<PAGE> 1
Lazard Funds
Annual
Report
Dec. 31, 1996
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The Lazard Funds, Inc.
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<TABLE>
<S> <C>
BOARD OF DIRECTORS
- --------------------------------
JOHN J. BURKE(1) Retired Vice Chairman, Montana Power Company
KENNETH S. DAVIDSON(1) Private Investor
NORMAN EIG(2) Managing Director, Lazard Freres & Co. LLC
CARL FRISCHLING Partner, Kramer, Levin, Naftalis, Nessen, Kamin &
Frankel
HERBERT W. GULLQUIST(2) Managing Director, Lazard Freres & Co. LLC
LESTER Z. LIEBERMAN(1) Private Investor
RICHARD REISS(1) Managing Partner, Cumberland Associates
JOHN RUTLEDGE(1) President, Rutledge and Company
OFFICERS
- --------------------------------
NORMAN EIG Chairman of the Board
HERBERT W. GULLQUIST President
WILLIAM G. BUTTERLY, III Vice President and Secretary
GUS COUTSOUROS Treasurer
Member of (1) Audit Committee (2) Executive Committee
</TABLE>
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The Lazard Funds, Inc.
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Overview....................................................................... 2
Growth Charts.................................................................. 4
Performance Table.............................................................. 9
Portfolio of Investments
Lazard Equity Portfolio.................................................... 11
Lazard International Equity Portfolio...................................... 13
Lazard International Fixed-Income Portfolio................................ 16
Lazard Bond Portfolio...................................................... 24
Lazard Strategic Yield Portfolio........................................... 28
Lazard Small Cap Portfolio................................................. 38
Lazard International Small Cap Portfolio................................... 41
Lazard Emerging Markets Portfolio.......................................... 44
Lazard Global Equity Portfolio............................................. 47
Lazard Bantam Value Portfolio.............................................. 50
Statements of
Assets and Liabilities..................................................... 52
Operations................................................................. 54
Changes in Net Assets...................................................... 56
Financial Highlights........................................................... 60
Notes to Financial Statements.................................................. 65
Report of Independent Auditors................................................. 71
</TABLE>
1
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The Lazard Funds, Inc.
OVERVIEW
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DEAR SHAREHOLDERS,
Driven by extremely robust performance in the fourth quarter, major equity
markets around the world -- with the notable exception of the Japanese
Nikkei -- bolted to finish the year with strong gains. In the fixed income
markets, while volatility and rising interest rates depressed returns in the
traditional US markets, strong returns were posted in the US high yield,
emerging and non-US developed markets.
This has been a pivotal year for value creation by global companies. Corporate
managements around the globe are discovering the shareholder as the real
providers of competitive capital. As a result, there is a dramatic, yet
positive, change occurring in the relationship between corporate managements and
the shareholder. Managements are not only "talking the shareholder value talk"
(as evidenced by the number of references to the term in last year's annual
reports) but are starting to "walk the shareholder value walk" by taking real
action. Corporate restructuring and re-engineering, new senior management at
established companies, share repurchases, mergers and demergers are the new
catalysts for change.
Early to hop on this restructuring and value creation train, US companies are
now earning exceptional rates of return on capital, having reaped the benefits
of moderate economic growth, corporate re-engineering, deregulation and
productivity gains. Their next challenge will be to maintain their margins and
rates of return, though the efficiency they have created will make it difficult
to achieve the magnitude of recent years.
Many of these same forces which drove stellar US equity returns in the past few
years are now in place globally. New management, restructuring, cost-cutting,
improving global competitiveness and industry consolidation, the hallmarks of
"Corporate America's" recent history, are now being replicated in other markets.
Global competition for capital is now driving non-US companies to follow suit.
We are encouraged by these emerging opportunities outside the United States. The
pivotal concepts of "shareholder value" and "equity culture," which originated
in the US, are sweeping across Europe while taking root more gradually in Japan.
One driving force is pension reform. Demographic pressures, combined with an
inability to fund public social security programs in the future, are pushing
many governments to privatize pensions. Europeans, Japanese, and Asians are now
setting up pension and retirement schemes in an effort to create wealth for
their retirement. In all likelihood, they too will direct substantial funds
towards their local equity markets which will go a long way in developing a true
equity culture.
Although non-US stock prices are currently at historically cheap levels,
profitable returns are not guaranteed. A greater emphasis on stock picking will
be essential to distinguish those companies which will ride the wave of
structural change to greater efficiency and prosperity and those which will take
a plunge. This selectivity will be particularly critical in Japan, where the
"Big Bang" is occurring much faster than expected and investors are shunning
stocks of companies traditionally propped up by the government. In Europe, a
deliberate approach focusing on value will be particularly important in
targeting victors in the expected consolidation process.
2
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The Lazard Funds, Inc.
OVERVIEW (CONTINUED)
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Significant investment opportunities also beckon in small and mid-capitalization
stocks around the world. This is partly due to the valuation anomaly created
last year as prices of larger company stocks soared disproportionately to small-
and mid-cap stocks. The top 15 holdings in the S&P 500 Index returned over 33%,
1000 basis points more than the average. By contrast, the Russell 2000 Index,
designed to measure a universe of smaller cap companies, rose by 16.5%, roughly
half the return generated by the top 15 stocks in the S&P 500. Cheaper pricing
and less efficiency in the smaller-cap markets suggest stronger returns this
year combined with careful, bottom-up investing.
In an environment of low nominal returns in fixed income, sector
diversification, non-traditional asset class investing and credit risk were well
rewarded last year and should continue to provide strong performance this year.
Investors benefited last year from participating in non-traditional markets and
assets, where broad diversification disciplines reduce higher levels of risk.
Improving global competitiveness, better corporate returns, declining interest
rates, and a new equity culture bode well for future outperformance. We are also
encouraged by the better levels of operating performance which, combined with
continued economic activity and low levels of inflation, should support returns
through 1997. Other important issues that need to be monitored this year include
the development of a common European currency (EMU), Japanese banks' willingness
to write-off their bad debts, Hong Kong's transition to China, and the value of
the US dollar.
THE LAZARD FUNDS, INC.
3
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The Lazard Funds, Inc.
GROWTH CHARTS
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LAZARD EQUITY PORTFOLIO
The Lazard Equity Portfolio seeks capital appreciation through investing
primarily in common stocks of companies with relatively large capitalizations
that appear to the Investment Manager to be inexpensively priced relative to the
productivity of their equity or assets employed. Current income is incidental.
COMPARISON OF $50,000 INVESTMENT IN THE LAZARD EQUITY PORTFOLIO AND
THE STANDARD & POOR'S 500 STOCK INDEX
[GRAPH]
LAZARD INTERNATIONAL EQUITY PORTFOLIO
The Lazard International Equity Portfolio seeks capital appreciation through
investing primarily in the equity securities of non-United States companies.
COMPARISON OF $50,000 INVESTMENT IN THE LAZARD INTERNATIONAL EQUITY PORTFOLIO
AND THE MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALIA AND FAR EAST
INDEX
[GRAPH]
4
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The Lazard Funds, Inc.
GROWTH CHARTS (CONTINUED)
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LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO
The Lazard International Fixed-Income Portfolio seeks high total return from a
combination of current income and capital appreciation, consistent with what the
Investment Manager considers to be prudent investment risk, through investing
primarily in foreign fixed-income securities of varying maturities.
COMPARISON OF $50,000 INVESTMENT IN THE LAZARD INTERNATIONAL FIXED-INCOME
PORTFOLIO AND THE SALOMON WORLD GOVERNMENT BOND EX-U.S.
[GRAPH]
LAZARD BOND PORTFOLIO
The Lazard Bond Portfolio seeks to build and preserve capital through investing
in a range of bonds including obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, mortgage-backed securities,
asset-backed securities, municipal securities and corporate fixed-income
securities.
COMPARISON OF $50,000 INVESTMENT IN THE LAZARD BOND PORTFOLIO AND
THE LEHMAN INTERMEDIATE GOVERNMENT/CORPORATE BOND INDEX
[GRAPH]
5
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The Lazard Funds, Inc.
GROWTH CHARTS (CONTINUED)
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LAZARD STRATEGIC YIELD PORTFOLIO
The Lazard Strategic Yield Portfolio seeks to obtain a total return on its
assets by placing approximately equal emphasis on capital appreciation and
current income through investing principally in high-yielding fixed-income
securities. The Strategic Yield Portfolio may invest up to 50% of its total
assets in foreign, fixed-income securities. Many of the high-yielding securities
in which the Lazard Strategic Yield Portfolio invests are rated in the lower
rating categories (i.e., below investment grade) by the nationally recognized
securities rating services. 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.
COMPARISON OF $50,000 INVESTMENT IN THE LAZARD STRATEGIC YIELD PORTFOLIO AND
ONE MONTH LIBOR USD FIXED
[GRAPH]
LAZARD SMALL CAP PORTFOLIO
The Lazard Small Cap Portfolio seeks capital appreciation through investing
primarily in equity securities of companies with market capitalizations under $1
billion that are believed by the Investment Manager to be inexpensively priced
relative to the productivity of their equity or assets employed.
COMPARISON OF $50,000 INVESTMENT IN THE LAZARD SMALL CAP PORTFOLIO AND
THE RUSSELL 2000 STOCK INDEX
[GRAPH]
6
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The Lazard Funds, Inc.
GROWTH CHARTS (CONTINUED)
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LAZARD INTERNATIONAL SMALL CAP PORTFOLIO
The Lazard International Small Cap Portfolio seeks capital appreciation through
investing primarily in equity securities of non-United States companies with
market capitalizations under $1 billion that are believed by the Investment
Manager to be inexpensively priced relative to the productivity of their equity
or assets employed. The Lazard International Small Cap Portfolio operates
similarly to the Lazard Small Cap Portfolio, except that this Portfolio will
invest primarily in the equity securities of non-United States issuers and,
therefore, investment determinations include, among other items, the effect of
currency fluctuations and the political and economic factors of other
jurisdictions.
COMPARISON OF $50,000 INVESTMENT IN THE LAZARD INTERNATIONAL SMALL CAP PORTFOLIO
AND
THE SALOMON EMI EX-US INDEX
LAZARD EMERGING MARKETS PORTFOLIO
The Lazard Emerging Markets Portfolio seeks 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
produced recently, or are producing, a more stable economy, or countries that
have developed recently, or are developing, financial markets and investment
liquidity. The Lazard Emerging Markets Portfolio seeks securities of issuers
whose potential is significantly enhanced by their relationship to the emerging
markets country and are believed to be inexpensively priced relative to the
productivity of their equity or assets.
COMPARISON OF $50,000 INVESTMENT IN THE LAZARD EMERGING MARKETS PORTFOLIO AND
INTERNATIONAL FINANCE CORP. INVESTABLE INDEX
7
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The Lazard Funds, Inc.
GROWTH CHARTS (CONTINUED)
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LAZARD GLOBAL EQUITY PORTFOLIO
The Lazard Global Equity Portfolio seeks capital appreciation through investing
primarily in equity securities of companies with relatively large market
capitalizations that are located anywhere in the world which the Investment
Manager believes to be inexpensively priced relative to the return on total
capital or equity. In addition to security specific factors, investment
determinations include, among other items, analysis of U.S. and non-U.S.
markets.
COMPARISON OF $50,000 INVESTMENT IN THE LAZARD GLOBAL EQUITY PORTFOLIO AND
MORGAN STANLEY CAPITAL INTERNATIONAL WORLD INDEX
LAZARD BANTAM VALUE PORTFOLIO
The Lazard Bantam Value Portfolio seeks capital appreciation through investing
primarily in equity securities of companies with market capitalizations under
$500 million that are believed by the Investment Manager to be inexpensively
priced relative to the return on total capital or equity and which are likely to
increase market capitalization as a result of growth or are likely to be the
subject of acquisitions or other events.
COMPARISON OF $50,000 INVESTMENT IN THE LAZARD BANTAM VALUE PORTFOLIO AND
THE RUSSELL 2000 STOCK INDEX
Past performance is not indicative, nor a guarantee, of future results.
8
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The Lazard Funds, Inc.
PERFORMANCE TABLE
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<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURNS
PERIOD ENDED DECEMBER 31, 1996
--------------------------------------------------------
ONE THREE FIVE SINCE
YTD YEAR YEAR YEAR INCEPTION*
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Lazard Equity Portfolio 19.9% 19.9% 72.0% 114.8% 243.3%
Standard & Poor's 500 Stock Index 23.0% 23.0% 71.4% 103.1% 242.2%
Lazard International Equity Portfolio 15.6% 15.6% 31.0% 60.3% 65.6%
EAFE Index 6.0% 6.0% 27.1% 48.0% 48.4%
Lazard International Fixed-Income Portfolio: 5.5% 5.5% 31.3% 54.9% 61.0%
Salomon World Government Bond Index Ex-US: 4.1% 4.1% 31.9% 60.2% 71.2%
Lazard International Small Cap Portfolio 15.6% 15.6% 12.4% -- 22.2%
Salomon EMI Index Ex-US 7.2% 7.2% 22.4% -- 30.3%
Lazard Bond Portfolio:: 4.4% 4.4% 16.2% 33.4% 38.5%
Lehman Intermediate Gov't/Corp. Index:: 4.1% 4.1% 17.7% 37.2% 42.2%
Lazard Strategic Yield Portfolio::: 13.7% 13.7% 26.2% 54.6% 57.8%
One Month LIBOR USD Fixed Index::: 5.6% 5.6% 17.3% 25.8% 27.3%
Lazard Small Cap Portfolio 23.9% 23.9% 53.6% 149.3% 160.7%
Russell 2000 Stock Index 16.5% 16.5% 46.9% 106.8% 113.2%
Lazard Emerging Markets Portfolio 23.6% 23.6% -- -- 14.7%
IFC Investable Total Return Index 9.4% 9.4% -- -- (0.5%)
Lazard Global Equity Portfolio 15.8% -- -- -- 15.8%
MSCI World Index 12.8% -- -- -- 12.8%
Lazard Bantam Value Portfolio 33.3% -- -- -- 33.3%
Russell 2000 Stock Index 13.1% -- -- -- 13.1%
</TABLE>
* Performance is measured from June 1, 1987 for Lazard Equity Portfolio; from
October 31, 1991 for Lazard International Equity Portfolio, Lazard International
Fixed-Income Portfolio, Lazard Bond Portfolio and Lazard Small Cap Portfolio;
from October 1, 1991 for Lazard Strategic Yield Portfolio; from December 1, 1993
for Lazard International Small Cap Portfolio; from July 15, 1994 for Lazard
Emerging Markets Portfolio; from January 3, 1996 for Lazard Global Equity
Portfolio and from March 1, 1996 for the Lazard Bantam Value Portfolio. The
performance for the relevant index is for the comparable period. Portfolio
returns are net of fees and assume reinvestment of dividends and capital gain
distributions, if any. Certain expenses of a portfolio may have been reimbursed
by the adviser, without such reimbursement of expenses the portfolio's total
return would have been lower.
: Effective January 1, 1993, the Portfolio is 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, the Portfolio is measured by the "Intermediate" index
rather than the "Bond" index. Performance of the index shown "YTD", "One Year",
"Three Year", and "Since Inception" above now includes only the "Intermediate"
index.
::: Effective May 1, 1993, the Portfolio is measured by the "One Month LIBOR"
index rather than the "Merrill" or "Lehman" indices. Performance of the index
shown "YTD", "One Year", "Three Year", and "Since Inception" above now includes
only the "One Month LIBOR" index.
See additional footnotes on page 10.
9
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The Lazard Funds, Inc.
PERFORMANCE TABLE (CONTINUED)
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<TABLE>
<CAPTION>
AVERAGE ANNUAL RETURNS
PERIOD ENDED DECEMBER 31, 1996
-------------------------------------
ONE THREE FIVE SINCE
YEAR YEAR YEAR INCEPTION*
-------------------------------------
<S> <C> <C> <C> <C>
Lazard Equity Portfolio 19.9% 19.8% 16.5% 13.8%
Standard & Poor's 500 Stock Index 23.0% 19.7% 15.2% 13.7%
Lazard International Equity Portfolio 15.6% 9.4% 9.9% 10.3%
EAFE Index 6.0% 8.3% 8.2% 7.9%
Lazard International Fixed-Income Portfolio: 5.5% 9.5% 9.1% 9.7%
Salomon World Government Bond Index Ex-US: 4.1% 9.7% 9.9% 11.0%
Lazard International Small Cap Portfolio 15.6% 4.0% -- 6.7%
Salomon EMI Index Ex-US 7.2% 7.0% -- 9.0%
Lazard Bond Portfolio:: 4.4% 5.1% 5.9% 6.5%
Lehman Intermediate Gov't/Corp. Index:: 4.1% 5.6% 6.5% 7.1%
Lazard Strategic Yield Portfolio::: 13.7% 8.1% 9.1% 9.1%
One Month LIBOR USD Fixed Index::: 5.6% 5.5% 4.7% 4.7%
Lazard Small Cap Portfolio 23.9% 15.4% 20.0% 20.4%
Russell 2000 Stock Index 16.5% 13.7% 15.6% 15.8%
Lazard Emerging Markets Portfolio 23.6% -- -- 5.7%
IFC Investable Total Return Index 9.4% -- -- (0.2%)
Lazard Global Equity Portfolio -- -- -- --
MSCI World Index -- -- -- --
Lazard Bantam Value Portfolio -- -- -- --
Russell 2000 Stock Index -- -- -- --
</TABLE>
Past performance is not indicative, nor a guarantee, of future results; the
investment return and principal value of each portfolio of The Lazard Funds,
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 Standard & Poor's Corporation. The Morgan Stanley-Europe, Australia
and Far East Index (EAFE) is comprised of international equities that are
compiled by Morgan Stanley Capital International. The Salomon Extended Market
Index (EMI) Ex-US and the Salomon World Government Bond Index Ex-US are compiled
by Salomon Brothers. The Lehman Intermediate Gov't/Corp. Index is an index
calculated by Lehman Brothers. The London Interbank Offered Rates--US Dollar
Fixed rates--is an average derived from sixteen quotations provided by banks
determined by the British Bankers Association. The Russell 2000 Stock Index is
an index of common stocks and is a registered trademark of the Frank Russell
Company. The IFC Investable Total Return Index is an index of emerging markets
securities that represent 65% of market capital compiled by the International
Finance Corporation. The Morgan Stanley Capital International (MSCI)--World
Index (Net) 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.
This performance data is not authorized for distribution to prospective
investors in the Fund unless preceded or accompanied by an effective prospectus.
10
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The Lazard Funds, Inc.
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
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<TABLE>
<CAPTION>
DESCRIPTION SHARES VALUE
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<S> <C> <C>
LAZARD EQUITY PORTFOLIO
COMMON STOCKS--96.4%
AEROSPACE & DEFENSE--3.4%
Lockheed Martin Corp. ....... 44,400 $ 4,062,600
McDonnell Douglas Corp. ..... 82,600 5,286,400
--------------
9,349,000
--------------
AGRICULTURAL MACHINERY--1.9%
Deere & Co. ................. 131,400 5,338,125
--------------
AUTOMOTIVE--3.5%
Chrysler Corp. .............. 127,800 4,217,400
General Motors Corp. ........ 97,400 5,430,050
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9,647,450
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AUTO PARTS--0.9%
Lear Corp. (a)............... 76,900 2,624,213
--------------
BANKS--9.7%
Bank of New York Company,
Inc. ....................... 233,400 7,877,250
BankAmerica Corp. ........... 34,500 3,441,375
Chase Manhattan Corp.
(New)....................... 91,512 8,167,446
KeyCorp (New)................ 61,000 3,080,500
NationsBank Corp. ........... 44,900 4,388,975
--------------
26,955,546
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BEVERAGES--2.6%
Cadbury Schweppes PLC (b).... 136,200 4,647,825
PepsiCo Inc. ................ 93,800 2,743,650
--------------
7,391,475
--------------
BROADCASTING--0.5%
Viacom, Inc. Class B (a)..... 42,800 1,492,650
--------------
CHEMICALS & PLASTICS--3.1%
Du Pont (E.I.) De Nemours &
Co. ........................ 42,500 4,010,937
Morton International,
Inc. ....................... 46,800 1,907,100
Union Carbide Corp. ......... 70,000 2,861,250
--------------
8,779,287
--------------
COMMERCIAL SERVICES--2.4%
Viad Corp. .................. 129,700 $ 2,140,050
WMX Technologies, Inc. ...... 138,700 4,525,087
--------------
6,665,137
--------------
COMMUNICATION SERVICES--3.2%
Bell Atlantic Corp. ......... 91,800 5,944,050
U S West, Inc. (a)........... 157,900 2,921,150
--------------
8,865,200
--------------
COMPUTERS & BUSINESS
EQUIPMENT--2.0%
Digital Equipment Corp. (a).. 36,000 1,309,500
EMC Corp. (a)................ 126,000 4,173,750
--------------
5,483,250
--------------
DRUGS & HEALTH CARE--6.9%
Astra AB (b)................. 74,200 3,635,800
Columbia/HCA Healthcare
Corp. ...................... 133,837 5,453,858
Pharmacia & Upjohn, Inc. .... 87,500 3,467,187
United Healthcare Ltd. ...... 148,000 6,660,000
--------------
19,216,845
--------------
ENERGY--10.2%
Atlantic Richfield Co. ...... 42,200 5,591,500
Elf Aquitaine SA (b)......... 120,600 5,457,150
Kerr-McGee Corp. ............ 39,200 2,822,400
Mobil Corp. ................. 56,000 6,846,000
Noble Affiliates, Inc. ...... 64,900 3,107,087
Royal Dutch Petroleum Co.
(b)......................... 26,800 4,576,100
--------------
28,400,237
--------------
ENTERTAINMENT--2.5%
Brunswick Corp. ............. 157,600 3,782,400
Carnival Corp. Class A....... 94,100 3,105,300
--------------
6,887,700
--------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
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The Lazard Funds, Inc.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
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<TABLE>
<CAPTION>
DESCRIPTION SHARES VALUE
- ----------------------------------------------------------
<S> <C>
LAZARD EQUITY PORTFOLIO (CONTINUED)
FINANCIAL SERVICES--2.2%
Travelers Group, Inc. ....... 133,866 $ 6,074,170
--------------
FOOD PROCESSING--2.7%
Archer Daniels Midland Co. .. 193,145 4,249,190
IBP, Inc. ................... 139,100 3,373,175
--------------
7,622,365
--------------
GAS EXPLORATION--1.6%
Burlington Resources,
Inc. ....................... 90,400 4,553,900
--------------
HOTELS & RESTAURANTS--0.9%
Wendy's International,
Inc. ....................... 129,800 2,660,900
--------------
INDUSTRIAL & MACHINERY--0.5%
ITT Industries, Inc. ........ 57,200 1,401,400
--------------
INSURANCE--6.6%
Aetna Inc. .................. 22,300 1,784,000
Allstate Corp. .............. 57,999 3,356,692
Cigna Corp. ................. 26,900 3,675,213
Exel Ltd. ................... 98,800 3,742,050
ITT Hartford Group, Inc. .... 86,800 5,859,000
--------------
18,416,955
--------------
MANUFACTURING--2.7%
General Electric Co. ........ 75,200 7,435,400
--------------
MEDICAL SUPPLIES--1.8%
Baxter International,
Inc. ....................... 121,000 4,961,000
--------------
MULTIMEDIA--1.8%
Gannett Company, Inc. ....... 66,000 4,941,750
--------------
OFFICE EQUIPMENT--1.0%
Xerox Corp. ................. 53,100 2,794,388
--------------
PAPER PRODUCTS--2.4%
Champion International
Corp. ...................... 54,500 2,357,125
Kimberly-Clark Corp. ........ 44,206 $ 4,210,622
--------------
6,567,747
--------------
RETAIL--5.2%
Federated Department Stores,
Inc. (a).................... 156,200 5,330,325
Nordstrom, Inc. ............. 44,000 1,559,250
Sears Roebuck & Co. ......... 75,600 3,487,050
Wal-Mart Stores, Inc. ....... 178,000 4,071,750
--------------
14,448,375
--------------
TECHNOLOGY--5.1%
Advanced Micro Devices, Inc.
(a)......................... 108,000 2,781,000
International Business
Machines Corp. ............. 61,200 9,241,200
LSI Logic Corp. (a).......... 77,100 2,062,425
--------------
14,084,625
--------------
TOBACCO--5.5%
Philip Morris Cos., Inc. .... 86,600 9,753,325
UST, Inc. ................... 175,300 5,675,337
--------------
15,428,662
--------------
TRANSPORTATION--3.6%
Burlington Northern Santa
Fe.......................... 46,800 4,042,350
Union Pacific Corp. ......... 98,200 5,904,275
--------------
9,946,625
--------------
TOTAL COMMON STOCKS
(Identified cost
$216,922,843)............... 268,434,377
--------------
PREFERRED STOCKS--1.1%
(Identified cost $2,626,127)
FINANCIAL SERVICES--1.1%
Time Warner Financing Trust.. 82,500 3,196,875
--------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
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The Lazard Funds, Inc.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- ----------------------------------------------------------
<S> <C> <C>
LAZARD EQUITY PORTFOLIO
(CONTINUED)
REPURCHASE AGREEMENT--3.3%
State Street Bank and Trust
Co., 6.00%, 1/2/97
(Dated 12/31/96,
collateralized by $8,590,000
United States Treasury
Notes, 7.00%, 07/15/06, with
a value of $9,272,819)
(Identified cost
$9,086,000)................. $ 9,086 $ 9,086,000
--------------
TOTAL INVESTMENTS
(Identified cost
$228,634,970) (c)........... 100.8% $280,717,252
LIABILITIES IN EXCESS OF CASH
AND OTHER ASSETS............. (0.8) (2,111,933)
---- ---------
NET ASSETS.................... 100.0% $278,605,319
==== =========
</TABLE>
(a) Non-income producing security.
(b) American Depository Receipts.
(c) The aggregate cost for federal income tax purposes is $228,881,016; based on
tax cost aggregate gross unrealized appreciation is $53,113,441 and the
aggregate gross unrealized depreciation is $1,277,205 resulting in net
unrealized appreciation of $51,836,236.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
LAZARD INTERNATIONAL
EQUITY PORTFOLIO
COMMON STOCKS--95.3%
AUSTRALIA--2.4%
Coles Myer, Ltd. ........ 2,164,847 $ 8,913,367
Westpac Bank Corp. ...... 6,221,600 35,407,882
--------------
TOTAL AUSTRALIA.......... 44,321,249
--------------
DENMARK--1.1%
Unidanmark Class A....... 381,800 19,767,943
--------------
FINLAND--1.0%
Kymmene OY............... 852,100 17,875,576
--------------
FRANCE--14.4%
Accor SA................. 110,959 14,050,316
Alcatel Alsthom (Cie Gen
El)..................... 559,300 44,929,409
Banque Nationale de
Paris................... 746,222 28,879,518
Cie de Saint Gobain...... 239,600 33,895,423
Elf Aquitaine SA......... 414,100 37,694,792
Generale des Eaux........ 317,892 39,395,694
Rhone-Poulenc SA......... 1,299,790 44,315,862
Total SA Class B......... 232,281 18,892,277
--------------
TOTAL FRANCE............. 262,053,291
--------------
GERMANY--13.1%
Daimler-Benz AG (a)...... 614,200 42,309,072
Deutsche Bank AG......... 684,000 31,959,709
Deutsche Telekom AG (a),
(b)..................... 628,100 12,797,537
Hoechst AG............... 1,261,500 59,599,071
Mannesmann AG (b)........ 73,005 31,641,534
Metro AG (a)............. 183,000 14,746,556
Thyssen AG............... 89,100 15,807,317
Veba AG.................. 506,080 29,270,289
--------------
TOTAL GERMANY............ 238,131,085
--------------
HONG KONG--3.0%
HSBC Holdings, Ltd. ..... 1,737,848 37,185,835
</TABLE>
The accompanying notes are an integral part of these financial statements.
13
<PAGE> 16
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
LAZARD INTERNATIONAL EQUITY
PORTFOLIO (CONTINUED)
Swire Pacific, Ltd. ..... 1,817,500 $ 17,330,225
--------------
TOTAL HONG KONG.......... 54,516,060
--------------
ITALY--1.9%
Ente Nazionale
Idrocarburi SPA (ENI)... 3,504,100 17,982,478
Fiat SPA................. 3,199,300 9,680,150
Istituto Nazionale delle
Assicurazioni (INA)..... 5,362,900 6,985,557
--------------
TOTAL ITALY.............. 34,648,185
--------------
JAPAN--22.6%
Dai Nippon Printing...... 808,000 14,163,198
Honda Motor Co. ......... 1,124,000 32,125,378
Matsushita Electric
Industrial Co. ......... 1,881,000 30,697,608
Mitsubishi Heavy
Industries.............. 4,568,000 36,288,403
Mitsui Marine & Fire..... 1,140,000 6,132,631
Nintendo Co. ............ 395,500 28,310,984
NKK Corp. (a)............ 6,933,000 15,624,842
Omron Corp. ............. 698,000 13,139,107
Orix Corp. .............. 608,000 25,304,896
Promise Company, Ltd. ... 218,600 10,759,175
Ricoh Company, Ltd. ..... 3,210,000 36,864,692
Rohm Company, Ltd. ...... 593,000 38,915,465
Sekisui Chemical Co. .... 2,005,000 20,256,023
Sony Corp. .............. 816,000 53,479,320
Sumitomo Trust &
Banking................. 2,522,000 25,261,376
Toyota Motor Corp. ...... 784,000 22,543,131
--------------
TOTAL JAPAN.............. 409,866,229
--------------
NETHERLANDS--3.4%
Heineken NV.............. 108,800 19,270,802
Royal Dutch Petroleum Co.
(b)..................... 247,800 $ 42,311,850
--------------
TOTAL NETHERLANDS........ 61,582,652
--------------
NEW ZEALAND--0.3%
Lion Nathan, Ltd. ....... 2,487,000 5,960,361
--------------
SPAIN--2.3%
ENDESA................... 589,900 41,984,795
--------------
SWEDEN--3.5%
Astra AB Series B........ 378,300 18,249,637
Electrolux AB Series B... 331,800 19,266,089
Svenska Handelsbanken
Series A................ 891,800 25,629,819
--------------
TOTAL SWEDEN............. 63,145,545
--------------
SWITZERLAND--6.2%
Baloise Holdings,
Ltd. ................... 8,073 16,224,408
Elektrowatt AG........... 23,600 9,397,684
Nestle SA................ 31,110 33,399,380
Novartis AG (a).......... 29,288 33,543,895
SGS Holding.............. 7,947 19,533,530
--------------
TOTAL SWITZERLAND........ 112,098,897
--------------
UNITED KINGDOM--20.1%
Allied Domecq PLC........ 3,039,200 23,847,072
B.A.T Industries PLC..... 3,446,200 28,575,652
British Aerospace Ord.
PLC..................... 2,518,787 55,148,360
BTR PLC.................. 6,383,500 31,168,366
Cadbury Schweppes PLC.... 4,134,931 34,924,122
General Electric Co.
PLC..................... 2,767,900 18,161,824
Grand Metropolitan PLC... 4,527,200 35,522,659
Mirror Group PLC......... 3,323,600 12,242,145
National Power PLC....... 4,273,400 35,727,586
Rank Group PLC (a)....... 1,994,400 14,965,688
Redland PLC.............. 2,657,800 16,801,922
Sears PLC................ 14,956,300 24,085,869
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE> 17
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
LAZARD INTERNATIONAL EQUITY
PORTFOLIO (CONTINUED)
Unilever PLC............. 1,377,700 $ 33,398,073
--------------
TOTAL UNITED KINGDOM..... 364,569,338
--------------
TOTAL COMMON STOCKS
(Identified cost
$1,468,482,320)......... 1,730,521,206
--------------
PREFERRED STOCKS--1.1%
(Identified cost
$26,154,451)
ITALY--1.1%
Fiat SPA................. 12,118,500 20,011,102
--------------
REPURCHASE AGREEMENT--3.1%
State Street Bank and
Trust Co., 6.00%, 1/2/97
(Dated 12/31/96,
collateralized by
$54,225,000 United
States Treasury Notes,
7.00%, 07/15/06, with a
value of $58,535,345)
(Identified cost
$57,386,000)............ $ 57,386 $ 57,386,000
--------------
TOTAL INVESTMENTS
(Identified cost
$1,552,022,771) (c)..... 99.5% 1,807,918,308
CASH AND OTHER ASSETS IN
EXCESS OF LIABILITIES.... 0.5 8,254,860
--- ----------
NET ASSETS................ 100.0% $1,816,173,168
=== ==========
</TABLE>
(a) Non-income producing security.
(b) American Depository Receipts.
(c) The aggregate cost for federal income tax purposes is $1,556,095,816; based
on tax cost aggregate gross unrealized appreciation is $293,414,717 and the
aggregate gross unrealized depreciation is $41,592,225, resulting in net
unrealized appreciation of $251,822,492.
* Percentages of common and preferred stocks are presented in the portfolio by
country.
Percentages by industry are as follows:
Aerospace & Defense 3.0%, Automotive 7.0%, Banks 9.3%, Chemicals & Plastics
6.8%, Computer & Business Equipment 2.0%, Conglomerates 3.7%, Construction
Materials 2.8%, Drugs & Health Care 2.9%, Electrical Equipment 9.2%,
Electronics 4.4%, Energy 2.3%, Financial Services 3.9%, Food & Beverage 6.5%,
Gas Exploration 1.0%, Household Products 1.8%, Insurance 1.6%, International
Oil 1.0%, Leisure Time 0.8%, Machinery 3.7%, Paper Products 1.0%, Petroleum
Equipment 2.2%, Publishing 0.7%, Retail 2.6%, Services 2.6%, Steel 1.7%,
Telephone 0.7%, Tobacco 1.6%, Transportation 1.0%, Utilities 8.6%
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
15
<PAGE> 18
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- -------------------------------------------------------
<S> <C> <C>
LAZARD INTERNATIONAL
FIXED-INCOME PORTFOLIO
CURRENCY DENOMINATED BONDS*--95.0%
ARGENTINA PESO--0.5%
GOVERNMENT OBLIGATION
Republic of Argentina,
3.58%, 4/1/01 (a).......... 395 $ 468,366
-----------
AUSTRALIAN DOLLAR--2.6%
CORPORATE BOND
Bayerische Vereinsbank,
10.00%, 12/16/99........... 210 180,481
GOVERNMENT OBLIGATION
Commonwealth of Australia,
12.00%, 11/15/01........... 2,235 2,142,889
-----------
TOTAL AUSTRALIAN DOLLAR...... 2,323,370
-----------
AUSTRIAN SCHILLING--1.7%
GOVERNMENT OBLIGATION
Republic of Austria,
8.00%, 3/18/02............. 14,670 1,530,877
-----------
BRAZILIAN REAL--0.2%
CORPORATE
Chase Brazil Note,
17.106%, 5/2/97............ 135 137,455
-----------
BRITISH POUND--9.2%
CORPORATE BONDS
Barclays Bank PLC,
12.75%, 11/26/97........... 310 556,986
Bayerische Landesbank
Girozentrale,
8.50%, 2/26/03............. 275 489,389
Birmingham Midshires Building
Society,
9.125%, 1/5/06............. 500 883,909
Deut Pfandbriefe Bank,
6.50%, 12/31/98............ 300 506,818
Merrill Lynch & Co.,
7.375%, 12/6/01............ 387 650,580
North American Capital Corp.,
8.25%, 11/17/03............ 876 1,497,019
The Woolwich Building
Society,
11.625%, 12/18/01.......... 470 $ 919,447
West LB Finance Curacao NV,
8.50%, 6/2/03.............. 710 1,249,829
GOVERNMENT OBLIGATIONS
United Kingdom Treasury
Bonds,
7.75%, 9/8/06.............. 801 1,395,008
-----------
TOTAL BRITISH POUND.......... 8,148,985
-----------
CANADIAN DOLLAR--1.6%
CORPORATE BONDS
NHA Mortgage Backed,
7.00%, 5/1/06.............. 290 220,936
7.125%, 6/1/03............. 2 1,331
Quebec Housing,
8.95%, 5/13/13 (d)......... 415 355,506
GOVERNMENT OBLIGATION
Government of Canada,
4.25%, 12/1/21 (a), (d).... 1,010 816,578
-----------
TOTAL CANADIAN DOLLAR........ 1,394,351
-----------
COLOMBIAN PESO--0.3%
CORPORATE BONDS
Cargil BA Colombia,
0.00%, 1/21/97............. 190,000 189,264
0.00%, 1/27/97............. 50,000 49,130
-----------
TOTAL COLOMBIAN PESO......... 238,394
-----------
CZECH KORUNA--0.5%
CORPORATE BONDS
CEZ AS,
11.30%, 6/6/05............. 1,800 66,349
Skofin,
11.625%, 2/9/98............ 10,000 366,952
-----------
TOTAL CZECH KORUNA........... 433,301
-----------
DANISH KRONE--4.7%
CORPORATE BONDS
Kreditforen Denmark,
10.20%, 4/15/04 (a)........ 5,000 977,796
</TABLE>
The accompanying notes are an integral part of these financial statements.
16
<PAGE> 19
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- -------------------------------------------------------
<S> <C> <C>
LAZARD INTERNATIONAL
FIXED-INCOME PORTFOLIO
(CONTINUED)
Nykredit,
6.00%, 10/1/26............. 13,561 $ 1,995,890
8.00%, 10/1/26............. 26 4,451
Unikredit,
8.00%, 10/1/26............. 6,870 1,168,415
-----------
TOTAL DANISH KRONE........... 4,146,552
-----------
DUTCH GUILDER--2.2%
GOVERNMENT OBLIGATION
Government of Netherlands,
8.75%, 1/15/07............. 2,757 1,948,983
-----------
EGYPTIAN POUND--0.3%
GOVERNMENT OBLIGATION
Egypt Discounted Treasury
Bill,
0.00%, 1/30/97............. 875 255,777
-----------
ESTONIAN KROON--0.2%
CORPORATE BOND
Merita Bank,
10.00%, 12/28/98........... 1,000 81,533
GOVERNMENT OBLIGATION
City of Tallinn,
8.05%, 2/10/97............. 1,500 121,818
-----------
TOTAL ESTONIAN KROON......... 203,351
-----------
FINNISH MARKKA--1.1%
GOVERNMENT OBLIGATIONS
Republic of Finland,
7.25%, 4/18/06............. 3,000 697,850
10.00%, 9/15/01............ 1,000 263,180
-----------
TOTAL FINNISH MARKKA......... 961,030
-----------
FRENCH FRANC--7.7%
CORPORATE BOND
Credit Foncier de France,
7.50%, 3/29/05............. 12,010 2,538,106
GOVERNMENT OBLIGATIONS
Government of France,
8.50%, 11/25/02 (d)........ 11,826 2,681,563
8.50%, 4/25/03 (d)......... 5,408 $ 1,232,005
8.50%, 10/25/19 (d)........ 1,388 326,742
-----------
TOTAL FRENCH FRANC........... 6,778,416
-----------
GERMAN MARK--9.9%
CORPORATE BONDS
Autobahn Tank & Rast,
6.00%, 10/16/00............ 610 412,864
Baden Wurttemberg,
6.75%, 6/22/05............. 914 626,638
Bank Nederlandse Gemeenten,
6.50%, 11/4/08............. 2,000 1,335,456
International Bank
Reconstruction &
Development,
7.125%, 4/12/05 (d)........ 1,700 1,198,661
Land Hessen,
6.00%, 11/29/13............ 1,000 664,479
GOVERNMENT OBLIGATION
Federal Republic of Germany,
6.00%, 2/16/06 (d)......... 6,804 4,491,042
-----------
TOTAL GERMAN MARK............ 8,729,140
-----------
GREEK DRACHMA--3.1%
GOVERNMENT OBLIGATIONS
Greek Treasury Bill,
0.00%, 1/31/97............. 3,500 14,044
Kingdom of Greece,
5.25%, 2/1/16.............. 263,400 2,440,732
Republic of Hellenic,
14.30%, 8/14/03............ 40,000 164,079
14.80%, 6/30/00............ 30,000 122,755
-----------
TOTAL GREEK DRACHMA.......... 2,741,610
-----------
HUNGARIAN FORINT--0.1%
GOVERNMENT OBLIGATION
Government of Hungary,
30.00%, 4/18/97............ 11,180 98,650
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE> 20
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- -------------------------------------------------------
<S> <C> <C>
LAZARD INTERNATIONAL
FIXED-INCOME PORTFOLIO
(CONTINUED)
INDONESIAN RUPIAH--0.2%
CORPORATE BOND
Bank Dagang Nasional
Indonesia,
0.00%, 2/11/97............. 500,000 $ 208,133
-----------
IRISH POUND--2.6%
GOVERNMENT OBLIGATION
Republic of Ireland,
8.00%, 10/18/00 (d)........ 1,248 2,255,536
-----------
ITALIAN LIRA--10.1%
GOVERNMENT OBLIGATIONS
Republic of Italy,
11.50%, 3/1/03 (d)......... 2,735,000 2,190,524
12.50%, 3/1/01 (d)......... 8,515,000 6,750,257
-----------
TOTAL ITALIAN LIRA........... 8,940,781
-----------
JAPANESE YEN--15.1%
CORPORATE BONDS
Aderans Co.,
1.80%, 8/29/97............. 14,000 121,009
Export-Import Bank of Japan,
4.375%, 10/1/03 (d)........ 205,000 2,000,259
Isveimer,
4.15%, 3/23/99............. 177,000 1,616,246
GOVERNMENT OBLIGATIONS
Government of Japan,
3.00%, 4/20/01............. 47,650 437,551
3.00%, 9/20/05............. 590,950 5,258,899
3.80%, 9/20/16............. 91,000 825,771
Republic of Austria,
4.50%, 9/28/05 (d)......... 80,000 792,677
6.25%, 10/16/03............ 15,000 161,741
Republic of Italy,
3.50%, 6/20/01 (d)......... 230,000 2,136,204
-----------
TOTAL JAPANESE YEN........... 13,350,357
-----------
KENYAN SHILLING--0.3%
GOVERNMENT OBLIGATIONS
Kenyan Treasury Bill,
0.00%, 2/24/97............. 8,000 142,101
0.00%, 3/3/97.............. 6,000 $ 106,172
-----------
TOTAL KENYAN SHILLING........ 248,273
-----------
LEBANESE POUND--0.3%
CORPORATE BONDS
Paribas Participation,
0.00%, 2/6/97.............. 30,000 19,037
0.00%, 4/10/97............. 100,000 61,025
0.00%, 5/1/97.............. 45,600 27,554
0.00%, 5/29/97............. 250,000 150,741
-----------
TOTAL LEBANESE POUND......... 258,357
-----------
MALAYSIAN RINGGIT--0.1%
CORPORATE BOND
Peregrine Investment Holdings
Ltd.,
8.08%, 5/6/97.............. 300 118,707
-----------
MEXICAN PESO--0.2%
CORPORATE BOND
UDI Bonos,
7.00%, 5/27/99............. 4 76,996
GOVERNMENT OBLIGATIONS
Mexican Cetes,
0.00%, 5/29/97............. 113 129,546
0.00%, 6/26/97............. 4 4,521
-----------
TOTAL MEXICAN PESO........... 211,063
-----------
NORWEGIAN KRONE--1.1%
CORPORATE BOND
Sparebanken Norway,
10.25%, 6/23/03 (a)........ 6,000 999,767
-----------
POLISH ZLOTY--0.3%
GOVERNMENT OBLIGATIONS
Government of Poland,
0.00%, 8/27/97............. 550 167,624
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE> 21
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- -------------------------------------------------------
<S> <C> <C>
LAZARD INTERNATIONAL
FIXED-INCOME PORTFOLIO
(CONTINUED)
Poland Treasury Bill,
0.00%, 4/2/97.............. 200 $ 66,534
-----------
TOTAL POLISH ZLOTY........... 234,158
-----------
PORTUGUESE ESCUDO--0.2%
GOVERNMENT OBLIGATION
Republic of Portugal,
11.875%, 2/23/00........... 26,000 195,440
-----------
SOUTH AFRICAN RAND--0.1%
CORPORATE BOND
Eskom,
15.00%, 10/1/98............ 225 47,161
GOVERNMENT OBLIGATION
Republic of South Africa,
12.50%, 12/21/06........... 390 68,193
-----------
TOTAL SOUTH AFRICAN RAND..... 115,354
-----------
SOUTH KOREAN RAND--0.1%
CORPORATE BOND
Wood & Co,
0.00%, 1/17/97............. 3,000 92,942
-----------
SPANISH PESETA--4.1%
CORPORATE BOND
Catalunya Generalitat,
9.30%, 11/24/03............ 67,000 585,802
GOVERNMENT OBLIGATION
Kingdom of Spain,
8.00%, 5/30/04............. 361,910 3,024,070
-----------
TOTAL SPANISH PESETA......... 3,609,872
-----------
SWEDISH KRONA--2.2%
GOVERNMENT OBLIGATION
Kingdom of Sweden,
10.25%, 5/5/00............. 11,500 1,947,727
-----------
THAILAND BAHT--0.2%
CORPORATE BONDS
Peregrine Investment Holdings
Ltd.,
0.00%, 1/6/97.............. 1,336 52,031
Peregrine Note,
0.00%, 1/6/97.............. 3,000 116,836
-----------
TOTAL THAILAND BAHT.......... 168,867
-----------
UNITED STATES DOLLAR--11.9%
COLLATERALIZED MORTGAGE
OBLIGATIONS
Federal National Mortgage
Association, Series 23,
Class 2,
10.00%, 9/1/17............. 621 193,920
CONVERTIBLE BOND
Finance One PLC,
2.00%, 8/31/01............. 20 18,150
CORPORATE BONDS
Americold Corp.,
12.875%, 5/1/08............ 255 263,925
Amtrol Inc. 144A,
10.625%, 12/31/06.......... 436 450,170
Argosy Gaming Co. 144A,
13.25%, 6/1/04............. 200 187,000
Cablevision Systems Corp.,
10.50%, 5/15/16............ 129 133,192
Calpine Corp.,
10.50%, 5/15/06............ 210 222,600
Carrols Corp.,
11.50%, 8/15/03............ 300 322,500
Cobb Theatres LLC/Finance
Corp. 144A,
10.625%, 3/1/03............ 500 528,750
Collins & Aikman Corp.,
11.50%, 4/15/06............ 5 5,450
Commodore Media Inc. 144A,
7.50%, 5/1/03 (a).......... 50 52,750
Commonwealth Aluminum Corp.
144A,
10.75%, 10/1/06............ 750 772,500
</TABLE>
The accompanying notes are an integral part of these financial statements.
19
<PAGE> 22
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- -------------------------------------------------------
<S> <C> <C>
LAZARD INTERNATIONAL
FIXED-INCOME PORTFOLIO
(CONTINUED)
Courtyard by Marriott II Ltd.
144A, Series B,
10.75%, 2/1/08............. 50 $ 52,750
Dade International, Inc.
144A,
11.125%, 5/1/06............ 290 313,925
Eagle Food Centers, Inc.,
8.625%, 4/15/00............ 110 105,600
Echostar Satellite Broadcast
Corp. 144A,
13.125%, 3/15/04........... 300 226,500
ICF Kaiser International
Inc.,
13.00%, 12/31/03 (a)....... 115 109,250
Indah Kiat Paper & Pulp
Corp.,
8.875%, 11/1/00............ 100 99,000
International Specialty
Products Holdings Inc. 144A,
9.75%, 2/15/02............. 2 2,050
Intertek Finance Corp. 144A,
10.25%, 11/1/06............ 239 248,560
Maxus Energy Corp.,
10.83%, 9/1/04............. 345 370,875
Orbcomm Global LP 144A,
14.00%, 8/15/04............ 150 151,875
Peregrine Investment Holdings
Ltd,
11.10%, 5/12/97............ 150 144,093
PhoneTel Technologies, Inc,
12.00%, 12/15/06........... 200 205,000
Pierce Leahy Corp.,
11.125%, 7/15/06........... 186 204,600
Plains Resources Inc. 144A,
10.25%, 3/15/06............ 95 101,650
Poindexter (J.B.) & Co,
12.50%, 5/15/04............ 410 399,750
Reliance Industries Ltd.
144A,
9.375%, 6/24/26............ 250 274,250
Remington Products Co. 144A,
11.00%, 5/15/06............ 150 132,000
Sabreliner Corp.,
12.50%, 4/15/03............ 84 80,640
Scholastic Brands, Inc.,
11.00%, 1/15/07............ 200 204,000
Smith's Food & Drug Centers
Inc,
11.25%, 5/15/07............ 200 221,000
Spanish Broadcasting System,
Inc. 144A,
7.50%, 6/15/02............. 250 262,500
Telemundo Group, Inc,
7.00%, 2/15/06............. 150 144,375
Transtexas Gas Corp,
11.50%, 6/15/02............ 50 54,000
Unisys Corp. 144A,
12.00%, 4/15/03............ 211 224,715
Waxman Industries Inc. 144A,
12.75%, 6/1/04............. 95 69,588
William Carter Co. 144A,
10.375%, 12/1/06........... 850 879,750
FOREIGN GOVERNMENT OBLIGATIONS
Argentina Bocon,
5.38%, 9/1/02 (a).......... 50 53,575
Government of Poland,
0.00%, 1/2/97.............. 450 156,859
United Mexican States 144A,
7.56%, 8/6/01.............. 120 120,276
Venezuela FLIRB,
6.50%, 3/31/07 (a), (b).... 250 222,500
MORTGAGE-BACKED SECURITIES
Federal National Mortgage
Association,
5.42%, 12/16/97............ 35 34,934
STRUCTURED NOTES
Asia Invest Interest, Ltd.,
0.00%, 1/13/97............. 130 129,121
0.00%, 6/13/97............. 90 85,095
0.00%, 11/12/97............ 135 125,010
Chase Russian GKO,
0.00%, 6/20/97............. 200 230,537
0.00%, 7/3/97.............. 175 180,057
ING Sekar Philippine Note,
0.00%, 2/6/97.............. 58 57,118
</TABLE>
The accompanying notes are an integral part of these financial statements.
20
<PAGE> 23
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- -------------------------------------------------------
<S> <C> <C>
LAZARD INTERNATIONAL
FIXED-INCOME PORTFOLIO
(CONTINUED)
YANKEE BONDS
Den Norske Credit,
5.75%, 11/29/49 (a)........ 700 $ 600,250
Hong Kong & Shanghai Bank,
6.00%, 8/29/49 (a)......... 100 87,180
-----------
TOTAL UNITED STATES DOLLAR... 10,515,715
-----------
TOTAL CURRENCY DENOMINATED
BONDS*
(Identified cost
$81,440,933)................ 84,009,657
-----------
<CAPTION>
SHARES
---------
<S> <C> <C>
PREFERRED STOCKS--0.4%
Cablevision Systems Corp. ... 2,329 209,028
Fuji International Finance
(Bermuda) Trust............. 4 104,965
Silgan Holdings, Inc. 144A... 51 54,570
-----------
TOTAL PREFERRED STOCKS
(Identified cost $373,949)... 368,563
-----------
<CAPTION>
PRINCIPAL
AMOUNT
(000)
---------
<S> <C> <C>
COMMERCIAL PAPER--1.0%
American Express Credit
Corp.,
5.27%, 5/19/97............. 100 97,980
Ford Motor Credit Corp.,
5.31%, 1/13/97............. 100 99,823
5.33%, 2/14/97............. 25 24,837
General Electric Capital
Corp.,
5.30%, 1/21/97............. 177 176,479
5.32%, 4/25/97............. 175 172,052
General Motors Acceptance
Corp.,
5.38%, 4/29/97............. 200 $ 196,473
5.47%, 2/28/97............. 125 123,898
-----------
TOTAL COMMERCIAL PAPER
(Identified cost $891,542)... 902 891,542
-----------
DISCOUNT NOTES--0.4%
Federal Farm Credit Bank
Discount Note,
5.27%, 12/18/97............ 205 194,467
Federal National Mortgage
Association Discount Note,
5.35%, 3/31/97............. 100 98,677
-----------
TOTAL DISCOUNT NOTES
(Identified cost $293,144)... 293,144
-----------
REPURCHASE AGREEMENT--0.3%
State Street Bank and Trust
Co., 6.00%, 1/2/97
(Dated 12/31/96,
collateralized by $280,000
United States Treasury
Notes, 7.00%, 07/15/06, with
a value of $302,257)
(Identified cost $293,000)
(d)......................... 293 293,000
-----------
TOTAL INVESTMENTS
(Identified cost $83,292,568)
(c)......................... 97.1% 85,855,906
CASH AND OTHER ASSETS IN
EXCESS OF LIABILITIES........ 2.9 2,573,932
--- --------
NET ASSETS.................... 100.0% $88,429,838
=== ========
</TABLE>
(a) Variable rate security. Interest shown is the current rate.
(b) Front Loaded Interest Reduction Bond.
(c) The aggregate cost for federal income tax purposes is $83,296,460; based on
tax cost aggregate gross unrealized appreciation is $3,279,819 and the
aggregate gross unrealized depreciation is $720,334, resulting in net
unrealized appreciation of $2,559,446.
(d) Segregated securities for when-issued purchases and forward foreign currency
contracts.
The accompanying notes are an integral part of these financial statements.
21
<PAGE> 24
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO (CONTINUED)
* Percentages of holdings are presented in the portfolio by currency
denomination.
Percentages by country are as follows:
Argentina 0.6%, Australia 2.6%, Austria 2.8%, Bermuda 0.1%, Brazil 0.2%,
Canada 1.6%, Colombia 0.3%, Czech Republic 0.5%, Denmark 4.7%, Egypt 0.3%,
Estonia 0.2%, Finland 1.1%, France 7.7%, Germany 9.9%, Greece 5.9%, Hungary
0.1%, Indonesia 0.3%, Ireland 2.6%, Italy 10.1%, Japan 11.3%, Kenya 0.3%,
Lebanon 0.3%, Malaysia 0.1%, Mexico 0.4%, Netherlands 2.2%, Norway 1.1%,
Poland 0.3%, Portugal 0.2%, South Africa 0.1%, Slovakia 0.1%, Spain 4.1%,
Sweden 2.2%, Thailand 0.2%, United Kingdom 9.2%, United States 11.4%,
Venezuela 0.3%.
Percentages by industry are as follows:
Aerospace 0.1%, Apparel 0.1%, Automotive 0.1%, Banking & Finance 15.0%,
Biotechnology 0.4%, Building & Construction 0.1%, Clothing 1.0%,
Collateralized Mortgage Obligations 0.2%, Communications 0.8%, Computers
0.3%, Entertainment 0.6%, Environmental Services 0.1%, Financial Services
8.7%, Food Service 0.7%, Foreign Government Obligations 59.4%, Gaming 0.2%,
Hotels 0.1%, Manufacturing 2.8%, Miscellaneous 0.5%, Oil & Gas 1.0%, Paper
Products & Services 0.1%, Restaurants 0.4%, Structured Notes 0.8%,
Telecommunications 0.7%, Utilities .4%, Yankee Bonds 0.8%
The accompanying notes are an integral part of these financial statements.
22
<PAGE> 25
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO (CONTINUED)
Forward Foreign Currency Contracts open at December 31, 1996:
<TABLE>
<CAPTION>
Unrealized
Contracts In Exchange Delivery Appreciation
to Deliver For Date (Depreciation)
- ------------------- ----------------- --------- --------------
<S> <C> <C> <C>
$ 205,000 CLP 90,925,167 12/23/97 $ (1,200)
$ 35,000 VEB 18,077,500 12/12/97 (616)
$ 65,000 MXN 574,600 5/19/97 2,920
$ 200,000 KRW 170,000,000 4/29/97 (2,848)
$ 170,518 MXN 1,500,000 4/25/97 8,908
$ 25,000 KRW 21,477,500 4/3/97 (43)
$ 100,000 PEN 264,400 3/31/97 (602)
$ 70,000 CNY 617,967 3/26/97 3,393
ATS 6,619,180 $ 609,501 3/12/97 (4,378)
AUD 1,703,134 $ 1,372,556 3/12/97 19,910
CAD 81,528 $ 60,000 3/12/97 187
DEM 1,647,891 $ 1,068,535 3/12/97 (7,349)
DKK 1,961,285 $ 334,873 3/12/97 680
ESP 36,405,555 $ 280,129 3/12/97 181
FIM 2,064,397 $ 449,488 3/12/97 (1,421)
GBP 951,010 $ 1,591,887 3/12/97 (34,604)
IEP 1,357,948 $ 2,282,439 3/12/97 (17,273)
ITL 1,477,102,369 $ 964,329 3/12/97 (6,051)
JPY 132,186,823 $ 1,172,807 3/12/97 19,846
NOK 6,315,568 $ 988,615 3/12/97 5,061
XEU 246,562 $ 311,013 3/12/97 840
$ 115,835 ATS 1,244,414 3/12/97 (425)
$ 264,704 AUD 334,138 3/12/97 672
$ 2,360,192 BEL 74,214,092 3/12/97 (9,197)
$ 2,950,741 CAD 3,968,980 3/12/97 (38,889)
$ 507,726 CHF 654,307 3/12/97 (15,302)
$ 1,334,467 DEM 2,035,927 3/12/97 (5,240)
$ 85,000 ESP 11,165,600 3/12/97 860
$ 95,000 FIM 436,953 3/12/97 440
$ 2,055,271 FRF 10,676,241 3/12/97 10,983
$ 1,819,285 GBP 1,422,566 3/12/97 31,125
$ 338,448 ITL 516,756,413 3/12/97 1,035
$ 7,378,595 JPY 827,296,907 3/12/97 (162,740)
$ 2,359,697 NLG 4,040,261 3/12/97 (8,546)
$ 202,363 SEK 1,350,366 3/12/97 (3,733)
$ 60,000 HUF 9,828,600 2/28/97 (790)
$ 125,000 INR 4,698,125 2/28/97 4,675
$ 25,000 ARS 25,563 2/14/97 563
$ 20,000 INR 745,200 1/26/97 97
$ 175,000 VEB 85,085,000 1/21/97 2,693
$ 100,000 RUR 574,979,000 1/8/97 3,525
PLN 259,020 $ 90,267 1/2/97 (66)
HUF 10,000,000 $ 62,274 1/2/97 431
--------------
$ (202,290)
==============
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
23
<PAGE> 26
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- ---------------------------------------------------------
<S> <C> <C>
LAZARD BOND PORTFOLIO
ASSET-BACKED SECURITIES--13.8%
Advanta Home Equity Loan
Trust, Series 1993-2, Class
A2, 6.15%, 10/25/09, (c).... $ 477 $ 467,273
Chase Manhattan Auto Owner
Trust, Series 1996C, Class
A4, 6.15%, 3/15/02.......... 665 659,389
Chase Manhattan Credit Card
Master Trust, Series 1996-3,
Class A, 7.04%, 2/15/05,
(a), (c).................... 1,616 1,652,861
Chase Manhattan Grantor
Trust, Series 1996-B, Class
A, 6.61%, 9/15/02........... 1,404 1,413,444
Delta Funding Home Equity
Loan Trust, Series 1996-2,
Class A3, 7.54%, 10/25/14... 37 37,173
EQCC Home Equity Loan Trust,
Series 1994-2, Class A2,
7.35%, 6/15/14.............. 125 126,562
IMC Home Equity Loan Trust,
Series 1996-3, Class A2,
7.06%, 4/25/11.............. 518 521,602
Lehman FHA Title I Loan
Trust, Series 1996-2, Class
A2, 6.78%, 3/25/08.......... 1,014 1,015,584
Midland Realty Acceptance
Corp. Series 1996-C1, Class
A2, 7.475%, 12/25/05........ 344 354,965
Money Store Trust, Series
1996B, Class A14, 7.35%,
5/15/12..................... 116 118,628
Money Store Trust, Series
1996C, Class A11, 6.635%,
9/15/14..................... 116 115,979
Nations Bank Auto Owner
Trust, Series 1996-A, Class
A4, 6.625%, 12/15/00, (c)... 440 445,258
NationsBank Credit Card
Master Trust, Series 1993-2,
Class A, 6.00%, 12/15/05.... $ 675 $ 652,003
Sears Credit Account Master
Trust, Series 1996-4, Class
A, 6.45%, 10/15/06, (c)..... 1,051 1,048,698
Security Pacific Home Equity
Loan, Series 1991-1, Class
A, 7.85%, 5/15/98........... 8 7,535
Standard Credit Card Master
Trust I, Series 1995-3,
Class A, 7.85%, 2/7/02...... 540 562,275
The Money Store Home Equity
Trust, Series 1996-C, Class
A11, 6.96%, 8/15/10, (c).... 419 422,994
--------------
TOTAL ASSET-BACKED SECURITIES
(Identified cost
$9,595,622)................. 9,622,223
--------------
COLLATERIZED MORTGAGE OBLIGATIONS--5.0%
Asset Securitization Corp.
144A, Series 1996-D3, Class
ACS2, 1.72%, 10/13/26....... 2,396 284,899
Asset Securitization Corp.,
Series 1995-MD4, Class A1,
7.10%, 8/13/29.............. 320 323,778
Asset Securitization Corp.,
Series 1996-D2, Class ACS2,
1.61%, 2/28/26, (a)......... 2,125 216,152
Asset Securitization Corp.,
Series 1996-D3, Class A1A,
7.01%, 10/13/26............. 141 143,626
Asset Securitization Corp.,
Series 1996-MD6, Class A1B,
6.88%, 11/13/26............. 248 249,008
DLJ Mortgage Acceptance
Corp., Series 1993-MF7,
Class A1, 7.40%, 6/18/03.... 344 351,073
Federal National Mortgage
Association, Series 23,
Class 2, 10.00%, 9/1/17..... 1,296 405,022
</TABLE>
The accompanying notes are an integral part of these financial statements.
24
<PAGE> 27
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- --------------------------------------------------------
<S> <C> <C>
LAZARD BOND PORTFOLIO
(CONTINUED)
GMAC Commercial Mortgage
Securities Inc. Series
1996-C1, Class A2A, 6.79%,
9/15/03..................... $ 308 $ 308,002
GMAC Commercial Mortgage
Securities Inc., Series
1996-C1 A2A, 6.875%,
7/15/01..................... 282 284,183
LB Commercial Conduit
Mortgage Trust, Series
1996-C2, Class A, 1.00%,
10/25/26.................... 340 348,015
LB Commercial Conduit
Mortgage Trust, Series
1996-C2, Class IO, 1.249%,
10/25/26.................... 4,070 251,805
Merrill Lynch Mortgage
Investments, Inc. 144A,
Series 1996-C1, Class IO,
0.57%, 3/25/26, (a)......... 4,763 146,215
Structured Asset
Securitization Corp., Series
1996-CFL, Class X1, 1.30%,
2/25/28..................... 3,093 158,986
Structured Asset
Securitization Corp., Series
1996-CFL, Class X2, 1.27%,
2/25/28..................... 1,685 53,718
--------------
TOTAL COLLATERIZED MORTGAGE
OBLIGATIONS
(Identified cost
$3,499,195)................. 3,524,482
--------------
CORPORATE BONDS--20.5%
ADVERTISING--0.6%
Universal Outdoor Holdings
Inc., 9.75%, 10/15/06....... 417 430,553
--------------
AEROSPACE & DEFENSE--0.7%
BE Aerospace Inc. 144A,
9.875%, 2/1/06.............. 125 131,250
Lockheed Martin Corp., 7.45%,
6/15/04..................... 328 339,503
--------------
470,753
--------------
BANKS--0.9%
Chase Manhattan Corp. New,
7.625%, 1/15/03............. $ 470 $ 487,724
Key Bank of Washington,
7.125%, 8/15/06............. 139 139,396
--------------
627,120
--------------
BROADCASTING--1.3%
Cablevision Systems Corp.,
10.50%, 5/15/16, (c)........ 258 266,385
Cox Communications Inc.,
6.50%, 11/15/02............. 265 260,561
Rifkin Acquisitions Partners
LP 144A, 11.125%, 1/15/06... 187 194,948
Sullivan Broadcasting,
10.25%, 12/15/05............ 170 170,850
--------------
892,744
--------------
BUSINESS SERVICES AND
SUPPLIES--1.0%
American Pad & Paper Co.
144A, 13.00%, 11/15/05...... 155 179,800
Pierce Leahy Corp., 11.125%,
7/15/06..................... 501 547,343
--------------
727,143
--------------
CHEMICALS & PLASTICS--0.4%
Collins & Aikman Corp.,
11.50%, 4/15/06, (c)........ 250 272,500
--------------
COMMUNICATION SERVICES--0.5%
IXC Communications Inc.,
144A, 12.50%, 10/1/05....... 300 328,500
--------------
COMPUTERS--0.7%
Unisys Corp. 144A, 12.00%,
4/15/03..................... 465 495,225
--------------
ENERGY--0.5%
Maxus Energy Corp., 10.83%,
9/1/04...................... 175 188,125
Panenergy Corp., 7.375%,
9/15/03..................... 174 178,748
--------------
366,873
--------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
25
<PAGE> 28
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- --------------------------------------------------------
<S> <C>
LAZARD BOND PORTFOLIO (CONTINUED)
ENTERTAINMENT--0.7%
AMF Group Inc., 10.875%,
3/15/06..................... $ 150 $ 159,000
Argosy Gaming Co., 13.25%,
6/1/04...................... 38 35,435
Hollywood Casino Inc.,
12.75%, 11/1/03............. 286 274,560
------------
468,995
------------
FINANCIAL SERVICES--5.4%
Aetna Services Inc., 6.75%,
8/15/01..................... 192 192,929
Avco Financial Services Inc.,
6.35%, 9/15/00.............. 128 127,005
Bank of New York Co. Inc.,
6.625%, 6/15/03............. 235 232,307
BankAmerica Corp., 6.875%,
6/1/03...................... 94 93,967
Capital One Bank, 7.15%,
9/15/06..................... 268 272,309
Capital One Bank Medium Term
Note, 7.35%, 6/20/00........ 266 270,091
Citicorp, 6.75%, 8/15/05..... 107 104,795
Cobb Theatres LLC/Finance
Corp. 144A, 10.625%,
3/1/03...................... 165 174,488
Countrywide Funding Corp.,
7.45%, 9/16/03.............. 175 178,421
Finova Capital Corp., 5.98%,
2/27/01..................... 125 122,271
Fleet Norstar Financial,
7.25%, 9/1/99............... 161 164,025
Heller Financial Inc., 6.50%,
11/1/01..................... 279 276,927
Household Finance Corp.,
7.25%, 7/15/03.............. 353 360,378
MBNA Corp., 6.50%, 9/15/00... 196 195,630
McDonnell Douglas Finance
Corp., 6.45%, 12/5/02....... 230 226,521
Merrill Lynch & Co. Inc.
6.25%, 1/15/06............. 172 163,008
6.00%, 1/15/01............. $ 333 $ 326,593
NationsBank Corp., 5.75%,
1/17/01..................... 159 154,170
Norwest Financial Inc.,
6.125%, 8/1/03.............. 164 159,851
------------
3,795,686
------------
HEALTHCARE--0.4%
Columbia/HCA Healthcare
Corp., 6.87%, 9/15/03....... 275 276,837
------------
HOTELS & RESTAURANTS--0.2%
ITT Corp., 6.75%, 11/15/03... 170 166,882
------------
MANUFACTURING--1.0%
Philip Morris Cos., Inc.,
6.80%, 12/1/03.............. 148 146,006
Remington Products Co. LLC,
11.00%, 5/15/06............. 75 66,000
Silgan Corp., 11.75%,
6/15/02, (c)................ 434 462,210
------------
674,216
------------
OIL & GAS--1.0%
Plains Resources Inc. 144A,
10.25%, 3/15/06............. 145 155,150
Tenneco Inc., 8.075%,
10/1/02..................... 134 142,147
Transtexas Gas Corp., 11.50%,
6/15/02..................... 350 378,000
------------
675,297
------------
RESTAURANTS, LODGING & ENTERTAINMENT--1.5%
Carrols Corp., 11.50%,
8/15/03, (c)................ 467 502,025
Courtyard by Marriott II Ltd.
144A, Series B, 10.75%,
2/1/08, (c)................. 525 553,875
------------
1,055,900
------------
RETAIL GROCERY--0.1%
Pueblo Xtra International,
9.50%, 8/1/03............... 73 68,438
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
26
<PAGE> 29
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- --------------------------------------------------------
<S> <C>
LAZARD BOND PORTFOLIO (CONTINUED)
RETAIL--0.8%
May Department Stores Co.,
9.875%, 12/1/02, (c)........ $ 407 $ 469,112
Sears Roebuck Acceptance
Corp., 6.56%, 11/20/03...... 132 129,509
------------
598,621
------------
TECHNOLOGY--0.8%
Wright Medical Technology
Inc., 10.75%, 7/1/00........ 557 562,570
------------
TELECOMMUNICATION--0.5%
Lucent Technologies Inc.,
7.25%, 7/15/06.............. 127 130,133
Phonetel Technologies, Inc.,
12.00%, 12/15/06............ 200 205,000
------------
335,133
------------
TURNPIKES & TOLL ROADS--0.5%
Florida State Turnpike
Authority, 5.625%, 7/1/25... 360 356,400
------------
UTILITIES--0.8%
Calpine Corp., 10.50%,
5/15/06..................... 275 291,500
Texas Utilities Electric Co.,
7.375%, 8/1/01.............. 247 253,444
------------
544,944
------------
WHOLESALE TRADE--0.2%
Smith's Food & Drug Centers
Inc., 11.25%, 5/15/07....... 100 110,500
------------
TOTAL CORPORATE BONDS
(Identified cost
$13,996,915)................ 14,301,830
------------
MORTGAGE PASS-THROUGH SECURITIES--48.4%
Federal Home Loan Mortgage
Corp.,
5.719%, 10/1/26............ 376 383,285
6.01%, 9/25/36............. 332 325,354
6.096%, 9/1/26............. 523 532,288
6.158%, 11/1/26............ 359 363,308
6.50%, (TBA)............... 1,511 1,483,606
6.50%, 2/1/11.............. $ 769 $ 757,509
6.50%, 4/1/11.............. 88 86,584
7.00%, (TBA)............... 1,082 1,081,318
7.00%, 1/1/11.............. 680 681,028
7.00%, 3/1/11.............. 83 83,360
7.00%, 8/1/25.............. 956 941,366
7.00%, 9/1/25.............. 590 578,859
7.00%, 1/1/26.............. 614 602,970
7.00%, 4/1/26.............. 10 9,329
9.50%, 1/1/99.............. 384 411,720
9.50%, 1/1/99.............. 96 102,930
Federal National Mortgage
Association,
5.39%, 10/1/26............. 342 347,382
6.12%, 8/1/26.............. 447 447,014
6.67%, 12/1/25............. 387 394,050
6.87%, 8/1/36.............. 328 329,140
7.00%, (TBA)............... 4,735 4,629,930
7.50%, 12/1/26............. 117 116,506
7.74%, 7/1/25.............. 532 547,021
8.00%, (TBA)............... 3,191 3,250,831
8.00%, 9/1/25.............. 1,244 1,268,381
8.00%, 10/1/25............. 339 345,293
8.00%, 1/1/26.............. 569 580,355
Government National Mortgage
Association,
7.00%, (TBA)............... 3,013 3,078,924
6.00%, (TBA)............... 38 38,012
6.50%, (TBA)............... 4,936 5,000,020
6.50%, 1/20/24............. 452 461,040
8.50%, (TBA)............... 4,070 4,217,538
9.00%, 9/15/25............. 114 120,110
Morgan Stanley Capital One
Inc., 1.42%, 11/15/28....... 2,813 222,202
------------
TOTAL MORTGAGE PASS-THROUGH
SECURITIES
(Identified cost
$33,980,287)................ 33,818,563
------------
U.S. GOVERNMENT OBLIGATIONS--12.7%
United States Treasury Notes,
6.25%, 8/31/00............. 2,113 2,120,924
6.375%, 3/31/01............ 592 595,978
6.50%, 10/15/06............ 164 164,897
7.50%, 11/15/01............ 1,115 1,173,716
</TABLE>
The accompanying notes are an integral part of these financial statements.
27
<PAGE> 30
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- --------------------------------------------------------
<S> <C>
LAZARD BOND PORTFOLIO (CONTINUED)
7.75%, 12/31/99............ $ 1,024 $ 1,071,043
United States Treasury
Strips, 0.00%, 5/15/03...... 5,601 3,771,097
------------
TOTAL U.S. GOVERNMENT
OBLIGATIONS
(Identified cost
$8,935,929)................. 8,897,655
------------
REPURCHASE AGREEMENT--30.8%
State Street Bank and Trust
Co., 6.00%, 1/2/97
(Dated 12/31/96,
collateralized by
$20,360,000 United States
Treasury Notes, 7.00%,
07/15/06, with a value of
$21,978,416)
(Identified cost
$21,543,000) (c)............ 21,543 21,543,000
------------
<CAPTION>
DESCRIPTION VALUE
- --------------------------------------------------------
<S> <C> <C>
TOTAL INVESTMENTS
(Identified cost $91,550,948)
(b)......................... 131.2% $ 91,707,753
LIABILITIES IN EXCESS OF CASH
AND OTHER ASSETS............. (31.2) (21,801,601)
---- ---------
NET ASSETS.................... 100.0% $ 69,906,152
==== =========
</TABLE>
(a) Variable rate security. Interest shown is the current rate.
(b) The aggregate cost for federal income tax purposes is $91,582,002; based on
tax cost aggregate gross unrealized appreciation is $504,208 and the
aggregate gross unrealized depreciation is $378,457, resulting in net
unrealized appreciation of $125,751.
(c) Segregated securities for when-issued purchases.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- --------------------------------------------------------
<S> <C>
LAZARD STRATEGIC YIELD PORTFOLIO
CURRENCY DENOMINATED BONDS*--84.9%
ARGENTINA PESO--2.1%
GOVERNMENT OBLIGATION
Argentina Bocon Pre I,
3.58%, 4/1/01 (a)......... 3,590 $ 4,256,796
--------------
BRAZILIAN REAL--0.7%
CORPORATE BOND
Chase Brazil Note,
17.106%, 5/2/97........... 1,360 1,384,737
--------------
BRITISH POUND--1.3%
CORPORATE BONDS
Birmingham Midshires
Building Society,
9.125%, 1/5/06............ 350 $ 618,736
North American Capital
Corp.,
8.25%, 11/17/03........... 662 1,131,309
The Woolwich Building
Society,
11.625%, 12/18/01......... 415 811,852
--------------
TOTAL BRITISH POUND......... 2,561,897
--------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
28
<PAGE> 31
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- --------------------------------------------------------
<S> <C> <C>
LAZARD STRATEGIC YIELD
PORTFOLIO (CONTINUED)
CANADIAN DOLLAR--1.5%
GOVERNMENT OBLIGATIONS
Government of Canada,
4.25%, 12/1/21............ 3,245 $ 2,623,561
Quebec Housing,
8.95%, 5/13/13............ 390 334,090
--------------
TOTAL CANADIAN DOLLAR....... 2,957,651
--------------
COLOMBIAN PESO--1.3%
CORPORATE BONDS
Cargil Colombia,
0.00%, 1/21/97............ 1,316,525 1,311,422
0.00%, 1/27/97............ 500,000 491,304
0.00%, 2/3/97............. 807,000 789,195
--------------
TOTAL COLOMBIAN PESO........ 2,591,921
--------------
CZECH KORUNA--2.2%
CORPORATE BONDS
CEZ AS,
11.30%, 6/6/05............ 58,000 2,137,920
Komercni Banka,
11.10%, 6/26/98........... 7,000 255,322
Skofin,
11.625%, 2/9/98........... 55,000 2,018,237
--------------
TOTAL CZECH KORUNA.......... 4,411,479
--------------
DANISH KRONE--2.8%
CORPORATE BONDS
Kreditforeningen Denmark,
10.20%, 4/15/04........... 9,590 1,875,413
Nykredit,
8.00%, 10/1/26............ 82 14,038
Unikredit,
8.00%, 10/1/26............ 22,045 3,749,300
--------------
TOTAL DANISH KRONE.......... 5,638,751
--------------
EGYPTIAN POUND--1.2%
GOVERNMENT OBLIGATIONS
Egypt Discounted Treasury
Bill,
0.00%, 1/30/97............ 7,000 2,046,214
0.00%, 6/3/99............. 1,000 $ 282,738
--------------
TOTAL EGYPTIAN POUND........ 2,328,952
--------------
ESTONIAN KROON--0.7%
CORPORATE BONDS
City of Tallinn,
8.05%, 2/10/97............ 3,500 284,242
Estonia Telephone Co.,
0.00%, 3/20/97............ 2,000 159,996
Merita Bank,
10.00%, 12/28/98.......... 7,000 570,728
Port of Tallinn,
0.00%, 3/24/97............ 4,000 319,601
--------------
TOTAL ESTONIAN KROON........ 1,334,567
--------------
FRENCH FRANC--1.3%
CORPORATE BOND
Credit Foncier de France,
7.50%, 3/29/05............ 11,995 2,534,936
--------------
GERMAN MARK--0.4%
CORPORATE BONDS
Autobahn Tank & Rast,
6.00%, 10/16/00........... 1,050 710,667
--------------
GREEK DRACHMA--1.6%
GOVERNMENT OBLIGATIONS
Greek Treasury Bill,
0.00%, 1/31/97............ 110,000 441,370
Republic of Hellenic,
14.30%, 8/14/03........... 560,000 2,297,110
14.80%, 6/30/00........... 110,000 450,103
--------------
TOTAL GREEK DRACHMA......... 3,188,583
--------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
29
<PAGE> 32
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- ---------------------------------------------------------
<S> <C> <C>
LAZARD STRATEGIC YIELD
PORTFOLIO (CONTINUED)
HUNGARIAN FORINT--0.6%
GOVERNMENT OBLIGATIONS
Government of Hungary,
30.00%, 4/18/97........... 55,810 $ 492,454
30.00%, 7/5/97............ 94,000 792,111
--------------
TOTAL HUNGARIAN FORINT...... 1,284,565
--------------
INDONESIAN RUPIAH--2.3%
CORPORATE BONDS
Medco Energi Corp.,
0.00%, 1/13/97............ 1,000,000 421,138
PT Centris,
0.00%, 2/10/97............ 2,000,000 831,017
0.00%, 4/22/97............ 1,000,000 402,252
Sekar Bumi Corp.,
0.00%, 2/25/97............ 3,000,000 1,238,166
0.00%, 2/27/97............ 1,000,000 412,367
Steady Safe,
0.00%, 4/30/97............ 3,000,000 1,202,187
--------------
TOTAL INDONESIAN RUPIAH..... 4,507,127
--------------
ITALIAN LIRA--2.5%
GOVERNMENT OBLIGATIONS
Republic of Italy,
12.00%, 1/17/99........... 3,440,000 2,494,397
12.50%, 3/1/01............ 3,235,000 2,564,542
--------------
TOTAL ITALIAN LIRA.......... 5,058,939
--------------
JAPANESE YEN--0.1%
CONVERTIBLE BOND
Aderans Co.,
1.80%, 8/29/97............ 23,000 198,800
--------------
KENYAN SHILLING--1.1%
GOVERNMENT OBLIGATIONS
Kenyan Treasury Bill,
0.00%, 2/24/97............ 75,000 1,332,197
0.00%, 3/3/97............. 54,000 955,547
--------------
TOTAL KENYAN SHILLING....... 2,287,744
--------------
LEBANESE POUND--1.1%
CORPORATE BONDS
Paribas Participation,
0.00%, 2/6/97............. 370,000 $ 234,795
0.00%, 4/10/97............ 380,000 231,893
0.00%, 5/1/97............. 1,334,030 806,091
0.00%, 5/29/97............ 1,600,000 964,742
--------------
TOTAL LEBANESE POUND........ 2,237,521
--------------
MALAYSIAN RINGGIT--0.6%
CORPORATE BONDS
Peregrine,
7.80%, 5/27/97............ 2,750 1,087,048
Peregrine Investment
Holdings Ltd.,
8.08%, 5/6/97............. 400 158,276
--------------
TOTAL MALAYSIAN RINGGIT..... 1,245,324
--------------
MEXICAN PESO--1.1%
CORPORATE BOND
UDI Bonos,
7.00%, 5/27/99............ 16 351,983
GOVERNMENT OBLIGATIONS
Mexican Cetes,
0.00%, 5/29/97............ 62 71,130
0.00%, 6/26/97............ 514 580,851
0.00%, 12/4/97............ 1,100 1,118,743
--------------
TOTAL MEXICAN PESO.......... 2,122,707
--------------
NEW ZEALAND DOLLAR--2.7%
GOVERNMENT OBLIGATION
New Zealand,
10.00%, 3/15/02........... 6,780 5,384,605
--------------
NORWEGIAN KRONE--1.0%
CORPORATE BOND
Sparebanken Norway,
10.25%, 6/23/03 (a)....... 12,250 2,041,191
--------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
30
<PAGE> 33
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- ---------------------------------------------------------
<S> <C> <C>
LAZARD STRATEGIC YIELD
PORTFOLIO (CONTINUED)
POLISH ZLOTY--2.1%
GOVERNMENT OBLIGATIONS
Government of Poland,
16.00%, 10/12/98.......... 1,300 $ 426,170
Poland Treasury Bill,
0.00%, 1/2/97............. 4,760 1,659,219
0.00%, 4/2/97............. 5,700 1,896,223
0.00%, 8/27/97............ 400 121,908
--------------
TOTAL POLISH ZLOTY.......... 4,103,520
--------------
PORTUGUESE ESCUDO--1.0%
GOVERNMENT OBLIGATION
Republic of Portugal,
11.875%, 2/23/00.......... 258,000 1,939,368
--------------
SLOVAKIAN KORUNA--0.5%
CORPORATE BONDS
Wood & Co.,
0.00%, 1/17/97............ 19,000 588,634
Wood SKK Note,
0.00%, 2/4/97............. 12,900 396,551
--------------
TOTAL SLOVAKIAN KORUNA...... 985,185
--------------
SOUTH AFRICAN RAND--0.6%
CORPORATE BOND
Eskom,
15.00%, 10/1/98........... 2,245 470,562
GOVERNMENT OBLIGATION
Republic of South Africa,
12.50%, 12/21/06.......... 3,875 677,561
--------------
TOTAL SOUTH AFRICAN RAND.... 1,148,123
--------------
SPANISH PESETA--3.3%
GOVERNMENT OBLIGATION
Spanish Government,
11.30%, 1/15/02........... 703,970 6,615,393
--------------
SWITZERLAND FRANC--0.3%
CONVERTIBLE BONDS
Cesar Co.,
0.125%, 9/30/98........... 250 167,165
0.125%, 9/30/00........... 650 $ 422,488
--------------
TOTAL SWITZERLAND FRANC..... 589,653
--------------
THAILAND BAHT--1.3%
CORPORATE BONDS
Finance One Bill of
Exchange,
0.00%, 8/28/97............ 10,000 364,994
0.00%, 10/15/97........... 10,000 360,249
Krungthai Thanakit PLC,
0.00%, 5/21/97............ 21,000 787,891
Peregrine Investment
Holdings Ltd.,
0.00%, 1/6/97............. 6,168 240,144
Peregrine THB Discount Note,
0.00%, 5/21/97............ 10,000 374,129
Peregrine THB Note,
0.00%, 1/6/97............. 3,000 116,836
Phatra Thanakit Co., Ltd.,
0.00%, 12/18/97........... 10,000 353,201
--------------
TOTAL THAILAND BAHT......... 2,597,444
--------------
UNITED STATES DOLLAR--45.6%
COLLATERALIZED MORTGAGE
OBLIGATIONS
Asset Securitization Corp.
144A, Series 1996-D3, Class
ACS2,
1.72%, 10/13/26........... 2,851 339,002
Asset Securitization Corp.,
Series 1995-MD4, Class
ACS2,
2.17%, 8/13/29 (a)........ 4,042 735,165
Asset Securitization Corp.,
Series 1996-D2, Class ACS2,
1.61%, 2/28/26 (a)........ 5,720 581,831
</TABLE>
The accompanying notes are an integral part of these financial statements.
31
<PAGE> 34
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- --------------------------------------------------------
<S> <C> <C>
LAZARD STRATEGIC YIELD
PORTFOLIO (CONTINUED)
Federal Home Loan Mortgage
Corp., Series T4, Class
AWAC,
6.01%, 9/25/36............ 709 $ 695,731
Federal National Mortgage
Association, Series 23,
Class 2,
10.00%, 9/1/17............ 4,603 1,438,441
LB Commercial Conduit
Mortgage Trust, Series
1996-C2, Class I0,
1.249%, 10/25/26 (a)...... 8,713 539,096
Lennar Central Partners Ltd.
144A, Series 1994-1, Class
D,
9.89%, 9/15/04............ 370 372,633
Merrill Lynch Mortgage
Investments Inc. 144A,
Series 1996-C1, Class I0,
0.57%, 4/25/28 (a)........ 15,240 467,857
Morgan Stanley Capital One
Inc. 144A, Series 1996-WF1,
Class X,
1.42%, 11/15/28........... 6,023 475,854
Structured Asset
Securitization Corp.,
Series 1996-CFL, Class X1,
1.30%, 2/25/28............ 6,608 339,678
Structured Asset
Securitization Corp.,
Series 1996-CFL, Class X2,
1.27%, 2/25/28............ 3,531 112,537
CONVERTIBLE BONDS
Finance One PLC,
2.00%, 8/31/01............ 200 181,500
Huntingdon International
Holdings Capital Ltd. 144A,
7.50%, 9/25/06............ 480 369,600
CORPORATE BONDS
American Pad & Paper Co.
144A,
13.00%, 11/15/05.......... 374 433,840
Americold Corp.,
12.875%, 5/1/08........... 695 $ 719,325
AMF Group Inc. 144A,
10.875%, 3/15/06 (c)...... 950 1,007,000
Amtrol Inc. 144A,
10.625%, 12/31/06 (c)..... 1,791 1,849,207
Argentina Bocon,
5.30%, 9/1/02 (a)......... 750 803,625
Argosy Gaming Co. 144A,
13.25%, 6/1/04............ 762 710,565
BE Aerospace Inc. 144A,
9.875%, 2/1/06............ 845 887,250
Cablevision Systems Corp.,
10.50%, 5/15/16........... 162 167,265
Calpine Corp.,
10.50%, 5/15/06........... 380 402,800
Carrols Corp.,
11.50%, 8/15/03........... 820 881,500
Ce Casecnan Water & Energy,
Inc., 144A Series B,
11.95%, 11/15/10.......... 1,150 1,279,375
Cobb Theatres LLC/Finance
Corp. 144A,
10.625%, 3/1/03 (c)....... 1,000 1,057,500
Collins & Aikman Corp.,
11.50%, 4/15/06 (c)....... 1,600 1,744,000
Commodore Media Inc. 144A,
7.50%, 5/1/03 (a)......... 650 685,750
Commonwealth Aluminum Corp.
144A,
10.75%, 10/1/06 (c)....... 1,500 1,545,000
Courtyard by Marriott II
Ltd. 144A, Series B,
10.75%, 2/1/08 (c)........ 1,150 1,213,250
CSK Auto, Inc.,
11.00%, 11/1/06........... 500 525,000
Dade International, Inc.
144A,
11.125%, 5/1/06........... 200 216,500
Den Norske Credit,
5.75%, 11/29/49 (a)....... 800 686,000
Duane Reade Holding Corp.,
0.00%, 9/15/04............ 1,000 580,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
32
<PAGE> 35
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- ---------------------------------------------------------
<S> <C> <C>
LAZARD STRATEGIC YIELD
PORTFOLIO (CONTINUED)
Dynacare, Inc.,
10.75%, 1/15/06 (c)....... 1,215 $ 1,230,187
Eagle Food Centers, Inc.,
8.625%, 4/15/00........... 600 576,000
Echostar Satellite Broadcast
Corp. 144A,
13.125%, 3/15/04.......... 500 377,500
Export-Import Bank of Japan,
8.00%, 6/4/00............. 340 339,625
Fundy Cable Ltd.,
11.00%, 11/15/05.......... 475 503,500
Grand Union Co.,
12.00%, 9/1/04 (c)........ 1,500 1,582,500
Hayes Wheels International,
Inc.,
11.00%, 7/15/06 (c)....... 615 671,119
Hollywood Casino Inc.,
12.75%, 11/1/03 (c)....... 1,263 1,212,480
Hong Kong & Shanghai Bank,
6.00%, 8/29/49 (a), (c)... 1,200 1,046,160
ICF Kaiser International
Inc.,
13.00%, 12/31/03 (a)...... 392 372,400
Indah Kiat Paper & Pulp
Corp.,
8.875%, 11/1/00........... 600 594,000
International Specialty
Products Holdings Inc.
144A,
9.75%, 2/15/02............ 250 256,250
Intertek Financial Corp.
144A,
10.25%, 11/1/06........... 372 386,880
Isveimer,
6.14766%, 12/18/97 (a).... 475 471,865
IXC Communications Inc.,
144A,
12.50%, 10/1/05........... 450 492,750
K & F Industries, Inc.,
10.375%, 9/1/04........... 1,300 1,371,500
Lodgenet Entertainment
Corp.,
10.25%, 12/15/06.......... 1,000 $ 1,002,500
Maxus Energy Corp.,
10.83%, 9/1/04 (c)........ 1,050 1,128,750
Maxxam Group Holdings Inc.,
12.00%, 8/1/03............ 1,000 1,020,000
Nextel Communications, Inc.,
0.00%, 8/15/04............ 1,000 682,500
Orbcomm Global LP 144A,
14.00%, 8/15/04........... 1,100 1,113,750
Park Broadcasting Inc. 144A,
11.75%, 5/15/04 (c)....... 1,250 1,468,750
Parker Drilling Co. 144A,
9.75%, 11/15/06........... 500 527,500
Peregrine Investment
Holdings Ltd.,
11.10%, 5/12/97........... 250 240,156
11.55%, 1/13/97........... 200 198,876
PhoneTel Technologies, Inc,
12.00%, 12/15/06.......... 1,200 1,230,000
Pierce Leahy Corp.,
11.125%, 7/15/06 (c)...... 1,380 1,518,000
Plains Resources Inc. 144A,
10.25%, 3/15/06........... 315 337,050
Poindexter (J.B.) & Co.,
12.50%, 5/15/04........... 973 948,675
Pueblo Xtra International,
9.50%, 8/1/03............. 476 446,250
Reliance Industries Ltd.
144A,
8.125%, 9/27/05........... 350 350,656
8.125%, 9/27/05........... 100 101,500
9.375%, 6/24/26........... 500 548,500
Remington Products Co. 144A,
11.00%, 5/15/06........... 925 814,000
Rifkin Acquisitions Partners
LP 144A,
11.125%, 1/15/06 (c)...... 1,123 1,170,728
Sabreliner Corp.,
12.50%, 4/15/03 (c)....... 1,200 1,152,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
33
<PAGE> 36
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- --------------------------------------------------------
<S> <C> <C>
LAZARD STRATEGIC YIELD
PORTFOLIO (CONTINUED)
Scholastic Brands, Inc.,
11.00%, 1/15/07........... 1,000 $ 1,020,000
Silgan Corp.,
11.75%, 6/15/02 (c)....... 1,067 1,136,355
Smith's Food & Drug Centers
Inc.,
11.25%, 5/15/07........... 710 784,550
Spanish Broadcasting
Systems, Inc. 144A,
7.50%, 6/15/02 (c)........ 1,100 1,155,000
Spinnaker Industries, Inc.
144A,
10.75%, 10/15/06.......... 500 520,000
Sullivan Broadcasting,
10.25%, 12/15/05.......... 400 402,000
Telemundo Group, Inc.,
7.00%, 2/15/06 (c)........ 1,400 1,347,500
Terex Corp. 144A,
13.25%, 5/15/02........... 1,000 1,077,500
Tokheim Corp. 144A,
11.50%, 8/1/06............ 1,500 1,567,500
Transtexas Gas Corp.,
11.50%, 6/15/02 (c)....... 1,600 1,728,000
Unisys Corp. 144A,
12.00%, 4/15/03 (c)....... 1,011 1,076,715
Universal Outdoor, Inc.,
9.75%, 10/15/06........... 1,000 1,032,500
Waxman Industries Inc. 144A,
12.75%, 6/1/04............ 220 161,150
William Carter Co. 144A,
10.375%, 12/1/06 (c)...... 1,150 1,190,250
Wright Medical Technology
Inc. 144A,
10.75%, 7/1/00............ 929 938,290
FOREIGN GOVERNMENT
OBLIGATIONS
Federal Republic of Brazil,
6.56%, 4/15/12............ 1,150 871,125
Morocco Restructuring &
Consolidation Agreement,
6.38%, 1/1/09 (a)......... 1,000 822,500
Republic of Croatia,
6.69%, 7/31/10............ 250 $ 241,563
Republic of Venezuela,
6.63%, 3/31/07 (a)........ 750 667,500
Russia IAN,
0.00%, 12/15/15........... 2,000 1,385,000
United Mexican States,
6.35%, 12/31/19........... 250 214,375
7.56%, 8/6/01............. 200 200,470
United Mexican States 144A,
6.38%, 12/31/19........... 1,000 858,750
Venezuela DCB,
6.50%, 12/18/08........... 500 424,375
MORTGAGE-BACKED SECURITIES
Federal Home Loan Mortgage
Corp.,
6.10%, 9/1/26............. 192 195,206
Federal National Mortgage
Association,
5.42%, 12/16/97........... 870 868,369
6.12%, 8/1/26............. 164 163,939
6.67%, 12/1/25............ 141 143,602
Government National Mortgage
Association,
6.00%, 11/20/25 (a)....... 927 947,832
6.00%, 12/20/99........... 1,390 1,420,413
6.50%, 12/20/99........... 582 589,548
Residential Mortgage
Funding,
2.01%, 1/3/20 (a)......... 13,578 1,370,535
MUNICIPALS
Harris County Texas,
5.625%, 10/1/23........... 615 605,326
STRUCTURED NOTES
Bt & Co Croatia Index Note,
3.00%, 3/1/99............. 1,500 972,349
Bt Croatia,
0.00%, 10/1/99............ 1,000 697,946
Asia Invest Interest, Ltd.,
0.00%, 1/13/97............ 1,025 1,018,071
0.00%, 6/13/97............ 1,225 1,158,237
0.00%, 11/12/97........... 1,225 1,134,348
</TABLE>
The accompanying notes are an integral part of these financial statements.
34
<PAGE> 37
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- ---------------------------------------------------------
<S> <C> <C>
LAZARD STRATEGIC YIELD
PORTFOLIO (CONTINUED)
Asia Invest Interest, Ltd.
Cayman Islands,
0.00%, 2/5/97............. 275 $ 272,671
Chase Russian GKO,
0.00%, 6/20/97............ 2,025 2,334,181
0.00%, 7/3/97............. 1,450 1,491,904
ING Sekar Philippine Note,
0.00%, 2/6/97 (c)......... 1,338 1,317,652
Midland Bank Barkrie,
0.00%, 4/23/97............ 800 579,040
Russian Sovereign Note,
0.00%, 2/5/97............. 700 686,532
U.S. GOVERNMENT OBLIGATIONS
United States Treasury
Notes,
6.875%, 3/31/97 (c)....... 510 511,831
--------------
TOTAL UNITED STATES
DOLLAR..................... 90,831,034
--------------
TOTAL CURRENCY DENOMINATED
BONDS*
(Identified cost
$164,543,162).............. 169,079,180
--------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
---------
<S> <C> <C>
PREFERRED STOCKS--1.4%
Cablevision Systems
Corp. ..................... 7,454 $ 668,996
Fuji International Finance
(Bermuda) Trust............ 28 734,755
Silgan Holdings, Inc.
144A....................... 309 330,630
Georgetown Re Limited....... 2 1,000,000
------------
TOTAL PREFERRED STOCKS
(Identified cost
$2,748,174)................ 2,734,381
------------
RIGHTS--0.0%
(Identified cost $0)
United Mexican States....... 633 0
------------
COMMERCIAL PAPER--4.7%
American Express Credit
Corp.,
5.27%, 5/19/97............ 1,255 $ 1,229,647
Ford Motor Credit Co.,
5.34%, 4/3/97............. 500 493,177
Ford Motor Credit Corp.,
5.31%, 1/13/97............ 420 419,256
5.33%, 2/14/97............ 375 372,557
General Electric Capital
Corp.,
5.30%, 1/21/97............ 1,206 1,202,449
5.30%, 2/28/97............ 1,000 991,461
5.32%, 4/25/97............ 1,517 1,491,444
5.34%, 6/26/97............ 330 321,385
General Motors Acceptance
Corp.,
5.38%, 4/29/97............ 2,000 1,964,731
5.47%, 2/28/97............ 845 837,553
------------
TOTAL COMMERCIAL PAPER
(Identified cost
$9,323,660)................ 9,323,660
------------
DISCOUNT NOTES--1.6%
Federal Farm Credit Bank
Discount Note,
5.27%, 12/18/97........... 2,160 2,049,014
Federal National Mortgage
Association Discount Note,
5.35%, 3/31/97............ 1,090 1,075,583
------------
TOTAL DISCOUNT NOTES
(Identified cost
$3,124,597)................ 3,124,597
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
35
<PAGE> 38
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- --------------------------------------------------------
<S> <C>
LAZARD STRATEGIC YIELD PORTFOLIO
(CONTINUED)
REPURCHASE AGREEMENT--5.1%
State Street Bank and Trust
Co., 6.00%, 1/2/97
(Dated 12/31/96,
collateralized by
$9,610,000 United States
Treasury Notes, 7.00%,
07/15/06, with a value of
$10,373,899)
6.00%, 1/2/97
(Identified cost
$10,167,000) (c)........... 10,167 $ 10,167,000
------------
<CAPTION>
DESCRIPTION VALUE
- --------------------------------------------------------
<S> <C> <C>
TOTAL INVESTMENTS
(Identified cost
$189,906,593) (b).......... 97.7% $194,428,818
CASH AND OTHER ASSETS IN
EXCESS OF LIABILITIES....... 2.3 4,653,980
--- ---------
NET ASSETS................... 100.0% $199,082,798
=== =========
</TABLE>
(a) Variable rate security. Interest shown is the current rate.
(b) The aggregate cost for federal income tax purposes is $190,074,528; based on
tax cost aggregate gross unrealized appreciation is $5,268,574 and the
aggregate gross unrealized depreciation is $914,284, resulting in net
unrealized appreciation of $4,354,290.
(c) Segregated securities for when-issued purchases and forward foreign currency
contracts.
* Percentages of holdings are presented in the portfolio by currency
denomination.
Percentages by country are as follows:
Argentina 2.5%, Brazil 1.1%, Canada 1.5%, Colombia 1.3%, Czech Republic 2.2%,
Denmark 2.8%, Egypt 1.2%, Estonia 0.7%, France 1.3%, Germany 1.2%, Greece
1.6%, Hungary 0.6%, Indonesia 2.7%, Italy 2.5%, Japan 0.3%, Kenya 1.1%,
Lebanon 1.1%, Malaysia 0.6%, Mexico 1.7%, Morocco 0.4%, New Zealand 2.7%,
Norway 1.0%, Poland 2.1%, Portugal 1.0%, Slovakia 0.5%, South Africa 0.6%,
Spain 3.3%, Switzerland 0.3%, Thailand 1.4%, United Kingdom 1.3%, United
States 43.2%, Venezuela 0.5%.
Percentages by industry are as follows:
Advertising 0.5%, Aerospace 1.7%, Automotive 1.5%, Banking & Finance 11.6%,
Biotechnology 0.1%, Broadcasting 0.9%, Building & Construction 0.1%, Business
Services 0.8%, Chemicals 0.1%, Clothing 0.6%, Collateralized Mortgage
Obligations 3.2%, Commercial Services 0.6%, Communications 2.2%, Computers
0.5%, Construction 0.5%, Entertainment 1.0%, Environmental Services 0.2%,
Financial Services 3.6%, Food Service 1.0%, Foreign Government Obligations
24.3%, Gaming 1.0%, Hotels 0.6%, Manufacturing 5.8%, Medical Supplies 1.1%,
Miscellaneous 2.5%, Mortgage Backed Securities 2.9%, Municipal 0.3%, Oil &
Gas 2.4%, Paper Products & Services 0.5%, Real Estate 1.0%, Recreation 0.5%,
Restaurants 0.4%, Retail 1.4%, Structured Notes 5.7%, Telecommunications
2.1%, Transportation 0.6%, U.S. Government Obligation 0.3%, Utilities 2.2%
The accompanying notes are an integral part of these financial statements.
36
<PAGE> 39
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED)
Forward Foreign Currency Contracts open at December 31, 1996:
<TABLE>
<CAPTION>
Unrealized
Contracts In Exchange Deliver Appreciation
to Deliver For Date (Depreciation)
- ------------------- ------------------- --------- --------------
<S> <C> <C> <C>
$ 2,160,000 CLP 958,040,784 12/23/97 $(12,649)
$ 870,000 VEB 449,355,000 12/12/97 (15,303)
$ 330,000 INR 12,295,800 6/26/97 1,602
$ 1,255,000 MXN 11,094,200 5/19/97 56,371
$ 2,000,000 KRW 1,700,000,000 4/29/97 (28,483)
$ 1,477,819 MXN 13,000,000 4/25/97 77,205
$ 500,000 KRW 429,550,000 4/3/97 (852)
$ 1,090,000 PEN 2,881,960 3/31/97 (6,556)
$ 510,000 CNY 4,502,331 3/26/97 24,719
AUD 6,674,510 $ 5,408,890 3/12/97 107,924
CAD 3,902,792 $ 2,915,406 3/12/97 52,113
CHF 807,647 $ 626,714 3/12/97 18,888
DEM 22,394,608 $ 14,657,014 3/12/97 35,898
DKK 33,346,625 $ 5,693,659 3/12/97 11,563
ESP 921,535,589 $ 7,077,846 3/12/97 (8,489)
FRF 13,316,973 $ 2,565,693 3/12/97 (11,643)
GBP 1,968,919 $ 3,301,011 3/12/97 (66,389)
ITL 8,093,101,081 $ 5,316,607 3/12/97 1,854
JPY 434,996,704 $ 3,874,735 3/12/97 80,603
NOK 13,004,895 $ 2,035,736 3/12/97 10,422
XEU 2,591,581 $ 3,269,021 3/12/97 8,825
$ 3,454,161 AUD 4,366,000 3/12/97 13,362
$ 150,000 CAD 203,820 3/12/97 (467)
$ 570,287 DEM 881,594 3/12/97 5,293
$ 21,302 ESP 2,768,435 3/12/97 (14)
$ 242,000 GBP 143,659 3/12/97 3,696
$ 11,961 NLG 20,472 3/12/97 (47)
$ 1,000,000 HUF 163,810,000 2/28/97 (13,162)
$ 845,000 INR 31,759,325 2/28/97 31,603
$ 375,000 ARS 383,438 2/14/97 8,438
CLP 454,750,000 $ 1,071,512 1/28/97 8,242
$ 1,070,000 CLP 454,750,000 1/28/97 (6,730)
$ 1,190,000 VEB 578,578,000 1/21/97 18,310
$ 420,000 RUR 2,414,911,800 1/8/97 14,806
$ 375,802 THB 9,626,162 1/6/97 (454)
$ 237,996 PLN 682,930 1/2/97 174
CHF 2,205 $ 1,629 1/2/97 (19)
-------
$420,654
================
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
37
<PAGE> 40
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES VALUE
- ---------------------------------------------------------
<S> <C>
LAZARD SMALL CAP PORTFOLIO
COMMON STOCKS--93.9%
AEROSPACE & DEFENSE--1.5%
Alliant Techsystems, Inc.
(a)........................ 274,900 $ 15,119,500
--------------
AIRLINE--1.1%
USAir Group, Inc. (a)....... 457,500 10,694,063
--------------
APPAREL & TEXTILES--1.3%
Warnaco Group, Inc. Class
A.......................... 423,000 12,531,375
--------------
AUTO PARTS--1.1%
Durakon Industries, Inc.
(a)........................ 430,000 5,482,500
Modine Manufacturing Co. ... 92,500 2,474,375
Standard Motor Products,
Inc. Class A............... 215,000 2,983,125
--------------
10,940,000
--------------
BANKING & FINANCIAL SERVICES--4.8%
Coast Savings Financial,
Inc. (a)................... 310,000 11,353,750
Cullen/Frost Bankers,
Inc. ...................... 272,000 9,044,000
Hibernia Corp. Class A...... 899,600 11,919,700
North Fork Bancorp, Inc. ... 411,000 14,641,875
--------------
46,959,325
--------------
BROADCASTING--1.6%
Cablevision Systems Corp.
Class A (a)................ 58,000 1,776,250
Emmis Broadcasting Corp.
(a)........................ 434,200 14,220,050
--------------
15,996,300
--------------
BUSINESS SERVICES AND SUPPLIES--1.3%
American Pad & Paper Co.
(a)........................ 570,000 12,896,250
--------------
CHEMICALS & PLASTICS--1.6%
MacDermid, Inc. ............ 20,100 552,750
Mississippi Chemical
Corp. ..................... 618,000 14,832,000
--------------
15,384,750
--------------
COMMERCIAL SERVICES--0.2%
AFA Protective Systems,
Inc. ...................... 15,100 1,751,600
--------------
COMMUNICATIONS--2.6%
Associated Group, Inc. Class
A (a)...................... 56,650 1,741,988
Associated Group, Inc. Class
B (a)...................... 256,650 $ 7,635,337
Cellular Communications of
Puerto Rico, Inc. (a)...... 230,058 4,543,646
International CableTel, Inc.
(a)........................ 476,000 12,019,000
--------------
25,939,971
--------------
COMPUTERS & BUSINESS EQUIPMENT--4.9%
Lexmark International Group,
Inc. Class A (a)........... 667,100 18,428,637
Stratus Computer, Inc.
(a)........................ 675,400 18,404,650
Wang Laboratories, Inc.
(a)........................ 540,500 10,945,125
--------------
47,778,412
--------------
CONSTRUCTION MATERIALS--0.1%
Puerto Rican Cement Company,
Inc. ...................... 35,000 1,093,750
--------------
COSMETICS & TOILETRIES--1.3%
Alberto Culver Co. Class
A.......................... 276,900 11,422,125
Tranzonic Co. Class A....... 100,000 1,787,500
--------------
13,209,625
--------------
DRUGS & HEALTH CARE--5.0%
Integrated Health Services,
Inc. ...................... 473,200 11,534,250
Lincare Holdings, Inc.
(a)........................ 382,000 15,662,000
Magellan Health Services,
Inc. (a)................... 704,000 15,752,000
Perrigo Co. (a)............. 699,000 6,378,375
--------------
49,326,625
--------------
ELECTRICAL EQUIPMENT--5.9%
American Power Conversion
Corp. (a).................. 659,500 17,971,375
Amphenol Corp. Class A...... 786,500 17,499,625
Anixter International, Inc.
(a)........................ 786,400 12,680,700
Belden, Inc. ............... 252,900 9,357,300
--------------
57,509,000
--------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
38
<PAGE> 41
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
LAZARD SMALL CAP PORTFOLIO
(CONTINUED)
ELECTRONICS--1.3%
Allen Organ Co. Class B..... 35,000 $ 1,347,500
Boston Acoustics, Inc. ..... 40,000 715,000
Input/Output Inc. (a)....... 553,900 10,247,150
------------
12,309,650
------------
FOOD & BEVERAGE--0.2%
Farmer Brothers Co. ........ 15,000 2,280,000
------------
HOUSEHOLD APPLIANCES &
HOME FURNISHINGS--3.0%
Ethan Allen Interiors,
Inc. ...................... 298,000 11,473,000
National Presto Industries,
Inc. ...................... 42,000 1,569,750
Sunbeam Corporation, Inc. .. 620,100 15,967,575
------------
29,010,325
------------
INDUSTRIAL & MACHINERY--6.8%
Briggs & Stratton Corp. .... 303,300 13,345,200
Duriron Company, Inc. ...... 520,100 14,107,712
Manitowoc Company, Inc. .... 447,900 18,139,950
Measurex Corp. ............. 371,700 8,920,800
United Dominion Industries,
Ltd. ...................... 500,000 11,750,000
------------
66,263,662
------------
INSURANCE--6.3%
American Bankers Insurance
Group, Inc. ............... 208,600 10,664,675
Amerin Corp. (a)............ 497,800 12,818,350
NAC Re Corp. ............... 337,000 11,415,875
Penncorp Financial Group,
Inc. ...................... 458,800 16,516,800
Reliance Group Holdings,
Inc. ...................... 1,180,000 10,767,500
------------
62,183,200
------------
LEISURE TIME--0.6%
Polaris Industries, Inc. ... 266,700 6,334,125
------------
MANUFACTURING--9.1%
Alltrista Corp. (a)......... 358,400 9,228,800
Carlisle Companies, Inc. ... 186,000 11,253,000
Crane Co. .................. 407,100 11,805,900
Herman Miller, Inc. ........ 276,700 $ 15,668,137
Mark IV Industries, Inc. ... 834,585 18,882,486
TRINOVA Corp. .............. 414,100 15,062,888
Varlen Corp. ............... 343,970 7,072,883
------------
88,974,094
------------
MEDICAL SUPPLIES--1.2%
Dentsply International,
Inc. ...................... 240,000 11,400,000
------------
OIL & GAS--3.1%
Helmerich & Payne, Inc. .... 180,300 9,398,138
Ultramar Diamond Shamrock
Corp. ..................... 204,000 6,451,500
Vintage Petroleum, Inc. .... 410,500 14,162,250
------------
30,011,888
------------
PUBLISHING--3.4%
Banta Corp. ................ 562,750 12,872,906
Scientific Games Holdings
Corp. (a).................. 464,500 12,425,375
World Color Press, Inc.
(a)........................ 402,000 7,738,500
------------
33,036,781
------------
REAL ESTATE--3.4%
Alexander's, Inc. (a)....... 45,000 3,560,625
FelCor Suite Hotels,
Inc. ...................... 330,000 11,673,750
Liberty Property Trust...... 271,500 6,991,125
Reckson Associates Realty
Corp. ..................... 260,000 10,985,000
------------
33,210,500
------------
RESTAURANTS, LODGING &
ENTERTAINMENT--0.5%
Sbarro, Inc. ............... 193,200 4,926,600
------------
RETAIL--4.3%
Fingerhut Companies,
Inc. ...................... 822,200 10,071,950
Fred Meyer, Inc. (a)........ 388,000 13,774,000
HSN Inc. (a)................ 362,790 8,616,262
Sotheby's Holdings, Inc.
Class A.................... 508,200 9,465,225
------------
41,927,437
------------
RETAIL TRADE--2.0%
Carson Pirie Scott & Co.
(a)........................ 431,200 10,887,800
</TABLE>
The accompanying notes are an integral part of these financial statements.
39
<PAGE> 42
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES VALUE
- -------------------------------------------------------
<S> <C>
LAZARD SMALL CAP PORTFOLIO (CONTINUED)
Proffitts, Inc. (a)......... 250,000 $ 9,218,750
------------
20,106,550
------------
STEEL--1.7%
Huntco, Inc. Class A........ 308,600 4,551,850
UCAR International, Inc.
(a)........................ 332,000 12,491,500
------------
17,043,350
------------
TECHNOLOGY--1.3%
Intelligent Electronics,
Inc. ...................... 855,600 6,844,800
Mecklermedia Corp. (a)...... 320,000 6,320,000
Verbex Voice Systems, Inc.
(a), (b)................... 180,501 0
------------
13,164,800
------------
TELECOMMUNICATION
EQUIPMENT--5.9%
Allen Group, Inc. .......... 721,700 16,057,825
Network Equipment
Technologies, Inc. (a)..... 1,011,600 16,691,400
Oak Industries, Inc. (a).... 455,900 10,485,700
Scientific-Atlanta, Inc. ... 949,800 14,247,000
------------
57,481,925
------------
TRANSPORTATION--2.4%
Air Express International
Corp. ..................... 473,000 15,254,250
Rollins Truck Leasing
Co. ....................... 685,800 8,658,225
------------
23,912,475
------------
TRUCKING & FREIGHT
FORWARDING--3.1%
Landstar Systems Inc. (a)... 500,000 11,625,000
Pittston Burlington Group... 353,700 7,074,000
Xtra Corp. ................. 280,000 12,145,000
------------
30,844,000
------------
TOTAL COMMON STOCKS
(Identified cost
$740,261,297).............. 921,551,908
------------
<CAPTION>
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- -------------------------------------------------------
<S> <C> <C>
CONVERTIBLE BONDS--0.4%
COMMUNICATIONS--0.4%
International CableTel, Inc.
144A 7.25%, 4/15/05........ $ 3,400 $ 3,646,500
------------
RESTAURANTS, LODGING &
ENTERTAINMENT--0.0%
Interactive Light Holdings,
Inc. 8.00%, 1/25/99 (a),
(b)........................ 1,000 500,000
------------
TECHNOLOGY--0.0%
Verbex Voice Systems, Inc.
10.00%, 6/30/97 (a), (b)... 100 0
------------
TOTAL CONVERTIBLE BONDS
(Identified cost
$4,644,040)................ 4,146,500
------------
CORPORATE BONDS--0.5%
(Identified cost $5,589,000)
COMMUNICATIONS--0.5%
International CableTel, Inc.
7.00%, 6/15/08............. 5,589 5,030,100
------------
<CAPTION>
SHARES
---------
<S> <C> <C>
PREFERRED STOCKS--0.0%
(Identified cost $1,500,000)
TECHNOLOGY--0.0%
Verbex Voice Systems, Inc.,
0.00%, (a), (b)............ 687,285 0
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
40
<PAGE> 43
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- ------------------------------------------------------
<S> <C>
LAZARD SMALL CAP PORTFOLIO (CONTINUED)
REPURCHASE AGREEMENT--4.6%
State Street Bank and Trust
Co., 6.00%, 1/2/97
(Dated 12/31/1996,
collateralized by
$44,985,000 United States
Treasury Note, 6.375%,
05/15/1999, with a value of
$45,827,389)
(Identified cost
$44,928,000)............... $ 44,928 $ 44,928,000
---------
<CAPTION>
DESCRIPTION VALUE
- ------------------------------------------------------
<S> <C> <C>
TOTAL INVESTMENTS
(Identified cost
$796,922,337) (c).......... 99.4% $975,656,508
CASH AND OTHER ASSETS IN
EXCESS OF LIABILITIES....... 0.6 5,748,916
----- ------------
NET ASSETS................... 100.0% $981,405,424
===== ============
</TABLE>
(a) Non-income producing security.
(b) Private placement (see note 6).
(c) The aggregate cost for federal income tax purposes is $796,922,337; based on
tax cost aggregate gross unrealized appreciation is $194,217,511 and the
aggregate gross unrealized depreciation is $15,483,340 resulting in net
unrealized appreciation of $178,734,171.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES VALUE
- -------------------------------------------------------
<S> <C>
LAZARD INTERNATIONAL SMALL CAP PORTFOLIO
COMMON STOCKS--88.8%
AUSTRALIA--5.3%
Bibury Ltd. (a), (c)........ 472,100 $ 0
Cochlear Limited............ 894,000 2,494,189
Energy Equity Corporation
Ltd. (a)................... 3,346,200 2,526,739
Pasminco Ltd. .............. 1,084,500 1,706,788
------------
TOTAL AUSTRALIA............. 6,727,716
------------
AUSTRIA--1.8%
Austria Mikro Systeme
International AG........... 30,315 2,340,429
------------
BELGIUM--2.0%
Audiofina SA................ 46,500 2,198,408
Audiofina SA (Lux).......... 7,100 323,543
------------
TOTAL BELGIUM............... 2,521,951
------------
CANADA--1.7%
Maple Leaf Foods, Inc. ..... 319,500 2,158,311
------------
FINLAND--6.9%
Amer Group, Ltd. ........... 100,200 2,069,348
<CAPTION>
DESCRIPTION SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
Huhtamaki Group............. 65,200 $ 3,033,217
Sampo Insurance Company
Ltd. ...................... 46,500 3,669,457
------------
TOTAL FINLAND............... 8,772,022
------------
FRANCE--7.1%
Business Objects SA (a),
(b)........................ 22,200 299,700
Credit National............. 33,500 1,929,228
Europeene d' Extincteurs.... 32,000 1,985,930
Le Carbone-Lorraine......... 7,049 1,334,127
Scor SA (a), (b)............ 68,600 2,358,125
Societe des Immeubles de
France..................... 19,615 1,156,826
------------
TOTAL FRANCE................ 9,063,936
------------
GERMANY--2.6%
Cewe Color Holding AG....... 7,400 1,683,130
Data Modul AG............... 23,530 527,544
Holsten Brauerei AG......... 337 74,461
</TABLE>
The accompanying notes are an integral part of these financial statements.
41
<PAGE> 44
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
LAZARD INTERNATIONAL SMALL
CAP PORTFOLIO (CONTINUED)
Marseille-Kliniken AG....... 47,000 $ 1,017,091
------------
TOTAL GERMANY............... 3,302,226
------------
HONG KONG--3.4%
Peregrine Investment
Holdings Ltd. ............. 1,499,000 2,567,942
Shaw Brothers (Hong Kong)
Ltd. ...................... 1,427,000 1,697,382
------------
TOTAL HONG KONG............. 4,265,324
------------
IRELAND--4.1%
Fitzwilton PLC.............. 2,842,550 2,408,533
Jurys Hotel Group PLC....... 263,300 1,204,728
Jurys Hotel Group PLC
(Dublin)................... 177,300 811,235
Unidare PLC................. 241,600 777,902
------------
TOTAL IRELAND............... 5,202,398
------------
ITALY--5.0%
Arnoldo Mondadori Editore
SPA........................ 333,600 2,715,861
Editoriale L' Espresso SPA
(a)........................ 558,000 1,544,891
SONDEL-Societa Nordelettrica
SPA (a).................... 937,200 2,088,158
------------
TOTAL ITALY................. 6,348,910
------------
JAPAN--4.9%
Aderans Company Ltd. ....... 90,000 2,199,292
Dowa Fire & Marine Insurance
Co. ....................... 301,000 1,159,192
Kanamoto Company Ltd. ...... 77,000 837,752
Nisshin Fire & Marine
Insurance Co. ............. 336,000 1,282,376
Zenitaka Corp............... 146,000 685,813
------------
TOTAL JAPAN................. 6,164,425
------------
NEW ZEALAND--7.3%
Fisher & Paykel Industries
Ltd. ...................... 575,516 2,258,122
The Warehouse Group Ltd. ... 678,200 1,630,173
<CAPTION>
DESCRIPTION SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
Tranz Rail Holdings Ltd.
(a), (b)................... 162,300 $ 2,870,681
Wrightson Ltd. ............. 2,873,200 2,498,435
------------
TOTAL NEW ZEALAND........... 9,257,411
------------
NORWAY--6.8%
Aker AS Class B............. 125,400 2,510,686
Fokus Bank AS............... 390,800 2,662,712
P4 Radio Hele Norge ASA
(a)........................ 281,000 2,529,528
Smedvig ASA (a)............. 44,000 894,600
------------
TOTAL NORWAY................ 8,597,526
------------
PAKISTAN--0.0%
Lever Brothers Ltd. ........ 540 8,771
Packages.................... 840 1,032
------------
TOTAL PAKISTAN.............. 9,803
------------
SPAIN--4.4%
Corporacion Financiera
Reunida SA (a)............. 1,070,400 3,512,347
Prosegur Cia de Seguridad
SA......................... 229,500 2,121,317
------------
TOTAL SPAIN................. 5,633,664
------------
SWEDEN--8.5%
Getinge Industries AB....... 66,198 1,305,537
Intentia International AB
(a)........................ 178,000 2,662,209
Scala International AB
(a)........................ 36,600 3,327,321
TV 4 AB Series A............ 172,900 3,549,319
------------
TOTAL SWEDEN................ 10,844,386
------------
SWITZERLAND--2.8%
Attisholz Holding AG........ 2,600 1,010,086
Liechtenstein Global Trust
AG......................... 5,000 2,562,570
------------
TOTAL SWITZERLAND........... 3,572,656
------------
UNITED KINGDOM--12.9%
Bell Cablemedia PLC (a),
(b)........................ 75,400 1,168,700
Filofax Group PLC........... 457,100 1,080,688
Greycoat PLC................ 520,675 1,382,639
Hogg Robinson PLC........... 565,300 2,953,855
</TABLE>
The accompanying notes are an integral part of these financial statements.
42
<PAGE> 45
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
LAZARD INTERNATIONAL SMALL
CAP PORTFOLIO (CONTINUED)
London Clubs International
PLC........................ 503,800 $ 2,623,868
McDonnell Information
Systems PLC (a)............ 1,680,800 979,051
Scholl PLC.................. 736,400 3,746,973
Takare PLC.................. 1,035,900 2,413,610
------------
TOTAL UNITED KINGDOM........ 16,349,384
------------
UNITED STATES--1.3%
Flextronics International,
Ltd. (a)................... 57,800 1,603,950
------------
TOTAL COMMON STOCKS
(Identified cost
$105,587,459).............. 112,736,428
------------
PREFERRED STOCKS--6.5%
GERMANY--4.5%
Hornbach Holding AG......... 34,300 2,451,911
Moebel Walther AG........... 50,770 3,332,317
------------
TOTAL GERMANY............... 5,784,228
------------
UNITED KINGDOM--2.0%
Signet Group PLC (a), (b)... 23 2,484,000
------------
TOTAL PREFERRED STOCKS
(Identified cost
$5,450,705)................ 8,268,228
------------
WARRANTS--0.1%
(Identified cost $0)
HONG KONG--0.1%
Peregrine Investment
Holdings, Ltd. ............ 149,900 47,967
------------
<CAPTION>
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- -------------------------------------------------------
<S> <C> <C>
CONVERTIBLE BONDS--1.4%
(Identified cost $1,700,000)
UNITED STATES--1.4%
International CableTel, Inc.
144A, 7.25%, 4/15/05....... $ 1,700 $ 1,823,250
------------
REPURCHASE AGREEMENT--1.8%
State Street Bank and Trust
Co., 6.00%, 1/2/97
(Dated 12/31/96,
collateralized by
$2,180,000 United States
Treasury Note, 7.00%,
07/15/06, with a value of
$2,353,288)
(Identified cost
$2,303,000) (e)............ 2,303 2,303,000
------------
TOTAL INVESTMENTS
(Identified cost
$115,041,164) (d).......... 98.6% 125,178,873
CASH AND OTHER ASSETS IN
EXCESS OF LIABILITIES....... 1.4 1,793,664
----- ------------
NET ASSETS................... 100.0% $126,972,537
===== ============
</TABLE>
(a) Non-income producing security.
(b) American Depository Receipts.
(c) Bankrupt security valued at zero.
(d) The aggregate cost for federal income tax purposes is $115,065,035; based on
tax cost aggregate gross unrealized appreciation is $17,564,079 and the
aggregate gross unrealized depreciation is $7,450,241, resulting in net
unrealized appreciation of $10,113,838.
(e) Segregated securities for when-issued purchases.
* Percentages of common stocks, preferred stocks, and convertible bonds are
presented in the portfolio by country.
The accompanying notes are an integral part of these financial statements.
43
<PAGE> 46
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
Percentages by industry are as follows:
Agriculture 2.0%, Apparel & Textiles 2.3%, Banks 1.5%, Broadcasting 8.0%,
Building & Construction 0.5%, Computers 5.5%, Conglomerates 1.6%,
Construction Materials 2.0%, Cosmetics & Toiletries 3.0%, Drugs & Health Care
4.7%, Electrical Equipment 2.9%, Electronics 4.1%, Entertainment 3.4%,
Financial Services 8.9%, Food & Beverage 2.5%, Food Processing 1.7%, Gas
Exploration 2.7%, Hotel & Restaurants 1.6%, Insurance 6.7%, Leisure Time
1.3%,Manufacturing 2.2%, Medical Supplies 1.0%, Miscellaneous 3.5%,
Non-Ferrous Metals 1.3%, Paper Products 1.6%, Publishing 2.1%, Real Estate
2.0%, Retail 11.4%, Software 0.2%, Telecommunication 1.4%, Telephone 0.9%,
Transportation 2.3%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES VALUE
- -------------------------------------------------------
<S> <C>
LAZARD EMERGING MARKETS PORTFOLIO
COMMON STOCKS--79.8%
ARGENTINA--4.8%
Capex SA.................... 258,900 $ 2,149,300
Capex SA 144A............... 68,700 1,142,137
Metrogas SA Class B (b)..... 103,400 956,450
Quilmes Industrial Quinsasa
(b)........................ 61,900 495,200
YPF Sociedad Anonima Class D
(b)........................ 90,000 2,272,500
--------------
TOTAL ARGENTINA............. 7,015,587
--------------
BRAZIL--1.6%
Pao de Acucar 144A (c)...... 129,700 2,309,153
--------------
CHILE--4.7%
AFP Provida SA (b).......... 99,700 1,869,375
Banco BHIF (a), (b)......... 97,400 1,594,925
Chilectra SA (b)............ 30,700 1,584,375
Compania Telecomunicacion
Chile (b).................. 17,500 1,769,687
--------------
TOTAL CHILE................. 6,818,362
--------------
COLOMBIA--1.1%
Banco de Bogota............. 284,337 1,638,993
--------------
CZECH REPUBLIC--1.0%
Komercni Banka AS 144A (a),
(c)........................ 51,700 1,401,070
--------------
ECUADOR--1.5%
La Cemento Nacional CA 144A
(c)........................ 10,000 2,240,000
--------------
EGYPT--1.1%
Commercial International
Bank of Egypt SA 144A (a),
(c)........................ 113,330 1,597,953
--------------
<CAPTION>
DESCRIPTION SHARES VALUE
- ---------------------------------------------------------
<S> <C> <C>
GREECE--2.4%
Ergo Bank SA................ 19,100 $ 968,122
Papastratos Cigarette SA.... 36,450 667,804
Titan Cement Co. SA......... 34,300 1,865,083
--------------
TOTAL GREECE................ 3,501,009
--------------
HONG KONG--5.0%
Chen Hsong Holdings......... 3,634,000 2,208,262
Guangshen Railway Co., Ltd.
(a), (b)................... 90,800 1,872,750
Peregrine Investment
Holdings Ltd. ............. 1,202,000 2,059,150
Yue Yuen Industrial
Holdings................... 2,862,000 1,091,590
--------------
TOTAL HONG KONG............. 7,231,752
--------------
HUNGARY--1.6%
MOL Magyar Olaj-es Gazipari
144A (c)................... 182,300 2,278,039
--------------
INDIA--6.6%
Hindalco Industries Ltd.
144A (c)................... 105,050 2,586,856
Industrial Credit &
Investment India Ltd.
144A....................... 262,000 2,554,500
Larsen & Toubro Ltd. 144A
(b)........................ 169,000 2,463,175
State Bank of India (a)..... 116,600 2,025,342
--------------
TOTAL INDIA................. 9,629,873
--------------
INDONESIA--9.7%
Astra International......... 822,000 2,262,066
Bank Bali................... 829,750 2,072,618
</TABLE>
The accompanying notes are an integral part of these financial statements.
44
<PAGE> 47
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
LAZARD EMERGING MARKETS
PORTFOLIO (CONTINUED)
Daya Guna Samudera (a)...... 1,261,000 $ 1,468,141
Kalbe Farma................. 1,835,000 2,097,587
Kawasan Industri (a)........ 320,583 61,076
Matahari Putra Prima........ 2,558,500 2,978,779
Steady Safe................. 1,750,067 2,241,301
Trias Sentosa............... 1,927,500 979,255
--------------
TOTAL INDONESIA............. 14,160,823
--------------
MALAYSIA--3.1%
Edaran Otomobil Nasional
Berhad..................... 214,000 2,139,576
IOI Properties Berhad....... 343,000 1,113,680
Sistem Televisyen Malaysia
Berhad..................... 238,000 475,906
Sistem Televisyen Malaysia
Berhad A Shares............ 140,000 259,434
Southern Bank Berhad (a).... 208,500 520,115
--------------
TOTAL MALAYSIA.............. 4,508,711
--------------
MEXICO--7.3%
Cemex SA de CV.............. 576,100 2,074,750
Corporacion Geo SA de CV
144A (a), (b).............. 75,000 1,411,950
Elamex SA de CV (a)......... 111,100 1,069,338
Fomento Economico Mexicano
SA de CV Series B.......... 648,500 2,224,276
Grupo Embotelladoras de
Mexico SA de CV (a), (b)... 246,600 2,065,275
Pan American Beverages, Inc.
Class A (b)................ 38,000 1,781,250
--------------
TOTAL MEXICO................ 10,626,839
--------------
MOROCCO--1.3%
Banque Marocaine de Commerce
144A (a), (c).............. 126,900 1,903,500
--------------
PERU--2.5%
Cerveceria Backus &
Johnston................... 2,587,641 2,229,444
<CAPTION>
DESCRIPTION SHARES VALUE
- ---------------------------------------------------------
<S> <C> <C>
Telefonica del Peru SA...... 77,000 $ 1,453,375
--------------
TOTAL PERU.................. 3,682,819
--------------
PHILIPPINES--2.5%
Benpres Holdings Corp. 144A
(a), (c)................... 258,600 1,939,500
Fil-Estate Land Inc. ....... 1,844,000 1,612,624
--------------
TOTAL PHILIPPINES........... 3,552,124
--------------
PORTUGAL--3.0%
Banco Totta & Acores........ 116,700 2,200,779
Investec-Consultadoria
Internacional SA (a)....... 34,700 1,076,472
Portugal Telecom SA (b)..... 40,400 1,141,300
--------------
TOTAL PORTUGAL.............. 4,418,551
--------------
RUSSIA--0.7%
First NIS Regional Fund
(a)........................ 88,000 985,600
--------------
SOUTH AFRICA--6.3%
Amalgamated Banks of South
Africa..................... 414,000 2,123,758
Barlow Ltd. ................ 232,900 2,065,908
JD Group Ltd. .............. 419,744 1,973,788
Kersaf Investments Ltd. .... 100,800 921,065
Malbak Ltd. ................ 464,390 2,034,839
Malbak Ltd. 144A (c)........ 8,610 37,733
--------------
TOTAL SOUTH AFRICA.......... 9,157,091
--------------
SOUTH KOREA--8.7%
Chosun Brewery (a).......... 61,569 1,676,207
Korea Chemical Co., Ltd. ... 22,750 1,608,385
Korea Mobile Telecom
Corp. ..................... 3,016 3,027,279
Korean Air Lines............ 85,977 1,415,314
New Korea Trust (a)......... 168,000 1,743,840
Pohang Iron & Steel Co.,
Ltd. ...................... 12,000 689,396
Samsung Electronics Ltd.
144A (a), (c).............. 1 36
Seoul City Gas Co. ......... 16,400 1,028,639
Shinhan Bank................ 89,540 1,437,938
--------------
TOTAL SOUTH KOREA........... 12,627,034
--------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
45
<PAGE> 48
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
LAZARD EMERGING MARKETS
PORTFOLIO (CONTINUED)
THAILAND--1.4%
Bangkok Expressway (a)...... 1,840,000 $ 2,062,700
------------
VENEZUELA--1.9%
Compania Anonima Nacional
Telefonos de Venezuela
(a)........................ 96,000 2,700,000
------------
TOTAL COMMON STOCKS
(Identified cost
$109,922,860).............. 116,047,583
------------
PREFERRED STOCKS--10.3%
ARGENTINA--0.5%
Quilmes Industrial Quinsasa
(b)........................ 84,650 772,431
------------
BRAZIL--8.7%
Banco Itau SA............... 4,930,000 2,135,021
Cemig Cia Energetica de
Minas Gerais............... 57,808,000 1,969,399
Centrais Electricas Bras B
Shares..................... 6,400,000 2,377,442
Companhia Cervejaria
Brahma..................... 4,331,400 2,367,660
Companhia Cimento Portla
Itau....................... 6,426,000 2,257,047
Dixie Toga SA............... 2,105,800 1,600,983
------------
TOTAL BRAZIL................ 12,707,552
------------
COLOMBIA--1.1%
Gran Cadena de Almacenes
Class B 144A (b)........... 141,400 1,520,050
------------
TOTAL PREFERRED STOCKS
(Identified cost
$13,902,648)............... 15,000,033
------------
WARRANTS--0.0%
HONG KONG--0.0%
Peregrine Investment
Holdings Ltd. ............. 65,900 21,088
------------
<CAPTION>
DESCRIPTION SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
INDONESIA--0.0%
Bank Bali................... 29,000 $ 14,733
------------
TOTAL WARRANTS
(Identified cost $0)........ 35,821
------------
<CAPTION>
PRINCIPAL
AMOUNT
(000)
---------
<S> <C> <C>
BONDS--1.1%
SOUTH AFRICA--1.1%
Eskom, 15.00%, 10/1/98...... $ 3,150 660,254
Republic of South Africa,
12.50%, 12/21/06........... 5,420 947,711
------------
TOTAL SOUTH AFRICA.......... 1,607,965
------------
TOTAL BONDS
(Identified cost
$1,618,745)................ 1,607,965
------------
CONVERTIBLE BONDS--0.9%
(Identified cost $1,419,375)
PHILIPPINES--0.9%
Bacnotan Consolidated
Industries 144A, 5.50%,
6/21/04.................... 1,500 1,290,000
------------
REPURCHASE AGREEMENT--8.0%
State Street Bank and Trust
Co., 6.00%, 1/2/97
(Dated 12/31/96,
collateralized by
$10,975,000 United States
Treasury Notes, 7.00%,
07/15/06, with a value of
$11,847,403)
(Identified cost
$11,615,000)............... 11,615 11,615,000
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
46
<PAGE> 49
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION VALUE
- -------------------------------------------------------
<S> <C> <C>
LAZARD EMERGING MARKETS
PORTFOLIO (CONTINUED)
TOTAL INVESTMENTS
(Identified cost
$138,478,628) (d).......... 100.2% $145,596,402
LIABILITIES IN EXCESS OF CASH
AND OTHER ASSETS............ (0.2) (268,442)
----- ------------
NET ASSETS................... 100.0% $145,327,960
===== ============
</TABLE>
(a) Non-income producing security.
(b) American Depository Receipts.
(c) Global Depository Receipts.
(d) The aggregate cost for federal income tax purposes is $138,587,273; based on
tax cost aggregate gross unrealized appreciation is $14,652,018 and the
aggregate gross unrealized depreciation is $7,642,889, resulting in net
unrealized appreciation of $7,009,129.
* Percentages of common and preferred stocks are presented in the portfolio by
country.
Percentage by industry are as follows:
Airline 1.0%, Apparel & Textiles 0.8%, Automotive 1.5%, Banks 13.2%,
Beverages 1.4%, Brewery 2.2%, Broadcasting 0.5%, Building & Housing 3.2%,
Business Services & Supplies 1.5%, Chemicals & Plastics 1.8%, Communications
5.6%, Conglomerates 4.4%, Construction Materials 5.1%, Corporate 0.5%,
Domestic Oil 0.7%, Drugs & Health Care 1.4%, Financial Services 6.3%,
Fishing 1.0%, Food & Beverages 5.4%, Foreign Government 0.7%, Holding
Company-Diversified 1.4%, Homebuilders 1.0%, Industrial & Machinery 3.3%,
International Oil 1.6%, Leisure Time 0.6%, Manufacturing 0.7%, Metals 1.8%,
Miscellaneous 4.8%, Oil & Gas 1.6%, Real Estate 1.9%, Retail 6.0%, RIC 0.7%,
Steel 0.5%, Tobacco 0.5%, Transportation 2.7%, Utilities 3.6%, Trusts 1.2%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES VALUE
- --------------------------------------------------------
<S> <C> <C>
LAZARD GLOBAL EQUITY PORTFOLIO
COMMON STOCKS--95.0%
AUSTRALIA--0.9%
Westpac Bank Corp. ............ 16,200 $ 92,196
----------
-
FINLAND--0.8%
UPM-Kymmene OY................. 3,612 75,774
----------
-
FRANCE--8.1%
Accor SA....................... 480 60,781
Alcatel Alsthom (Cie Gen El)... 1,400 112,464
Cie de Saint Gobain............ 600 84,880
<CAPTION>
DESCRIPTION SHARES VALUE
- --------------------------------------------------------
<S> <C> <C>
Elf Aquitaine SA............... 1,800 $ 163,851
Generale des Eaux.............. 1,330 164,824
Rhone-Poulenc SA............... 1,948 66,416
Rhone-Poulenc SA (b)........... 4,000 135,500
----------
-
TOTAL FRANCE................... 788,716
----------
-
GERMANY--9.7%
Daimler-Benz AG (a)............ 2,450 168,768
Deutsche Bank AG............... 2,600 121,484
Deutsche Telekom AG (a), (b)... 10,000 203,750
Hoechst AG..................... 2,200 103,938
Mannesmann AG.................. 255 110,531
Thyssen AG..................... 500 88,705
</TABLE>
The accompanying notes are an integral part of these financial statements.
47
<PAGE> 50
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES VALUE
- ----------------------------------------------------------
<S> <C>
LAZARD GLOBAL EQUITY PORTFOLIO (CONTINUED)
Veba AG........................ 2,700 $ 156,161
-------------
-
TOTAL GERMANY.................. 953,337
-------------
-
HONG KONG--2.0%
HSBC Holdings, Ltd. ........... 8,926 190,995
-------------
-
ITALY--1.9%
Ente Nazionale Idrocarburi SPA
(ENI)......................... 18,700 95,965
Fiat SPA....................... 12,900 39,032
Istituto Nazionale delle
Assicurazioni (INA)........... 38,200 49,758
-------------
-
TOTAL ITALY.................... 184,755
-------------
-
JAPAN--13.1%
Honda Motor Co. ............... 4,000 114,325
Matsushita Electric Industrial
Co. .......................... 7,000 114,239
Mitsubishi Heavy Industries.... 15,000 119,161
Mitsui Marine & Fire........... 5,000 26,898
NKK Corp. (a).................. 24,000 54,089
Omron Corp. ................... 4,000 75,296
Promise Company, Ltd. ......... 1,400 68,906
Ricoh Company, Ltd. ........... 12,000 137,812
Rohm Company, Ltd. ............ 2,000 131,249
Sekisui Chemical Co. .......... 7,000 70,719
Sony Corp. .................... 2,300 150,738
Sumitomo Trust & Banking....... 10,000 100,164
Toyota Motor Corp. ............ 4,000 115,016
-------------
-
TOTAL JAPAN.................... 1,278,612
-------------
-
NETHERLANDS--2.6%
Heineken NV.................... 580 102,730
Royal Dutch Petroleum Co. (b).. 910 155,383
-------------
-
TOTAL NETHERLANDS.............. 258,113
-------------
-
<CAPTION>
DESCRIPTION SHARES VALUE
- -----------------------------------------------------------
<S> <C> <C>
SPAIN--1.1%
ENDESA......................... 1,490 $ 106,047
-------------
-
SWEDEN--2.0%
Astra AB Series B.............. 2,080 100,342
Svenska Handelsbanken Series
A............................. 2,400 68,975
Svenska Handelsbanken Series
B............................. 1,000 27,566
-------------
-
TOTAL SWEDEN................... 196,883
-------------
-
SWITZERLAND--4.2%
Baloise Holdings, Ltd. ........ 29 58,282
Nestle SA...................... 85 91,255
Novartis AG (a)................ 110 125,984
SEZ Holding AG (a)............. 100 137,467
-------------
-
TOTAL SWITZERLAND.............. 412,988
-------------
-
UNITED KINGDOM--14.5%
Allied Domecq PLC.............. 11,100 87,096
B.A.T Industries PLC........... 18,900 156,718
British Aerospace Ord. PLC..... 8,000 175,158
BTR PLC........................ 23,400 114,254
Cadbury Schweppes PLC.......... 15,642 132,114
General Electric Co. PLC....... 16,400 107,610
Grand Metropolitan PLC......... 18,100 142,022
Mirror Group PLC............... 29,400 108,292
National Power PLC............. 20,400 170,553
Redland PLC.................... 8,800 55,631
Sears PLC...................... 44,600 71,825
Unilever PLC................... 3,980 96,483
-------------
-
TOTAL UNITED KINGDOM........... 1,417,756
-------------
-
UNITED STATES--34.1%
Aetna Inc. .................... 2,400 192,000
Archer Daniels Midland Co. .... 6,287 138,314
BankAmerica Corp. ............. 700 69,825
Bell Atlantic Corp. ........... 2,200 142,450
Champion International
Corp. ........................ 1,980 85,635
Chase Manhattan Corp. (New).... 900 80,325
Columbia/HCA Healthcare
Corp. ........................ 2,500 101,875
Deere & Co. ................... 3,800 154,375
Digital Equipment Corp. (a).... 4,000 145,500
Du Pont (E.I.) De Nemours &
Co. .......................... 900 84,938
General Electric Co. .......... 1,900 187,862
General Motors Corp. .......... 2,500 139,375
International Business Machines
Corp. ........................ 1,800 271,800
Kimberly-Clark Corp. .......... 700 66,675
Lockheed Martin Corp. ......... 1,500 137,250
Mobil Corp. ................... 1,450 177,263
</TABLE>
The accompanying notes are an integral part of these financial statements.
48
<PAGE> 51
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES VALUE
- --------------------------------------------------------
<S> <C>
LAZARD GLOBAL EQUITY PORTFOLIO (CONTINUED)
Philip Morris Companies,
Inc. ......................... 1,900 $ 213,987
Sears Roebuck & Co. ........... 3,520 162,360
Travelers Group, Inc. ......... 4,200 190,575
U S West, Inc. (a)............. 4,730 87,505
Union Pacific Corp. ........... 1,800 108,225
UST, Inc. ..................... 2,400 77,700
Viacom, Inc. Class B (a)....... 3,470 121,016
WMX Technologies, Inc. ........ 2,700 88,088
Xerox Corp. ................... 2,190 115,249
----------
-
TOTAL UNITED STATES............ 3,340,167
----------
-
TOTAL COMMON STOCKS
(Identified cost $8,686,581)... 9,296,339
----------
-
PREFERRED STOCKS--0.7%
(Identified cost $74,298)
ITALY--0.7%
Fiat SPA....................... 43,000 71,005
----------
-
<CAPTION>
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- --------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT--5.0%
State Street Bank and Trust
Co., 6.00%, 1/2/97
(Dated 12/31/96,
collateralized by $465,000
United States Treasury Notes,
7.00%, 07/15/06, with a value
of $501,963)
(Identified cost $487,000).... $ 487 $ 487,000
----------
-
TOTAL INVESTMENTS
(Identified cost $9,247,879)
(c)........................... 100.7% 9,854,344
LIABILITIES IN EXCESS OF CASH
AND OTHER ASSETS............... (0.7) (70,321)
---- -------
NET ASSETS...................... 100.0% $9,784,023
==== =======
</TABLE>
(a) Non-income producing security.
(b) American Depository Receipts.
(c) The aggregate cost for federal income tax purposes is $9,258,048; based on
tax cost aggregate gross unrealized appreciation is $753,434 and the
aggregate gross unrealized depreciation is $157,138, resulting in net
unrealized appreciation of $596,296.
* Percentages of common stocks, preferred stocks, and convertible bonds are
presented in the portfolio by country.
Percentages by industry are as follows:
Aerospace & Defense 3.2%, Agricultural Machinery 1.6%, Automotive 6.6%, Banks
7.7%, Broadcasting 1.2%, Business Services & Supplies 3.7%, Chemicals &
Plastics 2.7%, Computers & Business Equipment 6.9%, Conglomerates 2.6%,
Construction Materials 0.6%, Containers & Glass 0.9%, Drug & Healthcare 3.4%,
Electrical Equipment 4.9%, Electronics 2.7%, Energy 3.4%, Finance 0.7%, Food
& Beverage 5.6%, Food Processing 2.2%, Gas Exploration 2.7%, Home Furnishings
2.7%, Household Products 1.0%, Industrial & Machinery 2.3%, Insurance 5.3%,
Leisure Time 0.6%, Newspapers 1.1%, P aper Products 2.3%, Pollution Control
0.9%, Railroad 1.1%, Retail Trade 2.4%, Steel 1.5%, Telephone 4.4%, Tobacco
2.4%, Utilities 4.4%
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
49
<PAGE> 52
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
LAZARD BANTAM VALUE PORTFOLIO
COMMON STOCKS--94.4%
AIRLINE--1.2%
World Airways, Inc. (a)...... 51,700 $ 420,063
-----------
AUTO PARTS--6.7%
APS Holding Corp. Class A
(a)......................... 64,700 1,002,850
Dura Automotive Systems, Inc.
(a)......................... 24,600 553,500
United Auto Group, Inc. (a).. 30,000 772,500
-----------
2,328,850
-----------
CHEMICALS & PLASTICS--2.5%
Mississippi Chemical
Corp. ...................... 36,000 864,000
-----------
COMPUTER SOFTWARE--1.6%
BancTec, Inc. (a)............ 27,100 558,938
-----------
CONSUMER GOODS--2.3%
Toro Co. .................... 21,600 788,400
-----------
CONTAINERS & GLASS--1.7%
United States Can Corp. (a).. 35,400 597,375
-----------
DRUGS & HEALTH CARE--2.2%
Integrated Health Services,
Inc. ....................... 31,400 765,375
-----------
ELECTRONICS--4.7%
Charter Power Systems,
Inc. ....................... 14,600 445,300
Cidco, Inc. (a).............. 41,500 726,250
Esterline Technologies Corp.
(a)......................... 16,600 433,675
-----------
1,605,225
-----------
FINANCIAL SERVICES--6.4%
Metris Companies, Inc. (a)... 20,000 480,000
National Auto Credit, Inc.
(a)......................... 87,450 1,049,400
Trans Financial, Inc. ....... 30,000 690,000
-----------
2,219,400
-----------
HOTELS & RESTAURANTS--1.9%
NPC International, Inc.
(a)......................... 79,500 655,875
-----------
HOUSEHOLD APPLIANCES & HOME
FURNISHINGS--2.0%
Stanley Furniture, Inc.
(a)......................... 34,300 681,712
-----------
<CAPTION>
DESCRIPTION SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
INDUSTRIAL & MACHINERY--10.2%
Applied Power, Inc. Class
A........................... 24,900 $ 986,662
Gardner Denver Machinery,
Inc. (a).................... 24,500 839,125
Graco, Inc. ................. 33,300 815,850
Scotsman Industries, Inc. ... 37,100 876,488
-----------
3,518,125
-----------
INSURANCE--3.7%
Delphi Financial Group, Inc.
Class A..................... 20,440 602,980
MMI Cos., Inc. .............. 21,300 686,925
-----------
1,289,905
-----------
LEISURE TIME--7.3%
Carmike Cinemas, Inc. Class A
(a)......................... 25,000 634,375
Coastcast Corp. (a).......... 70,000 1,015,000
Steinway Musical Instruments,
Inc. (a).................... 49,200 854,850
-----------
2,504,225
-----------
MANUFACTURING--7.6%
ABC Rail Products Corp. (a).. 34,700 689,663
EASCO, Inc. ................. 142,000 1,082,750
Varlen Corp. ................ 41,000 843,062
-----------
2,615,475
-----------
OIL & GAS--12.3%
Coflexip SA (a), (b)......... 29,600 777,000
Houston Exploration Co. (a).. 60,000 1,050,000
National-Oilwell, Inc. (a)... 50,000 1,537,500
Titan Exploration, Inc.
(a)......................... 75,000 900,000
-----------
4,264,500
-----------
PUBLISHING--2.1%
Mecklermedia Corp. (a)....... 37,200 734,700
-----------
RETAIL-JEWELRY--2.0%
Lazare Kaplan International,
Inc. (a).................... 40,000 685,000
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
50
<PAGE> 53
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
LAZARD BANTAM VALUE PORTFOLIO
(CONTINUED)
RETAIL TRADE--1.8%
Value City Department Stores,
Inc. (a).................... 60,200 $ 632,100
-----------
STEEL--2.4%
Citation Corp. (a)........... 80,000 820,000
-----------
TELECOMMUNICATION
EQUIPMENT--5.3%
Allen Group, Inc. (a)........ 40,400 898,900
Network Equipment
Technologies, Inc. (a)...... 55,700 919,050
-----------
1,817,950
-----------
TOYS & AMUSEMENTS--2.1%
Empire of Carolina, Inc.
(a)......................... 170,700 725,475
-----------
TRANSPORTATION--4.4%
Pittston Burlington Group,... 34,600 692,000
Team Rental Group, Inc. (a).. 51,000 822,375
-----------
1,514,375
-----------
TOTAL COMMON STOCKS
(Identified cost
$29,580,531)................ 1,954,290 32,607,043
-----------
<CAPTION>
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- -------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT--4.6%
State Street Bank and Trust
Co., 6.00%, 1/2/97
(Dated 12/31/96,
collateralized by $1,515,000
United States Treasury
Notes, 7.00%, 07/15/06, with
a value of $1,635,427)
6.00%, 1/2/97
(Identified cost $1,599,000)
(a)......................... $ 1,599 $ 1,599,000
-----------
TOTAL INVESTMENTS
(Identified cost $31,179,531)
(c)......................... 99.0% 34,206,042
CASH AND OTHER ASSETS IN
EXCESS OF LIABILITIES........ 1.0 343,305
----- -----------
NET ASSETS.................... 100.0% $34,549,347
===== ===========
</TABLE>
(a) Non-income producing security.
(b) American Depository Receipts.
(c) The aggregate cost for federal income tax purposes is $31,189,436; based on
tax cost aggregate gross unrealized appreciation is $3,780,692 and the
aggregate gross unrealized depreciation is $764,087, resulting in net
unrealized appreciation of $3,016,605.
The accompanying notes are an integral part of these financial statements.
51
<PAGE> 54
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LAZARD LAZARD
LAZARD INTERNATIONAL INTERNATIONAL LAZARD
EQUITY EQUITY FIXED-INCOME BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments in securities, at value*............ $ 280,717,252 $1,807,918,308 $85,855,906 $ 91,707,753
Cash............................................ 81 618,427 1,807,625 338
Net foreign currency contracts.................. -- -- -- --
Receivables for:
Investments sold............................... 105,700 -- -- 4,499,178
Dividends and interest......................... 546,257 5,043,199 2,496,183 587,705
Capital stock sold............................. 1,134,752 5,818,631 382,628 390,673
Due from Manager................................ -- -- -- --
Deferred organizational expenses................ -- -- -- --
--------- ---------- --------- --------
Total assets.................................... 282,504,042 1,819,398,565 90,542,342 97,185,647
--------- ---------- --------- --------
LIABILITIES
Payables for:
Investments purchased.......................... 2,858,310 -- 1,442,799 26,831,574
Capital stock repurchased...................... 758,477 1,298,953 219 125,500
Dividends declared............................. -- -- 78,184 68,539
Investment management fees payable.............. 193,137 1,116,987 283,756 204,532
Net foreign currency contracts.................. -- -- 202,290 --
Due to Manager.................................. -- -- -- --
Accrued directors fees payable.................. 3,200 3,200 3,200 3,200
Accrued expenses and other payables............. 85,599 806,257 102,056 46,150
--------- ---------- --------- --------
Total liabilities............................... 3,898,723 3,225,397 2,112,504 27,279,495
--------- ---------- --------- --------
Net assets, at value............................ 278,605,319 1,816,173,168 88,429,838 69,906,152
--------- ---------- --------- --------
NET ASSETS
Paid in capital................................. 222,896,826 1,551,277,018 86,235,677 70,138,030
Undistributed (distributions in excess of)
Investment income--net......................... 26,137 (3,305,547) (386,092) 1,340
Unrealized appreciation (depreciation) on:
Investments--net............................... 52,082,282 255,895,537 2,563,338 156,804
Foreign currency--net.......................... -- 10,812 (204,547) --
Accumulated realized gain (loss)--net........... 3,600,074 12,295,348 221,462 (390,022)
--------- ---------- --------- --------
NET ASSETS, AT VALUE............................ $ 278,605,319 $1,816,173,168 $88,429,838 $ 69,906,152
========= ========== ========= ========
Shares of capital stock outstanding**........... 14,480,367 133,302,794 8,201,037 7,073,035
========= ========== ========= ========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SHARE...................................... $ 19.24 $ 13.62 $ 10.78 $ 9.88
========= ========== ========= ========
</TABLE>
* For identified cost, see accompanying portfolios of investments
** $0.001 par value, 1,550,000,000 shares authorized
The accompanying notes are an integral part of these financial statements.
52
<PAGE> 55
================================================================================
<TABLE>
<CAPTION>
LAZARD LAZARD LAZARD LAZARD LAZARD
STRATEGIC LAZARD INTERNATIONAL EMERGING GLOBAL BANTAM
YIELD SMALL CAP SMALL CAP MARKETS EQUITY VALUE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 194,428,818 $ 975,656,508 $ 125,178,873 $ 145,596,402 $ 9,854,344 $ 34,206,042
6,016,786 903 834,425 2,236,263 42,307 46,710
420,654 -- -- -- 1,641 --
1,696,108 1,428,833 828,185 -- -- 378,765
4,025,138 1,027,269 270,013 205,703 23,417 10,354
5,926,841 4,726,627 245,152 191,428 10,000 137,574
-- -- -- -- 100,689 --
-- -- 6,744 9,642 725 5,951
--------- --------- --------- --------- -------- --------
212,514,345 982,840,140 127,363,392 148,239,438 10,033,123 34,785,396
--------- --------- --------- --------- -------- --------
12,371,478 -- 192,446 2,013,703 156,957 142,410
515,396 601,257 6,000 -- 50,000 --
225,950 -- -- -- -- --
168,080 613,781 71,163 763,282 -- 10,891
-- -- 6,354 -- -- --
-- -- -- 20,680 -- 31,008
3,200 3,200 3,200 3,200 3,200 3,135
147,443 216,478 111,692 110,613 38,943 48,605
--------- --------- --------- --------- -------- --------
13,431,547 1,434,716 390,855 2,911,478 249,100 236,049
--------- --------- --------- --------- -------- --------
199,082,798 981,405,424 126,972,537 145,327,960 9,784,023 34,549,347
--------- --------- --------- --------- -------- --------
194,534,501 781,421,457 115,849,885 135,554,863 8,811,638 30,587,540
(10,914) -- (46,947) (105,600) (10,696) --
4,522,225 178,734,171 10,137,709 7,117,774 606,465 3,026,512
434,465 -- (485) 379 291 --
(397,479) 21,249,796 1,032,375 2,760,544 376,325 935,295
--------- --------- --------- --------- -------- --------
$ 199,082,798 $ 981,405,424 $ 126,972,537 $ 145,327,960 $ 9,784,023 $ 34,549,347
========= ========= ========= ========= ======== ========
19,892,579 53,230,190 10,640,540 12,969,409 852,071 2,746,889
========= ========= ========= ========= ======== ========
$ 10.01 $ 18.44 $ 11.93 $ 11.21 $ 11.48 $ 12.58
========= ========= ========= ========= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
53
<PAGE> 56
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LAZARD LAZARD
LAZARD INTERNATIONAL INTERNATIONAL LAZARD
EQUITY EQUITY FIXED-INCOME BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Income:
Interest................................................. $ 721,767 $ 4,811,713 $4,063,186 $4,022,831
Dividends................................................ 6,008,960 39,513,337 -- --
-------- --------- -------- -------
Total investment income*.................................. 6,730,727 44,325,050 4,063,186 4,022,831
-------- --------- -------- -------
EXPENSES:
Management fees.......................................... 1,829,111 11,746,379 462,235 306,035
Administration fees...................................... 86,303 294,078 49,764 49,852
Custodian fees........................................... 79,008 1,652,940 104,294 65,711
Professional services.................................... 44,757 148,795 28,601 29,576
Registration fees........................................ 60,388 146,254 41,641 23,430
Shareholders services.................................... 32,883 48,643 17,891 18,002
Directors' fees and expenses............................. 15,629 15,629 15,629 15,629
Shareholders' reports.................................... 16,174 23,428 9,187 9,662
Amortization of organizational expenses.................. -- 11,265 11,696 11,768
Other.................................................... 14,869 93,602 6,957 6,135
-------- --------- -------- -------
Total expenses before fees waived and expenses
reimbursed............................................... 2,179,122 14,181,013 747,895 535,800
Management fees waived and expenses reimbursed........... -- -- (100,766) (37,009)
Administration fees waived............................... -- -- -- (9,375)
Fees paid indirectly..................................... (3,058) (11,673) -- (1,017)
-------- --------- -------- -------
Expenses--net............................................. 2,176,064 14,169,340 647,129 488,399
-------- --------- -------- -------
INVESTMENT INCOME--NET.................................... 4,554,663 30,155,710 3,416,057 3,534,432
-------- --------- -------- -------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NET
Realized gain (loss) on:
Investments--net**++................................... 13,281,290 80,314,399 633,875 (361,558)
Foreign exchange transactions--net..................... -- (2,428,185) (642,315) --
Net unrealized appreciation (depreciation) during the
period on:
Investments--net....................................... 26,925,773 128,985,358 800,081 (186,850)
Foreign currency--net.................................. -- 46,559 (218,222) --
-------- --------- -------- -------
Realized and unrealized gain (loss) on investments--net... 40,207,063 206,918,131 573,419 (548,408)
-------- --------- -------- -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...... $ 44,761,726 $ 237,073,841 $3,989,476 $2,986,024
======== ========= ======== =======
*Net of foreign withholding taxes of:..................... $ 316,522 $ 6,880,243 $ 68,916 $ --
======== ========= ======== =======
</TABLE>
** Includes net gains of $10,741,488 from in-kind redemptions for International
Equity Portfolio.
+ Does not include the operations of Special Equity Portfolio from January 1,
1996 through June 28, 1996 (acquisition date). See note 8.
++ Net of foreign withholding taxes of $91, $1,128, and $13 for International
Fixed-Income Portfolio, Strategic Yield Portfolio, and Emerging Markets
Portfolio, respectively.
+++ For the period January 4, 1996 and March 5, 1996 (commencement of
operations) through December 31, 1996 for Global Equity Portfolio and Bantam
Value Portfolio, respectively.
The accompanying notes are an integral part of these financial statements.
54
<PAGE> 57
================================================================================
<TABLE>
<CAPTION>
LAZARD LAZARD LAZARD LAZARD LAZARD
STRATEGIC LAZARD INTERNATIONAL EMERGING GLOBAL BANTAM
YIELD SMALL CAP SMALL CAP MARKETS EQUITY VALUE
PORTFOLIO PORTFOLIO+ PORTFOLIO PORTFOLIO PORTFOLIO+++ PORTFOLIO+++
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 10,816,958 $ 3,208,916 $ 460,646 $ 820,907 $ 24,949 $ 73,506
-- 8,725,998 2,774,800 1,895,134 117,950 615,683
-------- --------- -------- ------- -------- --------
10,816,958 11,934,914 3,235,446 2,716,041 142,899 689,189
-------- --------- -------- ------- -------- --------
908,760 6,243,613 870,310 983,215 39,032 134,134
61,730 205,004 60,715 57,344 38,530 35,071
165,821 157,871 225,515 262,156 62,304 38,430
33,031 105,687 33,563 31,710 24,635 23,062
60,911 87,204 26,179 57,756 27,631 31,773
25,907 55,485 30,172 20,525 15,808 19,471
15,629 16,010 15,629 15,629 14,402 14,255
12,326 25,902 16,222 13,703 6,792 15,369
10,221 11,301 3,539 5,033 30,283 25,057
9,904 59,603 12,189 6,369 3,674 5,679
-------- --------- -------- ------- -------- --------
1,304,240 6,967,680 1,294,033 1,453,440 263,091 342,301
-- -- -- (87,108) (170,729) (123,243)
-- -- -- (6,250) (37,500) (31,250)
(29,546) (9,754) -- (22,922) (217) (20)
-------- --------- -------- ------- -------- --------
1,274,694 6,957,926 1,294,033 1,337,160 54,645 187,788
-------- --------- -------- ------- -------- --------
9,542,264 4,976,988 1,941,413 1,378,881 88,254 501,401
-------- --------- -------- ------- -------- --------
2,516,295 80,557,846 2,805,120 5,993,184 377,352 2,286,480
392,704 -- (254,554) (179,535) (17,605) --
3,314,942 101,358,499 12,577,697 8,056,816 606,465 3,026,512
426,406 -- (27,579) 1,948 291 --
-------- --------- -------- ------- -------- --------
6,650,347 181,916,345 15,100,684 13,872,413 966,503 5,312,992
-------- --------- -------- ------- -------- --------
$ 16,192,611 $ 186,893,333 $17,042,097 $ 15,251,294 $1,054,757 $5,814,393
======== ========= ======== ======= ======== ========
$ 83,216 $ 13,400 $ 371,994 $ 177,096 $ 12,585 $ --
======== ========= ======== ======= ======== ========
</TABLE>
55
<PAGE> 58
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LAZARD
LAZARD INTERNATIONAL
EQUITY EQUITY
PORTFOLIO PORTFOLIO
--------------------------- -------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
--------------------------- -------------------------------
1996 1995 1996 1995
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS:
Operations
Investment income--net........................... $ 4,554,663 $ 1,900,843 $ 30,155,710 $ 19,111,995
Realized gain (loss) on investments and foreign
exchange transactions.......................... 13,281,290 17,975,165 77,886,214 17,969,742
Unrealized appreciation (depreciation)--net...... 26,925,773 20,838,939 129,031,917 104,009,885
--------- ---------- ---------- ----------
Net increase in net assets resulting from
operations....................................... 44,761,726 40,714,947 237,073,841 141,091,622
--------- ---------- ---------- ----------
Distributions to shareholders:
From investment income--net...................... (4,528,526) (1,412,326) (24,135,758) (6,515,474)
From realized gains--net......................... (16,346,609) (11,452,652) (77,796,782) (14,115,900)
In excess of investment income--net.............. -- -- -- --
In excess of realized gains--net................. -- -- -- --
--------- ---------- ---------- ----------
(20,875,135) (12,864,978) (101,932,540) (20,631,374)
--------- ---------- ---------- ----------
Capital stock transactions:
Net proceeds from sales.......................... 119,520,042 55,622,979 724,862,042 497,338,051
Net proceeds from reinvestment of
distributions.................................. 19,399,464 12,294,787 97,822,842 19,395,497
Cost of shares redeemed.......................... (47,987,766) (21,085,965) (441,202,464) (169,521,331)
--------- ---------- ---------- ----------
Net increase in net assets from capital stock
transactions..................................... 90,931,740 46,831,801 381,482,420 347,212,217
--------- ---------- ---------- ----------
Total increase in net assets...................... 114,818,331 74,681,770 516,623,721 467,672,465
Net assets at beginning of period................. 163,786,988 89,105,218 1,299,549,447 831,876,982
--------- ---------- ---------- ----------
Net assets at end of period*...................... $278,605,319 $163,786,988 $1,816,173,168 $1,299,549,447
========= ========== ========== ==========
Shares issued and repurchased:
Shares outstanding at beginning of period......... 9,405,110 6,482,310 103,988,517 74,103,632
--------- ---------- ---------- ----------
Shares sold...................................... 6,564,476 3,491,105 55,561,307 42,535,462
Shares issued to shareholders from reinvestment
of distributions............................... 1,026,374 710,986 7,337,457 1,554,544
Shares repurchased............................... (2,515,593) (1,279,291) (33,584,487) (14,205,121)
--------- ---------- ---------- ----------
Net increase...................................... 5,075,257 2,922,800 29,314,277 29,884,885
--------- ---------- ---------- ----------
Shares outstanding at end of period............... 14,480,367 9,405,110 133,302,794 103,988,517
========= ========== ========== ==========
*Includes undistributed (distributions in excess
of) net investment income of:.................... $ 26,137 $ -- $ (3,305,547) $ 63,301
========= ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
56
<PAGE> 59
================================================================================
<TABLE>
<CAPTION>
LAZARD LAZARD
INTERNATIONAL LAZARD STRATEGIC
FIXED-INCOME BOND YIELD
PORTFOLIO PORTFOLIO PORTFOLIO
------------------------------- ------------------------------ -------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------------- ------------------------------ -------------------------------
1996 1995 1996 1995 1996 1995
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 3,416,057 $ 2,523,430 $ 3,534,432 $ 1,992,173 $ 9,542,264 $ 5,620,832
(8,440) 2,718,341 (361,558) 1,538,947 2,908,999 (216,880)
581,859 1,908,806 (186,850) 1,262,427 3,741,348 3,498,234
--------- --------- --------- -------- --------- ---------
3,989,476 7,150,577 2,986,024 4,793,547 16,192,611 8,902,186
--------- --------- --------- -------- --------- ---------
(2,820,888) (2,523,430) (3,534,447) (1,992,173) (9,541,005) (5,620,832)
(160,803) (801,842) (398,228) (16,046) -- --
-- (1,799,275) -- -- -- (88,052)
(734,353) -- -- -- -- --
--------- --------- --------- -------- --------- ---------
(3,716,044) (5,124,547) (3,932,675) (2,008,219) (9,541,005) (5,708,884)
--------- --------- --------- -------- --------- ---------
50,423,517 13,752,209 37,705,183 24,539,689 136,188,901 22,589,307
2,918,749 4,630,486 3,369,069 1,820,886 8,738,563 5,445,026
(10,810,163) (10,587,176) (16,304,852) (7,556,034) (30,970,196) (15,082,042)
--------- --------- --------- -------- --------- ---------
42,532,103 7,795,519 24,769,400 18,804,541 113,957,268 12,952,291
--------- --------- --------- -------- --------- ---------
42,805,535 9,821,549 23,822,749 21,589,869 120,608,874 16,145,593
45,624,303 35,802,754 46,083,403 24,493,534 78,473,924 62,328,331
--------- --------- --------- -------- --------- ---------
$ 88,429,838 $ 45,624,303 $ 69,906,152 $ 46,083,403 $ 199,082,798 $ 78,473,924
========= ========= ========= ======== ========= =========
4,204,312 3,499,078 4,560,693 2,650,557 8,245,403 6,846,915
--------- --------- --------- -------- --------- ---------
4,741,001 1,219,616 3,820,205 2,500,066 13,957,489 2,439,621
274,229 418,379 343,410 186,028 896,358 590,779
(1,018,505) (932,761) (1,651,273) (775,958) (3,206,671) (1,631,912)
--------- --------- --------- -------- --------- ---------
3,996,725 705,234 2,512,342 1,910,136 11,647,176 1,398,488
--------- --------- --------- -------- --------- ---------
8,201,037 4,204,312 7,073,035 4,560,693 19,892,579 8,245,403
========= ========= ========= ======== ========= =========
$ (386,092) $ 24,037 $ 1,340 $ 40,199 $ (10,914) $ 62,968
========= ========= ========= ======== ========= =========
</TABLE>
57
<PAGE> 60
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LAZARD
LAZARD INTERNATIONAL
SMALL CAP SMALL CAP
PORTFOLIO PORTFOLIO
--------------------------------- -------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
--------------------------------- -------------------------------
1996 1995 1996 1995
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Investment income--net..................... $ 4,976,988 $ 4,858,913 $ 1,941,413 $ 1,529,624
Realized gain (loss) on investments and
foreign exchange transactions............ 80,557,846 48,772,968 2,550,566 (214,539)
Unrealized appreciation
(depreciation)--net...................... 101,358,499 45,544,351 12,550,118 502,925
---------- ---------- --------- ---------
Net increase (decrease) in net assets
resulting from operations.................. 186,893,333 99,176,232 17,042,097 1,818,010
---------- ---------- --------- ---------
Distributions to shareholders:
From investment income--net................ (4,976,988) (4,858,913) (725,223) --
From realized gains--net................... (59,176,170) (48,772,968) (1,565,580) --
In excess of investment income--net........ -- -- -- --
In excess of realized gains--net........... -- (778,930) -- (594,717)
---------- ---------- --------- ---------
(64,153,158) (54,410,811) (2,290,803) (594,717)
---------- ---------- --------- ---------
Capital stock transactions:
Net proceeds from sales.................... 414,195,319 239,938,336 27,263,092 45,713,631
Net proceeds from reinvestment of
distributions............................ 61,545,749 54,147,470 2,230,609 584,483
Cost of shares redeemed.................... (263,446,823) (122,152,846) (32,806,897) (15,419,174)
---------- ---------- --------- ---------
Net increase in net assets from capital
stock transactions......................... 212,294,245 171,932,960 (3,313,196) 30,878,940
---------- ---------- --------- ---------
Total increase in net assets................ 335,034,420 216,698,381 11,438,098 32,102,233
Net assets at beginning of period........... 646,371,004 429,672,623 115,534,439 83,432,206
---------- ---------- --------- ---------
Net assets at end of period*................ $ 981,405,424 $ 646,371,004 $ 126,972,537 $ 115,534,439
========== ========== ========= =========
Shares issued and repurchased:
Shares outstanding at beginning of period... 40,536,196 29,940,743 10,986,319 8,034,455
---------- ---------- --------- ---------
Shares sold................................ 24,088,616 14,336,125 2,437,042 4,381,937
Shares issued to shareholders from
reinvestment of distributions............ 3,410,098 3,421,484 191,087 56,201
Shares repurchased......................... (14,804,720) (7,162,156) (2,973,908) (1,486,274)
---------- ---------- --------- ---------
Net increase (decrease)..................... 12,693,994 10,595,453 (345,779) 2,951,864
---------- ---------- --------- ---------
Shares outstanding at end of period......... 53,230,190 40,536,196 10,640,540 10,986,319
========== ========== ========= =========
*Includes undistributed (distributions in
excess of) net investment income of:....... $ -- $ -- $ (46,947) $ (22,525)
========== ========== ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
58
<PAGE> 61
================================================================================
<TABLE>
<CAPTION>
LAZARD
GLOBAL LAZARD
LAZARD EQUITY BANTAM VALUE
EMERGING MARKETS PORTFOLIO PORTFOLIO
PORTFOLIO ------------ ------------
------------------------------ PERIOD ENDED PERIOD ENDED
YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31,
------------------------------ ------------ ------------
1996 1995 1996 1996
- ----------------------------------------------
<S> <C> <C> <C> <C>
$ 1,378,881 $ 288,483 $ 88,254 $ 501,401
5,813,649 (1,803,813) 359,747 2,286,480
8,058,764 591,707 606,756 3,026,512
--------- -------- -------- ---------
15,251,294 (923,623) 1,054,757 5,814,393
--------- -------- -------- ---------
(1,060,033) (136,100) (82,372) (501,401)
(1,656,767) -- -- (1,351,185)
== == == ==
--------- -------- -------- ---------
(2,716,800) (136,100) (82,372) (1,852,586)
--------- -------- -------- ---------
102,675,561 28,211,253 9,221,560 29,848,114
2,454,675 113,328 75,948 1,737,733
(7,553,028) (9,073,505) (485,870) (998,307)
--------- -------- -------- ---------
97,577,208 19,251,076 8,811,638 30,587,540
--------- -------- -------- ---------
110,111,702 18,191,353 9,784,023 34,549,347
35,216,258 17,024,905 -- --
--------- -------- -------- ---------
$ 145,327,960 $ 35,216,258 $9,784,023 $34,549,347
========= ======== ======== =========
3,812,846 1,727,237 -- --
--------- -------- -------- ---------
9,629,141 3,079,834 891,432 2,685,157
220,357 12,192 6,692 140,707
(692,935) (1,006,417) (46,053) (78,975)
--------- -------- -------- ---------
9,156,563 2,085,609 852,071 2,746,889
--------- -------- -------- ---------
12,969,409 3,812,846 852,071 2,746,889
========= ======== ======== =========
$ (105,600) $ 3,727 $ (10,696) $ --
========= ======== ======== =========
</TABLE>
59
<PAGE> 62
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS LESS:
---------------------------------------- ------------------------------
NET REALIZED DIVIDENDS FROM
NET ASSET VALUE, AND UNREALIZED TOTAL FROM AND IN EXCESS DISTRIBUTIONS
BEGINNING INVESTMENT GAIN (LOSS) INVESTMENT OF INVESTMENT FROM REALIZED
PERIOD OF PERIOD INCOME-NET ON INVESTMENTS OPERATIONS INCOME-NET GAINS
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LAZARD EQUITY PORTFOLIO
Year ended
12/31/96................ $17.41 $0.331 $ 3.064 $ 3.395 $ (0.329) $(1.236)
12/31/95................ 13.75 0.226 4.931 5.157 (0.175) (1.322)
12/31/94................ 13.89 0.141 0.441 0.582 (0.152) (0.574)
12/31/93................ 12.74 0.158 2.172 2.330 (0.165) (1.015)
12/31/92................ 12.34 0.123 0.518 0.641 (0.132) (0.109)
12/31/91................ 11.53 0.107 3.051 3.158 (0.082) (2.266)
12/31/90................ 12.34 0.191 (0.778) (0.587) (0.223)(a) --
12/31/89................ 10.32 0.204 2.231 2.435 (0.214) (0.201)
12/31/88................ 8.73 0.181 1.597 1.778 (0.188) --
6/1/87* to 12/31/87..... 10.00 0.110 (1.280) (1.170) (0.100) --
- ---------------------------------------------------------------------------------------------------------------------
LAZARD INTERNATIONAL EQUITY PORTFOLIO
Year ended
12/31/96................ 12.50 0.166 1.767 1.933 (0.191) (0.622)
12/31/95................ 11.23 0.187 1.288 1.475 (0.091) (0.114)
12/31/94................ 12.32 0.078 (0.049) 0.029 -- (1.123)
12/31/93................ 9.48 0.021 2.919 2.940 (0.021) (0.079)
12/31/92................ 10.30 0.097 (0.779) (0.682) (0.138) --
10/29/91* to 12/31/91... 10.00 0.020 0.300 0.320 (0.020) --
- ---------------------------------------------------------------------------------------------------------------------
LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO
Year ended
12/31/96................ 10.85 0.539 0.032 0.571 (0.592) (0.049)
12/31/95................ 10.23 0.701 1.250 1.951 (1.129) (0.202)
12/31/94................ 10.51 0.592 (0.161) 0.431 (0.593) (0.116)
12/31/93................ 9.79 0.571 0.912 1.483 (0.570) (0.193)
12/31/92................ 10.28 0.614 (0.403) 0.211 (0.614) (0.087)
11/8/91* to 12/31/91.... 10.00 0.110 0.280 0.390 (0.110) --
- ---------------------------------------------------------------------------------------------------------------------
LAZARD BOND PORTFOLIO
Year ended
12/31/96................ 10.10 0.559 (0.141) 0.418 (0.568) (0.070)
12/31/95................ 9.24 0.595 0.863 1.458 (0.594) (0.004)
12/31/94................ 10.28 0.584 (1.010) (0.426) (0.584) (0.029)
12/31/93................ 10.21 0.551 0.302 0.853 (0.551) (0.232)
12/31/92................ 10.25 0.577 (0.004) 0.573 (0.577) (0.036)
11/12/91* to 12/31/91... 10.00 0.140 0.250 0.390 (0.140) --
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
See footnotes on page 64.
The accompanying notes are an integral part of these financial statements.
60
<PAGE> 63
================================================================================
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET
ASSETS NET ASSETS,
NET ASSET ----------------------- PORTFOLIO AVERAGE END OF
VALUE, END TOTAL INVESTMENT TURNOVER COMMISSION PERIOD
OF PERIOD RETURN++ EXPENSES INCOME-NET RATE RATE** (000'S)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$19.24 19.9% 0.89%(h),(i) 1.87% 65.80% $ 0.0582 $ 278,605
17.41 37.7 0.92(g) 1.45 80.72 163,787
13.75 4.2 1.05 1.15 66.52 89,105
13.89 18.6 1.05(d) 1.31 63.92 47,123
12.74 5.3 1.05(c) 1.19 174.45 24,646
12.34 27.5 1.93 0.84 90.00 14,821
11.53 (4.7) 1.77 1.62 70.00 14,397
12.34 23.6 1.78 1.71 78.00 16,239
10.32 20.4 1.84 1.86 111.00 12,336
8.73 (11.7) 1.68+ 1.93+ 97.00 10,186
- ----------------------------------------------------------------------------------------------------
13.62 15.6 0.91(h),(i) 1.93 38.59 0.0219 1,816,173
12.50 13.1 0.95(g) 1.82 62.54 1,299,549
11.23 0.2 0.94 0.75 106.15 831,877
12.32 31.0 0.99 1.13 86.95 603,642
9.48 (6.6) 1.05(c) 2.13 60.37 176,005
10.30 3.2 1.05+,(b) 2.19+ 0.18 4,967
- ----------------------------------------------------------------------------------------------------
10.78 5.5 1.05(h) 5.54 241.85 -- 88,430
10.85 19.4 1.05(f),(g) 5.99 189.97 45,624
10.23 4.2 1.05(e) 5.68 65.90 35,803
10.51 15.7 1.05(d) 5.50 115.84 13,546
9.79 2.0 1.05(c) 6.08 256.20 8,183
10.28 3.9 1.05+,(b) 4.82+ 6.43 1,427
- ----------------------------------------------------------------------------------------------------
9.88 4.4 0.80(h),(i) 5.77 460.29 -- 69,906
10.10 16.2 0.80(f),(g) 6.07 244.28 46,083
9.24 (4.2) 0.80(e) 6.11 120.51 24,494
10.28 8.6 0.80(d) 5.22 174.63 13,562
10.21 5.7 0.80(e) 5.59 131.38 8,532
10.25 3.9 0.80+,(b) 5.50+ 10.46 3,256
- ----------------------------------------------------------------------------------------------------
</TABLE>
See footnotes on page 64.
The accompanying notes are an integral part of these financial statements.
61
<PAGE> 64
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
FINANCIAL HIGHLIGHTS (CONTINUED)
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS LESS:
---------------------------------------- ------------------------------
NET REALIZED DIVIDENDS FROM
NET ASSET VALUE, AND UNREALIZED TOTAL FROM AND IN EXCESS DISTRIBUTIONS
BEGINNING INVESTMENT GAIN (LOSS) INVESTMENT OF INVESTMENT FROM REALIZED
PERIOD OF PERIOD INCOME-NET ON INVESTMENTS OPERATIONS INCOME-NET GAINS
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
LAZARD STRATEGIC YIELD PORTFOLIO
Year ended
12/31/96................ $ 9.52 $0.758 $ 0.498 $ 1.256 $ (0.766) $ 0.000
12/31/95................ 9.10 0.748 0.430 1.178 (0.758) --
12/31/94................ 10.13 0.762 (0.990) (0.228) (0.761) (0.039)
12/31/93................ 9.50 0.644 0.738 1.382 (0.633) (0.119)
12/31/92................ 9.97 1.049 (0.450) 0.599 (1.049) (0.020)
10/1/91* to 12/31/91.... 10.00 0.250 (0.030) 0.220 (0.250) --
- ---------------------------------------------------------------------------------------------------------------------
LAZARD SMALL CAP PORTFOLIO
Year ended
12/31/96***............. 15.95 0.105 3.680 3.785 (0.105) (1.190)
12/31/95................ 14.35 0.126 2.951 3.077 (0.154) (1.323)
12/31/94................ 15.26 0.070 0.220 0.290 (0.042) (1.158)
12/31/93................ 12.98 0.019 3.830 3.849 (0.020) (1.549)
12/31/92................ 10.42 0.019 2.560 2.579 (0.019) --
10/30/91* to 12/31/91... 10.00 0.030 0.420 0.450 (0.030) --
- ---------------------------------------------------------------------------------------------------------------------
LAZARD INTERNATIONAL SMALL CAP PORTFOLIO
Year ended
12/31/96................ 10.52 0.079 1.551 1.630 (0.082) (0.138)
12/31/95................ 10.38 0.139 0.056 0.195 -- (0.055)
12/31/94................ 10.86 0.072 (0.548) (0.476) -- --
12/1/93* to 12/31/93.... 10.00 0.004 0.859 0.863 (0.003) --
- ---------------------------------------------------------------------------------------------------------------------
LAZARD EMERGING MARKETS PORTFOLIO
Year ended
12/31/96................ 9.24 0.074 2.107 2.181 (0.083) (0.128)
12/31/95................ 9.86 0.080 (0.660) (0.580) (0.040) --
7/15/94* to 12/31/94.... 10.00 0.010 (0.154) (0.144) -- --
- ---------------------------------------------------------------------------------------------------------------------
LAZARD GLOBAL EQUITY PORTFOLIO
1/4/96* to 12/31/96..... 10.00 0.085 1.492 1.577 (0.097) 0.000
- ---------------------------------------------------------------------------------------------------------------------
LAZARD BANTAM VALUE PORTFOLIO
3/5/96* to 12/31/96..... 10.00 0.218 3.108 3.326 (0.218) (0.528)
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
See footnotes on page 64.
The accompanying notes are an integral part of these financial statements.
62
<PAGE> 65
================================================================================
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET
ASSETS NET ASSETS,
NET ASSET ----------------------- PORTFOLIO AVERAGE END OF
VALUE, END TOTAL INVESTMENT TURNOVER COMMISSION PERIOD
OF PERIOD RETURN++ EXPENSES INCOME-NET RATE RATE** (000'S)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$10.01 13.7% 1.08%(h),(i) 7.88% 188.88% -- $ 199,083
9.52 13.6 1.09(g) 8.02 205.33 78,474
9.10 (2.3) 1.05(e) 8.03 195.18 62,328
10.13 15.6 1.05(d) 6.36 215.60 34,943
9.50 6.0 1.05(c) 10.57 122.88 9,641
9.97 2.1 1.05+,(b) 9.52+ 11.26 4,256
- ----------------------------------------------------------------------------------------------------
18.44 23.9 0.84(h),(i) 0.60 50.58 0.0575 981,405
15.95 21.5 0.84(g) 0.90 69.68 646,371
14.35 2.0 0.85 0.51 70.11 429,673
15.26 30.1 0.88 0.16 98.47 350,952
12.98 24.8 1.05(c) 0.29 106.91 168,171
10.42 4.5 1.05+,(b) 2.47+ 5.50 2,512
- ----------------------------------------------------------------------------------------------------
11.93 15.6 1.12 1.67 100.98 0.0150 126,973
10.52 1.9 1.13(g) 1.56 117.53 115,534
10.38 (4.5) 1.05(e) 0.95 112.92 83,432
10.86 8.7 1.05+,(d) 1.76+ 0.84 13,522
- ----------------------------------------------------------------------------------------------------
11.21 23.6 1.38(h),(i) 1.40 50.87 0.0042 145,328
9.24 (5.9) 1.30(f),(g) 1.22 102.22 35,216
9.86 (1.4) 1.30+,(e) 0.31+ 30.68 17,025
- ----------------------------------------------------------------------------------------------------
11.48 15.8 1.05+, h),(i) 1.70+ 73.71 0.0422 9,784
- ----------------------------------------------------------------------------------------------------
12.58 33.3 1.05+, h),(i) 2.80+ 261.60 0.0402 34,549
- ----------------------------------------------------------------------------------------------------
</TABLE>
See footnotes on page 64.
The accompanying notes are an integral part of these financial statements.
63
<PAGE> 66
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
* Commencement of operations.
** The average commission rate paid is applicable for Portfolios that invest
greater than 10% of average assets in equity security transactions on which
commissions are charged. This disclosure is required for fiscal periods
beginning on or after September 1, 1995.
*** Does not include the operations of Special Equity Portfolio from January 1,
1996 through June 28, 1996 (acquisition date). See Note 8.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated.
(a) Includes $.032 per share of distributions from paid-in capital, none of
which is a return of capital for tax purposes.
(b) If the Investment Manager had not waived management fees and reimbursed
certain expenses the ratio of expenses to average net assets (and net
investment income per share) would have been 10.84%+ ($0.056) for
International Equity Portfolio, 20.70%+ ($0.293) for International
Fixed-Income Portfolio, 7.80%+ ($.0114) for Bond Portfolio, 6.22%+ ($0.075)
for Strategic Yield Portfolio, and 11.05%+ ($0.085) for Small Cap Portfolio.
(c) If the Investment Manager had not waived management fees and reimbursed
certain expenses the ratio of expenses to average net assets (and net
investment income per share) would have been 1.53% ($0.050) for Equity
Portfolio, 1.37% ($0.014) for International Equity Portfolio, 2.80% ($0.176)
for International Fixed-Income Portfolio, 3.23% ($0.0251) for Bond
Portfolio, 2.99% ($0.192) for Strategic Yield Portfolio, and 1.14%+ ($0.006)
for Small Cap Portfolio.
(d) If the Investment Manager had not waived management fees and reimbursed
certain expenses the ratio of expenses to average net assets (and net
investment income per share) would have been 1.18% ($0.020) for Equity
Portfolio, 2.87%+ ($0.010) for International Small Cap Portfolio, 2.08%
($0.119) for International Fixed-Income Portfolio, 1.76% ($0.101) for Bond
Portfolio, and 1.63% ($0.058) for Strategic Yield Portfolio.
(e) If the Investment Manager had not waived management fees and reimbursed
certain expenses the ratio of expenses to average net assets (and net
investment income per share) would have been 1.26% ($0.016) for
International Small Cap Portfolio, 1.51% ($0.048) for International
Fixed-Income Portfolio, 1.23% ($0.041) for Bond Portfolio, 1.15% ($0.009)
for Strategic Yield Portfolio, and 2.31%+ ($0.034) for Emerging Markets
Portfolio.
(f) If the Investment Manager and Administrator had not waived certain fees and
reimbursed certain expenses and the Portfolios had not paid fees indirectly
the ratio of expenses to average net assets (and net investment income per
share) would have been 1.25% ($0.678) for International Fixed-Income
Portfolio, 0.97% ($0.578) for Bond Portfolio, and 2.00% ($0.034) for
Emerging Markets Portfolio.
(g) Includes fees paid indirectly. Excluding fees paid indirectly, the expense
ratios would have been 0.92% for Equity Portfolio, 0.95% for International
Equity Portfolio, 1.05% for International Fixed-Income Portfolio, 0.80% for
Bond Portfolio, 1.08% for Strategic Yield Portfolio, 0.84% for Small Cap
Portfolio, 1.13% for International Small Cap Portfolio, and 1.30% for
Emerging Markets Portfolio.
(h) If the Investment Manager and Administrator had not waived certain fees and
reimbursed certain expenses and the Portfolios had not paid fees indirectly
the ratio of expenses to average net assets (and net investment income per
share) would have been 0.89% ($0.331) for Equity Portfolio, 0.91% ($0.166)
for International Equity Portfolio, 1.21% ($0.523) for International
Fixed-Income Portfolio, 0.88% ($0.551) for Bond Portfolio, 1.08% ($0.756)
for Strategic Yield Portfolio, 0.84% ($0.105) for Small Cap Portfolio, 1.48%
($0.068) for Emerging Markets Portfolio, 5.06% ($0.115) for Global Equity
Portfolio, and 1.91% ($0.151) for Bantam Value Portfolio.
(i) Includes fees paid indirectly. Excluding fees paid indirectly the expense
ratio would have been 0.89% for Equity Portfolio, 0.90% for International
Equity Portfolio, 0.80% for Bond Portfolio, 1.05% for Strategic Yield
Portfolio, 0.84% for Small Cap Portfolio, 1.36% for Emerging Markets
Portfolio, 1.05% for Global Equity Portfolio, and 1.05% for Bantam Value
Portfolio.
64
<PAGE> 67
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION
The Lazard Funds, Inc. (the "Fund") was incorporated in Maryland on May 17, 1991
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 was
originally composed of five portfolios: Lazard International Equity Portfolio
("International Equity Portfolio"), Lazard International Fixed-Income Portfolio
("International Fixed-Income Portfolio"), Lazard Bond Portfolio ("Bond
Portfolio"), Lazard Strategic Yield Portfolio ("Strategic Yield Portfolio") and
Lazard Small Cap Portfolio ("Small Cap Portfolio").
Effective January 1, 1992, Lazard Equity Fund and Lazard Special Equity Fund,
Inc. ("Old Funds") were reorganized as separate portfolios ("New Funds") of the
Fund, namely Lazard Equity Portfolio ("Equity Portfolio"), and Lazard Special
Equity Portfolio ("Special Equity Portfolio"), respectively. On June 28, 1996,
Small Cap Portfolio acquired the net assets of Special Equity Portfolio (see
Note 8). The per share data for Equity Portfolio includes per share data for the
Old Funds and New Funds.
Effective November 1, 1993, Lazard International Small Cap Portfolio
("International Small Cap Portfolio") and Lazard Emerging Markets Portfolio
("Emerging Markets Portfolio") were added to the Fund.
Effective December 30, 1995, Lazard Global Equity Portfolio ("Global Equity
Portfolio"), Lazard Bantam Value Portfolio ("Bantam Value Portfolio") and Lazard
Emerging World Funds Portfolio were added to the Fund. Global Equity Portfolio
and Bantam Value Portfolio commenced investment operations on January 4, 1996,
and March 5, 1996, respectively.
Effective November 1, 1996, the Fund offers Institutional Shares and Retail
Shares of each Portfolio. Institutional Shares and Retail Shares are identical,
except as to minimum investment requirements and the services offered to and
expenses borne by each class of shares. The Retail classes commenced operations
as follows: International Fixed-Income Portfolio and Emerging Markets Portfolio
on January 8, 1997; International Small Cap Portfolio on January 20, 1997;
International Equity Portfolio, Strategic Yield Portfolio and Bantam Value
Portfolio on January 23, 1997; Small Cap Portfolio and Global Equity Portfolio
on January 30, 1997; and Equity Portfolio on February 5, 1997.
Equity Portfolio is operated as "diversified" as defined in the Act. The
remaining Portfolios are "non-diversified."
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies:
(a) VALUATION OF INVESTMENTS--The value of securities, other than options listed
on national securities exchanges and debt securities maturing in 60 days or
less, is determined as of the close of regular trading on the New York Stock
Exchange. 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. New York time). Debt securities maturing in sixty days or
less are valued at amortized cost except where to do so would not reflect
accurately their fair value, in which case such securities are valued at fair
value as determined in good faith by the Fund's Board of Directors and in
accordance with procedures adopted by the Board of Directors. Each security for
which the primary market is on a national securities exchange is valued at the
last sale price in the principal exchange on which it is traded, or,
65
<PAGE> 68
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
if no sales are reported on such exchange on that day, at the closing bid price.
Any security held by any Portfolio for which the primary market is the National
Association of Securities Dealers Automated Quotations National Market System is
valued at the last sale price as quoted by such System or, in the absence of any
sale on the valuation date, at the closing bid price. Any other unlisted
security for which current over-the-counter market quotations or bids are
readily available is valued at its last quoted bid price or, if available, the
mean of two such prices.
All other securities and other assets for which current market quotations are
not readily available are valued at fair value as determined in good faith by
the Fund's Board of Directors and in accordance with procedures adopted 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. Dividend income is
recorded on the ex-date. Interest income is accrued daily. The Portfolios
amortize premiums and discounts on fixed income securities.
(c) FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS--International Equity Portfolio,
International Fixed-Income Portfolio, Strategic Yield Portfolio, International
Small Cap Portfolio, Emerging Markets Portfolio and Global Equity Portfolio (the
"eligible portfolios") may enter into forward foreign currency exchange
contracts ("forward contracts"). To the extent permitted by each eligible
portfolio's investment objectives, restrictions and policies, forward contracts
may be entered into for risk management purposes. Depending on how such
strategies are utilized, the risks associated with their use may vary.
Certain risks may arise upon entering into these forward contracts from the
possible movement in foreign exchange rates and the potential inability of
counterparties to meet the terms of their agreements. Forward contracts are
presented at an amount representing the net increase or decrease in value from
the date that the forward contract was entered into, to the financial statement
date. Gains and losses on these forward contracts are included in realized or
unrealized foreign exchange transactions in the accompanying Statements of
Operations.
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.
(d) FOREIGN CURRENCY TRANSLATIONS--The books and records of the portfolios are
maintained in U.S. dollars. Foreign exchange transactions are translated into
U.S. dollars on the following basis:
(i) the foreign currency market value of investment securities, contracts, and
other assets and liabilities stated in foreign currencies are translated at the
exchange rate at the end of the period; and
(ii) purchases and sales of investment securities, dividends, interest income
and expenses are translated at the rates of exchange prevailing on the
respective dates of such transactions.
The portfolios do not isolate that portion of the results of operations from
changes in
66
<PAGE> 69
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
foreign exchange rates on investments from the fluctuations arising from changes
in market prices of securities held. Such fluctuations are included with net
realized and unrealized gain or loss from investments. Foreign exchange gain
(loss) is treated as ordinary income for federal income tax purposes to the
extent constituting "Section 988 Transactions" pursuant to the Internal Revenue
Code ("IRC"), including, currency gains (losses) related to the sale of debt
securities, forward foreign currency exchange contracts, payments of
liabilities, and collections of receivables.
(e) FEDERAL INCOME TAXES--The Fund's policy is to qualify each Portfolio as a
regulated investment company under the IRC and to distribute all of its taxable
income, including any realized net capital gains to shareholders. Therefore, no
Federal income tax provision is required.
(f) DIVIDENDS AND DISTRIBUTIONS--The Fund intends to declare dividends from net
investment income daily on shares of International Fixed-Income Portfolio, Bond
Portfolio and Strategic Yield Portfolio and pay such dividends monthly.
Dividends from net investment income on shares of Equity Portfolio will be
declared and paid quarterly. Dividends from net investment income on shares of
International Equity Portfolio, Small Cap Portfolio, International Small Cap
Portfolio, Emerging Markets Portfolio, Global Equity Portfolio and Bantam Value
Portfolio will be declared and paid annually. During any particular year, net
realized gains from investment transactions in excess of available capital loss
carry forwards would be taxable to the Fund if not distributed. The Fund intends
to declare and distribute these amounts annually to shareholders; however, to
avoid taxation a second distribution may be required.
Income distributions 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, and realized gains--net, and paid in capital.
As a result of these book-tax differences the Portfolios made the following
reclassifications to the capital accounts for the period ended December 31,
1996:
<TABLE>
<CAPTION>
INCREASE (DECREASE)
-----------------------------------------------
UNDISTRIBUTED ACCUMULATED
INVESTMENT REALIZED GAIN
PAID IN CAPITAL INCOME-NET (LOSS)-NET
--------------- ------------- -------------
<S> <C> <C> <C>
International
Equity $ 52,636 $ (9,388,800) $ 9,336,164
International
Fixed-Income 37,253 (1,005,298) 968,045
Bond 37,806 (38,844) 1,038
Strategic Yield (8,181) (75,141) 83,322
International
Small Cap (62,270) (1,240,612) 1,302,882
Emerging Markets -- (428,175) 428,175
Global Equity -- (16,578) 16,578
</TABLE>
(g) 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 with the exception of the initial registration costs for Global Equity
Portfolio and Bantam Value Portfolio, which are being amortized over a one year
period. In the event that any of the initial shares of any of the Portfolios
during such period are redeemed, 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.
(h) ALLOCATION OF EXPENSES--Expenses not directly chargeable to a specific
Portfolio are allocated primarily on the basis of relative net assets.
67
<PAGE> 70
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
(i) FEES PAID INDIRECTLY--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 expense, and reflect the amount of
such credits as a reduction in total expenses.
(j) 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 AGREEMENT AND
OTHER TRANSACTIONS WITH AFFILIATES
The Fund has entered into an investment management agreement (the "Management
Agreement") with Lazard Freres Asset Management (the "Manager"), a division of
Lazard Freres & Co. LLC, on behalf of each Portfolio. Pursuant to the Management
Agreement, 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
Portfolios pays the 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: Equity Portfolio, 0.75%; International Equity Portfolio,
0.75%; International Fixed-Income Portfolio, 0.75%; Bond Portfolio, 0.50%;
Strategic Yield Portfolio, 0.75%; Small Cap Portfolio, 0.75%; International
Small Cap, 0.75%; Emerging Markets Portfolio, 1.00%; Global Equity Portfolio,
0.75% and Bantam Value Portfolio, 0.75%. The investment management fees are
accrued daily and payable monthly.
Under certain state regulations, if the total expenses of any of the Portfolios
exceed certain limitations the Fund's Manager is required to reimburse the
Portfolio for such excess.
The Manager has agreed to maintain the annualized total operating expenses of
International Fixed-Income Portfolio at a level not to exceed 1.05%; Emerging
Market Portfolio not to exceed 1.30%; Bond Portfolio not to exceed 0.80%; Global
Equity Portfolio not to exceed 1.05% and Bantam Value Portfolio not to exceed
1.05% of the average daily value of net assets of the relevant portfolio until
December 31, 1996 or such time as the respective Portfolio reaches total net
assets of $100 million.
For the year ended December 31, 1996, the Manager did not impose all or part of
its management fee amounting to $100,766 for International Fixed-Income
Portfolio, $37,009 for Bond Portfolio, $87,108 for Emerging Markets Portfolio,
$39,032 for Global Equity Portfolio and $126,612 for Bantam Value Portfolio. For
the same period the Manager reimbursed expenses amounting to $131,697 for Global
Equity Portfolio.
Effective June 1, 1995, the Fund has engaged 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 plus 0.02% of
average assets up to average assets of $1 billion and plus 0.01% of average
assets over $1 billion. State Street has agreed to waive the $37,500 fee for the
Bond, Emerging Markets, Global Equity and Bantam Value Portfolios for one year
or until each Portfolio reaches net assets of $50 million.
The Fund has a distribution agreement with Lazard Freres & Co. LLC. As the
distributor, Lazard Freres & Co. LLC acts as distributor for shares of each of
the Portfolios and
68
<PAGE> 71
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
bears the cost of printing and mailing prospectuses to potential investors and
of any advertising expenses incurred in connection with the distribution of
shares.
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, $20,000 per year, plus $1,000 per meeting attended, and reimburses
them for travel and out of pocket expenses.
4. SECURITY TRANSACTIONS AND TRANSACTIONS
WITH AFFILIATES
Purchase and sales of portfolio securities, (excluding short-term securities),
for the year ended December 31, 1996 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------- -------------
<S> <C> <C>
Equity $ 224,178,287 $ 150,566,511
International Equity 882,990,360 574,052,350
International Fixed-
Income(1) 183,260,901 143,121,105
Bond(2) 304,133,102 275,966,802
Strategic Yield(3) 297,952,202 206,766,941
Small Cap 552,442,521 396,619,876
International Small
Cap 111,342,885 113,448,483
Emerging Markets 132,942,831 44,826,102
Global Equity 11,881,674 3,498,178
Bantam Value 78,183,456 50,889,431
</TABLE>
(1) Includes purchases and sales of U.S. Government securities of $104,538 and
$104,541 respectively.
(2) Includes purchases and sales of U.S. Government securities of $101,870,385
and $111,959,124 respectively.
(3) Includes purchases and sales of U.S. Government securities of $1,327,756 and
$2,345,974 respectively.
For the period, Small Cap Portfolio, Global Equity Portfolio, and Bantam Value
Portfolio paid brokerage commissions of $4,465, $1,104, and $12,195,
respectively, to Lazard Freres & Co. LLC for portfolio transactions executed on
behalf of the Portfolios.
5. FEDERAL INCOME TAXES
For Federal income tax purposes capital loss carryforwards (exclusive of certain
capital losses incurred after October 31) of $383,193 and $388,093 are available
to the extent provided by regulations to offset future realized capital gains of
Strategic Yield Portfolio and Bond Portfolio, respectively. These losses expire
in 2003 for Strategic Yield Portfolio and 2004 for Bond Portfolio.
Additionally, certain capital and currency losses incurred after October 31,
within the taxable year are deemed to arise on the first business day of the
Portfolio's next taxable year. During the year ended December 31, 1996,
International Fixed-Income Portfolio, International Small Cap Portfolio, and
Global Equity Portfolio elected to defer net capital and currency losses of
$477,781, $25,995, and $9,189, respectively.
6. PRIVATE PLACEMENTS
At December 31, 1996, Small Cap Portfolio held the following securities which
were private placements and therefore restricted as to resale, and represented
0.05% (at value) of the net assets of the Portfolio:
<TABLE>
<CAPTION>
ACQUISITION
SECURITY DATE VALUE
- -------------------------- ----------- --------
<S> <C> <C>
Interactive Light Holdings
Inc. 8.00%, 1/25/99 2/4/94 $500,000
Verbex Voice Systems, Inc.
Series F Preferred
(conv.) 7/12/93 0
Verbex Voice Systems, Inc. 6/7/94 0
Verbex Voice Systems, Inc.
10.00%, 6/30/97 3/17/95 0
---------
$500,000
=========
</TABLE>
Verbex Voice Systems Inc. and Interactive Light Holdings Inc. are valued as
determined in good faith by the Fund's Board of Directors and in accordance with
the procedures adopted by the Board of Directors. Small Cap Portfolio will bear
any cost, including those involved in registration
69
<PAGE> 72
- --------------------------------------------------------------------------------
The Lazard Funds, Inc.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
under the Securities Act of 1933, in connection with the disposition of such
securities.
7. LINE OF CREDIT
The Fund has entered into a $50 million Line of Credit Agreement (the
"Agreement") with State Street Bank and Trust Company effective April 24, 1996,
primarily for temporary or emergency purposes, including the meeting of
redemption requests that otherwise might require the untimely disposition of
securities. Interest on borrowings is payable at the bank's Cost of Funds plus
0.75%, on an annualized basis. Under this Agreement, the Fund has agreed to pay
a 0.125% per annum fee on the unused portion of the commitment, payable
quarterly in arrears. At December 31, 1996, the Fund had no borrowings under
this Agreement.
8. REORGANIZATION
On June 28, 1996, Lazard Special Equity Portfolio transferred its net assets to
Small Cap Portfolio in exchange for Small Cap Portfolio shares having an
aggregate net asset value equal to the value of the net assets of Special Equity
Portfolio acquired, pursuant to a plan of reorganization approved by Special
Equity Portfolio's shareholders on June 21, 1996. The total shares issued by
Small Cap Portfolio were 1,717,733, and, prior to the acquisition, the total net
assets of Special Equity Portfolio and Small Cap Portfolio were $30,392,878 and
$848,629,559, respectively. The total net assets of Small Cap Portfolio after
the acquisition were $879,022,437.
The following is financial information for Special Equity Portfolio for the
period January 1, 1996 through June 28, 1996 (acquisition date):
<TABLE>
<S> <C>
Investment income:
Dividends $ 431,270
Interest 86,177
------------
Total investment income 517,447
------------
Expenses:
Management fees* 269,813
Administration fees* 22,348
Custodian fees 21,854
Professional services 30,465
Registration fees 8,543
Shareholder services 34,412
Directors' fees and expenses 6,983
Shareholders' reports 1,526
Other 14,800
Management fees waived and
expenses reimbursed* (139,117)
Fees paid indirectly (1,849)
------------
Total expenses 269,778
------------
Net investment income 247,669
------------
Net realized gain on investments 2,288,120
Net unrealized depreciation (1,780,657)
------------
Net realized and unrealized gain
on investments 507,463
------------
Net increase in net assets
resulting from operations $ 755,132
============
Net increase in net assets
resulting from operations $ 755,132
Distributions to shareholders:
From net investment income (247,669)
From net realized gains (4,548,049)
Capital stock redemptions in
excess of sales and
reinvestment of distributions (12,586,739)
------------
Total decrease in net assets (16,627,325)
Net assets at beginning of
period 47,020,203
------------
Net assets at end of period 30,392,878
------------
Net assets transferred to Small
Cap Portfolio (30,392,878)
------------
Ending net assets $ 0
------------
</TABLE>
* For the period indicated, the Manager did not impose part of its management
fee amounting to $116,769 and reimbursed $22,348 for Administration fees.
70
<PAGE> 73
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The Lazard Funds, Inc.
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
The Board of Directors and Shareholders
The Lazard Funds, Inc.
We have audited the accompanying statements of assets and liabilities, including
the schedules of portfolio investments, of The Lazard Funds, Inc. (comprised of
Lazard Equity Portfolio, Lazard International Equity Portfolio, Lazard
International Fixed-Income Portfolio, Lazard Bond Portfolio, Lazard Strategic
Yield Portfolio, Lazard Small Cap Portfolio, Lazard International Small Cap
Portfolio, Lazard Emerging Markets Portfolio, Lazard Global Equity Portfolio and
Lazard Bantam Value Portfolio) as of December 31, 1996 and the related
statements of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended and the financial
highlights for each of the periods presented, except as noted below. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The financial
highlights for the periods through December 31, 1991 of Lazard Equity Portfolio
were audited by other auditors whose report dated February 5, 1992 expressed an
unqualified opinion on those financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights audited by us,
as stated above, present fairly, in all material respects, the financial
position of each of the respective portfolios constituting the Lazard Funds,
Inc. as of December 31, 1996, the results of their operations for the year then
ended and changes in their net assets for each of the two years in the period
then ended and the financial highlights for the periods presented in conformity
with generally accepted accounting principles.
ANCHIN, BLOCK & ANCHIN LLP
New York, New York
January 28, 1997
71
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<PAGE> 75
THE LAZARD FUNDS, INC.
30 Rockefeller Plaza
New York, New York 10020
TELEPHONE
(800) 823-6300
INVESTMENT MANAGER
Lazard Freres Asset Management
30 Rockefeller Plaza
New York, New York 10020
Telephone: (212) 632-6400
DISTRIBUTOR
Lazard Freres & Co. LLC
30 Rockefeller Plaza
New York, New York 10020
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
7 Hanover Square
New York, New York 10004
<PAGE> 76
Lazard Funds
30 Rockefeller Plaza
58th Floor
New York, NY 10020
Telephone 800-823-6300
This report is for the information of the stockholders of the The Lazard Funds,
Inc. Its use in connection with any offering of the Fund's shares is authorized
only in the case of a concurrent of prior delivery of the Fund's current
prospectus.
