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 quarter ended March 31, 2014. 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.”

 

For the first quarter 2014, the Fund’s net asset value (“NAV”) performance underperformed its benchmark, the Morgan Stanley Capital International (MSCI^®) World^® Index (the “Index”). However, we are pleased with LGI’s favorable NAV performance over the three-year period and since 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 March 31, 2014)

 

For the first quarter of 2014, the Fund’s NAV returned -0.3%, underperforming the Index return of 1.3%. Similarly, the Fund’s NAV return of 13.0% for the twelve months ended March 31, 2014 underperformed the Index gain of 19.1%. However, the Fund’s NAV performance outperformed the Index for the three-year period (11.5% versus the benchmark’s 10.2% return), on an annualized basis, as well as since inception, returning, on an annualized basis, 7.4% versus 6.8% for the Index. Shares of LGI ended the first quarter of 2014 with a market price of $17.41, representing an 11.0% discount to the Fund’s NAV of $19.56.

 

The Fund’s net assets were $187.9 million as of March 31, 2014, with total leveraged assets of $244.1 million, representing a 23.0% leverage rate. This leverage rate is lower than that at the end of the fourth quarter of 2013 (24.8%), and below the maximum permitted leverage rate of 33¹/₃%.

 

Within the global equity portfolio, stock selection in the health care sector contributed to performance in the first quarter. In contrast, stock selection in the financials sector and in Japan detracted from performance for the quarter.

 

Performance for the smaller, short duration¹ emerging market currency and debt portion of the Fund was relatively weak in the first quarter, and detracted from performance over the last twelve months. However, it has contributed positively to performance over longer time-periods and since inception.

 

As of March 31, 2014, 77.4% of the Fund’s total leveraged assets consisted of global equities, 21.6% consisted of emerging market currency and debt instruments, and 1.0% consisted of cash and other net 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 of $0.10386 represents a distribution yield of 7.2% based on the Fund’s $17.41 market price as of the close of trading on the NYSE on March 31, 2014. It is currently estimated that $0.22434 of the $0.31158 distributed per share year-to-date through March 31, 2014 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. 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.

Lazard Global Total Return and Income Fund, Inc.

Investment Overview (continued)

 

 

Message from the Portfolio Managers

 

Global Equity Portfolio

(77.4% 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 GlaxoSmithKline, a global research-based pharmaceutical company based in the United Kingdom; Citigroup, a US-based financial services company; Canon, a Japanese manufacturer and distributor of network digital multifunction devices, copying machines, printers and cameras; and Total, a French 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 March 31, 2014, 49.3% of these stocks were based in North America, 27.0% were based in continental Europe (not including the United Kingdom), 13.8% were from the United Kingdom, 5.6% were from Japan, 3.7% were from the rest of Asia (not including Japan), and 0.6% were from the Middle East. The global equity portfolio is similarly well diversified across a number of industry sectors. The top two sectors, by weight, at March 31, 2014, were financials (17.6%), which includes banks, diversified financials, insurance, and real estate; and health care (16.1%), which includes health care equipment and services, and pharmaceuticals biotechnology and life sciences. Other sectors in the portfolio include consumer discretionary, consumer staples, energy, industrials, information technology, materials, and telecom services. The average dividend yield on the securities held in the global equity portfolio was approximately 2.7% as of March 31, 2014.

 

Global Equity Markets Review

Global markets rose during the first quarter, despite unease over the US Federal Reserve’s (the “Fed”) monetary policy, slowing growth in China, and geopolitical tension in eastern Europe. Stocks in the United States rose, but were somewhat volatile throughout the quarter, as investors reacted to messages from the Fed about tapering. Many investors became concerned that the Fed may begin to raise interest rates sooner than previously expected. However, at the end of the quarter Fed Chairman Janet Yellen reassured markets that the Fed intends to keep interest rates low until the US economy is stronger. Economic reports were mixed, with weaker data largely being attributed to severe winter weather in parts of the country. Japanese markets fell as disappointing fourth-quarter GDP growth and an impending consumption tax increase raised concerns about the effectiveness of Abenomics. In Europe, stocks rose after the euro zone posted positive fourth-quarter GDP growth, reassuring investors that the region’s recovery was gaining momentum. Chinese markets fell after a number of government reports indicated slowing economic activity in the country, including disappointing industrial production, fixed-asset investment, and retail sales. Uncertainty surrounding Crimea and its potential economic implications for other regions also spurred global uncertainty.

 

What Helped and What Hurt LGI

Stock selection in the health care sector contributed to performance. Shares of Danish pharmaceutical company Novo Nordisk rose after management reported solid quarterly results, which highlighted strong sales growth. Management also increased its guidance for 2014. We continue to like Novo Nordisk for its dominant position in diabetes treatments, which we believe can continue to drive high levels of financial productivity. Stock selection in the consumer discretionary sector also helped returns. Shares of German automaker BMW rose after management issued a bullish operating profit forecast for the year. We were encouraged by management’s comments, and believe BMW should benefit from demand for new models, an increased focus on prudent capital management, and a recovery in European car markets.

 

In contrast, stock selection in the financials sector detracted from performance. Shares of Japanese diversified financial companies including Mitsubishi UFJ

 

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Lazard Global Total Return and Income Fund, Inc.

Investment Overview (continued)

 

 

Financial and Sumitomo Mitsui Financial fell as optimism about the impacts of Abenomics faded, causing investors to sell companies with broad exposure to the country’s economy. However, we continue to believe that the government’s reforms have great potential to spur economic growth in the country. Stock selection in the information technology sector also hurt returns. After a strong rally in the latter half of 2013, shares of German software services company SAP fell after management issued revenue guidance that disappointed investors. We continue to hold SAP as we believe its transition toward cloud computing will benefit the company over the longer term, and that valuation is attractive at current levels.

 

Emerging Market Currency and Debt Portfolio

(21.6% of total leveraged assets)

 

The Fund also seeks enhanced income through investing in primarily high-yielding, short-duration emerging market forward currency contracts and local currency debt instruments. As of March 31, 2014, this portfolio consisted of forward currency contracts (81.3%) and sovereign debt obligations (18.7%). The average duration of the emerging market currency and debt portfolio remained relatively unchanged from the fourth quarter of 2013 to the first quarter at approximately 8 months, while the average yield increased from 5.8%² at the end of December 31, 2013 to 6.4% on March 31, 2014.

 

Emerging Market Currency and Debt Market Review

Emerging-market local currency and debt markets began the year sharply weaker as capital fled emerging-market assets and global contagion spread into developed economies’ asset markets. Most liquid, “mainstream” emerging markets subsequently recovered from January’s sell-off, but frontier markets were generally weaker.

 

While emerging-market growth rates continue to outpace the developed world, the magnitude of that differential has been narrowing as emerging economies rebalance away from domestic demand, credit-fueled growth models which propelled their economic expansions in the years following the global financial crisis. As emerging-market growth becomes more evenly shared between domestic and external demand, and as domestic policies selectively tighten, we believe emerging countries’ current account balances will continue to improve.

 

What Helped and What Hurt LGI

Top contributors during the first quarter were Brazil, Indonesia, and India. Brazilian exposure benefited from carry, spot, and duration gains as the currency strengthened and local bonds (both nominal and inflation-linked) outperformed the money market. Indonesia and India benefited from fiscal improvement, reform momentum, and tighter monetary policy. The team also avoided exposure to Argentina and the Ukraine, which devalued sharply during the quarter.

 

Conversely, Russia, Kazakhstan, Zambia, and Ghana were the largest detractors during the first quarter. Russian exposure detracted as geopolitical tensions flared and capital flight overwhelmed the seasonal current account surplus. Russian authorities have intervened heavily to contain the market stress. Kazakhstan authorities devalued the tenge following sharp appreciation versus the Russian ruble, a key trading partner. Despite pre-emptively trimming exposure prior to the move, remaining Kazakh exposure detracted. Zambia and Ghana detracted due to commodity linkages to China in the former and weak balance of payments and high inflation in the latter. Both central banks hiked interest rates but have undertaken only limited intervention to support their respective currencies.

 

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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 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, or 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 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 March 31, 2014; 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 the outlooks for markets, sectors and securities as discussed herein.

 

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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)

 

 

 

 

 

 

5

Lazard Global Total Return and Income Fund, Inc.

Investment Overview (concluded)

 

 

Ten Largest Equity Holdings
March 31, 2014 (unaudited)
Security		Value			Percentage of Net Assets
Novartis AG ADR		$6,708,078			3.6	%
HSBC Holdings PLC Sponsored ADR		6,204,462			3.3
Honeywell International, Inc.		6,001,572			3.2
Mitsubishi UFJ Financial Group, Inc. ADR		5,821,986			3.1
United Technologies Corp.		5,514,848			2.9
Sanofi SA ADR		5,499,856			2.9
Chevron Corp.		5,469,860			2.9
Apple, Inc.		5,421,074			2.9
Halliburton Co.		5,294,211			2.8
Bayerische Motoren Werke AG ADR		5,247,049			2.8

 

6

Lazard Global Total Return and Income Fund, Inc.

Portfolio of Investments

March 31, 2014 (unaudited)

 

 

Description		Shares				Value
Common Stocks—100.6%
Australia—1.4%
BHP Billiton, Ltd. Sponsored ADR			38,500			$	2,609,145
Denmark—2.5%
Novo Nordisk A/S Sponsored ADR			105,000				4,793,250
Finland—1.5%
Sampo Oyj, A Shares ADR			109,500				2,832,765
France—6.3%
GDF Suez Sponsored ADR			75,981				2,077,320
Sanofi SA ADR			105,200				5,499,856
Total SA Sponsored ADR			64,000				4,198,400
							11,775,576
Germany—5.4%
Bayerische Motoren Werke AG ADR			124,900				5,247,049
SAP AG Sponsored ADR			59,300				4,821,683
							10,068,732
Israel—0.7%
Israel Chemicals, Ltd. ADR			140,700				1,236,753
Italy—2.0%
Eni SpA Sponsored ADR			74,250				3,725,122
Japan—5.6%
Canon, Inc. Sponsored ADR			44,700				1,388,382
Mitsubishi UFJ Financial Group, Inc. ADR			1,050,900				5,821,986
Sumitomo Mitsui Financial Group, Inc. Sponsored ADR			393,600				3,404,640
							10,615,008
Singapore—2.3%
Singapore Telecommunications, Ltd. ADR			151,100				4,399,428
Sweden—2.7%
Assa Abloy AB ADR			187,100				4,982,473
Switzerland—6.8%
Novartis AG ADR			78,900				6,708,078
UBS AG			154,572				3,202,732
Zurich Insurance Group AG ADR			92,500				2,841,961
							12,752,771
United Kingdom—13.8%
BP PLC Sponsored ADR			102,155				4,913,656
British American Tobacco PLC Sponsored ADR			37,700				4,200,911
GlaxoSmithKline PLC Sponsored ADR			80,200				4,285,086
HSBC Holdings PLC Sponsored ADR			122,063				6,204,462
Unilever PLC Sponsored ADR			99,100				4,239,498
Wm Morrison Supermarkets PLC ADR			120,300				2,150,964
							25,994,577
United States—49.6%
American Express Co.			43,800				3,943,314
Apple, Inc.			10,100				5,421,074
Chevron Corp.			46,000				5,469,860
Cisco Systems, Inc.			220,400				4,939,164
Citigroup, Inc.			106,400				5,064,640
Comcast Corp., Class A			106,120				5,174,411
ConocoPhillips			53,100				3,735,585
Emerson Electric Co.			67,600				4,515,680
Halliburton Co.			89,900				5,294,211
Honeywell International, Inc.			64,700				6,001,572
Intel Corp.			157,500				4,065,075
International Business Machines Corp .			24,460				4,708,306
Joy Global, Inc.			66,400				3,851,200
Merck & Co., Inc.			75,300				4,274,781
Oracle Corp.			100,440				4,109,000
PepsiCo, Inc.			41,100				3,431,850
Pfizer, Inc.			149,766				4,810,484
United Technologies Corp.			47,200				5,514,848
Viacom, Inc., Class B			46,800				3,977,532
Wal-Mart Stores, Inc.			62,800				4,799,804
							93,102,391
Total Common Stocks
(Identified cost $156,991,436)							188,887,991

 

See Notes to Portfolio of Investments.

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Lazard Global Total Return and Income Fund, Inc.

Portfolio of Investments (continued)

March 31, 2014 (unaudited)

 

 

		Principal
		Amount
Description		(000) (a)				Value
Foreign Government Obligations—6.5%
Brazil—2.0%
Brazil NTN-B:
6.00%, 08/15/16			503			$	537,033
6.00%, 08/15/18			850				898,109
Brazil NTN-F:
10.00%, 01/01/17			2,211				922,215
10.00%, 01/01/23			3,733				1,425,003
							3,782,360
Colombia—0.1%
Republic of Colombia,
12.00%, 10/22/15			305,000				171,993
Mexico—1.0%
Mexican Bonos:
7.00%, 06/19/14			8,360				644,952
9.50%, 12/18/14			16,100				1,283,490
							1,928,442
Russia—2.0%
Russia Government Bonds - OFZ:
6.90%, 08/03/16			13,107				366,290
7.50%, 02/27/19			11,500				316,035
7.60%, 04/14/21			27,300				737,238
7.60%, 07/20/22			16,972				451,312
7.00%, 01/25/23			21,200				543,791
8.15%, 02/03/27			19,900				540,806
7.05%, 01/19/28			30,510				754,321
							3,709,793
South Africa—0.6%
Republic of South Africa,
8.25%, 09/15/17			11,090				1,074,017
Turkey—0.5%
Turkey Government Bonds:
4.00%, 04/29/15			1,347				633,977
8.80%, 11/14/18			550				244,193
							878,170
Uruguay—0.2%
Republica Orient Uruguay,
5.00%, 09/14/18			10,730				495,888
Zambia—0.1%
Zambia Treasury Bill,
0.00%, 10/13/14			1,500				222,977
Total Foreign Government Obligations (Identified cost $13,535,475)							12,263,640

 

Description		Shares				Value
Short-Term Investment—0.9%
State Street Institutional Treasury Money Market Fund (Identified cost $1,757,381)			1,757,381			$	1,757,381
Total Investments—108.0%
(Identified cost $172,284,292) (b), (c)						$	202,909,012
Liabilities in Excess of Cash and Other Assets—(8.0)%							(15,028,885	)
Net Assets—100.0%						$	187,880,127

 

See Notes to Portfolio of Investments.

 

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Lazard Global Total Return and Income Fund, Inc.

Portfolio of Investments (continued)

March 31, 2014 (unaudited)

 

 

 

Forward Currency Purchase Contracts open at March 31, 2014:

 

						Foreign			US $ Cost			US $
				Expiration		Currency			on Origination			Current			Unrealized			Unrealized
Currency		Counterparty		Date		Amount			Date			Value			Appreciation			Depreciation
AMD		JPM		10/28/14			189,302,400		$	432,000		$	438,558		$	6,558		$	—
BRL		BRC		04/02/14			2,175,053			930,026			958,595			28,569			—
BRL		BRC		04/02/14			2,383,376			1,025,990			1,050,408			24,418			—
CLP		BNP		05/16/14			625,468,000			1,084,000			1,135,321			51,321			—
CLP		CIT		04/28/14			359,265,000			645,000			653,317			8,317			—
CLP		UBS		04/21/14			433,586,250			783,000			789,062			6,062			—
CLP		UBS		04/25/14			357,518,400			633,000			650,350			17,350			—
CNY		BRC		05/19/14			5,489,474			892,162			882,038			—			10,124
CNY		HSB		04/22/14			11,088,746			1,807,000			1,782,575			—			24,425
COP		CIT		04/10/14			2,043,747,700			996,221			1,035,889			39,668			—
COP		UBS		04/16/14			3,418,622,800			1,766,000			1,732,097			—			33,903
COP		UBS		05/23/14			1,632,157,250			799,000			824,682			25,682			—
CZK		JPM		04/04/14			17,581,440			861,162			882,333			21,171			—
CZK		JPM		04/22/14			18,921,698			946,620			949,685			3,065			—
CZK		JPM		05/05/14			17,254,885			865,933			866,089			156			—
EUR		CIT		04/07/14			332,000			461,762			457,375			—			4,387
EUR		CIT		04/07/14			353,000			484,686			486,305			1,619			—
EUR		CIT		06/23/14			1,950,771			2,716,187			2,687,159			—			29,028
EUR		JPM		04/04/14			640,723			882,725			882,688			—			37
EUR		JPM		05/06/14			665,511			898,965			916,775			17,810			—
EUR		JPM		05/06/14			764,224			1,059,099			1,052,758			—			6,341
EUR		JPM		05/06/14			999,011			1,362,263			1,376,190			13,927			—
EUR		JPM		05/06/14			1,016,434			1,383,586			1,400,191			16,605			—
GHS		CIT		04/04/14			1,343,000			503,562			498,455			—			5,107
GHS		CIT		04/15/14			3,247,000			1,213,831			1,197,601			—			16,230
HUF		BNP		04/15/14			135,177,270			618,815			605,560			—			13,255
HUF		BNP		04/15/14			192,999,800			852,923			864,590			11,667			—
HUF		JPM		04/10/14			56,496,895			250,568			253,163			2,595			—
HUF		JPM		04/10/14			435,704,550			1,906,481			1,952,392			45,911			—
IDR		JPM		04/28/14			11,790,516,000			1,031,000			1,033,168			2,168			—
IDR		SCB		04/17/14			8,957,793,000			783,778			786,462			2,684			—
INR		BRC		04/21/14			89,034,000			1,412,117			1,484,016			71,899			—
INR		SCB		04/10/14			83,934,460			1,354,000			1,402,915			48,915			—
KRW		BRC		04/24/14			1,990,594,500			1,858,024			1,868,009			9,985			—
KRW		SCB		04/24/14			1,428,872,700			1,319,000			1,340,880			21,880			—
KZT		CIT		09/12/14			108,679,000			569,000			572,219			3,219			—

 

See Notes to Portfolio of Investments.

 

9

Lazard Global Total Return and Income Fund, Inc.

Portfolio of Investments (continued)

March 31, 2014 (unaudited)

 

 

Forward Currency Purchase Contracts open at March 31, 2014 (continued):

 

						Foreign			US $ Cost			US $
				Expiration		Currency			on Origination			Current			Unrealized			Unrealized
Currency		Counterparty		Date		Amount			Date			Value			Appreciation			Depreciation
KZT		CIT		11/14/14			95,691,000		$	501,000		$	497,132		$	—		$	3,868
KZT		CIT		02/13/15			112,132,000			578,000			571,881			—			6,119
KZT		HSB		06/16/14			66,358,400			356,000			356,197			197			—
KZT		HSB		06/16/14			106,216,700			669,503			570,148			—			99,355
KZT		HSB		06/16/14			134,019,200			844,056			719,386			—			124,670
KZT		HSB		09/11/14			108,679,000			569,000			572,340			3,340			—
MXN		CIT		04/30/14			31,020,000			2,350,000			2,370,883			20,883			—
MYR		BRC		04/10/14			2,185,292			667,000			668,824			1,824			—
MYR		BRC		05/21/14			4,803,828			1,460,441			1,466,030			5,589			—
MYR		JPM		04/21/14			5,140,659			1,543,000			1,572,099			29,099			—
NGN		BRC		04/22/14			111,255,600			667,000			669,878			2,878			—
NGN		BRC		06/18/14			39,365,250			219,000			232,079			13,079			—
NGN		CIT		04/04/14			38,728,000			234,403			234,498			95			—
NGN		CIT		04/11/14			38,728,000			233,583			233,985			402			—
NGN		CIT		04/29/14			55,891,450			337,000			335,795			—			1,205
NGN		JPM		06/17/14			60,480,000			336,000			356,709			20,709			—
PEN		CIT		04/10/14			2,832,691			1,007,000			1,006,501			—			499
PEN		CIT		05/14/14			3,219,298			1,137,762			1,138,728			966			—
PEN		JPM		04/28/14			1,616,147			573,000			572,827			—			173
PHP		HSB		04/14/14			79,954,875			1,775,000			1,782,366			7,366			—
PHP		JPM		05/13/14			43,164,105			969,000			961,567			—			7,433
PLN		BNP		04/14/14			4,312,796			1,401,000			1,425,183			24,183			—
PLN		BRC		04/14/14			4,289,451			1,407,000			1,417,468			10,468			—
PLN		JPM		04/28/14			3,819,800			1,254,862			1,261,134			6,272			—
RON		JPM		04/07/14			1,494,075			455,358			461,214			5,856			—
RON		JPM		04/07/14			1,849,299			570,525			570,870			345			—
RON		JPM		04/07/14			5,614,196			1,708,000			1,733,074			25,074			—
RSD		CIT		04/07/14			234,751,650			2,797,493			2,797,356			—			137
SGD		HSB		04/14/14			1,908,713			1,506,513			1,517,391			10,878			—
THB		BNP		04/10/14			7,112,880			219,798			219,185			—			613
THB		SCB		04/24/14			28,852,560			895,958			888,549			—			7,409
TRY		CIT		05/12/14			1,354,500			600,000			625,320			25,320			—
TRY		JPM		04/21/14			308,451			139,274			143,284			4,010			—
TRY		JPM		04/21/14			1,006,465			459,000			467,532			8,532			—
TRY		JPM		04/21/14			1,045,083			503,000			485,471			—			17,529
TWD		HSB		04/14/14			27,537,840			912,000			904,615			—			7,385
TWD		SCB		06/18/14			26,927,810			889,000			886,286			—			2,714

 

See Notes to Portfolio of Investments.

 

10

Lazard Global Total Return and Income Fund, Inc.

Portfolio of Investments (continued)

March 31, 2014 (unaudited)

 

 

Forward Currency Purchase Contracts open at March 31, 2014 (concluded):

 

Currency		Counterparty		Expiration Date		Foreign Currency Amount			US $ Cost on Origination Date			US $ Current Value			Unrealized Appreciation			Unrealized Depreciation
UGX		CIT		04/11/14			968,123,000		$	382,128		$	379,145		$	—		$	2,983
UGX		CIT		05/02/14			596,095,500			231,000			232,084			1,084			—
UGX		CIT		05/02/14			650,210,000			253,000			253,153			153			—
UGX		CIT		05/02/14			1,123,527,000			437,000			437,434			434			—
UGX		CIT		05/02/14			1,168,549,000			457,000			454,963			—			2,037
UGX		CIT		05/20/14			192,900,000			75,000			74,759			—			241
UYU		HSB		04/30/14			7,522,000			326,476			330,492			4,016			—
UYU		JPM		04/07/14			6,456,240			285,390			285,590			200			—
UYU		JPM		04/14/14			17,437,000			775,926			769,732			—			6,194
UYU		JPM		04/24/14			25,036,435			1,090,437			1,101,956			11,519			—
ZAR		CIT		04/24/14			3,741,235			340,757			354,164			13,407			—
ZAR		JPM		04/24/14			4,518,141			418,000			427,710			9,710			—
ZMW		CIT		04/11/14			1,907,676			313,144			309,009			—			4,135
ZMW		JPM		04/08/14			1,500,000			253,207			243,282			—			9,925
ZMW		SCB		04/08/14			5,658,000			878,844			917,660			38,816			—
ZMW		SCB		04/09/14			5,658,000			878,435			917,271			38,836			—
Total Forward Currency Purchase Contracts									$	77,530,759		$	77,932,059		$	848,761		$	447,461

 

Forward Currency Sale Contracts open at March 31, 2014:

 

Currency		Counterparty		Expiration Date		Foreign Currency Amount			US $ Cost on Origination Date			US $ Current Value			Unrealized Appreciation			Unrealized Depreciation
BRL		BRC		04/02/14			2,440,411		$	1,033,000		$	1,075,545		$	—		$	42,545
BRL		BRC		05/05/14			2,549,512			1,089,000			1,114,023			—			25,023
BRL		UBS		04/02/14			2,118,018			895,000			933,459			—			38,459
CNY		HSB		04/22/14			372,741			61,000			59,920			1,080			—
CZK		JPM		04/04/14			17,581,440			882,725			882,333			392			—
EUR		BNP		04/15/14			450,065			618,814			620,014			—			1,200
EUR		BNP		04/15/14			620,000			852,924			854,119			—			1,195
EUR		BNP		04/24/14			3,240,064			4,395,276			4,463,459			—			68,183
EUR		CIT		04/07/14			2,009,000			2,797,493			2,767,668			29,825			—
EUR		HSB		04/22/14			962,023			1,340,021			1,325,273			14,748			—
EUR		JPM		04/04/14			640,000			861,162			881,692			—			20,530
EUR		JPM		04/07/14			330,000			455,358			454,619			739			—
EUR		JPM		04/07/14			410,681			570,525			565,769			4,756			—
EUR		JPM		04/10/14			182,000			250,567			250,728			—			161
EUR		JPM		04/10/14			1,405,000			1,906,480			1,935,564			—			29,084

 

See Notes to Portfolio of Investments.

 

11

Lazard Global Total Return and Income Fund, Inc.

Portfolio of Investments (continued)

March 31, 2014 (unaudited)

 

 

Forward Currency Sale Contracts open at March 31, 2014 (concluded):

 

Currency		Counterparty		Expiration Date		Foreign Currency Amount			US $ Cost on Origination Date			US $ Current Value			Unrealized Appreciation			Unrealized Depreciation
EUR		JPM		04/22/14			691,254		$	946,619		$	952,264		$	—		$	5,645
EUR		JPM		04/28/14			909,000			1,254,862			1,252,213			2,649			—
EUR		JPM		05/05/14			629,000			865,933			866,481			—			548
EUR		JPM		05/06/14			5,030			6,940			6,929			11			—
EUR		JPM		05/06/14			1,206,410			1,628,749			1,661,892			—			33,143
EUR		JPM		05/06/14			1,203,000			1,652,320			1,657,195			—			4,875
EUR		UBS		06/23/14			1,328,168			1,828,595			1,829,532			—			937
JPY		CIT		06/16/14			149,614,522			1,457,000			1,450,115			6,885			—
JPY		SCB		04/25/14			134,391,001			1,313,958			1,302,213			11,745			—
JPY		SCB		04/25/14			135,043,177			1,319,000			1,308,533			10,467			—
KZT		BRC		06/16/14			35,558,500			190,000			190,870			—			870
NGN		BRC		06/18/14			39,365,250			235,087			232,079			3,008			—
RSD		CIT		04/07/14			38,697,920			461,763			461,134			629			—
RSD		CIT		04/07/14			41,318,650			484,686			492,362			—			7,676
RUB		CIT		04/30/14			33,924,852			949,000			960,590			—			11,590
SGD		HSB		04/14/14			1,908,713			1,493,867			1,517,391			—			23,524
TRY		CIT		05/12/14			527,873			233,756			243,699			—			9,943
TRY		JPM		04/21/14			2,051,609			985,071			953,031			32,040			—
ZAR		CIT		04/24/14			10,285,224			941,000			973,651			—			32,651
ZAR		JPM		04/24/14			9,190,880			850,000			870,055			—			20,055
Total Forward Currency Sale Contracts									$	37,107,551		$	37,366,414			118,974			377,837
Gross unrealized appreciation/depreciation on Forward Currency
Purchase and Sale Contracts															$	967,735		$	825,298

 

See Notes to Portfolio of Investments.

 

12

Lazard Global Total Return and Income Fund, Inc.

Portfolio of Investments (concluded)

March 31, 2014 (unaudited)

 

 

Currency Abbreviations:
AMD	—	Armenian Dram		NGN	—	Nigerian Naira
BRL	—	Brazilian Real		PEN	—	Peruvian New Sol
CLP	—	Chilean Peso		PHP	—	Philippine Peso
CNY	—	Chinese Renminbi		PLN	—	Polish Zloty
COP	—	Colombian Peso		RON	—	New Romanian Leu
CZK	—	Czech Koruna		RSD	—	Serbian Dinar
EUR	—	Euro		RUB	—	Russian Ruble
GHS	—	Ghanaian Cedi		SGD	—	Singapore Dollar
HUF	—	Hungarian Forint		THB	—	Thai Baht
IDR	—	Indonesian Rupiah		TRY	—	New Turkish Lira
INR	—	Indian Rupee		TWD	—	New Taiwan Dollar
JPY	—	Japanese Yen		UGX	—	Ugandan Shilling
KRW	—	South Korean Won		UYU	—	Uruguayan Peso
KZT	—	Kazakhstan Tenge		ZAR	—	South African Rand
MXN	—	Mexican New Peso		ZMW	—	Zambian Kwacha
MYR	—	Malaysian Ringgit

 

Counterparty Abbreviations:
BNP	—	BNP Paribas SA
BRC	—	Barclays Bank PLC
CIT	—	Citibank NA
HSB	—	HSBC Bank USA
JPM	—	JPMorgan Chase Bank
SCB	—	Standard Chartered Bank
UBS	—	UBS AG

 

See Notes to Portfolio of Investments.

 

13

Lazard Global Total Return and Income Fund, Inc.

Notes to Portfolio of Investments

March 31, 2014 (unaudited)

 

 

(a)	Principal amount denominated in respective country’s currency.
(b)	For federal income tax purposes, the aggregate cost was $172,284,292, aggregate gross unrealized appreciation was $43,206,281, aggregate gross unrealized depreciation was $12,581,561, and the net unrealized appreciation was $30,624,720.
(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
NTN-F	—	Brazil Sovereign “Nota do Tesouro Nacional” Series F

 

Portfolio holdings by industry (as a percentage of net assets):
Agriculture			0.7	%
Alcohol & Tobacco			2.2
Automotive			2.8
Banking			8.2
Cable Television			2.8
Computer Software			4.8
Energy Exploration & Production			2.0
Energy Integrated			9.8
Energy Services			2.8
Financial Services			6.5
Food & Beverages			1.8
Gas Utilities			1.1
Household & Personal Products			2.3
Insurance			3.0
Leisure & Entertainment			2.1
Manufacturing			13.2
Metals & Mining			1.4
Pharmaceutical & Biotechnology			16.2
Retail			3.7
Semiconductors & Components			2.9
Technology Hardware			8.0
Telecommunications			2.3
Subtotal			100.6
Foreign Government Obligations			6.5
Short-Term Investment			0.9
Total Investments			108.0	%

 

14

Lazard Global Total Return and Income Fund, Inc.
Notes to Portfolio of Investments (continued)
March 31, 2014 (unaudited)

 

 

Valuation of Investments:

 

Net asset value per share is determined by State Street Bank and Trust Company for the Fund on each day the NYSE is open for business. 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, generally as of the close of regular trading on the NYSE (normally 4:00 p.m. Eastern time) 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 are valued using quotations from an independent pricing service. Investments in money market funds are valued at the fund’s net asset value.

 

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 primarily on institutional trading in similar groups of securities, or by using brokers’ quotations or a matrix system which considers such factors as other security prices, yields and maturities. Debt securities maturing in 60 days or less are valued at amortized cost, except where to do so would not accurately reflect their fair value, in which case such securities are valued at fair value as determined by, or in accordance with procedures approved by, the Board of Directors (the “Board”).

 

The Valuation Committee of the Investment Manager, which meets periodically under the direction of 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 net asset value 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.

 

The effect of using fair value pricing is that the net asset value 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’ net asset values.

 

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 accounting principles generally accepted in the United States of America 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

 

15

Lazard Global Total Return and Income Fund, Inc.
Notes to Portfolio of Investments (concluded)
March 31, 2014 (unaudited)

 

 

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)

 

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

 

The following table summarizes the valuation of the Fund’s investments by each fair value hierarchy level as of March 31, 2014:

 

		Unadjusted
		Quoted Prices in				Significant
		Active Markets				Other				Significant
		for Identical				Observable				Unobservable
		Investments				Inputs				Inputs				Balance as of
Description		(Level 1)				(Level 2)				(Level 3)				March 31, 2014
Assets:
Common Stocks*		$	188,887,991			$	—			$	—			$	188,887,991
Foreign Government Obligations*			—				12,263,640				—				12,263,640
Short-Term Investment			1,757,381				—				—				1,757,381
Other Financial Instruments**
Forward Currency Contracts			—				967,735				—				967,735
Total		$	190,645,372			$	13,231,375			$	—			$	203,876,747
Liabilities:
Other Financial Instruments**
Forward Currency Contracts		$	—			$	(825,298	)		$	—			$	(825,298	)

 

*	Please refer to Portfolio of Investments (pages 7 through 8) and Notes to Portfolio of Investments (page 14) for portfolio holdings by country and industry.
**	Other financial instruments are derivative instruments which are valued at their respective unrealized appreciation/depreciation.

 

The foreign government obligations included in Level 2 were valued on the basis of prices provided by independent pricing services. The forward currency contracts included in Level 2 were valued using quotations provided by an independent pricing service.

 

There were no transfers into or out of Levels 1, 2, or 3 during the period ended March 31, 2014.

 

For further information regarding security characteristics see Portfolio of Investments.

 

16

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 43010, Providence, Rhode Island 02940-3010.

 

17

Lazard Global Total Return and Income Fund, Inc.

Board of Directors and Officers Information

(unaudited)

 

 

Name (Age)		Position(s) with the Fund(1)		Principal Occupation(s) and Other Public Company Directorships Held During the Past Five Years
Board of Directors:
Class I — Directors with Term Expiring in 2015
Independent Directors:
Leon M. Pollack (73)		Director		Private Investor
Robert M. Solmson (66)		Director		Fairwood Capital, LLC, a private investment corporation engaged primarily in real estate and hotel investments, President (2008 – present)
Interested Director:
Charles L. Carroll (53)		Chief Executive Officer, President and Director		Investment Manager, Deputy Chairman and Head of Global Marketing (2004 – present)
Class II — Directors with Term Expiring in 2016
Independent Directors:
Kenneth S. Davidson (69)		Director		Davidson Capital Management Corporation, an investment manager, President (1978 – present) Balestra Capital, Ltd., an investment manager and adviser, Senior Advisor (July 2012 – present) Aquiline Holdings LLC, an investment manager, Partner (2006 – June 2012)
Nancy A. Eckl (51)		Director		College Retirement Equities Fund (eight accounts), Trustee (2007 – present)
				TIAA-CREF Funds (59 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 (42)		Director		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)
				Office of Council to the President, The White House, Associate Counsel to the President (2009)
Class III — Directors with Term Expiring in 2017
Independent Director:
Richard Reiss, Jr. (70)		Director		Georgica Advisors LLC, an investment manager, Chairman (1997 – present)
				O’Charley’s, Inc., a restaurant chain, Director (1984 – 2012)
Interested Director:
Ashish Bhutani (54)		Director		Investment Manager, Chief Executive Officer (2004 – present)
				Lazard Ltd, Vice Chairman and Director (2010 – present)

(1)

Each Director also serves as a director for each of The Lazard Funds, Inc., Lazard Retirement Series, Inc. and Lazard World Dividend & Income Fund, Inc. (collectively with the Fund, the “Lazard Funds”). All of the Independent Directors are also board members of Lazard Alternative Strategies 1099 Fund, a closed-end registered management investment company advised by an affiliate of the Investment Manager.

 

18

Lazard Global Total Return and Income Fund, Inc.

Board of Directors and Officers Information (concluded)

(unaudited)

 

 

Name (Age)		Position(s) with the Fund(1)		Principal Occupation(s) During the Past Five Years
Officers(2):
Nathan A. Paul (41)		Vice President and Secretary		Managing Director and General Counsel of the Investment Manager
Stephen St. Clair (55)		Treasurer		Vice President of the Investment Manager
Brian D. Simon (52)		Chief Compliance Officer and Assistant Secretary		Managing Director (since February 2011, previously Director) of the Investment Manager and Chief Compliance Officer of the Investment Manager and the Fund
Tamar Goldstein (39)		Assistant Secretary		Senior Vice President (since February 2012, previously Vice President) of the Investment Manager
Cesar A. Trelles (39)		Assistant Treasurer		Vice President (since February 2011, previously Fund Administration Manager) of the Investment Manager

(1)	Each officer also serves as an officer for each of the Lazard Funds. Messrs. Paul and Simon and Ms. Goldstein serve as officers of Lazard Alternative Strategies 1099 Fund.
(2)	In addition to Charles L. Carroll, President, whose information is included in the Class I Interested Director section.

 

19

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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 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, Inc.
P.O. Box 43010
Providence, Rhode Island 02940-3010

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

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