LAZARD
RETIREMENT SERIES
SEMI-ANNUAL REPORT
JUNE 30, 1998
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LAZARD RETIREMENT SERIES, INC.
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BOARD OF DIRECTORS
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JOHN J. BURKE RETIRED VICE CHAIRMAN, MONTANA POWER COMPANY
KENNETH S. DAVIDSON PRIVATE INVESTOR
NORMAN EIG VICE CHAIRMAN, LAZARD FRERES & CO. LLC
CARL FRISCHLING PARTNER, KRAMER, LEVIN, NAFTALIS, NESSEN,
KAMIN & FRANKEL
HERBERT W. GULLQUIST VICE CHAIRMAN, LAZARD FRERES & CO. LLC
WILLIAM KATZ PRESIDENT, BBDO NEW YORK
LESTER Z. LIEBERMAN PRIVATE INVESTOR
RICHARD REISS CHAIRMAN, GEORGICA ADVISORS
JOHN RUTLEDGE PRESIDENT, RUTLEDGE AND COMPANY
OFFICERS
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NORMAN EIG CHAIRMAN OF THE BOARD
HERBERT W. GULLQUIST PRESIDENT
WILLIAM G. BUTTERLY, III VICE PRESIDENT AND SECRETARY
JAMES GIALLANZA TREASURER
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LAZARD RETIREMENT SERIES, INC.
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TABLE OF CONTENTS
Overview ................................................................ 2
Growth Charts .......................................................... 5
Performance Table ....................................................... 7
Portfolio of Investments
Lazard Retirement Equity Portfolio .................................. 8
Lazard Retirement Small Cap Portfolio ............................... 10
Lazard Retirement Emerging Markets Portfolio ......................... 13
Notes to Portfolios of Investments .................................. 16
Statements of
Assets and Liabilities .............................................. 17
Operations .......................................................... 18
Changes in Net Assets ................................................. 19
Financial Highlights .................................................... 21
Notes to Financial Statements ........................................... 23
1
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LAZARD RETIREMENT SERIES, INC.
OVERVIEW
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In the wake of the disastrous events of the fourth quarter 1997, investors
greeted the New Year with a combination of apprehension and hope. Would the
turmoil in Asian markets spread to markets in the U.S. and Europe? Or would it
present only a temporary setback? Mid-year, there appears to be no solid answer.
Certainly, world markets have been affected by the Asian crisis, but the effects
have been far from ruinous, and the unprecedented level of M&A activity would
suggest that markets in the U.S. and Europe remain both healthy and optimistic.
Nevertheless, while fundamentals in the U.S. remain strong and Europe progresses
optimistically toward the inception of EMU, analysts keep a keen eye on Asia
and, in particular, on the region's largest economy, Japan.
JAPAN
An American professor based in Japan recently described the society as
resembling a giant air bag which has shielded citizens so effectively from the
recession that they have little reason to demand the reforms necessary to pull
the country out of its economic torpor. That may explain, in part, why none of
former Prime Minister Ryutaro Hashimoto's recent strategies took hold. In
December, for example, there was little response to the announcement of 2
trillion Yen in tax cuts and 10 trillion Yen in support for deposit insurance
and threatened banks. January's rash of ill-conceived accounting strategies that
were intended to rescue the weaker banks had little effect, and the announcement
in February of a stimulus package was greeted with catcalls. Similarly, the
Fiscal Reform Bill of March accomplished little. Even April's enormous stimulus
package failed to impress critics, as it was partially offset by its short-term
nature and prior tightening policies. All these good intentions required nothing
less dramatic than the rescue of the Yen by the U.S. Treasury in June; Mr.
Hashimoto resigned in July. To the extent that fundamentally strong companies
are still reliant on good governmental policy, the real issue may not be whether
Mr. Hashimoto's successor, Mr. Obuchi, will be able to implement the necessary
reforms to bring Japan back from recession, but whether the Japanese public will
demand them. Japanese corporations are still largely characterized by lifetime
employment, close links to the ruling party, minimal transparency, and murky
accounting. Return on equity targets are only now starting to be set explicitly.
In this environment, bottom-up stock picking in Japan will be essential, and the
most direct method of research, one-on-one meetings with management, remains our
prime indicator of an individual company's commitment both to corporate reform
and shareholder value.
EUROPE
The effects of the Asian crisis were reflected in the somewhat diminished pace
of returns in Europe, and the market did experience some volatility. However,
the European markets remained confident, particularly in light of the approach
of EMU. This confidence was reflected in the pace of M&A activity, which
accelerated in the second quarter as many European compa-
2
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LAZARD RETIREMENT SERIES, INC.
OVERVIEW (CONTINUED)
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nies sought to use their strong balance sheets to participate in much needed
industry consolidation. Most prominent in this endeavor was the financial
services sector, wherein banks, in an effort to eliminate overlapping costs and
earn a better return on capital, began to merge with other banks and with
insurance companies, both within the same country and cross-border. The second
quarter witnessed a continuation of this activity and its expansion to other
sectors and continents. The confidence of the European equity culture is perhaps
best reflected by Daimler-Benz's acquisition of American automaker Chrysler,
which marked the largest industrial takeover, as well as the largest takeover of
a U.S. company, ever. As BMW and Volkswagen battled over Rolls-Royce, the new
equity culture in Europe continued to attract increasing numbers of investors.
The upbeat outlook for equities in Europe is underpinned by the improvements in
corporate profitability and returns on capital, a strong liquidity backdrop, and
considerable scope for industry consolidation and reorganization. For a society
that has been steeped during the greater part of the twentieth century in
socialist political and economic structures, these reforms represent nothing
less than a massive paradigm shift. In the midst of this transformation,
attention to details normally overlooked in top-down investing will be
imperative: corporate accounting, cash flow, and emerging competition.
U.S.
In the U.S., the Asian crisis was reflected in a continuing flight to large
capitalization stocks, which resulted in a volatile mid and small cap market.
Despite the Asian crisis, S&P 500 stocks continue to be the best performing
asset class in the world, a distinction earned with the help of low inflation,
low interest rates, strong economic growth, and the effects of a decade's worth
of corporate restructuring. Management at the largest U.S. corporations
apparently understood the unusual position their current, high valuations
provide, and are using company stock to engage in what has become a frenzy of
M&A activity. According to the Justice Department, U.S. mergers this year are
likely to amount to $1.75 trillion, equal to over one-fifth of the entire U.S.
GDP, and representing the combined worth of all merger activity from 1990
through the start of 1996. The growth of mergers and acquisitions is further
spurred as margin pressures in U.S. companies mount, restructuring reaches its
final stages, and pricing flexibility is severely restrained by low inflation, a
strong dollar, and overcapacity in many industries. In many of these cases, a
merger provides the ideal solution to developing cross-selling opportunities,
driving down suppliers' costs, and pooling research and development.
CONCLUSION
In the current environment, the U.S. economy has served as a beacon for markets
across the world, showing how corporate restructuring, transparent business
practices, and a relative freedom from government constraints can provide strong
returns for investors. While markets in Europe have begun to reap the benefits
of following this example, Japan and other Asian markets
3
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LAZARD RETIREMENT SERIES, INC.
OVERVIEW (CONTINUED)
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have seemed almost too stunned by the bright light to cut through the
corruption, turbid accounting, and suffocating governmental constraints that are
hampering their progress. Despite the rather black and white scenario, one need
not dismiss Japanese businesses entirely, nor embrace companies in Europe and in
the U.S. too blindly. In the end, it is the performance of INDIVIDUAL companies
that create performance in any portfolio. In Japan, where valuations are at an
all-time low, we look for younger companies that have less entrenched
hierarchies and are more accountable to shareholders. And, as EMU's inception
next January will make individual European stock analysis and industrial
knowledge even more crucial, we search, company by company, for the managements
most committed to shareholder returns and structural reforms. Finally, in the
U.S. market, where valuations are just beginning to be reassessed, it is
important not only to review the individual company's potential for higher unit
sales, but to monitor those companies in which margins may have peaked. With a
new Prime Minister in Japan, and the inauguration of the euro less than half a
year away, groundbreaking changes are inevitable. With change will come
volatility; the importance of anchoring investments in fundamentally strong
companies will remain critical.
4
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LAZARD RETIREMENT SERIES, INC.
GROWTH CHARTS
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LAZARD RETIREMENT EQUITY PORTFOLIO
The Lazard Retirement Equity Portfolio seeks capital appreciation through
investing primarily in equity securities of companies with relatively large
capitalizations that the Investment Manager considers to be inexpensively priced
relative to the return on total capital or equity.
COMPARISON OF $10,000 INVESTMENT IN LAZARD RETIREMENT EQUITY
PORTFOLIO AND THE STANDARD & POOR'S 500 STOCK INDEX
[The following table represents a chart in the printed report]
LREP S&P 500
3-19-98 10,000 10,000
Mar-98 10,230.00 10,154.37
Apr-98 10,309.79 10,256.52
May-98 10,250.00 10,080.11
Jun-98 10,409.90 10,489.56
LAZARD RETIREMENT SMALL CAP PORTFOLIO
The Lazard Retirement Small Cap Portfolio seeks capital appreciation through
investing primarily in equity securities of companies with market
capitalizations in the range of companies represented in the Russell 2000 Index
that the Investment Manager considers to be inexpensively priced relative to the
return on total capital or equity.
COMPARISON OF $10,000 INVESTMENT IN LAZARD RETIREMENT
SMALL CAP PORTFOLIO AND THE RUSSELL 2000 INDEX
[The following table represents a chart in the printed report]
LRSCP Russell 2000
11-4-97 10000.00 10000.00
Nov-97 9720.00 9762.77
Dec-97 9855.83 9933.62
Jan-98 9855.83 9776.87
Feb-98 10566.97 10499.77
Mar-98 10957.59 10932.78
Apr-98 10957.59 10993.24
May-98 10446.77 10401.15
Jun-98 10186.65 10422.99
PAST PERFORMANCE IS NOT INDICATIVE, NOR A GUARANTEE, OF FUTURE RESULTS.
5
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LAZARD RETIREMENT SERIES, INC.
GROWTH CHARTS (CONTINUED)
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LAZARD RETIREMENT EMERGING MARKETS PORTFOLIO
The Lazard Retirement Emerging Markets Portfolio seeks long-term capital
appreciation through investing primarily in equity securities of non-United
States issuers who are located, or doing significant business, in emerging
market countries. Emerging market countries include countries where political
and economic trends have recently produced, or are producing, a more stable
economy, or countries that have recently developed, or are developing, financial
markets and investment liquidity. The Lazard Retirement Emerging Markets
Portfolio seeks securities of issuers whose potential is significantly enhanced
by their relationship to the emerging market country and that the Investment
Manager considers to be inexpensively priced relative to the return on total
capital or equity.
COMPARISON OF $10,000 INVESTMENT IN LAZARD RETIREMENT EMERGING MARKETS
PORTFOLIO, MORGAN STANLEY CAPITAL INTERNATIONAL EMERGING MARKETS FREE INDEX AND
INTERNATIONAL FINANCE CORP. INVESTABLE TOTAL RETURN INDEX
[The following table represents a chart in the printed report]
LREMP MSCIEMF IFCI
11-4-97 10,000.00 10,000.00 10,000.00
Nov-97 9,360.00 9,180.00 9,534.42
Dec-97 9,529.38 9,401.22 9,660.48
Jan-98 9,027.31 8,663.88 9,027.04
Feb-98 9,880.83 9,568.18 9,948.76
Mar-98 10,402.99 9,983.40 10,338.57
Apr-98 10,362.83 9,874.65 10,365.30
May-98 9,107.64 8,521.42 9,069.48
Jun-98 8,494.69 7,627.56 8,129.00
PAST PERFORMANCE IS NOT INDICATIVE, NOR A GUARANTEE, OF FUTURE RESULTS.
6
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LAZARD RETIREMENT SERIES, INC.
PERFORMANCE TABLE
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CUMULATIVE TOTAL RETURNS FOR
PERIODS ENDED JUNE 30, 1998
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SINCE
YTD INCEPTION*
-----------------------------
Lazard Retirement Equity Portfolio 4.10% 4.10%
Standard & Poor's 500 Stock Index 4.90% 4.90%
Lazard Retirement Small Cap Portfolio 3.35% 1.86%
Russell 2000 Index 4.93% 4.23%
Lazard Retirement Emerging Markets Portfolio (10.85%) (15.05%)
MSCI Emerging Markets Free Index (18.87%) (23.73%)
IFC Investable Total Return Index (15.74%) (18.71%)
NOTES TO PERFORMANCE TABLE
*Performance is measured from March 19, 1998 for Lazard Retirement Equity
Portfolio, and from November 4, 1997 for Lazard Retirement Small Cap Portfolio
and Lazard Retirement Emerging Markets Portfolio.
The performance for the relevant index is for the comparable period. Portfolio
returns are net of fees and assume reinvestment of all dividends and
distributions, if any. Certain expenses of a Portfolio may have been waived
and/or reimbursed by the Investment Manager; without such waiver/reimbursement
of expenses the Portfolio's total return would have been lower.
Past performance is not indicative, nor a guarantee, of future results; the
investment return and principal value of each Portfolio of Lazard Retirement
Series, Inc. will fluctuate, so that an investor's shares in a Portfolio, when
redeemed, may be more or less than their original cost. Within the longer
periods illustrated there may have been short-term fluctuations, counter to the
overall trend of investment results, and no single period of any length may be
taken as typical of what may be expected in future periods.
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 Stock Index is an index of common stocks and is a registered
trademark of The McGraw-Hill Companies. The Russell 2000 Index is an index of
common stocks and is a registered trademark of the Frank Russell Company. The
Morgan Stanley Capital International (MSCI) Emerging Markets Free (EMF) Index
is comprised of emerging market securities in countries open to non-local
investors and is compiled by Morgan Stanley Capital International. The IFC
Investable Total Return Index is an index of emerging market securities that
represent 65% of market capital compiled by the International Finance
Corporation.
This performance data is not authorized for distribution to prospective
investors in the Fund unless preceded or accompanied by an effective
prospectus.
Effective January 1, 1998 Lazard Retirement Emerging Markets Portfolio changed
its comparative index to the MSCI Emerging Markets Free Index from the IFC
Investable Total Return Index. The Investment Manager feels that this index is
a more accurate comparison given the Portfolio's investment objectives.
7
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LAZARD RETIREMENT SERIES, INC.
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED)
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DESCRIPTION SHARES VALUE
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LAZARD RETIREMENT EQUITY PORTFOLIO
COMMON STOCKS-94.2%
AEROSPACE & DEFENSE-3.2%
United Technologies Corp. ......... 110 $10,175
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AGRICULTURAL MACHINERY-1.8%
Deere & Co. ..................... 110 5,816
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BANKING-10.1%
Bank of New York Company,
Inc. ........................... 95 5,765
BankAmerica Corp. ............... 70 6,051
Chase Manhattan Corp. ............ 110 8,305
Fleet Financial Group, Inc. ...... 70 5,845
Mellon Bank Corp. ............... 85 5,918
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31,884
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CHEMICALS & PLASTICS-5.4%
Du Pont (E.I.) de Nemours &
Co. .............................. 105 7,836
Hoechst AG (b) .................. 185 9,180
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17,016
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COMPUTERS & BUSINESS
EQUIPMENT-10.4%
Cognizant Corp. .................. 110 6,930
Hewlett-Packard Co. ............... 150 8,981
International Business
Machines Corp. .................. 75 8,611
NCR Corp. (a) ..................... 260 8,450
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32,972
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CONGLOMERATES-2.7%
Philip Morris Companies, Inc. 220 8,663
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DRUGS & HEALTH CARE-6.4%
Amgen, Inc. ..................... 90 5,884
Astra AB (b) ..................... 280 5,670
Johnson & Johnson ............... 120 8,850
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20,404
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ENERGY-2.7%
Mobil Corp. ..................... 110 8,429
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FOOD & BEVERAGES-9.2%
Cadbury Schweppes PLC (b) ......... 95 5,854
Diageo PLC (b) .................. 180 8,674
Heineken NV (b) .................. 238 9,329
PepsiCo, Inc. ..................... 130 5,354
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29,211
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HOTELS & RESTAURANTS-2.7%
McDonald's Corp. .................. 125 8,625
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INSURANCE-9.5%
Aetna, Inc. ..................... 120 9,135
Allstate Corp. .................. 70 6,410
The Hartford Financial Services
Group, Inc. ..................... 80 9,150
Travelers Group, Inc. ............ 90 5,456
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30,151
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MANUFACTURING-2.7%
General Electric Co. ............ 95 8,645
-------
MULTIMEDIA-1.9%
Gannett Company, Inc. ............ 85 6,040
-------
OIL & GAS-3.7%
British Petroleum Company
PLC (b) ........................ 70 6,178
Royal Dutch Petroleum Co. (b) 100 5,481
-------
11,659
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PAPER PRODUCTS-4.5%
Champion International
Corp. ........................... 115 5,657
Kimberly-Clark Corp. ............ 190 8,716
-------
14,373
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
8
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LAZARD RETIREMENT SERIES, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
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DESCRIPTION SHARES VALUE
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LAZARD RETIREMENT EQUITY PORTFOLIO (CONTINUED)
RETAIL-6.8%
Federated Department Stores,
Inc. (a) ........................... 110 $ 5,919
Lowe's Companies, Inc. ............... 170 6,896
Sears, Roebuck & Co. ............... 140 8,549
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21,364
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TECHNOLOGY-1.5%
Advanced Micro Devices,
Inc. (a) ........................... 270 4,607
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TELECOMMUNICATIONS-5.4%
Ameritech Corp. ..................... 200 8,975
Bell Atlantic Corp. .................. 180 8,212
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17,187
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UTILITIES-3.6%
Duke Energy Corp. .................. 95 5,629
Edison International ............... 195 5,764
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11,393
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TOTAL COMMON STOCKS
(Identified cost $290,883)............ 298,614
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TOTAL INVESTMENTS
(Identified cost $290,883) (d) ..... 94.2% $298,614
CASH AND OTHER ASSETS IN EXCESS
OF LIABILITIES .................... 5.8 18,498
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NET ASSETS ..........................100.0% $317,112
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
9
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LAZARD RETIREMENT SERIES, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
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DESCRIPTION SHARES VALUE
- -----------------------------------------------------
LAZARD RETIREMENT SMALL CAP PORTFOLIO
COMMON STOCKS-87.5%
APPAREL & TEXTILES-0.5%
Mohawk Industries, Inc. (a) ...... 50 $ 1,584
Stride Rite Corp. ............... 200 3,013
-------
4,597
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AUTO PARTS-2.9%
Borg-Warner Automotive, Inc. 200 9,613
Dura Automotive Systems,
Inc. (a) ........................ 200 6,425
Tower Automotive, Inc. (a) ...... 300 12,862
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28,900
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BANKING-2.7%
AMRESCO, Inc. (a) ............... 200 5,825
HUBCO, Inc. ..................... 250 8,953
Long Island Bancorp, Inc. ......... 200 12,150
-------
26,928
-------
BUILDING & CONSTRUCTION-1.4%
Apogee Enterprises, Inc. ......... 900 13,781
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BUSINESS SERVICES AND
SUPPLIES-1.1%
CDI Corp. (a) ..................... 400 10,700
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CHEMICALS & PLASTICS-1.6%
A. Schulman, Inc. ............... 300 5,869
Ferro Corp. ..................... 300 7,594
Rock-Tenn Co. Class A ............ 200 2,512
-------
15,975
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COMMERCIAL SERVICES-1.1%
Pittston Brink's Group ............ 300 11,063
-------
COMMUNICATION SERVICES-0.0%
Dynatech Corp. (a) ............... 100 313
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COMPUTERS & BUSINESS
EQUIPMENT-3.5%
Bell & Howell Co. (a) ............ 300 7,744
Data General Corp. (a) ............ 550 8,216
Komag, Inc. (a) .................. 600 3,206
Stratus Computer, Inc. (a) ...... 200 5,062
Wang Laboratories, Inc. (a) ...... 400 10,175
-------
34,403
-------
CONGLOMERATES-1.3%
ACX Technologies, Inc. (a) ...... 300 6,525
Aeroquip-Vickers, Inc. ............ 100 5,838
-------
12,363
-------
CONSTRUCTION MATERIALS-0.9%
Martin Marietta Materials, Inc. 200 9,000
-------
CONTAINERS: PAPER &
PLASTIC-1.2%
First Brands Corp. ............... 450 11,531
-------
DRUGS & HEALTH CARE-6.8%
Apria Healthcare Group,
Inc. (a) ........................ 400 2,675
Integrated Health Services, Inc. 400 15,000
Magellan Health Services,
Inc. (a) ........................ 400 10,150
Perrigo Co. (a) .................. 1,000 10,063
Sierra Health Services, Inc. (a) 600 15,112
Sun Healthcare Group, Inc. (a) 600 8,775
Sunrise Medical, Inc. (a) ......... 400 6,000
-------
67,775
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ELECTRICAL EQUIPMENT-4.5%
Anixter International, Inc. (a) ... 700 13,343
BMC Industries, Inc. ............ 800 7,000
Belden, Inc. ..................... 200 6,125
Lam Research Corp. (a) ............ 350 6,694
MagneTek, Inc. (a) ............... 700 11,025
-------
44,187
-------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
10
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LAZARD RETIREMENT SERIES, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
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DESCRIPTION SHARES VALUE
- -------------------------------------------------------
LAZARD RETIREMENT SMALL CAP PORTFOLIO
(CONTINUED)
ELECTRONICS-2.7%
Credence Systems Corp. (a) ...... 600 $11,400
International Rectifier Corp. (a) 300 2,550
Kemet Corp. (a) .................. 500 6,578
Silicon Valley Group, Inc. (a) .... 400 6,425
-------
26,953
-------
FOOD & BEVERAGES-0.2%
Vlasic Foods International,
Inc. (a) ........................ 100 2,013
-------
GAS EXPLORATION-1.3%
Barrett Resources Corp. (a) ...... 350 13,103
-------
HOMEBUILDERS-2.4%
Kaufman & Broad Home
Corp. ........................... 300 9,525
Toll Brothers, Inc. (a) ......... 300 8,606
Walter Industries, Inc. (a) ...... 300 5,681
-------
23,812
-------
HOTELS & RESTAURANTS-1.6%
Lone Star Steakhouse &
Saloon, Inc. (a) ............... 200 2,763
Prime Hospitality Corp. (a) ...... 300 5,231
Ryan's Family Steak Houses,
Inc. (a) ........................ 800 8,200
-------
16,194
-------
HOUSEHOLD APPLIANCES &
HOME FURNISHINGS-3.2%
Bassett Furniture Industries,
Inc. ........................... 400 11,275
Furniture Brands International,
Inc. (a) ........................ 300 8,419
Harman International
Industries, Inc. ............... 300 11,550
-------
31,244
-------
INDUSTRIAL & MACHINERY-7.2%
Albany International Corp.
Class A ........................ 302 7,217
Briggs & Stratton Corp. ......... 200 7,488
OmniQuip International, Inc. ...... 200 3,700
Regal-Beloit Corp. ............... 300 8,550
Roper Industries, Inc. ............ 300 7,838
Scotsman Industries, Inc. ......... 300 8,325
United Dominion Industries,
Ltd. ........................... 300 10,012
Watts Industries, Inc.
Class A ........................ 300 6,263
Wyman-Gordon Co. (a) ............ 600 11,962
-------
71,355
-------
INSURANCE-5.1%
Amerin Corp. (a) .................. 300 8,756
E.W. Blanch Holdings, Inc. ...... 300 11,025
Frontier Insurance Group, Inc. 275 6,205
HCC Insurance Holdings, Inc. 300 6,600
Horace Mann Educators
Corp. ........................... 200 6,900
NAC Re Corp. ..................... 200 10,675
-------
50,161
-------
INVESTMENT COMPANIES-0.6%
CMAC Investment Corp. ............ 100 6,150
-------
LEISURE TIME-0.8%
Polaris Industries, Inc. ......... 200 7,525
-------
MACHINERY-1.6%
JLG Industries, Inc. ............ 600 12,150
McDermott International, Inc. 100 3,444
-------
15,594
-------
MANUFACTURING-1.3%
Mark IV Industries, Inc. ......... 600 12,975
-------
MEDICAL SUPPLIES-1.3%
The West Company, Inc. ............ 450 12,741
-------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
11
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LAZARD RETIREMENT SERIES, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE
- ------------------------------------------------------------
LAZARD RETIREMENT SMALL CAP PORTFOLIO
(CONTINUED)
OIL & GAS-2.6%
Devon Energy Corp. .................. 300 $ 10,481
Helmerich & Payne, Inc. ............ 250 5,563
Vintage Petroleum, Inc. ............ 500 9,437
-------
25,481
--------
PAPER PRODUCTS-1.4%
Gibson Greetings, Inc. (a) ......... 200 5,000
Wausau-Mosinee Paper Corp. 400 9,150
-------
14,150
--------
PRINTING-1.5%
Bowne & Company, Inc. ............... 200 9,000
Electronics for Imaging, Inc. (a) 300 6,338
-------
15,338
--------
PUBLISHING-1.6%
Banta Corp. ........................ 300 9,262
World Color Press, Inc. (a) ......... 200 7,000
-------
16,262
--------
REAL ESTATE-1.6%
Chateau Properties, Inc. ............ 200 5,750
Glenborough Realty Trust, Inc. 200 5,275
Kilroy Realty Corp. .................. 200 5,000
-------
16,025
--------
RETAIL-4.4%
Ann Taylor Stores Corp. (a) ......... 400 8,475
Eagle Hardware & Garden,
Inc. (a) ........................... 800 18,500
Hughes Supply, Inc. .................. 200 7,325
Oakley, Inc. (a) ..................... 700 9,362
-------
43,662
--------
RETAIL TRADE-2.1%
Cole National Corp. (a) ............ 200 8,000
Footstar, Inc. (a) .................. 200 9,600
The Wet Seal, Inc. Class A (a) ....... 100 3,200
-------
20,800
--------
STEEL-0.8%
Reliance Steel & Aluminum Co. 200 7,725
-------
TECHNOLOGY-1.0%
VLSI Technology, Inc. (a) ............ 600 10,069
-------
TELECOMMUNICATIONS-2.4%
NTL, Inc. (a) ........................ 200 10,700
Vanguard Cellular Systems,
Inc. (a) ........................... 700 13,212
--------
23,912
--------
TELECOMMUNICATIONS
EQUIPMENT-1.8%
Allen Telecom, Inc. (a) ............ 900 10,462
Oak Industries, Inc. (a) ............ 200 7,075
--------
17,537
--------
TOBACCO-0.1%
Swisher International Group,
Inc. (a) ........................... 100 800
-------
TRANSPORTATION-4.1%
Budget Group, Inc. Class A (a) ...... 200 6,388
Circle International Group, Inc. . 450 12,600
CNF Transportation, Inc. ............ 300 12,750
Pittston Burlington Group ............ 600 9,337
--------
41,075
--------
UTILITIES-2.9%
Calpine Corp. (a) .................. 700 14,131
Sierra Pacific Resources ............ 400 14,525
--------
28,656
--------
WHOLESALE TRADE-0.4%
Unisource Worldwide, Inc. ............ 400 4,325
-------
TOTAL COMMON STOCKS
(Identified cost $891,954)............ 867,153
--------
TOTAL INVESTMENTS
(Identified cost $891,954) (d) ...... 87.5% $867,153
CASH AND OTHER ASSETS IN EXCESS
OF LIABILITIES ..................... 12.5 123,837
----- --------
NET ASSETS ........................... 100.0% $990,990
===== ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
12
<PAGE>
================================================================================
LAZARD RETIREMENT SERIES, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE
- ------------------------------------------------------------
LAZARD RETIREMENT EMERGING MARKETS PORTFOLIO*
COMMON STOCKS-80.8%
ARGENTINA-5.5%
Quilmes Industrial Quinsasa (b) ...... 2,200 $ 21,450
Telefonica de Argentina SA (b) ....... 500 16,219
YPF Sociedad Anonima,
Class D (b) ........................ 1,000 30,062
--------
TOTAL ARGENTINA ..................... 67,731
--------
BRAZIL-9.9%
Companhia Cervejaria
Brahma (b) ........................ 2,100 26,250
Companhia Energetica de
Minas (b) ........................... 918 27,994
Souza Cruz SA ........................ 3,400 25,282
Telecomunicacoes Brasileiras
SA (b) .............................. 400 43,675
--------
TOTAL BRAZIL ........................ 123,201
--------
CHILE-5.4%
AFP Provida SA (b) .................. 1,500 25,031
Banco BHIF (b) ..................... 1,200 17,925
Quinenco SA (b) ..................... 1,400 12,600
Santa Isabel SA (b) .................. 1,100 12,100
--------
TOTAL CHILE ........................ 67,656
--------
COLOMBIA-1.4%
Banco Ganadero SA (b) ............... 1,000 17,625
--------
CZECH REPUBLIC-1.4%
Ceske Energeticke
Zavody AS (a) ..................... 650 17,661
--------
GREECE-2.8%
Hellenic Telecommunication
Organization SA ..................... 1,333 34,211
--------
HONG KONG-4.7%
Giordano International, Ltd. ......... 48,000 9,726
Guangshen Railway Company,
Ltd. (b) ........................... 1,500 10,219
Peregrine Investment Holdings,
Ltd. (g) ........................... 14,000 0
Shenzhen Expressway Co. (a) ......... 102,000 18,826
Yue Yuen Industrial Holdings ......... 11,000 19,663
--------
TOTAL HONG KONG ..................... 58,434
--------
INDIA-5.3%
Hindalco Industries, Ltd. (c) ...... 900 12,150
Larsen & Toubro, Ltd. (c), (e) ...... 2,300 20,700
Mahanagar Telephone Nigam,
Ltd. (a), (c), (e) .................. 900 9,180
State Bank of India (a), (c), (e) .... 2,100 24,150
--------
TOTAL INDIA ........................ 66,180
--------
INDONESIA-0.3%
PT Indah Kiat Pulp & Paper
Corp. .............................. 20,000 3,857
--------
ISRAEL-5.0%
ECI Telecom, Ltd. (b) ............... 800 30,300
Supersol, Ltd. (b) .................. 1,900 31,350
--------
TOTAL ISRAEL ........................ 61,650
--------
MALAYSIA-1.3%
Jaya Tiasa Holdings Berhad ......... 13,000 16,131
--------
MEXICO-13.7%
Cemex SA de CV ..................... 7,210 27,081
Fomento Economico Mexicano
SA (a) .............................. 720 22,757
Grupo Financiero Banamex
Accival SA de CV (a) ............... 13,000 25,319
Grupo Industrial Maseca SA de
CV (b) .............................. 2,300 25,587
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
13
<PAGE>
================================================================================
LAZARD RETIREMENT SERIES, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE
- -----------------------------------------------------------
LAZARD RETIREMENT EMERGING MARKETS PORTFOLIO*
(CONTINUED)
Panamerican Beverages, Inc.,
Class A (b) ..................... 900 $ 28,294
Pepsi-Gemex SA de CV (c) ......... 1,800 21,712
Tubos de Acero de Mexico
SA (b) ........................... 1,500 19,219
----------
TOTAL MEXICO ..................... 169,969
----------
PERU-2.8%
Cerveceria Backus & Johnson
SA .............................. 6,875 3,511
Telefonica del Peru SA (b) ......... 1,500 30,656
----------
TOTAL PERU ........................ 34,167
----------
PHILIPPINES-1.3%
Benpres Holdings
Corp. (a), (c), (e) ............... 2,800 7,000
Benpres Holdings Corp. (a) ......... 32,000 4,835
Philippine National Bank (a) ...... 3,700 4,392
---------
TOTAL PHILIPPINES ................... 16,227
---------
POLAND-2.2%
Bank Handlowy W.
Warszawie (a), (c), (e) ......... 1,400 26,740
---------
PORTUGAL-1.7%
Portugal Telecom SA (b) ............ 400 21,175
---------
RUSSIA-1.1%
AO Tatneft (b) ..................... 1,800 13,950
---------
SOUTH AFRICA-6.0%
Amalgamated Banks of South
Africa, Ltd. ..................... 4,000 24,958
Barlow, Ltd. ..................... 3,165 16,679
JD Group, Ltd. ..................... 2,300 15,476
Rembrandt Group, Ltd. ............ 2,800 17,470
----------
TOTAL SOUTH AFRICA ................ 74,583
----------
SOUTH KOREA-4.7%
Kookmin Bank (c), (e) ............ 1,904 7,330
Samsung Electronics
Co. (c), (e) ..................... 866 13,726
SK Telecom Company, Ltd. (b) ....... 6,798 37,814
----------
TOTAL SOUTH KOREA .................. 58,870
----------
THAILAND-1.5%
Bangkok Expressway Public
Company, Ltd. (a) ............... 23,000 9,265
Industrial Finance Corporation
of Thailand ..................... 25,800 5,319
Thai Farmers Bank Public
Company, Ltd. ..................... 4,000 3,531
----------
TOTAL THAILAND ..................... 18,115
----------
VENEZUELA-2.5%
Compania Anonima Nacional
Telefonos de Venezuela (b) ...... 800 20,000
Mavesa SA (b) ..................... 3,400 10,837
---------
TOTAL VENEZUELA .................. 30,837
----------
TOTAL COMMON STOCKS
(Identified cost $1,195,801) ...... 1,002,705
----------
PREFERRED STOCKS-12.1%
BRAZIL-12.1%
Banco Bradesco SA (b) ............ 2,900 23,200
Banco Itau SA ..................... 40,000 22,827
Companhia Brasileira de
Distribuicao Grupo Pao de
Acucar (c) ........................ 1,200 27,150
Companhia Cimento
Portland ........................ 80,000 14,187
Companhia Paranaense de
Energia-Copel (b) ............... 2,400 22,200
Companhia Riograndense de
Telecomunicacoes .................. 23,500 25,622
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
14
<PAGE>
================================================================================
LAZARD RETIREMENT SERIES, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE
- -----------------------------------------------------
LAZARD RETIREMENT EMERGING MARKETS PORTFOLIO*
(CONTINUED)
Telesp de Sao Paulo SA ......... 45,000 $ 10,583
Telesp Celular SA (a) ......... 45,000 3,735
Telesp Tel Sao Paulo (f) ...... 2,114 34
--------
TOTAL BRAZIL .................. 149,538
--------
TOTAL PREFERRED STOCKS
(Identified cost $161,421) ...... 149,538
--------
DESCRIPTION VALUE
- -------------------------------------------------------------
TOTAL INVESTMENTS
(Identified cost $1,357,222) (d) ...... 92.6% $1,148,508
CASH AND OTHER ASSETS IN EXCESS
OF LIABILITIES ..................... 7.4 91,931
------ ----------
NET ASSETS ........................... 100.0% $1,240,439
====== ==========
*Percentages of common stocks and preferred stocks are presented in the
portfolio by country.
Percentages by industry are as follows:
Banking 14.0%, Brewery 4.1%, Conglomerates 6.4%, Construction & Materials 6.9%,
Electronics 1.1%, Financial Services 4.5%, Food & Beverages 9.8%, Metals 1.0%,
Oil & Gas 3.5%, Paper Products 0.3%, Railroad 0.8%, Retail 8.3%, Steel 1.5%,
Telecommunications 22.9%, Tobacco 2.0%, Utilities 5.5%.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
15
<PAGE>
================================================================================
LAZARD RETIREMENT SERIES, INC.
NOTES TO PORTFOLIOS OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) American Depositary Receipts.
(c) Global Depositary Receipts.
(d) For federal income tax purposes, the aggregate cost, aggregate gross
unrealized appreciation, aggregate gross unrealized depreciation and the net
unrealized appreciation (depreciation) is as follows:
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE NET
GROSS GROSS UNREALIZED
AGGREGATE UNREALIZED UNREALIZED APPRECIATION
PORTFOLIO COST APPRECIATION DEPRECIATION (DEPRECIATION)
- --------- ------------ -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Retirement Equity $ 290,883 $13,418 $ 5,687 $ 7,731
Retirement Small Cap 891,954 66,696 91,497 (24,801)
Retirement Emerging Markets 1,357,222 42,997 251,711 (208,714)
</TABLE>
(e) Pursuant to Rule 144A of the Securities Act of 1933, these securities may
only be resold in transactions exempt from registration, normally to
qualified institutional buyers. At June 30, 1998, these securities amounted
to $108,826 or 8.8% of net assets for the Retirement Emerging Markets
Portfolio.
(f) Rights
(g) Bankrupt security valued at zero.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
16
<PAGE>
================================================================================
LAZARD RETIREMENT SERIES, INC.
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LAZARD LAZARD LAZARD
RETIREMENT RETIREMENT RETIREMENT
EQUITY SMALL CAP EMERGING MARKETS
PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments in securities, at value (cost $290,883, $891,954
and $1,357,222, respectively) ................................. $298,614 $ 867,153 $1,148,508
Cash ......................................................... 2,830 93,781 86,830
Foreign currency (cost $0, $0, and $5,516, respectively) ...... - - 5,493
Receivables for:
Investments sold ............................................. - 846 2,789
Dividends and interest ....................................... 481 462 4,389
Capital stock sold .......................................... 109 12,284 230
Due from Manager ............................................. 31,761 63,670 57,288
Deferred organizational expenses .............................. 15,575 14,980 14,980
-------- --------- ----------
Total assets ................................................... 349,370 1,053,176 1,320,507
-------- --------- ----------
LIABILITIES
Payable for investments purchased .............................. - - 19,913
Accrued directors' fees payable .............................. 2,113 2,138 2,138
Accrued expenses and other payables ........................... 30,145 60,048 58,017
-------- --------- ----------
Total liabilities ............................................. 32,258 62,186 80,068
-------- --------- ----------
Net assets ................................................... 317,112 990,990 1,240,439
======== ========= ==========
NET ASSETS
Paid in capital ................................................ 308,421 997,505 1,465,062
Undistributed (distributions in excess of) investment
income-net ................................................... 504 (2,219) 5,075
Unrealized appreciation (depreciation) on:
Investments-net ............................................. 7,731 (24,801) (208,714)
Foreign currency-net .......................................... - - 384
Accumulated realized gain (loss)-net ........................... 456 20,505 (21,368)
-------- --------- ----------
Net assets ................................................... $317,112 $ 990,990 $1,240,439
======== ========= ==========
Shares of capital stock outstanding* ........................... 30,466 97,434 146,557
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE ...... $ 10.41 $ 10.17 $ 8.46
</TABLE>
* $0.001 par value, 500,000,000 shares authorized for the Portfolios in total.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
17
<PAGE>
================================================================================
LAZARD RETIREMENT SERIES, INC.
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LAZARD LAZARD LAZARD
RETIREMENT RETIREMENT RETIREMENT
EQUITY SMALL CAP EMERGING MARKETS
PORTFOLIO** PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
INCOME:
Interest ......................................................... $ 311 $ 578 $ 3,071
Dividends ...................................................... 1,208 2,377 14,146
--------- --------- ----------
Total investment income* .......................................... 1,519 2,955 17,217
--------- --------- ----------
EXPENSES:
Management fees ................................................ 507 2,722 6,708
Administration fees ............................................. 12,516 18,823 18,884
Distribution fees ................................................ 201 907 1,677
Custodian fees ................................................... 16,719 23,390 24,542
Professional services .......................................... 13,369 12,594 13,514
Registration fees ................................................ 91 298 430
Shareholders' services .......................................... 11,025 11,392 11,327
Directors' fees and expenses .................................... 4,998 7,837 7,837
Shareholders' reports .......................................... 2,555 5,037 2,941
Amortization of organizational expenses ........................ 940 995 995
Other ............................................................ 88 222 209
--------- --------- ----------
Total expenses before fees waived and expenses reimbursed ......... 63,009 84,217 89,064
Management fees waived and expenses reimbursed .................. (48,783) (59,861) (57,465)
Administration fees waived ....................................... (12,500) (18,750) (18,750)
Expense reductions ............................................. (711) (162) (775)
--------- --------- ----------
Expenses-net ...................................................... 1,015 5,444 12,074
--------- --------- ----------
INVESTMENT INCOME (LOSS)-NET .................................... 504 (2,489) 5,143
--------- --------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY-NET
Realized gain (loss) on:
Investments-net ................................................ 456 20,505 (20,139)
Foreign currency-net .......................................... - - (1,229)
Change in net unrealized appreciation (depreciation) on:
Investments-net ................................................ 7,731 (15,597) (133,356)
Foreign currency-net .......................................... - - 324
--------- --------- ----------
Realized and unrealized gain (loss) on investments and
foreign currency-net .......................................... 8,187 4,908 (154,400)
--------- --------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ... $ 8,691 $ 2,419 $ (149,257)
========= ========= ==========
* Net of foreign withholding taxes of: .......................... $ 44 $ 7 $ 1,455
========= ========= ==========
**Portfolio commenced operations on March 19, 1998.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
18
<PAGE>
================================================================================
LAZARD RETIREMENT SERIES INC.
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LAZARD
RETIREMENT EQUITY
PORTFOLIO
------------------
PERIOD ENDED
JUNE 30, 1998**
(UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Investment income (loss)-net ............................................. $ 504
Realized gain (loss) on investments and foreign currency-net ............... 456
Change in unrealized appreciation (depreciation)-net ..................... 7,731
--------
Net increase (decrease) in net assets resulting from operations ............ 8,691
--------
DISTRIBUTIONS TO SHAREHOLDERS:
From investment income-net ................................................ -
In excess of investment income-net ....................................... -
From Capital ............................................................... -
--------
Net decrease in net assets resulting from distributions ..................... -
--------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from sales ................................................... 308,421
Net proceeds from reinvestment of distributions ........................... -
Cost of shares redeemed ................................................... -
--------
Net increase (decrease) in net assets from capital stock transactions ...... 308,421
--------
Total increase (decrease) in net assets .................................... 317,112
Net assets at beginning of period .......................................... -
--------
Net assets at end of period* ................................................ $317,112
========
SHARES ISSUED AND REPURCHASED:
Shares outstanding at beginning of period ................................. -
--------
Shares sold ............................................................... 30,466
Shares issued to shareholders from reinvestment of distributions ......... -
Shares repurchased ......................................................... -
--------
Net increase (decrease) ................................................... 30,466
--------
Shares outstanding at end of period ....................................... 30,466
========
*Includes undistributed (distributions in excess of) investment Income-net $ 504
========
</TABLE>
**Portfolio commenced operations on March 19, 1998.
***Portfolio commenced operations on November 4, 1997.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
19
<PAGE>
===============================================================================
LAZARD RETIREMENT SERIES INC.
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LAZARD LAZARD
RETIREMENT RETIREMENT
SMALL CAP EMERGING MARKETS
PORTFOLIO PORTFOLIO
- ------------------------------------------- --------------------------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1998 PERIOD ENDED JUNE 30, 1998 PERIOD ENDED
(UNAUDITED) DECEMBER 31, 1997*** (UNAUDITED) DECEMBER 31, 1997***
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ (2,489) $ 648 $ 5,143 $ 4,321
20,505 - (21,368) (68)
(15,597) (9,204) (133,032) (75,298)
- --------- -------- ---------- ----------
2,419 (8,556) (149,257) (71,045)
- --------- -------- ---------- ----------
- (648) - (4,321)
- (283) - (874)
- - - (582)
- --------- -------- ---------- ----------
- (931) - (5,777)
- --------- -------- ---------- ----------
470,478 600,030 69,687 1,500,060
- 931 - 5,777
(73,381) - (109,006) -
- --------- -------- ---------- ----------
397,097 600,961 (39,319) 1,505,837
- --------- -------- ---------- ----------
399,516 591,474 (188,576) 1,429,015
591,474 - 1,429,015 -
- --------- -------- ---------- ----------
$ 990,990 $591,474 $1,240,439 $1,429,015
========= ======== ========== ==========
60,099 - 150,628 -
- --------- -------- ---------- ----------
44,282 60,003 7,422 150,006
- 96 - 622
(6,947) - (11,493) -
- --------- -------- ---------- ----------
37,335 60,099 (4,071) 150,628
- --------- -------- ---------- ----------
97,434 60,099 146,557 150,628
========= ======== ========== ==========
$ (2,219) $ 270 $ 5,075 $ (68)
========= ======== ========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
20
<PAGE>
================================================================================
LAZARD RETIREMENT SERIES, INC.
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
- --------------------------------------------------------------------------------
LAZARD RETIREMENT EQUITY PORTFOLIO
FOR THE PERIOD
3/19/98* TO
6/30/98+
---------------
Net asset value, beginning of period ......... $ 10.00
---------
Income (loss) from investment operations:
Net investment income ........................ 0.02
Net realized and unrealized gain (loss) ...... 0.39
---------
Total from investment operations ............ 0.41
---------
Less distributions from and in excess of:
Net investment income ........................ -
Net realized gain ........................... -
---------
Total distributions ........................ -
---------
Net asset value, end of period ............... $ 10.41
=========
TOTAL RETURN (A) .............................. 4.1%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ...... $ 317
Ratios to average net assets:
Net expenses (b) ........................... 1.50%
Gross expenses (b) ........................... 93.15%
Net investment income (b) .................. 0.75%
Portfolio turnover rate ..................... 2%
LAZARD RETIREMENT SMALL CAP PORTFOLIO
SIX MONTHS FOR THE PERIOD
ENDED 11/4/97* TO
6/30/98+ 12/31/97
------------ ---------------
Net asset value, beginning of period ......... $ 9.84 $ 10.00
------ ---------
Income (loss) from investment operations:
Net investment income (loss) ............... (0.03) 0.02
Net realized and unrealized gain (loss) ..... 0.36 (0.16)
------ ---------
Total from investment operations ............ 0.33 (0.14)
------ ---------
Less distributions from and in excess of:
Net investment income ..................... - (0.02)
Net realized gain ........................... - -
------ ---------
Total distributions ........................ - (0.02)
------ ---------
Net asset value, end of period ............... $10.17 $ 9.84
====== =========
TOTAL RETURN (A) ........................... 3.4% (1.4)%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ..... $ 991 $ 591
Ratios to average net assets:
Net expenses (b) ........................... 1.50% 1.50%
Gross expenses (b) ........................ 23.21% 52.55%
Net investment income (b) ..................(0.69)% 0.71%
Portfolio turnover rate ..................... 17% 0%
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
21
<PAGE>
- --------------------------------------------------------------------------------
LAZARD RETIREMENT SERIES, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
- --------------------------------------------------------------------------------
LAZARD RETIREMENT EMERGING MARKETS PORTFOLIO
SIX MONTHS FOR THE PERIOD
ENDED 11/4/97* TO
6/30/98+ 12/31/97
------------ ---------------
Net asset value, beginning of period ......... $ 9.49 $ 10.00
------- ---------
Income (loss) from investment operations:
Net investment income ..................... 0.04 0.04
Net realized and unrealized gain (loss) ..... (1.07) ( 0.51)
------- ---------
Total from investment operations ............ (1.03) (0.47)
------- ---------
Less distributions from and in excess of:
Net investment income ..................... - (0.04)
Net realized gain ........................... - -
------- ---------
Total distributions ........................ - (0.04)
------- ---------
Net asset value, end of period ............... $ 8.46 $ 9.49
======= =========
TOTAL RETURN (A) ........................... (10.9)% (4.7)%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ..... $ 1,240 $ 1,429
Ratios to average net assets:
Net expenses (b) ........................... 1.80% 1.80%
Gross expenses (b) ........................ 13.28% 23.17%
Net investment income (b) .................. 0.77% 1.96%
Portfolio turnover rate ..................... 23% 0%
* Commencement of operations
+ Unaudited
(a) Total returns are historical and assume changes in share price,
reinvestments of all dividends and distributions, and no sales charge. Had
certain expenses not been reduced during the periods shown, total returns
would have been lower. Periods of less than one year are not annualized.
(b) Annualized for periods of less than one year.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
22
<PAGE>
================================================================================
LAZARD RETIREMENT SERIES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION
Lazard Retirement Series, Inc. (the "Fund") was incorporated in Maryland on
February 13, 1997 and is registered under the Investment Company Act of 1940
(the "Act"), as amended, as a no-load, open-end management investment company.
The Fund is comprised of nine portfolios (each referred to as 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. Currently, only the following three portfolios, each of which is
"non-diversified" as defined in the Act, are being offered: Lazard Retirement
Equity Portfolio ("Equity Portfolio"), Lazard Retirement Small Cap Portfolio
("Small Cap Portfolio") and Lazard Retirement Emerging Markets Portfolio
("Emerging Markets Portfolio"). Equity Portfolio commenced operations on March
19, 1998 and Small Cap Portfolio and Emerging Markets Portfolio commenced
operations on November 4, 1997. The other six portfolios have issued 20,001
shares, at $10 per share, but had not commenced operations at June 30, 1998.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies:
(A) VALUATION OF INVESTMENTS-Market values for equity securities listed on the
New York Stock Exchange ("NYSE"), other U.S. exchanges or NASDAQ are based on
the last quoted sales price on the principal exchange on which the security is
traded as of the close of regular trading on the NYSE (normally 4:00 p.m.
Eastern Time) on each valuation date; securities not traded on the valuation
date are valued at the closing bid price. Any securities not listed for which
current over-the-counter market quotations or bids are readily available are
valued at the last quoted bid price, or, if available, the mean of two such
prices. Securities listed on foreign exchanges are valued at the last quoted
sales price; securities not traded on the valuation date are valued at the
closing bid price. Bonds and other fixed-income securities are valued on the
basis of prices provided by a pricing service, which are based primarily on
institutional size trading in similar groups of securities, or using brokers'
quotations. Mortgage-backed securities issued by certain government-related
organizations are valued using pricing services or brokers' quotations based on
a matrix system which considers such factors as other security prices, yields
and maturities. Debt securities maturing in sixty days or less are valued at
amortized cost except where to do so would not accurately reflect their fair
value, in which case such securities are valued at fair value as determined in
good faith in accordance with procedures adopted by the Board of Directors.
Options on stocks and stock indices traded on national securities exchanges are
valued as of the close of options trading on such exchanges (which is currently
4:10 p.m. Eastern Time). Securities for which market quotations are not readily
available are valued at fair value as determined in good faith using methods
approved by the Board of Directors. The Portfolio securities of any of the
Portfolios may also be valued on the basis of prices provided by a pricing
service when such prices are believed by the Investment Manager to reflect the
fair market value of such securities.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME-Security transactions are
accounted for on the trade date. Realized gains and losses on sales of
investments are recorded on a specific identification basis and dividend income
is recorded on the ex-dividend date. Interest income is accrued daily. The
Portfolios amortize premiums and accrete discounts on fixed-income securities
using the effective yield method.
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LAZARD RETIREMENT SERIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
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(C) FOREIGN CURRENCY TRANSLATION AND FORWARD FOREIGN CURRENCY CONTRACTS-The
accounting records of the Portfolios are maintained in U.S. dollars. Investment
securities and other assets and liabilities denominated in foreign currencies
are translated into U.S. dollars at the prevailing rate of exchange at period
end. Purchases and sales of securities, income receipts and expense payments are
translated into U.S. dollars at the prevailing exchange rate on the respective
dates of transactions.
The Portfolios do not isolate the portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in their market prices. Such fluctuations are included in
net realized and unrealized gain or loss from investments. Net realized exchange
gains (losses) from foreign currency transactions represent net foreign exchange
gains (losses) from forward foreign currency contracts, disposition of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions, and the difference between the amount of net
investment income recorded on the Portfolio's accounting records and the U.S.
dollar equivalent amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in the value of assets and
liabilities, other than investments in securities, as a result of changes in
exchange rates.
A forward foreign currency contract is an agreement between two parties to buy
or sell currency at a set price on a future date. Emerging Markets Portfolio (
the "Eligible Portfolio" ) may enter into forward foreign currency contracts for
risk management. Risk management includes hedging strategies which serve to
reduce an Eligible Portfolio's exposure to foreign currency fluctuations. Such
exposure may exist during the period that a foreign denominated investment is
held, or during the period between the trade date and settlement date of an
investment which is purchased or sold. Risks may arise upon entering into these
contracts from the potential inability of counterparties to meet the terms of
their contracts and from unanticipated movements in the value of the foreign
currency relative to the U.S. dollar.
The U.S. dollar value of forward foreign currency contracts is determined using
forward exchange rates provided by a quotation service. Daily fluctuations in
the value of such contracts are recorded as unrealized gains or losses. When the
contract is closed, the Portfolio records a realized gain or loss equal to the
difference between the value at the time it was opened and the value at the time
it was closed. Such gains and losses are disclosed in the realized or unrealized
gain (loss) on foreign currency in the accompanying Statements of Operations.
(D) FEDERAL INCOME TAXES-The Fund's policy is to continue to have each Portfolio
qualify as a regulated investment company under the Internal Revenue Code and to
distribute all of its taxable income, including any realized net capital gains
to shareholders. Therefore, no federal income tax provision is required.
Under current tax law, certain capital and net foreign currency losses realized
after October 31 within the taxable year may be deferred and treated as
occurring on the first day of the following tax year. For the tax period ended
December 31, 1997, Emerging Markets Portfolio elected to defer $68 of net
capital and currency losses arising between November 4, 1997 and December 31,
1997.
(E) DIVIDENDS AND DISTRIBUTIONS-The Fund intends to declare and to pay dividends
annually from net investment income on shares of Equity Portfolio, Small Cap
Portfolio and Emerging Markets Portfolio. During any particular year, net
realized gains from investment transactions in excess of available capital loss
carryforwards would be taxable to the Portfolio if not distributed. The
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LAZARD RETIREMENT SERIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
Portfolios intend to declare and distribute these amounts annually to
shareholders; however, to avoid taxation, a second distribution may be required.
Income dividends and capital gains distributions are determined in accordance
with federal income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments of foreign currency
transactions. Book and tax differences relating to shareholder distributions
will result in reclassifications and may affect the allocation between
investment income-net, realized gains-net and paid in capital.
(F) ORGANIZATIONAL EXPENSES-Costs incurred by the Fund in connection with its
organization have been deferred and are being amortized on a straight line basis
over a five-year period from the date of commencement of operations of each
Portfolio. In the event that any of the initial shares of any of the Portfolios
are redeemed during such amortization period, the appropriate Portfolio will be
reimbursed by such holder for any unamortized organizational expenses in the
same proportion as the number of shares redeemed bears to the number of initial
shares held at the time of redemption.
(G) ALLOCATION OF EXPENSES-Expenses not directly chargeable to a specific
Portfolio are allocated primarily on the basis of relative net assets.
(H) EXPENSE REDUCTIONS-Portfolios leaving excess cash in demand deposit accounts
may receive credits which are available to offset custody expenses. The
Statements of Operations report gross custody expenses, and report the amount of
such credits separately as an expense reduction.
(I) STRUCTURED INVESTMENTS-Certain Portfolios may invest in structured
investments whose values are linked either directly or inversely to changes in
foreign currencies, interest rates, commodities, indices, or other underlying
instruments. A Portfolio uses these securities to increase or decrease its
exposure to different underlying instruments and to gain exposure to markets
that might be difficult to invest in through conventional securities. Structured
investments may be more volatile than their underlying instruments, but any loss
is limited to the amount of the original investment.
(J) DELAYED DELIVERY COMMITMENTS-Each Portfolio may purchase or sell securities
on a when-issued or forward commitment basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of the
underlying securities and the date when the securities will be delivered and
paid for are fixed at the time the transaction is negotiated. Collateral
consisting of liquid securities or cash is maintained at the custodian in a
segregated account in an amount at least equal to these commitments.
(K) ESTIMATES-The preparation of financial statements in conformity with
generally accepted accounting principles requires the Fund to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of income and expense
during the reporting period. Actual results could differ from those estimates.
3. INVESTMENT MANAGEMENT AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund has entered into investment management agreements (the "Management
Agreements") with Lazard Asset Management (the "Manager"), a division of Lazard
Freres & Co. LLC, on behalf of each Portfolio. Pursuant to the Management
Agreements, the Manager will regularly provide the Portfolios with investment
research, advice and supervision and furnish continuously an investment program
for each Portfolio consistent with its investment objectives and policies,
including the purchase, retention and disposition of securities. Each of the
Port-
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LAZARD RETIREMENT SERIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
folios pays the Manager an investment management fee at the annual rate set
forth below as a percentage of the average daily net assets of the relevant
Portfolio: Equity Portfolio, 0.75%; Small Cap Portfolio, 0.75%; and Emerging
Markets Portfolio, 1.00%. The investment management fees are accrued daily and
payable monthly.
The Manager has voluntarily agreed to reduce its fees and, if necessary,
reimburse the following Portfolios if annualized operating expenses exceed the
following percentages of average daily net assets:
ANNUAL
PORTFOLIO OPERATING EXPENSES
- --------- -------------------
Equity 1.50%
Small Cap 1.50
Emerging Markets 1.80
For the period ended June 30, 1998, the Manager waived, in entirety, its
management fee amounting to $507 for Equity Portfolio, $2,722 for Small Cap
Portfolio and $6,708 for Emerging Markets Portfolio. For the same period, the
Manager has agreed to reimburse expenses amounting to $48,276 for Equity
Portfolio, $57,139 for Small Cap Portfolio and $50,757 for Emerging Markets
Portfolio.
The Fund has entered into an administrative agreement with State Street Bank and
Trust Company ("State Street") to provide certain administrative services. Each
Portfolio will bear the cost of such expenses at the annual rate of $37,500 and
0.02% of average assets up to $1 billion plus 0.01% of average assets over $1
billion. State Street has agreed to waive the $37,500 fee for the Equity
Portfolio, Small Cap Portfolio and Emerging Markets Portfolio for one year or
until each Portfolio reaches net assets of $50 million, if sooner than one year.
The Fund has a distribution agreement with Lazard Freres & Co. LLC (the
"Distributor"). The Distributor acts as distributor for shares of each of the
portfolios and bears the cost of printing and mailing prospectuses to potential
investors and of any advertising expenses incurred in connection with
distribution of shares.
The Distributor provides each Portfolio with distribution services pursuant to a
separate Distribution Plan (the "Plan") in accordance with Rule 12b-1 under the
Act. Under the Plan, the Distributor is entitled to distribution fees from each
Portfolio. The distribution fee is an asset-based fee to support distribution
efforts and/or servicing of accounts. Each Portfolio will pay a monthly
distribution fee at an annual rate of 0.25% of the average daily net assets of
each Portfolio for such services under the 12b-1 plan adopted by the Fund. The
distribution fee may be retained by the Distributor if a shareholder invests
directly through the Distributor. Usually the fees are paid to external
organizations such as 401(k) alliance sponsors, discount brokers and bank trust
departments who distribute the Fund to the public.
Certain Directors of the Fund are Managing Directors of the Manager. The Fund
pays each director who is not an officer of the Manager or an interested
Director its allocable share of a fixed fee of $20,000 per year, plus $1,000 per
meeting attended for the Fund and The Lazard Funds, Inc., a related party, and
reimburses them for travel and out of pocket expenses.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
Purchases and sales of portfolio securities (excluding short-term securities),
for the period ended June 30, 1998 were as follows:
PORTFOLIO PURCHASES SALES
- --------- --------- ------
Equity $294,902 $ 4,475
Small Cap 469,465 108,916
Emerging Markets 402,205 276,357
For the period ended June 30, 1998, Equity Portfolio paid brokerage commissions
of $8 to Lazard Freres & Co. LLC for portfolio transactions executed on behalf
of the Portfolio.
26
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LAZARD RETIREMENT SERIES, INC.
30 Rockefeller Plaza
New York, New York 10112
TELEPHONE
(800) 823-6300
INVESTMENT MANAGER
Lazard Asset Management
30 Rockefeller Plaza
New York, New York 10112
Telephone: (212) 632-6400
DISTRIBUTOR
Lazard Freres & Co. LLC
30 Rockefeller Plaza
New York, New York 10112
CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Boston Financial Data Services, Inc.
2 Heritage Drive
North Quincy, Massachusetts 02171
Telephone: 1-800-986-3455
INDEPENDENT PUBLIC ACCOUNTANTS
Anchin, Block & Anchin LLP
1375 Broadway
New York, New York 10018
LEGAL COUNSEL
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038
<PAGE>
LAZARD
RETIREMENT SERIES
30 Rockefeller Plaza
58th Floor
New York, NY 10112
Telephone 800.823 6300
http://www.lazardfunds.com
This report is for the information of the stockholders of Lazard Retirement
Series, Inc. Its use in connection with any offering of the Fund's shares is
authorized only in the case of a concurrent or prior delivery of the Fund's
current propectus.
