LAZARD RETIREMENT SERIES INC, 497, 1997-10-23

LAZARD RETIREMENT SERIES INC
497, 1997-10-23

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MAY 20, 1997
As revised, October 23, 1997

PROSPECTUS

LAZARD RETIREMENT
SERIES, INC.

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Lazard Retirement Equity Portfolio
Lazard Retirement Small Cap Portfolio
Lazard Retirement Bantam Value Portfolio
Lazard Retirement Global Equity Portfolio
Lazard Retirement International Equity
Portfolio
Lazard Retirement International Small
Cap Portfolio
Lazard Retirement Emerging Markets
Portfolio
Lazard Retirement International Fixed-
Income Portfolio
Lazard Retirement Strategic Yield Portfolio

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30 Rockefeller Plaza
New York, New York 10112
(800) 823-6300

INVESTORS ARE ADVISED TO READ THIS PROSPECTUS
AND RETAIN IT FOR FUTURE REFERENCE.

This Prospectus sets forth concisely information about the Fund and the
Portfolios that a prospective investor should know before investing in a
Portfolio. A Statement of Additional Information dated May 20, 1997, which may
be revised from time to time, containing additional and more detailed
information about the Portfolios, has been filed with the Securities and
Exchange Commission and is incorporated by reference into this Prospectus. The
Securities and Exchange Commission maintains a Web site (http://www.sec.gov)
that contains the Statement of Additional Information, material incorporated by
reference, and other information regarding the Fund. The Statement of Additional
Information is available without charge and can be obtained by writing or
calling the Fund at the address and telephone number printed above.

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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<PAGE>

Lazard Retirement Series, Inc. (the "Fund") is a no-load, open-end management
investment company, known as a mutual fund. By this Prospectus, the Fund is
offering shares of nine portfolios (each, a "Portfolio"), WHICH ARE OFFERED ONLY
TO QUALIFIED PENSION AND RETIREMENT PLANS AND VARIABLE ANNUITY AND VARIABLE LIFE
INSURANCE SEPARATE ACCOUNTS ESTABLISHED BY INSURANCE COMPANIES TO FUND VARIABLE
ANNUITY CONTRACTS AND VARIABLE LIFE INSURANCE POLICIES. Shares of the Portfolios
bear certain costs pursuant to a Distribution and Servicing Plan adopted in
accordance with Rule 12b-1 under the Investment Company Act of 1940, as amended
(the "1940 Act"). For offers to separate accounts, this Prospectus should be
read in conjunction with the prospectus of the separate accounts of the specific
insurance product which should precede or accompany this Prospectus.

Lazard Asset Management (the "Investment Manager"), a division of Lazard Freres
& Co. LLC ("Lazard Freres"), professionally manages each Portfolio.

The names and investment objectives of the Portfolios are as follows:

LAZARD RETIREMENT EQUITY PORTFOLIO seeks capital appreciation. This Portfolio
invests primarily in equity securities of companies with relatively large
capitalizations that the Investment Manager considers inexpensively priced
relative to the return on total capital or equity.

LAZARD RETIREMENT SMALL CAP PORTFOLIO seeks capital appreciation. This Portfolio
invests primarily in equity securities of companies with market capitalizations
under $1 billion that the Investment Manager considers inexpensively priced
relative to the return on total capital or equity.

LAZARD RETIREMENT BANTAM VALUE PORTFOLIO seeks capital appreciation. This
Portfolio invests primarily in equity securities of companies with market
capitalizations under $500 million that the Investment Manager considers
inexpensively priced relative to the return on total capital or equity and which
it believes are likely to increase market capitalization as a result of growth
or are likely to be the subject of acquisitions or other events.

LAZARD RETIREMENT GLOBAL EQUITY PORTFOLIO seeks capital appreciation. This
Portfolio invests primarily in equity securities of companies with relatively
large capitalizations that are located anywhere in the world which the
Investment Manager considers inexpensively priced relative to the return on
total capital or equity.

LAZARD RETIREMENT INTERNATIONAL EQUITY PORTFOLIO seeks capital appreciation.
This Portfolio invests primarily in the equity securities of non-United States
companies that the Investment Manager considers inexpensively priced relative to
the return on total capital or equity.

LAZARD RETIREMENT INTERNATIONAL SMALL CAP PORTFOLIO seeks capital appreciation.
This Portfolio invests primarily in equity securities of non-United States
companies with market capitalizations under $1 billion that the Investment
Manager considers inexpensively priced relative to the return on total capital
or equity.

LAZARD RETIREMENT EMERGING MARKETS PORTFOLIO seeks capital appreciation. This
Portfolio invests primarily in equity securities of non-United States issuers
located, or doing significant business, in emerging market countries that the
Investment Manager considers inexpensively priced relative to the return on
total capital or equity.

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<PAGE>

LAZARD RETIREMENT INTERNATIONAL FIXED-INCOME PORTFOLIO seeks high total return,
consisting of current income and capital appreciation, consistent with what the
Investment Manager considers to be prudent investment risk. This Portfolio
invests primarily in foreign fixed-income securities of varying maturities.

LAZARD RETIREMENT STRATEGIC YIELD PORTFOLIO seeks total return, consisting of
current income and capital appreciation. This Portfolio invests principally in
high-yielding domestic and foreign fixed-income securities. These securities,
which are often referred to as "junk bonds," are subject to greater risk of loss
of principal and interest than higher rated securities and are considered to be
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal.

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<PAGE>

TABLE OF CONTENTS

Page

Annual Operating Expenses................................................ 5
Description of the Portfolios............................................ 6
General............................................................... 6
Investment Objectives and Policies.................................... 6
Investment Considerations and Risks................................... 15
Management of the Fund and the Portfolios................................ 18
Purchase of Shares....................................................... 21
Redemption of Shares..................................................... 21
Distribution and Servicing Plan.......................................... 21
Dividends and Distributions.............................................. 22
Taxation................................................................. 23
Organization and Description of Capital Stock............................ 23
Performance Information.................................................. 24
Appendix A............................................................... 26
Appendix B............................................................... 34

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<PAGE>

Annual Operating Expenses
(as a percentage of average daily net assets)

<TABLE>
<CAPTION>
Total Portfolio
Management 12b-1 Other Operating
Fees Fees Expenses Expenses
------------ -------- --------- ------------
<S> <C> <C> <C> <C>
EQUITY PORTFOLIO .75% .25% .50% 1.50%
INTERNATIONAL EQUITY PORTFOLIO .75% .25% .60% 1.60%
INTERNATIONAL FIXED-INCOME PORTFOLIO .75% .25% .50% 1.50%
STRATEGIC YIELD PORTFOLIO .75% .25% .50% 1.50%
SMALL CAP PORTFOLIO .75% .25% .50% 1.50%
INTERNATIONAL SMALL CAP PORTFOLIO .75% .25% .80% 1.80%
EMERGING MARKETS PORTFOLIO 1.00% .25% .55% 1.80%
GLOBAL EQUITY PORTFOLIO .75% .25% .60% 1.60%
BANTAM VALUE PORTFOLIO .75% .25% .50% 1.50%

</TABLE>

EXAMPLE

An investor would pay the following expenses on a $1,000 investment, assuming a
5% annual return (cumulatively through the end of each time period):

1 YEAR 3 YEARS
------ -------
EQUITY PORTFOLIO $15 $48
INTERNATIONAL EQUITY PORTFOLIO $16 $51
INTERNATIONAL FIXED-INCOME PORTFOLIO $15 $48
STRATEGIC YIELD PORTFOLIO $15 $48
SMALL CAP PORTFOLIO $15 $48
INTERNATIONAL SMALL CAP PORTFOLIO $18 $57
EMERGING MARKETS PORTFOLIO $18 $57
GLOBAL EQUITY PORTFOLIO $16 $51
BANTAM VALUE PORTFOLIO $15 $48

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THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED REPRESENTATIVE OF
FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL RETURN, EACH
PORTFOLIO'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL RETURN
GREATER OR LESS THAN 5%.
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The purpose of the foregoing table is to assist investors in understanding the
costs and expenses borne by each Portfolio, the payment of which will reduce
investors' annual return. The expenses noted above are based on estimated
amounts for the current fiscal year. The information in the foregoing table does
not reflect deduction of account fees and charges to separate accounts or
related insurance policies that may be imposed by participating insurance
companies. For a further description of the various costs and expenses incurred
in the operation of the Portfolios, see "Management of the Fund and the
Portfolios" and "Distribution and Servicing Plan."

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<PAGE>

DESCRIPTION OF THE PORTFOLIOS

GENERAL

Shares of the Portfolios are offered only to variable annuity and variable life
insurance separate accounts established by affiliated and unaffiliated life
insurance companies ("Participating Insurance Companies") to fund variable
annuity contracts ("VA contracts") and variable life insurance policies ("VLI
policies" and, together with VA contracts, "Policies"). The Policies are
described in the separate prospectuses and statements of additional information
issued by the Participating Insurance Companies over which the Fund assumes no
responsibility. Portfolio shares also are offered to qualified pension and
retirement plans and accounts permitting accumulation of assets on a
tax-deferred basis ("Eligible Plans" or "Plans").

Differences in tax treatment or other considerations may cause the interests of
Policy owners and Eligible Plan participants to conflict, although the Fund
currently does not foresee any disadvantages to Policy owners or Eligible Plan
participants arising therefrom. Nevertheless, the Fund's Board of Directors
intends to monitor events to identify any material conflicts which may arise and
to determine what action, if any, should be taken in response thereto.
Resolution of an irreconcilable conflict might result in the withdrawal of a
substantial amount of a Portfolio's assets which could adversely affect the
Portfolio's net asset value per share.

INVESTMENT OBJECTIVES AND POLICIES

Each Portfolio has a different investment objective which it pursues through
separate investment policies as described herein. The differences in objectives
and policies among the Portfolios determine the types of portfolio securities in
which each Portfolio invests, and can be expected to affect the degree of risk
to which each Portfolio is subject and its yield or return. The following
investment objectives and related policies and activities of each of the
Portfolios, except as otherwise indicated, are not fundamental and may be
changed by the Board of Directors of the Fund without the approval of the
shareholders. There can be no assurance that any of the Portfolios will achieve
its respective investment objective. The types of portfolio securities in which
each Portfolio may invest are described in greater detail below and under
"Appendix A--Certain Portfolio Securities."

EQUITY PORTFOLIOS--These portfolios will invest principally in equity
securities. These Portfolios will engage in a value-oriented search for equity
securities before they have attracted wide investor interest. The Investment
Manager attempts to identify inexpensive securities through traditional measures
of value, including low price to earnings ratio, high yield, unrecognized
assets, potential for management change and/or the potential to improve
profitability. The Investment Manager focuses on individual stock selection (a
"bottom-up" approach) rather than on forecasting stock market trends (a
"top-down" approach). Risk is tempered by diversification of investments.

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<PAGE>

EQUITY PORTFOLIO

The Equity Portfolio is a non-diversified portfolio the investment objective of
which is to seek capital appreciation. The Portfolio invests primarily in equity
securities of companies with relatively large capitalizations that the
Investment Manager considers inexpensively priced relative to the return on
total capital or equity.

Under normal market conditions, the Portfolio will invest at least 65% of its
total assets in equity securities, including common stocks, preferred stocks and
convertible securities, as well as warrants to purchase such securities. In
addition, at times judged by the Investment Manager to be appropriate, the
Portfolio may hold up to 20% of its total assets in U.S. Government securities
and debt obligations of domestic corporations rated Baa or better by Moody's
Investors Service, Inc. ("Moody's") or BBB or better by Standard & Poor's
Ratings Group ("S&P"), Fitch Investors Service, L.P. ("Fitch") and Duff & Phelps
Credit Rating Co. ("Duff" and together with Moody's, S&P and Fitch, the "Rating
Agencies"). Obligations rated Baa /BBB by one or more Rating Agencies are
considered investment grade obligations that may have speculative
characteristics. See "Appendix A--Certain Portfolio Securities--Ratings" for a
description of the ratings of the Rating Agencies. The Portfolio also may invest
without limitation in short-term money market instruments of the types described
in "Appendix A--Money Market Instruments."

The Portfolio also may invest up to 15% of its total assets in foreign equity or
debt securities. See "Investment Considerations and Risks--Foreign Securities."

In addition, the Portfolio may engage in various investment techniques, such as
options and futures transactions and lending portfolio securities. For a
discussion of the investment techniques and their related risks, see "Investment
Considerations and Risks" and "Appendix A--Investment Techniques" below and
"Investment Objectives and Management Policies--Management Policies" in the
Statement of Additional Information.

SMALL CAP PORTFOLIO

The Small Cap Portfolio is a non-diversified portfolio the investment objective
of which is to seek capital appreciation. The Portfolio invests primarily in
equity securities of United States companies with market capitalizations under
$1 billion that the Investment Manager considers inexpensively priced relative
to the return on total capital or equity. Market capitalization of a company's
stock is its market price per share times the number of shares outstanding. The
equity securities in which the Portfolio may invest include common stocks,
preferred stocks, securities convertible into or exchangeable for common stocks,
rights and warrants and American and Global Depositary Receipts.

Investments generally are made in equity securities of companies which in the
Investment Manager's opinion have one or more of the following characteristics
(the "Small Cap Factors"): (i) are undervalued relative to their earnings power,
cash flow, and/or asset values; (ii) have an attractive price/value relationship
(i.e., have high returns on equity and/or assets with correspondingly low
price-to-book and/or price-to-asset value as compared to the market generally or
the companies' industry groups in particular), with expectations that some
catalyst will cause the perception of value to change within a 24-month time
horizon; (iii) have experienced significant

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<PAGE>

relative under performance and are out of favor due to a set of circumstances
which are unlikely to harm a company's franchise or earnings power over the
longer term; (iv) have low projected price-to-earnings or price-to-cash-flow
multiples relative to their industry peer group and/or the market in general;
(v) have the prospect, or the industry in which the company operates has the
prospect, to allow it to be become a larger factor in the business and receive a
higher valuation as such; (vi) have significant financial leverage but have high
levels of free cash flow used to reduce leverage and enhance shareholder value;
and (vii) have a relatively short corporate history with the expectation that
the business may grow to generate meaningful cash flow and earnings over a
reasonable investment horizon.

Under normal conditions, the Portfolio will invest at least 65% of the value of
its total assets in the small capitalization equity securities described above.
Assets not invested in such small capitalization equity securities generally
will be invested in large capitalization equity securities or debt securities,
including cash equivalents. The Portfolio also may invest up to 15% of its total
assets in foreign equity or debt securities. See "Investment Considerations and
Risks--Foreign Securities."

The Investment Manager believes that the issuers of small capitalization stocks
often have sales and earnings growth rates which exceed those of larger
companies, and that such growth rates, in turn, may be reflected in more rapid
share price appreciation. However, investing in smaller capitalization stocks
can involve greater risk than is customarily associated with larger, more
established companies. See "Investment Considerations and Risks--Equity
Securities."

When, in the Investment Manager's judgment, business or financial conditions
warrant, the Portfolio may assume a temporary defensive position and invest
without limitation in large capitalization companies or short-term money market
instruments of the types described in "Appendix A--Money Market Instruments" or
hold its assets in cash.

In addition, the Portfolio may engage in various investment techniques, such as
options and futures transactions and lending portfolio securities. For a
discussion of the investment techniques and their related risks, see "Investment
Considerations and Risks" and "Appendix AaeInvestment Techniques" below and
"Investment Objectives and Management PoliciesaeManagement Policies" in the
Statement of Additional Information.

BANTAM VALUE PORTFOLIO

The Bantam Value Portfolio is a non-diversified portfolio the investment
objective of which is to seek capital appreciation. The Portfolio will invest
primarily in equity securities of companies with market capitalizations under
$500 million that the Investment Manager considers inexpensively priced relative
to the return on total capital or equity. The equity securities in which the
Portfolio may invest include common stocks, preferred stock, securities
convertible into or exchangeable for common stocks, rights and warrants and
American and Global Depositary Receipts. Investments are generally made in
equity securities of companies which, in the Investment Manager's opinion, have
one or more of the characteristics of the Small Cap Factors, as well as a
potential for increasing recognition, market capitalization and value. See
"Small Cap Portfolio" above.

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<PAGE>

Under normal market conditions, the Portfolio will invest at least 65% of the
value of its total assets in the small capitalization equity securities
described above. Assets not invested in such small capitalization equity
securities generally will be invested in large capitalization equity securities
or debt securities, including cash equivalents. For a description of the risks
associated with investing in small capitalization equity securities, see
"Investment Considerations and Risks--Equity Securities."

When, in the Investment Manager's judgment, business or financial conditions
warrant, the Portfolio may assume a temporary defensive position and invest
without limit in larger capitalization companies or short-term money market
instruments of the types described in "Appendix A--Money Market Instruments" or
hold its assets in cash.

GLOBAL EQUITY PORTFOLIO

The Global Equity Portfolio is a non-diversified portfolio the investment
objective of which is to seek capital appreciation. The Portfolio will invest
primarily in equity securities of companies both U.S. and non-U.S. that the
Investment Manager considers inexpensively priced relative to the return on
total capital or equity. The Portfolio engages in a value-oriented search for
equity securities of issuers located anywhere in the world. In selecting
investments for the Portfolio, the Investment Manager attempts to identify
inexpensive markets worldwide, including the United States, through traditional
measures of value, including low price to earnings ratio, high yield,
unrecognized assets, potential for management change and/or potential to improve
profitability. In addition, the Investment Manager seeks to identify companies
that it believes are financially productive and undervalued in those markets.

Under normal market conditions, the Portfolio will invest at least 65% of the
value of its total assets in the equity securities of companies within not less
than four countries, including the United States. The percentage of the
Portfolio's assets invested in particular geographic sectors may shift from time
to time in accordance with the Investment Manager's judgment. With a focus on
stock picking, the country allocation decision is an outgrowth of stock
selection and is used as an overlay and risk control mechanism to enhance
diversification. Nonetheless, the Investment Manager currently intends to invest
not less than 25% of the assets of the Portfolio in securities of U.S. issuers.
For a description of the risks associated with investing in foreign securities,
see "Investment Considerations and Risks--Foreign Securities."

The assets of the Portfolio are expected to be invested principally in equity
securities, including American and Global Depositary Receipts, and in
convertible bonds and other convertible securities. The Portfolio is not
required to invest exclusively in equity securities, and, if deemed advisable,
under normal market conditions, the Portfolio may

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<PAGE>

invest up to 20% of the value of its total assets in fixed-income securities.
The Portfolio will not invest in fixed-income securities rated lower than
investment grade by the Rating Agencies.

When, in the Investment Manager's judgment, business or financial conditions
warrant, the Portfolio may assume a temporary defensive position and invest
without limit in the equity securities of U.S. companies or short-term money
market instruments of the types described in "Appendix A--Money Market
Instruments" or hold its assets in cash.

In addition, the Portfolio may engage in various investment techniques, such as
foreign currency transactions, options and futures transactions and lending
portfolio securities. For a discussion of the investment techniques and their
related risks, see "Investment Considerations and Risks" and "Appendix
A--Investment Techniques" below and "Investment Objectives and Management
Policies--Management Policies" in the Statement of Additional Information.

INTERNATIONAL EQUITY PORTFOLIO

The International Equity Portfolio is a non-diversified portfolio the investment
objective of which is to seek capital appreciation. The Portfolio invests
primarily in the equity securities of non-United States companies (i.e.,
incorporated or organized outside the United States). The Portfolio is not
required to invest exclusively in common stocks or other equity securities, and,
if deemed advisable, the Portfolio may invest up to 20% of the value of its
total assets in fixed-income securities and short-term money market instruments.
The Portfolio will not invest in fixed-income securities rated lower than
investment grade by the Rating Agencies. In addition, the Portfolio may have
substantial investments in American Depositary Receipts and Global Depositary
Receipts and in convertible bonds and other convertible securities.

The Investment Manager currently intends to invest the Portfolio's assets in
companies based in Continental Europe, the United Kingdom, the Pacific Basin and
in such other areas and countries as the Investment Manager may determine from
time to time. Under normal market conditions, the Portfolio will invest at least
80% of the value of its total assets in the equity securities of companies
within not less than three different countries (not including the United
States). The percentage of the Portfolio's assets invested in particular
geographic sectors may shift from time to time in accordance with the judgment
of the Investment Manager. For a description of the risks associated with
investing in foreign securities, see "Investment Considerations and
Risks--Foreign Securities."

The Investment Manager recognizes that some of the best opportunities are in
securities not generally followed by investment professionals. Thus, the
Investment Manager relies on its research capability and also maintains a
dialogue with foreign brokers and with the management of foreign companies in an
effort to gather the type of "local knowledge" that it believes is critical to
successful investment abroad. To this end, the Investment Manager communicates
with its affiliates, Lazard Freres & Cie. in Paris, Lazard Brothers & Co. Ltd.
in London and Lazard Japan Asset Management K.K. in Tokyo, for information
concerning current business trends, as well as for a better understanding of the
management of local businesses.

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<PAGE>

INTERNATIONAL SMALL CAP PORTFOLIO

The International Small Cap Portfolio is a non-diversified portfolio the
investment objective of which is to seek capital appreciation. The Portfolio
will invest primarily in equity securities of non-United States companies with
market capitalizations under $1 billion that the Investment Manager considers
inexpensively priced relative to the return on total capital or equity. Under
normal market conditions, the Portfolio will invest at least 65% of the value of
its total assets in small capitalization equity securities. The Portfolio will
invest in equity securities listed on national or regional securities exchanges
or traded over-the-counter of companies based in Continental Europe, the United
Kingdom, the Pacific Basin, Latin America, Canada and such other areas as the
Investment Manager may determine from time to time. The Portfolio also may
invest in American and Global Depositary Receipts and in convertible bonds and
other convertible securities. In selecting investments for the Portfolio, the
Investment Manager will attempt to ascertain inexpensive markets worldwide
through traditional measures of value, and identify securities within such
undervalued markets which, in the Investment Manager's opinion, have one or more
of the characteristics of the Small Cap Factors listed under "Small Cap
Portfolio." For a description of the risks associated with investing in small
capitalization equity securities, see "Investment Considerations and
Risks--Equity Securities."

Under normal market conditions, the Portfolio will invest at least 65% of the
value of its total assets in the equity securities of companies in not less than
three different countries (not including the United States). The remaining
portion of the assets of the Portfolio may be invested in the same or different
countries. The percentage of the Portfolio's assets in a particular geographic
sector may shift from time to time in accordance with the judgment of the
Investment Manager. See "Investment Consideration and Risks--Foreign
Securities."

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<PAGE>

techniques and their related risks, see "Investment Considerations and Risks"
and "Appendix A--Investment Techniques" below and "Investment Objectives and
Management Policies--Management Policies" in the Statement of Additional
Information.

EMERGING MARKETS PORTFOLIO

The Emerging Markets Portfolio is a non-diversified portfolio the investment
objective of which is to seek long-term capital appreciation. The Portfolio will
invest primarily in securities of issuers which are located, or doing
significant business, in emerging market countries. Emerging markets include
countries where political and economic trends have produced or are producing a
more stable economic environment, developed or developing financial markets and
investment liquidity. Factors affecting a determination of an emerging market
include a legitimate program to reduce government spending and deficits and
reduce excessive regulation of commercial activity, including reducing
confiscatory tax rates, control of inflation, lower trade barriers, stability of
currency exchange rates, increasing foreign and domestic investment,
privatization of state-owned companies and expansion of developed financial
product exchanges.

Under normal market conditions, the Portfolio will invest at least 65% of the
value of its total assets in securities of companies in not less than three
different countries (not including the United States). The remaining portion of
the assets of the Portfolio may be invested in the same or different countries.
The percentage of the Portfolio's assets invested in particular emerging markets
may shift from time to time in accordance with the Investment Manager's
judgment. Emerging market countries generally will include any countries (i)
having an "emerging stock market" as defined by the International Finance
Corporation; (ii) with low- to middle-income economies according to the World
Bank; or (iii) listed in World Bank publications as developing. Currently, the
countries not included in these categories are Australia, Austria, Belgium,
Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, Netherlands,
New Zealand, Norway, Spain, Sweden, Switzerland, the United Kingdom and the
United States. For a description of the risks associated with investing in
emerging markets, see "Investment Considerations and Risks--Foreign Securities."

The Portfolio invests primarily in equity securities of issuers located, or
doing significant business, in emerging markets including: issuers organized
under the laws of the emerging market country or for which the principal trading
market for such securities is located in the emerging market country or issuers,
wherever organized, when the issuer's principal activities are in the emerging
market country. The Portfolio may invest in closed-end investment companies
investing in emerging market securities. The Portfolio also may invest in
American and Global Depositary Receipts with respect to emerging market
securities.

Although the Portfolio expects to invest principally in equity securities of
emerging markets issuers, there is no requirement that the Portfolio invest
exclusively in equity securities. When, in the Investment Manager's judgment,
business or financial conditions warrant, the Portfolio may invest in
fixed-income securities or assume a temporary defensive position and invest
without limit in the equity securities of U.S. companies or short-term money
market instruments of the types described in

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<PAGE>

"Appendix A--Money Market Instruments" or hold its assets in cash.

FIXED-INCOME PORTFOLIOS--These Portfolios will invest principally in
fixed-income securities.

INTERNATIONAL FIXED-INCOME PORTFOLIO

The International Fixed-Income Portfolio is a non-diversified portfolio the
investment objective of which is to seek high total return, consisting of
current income and capital appreciation, consistent with what the Investment
Manager considers to be prudent investment risk. The Portfolio invests primarily
in foreign fixed-income securities of varying maturities, typically greater than
one year. Under normal market conditions, the Investment Manager anticipates
that the effective duration of the Portfolio will be in the range of two to
eight years. The Portfolio's effective duration generally will be shorter than
the Portfolio's average maturity. The Portfolio's effective "duration" is a
measure of the price sensitivity of its investment portfolio, including expected
cash flow, redemptions and mortgage prepayments under a wide range of interest
rate conditions.

The Portfolio seeks high current yields by investing in a portfolio of
fixed-income securities, such as bonds, debentures, notes, convertible debt
obligations, and mortgage-related and asset-back securities, denominated in a
range of foreign currencies and in the U.S. dollar. Under normal market
conditions, the Portfolio will invest at least 65% of the value of its total
assets in the fixed-income securities of companies within, or governments,
political subdivisions, authorities, agencies or instrumentalities of, not less
than three different countries (not including the United States). The Portfolio
has the flexibility to invest in any region of the world. The Investment Manager
currently intends to invest the Portfolio's assets principally in fixed-income
securities of companies within, or governments of, Continental Europe, the
United Kingdom, Canada, the Pacific Basin and in such other areas and countries
as the Investment Manager may determine from time to time, including countries
that are considered emerging market countries at the time of investment. See
"Investment Considerations and Risks--Foreign Securities." The Portfolio also
may invest in American or Global Depositary Receipts issued in relation to a
pool of fixed-income securities in which the Portfolio could invest directly.

At least 85% of the Portfolio's assets will be invested in (i) fixed-income
securities rated investment grade by one or more Rating Agencies; (ii)
commercial paper issued by foreign or U.S. companies rated Prime-2 or better by
Moody's, A or better by S&P, F-2 or better by Fitch or Duff-2 or better by Duff;
or (iii) fixed-income securities or commercial paper that, if unrated, is
determined by the Investment Manager to be of comparable quality. Up to 15% of
the value of the Portfolio's assets may be invested in high yield, high risk
fixed-

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<PAGE>

income securities that are rated below investment grade by the Rating
Agencies or, if unrated, are determined by the Investment Manager to be of
comparable quality. Fixed-income securities rated below investment grade are
considered to be predominantly speculative. The Portfolio has no current
intention of investing more than 5% of its total assets in securities that are
in default. For a description of the special risks associated with investing in
fixed-income securities rated below investment grade, see "Investment
Considerations and Risksae Lower Rated Securities."

When, in the Investment Manager's judgment, business or financial conditions
warrant, the Portfolio may assume a temporary defensive position and invest
without limit in high quality short-term debt securities or short-term money
market instruments of the types described in "Appendix A--Money Market
Instruments" or hold its assets in cash.

In addition, the Portfolio may engage in various investment techniques, such as
foreign currency transactions, options and futures transactions and lending
portfolio securities. For a discussion of the investment techniques and their
related risks, see "Investment Considerations and Risks" and "Appendix
AaeInvestment Techniques" below and "Investment Objectives and Management
PoliciesaeManagement Policies" in the Statement of Additional Information.

STRATEGIC YIELD PORTFOLIO

The Strategic Yield Portfolio is a non-diversified portfolio the investment
objective of which is to seek total return, consisting of current income and
capital appreciation. The Portfolio invests principally in high-yielding
fixed-income securities.

Under normal market conditions, the Portfolio will invest at least 65% of the
value of its total assets in fixed-income securities, such as bonds, debentures,
notes, convertible debt obligations, and mortgage-related and asset-backed
securities, of domestic and foreign issuers. At least 95% of these obligations
when purchased by the Portfolio will have a rating of at least Caa/CCC by one or
more Rating Agencies or, if not rated, will be of comparable quality as
determined by the Investment Manager. See "Investment Considerations and
RisksaeForeign Securities." The Portfolio also may invest in American or Global
Depositary Receipts issued in relation to a pool of fixed-income securities in
which the Portfolio could invest directly.

The Investment Manager expects most of the Portfolio's investment securities
will pay cash income. In a limited number of cases, however, "zero coupon" or
"payment-in-kind" high-yield securities may be purchased when, in the opinion of
the Investment Manager, they offer appropriate value relative to their risk. See
"Appendix A--Certain Portfolio Securities--Zero Coupon Securities." Capital
appreciation may result, for example, from an improvement in the credit standing
of an issuer whose securities are held by the Portfolio or from a general
decline in interest rates or both.

When, in the Investment Manager's judgment, business or financial conditions
warrant, the Portfolio may assume a temporary defensive position and invest
without limit in investment grade debt securities or short-term money market
instruments of the types described in

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"Appendix A--Money Market Instruments" or hold its assets in cash.

In addition, the Portfolio may engage in various investment techniques, such as
options and futures transactions, foreign currency transactions and lending
portfolio securities. For a discussion of the investment techniques and their
related risks, see "Investment Considerations and Risks" and "Appendix
AaeInvestment Techniques" below and "Investment Objectives and Management
PoliciesaeManagement Policies" in the Statement of Additional Information.

INVESTMENT CONSIDERATIONS AND RISKS

GENERAL--Since each Portfolio will pursue different types of investments, the
risks of investing will vary depending on the Portfolio selected for investment.
Before investing in a Portfolio, each investor should assess the risks
associated with the types of investments made by the Portfolio. The net asset
value per share of each Portfolio should be expected to fluctuate. Investors
should consider each Portfolio as part of an overall investment program and
should invest only if they are willing to undertake the risks involved. See
"Investment Objectives and Management Policies--Management Policies" in the
Statement of Additional Information for a further discussion of certain risks.

EQUITY SECURITIES--(All Portfolios, except the International Fixed-Income
Portfolio and Strategic Yield Portfolio) Equity securities fluctuate in value,
often based on factors unrelated to the value of the issuer of the securities,
and such fluctuations can be pronounced. Changes in the value of a Portfolio's
investments will result in changes in the value of its shares and thus the
Portfolio's total return to investors.

The securities of the smaller companies in which the Small Cap, International
Small Cap, Emerging Markets and Bantam Value Portfolios may invest may be
subject to more abrupt or erratic market movements than larger, more established
companies, because these securities typically are traded in lower volume and the
issuers typically are more subject to changes in earnings and prospects. Smaller
capitalization companies often have limited product lines, markets or financial
resources. They may be dependent for management on one or a few key persons, and
can be more susceptible to losses and risks of bankruptcy. In addition,
securities in the small capitalization sector may be thinly traded (and
therefore have to be sold at a discount from current market prices or sold in
small lots over an extended period of time), may be followed by fewer investment
research analysts and may be subject to wider price swings and thus may create a
greater chance of loss than investing in securities of larger capitalization
companies.

FIXED-INCOME SECURITIES--(All Portfolios) Even though interest-bearing
securities are investments which promise a stable stream of income, the prices
of such securities generally are inversely affected by changes in interest rates
and, therefore, are subject to the risk of market price fluctuations. Certain
portfolio securities, such as those with interest rates that fluctuate directly
or indirectly based on multiples of a stated index, are designed to be highly
sensitive to changes in interest rates and can subject the holders thereof to
extreme reductions of yield and possibly loss of principal.

The values of fixed-income securities also may be affected by changes in the
credit rating or financial condition of the issuer.

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Certain portfolio securities, such as those rated below investment grade by the
Rating Agencies, may be subject to such risk with respect to the issuing entity
and to greater market fluctuations than certain lower yielding, higher rated
fixed-income securities. Once the rating of a portfolio security has been
changed, the Portfolio will consider all circumstances deemed relevant in
determining whether to continue to hold the security. See "Appendix A--Certain
Portfolio Securities--Ratings" below and "Appendix" in the Statement of
Additional Information.

FOREIGN SECURITIES--(All Portfolios) Foreign securities markets generally are
not as developed or efficient as those in the United States. Securities of some
foreign issuers are less liquid and more volatile than securities of comparable
U.S. issuers. Similarly, volume and liquidity in most foreign securities markets
are less than in the United States and, at times, volatility of price can be
greater than in the United States.

Because evidences of ownership of such securities usually are held outside the
United States, the Portfolios will be subject to additional risks which include
possible adverse political and economic developments, seizure or nationalization
of foreign deposits and adoption of governmental restrictions which might
adversely affect the payment of principal and interest on the foreign securities
or restrict the payment of principal and interest to investors located outside
the country of the issuer, whether from currency blockage or otherwise.

With respect to the Emerging Markets, International Fixed-Income and Strategic
Yield Portfolios, emerging market countries have economic structures that
generally are less diverse and mature, and political systems that are less
stable, than those of developed countries. Emerging markets may be more volatile
than the markets of more mature economies; however, such markets may provide
higher rates of return to investors. Many emerging market countries providing
investment opportunities for these Portfolios have experienced substantial, and
in some periods extremely high, rates of inflation for many years. Inflation and
rapid fluctuations in inflation rates have had and may continue to have adverse
effects on the economies and securities markets of certain of these countries.

Since foreign securities often are purchased with and payable in currencies of
foreign countries, the value of these assets as measured in U.S. dollars may be
affected favorably or unfavorably by changes in currency rates and exchange
control regulations.

FOREIGN CURRENCY TRANSACTIONS--(All Portfolios, except the Equity Portfolio,
Small Cap Portfolio and Bantam Value Portfolio) Currency exchange rates may
fluctuate significantly over short periods of time. They generally are
determined by the forces of supply and demand in the foreign exchange markets
and the relative merits of investments in different countries, actual or
perceived changes in interest rates and other complex factors, as seen from an
international perspective. Currency exchange rates also can be affected
unpredictably by intervention by U.S. or foreign governments or central banks,
or the failure to intervene, or by currency controls or political developments
in the United States or abroad. See "Appendix A--Investment Techniques--Foreign
Currency Transactions."

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USE OF DERIVATIVES--(All Portfolios) Each Portfolio may invest in derivatives
("Derivatives"). These are financial instruments which derive their performance,
at least in part, from the performance of an underlying asset, index or interest
rate. The Derivatives a Portfolio may use, to the extent described above, may
include options and futures, mortgage-related securities and asset-backed
securities. While Derivatives can be used effectively in furtherance of the
Portfolio's investment objective, under certain market conditions, they can
increase the volatility of the Portfolio's net asset value, can decrease the
liquidity of the Portfolio's securities, and make more difficult the accurate
pricing of the Portfolio's securities. See "Appendix A--Investment
Techniques--Use of Derivatives" below, and "Investment Objectives and Management
Policies--Management Policies--Derivatives" in the Statement of Additional
Information.

LOWER RATED SECURITIES--(International Fixed-Income Portfolio and Strategic
Yield Portfolio) Each of these Portfolios may invest a portion of its assets in
higher yielding (and, therefore, higher risk) debt securities such as those
rated below investment grade by the Rating Agencies (commonly known as "junk
bonds"). They may be subject to certain risks with respect to the issuing entity
and to greater market fluctuations than certain lower yielding, higher rated
fixed-income securities. The retail secondary market for these securities may be
less liquid than that of higher rated securities; adverse conditions could make
it difficult at times for the Portfolio to sell certain securities or could
result in lower prices than those used in calculating the Portfolio's net asset
value. See "Appendix A--Certain Portfolio Securities --Ratings."

PORTFOLIO TURNOVER--(All Portfolios) No Portfolio will consider portfolio
turnover to be a limiting factor in making investment decisions. The Investment
Manager anticipates that, under normal market conditions, the portfolio turnover
rate of each of the Bantam Value Portfolio, Emerging Markets Portfolio, Equity
Portfolio, Global Equity Portfolio, International Equity Portfolio,
International Small Cap Portfolio and Small Cap Portfolio will not exceed 100%.
The annual portfolio turnover rate of the International Fixed-Income Portfolio
and Strategic Yield Portfolio may exceed 200% (but is not expected to exceed
300%). A 200% portfolio turnover rate is greater than that of most other
investment companies. A high rate of portfolio turnover involves correspondingly
greater transaction expenses than a lower rate, which expenses are borne by the
Portfolio and its shareholders and may result in the realization of substantial
net short-term capital gains.

NON-DIVERSIFIED PORTFOLIOS--(All Portfolios) Each Portfolio is classified as a
"non-diversified" investment company, which means that the proportion of the
Portfolio's assets that may be invested in the securities of a single issuer is
not limited by the 1940 Act. A "diversified" investment company is required by
the 1940 Act generally, with respect to 75% of its total assets, to invest not
more than 5% of such assets in the securities of a single issuer. Since a
relatively high percentage of each Portfolio's assets may be invested in the
securities of a limited number of issuers, some of which may be within the same
industry, the Portfolio's securities may be more sensitive to changes in the
market value of a single issuer or industry. However, to meet Federal tax
requirements, at the

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close of each quarter no Portfolio may have more than 25%
of its total assets invested in any one issuer and, with respect to 50% of its
total assets, more than 5% of its total assets invested in any one issuer. These
limitations do not apply to U.S. Government securities.

STATE INSURANCE REGULATION--(All Portfolios) The Fund is intended to be a
funding vehicle for VA contracts and VLI policies to be offered by Participating
Insurance Companies and will seek to be offered in as many jurisdictions as
possible. Certain states may have regulations concerning concentration of
investments and purchase and sale of futures contracts, among other techniques.
If applied to the Fund, each Portfolio may be limited in its ability to engage
in such techniques and to manage its portfolio with the flexibility provided
herein. It is the Fund's intention that each Portfolio operate in material
compliance with current insurance laws and regulations, as applied, in each
jurisdiction in which the Portfolio is offered.

SIMULTANEOUS INVESTMENT BY OTHER PORTFOLIOS OR FUNDS--(All Portfolios)
Investment decisions for each Portfolio are made independently from those of the
other portfolios and accounts managed by the Investment Manager. If, however,
such other portfolios or accounts desire to invest in, or dispose of, the same
securities as the Portfolio, available investments or opportunities for sales
will be allocated equitably to each. In some cases, this procedure may adversely
affect the size of the position obtained for or disposed of by a Portfolio or
the price paid or received by a Portfolio.

MANAGEMENT OF THE FUND AND THE PORTFOLIOS

DIRECTORS

The Board of Directors, under applicable laws of the State of Maryland, in
addition to supervising the actions of the Investment Manager, as set forth
below, decides upon matters of general policy.

INVESTMENT MANAGER AND INVESTMENT MANAGEMENT AGREEMENT

Lazard Asset Management, 30 Rockefeller Plaza, New York, New York 10020, has
entered into an investment management agreement (the "Management Agreement")
with the Fund on behalf of each of the Portfolios. Pursuant to the Management
Agreement, the Investment Manager regularly will provide the Portfolios with
investment research, advice and supervision and continuously furnish an
investment program for each Portfolio consistent with its investment objectives
and policies, including the purchase, retention and disposition of securities.

The Investment Manager also is responsible for the selection of brokers and
dealers to effect securities transactions and the negotiation of brokerage
commissions, if any. Purchases and sales of securities on a securities exchange
are effected through brokers who charge a negotiated commission for their
services. Brokerage commissions may be paid to Lazard Freres for executing
securities transactions if the use of Lazard Freres is likely to result in price
and execution at least as favorable as those of other qualified brokers or
dealers. The allocation of brokerage transactions also may take into account a
broker's sales of

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<PAGE>

Portfolio shares. See "Portfolio Transactions" in the Statement of Additional
Information.

The Investment Manager is a division of Lazard Freres, a New York limited
liability company, which is registered as an investment adviser with the
Securities and Exchange Commission (the "Commission") and is a member of the New
York, American and Midwest Stock Exchanges. Lazard Freres provides its clients
with a wide variety of investment banking, brokerage and related services. The
Investment Manager provides investment management services to the Fund's other
portfolios and client discretionary accounts with assets totaling approximately
$38.1 billion as of December 31, 1996. Its clients are both individuals and
institutions, some of whose accounts have investment policies similar to those
of several of the Portfolios.

The Fund has agreed to pay the Investment Manager an investment management fee
at the annual rate set forth below as a percentage of the average daily value of
the net assets of the relevant Portfolio:

Investment Management
Name of Portfolio Fee Payable
- --------------- --------------------
Bantam Value Portfolio .75%
Emerging Markets Portfolio 1.00%
Equity Portfolio .75%
Global Equity Portfolio .75%
International Equity Portfolio .75%
International Fixed-Income Portfolio .75%
International Small Cap Portfolio .75%
Small Cap Portfolio .75%
Strategic Yield Portfolio .75%

The investment management fees are accrued daily and paid monthly.

Each Portfolio will bear all expenses not specifically assumed by the Investment
Manager, including, among others, the fee payable to the Investment Manager, the
fees of the Directors who are not "affiliated persons" of the Investment
Manager, the expenses of all Directors, the fees and out-of-pocket expenses of
the Fund's custodian and the transfer and dividend disbursing agent and the fee
payable under the Distribution and Servicing Plan. See "Distribution and
Servicing Plan." Expenses attributable to a particular Portfolio are charged
against the assets of that Portfolio; other expenses of the Fund are allocated
among the Portfolios on the basis determined by the Board of Directors,
including, but not limited to, proportionately in relation to the net assets of
each Portfolio. For a more detailed description of the expenses to be borne by
the Portfolios, see "Management" and "Distribution and Servicing Plan" in the
Statement of Additional Information.

PRINCIPAL PORTFOLIO MANAGERS

The names of the principal persons employed by or associated with the Investment
Manager who are primarily responsible for the day-to-day management of the
assets of each of the Portfolios are as follows:

BANTAM VALUE PORTFOLIO--Eileen Alexanderson, Herbert W. Gullquist, Bradley J.
Purcell, Michael S. Rome and Leonard M. Wilson

EMERGING MARKETS PORTFOLIO--Herbert W. Gullquist and John R. Reinsberg

EQUITY PORTFOLIO--Herbert W. Gullquist and Michael S. Rome

GLOBAL EQUITY PORTFOLIO--Herbert W. Gullquist, John R. Reinsberg and Michael S.
Rome

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INTERNATIONAL EQUITY PORTFOLIO--Herbert W. Gullquist and John R. Reinsberg

INTERNATIONAL FIXED-INCOME PORTFOLIO--Thomas F. Dunn and Ira O. Handler

INTERNATIONAL SMALL CAP PORTFOLIO--Herbert W. Gullquist and John R. Reinsberg

SMALL CAP PORTFOLIO--Eileen Alexanderson, Herbert W. Gullquist, Bradley J.
Purcell, Michael S. Rome and Leonard M. Wilson

STRATEGIC YIELD PORTFOLIO--Thomas F. Dunn and Ira O. Handler

BIOGRAPHICAL INFORMATION OF
PRINCIPAL PORTFOLIO MANAGERS

EILEEN ALEXANDERSON. Ms. Alexanderson is a Managing Director of the Investment
Manager where she has been employed since 1979.

THOMAS F. DUNN. Mr. Dunn is a Managing Director of the Investment Manager and
has been with the Investment Manager since January 1, 1995. Prior thereto, he
was a Senior Vice President of Goldman Sachs Asset Management.

HERBERT W. GULLQUIST. Mr. Gullquist is a Managing Director of the Investment
Manager and has been with the Investment Manager since 1982.

IRA O. HANDLER. Mr. Handler is a Senior Vice President of the Investment Manager
and has been a Global & Emerging Fixed-Income Portfolio Manager of the
Investment Manager since 1992.

BRADLEY J. PURCELL. Mr. Purcell is a Vice President of the Investment Manager
and has been with the Investment Manager since 1991.

JOHN R. REINSBERG. Mr. Reinsberg is a Managing Director of the Investment
Manager and has been with the Investment Manager since 1992.

MICHAEL S. ROME. Mr. Rome is a Managing Director of the Investment Manager and
has been with the Investment Manager since 1991.

LEONARD M. WILSON. Mr. Wilson has been a Senior Vice President of the Investment
Manager since 1988.

ADMINISTRATOR

State Street Bank and Trust Company ("State Street"), located at 225 Franklin
Street, Boston, Massachusetts 02110, serves as each Portfolio's administrator
pursuant to an Administration Agreement with the Fund.

DISTRIBUTOR

Under the terms of a distribution agreement with the Fund, Lazard Freres acts as
distributor for the Portfolios.

CUSTODIAN; TRANSFER AND DIVIDEND DISBURSING AGENT

State Street has been retained to act as Custodian of the Portfolios'
investments. Boston Financial Data Services Inc., an affiliate of State Street,
serves as the Fund's Transfer and Dividend Disbursing Agent. Neither the
Custodian nor the Transfer Agent has any part in deciding any of the Portfolio's
investment policies or which securities are to be purchased or sold for any
Portfolios. Subject to the supervision of the Fund's Board of Directors, the
Custodian may enter into subcustodial arrangements on behalf of any of the
Portfolios for the holding of foreign securities.

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PURCHASE OF SHARES

INDIVIDUALS MAY NOT PLACE PURCHASE ORDERS DIRECTLY WITH THE FUND. INDIVIDUALS
SHOULD CONSULT A PARTICIPATING INSURANCE COMPANY, THE ADMINISTRATOR OF AN
ELIGIBLE PLAN OR A FINANCIAL INTERMEDIARY FOR INFORMATION ON THE PURCHASE OF
PORTFOLIO SHARES. THE FUND DOES NOT ISSUE SHARE CERTIFICATES.

Purchase orders received by the Participating Insurance Company or Eligible Plan
on a given business day will be effected at the net asset value of the
applicable Portfolio determined on such business day if the orders are received
by the Fund on the next business day in accordance with applicable requirements.
It is each Participating Insurance Company's or Eligible Plan administrator's or
trustee's responsibility to transmit purchase orders in accordance with
applicable requirements.

Fund shares are sold on a continuous basis. Net asset value ordinarily is
determined as of 4:00 p.m. (New York Time) on each day during which the New York
Stock Exchange is open for trading. For purposes of determining net asset value,
options and futures contracts will be valued 15 minutes after the close of
trading on the floor of the New York Stock Exchange. Net asset value per share
is computed by dividing the value of the net assets of each Portfolio (i.e., the
value of its assets less liabilities) by the total number of shares outstanding.
Equity securities typically are valued based on market value, or where market
quotations are not readily available, based on fair value as determined in good
faith by the Board. Debt securities having remaining maturities of 60 days or
less are valued on an amortized cost basis unless the Board determines that such
method does not represent fair value. Other debt securities are valued using
available market quotations or at fair value which may be determined by one or
more pricing services. For further information regarding the methods employed in
valuing each Portfolio's investments, see "Determination of Net Asset Value" in
the Statement of Additional Information.

REDEMPTION OF SHARES

Portfolio shares may be redeemed at any time by the separate accounts of the
Participating Insurance Companies or by Eligible Plans. INDIVIDUALS MAY NOT
PLACE REDEMPTION ORDERS DIRECTLY WITH THE FUND. Redemption requests received by
the Participating Insurance Company or Eligible Plan on a given business day
will be effected at the net asset value of the applicable Portfolio determined
on such business day if the requests are received by the Fund in proper form and
in accordance with applicable requirements on the next business day. It is each
Participating Insurance Company's or Eligible Plan administrator's or trustee's
responsibility to properly transmit redemption requests in accordance with
applicable requirements. The value of the shares redeemed may be more or less
than their original cost, depending on the Portfolio's then-current net asset
value.

The Fund ordinarily will make payment for all shares redeemed within seven days
after receipt by the Transfer Agent of a redemption request in proper form,
except as provided by the rules of the Commission.

DISTRIBUTION AND SERVICING PLAN

Shares of the Portfolios are subject to a Distribution and Servicing Plan,
adopted pursuant to Rule 12b-1 under the 1940 Act.

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Under the Distribution and Servicing Plan, each Portfolio pays Lazard Freres for
advertising, marketing and distributing the Portfolio's shares and for the
provision of certain services to the holders of Portfolio shares at an annual
rate of .25 of 1% of the Portfolio's average daily net assets. Lazard Freres may
make payments to Participating Insurance Companies for providing these services
to Policy owners or to certain financial institutions, securities dealers and
other industry professionals (collectively, "Service Agents") for providing
these services to Eligible Plan participants. The services provided may include
personal services relating to shareholder accounts, such as answering
shareholder inquiries regarding the Fund and providing reports and other
information, and services related to the maintenance of shareholder accounts.
The fee payable for such services is intended to be a "service fee" as defined
in the NASD Conduct Rules. Depending on a Participating Insurance Company's
corporate structure and applicable state law, Lazard Freres may make payments to
the Participating Insurance Company's affiliated broker-dealer or other
affiliated company rather than the Participating Insurance Company itself.

From time to time, Lazard Freres may defer or waive receipt of fees under the
Distribution and Servicing Plan while retaining the ability to be paid by the
Fund under the Distribution and Servicing Plan thereafter. The fees payable to
Lazard Freres under the Distribution and Servicing Plan for advertising,
marketing and distributing Portfolio shares and for payments to Participating
Insurance Companies and Service Agents are payable without regard to actual
expenses incurred.

DIVIDENDS AND DISTRIBUTIONS

INTERNATIONAL FIXED-INCOME PORTFOLIO AND STRATEGIC YIELD PORTFOLIO--Declare
dividends from net investment income daily. Dividends ordinarily are paid five
business days prior to the end of each month. The earnings for Saturdays,
Sundays and holidays are declared as dividends on the next business day.

EQUITY PORTFOLIO, BANTAM VALUE PORTFOLIO, EMERGING MARKETS PORTFOLIO, GLOBAL
EQUITY PORTFOLIO, INTERNATIONAL EQUITY PORTFOLIO, INTERNATIONAL SMALL CAP
PORTFOLIO AND SMALL CAP PORTFOLIO--Declare and pay dividends from net investment
income annually.

APPLICABLE TO ALL PORTFOLIOS--Net realized capital gains, if any, generally will
be distributed once a year, but each Portfolio may make distributions on a more
frequent basis to comply with the distribution requirements of the Internal
Revenue Code of 1986, as amended (the "Code"), in all events in a manner
consistent with the provisions of the 1940 Act. No Portfolio will make
distributions from net realized capital gains unless capital loss carryovers, if
any, have been utilized or have expired. Shares begin accruing dividends on the
day the purchase order is received in proper form by the Transfer Agent.
Dividends and distributions will be invested in additional shares of the same
Portfolio at net asset value and credited to the shareholder's account on the
payment date or, at the shareholder's election, paid in cash.

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TAXATION

Each Portfolio intends to qualify as a regulated investment company under
Subchapter M of the Code. Each Portfolio will be treated as a separate entity
for tax purposes and thus the provisions of the Code applicable to regulated
investment companies generally will be applied to each Portfolio separately,
rather than to the Fund as a whole. In addition, net capital gains, net
investment income, and operating expenses will be determined separately for each
Portfolio. By qualifying as a regulated investment company under the Code, a
Portfolio will not be subject to Federal income taxes with respect to net
investment income and net capital gains distributed to its shareholders.

Section 817(h) of the Code and regulations thereunder set standards for
diversification of the investments underlying Policies in order for the Policies
to be treated as life insurance. These requirements, which are in addition to
diversification requirements applicable to the Portfolios under Subchapter M of
the Code, may affect the composition of a Portfolio's investments. Since the
shares of the Portfolios currently are sold to segregated asset accounts
underlying such Policies, each Portfolio intends to comply with the
diversification requirements as set forth in the regulations.

By meeting these and other requirements, the Participating Insurance Companies,
rather than the Policy owners, should be subject to tax on distributions
received with respect to Portfolio shares. The tax treatment on distributions
made to a Participating Insurance Company will depend on the Participating
Insurance Company's tax status.

Dividends and distributions made by the Portfolios to Eligible Plans are not
taxable to the Plans or to the participants thereunder. The Portfolios will be
managed without regard to tax ramifications.

Since the Fund's shareholders are the Participating Insurance Companies, their
separate accounts and Eligible Plans, no discussion is included herein as to the
Federal income tax consequences to Policy owners and Eligible Plan participants.
For information concerning the Federal income tax consequences, Policy owners
should consult the applicable prospectus of the separate account of the
Participating Insurance Company and Eligible Plan participants should consult
the Plan's administrator or trustee.

ORGANIZATION AND DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Fund consists of five hundred million shares
of common stock, $.001 par value. To date, the Fund's Board of Directors has
authorized a total of ten Portfolios. Each Portfolio is a separate pool of
assets constituting, in effect, a separate fund with its own investment
objectives and policies. A shareholder in a Portfolio will be entitled to its
pro rata share of all dividends and distributions arising from that Portfolio's
assets and, upon redeeming shares of that Portfolio, will receive the
then-current net asset value of that Portfolio represented by the redeemed
shares. See "Purchase of Shares" and "Redemption of Shares." The Fund is
empowered to establish, without shareholder approval, additional portfolios
which may have different investment objectives, policies or restrictions. All
shares of the Fund will be

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validly issued, fully paid and non-assessable. Each share has one vote.

In accordance with current law, the Fund anticipates that a Participating
Insurance Company issuing a VA contract or VLI policy or an Eligible Plan that
participates in the Fund will request voting actions from Policy holders or Plan
participants and will vote shares in proportion to the voting instructions
received. For further information on voting rights, Policy holders should refer
to the prospectus for their Policies and Plan participants should consult the
Plan's administrator or trustee.

Maryland law does not require annual meetings of shareholders except under
certain specified circumstances and it is anticipated that shareholder meetings
will be held only when required by Federal or Maryland law. A meeting of
shareholders will be called, however, for the purpose of voting upon the
question of removal of a director of the Fund, upon the written request of
holders of not less than ten percent of all votes entitled to be cast at the
meeting. The Fund will assist shareholders in communications concerning the
removal of any director of the Fund.

PERFORMANCE INFORMATION

From time to time, the Portfolios may advertise their "average annual total
return" and their "total return." THESE FIGURES ARE BASED ON HISTORICAL EARNINGS
AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. These total returns show
the investment results of the Portfolio over a specified period of time (such as
one, five or ten years, or the period of time since commencement of operations,
if shorter) and assume the reinvestment of all distributions and dividends. Both
types of total return are computed in the same manner, except that the "average
annual total return" requires the additional step of determining the annual rate
of return required for the initial investment to equal the "total return" at the
end of the relevant period.

In addition, from time to time, the Fund may advertise "yield" and "actual
distribution rate" quotations for one or more Portfolios. A Portfolio's "yield"
for any 30-day period is computed by dividing the net investment income per
share earned during such period by the maximum public offering price per share
on the last day of the period, and then annualizing such 30-day yield in
accordance with a formula prescribed by the Commission which provides for
compounding on a semi-annual basis. A Portfolio's "actual distribution rate" is
computed in the same manner as yield except that actual income dividends
declared per share during the period in question is substituted for net
investment income per share.

Performance will vary from time to time and past results are not necessarily
representative of future results. Investors should remember that performance is
a function of portfolio management in selecting the type and quality of
portfolio securities and is affected by operating expenses. Performance
information, such as that described above, may not provide a basis for
comparison with other investments or other investment companies using a
different method of calculating performance. Performance information of any
Portfolio should not be compared with other funds that offer their shares
directly to the public since the figures provided do not reflect charges imposed
by Participating Insurance Companies under their VA contracts or VLI policies.
The yield

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<PAGE>

and total return for a Portfolio should be distinguished from the rate of return
of a corresponding sub-account or investment division of a separate account of a
Participating Insurance Company, which rate will reflect the deduction of
additional charges, including mortality and expense risk charges, and therefore
will be lower. Variable annuity contract holders and variable life insurance
policy holders should consult the prospectus for their contract or policy.

Although the Fund is newly-organized and the Portfolios do not yet have their
own performance records, each Portfolio has the same investment objectives and
follows substantially the same investment policies as a corresponding publicly
offered series of The Lazard Funds, Inc., which is an open-end investment
company. These Lazard public funds have the same portfolio managers as the
corresponding Portfolios offered in this Prospectus. Historical performance
information for the corresponding Lazard public funds for various periods ended
December 31, 1996 is set forth on "Appendix B."

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<PAGE>

APPENDIX A

INVESTMENT TECHNIQUES

FOREIGN CURRENCY TRANSACTIONS--(All Portfolios, except the Bantam Value
Portfolio, Equity Portfolio and Small Cap Portfolio) Foreign currency
transactions may be entered into a variety of purposes, including: to fix in
U.S. dollars, between trade and settlement date, the value of a security the
Portfolio has agreed to buy or sell; to hedge the U.S. dollar value of
securities the Portfolio already owns, particularly if it expects a decrease in
the value of the currency in which the foreign security is denominated; or to
gain exposure to the foreign currency in an attempt to realize gains.

Foreign currency transactions may involve, for example, the Portfolio's purchase
of foreign currencies for U.S. dollars or the maintenance of short positions in
foreign currencies, which would involve the Portfolio agreeing to exchange an
amount of a currency it did not currently own for another currency at a future
date in anticipation of a decline in the value of the currency sold relative to
the currency the Portfolio contracted to receive in the exchange. The
Portfolio's success in these transactions will depend principally on the
Investment Manager's ability to predict accurately the future exchange rates
between foreign currencies and the U.S. dollar.

BORROWING MONEY--(All Portfolios) Each Portfolio is permitted to borrow to the
extent permitted under the 1940 Act, which permits an investment company to
borrow in an amount up to 33-1/3% of the value of its total assets. Each
Portfolio currently intends to borrow money only from banks for temporary or
emergency (not leveraging) purposes, in an amount up to 15% of the value of its
total assets (including the amount borrowed) valued at the lesser of cost or
market, less liabilities (not including the amount borrowed) at the time the
borrowing is made. While borrowings exceed 5% of a Portfolio's total assets, the
Portfolio will not make any additional investments.

USE OF DERIVATIVES--(All Portfolios) Each Portfolio may invest in the types of
Derivatives enumerated under "Investment Consideration and Risks--Use of
Derivatives." These instruments and certain related risks are described more
specifically under "Investment Objectives and Management Policies--Management
Policies--Derivatives" in the Statement of Additional Information.

Derivatives can be volatile and involve various types and degrees of risk,
depending upon the characteristics of the particular Derivative and the
Portfolio as a whole. Derivatives permit the Portfolio to increase or decrease
the level of risk, or change the character of the risk, of its portfolio by
making investments in specific securities.

Derivatives may entail investment exposures that are greater than their cost
would suggest, meaning that a small investment in Derivatives could have a large
potential impact on the Portfolio's performance.

If the Portfolio invests in Derivatives at inappropriate times or judges market
conditions incorrectly, such investments may lower the Portfolio's return or
result in a loss. The Portfolio also could experience losses if its Derivatives
were poorly correlated with its other investments or if the Portfolio were
unable to liquidate its position because of an illiquid secondary market. The
market for many Derivatives is, or suddenly can become, illiquid. Changes

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<PAGE>

in liquidity may result in significant, rapid and unpredictable changes in the
prices for Derivatives.

Although neither the Fund nor any Portfolio will be a commodity pool, certain
Derivatives subject the Portfolio to the rules of the Commodity Futures Trading
Commission which limit the extent to which the Portfolio can invest in such
Derivatives. The Portfolio may invest in futures contracts and options with
respect thereto for hedging purposes without limit. However, the Portfolio may
not invest in such contracts and options for other purposes if the sum of the
amount of initial margin deposits and premiums paid for unexpired options with
respect to such contracts, other than for bona fide hedging purposes, exceeds 5%
of the liquidation value of the Portfolio's assets, after taking into account
unrealized profits and unrealized losses on such contracts and options;
provided, however, that in the case of an option that is in-the-money at the
time of purchase, the in-the-money amount may be excluded in calculating the 5%
limitation.

Each Portfolio may invest up to 5% of its assets, represented by the premium
paid, in the purchase of call and put options. Each Portfolio may write (i.e.,
sell) covered call and put options contracts to the extent of 20% of the value
of its net assets at the time such option contracts are written. When required
by the Commission, a Portfolio will set aside permissible liquid assets in a
segregated account to cover its obligations relating to its transactions in
Derivatives. To maintain this required cover, the Portfolio may have to sell
portfolio securities at disadvantageous prices or times since it may not be
possible to liquidate a Derivative position at a reasonable price.

LENDING PORTFOLIO SECURITIES--(All Portfolios) Each Portfolio may lend
securities from its portfolio to brokers, dealers and other financial
institutions needing to borrow securities to complete certain transactions. The
Portfolio continues to be entitled to payments in amounts equal to the interest,
dividends or other distributions payable on the loaned securities which affords
the Portfolio an opportunity to earn interest on the amount of the loan and on
the loaned securities' collateral. Loans of portfolio securities may not exceed
33-1/3% of the value of the Portfolio's total assets, and the Portfolio will
receive collateral consisting of cash, U.S. Government securities or irrevocable
letters of credit which will be maintained at all times in an amount equal to at
least 100% of the current market value of the loaned securities. Such loans are
terminable by the Portfolio at any time upon specified notice. The Portfolio
might experience risk of loss if the institution with which it has engaged in a
portfolio loan transaction breaches its agreement with the Portfolio.

FORWARD COMMITMENTS--(All Portfolios) Each Portfolio may purchase securities on
a forward commitment or when-issued basis, which means that delivery and payment
take place a number of days after the date of the commitment to purchase. The
payment obligation and the interest rate receivable on a forward commitment or
when-issued security are fixed when the Portfolio enters into the commitment,
but the Portfolio does not make payment until it receives delivery from the
counterparty. The Portfolio will commit to purchase such securities only with
the intention of actually acquiring the securities, but the Portfolio may sell
these securities before the settlement date if it is deemed advisable. When
required by the Commission, a Portfolio may have to set aside permissible liquid
assets in a segregated account to cover its commitments.

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<PAGE>

CERTAIN PORTFOLIO SECURITIES

CONVERTIBLE SECURITIES--(All Portfolios) Convertible securities may be converted
at either a stated price or stated rate into underlying shares of common stock.
Convertible securities have characteristics similar to both fixed-income and
equity securities. Convertible securities generally are subordinated to other
similar but non-convertible securities of the same issuer, although convertible
bonds, as corporate debt obligations, enjoy seniority in right of payment to all
equity securities, and convertible preferred stock is senior to common stock, of
the same issuer. Because of the subordination feature, however, convertible
securities typically have lower ratings than similar non-convertible securities.

DEPOSITARY RECEIPTS--(All Portfolios) Each Portfolio may invest in the
securities of foreign issuers in the form of American Depositary Receipts
("ADRs") and Global Depositary Receipts ("GDRs"). These securities may not
necessarily be denominated in the same currency as the securities into which
they may be converted. ADRs are receipts typically issued by a United States
bank or trust company which evidence ownership of underlying securities issued
by a foreign corporation. GDRs are receipts issued outside the United States,
typically by non-United States banks and trust companies that evidence ownership
of either foreign or domestic securities. Generally, ADRs in registered form are
designed for use in the United States securities markets and GDRs in bearer form
are designed for use outside the United States.

FOREIGN GOVERNMENT OBLIGATIONS; SECURITIES OF SUPRANATIONAL ENTITIES--(All
Portfolios) Each Portfolio may invest in obligations issued or guaranteed by one
or more foreign governments or any of their political subdivisions, agencies or
instrumentalities that are determined by the Investment Manager to be of
comparable quality to the other obligations in which the Portfolio may invest.
Supranational entities include international organizations designated or
supported by governmental entities to promote economic reconstruction or
development and international banking institutions and related government
agencies. Examples include the International Bank for Reconstruction and
Development (the World Bank), the European Coal and Steel Community, the Asian
Development Bank and the InterAmerican Development Bank.

WARRANTS--(All Portfolios) A warrant is an instrument issued by a corporation
which gives the holder the right to subscribe to a specified amount of the
corporation's capital stock at a set price for a specified period of time. A
Portfolio may invest up to 5% of its total assets in warrants, except that this
limitation does not apply to warrants purchased by the Portfolio that are sold
in units with, or attached to, other securities.

MORTGAGE-RELATED SECURITIES--(International Fixed-Income Portfolio and Strategic
Yield Portfolio) Mortgage-related securities are a form of Derivative
collateralized by pools of mortgages. The mortgage-related securities which may
be purchased include those with fixed, floating and variable interest rates,
those with interest rates that change based on multiples of changes in interest
rates and those with interest rates that change inversely to changes in interest
rates, as well as stripped mortgage-backed securities. Stripped mortgage-backed
securities usually are structured with classes that receive different
proportions of interest and principal

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<PAGE>

distributions on a pool of mortgage-backed securities or whole loans. A common
type of stripped mortgage-backed security will have one class receiving some of
the interest and most of the principal from the mortgage collateral, while the
other class will receive most of the interest and the remainder of the
principal. Although certain mortgage-related securities are guaranteed by a
third party or otherwise similarly secured, the market value of the security,
which may fluctuate, is not secured. If a mortgage-related security is purchased
at a premium, all or part of the premium may be lost if there is a decline in
the market value of the security, whether resulting from changes in interest
rates or prepayments on the underlying mortgage collateral.

The mortgage-related securities in which these Portfolios may invest also
include multi-class pass through certificates secured principally by mortgage
loans on commercial properties. These mortgage-related securities are structured
similarly to mortgage-related securities secured by pools of residential
mortgages. Commercial lending, however, generally is viewed as exposing the
lender to a greater risk of loss than one- to four-family residential lending.
Commercial lending, for example, typically involves larger loans to single
borrowers or groups of related borrowers than residential one- to four-family
mortgage loans. In addition, the repayment of loans secured by income producing
properties typically is dependent upon the successful operation of the related
real estate project and the cash flow generated therefrom. Consequently, adverse
changes in economic conditions and circumstances are more likely to have an
adverse impact on mortgage-related securities secured by loans on commercial
properties than on those secured by loans on residential properties.

Each of these Portfolios also may invest in subordinated mortgage-related
securities ("Subordinated Securities"), which are issued or sponsored by
commercial banks, savings and loan institutions, mortgage bankers, private
mortgage insurance companies and other non-governmental issuers. Subordinated
Securities have no governmental guarantee, and are subordinated in some manner
as to the payment of principal and/or interest to the holders of more senior
mortgage-related securities arising out of the same pool of mortgages. The
holders of Subordinated Securities typically are compensated with a higher
stated yield than are the holders of more senior mortgage-related securities. On
the other hand, Subordinated Securities typically subject the holder to greater
risk than senior mortgage-related securities and tend to be rated in a lower
rating category, and frequently a substantially lower rating category, than the
senior mortgage-related securities issued in respect of the same pool of
mortgages. Subordinated Securities generally are likely to be more sensitive to
changes in prepayment and interest rates and the market for such securities may
be less liquid than is the case for traditional fixed-income securities and
senior mortgage-related securities.

As with other interest-bearing securities, the prices of certain
mortgage-related securities are inversely affected by changes in interest rates.
However, although the value of a mortgage-related security may decline when
interest rates rise, the converse is not necessarily true, since in periods of
declining interest rates the mortgages underlying the security are more likely
to be prepaid. For this and other reasons, a mortgage-related security's stated
maturity may be shortened by unscheduled prepayments on the underlying
mortgages,

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<PAGE>

and, therefore, it is not possible to predict accurately the security's return
to the Portfolio. Moreover, with respect to stripped mortgage-backed securities,
if the underlying mortgage securities experience greater than anticipated
prepayments of principal, the Portfolio may fail to fully recoup its initial
investment even if the securities are rated in the highest rating category by a
nationally recognized statistical rating organization. During periods of rapidly
rising interest rates, prepayments of mortgage-related securities may occur at
slower than expected rates. Slower prepayments effectively may lengthen a
mortgage-related security's expected maturity which generally would cause the
value of such security to fluctuate more widely in response to changes in
interest rates. Were the prepayments on the Portfolio's mortgage-related
securities to decrease broadly, the Portfolio's effective duration, and thus
sensitivity to interest rate fluctuations, would increase. For further
discussion concerning the investment considerations involved, see "Investment
Considerations and Risks--Fixed-Income Securities" and "Appendix A--Certain
Portfolio Securities--Illiquid Securities" below.

ASSET-BACKED SECURITIES--(International Fixed-Income Portfolio and Strategic
Yield Portfolio) Asset-backed securities are a form of Derivative. The
securitization techniques used for asset-backed securities are similar to those
used for mortgage-related securities. These securities include debt securities
and securities with debt-like characteristics. The collateral for these
securities has included home equity loans, automobile and credit card
receivables, boat loans, computer leases, airplane leases, mobile home loans,
recreational vehicle loans and hospital account receivables. The Portfolio may
invest in these and other types of asset-backed securities that may be developed
in the future.

Asset-backed securities present certain risks that are not presented by
mortgage-related securities. Primarily, these securities may provide the
Portfolio with a less effective security interest in the related collateral than
do mortgage-related securities. Therefore, there is the possibility that
recoveries on the underlying collateral may not, in some cases, be available to
support payments on these securities.

ZERO COUPON AND STRIPPED U.S. TREASURY SECURITIES--(Strategic Yield Portfolio)
The Portfolio may invest in zero coupon U.S. Treasury securities, which are
Treasury notes and Bonds that have been stripped of their unmatured interest
coupons, the coupons themselves and receipts or certificates representing
interests in such stripped debt obligations and coupons. Zero coupon securities
also are issued by corporations and financial institutions which constitute a
proportionate ownership of the issuer's pool of underlying U.S. Treasury
securities. A zero coupon security pays no interest to its holder during its
life and is sold at a discount to its face value at maturity. The market prices
of zero coupon securities generally are more volatile than the market prices of
securities that pay interest periodically and are likely to respond to a greater
degree to changes in interest rates than non-zero coupon securities having
similar maturities and credit qualities.

INVESTMENT COMPANIES--(All Portfolios) Each Portfolio may invest, to the extent
permitted under the 1940 Act, in securities issued by investment companies which
principally invest in securities of the type in which the Portfolio invests.
Investments in the securities of investment companies may

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<PAGE>

involve duplication of advisory fees and certain other expenses.

MONEY MARKET INSTRUMENTS--(All Portfolios) Each Portfolio, unless otherwise
provided, may invest in the following types of Money Market Instruments.

U.S. GOVERNMENT SECURITIES. Securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities include U.S. Treasury securities
that differ in their interest rates, maturities and times of issuance. Some
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities are supported by the full faith and credit of the U.S.
Treasury; others by the right of the issuer to borrow from the Treasury; others
by discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality; and others only by the credit of
the agency or instrumentality. These securities bear fixed, floating or variable
rates of interest. While the U.S. Government provides financial support to such
U.S. Government-sponsored agencies and instrumentalities, no assurance can be
given that it will always do so since it is not so obligated by law.

FOREIGN GOVERNMENT SECURITIES. (All Portfolios) Securities issued or
guaranteed by a foreign government or its agencies or
instrumentalities.

REPURCHASE AGREEMENTS. In a repurchase agreement, the Portfolio buys,
and the seller agrees to repurchase, a security at a mutually agreed upon time
and price (usually within seven days). The repurchase agreement thereby
determines the yield during the purchaser's holding period, while the seller's
obligation to repurchase is secured by the value of the underlying security.
Repurchase agreements could involve risks in the event of a default or
insolvency of the other party to the agreement, including possible delays or
restrictions upon the Portfolio's ability to dispose of the underlying
securities. The Portfolio may enter into repurchase agreements with certain
banks or non-bank dealers.

BANK OBLIGATIONS. The Portfolio may purchase certificates of deposit,
time deposits, bankers' acceptances and other short-term obligations issued by
domestic banks, foreign subsidiaries or foreign branches of domestic banks,
domestic and foreign branches of foreign banks, domestic savings and loan
associations and other banking institutions. With respect to such securities
issued by foreign subsidiaries or foreign branches of domestic banks, and
domestic and foreign branches of foreign banks, the Portfolio may be subject to
additional investment risks that are differing in some respects from those
incurred by a fund which invests only in debt obligations of U.S. domestic
issuers. See "Investment Considerations and RisksaeForeign Securities."

Certificates of deposit are negotiable certificates evidencing the obligation of
a bank to repay funds deposited with it for a specified period of time.

Time deposits are non-negotiable deposits maintained in a banking institution
for a specified period of time (in no event longer than seven days) at a stated
interest rate.

Banker's acceptances are credit instruments evidencing the obligation of a bank
to pay a draft drawn on it by a customer. These instruments reflect the
obligation both of the bank and the drawer to pay the face amount

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<PAGE>

of the instrument upon maturity. The other short-term obligations may include
uninsured, direct obligations bearing fixed, floating or variable interest
rates.

COMMERCIAL PAPER. Commercial paper consists of short-term, unsecured
promissory notes issued to finance short-term credit needs. The commercial paper
of U.S. issuers or foreign issuers (in the case of the International Equity
Portfolio, International Fixed-Income Portfolio, International Small Cap
Portfolio, Emerging Markets Portfolio, Strategic Yield Portfolio and Global
Equity Portfolio) purchased by the Portfolio will consist only of direct
obligations which, at the time of their purchase, are (a) rated not lower than
Prime-1 by Moody's, A-1 by S&P, Fitch-1 by Fitch or Duff-1 by Duff, (b) issued
by companies having an outstanding debt issue currently rated at least Aa/AA by
one or more Rating Agencies, or (c) if unrated, determined by the Investment
Manager to be of comparable quality to those rated obligations which may be
purchased by the Portfolio.

PARTICIPATION INTERESTS. Each Portfolio may purchase from financial
institutions participation interests in securities in which the Portfolio may
invest. A participation interest gives the Portfolio an undivided interest in
the security in the proportion that the Portfolio's participation interest bears
to the total principal amount of the security. These instruments may have fixed,
floating or variable rates of interest with remaining maturities of 13 months or
less. If the participation interest is unrated, or has been given a rating below
that which is permissible for purchase by the Portfolio, the participation
interest will be collateralized by U.S. Government securities, or, in the case
of unrated participation interests, the Investment Manager must have determined
that the instrument is of comparable quality to those instruments in which the
Portfolio may invest.

ILLIQUID SECURITIES--(All Portfolios) Each Portfolio may invest up to 15% of the
value of its net assets in securities as to which a liquid trading market does
not exist, provided such investments are consistent with the Portfolio's
investment objective. Such securities may include securities that are not
readily marketable, such as certain securities that are subject to legal or
contractual restrictions on resale, repurchase agreements providing for
settlement in more than seven days after notice, certain mortgage-related
securities, and, with respect to the International Fixed-Income Portfolio and
Strategic Yield Portfolio, certain privately negotiated, non-exchange traded
options and securities used to cover such options. As to these securities, the
Portfolio is subject to a risk that should the Portfolio desire to sell them
when a ready buyer is not available at a price the Portfolio deems
representative of their value, the value of the Portfolio's net assets could be
adversely affected.

RATINGS--(All Portfolios) Securities rated Baa by Moody's are considered medium
grade obligations; they are neither highly protected nor poorly secured, and are
considered by Moody's to have speculative characteristics. Bonds rated BBB by
S&P, Fitch and Duff are investment grade and regarded as having adequate
capacity to pay interest and repay principal; however, adverse changes in
economic conditions and circumstances are more likely to have an adverse impact
on these bonds and, therefore, impair timely payment. Securities rated Ba by
Moody's are judged to have speculative elements; their future cannot be
considered as well assured and often the

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<PAGE>

protection of interest and principal payments may be very moderate. Securities
rated BB by S&P, Fitch and Duff are regarded as having predominantly speculative
characteristics and, while such obligations have less near-term vulnerability to
default than other speculative grade debt, they face major ongoing uncertainties
or exposure to adverse business, financial or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
Securities rated Caa by Moody's or CCC by S&P, Fitch and Duff are of poor
standing and may be in default or there may be present elements of danger with
respect to principal or interest. Securities rated C by Moody's are regarded as
having extremely poor prospects of ever attaining any real investment standing.
Securities rated D by S&P, Fitch and Duff are in default, and payment of
interest and/or repayment of principal is in arrears. Such securities, though
high yielding, are characterized by great risk. See "Appendix" in the Statement
of Additional Information for a general description of securities ratings.

The Rating Agencies' ratings represent their opinions as to the quality of the
obligations which they undertake to rate. Ratings are relative and subjective
and, although ratings may be useful in evaluating the safety of interest and
principal payments, they do not evaluate the market value risks of such
obligations. Although these ratings may be an initial criterion for selection of
portfolio investments, the Investment Manager also will evaluate these
securities and the ability of the issuers of such securities to pay interest and
principal. The Portfolio's ability to achieve its investment objective may be
more dependent on the Investment Manager's credit analysis than might be the
case for a fund that invested in higher rated securities.

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<PAGE>

APPENDIX B

Set forth below is total return and average annual total return information for
publicly offered series of The Lazard Funds, Inc., which correspond to the
Portfolios offered in this Prospectus, calculated as described under
"Performance Information," and for an appropriate securities index. Investors
should not consider this performance data as an indication of the future
performance of the Portfolios offered in this Prospectus. The performance
figures below reflect the deduction of the historical fees and expenses paid by
the Institutional Shares of the Lazard public funds, and not those to be paid by
the Portfolios. The figures also do not reflect the deduction of charges or
expenses attributable to VA contracts or VLI policies. Policy owners should
refer to the applicable insurance company disclosure documents for information
on such charges and expenses. Additionally, although it is anticipated that each
Portfolio and its corresponding Lazard public fund will hold similar securities,
their investment results are expected to differ. In particular, differences in
asset size and in cash flow resulting from purchases and redemptions of
Portfolio shares may result in different security selections, differences in the
relative weightings of securities or differences in the price paid for
particular portfolio holdings.

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<PAGE>

The total return and average annual total return for the corresponding Lazard
public funds and securities indices for the indicated periods ended September
30, 1997 were:

<TABLE>
<CAPTION>
Total Returns
Name of Public Fund and Index Period Ended September 30, 1997
-------------------------------------------------------------
One Three Five Ten Since
Year Year Year Year Inception*
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Lazard Equity Portfolio 35.75% 104.23% 177.53% 300.66% 331.92%
Standard & Poor's 500 Index 40.67% 119.80% 157.56% 294.81% 347.21%

Lazard International Equity Portfolio 25.04% 43.02% 100.94% -- 93.46%
MSCI EAFE Index 12.18% 28.90% 78.85% -- 63.93%

Lazard International Fixed-Income Portfolio+ (0.86)% 21.97% 41.90% -- 55.50%
Salomon World Government Bond Index Ex-US+ (0.85)% 21.51% 38.11% -- 66.17%

Lazard Strategic Yield Portfolio 9.76% 35.91% 50.85% -- 67.01%
One Month LIBOR USD Fixed Index 5.58% 18.03% 26.78% -- 32.20%

Lazard Small Cap Portfolio 42.53% 90.27% 209.65% -- 241.09%
Russell 2000 Stock Index 33.19% 85.91% 154.16% -- 169.78%

Lazard International Small Cap Portfolio 15.56% 21.35% -- -- 33.51%
Salomon EMI Index Ex-US 0.35% 10.26% -- -- 31.57%

Lazard Emerging Markets Portfolio 18.00% 13.03% -- -- 31.79%
IFC Investable Total Return Index 5.39% (12.00)% -- -- 5.20%

Lazard Global Equity Portfolio 29.76% -- -- -- 37.80%
MSCI World Index 24.12% -- -- -- 33.91%

Lazard Bantam Value Portfolio 57.94% -- -- -- 92.84%
Russell 2000 Stock Index 33.19% -- -- -- 43.08%

</TABLE>

Average Annual Total Return
Name of Public Fund and Index Period Ended September 30, 1997
-------------------------------------------------------------------------------------
One Three Five Ten Since
Year Year Year Year Inception*
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Lazard Equity Portfolio 35.75% 26.87% 22.65% 14.89% 15.20%
Standard & Poor's 500 Index 40.67% 30.02% 20.83% 14.72% 15.59%

Lazard International Equity Portfolio 25.04% 12.67% 14.98% -- 11.79%
MSCI EAFE Index 12.18% 8.83% 12.33% -- 8.71%

Lazard International Fixed-Income Portfolio+ (0.86)% 6.84% 7.25% -- 7.74%
Salomon World Government Bond Index Ex-US+ (0.85)% 6.71% 6.67% -- 8.96%

Lazard Strategic Yield Portfolio 9.76% 10.77% 8.57% -- 8.92%
One Month LIBOR USD Fixed Index 5.58% 5.68% 4.86% -- 4.76%

Lazard Small Cap Portfolio 42.53% 23.91% 25.36% -- 23.03%
Russell 2000 Stock Index 33.19% 22.96% 20.51% -- 18.25%

Lazard International Small Cap Portfolio 15.56% 6.66% -- -- 7.83%
Salomon EMI Index Ex-US 0.35% 3.31% -- -- 7.42%

Lazard Emerging Markets Portfolio 18.00% 4.17% -- -- 8.97%
IFC Investable Total Return Index 5.39% (4.17)% -- -- 1.59%

Lazard Global Equity Portfolio 29.76% -- -- -- 20.20%
MSCI World Index 24.12% -- -- -- 18.24%

Lazard Bantam Value Portfolio 57.94% -- -- -- 51.83%
Russell 2000 Stock Index 33.19% -- -- -- 25.38%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Inception dates are: Lazard Equity Portfolio--June 1, 1987; Lazard Small Cap
Portfolio--October 31, 1991; Lazard Bantam Value Portfolio--March 1, 1996;
Lazard Global Equity Portfolio--January 3, 1996; Lazard International Equity
Portfolio--October 29, 1991; Lazard International Small Cap
Portfolio--December 1, 1993; Lazard Emerging Markets Portfolio--July 15,
1994; Lazard International Fixed-Income Portfolio--November 8, 1991; and
Lazard Strategic Yield Portfolio--October 1, 1991.

**The performance data of the indices have been prepared from sources and data
that the Investment Manager believes to be reliable, but no representation is
made as to their accuracy. These indices are unmanaged and have no fees or
costs. The S&P 500(R) Index is a market capitalization-weighted index of 500
common stocks, designed to measure performance of the broad domestic economy
through changes in the aggregate market value of 500 stocks representing all
major industries. The Russell 2000(R) Index is composed of 2,000 common
stocks of U.S. companies with market capitalizations ranging between $10
million and $2.57 billion as of September 30, 1997. The Morgan Stanley
Capital International (MSCI) World Index is an arithmetic, market
value-weighted average return net of dividends taxation, which is derived
from equities of EAFE Index countries plus equities from Canada and the
United States. The Morgan Stanley Capital International, Europe, Australia
and Far East Index (EAFE Index) is a broadly diversified international index
composed of the equity securities of approximately 1,000 companies located
outside the United States. The Salomon Extended Market Index (EMI) Ex-US
represents the bottom 20% based on market capitalization of the universe of
institutionally available global securities of non-U.S. companies with a
market capitalization greater than $100 million. The IFC Investable Total
Return Index is a market capitalization-weighted index of emerging markets
securities that represent approximately 65% of all securities based on market
capitalization compiled by the International Finance Corporation. The Salomon
World Government Bond Index Ex-US is a market capitalization-weighted index
of institutionally traded fixed rate non-U.S. dollar government bonds, fully
hedged into U.S. dollars. The London Interbank Offered Rate-US dollar Fixed
Rate Index is an average derived from sixteen quotations provided by banks
determined by the British Bankers Association.

+Effective January 1, 1993, Lazard International Fixed-Income Portfolio,
formerly Lazard Global Fixed-Income Portfolio, was renamed to reflect changes
in certain non-fundamental investment policies of the public fund. The
performance of the public fund is now measured by the index "excluding U.S."
Performance of the index "Since Inception" shown above is a blended return of
the index "including U.S." and the index "excluding U.S." for the applicable
periods.

++Effective May 1, 1993, Lazard Strategic Yield Portfolio, formerly Lazard
High-Yield Portfolio, was renamed to reflect changes in certain
non-fundamental investment policies of the public fund.

The above returns reflect partial waivers of fees. Without such waivers, the
total returns and average annual total returns would have been lower.

* * *

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE FUND'S
OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S SHARES,
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH
OFFERING MAY NOT LAWFULLY BE MADE.

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