c45055_n30b2.htm -- Converted by SEC Publisher, created by BCL Technologies Inc., for SEC Filing

Lazard Asset Management LLC
30 Rockefeller Plaza
New York, NY 10112-6300
www.LazardNet.com

 

 

  LAZARD ASSET MANAGEMENT
     

     Lazard Global Total
     Return & Income
     Fund, Inc.

     Third Quarter Report
     S E P T E M B E R   3 0,   2 0 0 6

 

 
  This report is intended only for the information of stockholders or those who have received the current prospectus covering shares of Common Stock of Lazard Global Total Return & Income Fund, Inc. which contains information about management fees and other costs.    
   



Lazard Global Total Return & Income Fund, Inc.
Investment Overview

Dear Shareholder,

We are pleased to present the Third Quarter Report for Lazard Global Total Return & Income Fund, Inc. (“LGI” or the “Fund”), for the period ended September 30, 2006. The Fund 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.”

The Fund has been in operation for nearly two and a half years, and we are very pleased with LGI’s performance thus far in 2006, and since the Fund’s inception. 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 September 30, 2006)

For the third quarter of 2006, the Fund’s Net Asset Value per share (“NAV”) performance increased 6.0%, comfortably outperforming the Morgan Stanley Capital International (MSCI®) World® Index, which returned 4.5% . Similarly, the year-to-date and one year NAV returns of 14.7% and 17.0% respectively, are well ahead of the benchmark returns of 10.8% and 14.2%, respectively. Since inception, the Fund’s annualized NAV return of 14.6%, compares favorably to the benchmark’s return of 13.1% . Shares of LGI ended the third quarter of 2006 with a market price of $21.13, representing an 8.7% discount to the Fund’s NAV of $23.14. The Fund’s net assets were $222.3 million as of September 30, 2006, with total leveraged assets of $311.0 million, representing 28.5% leverage.

We believe that LGI’s investment thesis remains sound, as demonstrated by the Fund’s favorable NAV performance this year and since inception. Third quarter performance was affected primarily by stock selection in financials. In addition, returns for the smaller, short-duration1 currency and debt portion of the Fund were up moderately over the third quarter, and have been a positive contributor to performance in 2006 and since inception.

As of September 30, 2006, 66.0% of the Fund’s total leveraged assets consisted of global equities and 33.0% consisted of emerging markets currency and debt instruments, while the remaining 1.0% consisted of cash and other assets.

Declaration of Dividends

Pursuant to LGI’s managed distribution policy, the Fund’s Board of Directors has declared a monthly dividend distribution of $0.1042 per share on the Fund’s outstanding stock each month since inception. The first dividend was paid on July 23, 2004. However, in September 2006, the Fund distributed $0.1637 per share (57% higher than the usual declared monthly distribution), representing payment of the Fund’s 2005 spillback distribution (pursuant to Section 855 of the Internal Revenue Code). The payment was in lieu of the regular monthly dividend, and constituted long-term capital gains realized between November 1, 2005 and December 31, 2005. Inclusive of the September distribution, dividends paid by the Fund in the last 12 monthly periods represent an annualized market yield of 6.2% based on the share price of $21.13 at the close of NYSE trading on September 30, 2006.

Additional Information

Please note that available on www.LazardNet.com, are frequent updates on the Fund’s performance, press releases, and a monthly fact sheet that provides information about the Fund’s major holdings, sector weightings, regional exposures, and other characteristics. You may also reach Lazard by phone at 1-800-828-5548.

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



Lazard Global Total Return & Income Fund, Inc.
Investment Overview (continued)

Message from the Portfolio Managers

Global Equity Portfolio
(66.0% of total leveraged assets)

The Fund’s equity portfolio is invested primarily in equity securities of large, well-known global companies with strong financial productivity at attractive valuations. Examples include GlaxoSmithKline, a global, research-based pharmaceutical company based in the United Kingdom; Bank of America, a holding company that provides banking and non-banking financial services and products in the U.S. and internationally; Nokia Corp., the Finnish manufacturer of mobile telephones, enhanced communicators, entertainment and gaming devices, and media and imaging telephones; and Total SA, the French-based energy supplier that explores for, produces, refines, transports, and markets oil and natural gas.

Companies held in the global equity portfolio are all based in developed-market regions around the world. As of September 30, 48.5% of these stocks were based in North America, 22.9% were from Continental Europe (not including the U.K.), 18.5% were from the U.K., and 10.1% were from Japan. The global equity portfolio is similarly well diversified across a number of industry sectors. The top two sectors, by weight, at September 30, were financials (31.2%), which includes banks, insurance companies, and financial services companies, and information technology (19.8%), a sector that encompasses industries involved in the design, development, installation, and implementation of information systems and applications, including hardware, software, IT services, and media-related companies. Other sectors in the portfolio include consumer discretionary, consumer staples, energy, health care, industrials, and telecommunications services. The average dividend yield on the global equity portfolio was approximately 2.2% at September 30.

Global Equity Market Review

Markets posted solid gains during the third quarter of 2006, after a sharp decline in May and early June over concerns about accelerating inflation and fears that the Federal Reserve (“Fed”) would continue its course of tight monetary policy. The third quarter rebound was spurred by the Fed’s decision to again leave the benchmark Fed Funds rate unchanged, at 5.25% . It was the second consecutive “no-change” after 17 consecutive increases. The Fed cited moderating growth and a cooling housing market as factors contributing to its decision to leave rates unchanged. Investors also cheered the recent 20% retracement in energy prices, from record levels, as the geopolitical landscape in the world’s major oil-producing region improved, and supply concerns waned, boosting consumer confidence. Although the market did rise, overall, during the quarter, it wasn’t without a few pullbacks, as investors wavered on the outlook for inflation and Fed actions. Yet, in general, it appears that economic growth remains healthy, albeit slowing, as inflation seems to be contained, and lower energy costs and a slowing housing market should help keep inflation in check. From a sector perspective, defensive groups such as telecom services, health care, consumer staples, and utilities outperformed. Technology stocks also significantly outperformed, following an extended period of lagging the broad market. Financials also performed well, particularly the large financial stocks with exposure to capital markets, as they continue to benefit from robust activity in mergers and acquisitions, initial public offerings, and securities trading. Conversely, industrial and materials stocks lagged, as these more cyclical sectors were hurt by fears of slowing growth, particularly in housing, and a decline in commodity prices. Energy stocks also declined, as the price of oil made a considerable pullback from record levels in July. From a regional perspective, U.S. stocks outperformed modestly, helped by the strength in technology, while European markets continued their solid performance. Japanese stocks lagged materially, as recent economic reports have been weaker than expected, calling into question the sustainability of the long-awaited economic recovery. In addition, the election of a new prime minister created uncertainty about the future pace of economic reform.

2



Lazard Global Total Return & Income Fund, Inc.
Investment Overview (continued)

What Helped and What Hurt LGI

The portfolio benefited from an overweight position and solid stock selection in the technology sector, after shares of Cisco, a large networking company, rose sharply. The company reported earnings that exceeded analysts’ expectations, due to broad-based strength across its business lines. Also within technology, shares of one of the portfolio’s largest positions, Microsoft, rallied after the company’s tender offer received fewer shares than had been anticipated, suggesting that investors may be ascribing a higher valuation to the company. Stock selection in energy also boosted returns, as more diversified holdings defended well in the weakness versus companies more leveraged to oil prices. Stock selection in financials hurt returns, as shares of Nomura Holdings, Inc. declined, based on concerns that earnings may be hurt by a slowing global and domestic economy. Part of our thesis for owning this Japanese bank is the beneficial leverage the banks will obtain from rising interest rates in Japan. However, the slower-than-expected rises in interest rates has lead to a fall in the share prices of banks in Japan.

Emerging Market Currency and Debt Portfolio
(33.0% of total leveraged assets)

The Fund also seeks enhanced income through investing in high-yielding, short-duration (typically, under one-year) emerging market forward currency contracts and local currency debt instruments. As of September 30, this portfolio consisted primarily of forward currency contracts (85.1%), and a smaller allocation to sovereign debt obligations (10.1%) and structured notes (4.8%) . The average duration of the emerging market currency and debt portfolio was approximately 4.4 months, as of September 30, with an average yield of 8.7% .2

At September 30, the Fund’s emerging market currency and debt holdings were highly diversified across 30 countries within Asia (26.5%), Latin America (22.0%), Africa (19.7%), Eastern Europe (16.0%), the Commonwealth of Independent States and Baltic countries (8.8%), and the Middle East (7.0%) .

Emerging Market Currency and Debt Market Review

In the third quarter of 2006, some of the themes affecting performance with emerging market currencies included U.S. growth and inflation data, the sustainability of China’s investment-led growth and its foreign exchange policy, global liquidity conditions, the direction of commodity price movements, and International Monetary Fund’s and the G7 countries’ views on global imbalances. Countries characterized by uncertain domestic policy or shaky macroeconomic fundamentals (such as large current account deficits) saw currencies become increasingly sensitive to global investor sentiment.

While emerging market central banks are in different stages of their monetary policy cycles, most are on hold or tightening (though exceptions do exist such as Brazil and Indonesia which are easing). The sustainability of each country’s balance of payments is an important indicator for future directional money market pressure and the potential for heightened volatility. The investment team is closely monitoring the effect that changes in foreign-investor risk appetite may have on specific local markets, and seeking to adjust exposure in the Fund’s emerging markets currency and debt portfolio accordingly. The reliance of a country on foreign portfolio capital inflows is an important factor. Large current account deficits can often create vulnerabilities for the local currency, with some countries particularly dependent on whimsical foreign financing sources, as opposed to more stable foreign direct investment or overseas worker remittance inflows.

What Helped and Hurt LGI

Money market returns (in U.S. dollar terms) were positive across all emerging market regions, except for Africa, during the third quarter of 2006. The third quarter’s top performing local markets were those most negatively impacted during the second quarter’s equity-driven capital outflow. Specifically, robust gains were reaped from recoveries in Turkey, the Philippines, and Colombian local markets, all of which suffered materially in the second quarter.

3



Lazard Global Total Return & Income Fund, Inc.
Investment Overview (continued)

Asia remains the portfolio’s heaviest regional weighting. This exposure helped returns, with good country selection in top-performing India, Indonesia, and the Philippines, as relatively high local-market yields and equity market inflows supported appreciating currencies. Latin American exposure also helped returns with powerful rallies in Colombia, Brazil, and Mexico, all rebounding from oversold levels during the May/June market turbulence. Within Europe, positions in Romania and Poland added value, and the Slovak money market also did well. Commonwealth of Independent States/Baltic exposures were a positive contributor with the Ukraine and Russia returning the most, while the depreciation of Kazak’s tenge detracted modestly from returns. In the Middle East/Africa region, Turkey was the top performer, and Egyptian T-Bills posted a consistent quarterly return. Conversely, four African markets detracted from returns, mostly explained by the correlated decline of the Botswana pula with the South African rand, on its economic and policy linkages. The portfolio had no exposure to the rand until late in September, at which point it initiated a 1% position, after the rand’s precipitous fall since May. South Africa’s external deficit has likely peaked, and should improve going forward, on reduced cost of energy imports and slowing domestic demand. While volatility remains high, and money market sentiment uncertain, the rand’s current valuation is more compelling than it’s been at any time over the past few years.

Please consider the Fund’s investment objective, risks, charges and expenses carefully before investing. For more complete information about the Fund, you may obtain the prospectus by calling 800-828-5548. Read the prospectus carefully before you invest. The prospectus contains investment objective, risks, charges, expenses and other information about the Fund, which may not be detailed in this report.

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

All returns reflect reinvestment of all dividends and distributions. Past performance is not indicative, nor a guarantee, of future results.

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 unmanaged, has no fees or costs and is not available for investment.

The views of the Fund’s management and the portfolio holdings described in this report are as of September 30, 2006; 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 investment. There is no assurance that the portfolio holdings discussed herein will remain in the Fund at the time you receive this report, or that portfolio holdings sold will have not been repurchased. The specific portfolio holdings discussed may in aggregate represent only a small percentage of the Fund’s holdings. It should not be assumed that investments identified and discussed were, or will be, profitable, or that the investment decisions we make in the future will be profitable, or equal the performance of the investments 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 the outlooks for markets, sectors and securities as discussed herein. You should read the Fund’s prospectus for a more detailed discussion of the Fund’s investment objective, strategies, risks and fees.

4



Lazard Global Total Return & Income Fund, Inc.
Investment Overview (continued)

Comparison of Changes in Value of $10,000 Investment in
LGI and MSCI World Index* (unaudited)
Average Annual Total Returns*            
Periods Ended September 30, 2006            
(unaudited)            
   
One
     
Since
   
Year
Inception**
Market Price   17.66 %   8.85 %
Net Asset Value   17.03     14.57  
MSCI World Index   14.18     13.10  

* All 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, nor 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.
 
  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 MSCI World Index represents market value-weighted aver- age returns of selected securities listed on the stock exchanges of Europe, Australasia and Far East, New Zealand, Canada, and the United States. The index is unmanaged, has no fees or costs and is not available for investment.
 
** The Fund’s inception date was April 28, 2004.
 

5



Lazard Global Total Return & Income Fund, Inc.
Investment Overview (concluded)

Ten Largest Equity Holdings            
September 30, 2006 (unaudited)            
          Percentage of
Security  
Value
  Net Assets
Microsoft Corp.   $ 8,920,512   4.01 %
Oracle Corp.     8,461,980   3.81  
Bank of America Corp.     7,403,374   3.33  
Diageo PLC Sponsored ADR     7,182,144   3.23  
Exxon Mobil Corp.     7,052,210   3.17  
JPMorgan Chase & Co.     6,992,156   3.15  
HSBC Holdings PLC Sponsored ADR     6,983,739   3.14  
Citigroup, Inc.     6,899,163   3.10  
Johnson & Johnson     6,773,242   3.05  
The Home Depot, Inc.     6,002,685   2.70  

6



Lazard Global Total Return & Income Fund, Inc.
Portfolio of Investments
September 30, 2006 (unaudited)

Description 
Shares 
 
Value 
 
 
Common Stocks—92.4%       
 
Finland—1.7%       
 
 Nokia Oyj Sponsored ADR (c)    192,800   
$ 
3,796,232 
 
 
 
France—2.9%       
 
 Societe Generale Sponsored ADR    72,000   
2,292,480 
 
 Total SA Sponsored ADR (c)    64,000   
4,220,160 
 
 
 Total France       
6,512,640 
 
 
 
Germany—2.0%       
 
 Siemens AG Sponsored ADR    50,600   
4,407,260 
 
 
 
Italy—2.0%       
 
 Eni SpA Sponsored ADR (c)    72,850   
4,335,303 
 
 
 
Japan—9.3%       
 
 Canon, Inc. Sponsored ADR    44,700   
2,337,363 
 
 Hoya Corp. Sponsored ADR (d)    54,300   
2,049,825 
 
 Mitsubishi UFJ Financial       
 
   Group, Inc. ADR (c)    323,100   
4,138,911 
 
 Mitsui Sumitomo Insurance       
 
   Co., Ltd. ADR (d)    17,600   
2,201,771 
 
 Nissan Motor Co., Ltd.       
 
   Sponsored ADR (d)    87,600   
1,967,496 
 
 Nomura Holdings, Inc. ADR    332,600   
5,847,108 
 
 Sumitomo Mitsui Financial       
 
   Group, Inc. ADR (d)    209,100   
2,216,460 
 
 
 Total Japan       
20,758,934 
 
 
 
Netherlands—2.3%       
 
 Heineken NV ADR (d)    225,600   
5,136,912 
 
 
 
Sweden—1.0%       
 
 Telefonaktiebolaget LM Ericsson       
 
   Sponsored ADR    61,900   
2,132,455 
 
 
 
Switzerland—9.3%       
 
 Credit Suisse Group Sponsored       
 
   ADR    73,400   
4,253,530 
 
 Nestle SA Sponsored ADR    57,400   
5,002,984 
 
 Novartis AG ADR    39,600   
2,314,224 
 
 Swiss Re Sponsored ADR    55,200   
4,223,904 
 
 UBS AG    42,800   
2,538,468 
 
 Zurich Financial Services AG ADR  .  92,500   
2,257,000 
 
 
 Total Switzerland       
20,590,110 
 
 
United Kingdom—17.1%             
 Barclays PLC Sponsored ADR (c), (d)    67,800   
$ 
3,442,206   
 BP PLC Sponsored ADR    69,600      4,564,368   
 Cadbury Schweppes PLC             
   Sponsored ADR (c)    112,700      4,820,179   
 Diageo PLC Sponsored ADR    101,100      7,182,144   
 GlaxoSmithKline PLC ADR (c)    80,200      4,269,046   
 HSBC Holdings PLC Sponsored ADR (d)    76,300      6,983,739   
 Tesco PLC Sponsored ADR    119,000      2,400,670   
 Vodafone Group PLC Sponsored ADR    191,712      4,382,537   
 
 Total United Kingdom          38,044,889   
 
 
United States—44.8%             
 Bank of America Corp. (c)    138,200      7,403,374   
 Chevron Corp.    73,400      4,760,724   
 Cisco Systems, Inc. (a)    220,400      5,069,200   
 Citigroup, Inc. (c)    138,900      6,899,163   
 ConocoPhillips    32,900      1,958,537   
 Dell, Inc. (a)    92,900      2,121,836   
 Exxon Mobil Corp. (c)    105,100      7,052,210   
 First Data Corp. (c)    84,300      3,540,600   
 General Electric Co.    116,300      4,105,390   
 Honeywell International, Inc.    55,000      2,249,500   
 International Business Machines Corp.    53,100      4,351,014   
 Johnson & Johnson (c)    104,300      6,773,242   
 JPMorgan Chase & Co. (c)    148,896      6,992,156   
 Mellon Financial Corp.    60,400      2,361,640   
 Microsoft Corp. (c)    326,400      8,920,512   
 Oracle Corp. (a), (c)    477,000      8,461,980   
 Pfizer, Inc.    103,500      2,935,260   
 The Coca-Cola Co. (c)    74,200      3,315,256   
 The Home Depot, Inc.    165,500      6,002,685   
 United Technologies Corp.    68,900      4,364,815   
 
 Total United States          99,639,094   
 
 
Total Common Stocks             
 (Identified cost $175,796,818)          205,353,829   
 

See Notes to Portfolio of Investments.

7


Lazard Global Total Return & Income Fund, Inc.
Portfolio of Investments (continued)
September 30, 2006 (unaudited)

   
Principal 
 
   
Amount 
 
Description   
(000) (e) 
Value 
 
 
Foreign Government   
 
 
 Obligations—4.4%   
 
 
Egypt—3.6%   
 
 
 Egypt Treasury Bills:   
 
 
   0.00%, 10/17/06   
6,800 
 
$ 
1,179,505 
 
   0.00%, 11/07/06   
2,725 
 
470,219 
 
   0.00%, 01/02/07   
7,500 
 
1,276,633 
 
   0.00%, 01/16/07   
3,875 
 
657,365 
 
   0.00%, 01/30/07   
7,400 
 
1,250,921 
 
   0.00%, 02/27/07   
11,700 
 
1,964,497 
 
   0.00%, 03/13/07   
3,950 
 
661,005 
 
   0.00%, 03/20/07   
3,250 
 
542,953 
 
 
 Total Egypt   
 
8,003,098 
 
 
 
Mexico—0.3%   
 
 
 Mexico Government Bond,   
 
 
   9.00%, 12/20/12   
6,050 
 
571,790 
 
 
 
Turkey—0.5%   
 
 
 Turkey Government Bond,   
 
 
   15.00%, 02/10/10   
2,033 
 
1,198,966 
 
 
 
Total Foreign Government   
 
 
 Obligations   
 
 
 (Identified cost $9,899,563)   
 
9,773,854 
 
 
 
Structured Notes—2.2%   
 
 
Brazil—1.3%   
 
 
 Citibank Brazil Inflation-Linked   
 
 
   Bond NTN-B:   
 
 
   9.55%, 05/18/09 (f)   
927 
 
943,211 
 
   9.55%, 08/17/10 (f)   
1,029 
 
1,013,583 
 
   9.10%, 05/18/15 (f)   
989 
 
936,845 
 
 
 Total Brazil   
 
2,893,639 
 
 
Colombia—0.2%   
 
 
 Citibank Colombia TES Linked Deposit,   
 
 
   9.61%, 04/26/12 (f)   
397 
 
$ 
439,646
 
 
Costa Rica—0.7%   
 
 
 Citibank CRC Linked Deposit,   
 
 
   12.06%, 10/11/06 (f)   
1,511 
 
1,581,648
 
 
Total Structured Notes   
 
 
 (Identified cost $4,829,132)   
 
4,914,933
 
 
Short-Term Investments—8.0%   
 
 
Repurchase Agreement—0.6%   
 
 
 State Street Bank and Trust Co.,   
 
 
   4.50%, 10/02/06   
 
 
   (Dated 09/29/06, collateralized by   
 
 
   $1,010,000 United States Treasury   
 
 
   Bond, 7.125%, 02/15/23, with a   
 
 
   value of $1,276,508)   
 
 
   Proceeds of $1,251,469 (c)  $
1,251 
 
1,251,000
 
 
Description   
Shares 
 
Value
 
Collateral for Securities   
 
 
 on Loan—7.4%   
 
 
 State Street Navigator Securities   
 
 
   Lending Prime Portfolio,   
 
 
   5.28% (g), (h)   
16,527,295 
 
16,527,295
 
 
Total Short-Term Investments   
 
 
 (Identified cost $17,778,295)   
 
17,778,295
 
 
Total Investments—107.0%   
 
 
 (Identified cost $208,303,808) (b)   
 
$ 
237,820,911
 
Liabilities in Excess of Cash   
 
 
 and Other Assets—(7.0)%   
 
(15,544,272
) 
 
Net Assets—100.0%   
 
$ 
222,276,639
 

See Notes to Portfolio of Investments.

8


Lazard Global Total Return & Income Fund, Inc.
Portfolio of Investments (continued)
September 30, 2006 (unaudited)
Forward Currency Contracts open at September 30, 2006:

   
U.S. $ Cost 
U.S. $ 
 
Forward Currency   
Expiration 
Foreign 
on Origination 
Current 
Unrealized 
Unrealized 
 
Purchase Contracts   
Date 
Currency 
Date 
Value 
Appreciation 
Depreciation 
 
 
ARS    10/27/06    1,981,070   
$ 
637,000   
$
636,052   
$ 
—   
$
948 
ARS    11/06/06    5,836,931      1,881,000    1,871,861      —    9,139   
ARS    11/13/06    1,917,300      616,000    614,404      —    1,596   
BRL    10/06/06    1,704,484      764,000    784,136      20,136    —   
BRL    12/20/06    1,672,163      645,000    758,258      113,258    —   
BRL    12/28/06    6,908,000      2,823,626    3,129,679      306,053    —   
BRL    01/31/07    1,874,000      773,421    843,665      70,244    —   
BWP    10/11/06    3,821,000      651,870    594,773      —    57,097   
BWP    11/06/06    4,582,208      749,000    710,112      —    38,888   
BWP    11/20/06    3,795,483      605,000    586,982      —    18,018   
BWP    12/21/06    2,080,969      332,000    320,386      —    11,614   
BWP    02/22/07    2,826,000      445,060    431,417      —    13,643   
BWP    03/21/07    3,044,586      478,000    463,132      —    14,868   
CLP    10/13/06    326,884,800      604,000    608,143      4,143    —   
CLP    10/16/06    264,913,550      493,000    492,837      —    163   
COP    10/10/06    1,395,221,500      601,000    582,254      —    18,746   
COP    10/10/06    919,525,550      383,000    383,737      737    —   
COP    10/10/06    321,381,000      135,000    134,119      —    881   
COP    10/23/06    360,262,500      150,000    150,187      187    —   
COP    10/25/06    360,262,500      150,000    150,163      163    —   
COP    10/26/06    2,026,843,250      823,000    844,751      21,751    —   
COP    11/17/06    759,720,000      312,000    316,099      4,099    —   
COP    11/17/06    708,235,800      291,000    294,678      3,678    —   
COP    12/29/06    5,317,340,000      1,999,000    2,205,068      206,068    —   
GHC    10/13/06    1,667,326,000      178,000    180,223      2,223    —   
GHC    12/18/06    2,076,144,000      222,000    221,589      —    411   
GHC    01/24/07    5,039,700,000      535,000    534,144      —    856   
GHC    02/28/07    9,296,280,000      980,000    978,952      —    1,048   
IDR    10/16/06    24,879,080,000      2,722,000    2,696,919      —    25,081   
IDR    10/30/06    4,771,840,000      512,000    517,273      5,273    —   
IDR    11/13/06    4,817,605,000      541,000    522,234      —    18,766   
IDR    12/20/06    5,430,180,000      588,000    588,637      637    —   
IDR    03/20/07    5,480,160,000      588,000    594,055      6,055    —   
ILS    11/20/06    3,594,962      820,000    834,789      14,789    —   
INR    10/05/06    88,092,900      1,890,000    1,917,803      27,803    —   
INR    11/07/06    24,714,880      529,000    537,362      8,362    —   
INR    11/17/06    18,388,470      393,000    399,680      6,680    —   
INR    12/22/06    45,073,160      979,000    978,530      —    470   
ISK    10/11/06    41,197,452      582,000    586,681      4,681    —   
ISK    11/06/06    35,790,440      511,000    506,732      —    4,268   
KRW    10/10/06    1,173,640,000      1,220,000    1,240,306      20,306    —   
KRW    10/25/06    451,390,800      476,000    477,220      1,220    —   
KRW    10/27/06    451,390,800      476,000    477,245      1,245    —   

See Notes to Portfolio of Investments.

9


Lazard Global Total Return & Income Fund, Inc.
Portfolio of Investments (continued)
September 30, 2006 (unaudited)
Forward Currency Contracts open at September 30, 2006 (continued):
   
U.S. $ Cost 
U.S. $ 
 
Forward Currency   
Expiration 
Foreign 
on Origination 
Current 
Unrealized 
Unrealized 
 
Purchase Contracts   
Date 
Currency 
Date 
Value 
Appreciation 
Depreciation 
 
 
KZT    11/15/06    35,893,000   
$ 
285,818   
$
282,626   
$ 
—   
$
3,192   
KZT    12/15/06    35,366,800      297,500    278,601      —    18,899   
KZT    09/08/07    68,641,200      552,000    540,271      —    11,729   
MXN    11/16/06    4,670,058      430,000    423,570      —    6,430   
MXN    11/24/06    11,942,705      1,053,000    1,082,725      29,725    —   
MXN    01/08/07    5,795,933      519,000    524,104      5,104    —   
MXN    03/30/07    6,290,201      557,000    566,058      9,058    —   
MYR    10/10/06    2,403,306      657,000    651,964      —    5,036   
MYR    10/12/06    3,226,311      891,000    875,309      —    15,691   
MYR    10/16/06    2,713,580      740,000    736,343      —    3,657   
MYR    10/18/06    2,713,358      740,000    736,352      —    3,648   
MYR    11/10/06    1,911,360      543,000    519,281      —    23,719   
MYR    11/13/06    2,908,000      790,432    790,166      —    266   
NGN    10/05/06    148,162,900      1,135,000    1,153,622      18,622    —   
NGN    01/10/07    128,760,000      990,005    989,706      —    299   
PEN    11/15/06    1,737,470      538,500    535,125      —    3,375   
PEN    02/15/07    1,738,547      538,500    535,517      —    2,983   
PHP    11/13/06    56,437,200      1,098,000    1,121,460      23,460    —   
PHP    12/18/06    33,201,950      655,000    658,645      3,645    —   
PHP    01/31/07    132,810,580      2,557,000    2,630,222      73,222    —   
PHP    06/26/07    81,843,980      1,502,000    1,610,827      108,827    —   
PLN    10/16/06    3,033,055      991,000    967,852      —    23,148   
PLN    10/17/06    8,637,650      2,761,000    2,756,382      —    4,618   
PLN    11/20/06    5,363,871      1,723,000    1,713,712      —    9,288   
RON    10/10/06    2,115,000      767,779    756,717      —    11,062   
RON    10/23/06    770,000      280,010    275,192      —    4,818   
RON    10/25/06    8,618,000      3,100,446    3,079,486      —    20,960   
RON    10/31/06    2,968,000      1,074,389    1,060,023      —    14,366   
RON    10/31/06    1,655,570      593,735    591,288      —    2,447   
RON    11/14/06    1,845,000      664,841    658,269      —    6,572   
RON    11/21/06    1,965,588      703,000    700,935      —    2,065   
RUB    10/06/06    14,598,120      509,000    544,847      35,847    —   
RUB    10/06/06    26,374,080      993,000    984,361      —    8,639   
RUB    02/01/07    4,929,750      175,000    184,836      9,836    —   
RUB    02/26/07    42,336,000      1,470,000    1,588,587      118,587    —   
RUB    02/26/07    7,284,020      251,000    273,320      22,320    —   
RUB    02/26/07    6,131,270      227,000    230,066      3,066    —   
RUB    05/24/07    106,389,050      3,826,944    3,996,193      169,249    —   
RUB    09/19/08    21,264,250      725,000    790,737      65,737    —   
SGD    10/06/06    1,187,874      753,500    749,010      —    4,490   
SGD    10/10/06    1,187,825      753,500    749,128      —    4,372   
SGD    10/12/06    1,067,116      679,000    673,068      —    5,932   
SGD    10/13/06    2,227,539      1,389,000    1,405,057      16,057    —   
SGD    10/23/06    2,230,585      1,422,000    1,407,680      —    14,320   
SGD    10/30/06    1,643,569      1,038,000    1,037,588      —    412   

See Notes to Portfolio of Investments.

10


azard Global Total Return & Income Fund, Inc.
Portfolio of Investments (concluded)
September 30, 2006 (unaudited)
Forward Currency Contracts open at September 30, 2006 (concluded):

   
U.S. $ Cost 
U.S. $ 
 
Forward Currency   
Expiration 
Foreign 
on Origination 
Current 
Unrealized 
Unrealized 
 
Purchase Contracts   
Date 
Currency 
Date 
Value 
Appreciation 
Depreciation 
 
 
SIT    10/18/06    206,775,360   
$
1,098,000   
$
1,094,166   
$ 
—   
$
3,834   
SKK    10/25/06    24,330,560   
828,500   
825,065   
—   
3,435   
SKK    11/27/06    24,324,760   
828,500   
825,328   
—   
3,172   
THB    11/10/06    60,777,500   
1,610,000   
1,609,005   
—   
995   
TRY    10/20/06    1,324,766   
893,000   
869,142   
—   
23,858   
TRY    10/20/06    1,682,579   
1,097,000   
1,103,893   
6,893   
—   
TRY    11/01/06    213,013   
143,000   
139,106   
—   
3,894   
TRY    02/09/07    1,428,000   
869,406   
897,217   
27,811   
—   
TRY    05/31/07    746,493   
459,352   
449,993   
—   
9,359   
TRY    06/27/07    4,353,244   
2,699,686   
2,597,945   
—   
101,741   
TZS    10/05/06    140,859,000   
111,000   
109,201   
—   
1,799   
TZS    10/12/06    271,637,300   
209,000   
210,132   
1,132   
—   
TZS    10/13/06    758,249,000   
617,040   
586,381   
—   
30,659   
TZS    10/26/06    447,902,000   
364,000   
344,991   
—   
19,009   
TZS    10/26/06    473,088,000   
384,000   
364,390   
—   
19,610   
TZS    11/09/06    583,200,000   
450,000   
447,022   
—   
2,978   
TZS    11/16/06    275,920,200   
213,000   
210,964   
—   
2,036   
TZS    12/05/06    782,207,000   
615,766   
594,036   
—   
21,730   
TZS    12/15/06    442,737,000   
346,880   
335,043   
—   
11,837   
TZS    12/20/06    695,237,000   
547,000   
525,196   
—   
21,804   
TZS    05/08/07    520,053,000   
396,684   
376,964   
—   
19,720   
UAH    10/11/06    1,497,000   
296,847   
296,455   
—   
392   
ZAR    10/23/06    7,708,676   
1,047,303   
990,424   
—   
56,879   
ZMK    10/13/06    1,432,822,000   
346,737   
343,076   
—   
3,661   
 
Total Forward Currency Purchase Contracts       
$
 92,496,577   
$
 93,259,230   
$ 
 1,597,989   
$
 835,336   
 
 
   
U.S. $ Cost 
U.S. $ 
 
Forward Currency   
Expiration 
Foreign 
on Origination 
Current 
Unrealized 
Unrealized 
 
Sale Contracts   
Date 
Currency 
Date 
Value 
Appreciation 
Depreciation 
 
 
BRL    12/28/06    1,643,477   
$
711,000   
$
744,579     
$ 
—   
$
33,579   
COP    10/10/06    1,395,221,500   
539,529   
582,254   
—   
42,725   
RUB    05/24/07    23,963,580   
892,000   
900,122   
—   
8,122   
THB    11/10/06    60,777,500   
1,598,567   
1,609,005   
—   
10,438   
TRY    02/09/07    1,428,000   
994,637   
897,217   
97,420   
—   
TZS    05/08/07    520,053,000   
392,197   
376,964   
15,233   
—   
 
Total Forward Currency Sale Contracts       
$
5,127,930   
$
5,110,141   
112,653   
94,864   
 
Gross unrealized appreciation/depreciation on Forward Currency Contracts   
   
   
$ 
1,710,642   
$
930,200   
 

See Notes to Portfolio of Investments.

11


Lazard Global Total Return & Income Fund, Inc.
Notes to Portfolio of Investments
September 30, 2006 (unaudited)
(a) Non-income producing security.
 
(b) For federal income tax purposes, the aggregate cost was $208,303,808, aggregate gross unrealized appreciation was $34,130,265, aggregate gross unrealized depreciation was $4,613,162 and the net unrealized appreciation was $29,517,103.
 
(c) Segregated security for forward currency contracts.
 
(d) Security or portion thereof is out on loan.
 
(e) Principal amount denominated in respective country’s currency unless otherwise specified.
 
(f) Pursuant to Rule 144A under the Securities Act of 1933, these securities may only be traded among “qualified institutional buyers.” Principal amount denominated in U.S. dollar. Interest rate shown reflects current yield as of September 30, 2006.
 
(g) Rate shown reflects 7 day yield as of September 30, 2006.
 
(h) Represents security purchased with cash collateral received for securities on loan.
 
Security Abbreviations:
ADR — American Depositary Receipt
NTN-B — Brazil Sovereign “Nota do Tesouro Nacional”
TES — Titulos de Tesoreria

Currency Abbreviations:       
ARS  —  Argentine Peso    NGN   — Nigerian Naira
BRL  —  Brazilian Real    PEN  — Peruvian New Sol 
BWP  —  Botswanian Pula    PHP  — Philippine Peso 
CLP  —  Chilean Peso    PLN  — Polish Zloty 
COP  —  Colombian Peso    RON  — Romanian Leu 
CRC  —  Costa Rican Colon    RUB  — Russian Ruble 
GHC  —  Ghanaian Cedi    SGD  — Singapore Dollar 
IDR  —  Indonesian Rupiah    SIT  — Slovenian Tolar 
ILS  —  Israeli Shekel    SKK  — Slovenska Koruna 
INR  —  Indian Rupee    THB  — Thai Baht 
ISK  —  Iceland Krona    TRY  — New Turkish Lira 
KRW  —  South Korean Won    TZS  — Tanzanian Shilling 
KZT  —  Kazakhstanian Tenge    UAH  — Ukranian Hryvnia 
MXN  —  Mexican Peso    ZAR  — South African Rand 
MYR  —  Malaysian Ringgit    ZMK  — Zambian Kwacha 

12


Lazard Global Total Return & Income Fund, Inc.
Notes to Portfolio of Investments (concluded)
September 30, 2006 (unaudited)

Portfolio holdings by industry (as percentage of net assets):
_____________________________________________________

Industry     
Alcohol & Tobacco    5.5 % 
Automotive.    0.9  
Banking    13.8  
Commercial Services    1.6  
Computer Software    7.8  
Drugs    4.3  
Energy Integrated    12.1  
Financial Services    11.1  
Food & Beverages    5.9  
Insurance    3.9  
Manufacturing    6.8  
Medical Products    3.0  
Retail    3.8  
Semiconductors & Components    2.0  
Technology.    2.0  
Technology Hardware    5.9  
Telecommunications    2.0  
   Subtotal.    92.4  
Foreign Government Obligations    4.4  
Structured Notes.    2.2  
Repurchase Agreement.    0.6  
Collateral for Securities on Loan.    7.4  
   Total Investments    107.0 % 

13


Lazard Global Total Return & 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 Shareholder Services, 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 of Directors, 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 43010, Providence, Rhode Island 02940-3010.

14


Lazard Global Total Return & Income Fund, Inc.
Board of Directors and Officers Information
(unaudited)

    Position(s)    Principal Occupation(s) During Past 5 Years 
Name (Age)    with the Fund(1)    and Other Directorships Held 
Board of Directors:         
         
Class I — Directors with Term Expiring in 2009     
Independent Directors:         
Leon Pollack (65)    Director    Director, Lazard Alternative Strategies Fund, LLC (“Lazard 
        Alternative”); Former Managing Director, Donaldson, Lufkin & 
        Jenrette. 
         
Robert M. Solmson (58)    Director    Director, Lazard Alternative; Director, Colonial Williamsburg Co.; 
        Former Chief Executive Officer and Chairman, RFS Hotel 
        Investors, Inc.; Former Director, Morgan Keegan, Inc.; Former 
        Director, Independent Bank, Memphis. 
Interested Director:         
Charles Carroll (46)    Chief Executive Officer,    Deputy Chairman and Head of Global Marketing of the 
    President and Director    Investment Manager. 


Class II — Directors with Term Expiring in 2007 

   
Independent Directors:         
Kenneth S. Davidson (61)    Director    President, Davidson Capital Management Corporation; President, 
        Aquiline Advisors LLC; Director, Lazard Alternative; Trustee, The 
        Juilliard School; Chairman of the Board, Bridgehampton Chamber 
        Music Festival; Trustee, American Friends of the National 
        Gallery/London. 
         
Lester Z. Lieberman (76)    Director    Private Investor; Chairman, Healthcare Foundation of New Jersey; 
        Director, Cives Steel Co.; Director, Northside Power Transmission 
        Co.; Advisory Trustee, New Jersey Medical School; Director, Public 
        Health Research Institute; Trustee Emeritus, Clarkson University; 
        Council of Trustees, New Jersey Performing Arts Center. 
Class III — Directors with Term Expiring in 2008     
Independent Directors:         
John J. Burke (78)    Director    Lawyer and Private Investor; Director, Lazard Alternative; 
        Director, Pacific Steel & Recycling; Director, Sletten Construction 
        Company; Trustee Emeritus, The University of Montana Foundation. 
Richard Reiss, Jr. (62)    Director    Chairman, Georgica Advisors LLC, an investment manager; Director, 
        Lazard Alternative; Director, O’Charley’s, Inc., a restaurant chain. 
Interested Director:         
Ashish Bhutani (46)    Director    Chief Executive Officer of the Investment Manager; from 2001 to 
        December 2002, Co-Chief Executive Officer North America of 
        Dresdner Kleinwort Wasserstein and member of its Global 
        Corporate and Markets Board and the Global Executive 
        Committee; from 1995 to 2001, Chief Executive Officer of 
        Wasserstein Perella Securities; and from 1989 to 2001, Deputy 
        Chairman of Wasserstein Perella Group. 

(1)      Each Director also serves as a Director for The Lazard Funds, Inc., Lazard Retirement Series, Inc. and Lazard World Dividend & Income Fund, Inc. (collectively, the “Lazard Funds”).
 

15


Lazard Global Total Return & Income Fund, Inc.
Board of Directors and Officers Information (concluded)
(unaudited)
    Position(s)     
Name (Age)    with the Fund(1)    Principal Occupation(s) During Past 5 Years 
 
Officers:         
Nathan A. Paul (33)    Vice President    Managing Director and General Counsel of the Investment 
    and Secretary    Manager. 

Stephen St. Clair (48)  		  Treasurer    Vice President of the Investment Manager. 

Brian Kawakami (56)  		  Chief Compliance Officer    Senior Vice President and Chief Compliance Officer of the 
        Investment Manager; Chief Compliance Officer at INVESCO, 
        from July 2002 to April 2006; Chief Compliance Officer at Aeltus 
        Investment Management, from 1993 to July 2002. 

Brian D. Simon (44)  		  Assistant Secretary    Director of the Investment Manager; Vice President, Law & 
        Regulations at J. & W. Seligman & Co., from July 1999 to 
        October 2002. 

David A. Kurzweil (32)  		  Assistant Secretary    Vice President of the Investment Manager; Associate at 
        Kirkpatrick & Lockhart LLP, a law firm, from August 1999 to 
        January 2003. 

Cesar A. Trelles (31)  		  Assistant Treasurer    Fund Administration Manager of the Investment Manager; 
        Manager for Mutual Fund Finance Group at UBS Global Asset 
        Management, from August 1998 to August 2004. 

(1)      Each officer also serves as an officer for each of the Lazard Funds.

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Lazard Global Total Return & Income Fund, Inc.
30 Rockefeller Plaza
New York, New York 10112-6300
Telephone: 800-828-5548
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 Lincoln Street
Boston, Massachusetts 02111

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

Dividend Disbursing Agent
Computershare Shareholder Services, Inc.
P.O. Box 43010
Providence, Rhode Island 02940-3010

Independent Registered Public Accounting Firm
Deloitte & Touche LLP
Two World Financial Center
New York, New York 10281-1414

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