Lazard Global Total
Return & Income
Fund, Inc.
First Quarter Report
M A R C H 3 1 , 2 0 0 8
Investment Overview
Dear Shareholders,
We are pleased to present this First Quarter Report for Lazard Global Total Return & Income Fund, Inc. (“LGI” or the “Fund”), for the period ended March 31, 2008. 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.”
The Fund has been in operation for almost four years, and we are pleased with LGI’s defensive net asset value (“NAV”) performance for the first quarter of 2008, and its favorable NAV returns 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, 2008)
For the first quarter of 2008, the Fund’s NAV performance decreased 7.6%, outperforming the Morgan Stanley Capital International (MSCI®) World® Index (the “Index”) loss of 9.1%. In addition, the Fund’s since inception annualized NAV return of 11.5% through March 31, 2008 outperformed the Index return of 9.9%. Shares of LGI ended the first quarter of 2008 with a market price of $19.30, representing a 13.1% discount to the Fund’s NAV of $22.20. The Fund’s net assets were $213.3 million as of March 31, 2008, with total leveraged assets of $289.3 million, representing 26.3% leverage.
We believe that LGI’s investment thesis remains sound, as demonstrated by the Fund’s favorable NAV performance since inception. First quarter performance benefited from stock selection in the financials, health care, and information technology sectors, and within the United States and Switzerland, while returns were hurt by stock selection in the consumer staples sector. After a very strong year in 2007, the smaller, short-duration1 emerging market currency and debt portion of the Fund added value in the first quarter. This portfolio has been a meaningful positive contributor to performance for the Fund since inception.
Given the recent turmoil with respect to auction rate securities and closed-end funds, we would like to remind our investors that the Fund does not leverage the portfolio through the issuance of auction rate securities. Although the Fund employs leverage as part of its investment strategy, the leverage is achieved without relying on these types of securities.
As of March 31, 2008, 70.0% of the Fund’s total leveraged assets consisted of global equities and 28.8% consisted of emerging market currency and debt instruments, while the remaining 1.2% consisted of cash and other assets.
Declaration of Dividends
Pursuant to LGI’s managed distribution policy, the Fund’s Board of Directors has approved a monthly dividend distribution of $0.1042 per share on the Fund’s outstanding stock for each month since inception. In addition, in December of 2006, and in September and December of 2007, the Fund made additional required distributions of accumulated income and net realized capital gains. The cumulative distributions for the 12 months ended December 31, 2007 totaled $1.6612 per share. There was no return of capital in 2007, and the Fund has not returned capital to investors since its inception. The $1.6612 distribution represents a market yield of 8.6% (including distributed capital gains), based on the share price of $19.30 at the close of NYSE trading on March 31, 2008.
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.
Investment Overview (continued)
Message from the Portfolio Managers
Global Equity Portfolio
(70.0% of total leveraged assets)
The Fund’s global 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 United States and internationally; Nokia Corp., a Finland-based manufacturer of mobile telephones; and Total SA, 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, 2008, 47.0% of these stocks were based in North America, 26.3% were based in Continental Europe (not including the United Kingdom), 19.1% were from the United Kingdom, and 7.6% were from Japan. The global equity portfolio is similarly well diversified across a number of industry sectors. The top two sectors, by weight, at March 31, were financials (23.0%), which includes banks, insurance companies, and financial services companies, and information technology (17.5%), 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 included consumer discretionary, consumer staples, energy, health care, industrials, telecommunication services, materials, and utilities. The average dividend yield on the global equity portfolio was approximately 2.8% as of March 31, 2008.
Global Equity Markets Review
Global stocks experienced significant
volatility during the first quarter of 2008, amid cycles of optimism and pessimism
concerning the status of the global economy.
In the United States, disappointing economic data, including a slowdown in consumer
spending and continued deterioration of the housing markets, further weakened
the outlook for economic growth. These factors contributed to the first quarter
of 2008 being one of the worst starts to a year since 2001. Despite the U.S.
Federal Reserve’s (the “Fed”) efforts to mitigate liquidity
concerns within the financials sector, the sector continued to weaken, as highlighted
by the continuing billion dollar write-offs by many of the largest U.S. financial
institutions arising from poorly timed investments in asset-backed securities
and mortgage-backed securities. As a result, the Fed became more aggressive and
cut the federal funds rate by 200 basis points during the quarter. It also, for
the first time in recent history, extended its lending facilities to non-bank
financial institutions. In contrast, the European Central Bank and the Bank of
England refused to follow the U.S. rate cuts, as they were concerned over inflationary
pressures. The U.S. dollar continued to slide against major world currencies,
which in turn pushed prices of commodities higher, and the price of oil reached
$110 per barrel. From a sector perspective, the defensive consumer staples sector
was the top performer. Conversely, the telecom services and information technology
sectors were hardest hit. European phone operators were particularly weak due
to negative operating outlooks and fears of intensified market competition. Information
technology stocks were also weak due to concern over slowing technology spending
by corporations. Regionally, all major markets declined, while the U.S. market,
in local terms, modestly outperformed the rest of the world.
What Helped and What Hurt LGI
During the first quarter, the Fund benefited from stock selection in health care. Shares of Swiss pharmaceutical maker Roche rose after reporting strong earnings for 2007. The approval from the U.S. Food and Drug
Administration to sell its drug, Avastin, to treat breast cancer, further boosted the shares. The Fund also benefited from stock selection within the financials sector. Notably, Zurich Financial Services outperformed as a
2
Investment Overview (continued)
result of its largely sidestepping the troubles arising from the collapse of the subprime mortgage market. Performance was also aided by the overweight exposure to the consumer staples sector. In addition, the portfolio lacked exposure to the more cyclical stocks in the industrials sector, which performed well on expectations of continued growth in emerging markets. Stock selection in the energy sector hurt performance, as BP, our large integrated energy holding, lagged the gains of smaller companies whose earnings were more sensitive to the rising price of oil.
Emerging Market Currency and Debt Portfolio
(28.8% 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 March 31, 2008, this portfolio consisted primarily of forward currency contracts (55.0%) and a smaller allocation to sovereign debt obligations (34.5%) and structured notes (10.5%) . The average duration of the emerging market currency and debt portfolio was approximately 8.8 months, as of March 31, with an average yield of 8.0%.2
Emerging Market Currency and Debt Market Review
With emerging market growth and domestic demand engines still exhibiting strength, inflation concerns continued to occupy
many emerging market central banks. Unlike most developed economies, which face rising input costs, the forces driving emerging market inflation are diverse. Rising price pressures in emerging markets are driven both by structural forces (i.e.,
demand-driven food and energy imports) as well as supply shocks (i.e., failed harvests). This is an increasingly important dynamic in emerging markets that central bank policy must now aggressively tackle. Food inflation disproportionately affects
the poorest citizens, and food and energy prices are heavily weighted in emerging markets consumer price index (CPI) baskets. The massive accumulation of foreign exchange (FX) reserves into emerging market central bank coffers in recent years
certainly has not helped. We believe that the ongoing emerging markets central bank tightening, via rate hikes or through strengthening currencies in the surplus economies, may benefit the portfolio in the period ahead. We have generally favored exposures to
countries with strong, sustainable growth, supportive balance of payments positions, and domestic central bank responsiveness to country-specific risk factors (i.e., imported food/energy prices, political instability and wage growth).
What Helped and What Hurt LGI
Eastern European positions, particularly in Poland, Slovakia, and Hungary, contributed to returns, despite modest weightings. Strong retail sales in Poland and Slovakia, solid export growth across all three countries
(given substantial trade linkages with the Eurozone, not the United States) and upward inflation pressures prompted expectations of continued monetary tightening through the interest rate and/or currency channels. Latin American markets also
contributed to return, mostly from FX and local debt positions in Peru, Colombia, and Brazil. Returns from Peru and Colombia were amongst the highest within emerging markets. In Peru, the sol rallied from buoyant commodity export inflows, while
Colombian local markets benefited from ongoing central bank tightening in response to rising inflation. Positions in Africa helped performance, mostly from Egyptian T-Bill holdings and positions in Nigeria. These two countries are consistently
providing positive quarterly returns, and have low correlation to other portfolio positions. Reductions in Tanzania and Uganda ahead of seasonal weakness in the first quarter preserved capital, while tactical Zambian activity added value too. We
avoided South Africa, which was the loss-leading country. In Asia, performance was helped by local-market positions in Malaysia, Indonesia, and Singapore. Outsized quarterly returns from Israel also contributed. Conversely, the portfolio was hurt by
sizeable exposure to Turkish FX and local debt. Heightened global risk aversion, related to U.S. banking system woes, negatively impacted assets of countries with large external financing requirements, such as Turkey, while its high risk premium
provided insufficient cushion, exacerbated
3
Investment Overview (continued)
by the simultaneous rise in domestic political tension. A lack of exposure to Romania, the Czech Republic, and Taiwan limited returns, as did long positions in India, the Philippines, and a smaller weighting in South Korea. In Latin America, a lack of exposure to Chile limited returns.
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 represents market value-weighted average returns of selected securities listed on the stock exchanges of Europe, Australasia and the 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 views of the Fund’s management and the portfolio holdings described in this report are as of March 31, 2008; 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 not have 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.
Please consider the Fund’s investment objective, risks, charges and expenses carefully before investing.
4
Investment Overview (continued)
Comparison of Changes in Value of $10,000 Investment in
LGI and MSCI World Index* (unaudited)
|
||||||
 |
LGI at Market Price | $13,002 | ||||
 |
LGI at Net Asset Value | 15,311 | ||||
 |
MSCI World Index | 14,488 | ||||
|
||||||
Average Annual Total Returns*
Periods Ended March 31, 2008
(unaudited)
One |
Since | |||||
Year |
Inception** | |||||
| Market Price | (6.16 | )% | 6.96 | % | ||
| Net Asset Value | 1.12 | 11.46 | ||||
| MSCI World Index | (3.25 | ) | 9.90 | |||
| * | 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 Index represents market value-weighted average returns of selected securities listed on the stock exchanges of Europe, Australasia and the 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
Investment Overview (concluded)
March 31, 2008 (unaudited)
| Percentage of | ||||||
| Security | Value |
Net Assets | ||||
| International Business Machines Corp. | $ |
9,291,798 | 4.36 | % | ||
| Microsoft Corp. | 9,263,232 | 4.34 | ||||
| Exxon Mobil Corp. | 8,889,358 | 4.17 | ||||
| Diageo PLC Sponsored ADR | 8,221,452 | 3.86 | ||||
| Oracle Corp. | 7,818,132 | 3.67 | ||||
| Johnson & Johnson | 6,765,941 | 3.17 | ||||
| Heineken NV ADR | 6,508,560 | 3.05 | ||||
| JPMorgan Chase & Co. | 6,395,083 | 3.00 | ||||
| HSBC Holdings PLC Sponsored ADR | 6,279,490 | 2.94 | ||||
| Singapore Telecommunications, Ltd. ADR | 6,141,550 | 2.88 | ||||
6
March 31, 2008 (unaudited)
| Description | Shares |
Value |
||
| Common Stocks—94.9% | ||||
| Finland—2.9% | ||||
| Nokia Oyj Sponsored ADR (c) | 192,800 | $ | 6,136,824 | |
| France—7.2% | ||||
| Sanofi-Aventis ADR | 105,200 | 3,949,208 | ||
| Societe Generale Sponsored ADR | 72,000 | 1,411,200 | ||
| Suez SA Sponsored ADR | 79,600 | 5,221,760 | ||
| Total SA Sponsored ADR | 64,000 | 4,736,640 | ||
| Total France | 15,318,808 | |||
| Ireland—1.8% | ||||
| CRH PLC Sponsored ADR | 98,300 | 3,769,805 | ||
| Italy—1.1% | ||||
| Eni SpA Sponsored ADR | 36,350 | 2,475,799 | ||
| Japan—7.3% | ||||
| Canon, Inc. Sponsored ADR | 44,700 | 2,072,739 | ||
| Hoya Corp. Sponsored ADR | 73,500 | 1,701,525 | ||
| Mitsubishi UFJ Financial Group, Inc. | ||||
| ADR | 528,000 | 4,593,600 | ||
| Nomura Holdings, Inc. ADR | 332,600 | 4,998,978 | ||
| Sumitomo Mitsui Financial Group, | ||||
| Inc. ADR | 321,200 | 2,119,920 | ||
| Total Japan | 15,486,762 | |||
| Netherlands—3.0% | ||||
| Heineken NV ADR | 225,600 | 6,508,560 | ||
| Singapore—2.9% | ||||
| Singapore Telecommunications, | ||||
| Ltd. ADR | 217,400 | 6,141,550 | ||
| Sweden—0.6% | ||||
| Telefonaktiebolaget LM Ericsson | ||||
| Sponsored ADR | 61,900 | 1,216,335 | ||
| Switzerland—10.1% | ||||
| Credit Suisse Group Sponsored ADR | 73,400 | 3,734,592 | ||
| Nestle SA Sponsored ADR (c) | 34,400 | 4,300,000 | ||
| Novartis AG ADR | 78,900 | 4,042,047 | ||
| Roche Holding AG Sponsored ADR | 46,200 | 4,358,970 | ||
| UBS AG (c) | 75,900 | 2,185,920 | ||
| Zurich Financial Services AG ADR | 92,500 | 2,904,500 | ||
| Total Switzerland | 21,526,029 | |||
| United Kingdom—18.1% | ||||
| Barclays PLC Sponsored ADR | 67,800 | 2,454,360 | ||
| BP PLC Sponsored ADR | 69,600 | 4,221,240 | ||
| Cadbury Schweppes PLC Sponsored | ||||
| ADR | 112,700 | 4,983,594 | ||
| Diageo PLC Sponsored ADR (c) | 101,100 | 8,221,452 | ||
| GlaxoSmithKline PLC Sponsored | ||||
| ADR | 80,200 | 3,402,886 | ||
| HSBC Holdings PLC Sponsored | ||||
| ADR | 76,300 | 6,279,490 | ||
| Tesco PLC Sponsored ADR | 153,200 | 3,447,000 | ||
| Vodafone Group PLC Sponsored | ||||
| ADR (c) | 191,712 | 5,657,421 | ||
| Total United Kingdom | 38,667,443 | |||
| United States—39.9% | ||||
| Bank of America Corp. (c) | 138,200 | 5,239,162 | ||
| Bank of New York Mellon Corp. | 103,600 | 4,323,228 | ||
| Bristol-Myers Squibb Co. | 92,600 | 1,972,380 | ||
| Cisco Systems, Inc. (a), (c) | 220,400 | 5,309,436 | ||
| ConocoPhillips | 32,900 | 2,507,309 | ||
| Exxon Mobil Corp. | 105,100 | 8,889,358 | ||
| General Electric Co. (c) | 116,300 | 4,304,263 | ||
| International Business Machines | ||||
| Corp. | 80,700 | 9,291,798 | ||
| Johnson & Johnson (c) | 104,300 | 6,765,941 | ||
| JPMorgan Chase & Co. (c) | 148,896 | 6,395,083 | ||
| Microsoft Corp. | 326,400 | 9,263,232 | ||
| Oracle Corp. (a), (c) | 399,700 | 7,818,132 | ||
| The Home Depot, Inc. | 165,500 | 4,629,035 | ||
| United Technologies Corp. (c) | 68,900 | 4,741,698 | ||
| Wyeth | 88,900 | 3,712,464 | ||
| Total United States | 85,162,519 | |||
| Total Common Stocks | ||||
| (Identified cost $175,918,523) | 202,410,434 | |||
See Notes to Portfolio of Investments.
7
March 31, 2008 (unaudited)
|
Principal |
|||||
|
Amount |
|||||
| Description |
(000)
(d) |
Value |
|||
| Foreign Government | |||||
| Obligations—13.9% | |||||
| Brazil—0.7% | |||||
| Brazil NTN-F, | |||||
| 10.00%, 07/01/10 | 2,641 | $ | 1,414,886 | ||
| Egypt—3.8% | |||||
| Egypt Treasury Bills: | |||||
| 0.00%, 04/15/08 | 2,825 | 517,048 | |||
| 0.00%, 05/13/08 | 2,750 | 500,681 | |||
| 0.00%, 05/27/08 | 7,450 | 1,352,835 | |||
| 0.00%, 06/10/08 | 2,050 | 371,286 | |||
| 0.00%, 06/17/08 | 21,800 | 3,943,146 | |||
| 0.00%, 06/24/08 | 2,400 | 433,544 | |||
| 0.00%, 07/08/08 | 4,925 | 885,112 | |||
| Total Egypt | 8,003,652 | ||||
| Ghana—0.3% | |||||
| Ghanaian Government Bonds: | |||||
| 13.50%, 03/30/10 | 420 | 422,675 | |||
| 14.00%, 03/07/11 | 310 | 311,933 | |||
| Total Ghana | 734,608 | ||||
| Hungary—1.5% | |||||
| Hungarian Government Bonds: | |||||
| 6.25%, 08/24/10 | 407,100 | 2,283,790 | |||
| 6.00%, 10/12/11 | 162,900 | 880,673 | |||
| Total Hungary | 3,164,463 | ||||
| Mexico—0.6% | |||||
| Mexican Bonos, | |||||
| 9.00%, 12/20/12 | 13,145 | 1,314,284 | |||
| Peru—2.6% | |||||
| Peruvian Certificates of Deposit: | |||||
| 0.00%, 04/11/08 | 2,100 | 763,541 | |||
| 0.00%, 05/02/08 | 5,800 | 2,103,885 | |||
| 0.00%, 06/06/08 | 3,700 | 1,336,793 | |||
| 0.00%, 07/03/08 | 3,600 | 1,296,615 | |||
| Total Peru | 5,500,834 | ||||
| Turkey—4.4% | |||||
| Turkish Government Bonds: | |||||
| 0.00%, 02/04/09 | 4,227 | 2,742,058 | |||
| 0.00%, 05/06/09 | 2,011 | 1,249,814 | |||
| 0.00%, 08/05/09 | 988 | 587,846 | |||
| 14.00%, 01/19/11 | 6,170 | 4,293,173 | |||
| 16.00%, 03/07/12 | 743 | 525,663 | |||
| Total Turkey | 9,398,554 | ||||
| Total Foreign Government | |||||
| Obligations | |||||
| (Identified cost $29,523,348) | 29,531,281 | ||||
| Structured Notes—3.7% | |||||
| Brazil—2.1% | |||||
| Citigroup Funding, Inc. Brazil | |||||
| Inflation-Indexed Currency and | |||||
| Credit Linked Unsecured Notes | |||||
| NTN-B: | |||||
| 7.90%, 05/18/09 (e) | 927 | 1,324,289 | |||
| 8.25%, 08/17/10 (e) | 1,029 | 1,433,864 | |||
| 7.85%, 05/18/15: | |||||
| Series LTCLN0335 (e) | 989 | 1,356,850 | |||
| Series LTCLN0948 (e) | 365 | 425,146 | |||
| Total Brazil | 4,540,149 | ||||
| Colombia—1.6% | |||||
| Citigroup Funding, Inc. Colombia | |||||
| TES Credit Linked Unsecured Note, | |||||
| 11.34%, 04/27/12 (e) | 397 | 559,619 | |||
| JPMorgan Chase & Co. Colombian | |||||
| Peso Linked Notes: | |||||
| 11.48%, 11/14/10 (e) | 1,200 | 1,245,840 | |||
| 12.48%, 03/05/15 (e) | 1,638 | 1,605,568 | |||
| Total Colombia | 3,411,027 | ||||
| Total Structured Notes | |||||
| (Identified cost $6,528,192) | 7,951,176 | ||||
See Notes to Portfolio of Investments.
8
March 31, 2008 (unaudited)
| Principal | |||||
| Amount | |||||
|
Description |
(000) |
Value |
|||
|
Repurchase Agreement—0.4% |
|||||
|
State Street Bank and Trust Co., |
|||||
|
0.80%, 04/01/08 |
|||||
| (Dated 03/31/08, collateralized by | |||||
| $855,000 United States Treasury | |||||
| Note and Bond, 2.00%, 01/15/16- | |||||
|
01/15/26, with
a value of $951,709) |
|||||
|
Proceeds of $927,021 |
|||||
| (Identified cost $927,000) (c) |
$927 |
$ | 927,000 |
||
| Total Investments—112.9% | |||||
| (Identified cost $212,897,063) (b) | 240,819,891 | ||||
| Liabilities in Excess of Cash and | |||||
| Other Assets—(12.9)% | (27,555,187 | ) | |||
| Net Assets—100.0% |
$ |
213,264,704 | |||
See Notes to Portfolio of Investments.
9
March 31, 2008 (unaudited)
Forward Currency Purchase Contracts open at March 31, 2008:
|
U.S. $ Cost |
U.S. $ |
|||||||||||||||
| Forward Currency | Expiration | Foreign |
on Origination |
Current |
Unrealized |
Unrealized |
||||||||||
| Purchase Contracts | Date | Currency |
Date |
Value |
Appreciation |
Depreciation |
||||||||||
| AED | 04/14/08 | 4,857,005 |
$ |
1,326,000 |
$ |
1,324,264 | $ |
— |
$ |
1,736 | ||||||
| AED | 04/23/08 | 3,000,000 | 822,594 | 818,654 | — | 3,940 | ||||||||||
| AED | 05/27/08 | 8,170,000 | 2,240,812 | 2,237,079 | — | 3,733 | ||||||||||
| AED | 06/26/08 | 3,445,000 | 947,470 | 945,589 | — | 1,881 | ||||||||||
| ARS | 04/04/08 | 3,739,788 | 1,179,001 | 1,179,791 | 790 | — | ||||||||||
| ARS | 04/15/08 | 1,936,249 | 614,000 | 609,996 | — | 4,004 | ||||||||||
| ARS | 04/17/08 | 3,442,077 | 1,086,000 | 1,084,123 | — | 1,877 | ||||||||||
| ARS | 04/25/08 | 1,509,456 | 472,001 | 474,951 | 2,950 | — | ||||||||||
| ARS | 05/19/08 | 3,757,820 | 1,178,001 | 1,179,167 | 1,166 | — | ||||||||||
| ARS | 08/06/08 | 2,789,648 | 863,001 | 866,475 | 3,474 | — | ||||||||||
| BRL | 04/04/08 | 1,257,164 | 673,001 | 715,895 | 42,894 | — | ||||||||||
| BRL | 04/04/08 | 165,299 | 94,000 | 94,130 | 130 | — | ||||||||||
| BRL | 06/18/08 | 3,839,076 | 2,091,000 | 2,154,630 | 63,630 | — | ||||||||||
| BRL | 09/15/08 | 1,174,095 | 669,000 | 645,495 | — | 23,505 | ||||||||||
| COP | 04/11/08 | 1,012,475,000 | 500,000 | 551,773 | 51,773 | — | ||||||||||
| COP | 04/25/08 | 978,508,000 | 532,666 | 531,639 | — | 1,027 | ||||||||||
| GHC | 04/18/08 | 245,000 | 246,281 | 246,884 | 603 | — | ||||||||||
| GHC | 04/28/08 | 587,000 | 591,853 | 589,987 | — | 1,866 | ||||||||||
| GHC | 06/20/08 | 416,015 | 413,000 | 412,243 | — | 757 | ||||||||||
| GHC | 07/11/08 | 234,320 | 232,000 | 230,908 | — | 1,092 | ||||||||||
| GHC | 07/21/08 | 702,563 | 718,000 | 690,503 | — | 27,497 | ||||||||||
| GHC | 09/29/08 | 538,000 | 520,813 | 519,113 | — | 1,700 | ||||||||||
| HUF | 04/14/08 | 267,489,435 | 1,473,000 | 1,616,812 | 143,812 | — | ||||||||||
| IDR | 04/11/08 | 7,939,935,000 | 873,000 | 861,795 | — | 11,205 | ||||||||||
| IDR | 04/11/08 | 7,883,902,000 | 859,000 | 855,713 | — | 3,287 | ||||||||||
| IDR | 04/24/08 | 6,420,015,000 | 687,000 | 696,088 | 9,088 | — | ||||||||||
| ILS | 06/11/08 | 4,726,500 | 1,150,000 | 1,339,333 | 189,333 | — | ||||||||||
| ILS | 07/07/08 | 5,290,992 | 1,267,000 | 1,498,068 | 231,068 | — | ||||||||||
| INR | 04/21/08 | 40,971,000 | 1,007,401 | 1,019,056 | 11,655 | — | ||||||||||
| INR | 04/22/08 | 12,028,770 | 299,000 | 299,157 | 157 | — | ||||||||||
| INR | 04/24/08 | 41,299,135 | 1,010,500 | 1,026,907 | 16,407 | — | ||||||||||
| INR | 04/25/08 | 41,299,135 | 1,010,500 | 1,026,804 | 16,304 | — | ||||||||||
| INR | 07/10/08 | 75,964,800 | 1,930,000 | 1,879,283 | — | 50,717 | ||||||||||
| KRW | 04/21/08 | 1,036,731,200 | 1,018,000 | 1,047,351 | 29,351 | — | ||||||||||
| KRW | 04/21/08 | 1,143,420,000 | 1,140,000 | 1,155,133 | 15,133 | — | ||||||||||
| KWD | 04/28/08 | 675,779 | 2,541,000 | 2,549,276 | 8,276 | — | ||||||||||
| KWD | 06/19/08 | 182,938 | 694,000 | 693,084 | — | 916 | ||||||||||
| MYR | 04/07/08 | 1,585,950 | 485,000 | 495,804 | 10,804 | — | ||||||||||
| MYR | 04/09/08 | 1,755,494 | 538,000 | 548,795 | 10,795 | — | ||||||||||
| MYR | 04/14/08 | 2,860,000 | 880,000 | 894,032 | 14,032 | — | ||||||||||
| MYR | 04/28/08 | 3,142,000 | 979,121 | 982,035 | 2,914 | — | ||||||||||
| MYR | 04/30/08 | 1,676,000 | 523,750 | 523,824 | 74 | — | ||||||||||
| MYR | 05/20/08 | 3,250,280 | 979,000 | 1,015,497 | 36,497 | — | ||||||||||
See Notes to Portfolio of Investments.
10
March 31, 2008 (unaudited)
Forward Currency Purchase Contracts open at March 31, 2008 (continued):
U.S.
$ Cost |
U.S.
$ |
|||||||||||||||
| Forward Currency | Expiration | Foreign | on
Origination |
Current |
Unrealized |
Unrealized |
||||||||||
| Purchase Contracts | Date | Currency |
Date |
Value |
Appreciation |
Depreciation |
||||||||||
| NGN | 04/07/08 | 52,480,800 | $ |
444,000 |
$ |
447,654 |
$ |
3,654 | $ |
— | ||||||
| NGN | 05/12/08 | 128,454,000 | 1,084,000 | 1,088,019 | 4,019 | — | ||||||||||
| NGN | 07/07/08 | 52,791,600 | 444,000 | 438,920 | — | 5,080 | ||||||||||
| NGN | 07/08/08 | 128,007,000 | 1,070,507 | 1,064,276 | — | 6,231 | ||||||||||
| NGN | 07/14/08 | 161,963,000 | 1,353,300 | 1,346,593 | — | 6,707 | ||||||||||
| NGN | 09/08/08 | 58,177,000 | 486,347 | 483,695 | — | 2,652 | ||||||||||
| PEN | 04/02/08 | 1,493,952 | 502,000 | 544,006 | 42,006 | — | ||||||||||
| PEN | 04/02/08 | 516,701 | 184,899 | 188,151 | 3,252 | — | ||||||||||
| PEN | 04/03/08 | 1,543,640 | 518,000 | 562,180 | 44,180 | — | ||||||||||
| PEN | 04/03/08 | 5,279,165 | 1,889,600 | 1,922,626 | 33,026 | — | ||||||||||
| PEN | 05/19/08 | 3,450,840 | 1,158,000 | 1,265,203 | 107,203 | — | ||||||||||
| PEN | 05/23/08 | 3,440,865 | 1,146,000 | 1,262,286 | 116,286 | — | ||||||||||
| PEN | 05/30/08 | 3,445,943 | 1,155,000 | 1,265,448 | 110,448 | — | ||||||||||
| PEN | 03/03/09 | 2,749,120 | 968,000 | 1,024,334 | 56,334 | — | ||||||||||
| PHP | 04/14/08 | 6,908,000 | 167,062 | 165,173 | — | 1,889 | ||||||||||
| PHP | 04/22/08 | 11,220,300 | 274,000 | 268,089 | — | 5,911 | ||||||||||
| PHP | 05/27/08 | 67,466,660 | 1,654,000 | 1,606,610 | — | 47,390 | ||||||||||
| PHP | 06/19/08 | 46,306,000 | 1,096,000 | 1,100,441 | 4,441 | — | ||||||||||
| PLN | 06/25/08 | 6,107,158 | 2,686,000 | 2,723,745 | 37,745 | — | ||||||||||
| RUB | 04/11/08 | 54,341,483 | 2,187,000 | 2,310,614 | 123,614 | — | ||||||||||
| RUB | 04/28/08 | 77,601,780 | 3,144,000 | 3,294,916 | 150,916 | — | ||||||||||
| RUB | 05/23/08 | 58,377,000 | 2,277,238 | 2,473,164 | 195,926 | — | ||||||||||
| RUB | 09/19/08 | 21,264,250 | 725,000 | 891,484 | 166,484 | — | ||||||||||
| RUB | 03/16/09 | 11,377,905 | 462,000 | 466,642 | 4,642 | — | ||||||||||
| SGD | 06/26/08 | 1,480,294 | 1,074,000 | 1,079,023 | 5,023 | — | ||||||||||
| SKK | 04/22/08 | 23,245,931 | 1,005,319 | 1,128,595 | 123,276 | — | ||||||||||
| SKK | 04/28/08 | 13,072,400 | 617,244 | 634,546 | 17,302 | — | ||||||||||
| SKK | 05/27/08 | 27,407,613 | 1,294,115 | 1,328,822 | 34,707 | — | ||||||||||
| SKK | 05/27/08 | 25,354,400 | 1,145,651 | 1,229,275 | 83,624 | — | ||||||||||
| SKK | 06/25/08 | 20,407,725 | 975,000 | 988,546 | 13,546 | — | ||||||||||
| TRY | 10/10/08 | 367,808 | 284,000 | 256,823 | — | 27,177 | ||||||||||
| TRY | 10/10/08 | 812,827 | 621,000 | 567,558 | — | 53,442 | ||||||||||
| TRY | 10/10/08 | 3,946,020 | 2,835,599 | 2,755,315 | — | 80,284 | ||||||||||
| TZS | 04/16/08 | 722,085,000 | 529,000 | 588,560 | 59,560 | — | ||||||||||
| TZS | 04/16/08 | 182,286,000 | 156,000 | 148,578 | — | 7,422 | ||||||||||
| TZS | 04/21/08 | 554,182,000 | 401,000 | 451,490 | 50,490 | — | ||||||||||
| TZS | 04/30/08 | 745,327,886 | 547,230 | 606,698 | 59,468 | — | ||||||||||
| TZS | 04/30/08 | 127,074,000 | 104,847 | 103,438 | — | 1,409 | ||||||||||
| TZS | 05/27/08 | 277,669,000 | 231,700 | 224,952 | — | 6,748 | ||||||||||
| TZS | 06/11/08 | 440,778,720 | 323,000 | 356,214 | 33,214 | — | ||||||||||
| UAH | 04/14/08 | 3,838,000 | 760,000 | 764,989 | 4,989 | — | ||||||||||
| UAH | 04/29/08 | 3,363,000 | 660,059 | 667,167 | 7,108 | — | ||||||||||
| UAH | 05/19/08 | 4,496,450 | 886,000 | 888,343 | 2,343 | — | ||||||||||
See Notes to Portfolio of Investments.
11
March 31, 2008 (unaudited)
Forward Currency Purchase Contracts open at March 31, 2008 (concluded):
U.S.
$ Cost |
U.S.
$ |
|||||||||||||||
| Forward Currency | Expiration | Foreign | on
Origination |
Current |
Unrealized |
Unrealized |
||||||||||
| Purchase Contracts | Date | Currency |
Date |
Value |
Appreciation |
Depreciation |
||||||||||
| UAH | 06/05/08 | 482,125 |
$ |
95,000 |
$ |
94,902 | $ |
— | $ |
98 | ||||||
| UAH | 06/24/08 | 2,780,000 | 553,234 | 544,604 | — | 8,630 | ||||||||||
| UAH | 08/19/08 | 7,293,970 | 1,433,000 | 1,408,296 | — | 24,704 | ||||||||||
| UAH | 08/26/08 | 3,106,880 | 608,000 | 598,783 | — | 9,217 | ||||||||||
| UAH | 08/27/08 | 3,766,070 | 737,000 | 725,640 | — | 11,360 | ||||||||||
| UAH | 08/28/08 | 2,865,000 | 561,215 | 551,881 | — | 9,334 | ||||||||||
| UAH | 09/05/08 | 1,206,000 | 235,088 | 231,832 | — | 3,256 | ||||||||||
| UAH | 09/22/08 | 2,108,000 | 412,121 | 403,459 | — | 8,662 | ||||||||||
| UAH | 10/01/08 | 2,161,210 | 425,000 | 412,699 | — | 12,301 | ||||||||||
| UGX | 05/16/08 | 448,920,000 | 261,000 | 262,230 | 1,230 | — | ||||||||||
| UGX | 05/30/08 | 410,025,000 | 231,000 | 238,664 | 7,664 | — | ||||||||||
| UGX | 07/10/08 | 427,692,960 | 244,000 | 246,566 | 2,566 | — | ||||||||||
| UGX | 07/17/08 | 460,202,600 | 260,000 | 264,667 | 4,667 | — | ||||||||||
| UGX | 08/28/08 | 249,570,000 | 141,000 | 141,480 | 480 | — | ||||||||||
| UGX | 09/02/08 | 811,053,000 | 459,000 | 459,000 | — | — | ||||||||||
| UGX | 09/03/08 | 880,300,000 | 500,170 | 498,020 | — | 2,150 | ||||||||||
| VND | 05/02/08 | 6,166,400,000 | 376,000 | 381,005 | 5,005 | — | ||||||||||
| VND | 06/02/08 | 6,147,600,000 | 376,000 | 378,050 | 2,050 | — | ||||||||||
| VND | 07/01/08 | 6,185,200,000 | 376,000 | 378,360 | 2,360 | — | ||||||||||
| VND | 07/01/08 | 16,249,740,000 | 1,004,000 | 994,026 | — | 9,974 | ||||||||||
| ZMK | 04/03/08 | 737,940,000 | 196,000 | 201,491 | 5,491 | — | ||||||||||
| ZMK | 06/03/08 | 775,950,000 | 210,000 | 210,000 | — | — | ||||||||||
| ZMK | 01/12/09 | 1,332,204,570 | 321,000 | 335,185 | 14,185 | — | ||||||||||
|
Total Forward Currency Purchase Contracts |
$ |
90,896,311 |
$ |
93,061,177 | $ | 2,657,634 | $ | 492,768 | ||||||||
See Notes to Portfolio of Investments.
12
March 31, 2008 (unaudited)
Forward Currency Sale Contracts open at March 31, 2008:
U.S.
$ Cost |
U.S.
$ |
|||||||||||||||
| Forward Currency | Expiration | Foreign | on
Origination |
Current |
Unrealized |
Unrealized |
||||||||||
| Sale Contracts | Date | Currency |
Date |
Value |
Appreciation |
Depreciation |
||||||||||
| ARS | 04/04/08 | 3,739,788 |
$ |
1,180,861 |
$ |
1,179,791 |
$ |
1,070 | $ | — | ||||||
| BRL | 06/18/08 | 2,559,866 | 1,491,503 | 1,436,690 | 54,813 | — | ||||||||||
| BRL | 06/18/08 | 4,611,415 | 2,651,000 | 2,588,094 | 62,906 | — | ||||||||||
| COP | 06/09/08 | 2,403,766,000 | 1,292,000 | 1,292,792 | — | 792 | ||||||||||
| COP | 02/27/09 | 3,293,053,000 | 1,649,000 | 1,668,402 | — | 19,402 | ||||||||||
| EUR | 04/22/08 | 691,000 | 1,005,319 | 1,090,094 | — | 84,775 | ||||||||||
| EUR | 04/28/08 | 727,000 | 1,121,398 | 1,146,651 | — | 25,253 | ||||||||||
| EUR | 04/28/08 | 400,000 | 617,244 | 630,895 | — | 13,651 | ||||||||||
| EUR | 05/27/08 | 839,000 | 1,294,115 | 1,321,377 | — | 27,262 | ||||||||||
| EUR | 05/27/08 | 773,000 | 1,145,651 | 1,217,430 | — | 71,779 | ||||||||||
| EUR | 05/27/08 | 1,960,458 | 3,067,920 | 3,087,608 | — | 19,688 | ||||||||||
| HUF | 04/14/08 | 80,540,192 | 464,000 | 486,817 | — | 22,817 | ||||||||||
| HUF | 04/14/08 | 25,787,250 | 157,000 | 155,868 | 1,132 | — | ||||||||||
| HUF | 04/14/08 | 186,949,243 | 1,138,199 | 1,129,995 | 8,204 | — | ||||||||||
| ILS | 06/11/08 | 4,726,500 | 1,300,740 | 1,339,333 | — | 38,593 | ||||||||||
| ILS | 07/07/08 | 5,290,992 | 1,454,129 | 1,498,068 | — | 43,939 | ||||||||||
| MXN | 04/03/08 | 14,159,107 | 1,316,000 | 1,329,866 | — | 13,866 | ||||||||||
| PEN | 04/02/08 | 2,010,653 | 688,344 | 732,156 | — | 43,812 | ||||||||||
| PEN | 04/03/08 | 3,681,250 | 1,259,839 | 1,340,679 | — | 80,840 | ||||||||||
| PEN | 04/03/08 | 3,141,555 | 1,095,000 | 1,144,127 | — | 49,127 | ||||||||||
| PEN | 05/19/08 | 3,315,358 | 1,139,298 | 1,215,530 | — | 76,232 | ||||||||||
| PEN | 05/19/08 | 9,858,900 | 3,540,000 | 3,614,629 | — | 74,629 | ||||||||||
| PEN | 05/23/08 | 3,053,424 | 1,049,287 | 1,120,153 | — | 70,866 | ||||||||||
| PEN | 05/30/08 | 3,053,424 | 1,049,287 | 1,121,304 | — | 72,017 | ||||||||||
| RUB | 04/11/08 | 37,960,158 | 1,574,000 | 1,614,076 | — | 40,076 | ||||||||||
| RUB | 04/11/08 | 16,381,325 | 687,136 | 696,538 | — | 9,402 | ||||||||||
| RUB | 05/23/08 | 40,012,433 | 1,577,000 | 1,695,142 | — | 118,142 | ||||||||||
| SKK | 05/27/08 | 19,852,800 | 960,000 | 962,537 | — | 2,537 | ||||||||||
| TRY | 10/10/08 | 3,938,000 | 3,008,403 | 2,749,715 | 258,688 | — | ||||||||||
| TRY | 10/10/08 | 1,188,656 | 929,000 | 829,981 | 99,019 | — | ||||||||||
| TRY | 10/10/08 | 3,217,379 | 2,312,000 | 2,246,540 | 65,460 | — | ||||||||||
| TZS | 04/14/08 | 534,131,250 | 452,654 | 435,445 | 17,209 | — | ||||||||||
| TZS | 04/21/08 | 382,091,000 | 326,295 | 311,288 | 15,007 | — | ||||||||||
| TZS | 06/11/08 | 440,778,720 | 333,936 | 356,214 | — | 22,278 | ||||||||||
| UAH | 08/28/08 | 629,760 | 123,000 | 121,310 | 1,690 | — | ||||||||||
| ZMK | 04/03/08 | 737,940,000 | 202,175 | 201,491 | 684 | — | ||||||||||
| Total Forward Currency Sale Contracts |
$ |
44,652,733 |
$ |
45,108,626 | 585,882 | 1,041,775 | ||||||||||
|
Gross unrealized appreciation/depreciation on Forward Currency Contracts |
$ |
3,243,516 | $ | 1,534,543 | ||||||||||||
See Notes to Portfolio of Investments.
13
March 31, 2008 (unaudited)
| (a) |
Non-income producing security. |
| (b) |
For federal income tax purposes, the aggregate cost was $212,897,063, aggregate gross unrealized appreciation was $40,079,286, aggregate gross unrealized depreciation was $12,156,458, and the net unrealized appreciation was $27,922,828. |
| (c) |
Segregated security for forward currency contracts. |
| (d) |
Principal amount denominated in respective country’s currency unless otherwise specified. |
| (e) |
Pursuant to Rule 144A under the Securities Act of 1933, these securities may only be traded among “qualified institutional buyers.” At March 31, 2008, these securities amounted to 3.7% of net assets and are not considered to be liquid. Principal amount denominated in U.S. dollars. Interest rate shown reflects current yield as of March 31, 2008. |
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
TES—Titulos de Tesoreria
| Currency Abbreviations: | ||||||
| AED | — United Arab Emirates | MYR | — Malaysian Ringgit | |||
|
Dirham |
NGN | — Nigerian Naira | ||||
| ARS | — Argentine Peso | PEN |
— Peruvian New Sol |
|||
| BRL | — Brazilian Real | PHP | — Philippine Peso | |||
| COP | — Colombian Peso | PLN |
— Polish Zloty |
|||
| EUR | — Euro | RUB | — Russian Ruble | |||
| GHC | — Ghanaian Cedi | SGD | — Singapore Dollar | |||
| HUF | — Hungarian Forint | SKK |
— Slovenska Koruna |
|||
| IDR | — Indonesian Rupiah | TRY | — New Turkish Lira | |||
| ILS | — Israeli Shekel | TZS | — Tanzanian Shilling | |||
| INR | — Indian Rupee | UAH | — Ukranian Hryvnia | |||
| KRW | — South Korean Won | UGX | — Ugandan Shilling | |||
| KWD | — Kuwaiti Dinar | VND | — Vietnamese Dong | |||
| MXN | — Mexican Peso | ZMK | — Zambian Kwacha | |||
Portfolio holdings by industry (as percentage of net assets):
| Industry | |||
| Alcohol & Tobacco. | 6.9 | % | |
| Banking | 14.1 | ||
| Computer Software | 8.0 | ||
| Drugs | 10.1 | ||
| Electric | 2.4 | ||
| Energy Integrated | 10.6 | ||
| Financial Services | 6.4 | ||
| Food & Beverages | 4.4 | ||
| Housing | 1.8 | ||
| Insurance | 1.4 | ||
| Manufacturing | 4.2 | ||
| Medical Products | 3.2 | ||
| Retail | 3.8 | ||
| Semiconductors & Components | 1.8 | ||
| Technology | 4.4 | ||
| Technology Hardware | 5.9 | ||
| Telecommunications | 5.5 | ||
|
Subtotal |
94.9 | ||
| Foreign Government Obligations | 13.9 | ||
| Structured Notes | 3.7 | ||
| Repurchase Agreement | 0.4 | ||
|
Total Investments |
112.9 | % |
14
March 31, 2008 (unaudited)
Valuation of Investments:
Market values for securities are generally based on the last reported sales price on the principal exchange or market on which the security is traded, generally as of the close of regular trading on the NYSE (normally 4:00 p.m. Eastern time) on each valuation date. Any securities not listed, for which current over-the-counter market quotations or bids are readily available, are valued at the last quoted bid price or, if available, the mean of two such prices. Forward currency contracts are valued at the current cost of offsetting the contracts. Securities listed on foreign exchanges are valued at the last reported sales price except as described below; securities listed on foreign exchanges that are not traded on the valuation date are valued at the last quoted bid price.
Bonds and other fixed-income securities that are not exchange-traded are valued on the basis of prices provided by pricing services which are based primarily on institutional trading in similar groups of securities, or by using brokers’ quotations.
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 readily available or reliable, such securities will be value at their fair values as determined by, or in accordance with procedures approved by, the Board of Directors. The Valuation Committee of the Investment Manager may evaluate a variety of factors to determine the fair value of securities for which current 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 analysts will also be considered. Fair valuing of foreign securities may be determined with the assistance of a pricing service, using correlations between the movement of prices of such securities and indices of domestic securities and other appropriate indicators, such as closing market prices of relevant ADRs or futures contracts. 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 of Directors, 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 Measurement:
The Fund adopted Financial Accounting Standards Board Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“FAS 157”), effective January 1, 2008. In accordance with FAS 157, 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. FAS 157 also establishes a framework for measuring fair value, and a three-level hierarchy for fair value measurement that is based upon the transparency of inputs to the valuation of an asset or liability. Inputs may be observable or unobservable and refer, broadly, to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions that market participants would use in pricing the asset or liability, developed based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-tier hierarchy of inputs is summarized below.
Level 1 – quoted prices in active markets for identical investments
15
March 31, 2008 (unaudited)
Level 2 – other significant observable inputs (including 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 following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of March 31, 2008:
|
Lazard Global Total
Return & |
||||||
|
Income Fund, Inc. |
||||||
|
Other |
||||||
|
Investments |
Financial |
|||||
| Level |
in Securities |
Instruments* |
||||
| Level 1 |
$ |
202,410,434 | $ |
— | ||
| Level 2 | 29,723,673 | 1,708,973 | ||||
| Level 3 | 8,685,784 | — | ||||
| Total |
$ |
240,819,891 |
$ |
1,708,973 | ||
| * |
Other financial instruments are derivative instruments not reflected in the Portfolio of Investments, such as futures, forwards and swap contracts, which are valued at the unrealized appreciation/depreciation on the instrument. |
Following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value:
|
Lazard Global Total
Return & |
||||||
|
Income Fund, Inc. |
||||||
Other |
||||||
Investments |
Financial |
|||||
in
Securities |
Instruments |
|||||
| Balance as of 12/31/07 | $ | 6,486,430 | $ | — | ||
| Accrued discounts/ | ||||||
| premiums | 1,481 | — | ||||
| Realized gain (loss)* | — | — | ||||
| Change in unrealized | ||||||
| appreciation/depreciation | 239,814 | — | ||||
| Net purchases (sales) | 1,958,059 | — | ||||
| Net transfers in and/or | ||||||
| out of Level 3 | — | — | ||||
| Balance as of 3/31/08 | $ | 8,685,784 | $ | — | ||
| Net change in unrealized | ||||||
| appreciation/depreciation | ||||||
| from Investments still | ||||||
| held as of 3/31/08 | $ | 239,814 | $ | — | ||
| * |
The realized gain (loss) recognized during the period ended 3/31/08 for other financial instruments was $0. |
16
(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 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.
17
(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 M. Pollack (67) | Director | Former Managing Director, Donaldson, Lufkin & Jenrette; Trustee, |
| Adelphi University | ||
| Robert M. Solmson (60) | Director | Director, Colonial Williamsburg Co.; Former Chief Executive |
| Officer and Chairman, RFS Hotel Investors, Inc.; Former Director, | ||
| Morgan Keegan & Co., Inc.; Former Director, Independent Bank, | ||
| Memphis | ||
| Interested Director: | ||
| Charles Carroll (47) | Chief Executive Officer, | Deputy Chairman and Head of Global Marketing of the |
| President and Director | Investment Manager | |
| Class II – Directors with Term Expiring in 2010 | ||
| Independent Directors: | ||
| Kenneth S. Davidson (63) | Director | President, Davidson Capital Management Corporation; President, |
| Aquiline Advisors LLC; Trustee, The Juilliard School; Chairman of | ||
| the Board, Bridgehampton Chamber Music Festival; Trustee, | ||
| American Friends of the National Gallery, London | ||
| Nancy A. Eckl (45) | Director | Former Vice President, Trust Invesments, American Beacon |
| Advisors, Inc. (“American Beacon”) and Vice President of certain | ||
| funds advised by American Beacon; Trustee, College Retirement | ||
| Equities Fund; Trustee, TIAA-CREF Institutional Mutual Funds, | ||
| TIAA-CREF Life Funds and TIAA Separate Account VA-I | ||
| Lester Z. Lieberman (77) | 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 2011 | ||
| Independent Director: | ||
| Richard Reiss, Jr. (64) | Director | Chairman, Georgica Advisors LLC, an investment manager; |
| Director, O’Charley’s, Inc., a restaurant chain | ||
| Interested Director: | ||
| Ashish Bhutani (48) | Director | Chief Executive Officer of the Investment Manager |
| (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”). All of the Independent Directors, except Mr. Lieberman, are also board members of Lazard Alternative Strategies Fund, LLC, a privately-offered fund registered under the Investment Company Act of 1940 that is advised by an affiliate of the Investment Manager. |
18
(unaudited)
| Position(s) | ||
| Name (Age) | with the Fund(1) | Principal Occupation(s) During Past 5 Years |
| Officers: | ||
| Nathan A. Paul (35) | Vice President | Managing Director and General Counsel of the Investment |
| and Secretary | Manager | |
| Stephen St. Clair (49) | Treasurer | Vice President of the Investment Manager |
| Brian Kawakami (58) | 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 | ||
| Brian D. Simon (45) | Assistant Secretary | Director of the Investment Manager |
| David A. Kurzweil (33) | Assistant Secretary | Senior Vice President of the Investment Manager |
| Cesar A. Trelles (33) | 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.
19
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, 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
Rockefeller Plaza
New York, NY 10112-6300
www.LazardNet.com
