment (0.25% per annum if the unused portion is equal to or exceeds 50% of the committed line amount), payable quarterly in arrears. During the period ended June 30, 2016, the Fund had borrowings under the Agreement as follows:

 

       
Average Daily  Maximum Daily  Weighted Average
Loan Balance*  Loan Outstanding  Interest Rate
$21,257,560  $27,071,000  1.24%

 

* For the 182 days borrowings were outstanding.

 

Effective July 27, 2016, the Agreement has been amended whereby interest on borrowings is payable at the higher of the Federal Funds rate or the reserve adjusted LIBOR rate plus 0.95%, on an annualized basis. The terms of the Agreement have also been amended whereby the Fund has agreed to pay a 0.15% per annum fee on the unused portion of the commitment (0.25% per annum if the unused portion is equal to or exceeds 25% of the committed line amount), payable quarterly in arrears.

 

Management believes that the fair value of the liabilities under the line of credit is equivalent to the recorded amount based on its short term maturity and interest rate, which fluctuates with LIBOR. The line of credit outstanding as of June 30, 2016 is categorized as Level 2 (see Note 10).

 

8. Investment Risks

 

(a) Non-US Securities Risk—The Fund invests in securities of foreign entities and in instruments denominated in foreign currencies which involve risks not typically associated with investments in US securities. The Fund’s performance will be influenced by political, social and economic factors affecting the non-US countries and companies in which the Fund invests. Non-US securities carry special risks, such as less developed or less efficient trading markets, political instability, a lack of company information, differing auditing and legal standards, and, potentially, less liquidity. In addition, investments denominated in currencies other than US dollars may experience a decline in value, in US dollar terms, due solely to fluctuations in currency exchange rates. The Fund’s investments could be adversely affected by delays in, or a refusal to grant, repatriation of funds or conversion of emerging market currencies. Emerging market countries can generally have economic structures that are less diverse and mature, and political systems that are less stable, than those of developed countries. The economies of countries with emerging markets may be


 

23

 

Lazard Global Total Return and Income Fund, Inc.

Notes to Financial Statements (continued)

June 30, 2016 (unaudited)

 

based predominantly on only a few industries, may be highly vulnerable to changes in local or global trade conditions, and may suffer from extreme debt burdens or volatile inflation rates. The securities markets of emerging market countries have historically been extremely volatile. These market conditions may continue or worsen. Significant devaluation of emerging market currencies against the US dollar may occur subsequent to acquisition of investments denominated in emerging market currencies. Investments in these countries may be subject to political, economic, legal, market and currency risks. The risks may include less protection of property rights and uncertain political and economic policies, the imposition of capital controls and/or foreign investment limitations by a country, nationalization of businesses and the imposition of sanctions by other countries, such as the US.

 

(b) Fixed-Income and Debt Securities Risk—The market value of a debt security may decline due to general market conditions that are not specifically related to a particular company, such as real or perceived adverse economic conditions, changes in the outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment generally. The debt securities market can be susceptible to increases in volatility and decreases in liquidity. Liquidity can decline unpredictably in response to overall economic conditions or credit tightening. Prices of bonds and other debt securities tend to move inversely with changes in interest rates. Interest rate risk is usually greater for fixed-income securities with longer maturities or durations. A rise in interest rates (or the expectation of a rise in interest rates) may result in periods of volatility, decreased liquidity and increased redemptions, and, as a result, the Fund may have to liquidate portfolio securities at disadvantageous prices. Risks associated with rising interest rates are heightened given that interest rates in the US and other countries are at or near historic lows.

 

The Fund’s investments in lower-rated, higher-yielding securities (“junk bonds”) are subject to greater credit risk than its higher rated investments. Credit risk is the risk that the issuer will not make interest or principal payments, or will not make payments on a timely basis. Non-investment grade securities tend to be more volatile, less liquid and are considered speculative. If there is a decline, or perceived decline, in the credit quality of a debt security (or any guarantor of payment on such security), the security’s value could fall, potentially lowering the Fund’s share price. The prices of non-investment grade securities, unlike investment grade debt securities, may fluctuate unpredictably and not necessarily inversely with changes in interest rates. The market for these securities may be less liquid and therefore these securities may be harder to value or sell at an acceptable price, especially during times of market volatility or decline.

Some debt securities may give the issuer the option to call, or redeem, the securities before their maturity, and, during a time of declining interest rates, the Fund may have to reinvest the proceeds in an investment offering a lower yield (and the Fund may not fully benefit from any increase in the value of its portfolio holdings as a result of declining interest rates).

 

9. Contractual Obligations

 

The Fund enters into contracts in the normal course of business that contain a variety of indemnifications. The Fund’s maximum exposure under these arrangements is unknown. Management has reviewed the Fund’s existing contracts and expects the risk of loss to be remote.

 

10. Fair Value Measurements

 

Fair value is defined as the price that the Fund would receive to sell an asset, or would pay to transfer a liability, in an orderly transaction between market participants at the date of measurement. The Fair Value Measurements and Disclosures provisions of GAAP also establish a framework for measuring fair value, and a three-level hierarchy for fair value measurement that is based upon the transparency of inputs to the valuation of an asset or liability. Inputs may be observable or unobservable and refer, broadly, to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions that market participants would use in pricing the asset or liability, developed based on the best information available in the circumstances. Each investment’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the overall fair value measurement. The three-level hierarchy of inputs is summarized below:

 

Level 1—unadjusted quoted prices in active markets for identical investments
   
Level 2—other significant observable inputs (including unadjusted quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)
   
Level 3—significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

 

Changes in valuation technique may result in transfer into or out of the current assigned level within the hierarchy.

 

The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in these securities.


 

24

 

Lazard Global Total Return and Income Fund, Inc.

Notes to Financial Statements (continued)

June 30, 2016 (unaudited)

 

The following table summarizes the valuation of the Fund’s investments by each fair value hierarchy level as of June 30, 2016:

 

Description  Unadjusted
Quoted Prices in
Active Markets
for Identical
Investments
(Level 1)
  Significant
Other
Observable
Inputs
(Level 2)
 Significant
Unobservable
Inputs
(Level 3)
   Balance as of
June 30, 2016
 
Assets:                            
Common Stocks*    $149,991,683     $     $     $149,991,683 
Foreign Government Obligations*           23,506,819            23,506,819 
Short-Term Investment     91,090                  91,090 
Other Financial Instruments**                            
Forward Currency Contracts           995,646            995,646 
Total    $150,082,773     $24,502,465     $     $174,585,238 
                             
Liabilities:                            
Other Financial Instruments**                            
Forward Currency Contracts    $     $(1,399,525)    $     $(1,399,525)

 

* Please refer to Portfolio of Investments (page 8 through 12) and Notes to Portfolio of Investments (page 13) for portfolio holdings by country and industry.
** Other financial instruments are derivative instruments which are valued at their respective unrealized appreciation (depreciation).

 

The Fund recognizes all transfers between levels as though they were transferred at the beginning of the reporting period. There were no transfers into or out of Levels 1, 2 or 3 during the period ended June 30, 2016.

 

For further information regarding security characteristics see Portfolio of Investments.

 

11. Derivative Instruments

 

The Fund may use derivative instruments, including forward currency contracts, to gain exposure to the local currency and interest rates of emerging markets or to hedge certain types of currency exposure.

 

During the period ended June 30, 2016, the approximate average monthly notional exposure for derivative instruments was as follows:

 

Forward currency contracts $82,300,000

 

The following table summarizes the fair value of derivative instruments on the Statement of Assets and Liabilities as of June 30, 2016:

 

   Fair Value 
Asset Derivatives     
Foreign Exchange Risk:     
Gross unrealized appreciation on forward currency contracts  $995,646 
      
Liability Derivatives     
Foreign Exchange Risk:     
Gross unrealized depreciation on forward currency contracts  $1,399,525 

The effect of derivative instruments on the Statement of Operations for the period ended June 30, 2016 was:

 

   Amount 
Realized Gain (Loss) on Derivatives     
Foreign Exchange Risk:     
Net realized gain (loss) on foreign currency transactions and forward currency contracts  $(258,903)
      
Net Change in Unrealized Appreciation
(Depreciation) on Derivatives
     
Foreign Exchange Risk:     
Net change in unrealized appreciation (depreciation) on foreign currency translations and forward currency contracts  $828,145 

 

See Note 2(d) and the Portfolio of Investments for additional disclosures about derivative instruments.

 

As of June 30, 2016, the Fund holds derivative instruments that are eligible for offset in the Statement of Assets and Liabilities and are subject to master netting arrangements. A master netting arrangement is an agreement between two counterparties who have multiple contracts with each other that provides for the net settlement of all contracts, as well as any cash collateral, through a single payment in the event of default on, or termination of, any one contract.


 

25

 

Lazard Global Total Return and Income Fund, Inc.

Notes to Financial Statements (continued)

June 30, 2016 (unaudited)

 

The required information for the Fund is presented in the below table, as of June 30, 2016:

 

         Net Amounts of
      Gross Amounts Offset  Assets Presented
   Gross Amounts of  in the Statement of  in the Statement of
Description  Recognized Assets  Assets and Liabilities  Assets and Liabilities
Forward Currency Contracts  $995,646  $  —  $995,646

 

        Amounts Not Offset in the     
        Statement of Assets and Liabilities     
   Net Amounts               
   of Assets               
   Presented in the               
   Statement of  Financial  Collateral     
Counterparty  Assets and Liabilities  Instruments  Received  Net Amounts
Barclays Bank PLC    $2,735     $(2,176)    $     $559 
BNP Paribas SA     53,868      (53,868)            
Citibank NA     450,419      (450,419)            
HSBC Bank USA NA     98,501      (67,403)           31,098 
JPMorgan Chase Bank NA     230,118      (161,908)           68,210 
Standard Chartered Bank     160,005      (12,246)           147,759 
Total    $995,646     $(748,020)    $     $247,626 

 

         Net Amounts of
      Gross Amounts Offset  Liabilities Presented
   Gross Amounts of  in the Statement of  in the Statement of
Description  Recognized Liabilities  Assets and Liabilities  Assets and Liabilities
Forward Currency Contracts  $1,399,525  $  —  $1,399,525

 

        Amounts Not Offset in the     
        Statement of Assets and Liabilities     
   Net Amounts               
   of Liabilities               
   Presented in the               
   Statement of  Financial  Collateral     
Counterparty  Assets and Liabilities  Instruments  Pledged  Net Amounts
Barclays Bank PLC    $2,176     $(2,176)    $     $ 
BNP Paribas SA     86,724      (53,868)           32,856 
Citibank NA     467,879      (450,419)           17,460 
HSBC Bank USA NA     67,403      (67,403)            
JPMorgan Chase Bank NA     161,908      (161,908)            
Standard Chartered Bank     12,246      (12,246)            
UBS AG     601,189                  601,189 
Total    $1,399,525     $(748,020)    $     $651,505 

 

26

 

Lazard Global Total Return and Income Fund, Inc.

Notes to Financial Statements (concluded)

June 30, 2016 (unaudited)

 

12. Subsequent Events

 

On August 17, 2016, the Board approved a change to the Fund’s investment strategy. The change, which relates to the Global Equity Portfolio, will begin to be implemented on or around September 1, 2016 (the “Effective Date”).

 

As of the Effective Date, the Fund’s Global Equity Portfolio invests in a portfolio of approximately 60 to 100 non-US equity securities (“Global Equity Investments”), including American Depository Receipts (“ADRs”). The Fund generally invests in securities of companies with market capitalizations greater than $2 billion and may invest in emerging markets. The Fund’s net asset value, which is expressed in US dollars, may be negatively affected by the strengthening of the US dollar versus the currencies in which Global Equity Investments are denominated. The Fund may, but is not required to, engage in currency hedging transactions with respect to Global Equity Investments denominated in non-US currencies to hedge the Fund’s exposure to such currencies’ fluctuations in exchange rates with the US dollar.

 

Emerging market countries can generally have economic structures that are less diverse and mature, and political systems that are less stable, than those of developed countries. The economies of countries with emerging markets may be based predominantly on only a few industries, may be highly vulnerable to changes in local or global trade conditions, and may suffer from extreme debt burdens or volatile inflation rates. The securities markets of emerging market countries have historically been extremely volatile. These market conditions may continue or worsen. Investments in these countries may be subject to political, economic, legal, market and currency risks. The risks may include less protection of property rights and uncertain political and economic policies, the imposition of capital controls and/or foreign investment limitations by a country, nationalization of businesses and the imposition of sanctions by other countries, such as the US. Significant devaluation of emerging market currencies against the US dollar may occur subsequent to acquisition of investments denominated in emerging market currencies.

In engaging in currency hedging transactions, the Investment Manager may not be able to accurately predict movements in currency exchange rates, and there may be imperfect correlations between movements in exchange rates that could cause the Fund to incur significant losses. Currency investments could be adversely affected by delays in, or a refusal to grant, repatriation of funds or conversion of emerging market currencies. Over-the-counter forward currency contracts and other over-the-counter derivatives transactions are subject to the risk of default by the counterparty and can be illiquid. Derivatives transactions incur costs, either explicitly or implicitly, which reduce return. Use of derivatives transactions, even when entered into for hedging purposes, may cause the Fund to experience losses greater than if the Fund had not engaged in such transactions.

 

Sector and country selection is an outgrowth of the Investment Manager’s stock selection process. In managing Global Equity Investments according to the Investment Manager’s bottom-up (securities-based) approach to security selection, the portfolio management team focuses on finding undervalued equities across all sectors and countries and does not set target exposures at the sector or country level.

 

Consideration is given to sector and industry commitments as part of the Investment Manager’s risk-monitoring mechanism, and the portfolio management team draws upon the expertise of the Investment Manager’s Global Risk Management team. While there are no strict sector or country limits, sector and country weights are monitored using the MSCI All Country World Index (the “MSCI ACW Index”) as a guide.

 

As part of the change to the Fund’s investment strategy, the Fund’s benchmark index will change from the MSCI World Index to the MSCI ACW Index.

 

Also in connection with the change to the Fund’s investment strategy, the fair value of non-US securities may be determined with the assistance of an independent pricing service using correlations between the movement of prices of such securities and indices of US securities and other appropriate indicators, such as closing market prices of relevant ADRs or futures contracts.


 

27

 

Lazard Global Total Return and Income Fund, Inc.

Proxy Voting Results

(unaudited)

 

The Annual Meeting of Stockholders was held on April 22, 2016, to vote on the following proposal. The proposal received the required number of votes of stockholders and was adopted.

 

Election of the following Directors:

 

Three Class II Directors, each to serve for a three-year term expiring at the 2019 Annual Meeting and until his or her successor is duly elected and qualified.

 

Director   For   Withhold Authority
Kenneth S. Davidson   7,719,329   552,352
Nancy A. Eckl   7,757,253   514,428
Trevor W. Morrison   7,712,305   559,376

 

28

 

Lazard Global Total Return and Income Fund, Inc.

Dividend Reinvestment Plan

(unaudited)

 

Unless you elect to receive distributions in cash (i.e., opt-out), all dividends, including any capital gain distributions, on your common stock will be automatically reinvested by Computershare, Inc., as dividend disbursing agent (the “Plan Agent”), in additional common stock under the Fund’s Dividend Reinvestment Plan (the “Plan”). You may elect not to participate in the Plan by contacting the Plan Agent. If you do not participate, you will receive all distributions in cash, paid by check mailed directly to you by the Plan Agent.

 

Under the Plan, the number of shares of common stock you will receive will be determined on the dividend or distribution payment date, as follows:

 

(1)  If the common stock is trading at or above net asset value at the time of valuation, the Fund will issue new shares at a price equal to the greater of (i) net asset value per common share on that date or (ii) 95% of the common stock’s market price on that date.
   
(2) If the common stock is trading below net asset value at the time of valuation, the Plan Agent will receive the dividend or distribution in cash and will purchase common stock in the open market, on the NYSE or elsewhere, for the participants’ accounts. It is possible that the market price for the common stock may increase before the Plan Agent has completed its purchases. Therefore, the average purchase price per share paid by the Plan Agent may exceed the market price at the time of valuation, resulting in the purchase of fewer shares than if the dividend or distribution had been paid in common stock issued by the Fund. The Plan Agent will use all dividends and distributions received in cash to purchase common stock in the open market within 30 days of the valuation date. Interest will not be paid on any uninvested cash payments.

 

You may withdraw from the Plan at any time by giving written notice to the Plan Agent. If you withdraw or the Plan is terminated, you will receive whole shares in your account

under the Plan and you will receive a cash payment for any fraction of a share in your account. If you wish, the Plan Agent will sell your shares and send you the proceeds, minus an initial $15 service fee plus $0.12 per share being liquidated (for processing and brokerage expenses).

 

The Plan Agent maintains all stockholders’ accounts in the Plan and gives written confirmation of all transactions in the accounts, including information you may need for tax records. Shares of common stock in your account will be held by the Plan Agent in non-certificated form. Any proxy you receive will include all common stock you have received under the Plan.

 

There is no brokerage charge for reinvestment of your dividends or distributions in newly-issued shares of common stock. However, all participants will pay a pro rata share of brokerage commissions incurred by the Plan Agent when it makes open market purchases.

 

Automatically reinvesting dividends and distributions does not mean that you do not have to pay income taxes due upon receiving dividends and distributions.

 

If you hold your common stock with a brokerage firm that does not participate in the Plan, you will not be able to participate in the Plan and any dividend reinvestment may be effected on different terms than those described above. Consult your financial advisor for more information.

 

The Fund reserves the right to amend or terminate the Plan if, in the judgment of the Board, the change is warranted. There is no direct service charge to participants in the Plan (other than the service charge when you direct the Plan Agent to sell your common stock held in a dividend reinvestment account); however, the Fund reserves the right to amend the Plan to include a service charge payable by the participants. Additional information about the Plan may be obtained from the Plan Agent at P.O. Box 30170, College Station, Texas 77842-3170.


 

29

 

Lazard Global Total Return and Income Fund, Inc.

Board of Directors and Officers Information

(unaudited)

Name (Age)
Address(1)
  Position(s) with the Fund
(Since) and Term(2)
  Principal Occupation(s) and Other Public Company
Directorships Held During the Past Five Years(2)
Board of Directors:
Class I – Directors with Term Expiring in 2018
Independent Director(3):
Robert M. Solmson (68)   Director
(September 2004)
  Fairwood Capital, LLC, a private investment corporation engaged primarily in real estate and hotel investments, President (2008 - present)
Interested Director(4):
Charles L. Carroll (55)   Chief Executive Officer,
President and Director
(June 2004)
  Investment Manager, Deputy Chairman and Head of Global Marketing (2004 - present)
Class II – Directors with Term Expiring in 2019
Independent Directors(3):
Kenneth S. Davidson (71)   Director
(February 2004)
 

Davidson Capital Management Corporation, an investment manager, President (1978 - present)

 

Landseer Advisors LLC, an investment manager, Senior Advisor (2012 - 2014)

 

Aquiline Holdings LLC, an investment manager, Partner (2006 - 2012)

         
Nancy A. Eckl (53)   Director
(February 2007)
 

College Retirement Equities Fund (eight accounts), Trustee (2007 - present)

 

TIAA-CREF Funds (67 funds) and TIAA-CREF Life Funds (11 funds), Trustee (2007 - present)

 

TIAA Separate Account VA-1, Member of the Management Committee (2007 - present)

 

American Beacon Advisors, Inc. (“American Beacon”) and certain funds advised by American Beacon, Vice President (1990 - 2006)

         
Trevor W. Morrison (45)   Director
(April 2014)
 

New York University School of Law, Dean and Eric M. and Laurie B. Roth Professor of Law (2013 - present)

 

Columbia Law School, Professor of Law (2008 - 2013)

Class III – Directors with Term Expiring in 2017
Independent Directors(3):
Franci J. Blassberg (62)   Director
(August 2014)
 

Debevoise & Plimpton LLP, a law firm, Of Counsel (2013 - present); previously, Partner (through 2012)

 

Cornell Law School, Visiting Professor of Practice (2015 - present); previously, Distinguished Practitioner in Residence (Fall 2013 and Fall 2014)

         
Richard Reiss, Jr. (72)   Director
(February 2004)
 

Georgica Advisors LLC, an investment manager, Chairman (1997 - present)

 

Resource America, Inc., a real estate asset management company, Director (2016 - present)

 

O’Charley’s, Inc., a restaurant chain, Director (1984 - 2012)

Interested Director(4):
Ashish Bhutani (56)   Director
(July 2005)
 

Investment Manager, Chief Executive Officer (2004 - present)

 

Lazard Ltd, Vice Chairman and Director (2010 - present)

 

(1) The address of each Director of the Fund is Lazard Asset Management LLC, 30 Rockefeller Plaza, New York, New York 10112-6300.
(2) Each Director serves as a Director for each of the funds in the Lazard Fund Complex (comprised of, as of July 31, 2016, 40 active investment portfolios). Each Director serves an indefinite term, until his or her successor is elected, and each Director serves in the same capacity for the other funds in the Lazard Fund Complex.
(3) “Independent Directors” are not “interested persons” (as defined in the 1940 Act) of the Fund.
(4) Messrs. Bhutani and Carroll are “interested persons” (as defined in the 1940 Act) of the Fund because of their positions with the Investment Manager.

 

30

 

Lazard Global Total Return and Income Fund, Inc.

Board of Directors and Officers Information (concluded)

(unaudited)

Name (Age)
Address(1)
  Position(s) with the Fund
(Since) and Term(2)
  Principal Occupation(s) During the Past Five Years
Officers(3):        
Nathan A. Paul (43)   Vice President
and Secretary
(February 2004)
  Managing Director and General Counsel of the Investment Manager
         
Christopher Snively (31)   Chief Financial Officer
(March 2016)
 

Senior Vice President of the Investment Manager (since November 2015)

 

Assurance Manager at PricewaterhouseCoopers LLP (2008 - November 2015)

         
Stephen St. Clair (57)   Treasurer
(February 2004)
  Vice President of the Investment Manager
         
Mark R. Anderson (46)   Chief Compliance Officer
(September 2014)
 

Director and Chief Compliance Officer of the Investment Manager (since September 2014)

 

Senior Vice President, Counsel and Deputy Chief Compliance Officer of AllianceBernstein L.P. (2004 - August 2014)

         
Tamar Goldstein (41)   Assistant Secretary
(February 2009)
  Director (since February 2016, previously Senior Vice President), and Director of Legal Affairs (since July 2015) of the Investment Manager
         
Shari L. Soloway (34)   Assistant Secretary
(November 2015)
 

Senior Vice President, Legal and Compliance, of the Investment Manager (since September 2015)

 

Vice President and Associate General Counsel of GE Asset Management (July 2011 - September 2015)

 

Associate at Clifford Chance US LLP (2006 - July 2011)

         
Cesar A. Trelles (41)   Assistant Treasurer
(December 2004)
  Vice President of the Investment Manager

 

(1) The address of each officer of the Fund is Lazard Asset Management LLC, 30 Rockefeller Plaza, New York, New York 10112-6300.
(2) Each officer serves for an indefinite term, until his or her successor is elected and qualifies or until his or her earlier resignation or removal. Each officer serves in the same capacity for the other funds in the Lazard Fund Complex.
(3) In addition to Charles L. Carroll, President, whose information is included in the Class I Interested Director section.

 

31

 

Lazard Global Total Return and Income Fund, Inc.

Other Information

(unaudited)

 

Proxy Voting

 

A description of the policies and procedures used to determine how proxies relating to Fund portfolio securities are voted is available (1) without charge, upon request, by calling (800) 823-6300 or (2) on the SEC’s website at http://www.sec.gov.

 

The Fund’s proxy voting record for the most recent 12-month period ended June 30 is available (1) without charge, upon request, by calling (800) 823-6300 or (2) on the SEC’s website at http://www.sec.gov. Information as of June 30 each year will generally be available by the following August 31.

 

Form N-Q

 

The Fund files a complete schedule of its portfolio holdings for the first and third quarters of its fiscal year with the SEC on Form N-Q. The Fund’s Forms N-Q are available on the SEC’s website at http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the SEC’s Public Reference Room may be obtained by calling 1-800-SEC-0330.

 

Board Consideration of Management Agreement

 

At a meeting of the Board held on June 28-29, 2016, the Board considered the approval, for an additional annual period, of the Management Agreement between the Fund and the Investment Manager. The Independent Directors were assisted in their review by independent legal counsel, who advised the Board on relevant legal standards and met with the Independent Directors in executive session separate from representatives of the Investment Manager.

 

Services Provided

Representatives of the Investment Manager discussed with the Board the Investment Manager’s written presentation provided in advance of the meeting addressing, among other matters, the nature, extent and quality of services that the Investment Manager provides the Fund, including a discussion of the Investment Manager and its clients (of which the Lazard Funds complex of 40 active funds comprises approximately $28 billion, and the Fund and the other publicly-traded closed-end fund managed by the Investment Manager comprise approximately $224 million (as of April 30, 2016), of the approximately $191 billion of total assets under the management of the Investment Manager and its global affiliates as of March 31, 2016). The Investment Manager’s representatives noted that the Investment Manager believes that the Fund and its shareholders continue to be able to obtain significant benefits as a result of the resources and support of the Investment

Manager’s global research, portfolio management, operations, technology, legal and compliance infrastructure. The Directors also considered information provided by the Investment Manager regarding its personnel, resources, financial condition and experience.

 

The Directors considered the various services provided by the Investment Manager including the Investment Manager’s research and portfolio management capabilities and oversight of day-to-day operations, including supervision of fund accounting and administration-related services and assistance in meeting legal and regulatory requirements. The Directors also considered the Investment Manager’s infrastructure and agreed that the Fund benefits from the services and infrastructure provided by the Investment Manager. The Directors accepted management’s assertion that such services and infrastructure are greater than those typically provided to a $28 billion fund complex not managed by a large, global firm such as the Investment Manager.

 

Comparative Fee, Expense Ratio and Performance Information

The Directors reviewed comparative fee, expense ratio and performance (through March 31, 2016) information prepared by Strategic Insight, noting the limitations of the Strategic Insight comparison group (the “Group”) as further discussed below, and broader Morningstar category (the “Category”).

 

Advisory Fees and Expense Ratios. The Directors also discussed the management fees paid to the Investment Manager (referred to in the Strategic Insight materials as “advisory fees”) and expense ratios (leveraged and unleveraged) for the Fund. They noted the methodology and assumptions used by Strategic Insight.

 

In reviewing Strategic Insight’s analysis, it was noted that the gross advisory fee and expense ratio were below the Group medians for common and managed assets. The Directors noted management’s explanation regarding the lack of comparability of funds within the Group due to the Fund’s unique strategy of achieving leverage through currency investments.

 

Performance. Strategic Insight’s performance analyses compared the Fund’s investment returns to those of the funds in the Group and Category over one-, three-, five- and ten-year periods ended March 31, 2016.

 

The Directors noted that the Fund’s total annualized return (based on net asset value) was below the Group and Category averages for all periods ended March 31, 2016, except for the ten-year period when its performance was above the Group average. The Directors, however, noted that there were only six other funds in the Group and that


 

32

 

Lazard Global Total Return and Income Fund, Inc.

Other Information (continued)

(unaudited)

 

no funds in the Group or Category pursued a strategy similar to that of the Fund’s strategy of investing in global equity securities and in emerging markets currencies primarily through forward currency contracts and debt obligations denominated in emerging markets currencies. They also were advised that the Investment Manager did not manage any funds, separate accounts or other accounts with investment objectives, policies and strategies similar to those of the Fund.

 

Fee Calculation

The Board considered that the method of calculating management fees is based on the Fund’s Total Leveraged Assets, pursuant to which the management fee borne by stockholders will increase to the extent the Investment Manager makes Currency Investments by incurring Financial Leverage rather than reducing the percentage of Net Assets invested in Global Equity Investments for the purposes of making Currency Investments, and considered the potential advantages of increased investment exposure through Financial Leverage. The Board considered the economic equivalence, and the similarities, from an investment management perspective, of Currency Investments (1) made with Currency Commitments and (2) made with the proceeds of Borrowings.

 

The Board considered that (1) this method of calculating management fees is different than the way closed-end investment companies typically calculate management fees, (2) traditionally closed-end funds calculate management fees based on Net Assets plus Borrowings (excluding Financial Leverage obtained through Currency Commitments) and (3) the Investment Manager’s fee would be lower if its fee were calculated only on Net Assets plus Borrowings, because the Investment Manager would not earn fees on Currency Investments made with Currency Commitments (forward currency contracts or other derivative instruments whose value is derived from the performance of an underlying emerging market currency). The Board considered that the Investment Manager’s fee is different because the Fund’s leverage strategy is different than the strategy employed by many other leveraged closed-end investment companies—that although the Fund may employ Borrowings in making Currency Investments, the Fund’s leverage strategy relies primarily on Currency Commitments rather than relying exclusively on borrowing money and/or issuing preferred stock. The Board considered the Fund’s use of Currency Commitments for leverage (rather than relying exclusively on borrowing money and/or issuing preferred stock) and the Investment Manager’s belief that forward currency contracts, or other derivative instruments whose value is derived from the performance of an underlying emerging market currency, often offer a

more attractive way to gain exposure to emerging market interest rate opportunities and currencies than investments in debt obligations and the fact that there might not be a viable debt market in certain emerging market countries. The Board also considered the Investment Manager’s view that foreign currency contracts present less counterparty and custody risks and the Investment Manager’s extensive expertise with these instruments, as discussed in detail in previous Board meetings.

 

Procedures adopted by the Investment Manager to evaluate possible conflicts of interest that may arise from the fee calculation methodology, include the following: (1) no less frequently than monthly, decisions regarding the amount of the Fund’s allocation to Currency Investments must be reviewed by a Managing Director of the Investment Manager not involved in the decision-making process and the Fund’s Chief Compliance Officer, and that such review be documented to include the basis therefor, documentation to be retained for six years, the first two years in an easily accessible place, (2) the Investment Manager must provide the Board with a quarterly report regarding these decisions and the reasons therefor and (3) the Investment Manager must deliver a quarterly certification to the Board, signed by a Managing Director of the Investment Manager and the Fund’s or the Investment Manager’s Chief Compliance Officer (as applicable), that the procedures had been complied with during the previous quarter. The Investment Manager’s representatives stated that such procedures had been followed and that the Investment Manager would continue to follow those procedures.

 

Investment Manager Profitability and Economies of Scale

The Directors reviewed information prepared by the Investment Manager concerning profits realized by the Investment Manager and its affiliates resulting from the Management Agreement, calculated using the actual revenues received for the calendar year ended December 31, 2015 and the Investment Manager’s cost allocation methodology to compute an estimate of the Fund’s costs to the Investment Manager. The Investment Manager’s representatives stated that neither the Investment Manager nor its affiliates receive any significant indirect benefits from the Investment Manager acting as investment adviser to the Fund. The Investment Manager’s representatives reviewed with the Board information provided on the Investment Manager’s brokerage practices and the Fund’s brokerage allocation, commission payments and soft dollar commissions and benefits.

 

The profitability percentages were within ranges determined by relevant court cases not to be so disproportionately large that they bore no reasonable relationship to the


 

33

 

Lazard Global Total Return and Income Fund, Inc.

Other Information (concluded)

(unaudited)

 

services rendered. Representatives of the Investment Manager stated that the Investment Manager believed the profits are not unreasonable in light of the services provided and other factors. The Directors considered the Investment Manager’s estimated profitability with respect to the Fund as part of their evaluation of whether the Fund’s fee under the Management Agreement, considered in relation to the mix of services provided by the Investment Manager, including the nature, extent and quality of such services, and evaluated profitability in light of the relevant circumstances for the Fund, supported the renewal of the Management Agreement. It was noted that, because the Fund is a closed-end fund without daily inflows and outflows of capital, there were not at this time significant economies of scale to be realized by the Investment Manager in managing the Fund’s assets.

 

At the conclusion of these discussions, each of the Directors expressed the opinion that he or she had been furnished with such information as may reasonably be necessary to make an informed business decision with respect to evaluation of the renewal of the Management Agreement. Based on its discussions and considerations as described above, the Board made the following conclusions and determinations.

 

The Board concluded that the nature, extent and quality of the services provided by the Investment Manager are adequate and appropriate, noting the benefits of advisory and research services and other services and infrastructure (as discussed above) associated with an approximately $191 billion global asset management business.
   
The Board was concerned about the Fund’s performance and agreed to continue to closely monitor performance.
The Board concluded that the Fund’s fee paid to the Investment Manager supported the renewal of the Management Agreement in light of the considerations discussed above.
   
The Board determined that because the Fund is a closed-end fund without daily inflows and outflows of capital the Fund’s fee schedule is reasonable in light of current economies of scale considerations and that there were not at this time significant economies of scale to be realized by the Investment Manager.

 

In evaluating the Management Agreement, the Board relied on the information described above as well as other information provided by the Investment Manager, in addition to information received on a routine and regular basis throughout the year relating to the operations of the Fund and the investment management and other services provided under the Management Agreement, including information on the investment performance of the Fund in comparison to similar funds and a benchmark performance index; general market outlook as applicable to the Fund; and compliance reports. The Board also relied on its previous knowledge, gained through meetings and other interactions with the Investment Manager, of the Fund and the services provided to the Fund by the Investment Manager. The Board considered these conclusions and determinations in their totality and determined to approve the Management Agreement. In deciding whether to vote to approve the Management Agreement, each Director may have accorded different weights to different factors so that each Director may have had a different basis for his or her decision.


 

34

 

Lazard Global Total Return and Income Fund, Inc.

30 Rockefeller Plaza
New York, New York 10112-6300
Telephone: 800-823-6300
http://www.LazardNet.com

 

Investment Manager

Lazard Asset Management LLC
30 Rockefeller Plaza
New York, New York 10112-6300
Telephone: 800-823-6300

 

Custodian

State Street Bank and Trust Company
One Iron Street
Boston, Massachusetts 02210

 

Transfer Agent and Registrar

Computershare Trust Company, N.A.
P.O. Box 43010
Providence, Rhode Island 02940-3010

 

Dividend Disbursing Agent

Computershare, Inc.
P.O. Box 30170
College Station, Texas 77842-3170

 

Independent Registered Public Accounting Firm

Deloitte & Touche LLP
30 Rockefeller Plaza
New York, New York 10112-0015

 

Legal Counsel

Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038-4982
http://www.stroock.com

 

 

This report is intended only for the information of stockholders of Lazard Global Total Return and Income Fund, Inc.

 

Lazard Asset Management LLC • 30 Rockefeller Plaza • New York, NY 10112 • www.lazardnet.com
 

ITEM 2. CODE OF ETHICS.

 

Not applicable.

 

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

 

Not applicable.

 

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

 

Not applicable.

 

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

 

Not applicable.

 

ITEM 6. INVESTMENTS

Not applicable.

 

ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED END MANAGEMENT INVESTMENT COMPANIES.

 

Not applicable.

 

ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable.

 

ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.

 

Not applicable.

 

ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

There were no material changes to the procedures by which shareholders may recommend nominees to the Registrant’s Board of Directors during the period covered by this report.

 

ITEM 11. CONTROLS AND PROCEDURES.

 

(a)     The Registrant’s principal executive and principal financial officers have concluded, based on their evaluation of the Registrant’s disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the Registrant’s disclosure controls and procedures are reasonably designed to ensure that information required to be disclosed by the Registrant on Form N-CSR is recorded, processed, summarized and reported within the required time periods and that information required to be disclosed by the Registrant in the reports that it files or submits on Form N-CSR is accumulated and communicated to the Registrant’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

 

(b)     There were no changes to the Registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting.

 

ITEM 12. EXHIBITS.

 

(a)(1) Not applicable.

 

(a)(2)     Certifications of principal executive and principal financial officers as required by Rule 30a-2(a) under the Investment Company Act of 1940.

 

(a)(3)     Not applicable.

 

(b)     Certifications of principal executive and principal financial officers as required by Rule 30a-2(b) under the Investment Company Act of 1940.

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Lazard Global Total Return and Income Fund, Inc.

 

By /s/ Charles L. Carroll  
  Charles L. Carroll  
  Chief Executive Officer  

 

Date September 6, 2016  

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By /s/ Charles L. Carroll  
  Charles L. Carroll  
  Chief Executive Officer  

 

Date September 6, 2016  

 

By /s/ Christopher Snively  
  Christopher Snively  
  Chief Financial Officer  

 

Date September 6, 2016  
 

Exhibit (a)(2)

 

Rule 30a-2(a) CERTIFICATIONS

I, Charles L. Carroll, certify that:

 

1. I have reviewed this report on Form N-CSR of Lazard Global Total Return and Income Fund, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the Registrant as of, and for, the periods presented in this report;

 

4. The Registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the Registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

 

(c) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

 

(d) Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant’s second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and

 

5. The Registrant's other certifying officer(s) and I have disclosed to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize, and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.

 

Date: September 6, 2016    
     
  /s/ Charles L. Carroll  
  Charles L. Carroll  
  Chief Executive Officer  
 

Rule 30a-2(a) CERTIFICATIONS

I, Christopher Snively, certify that:

 

1. I have reviewed this report on Form N-CSR of Lazard Global Total Return and Income Fund, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the Registrant as of, and for, the periods presented in this report;

 

4. The Registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the Registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

 

(c) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

 

(d) Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant’s second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and

 

5. The Registrant's other certifying officer(s) and I have disclosed to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize, and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.

 

Date: September 6, 2016    
     
  /s/ Christopher Snively  
  Christopher Snively  
  Chief Financial Officer  
 

Exhibit (b)

 

SECTION 906 CERTIFICATIONS

 

In connection with this report on Form N-CSR for the Registrant as furnished to the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1)     the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as applicable; and

 

(2)     the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

 

  By: /s/ Charles L. Carroll  
    Charles L. Carroll  
    Chief Executive Officer  
       
  Date: September 6, 2016  

 

  By: /s/ Christopher Snively  
    Christopher Snively  
    Chief Financial Officer  
       
  Date: September 6, 2016  

 

This certificate is furnished pursuant to the requirements of Form N-CSR and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.

 


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