Lazard Funds
Annual Report
December 31, 1997
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
- --------------------------------------------------------------------------------
BOARD OF DIRECTORS
- --------------------------
JOHN J. BURKE RETIRED VICE CHAIRMAN, MONTANA POWER COMPANY
KENNETH S. DAVIDSON PRIVATE INVESTOR
NORMAN EIG VICE CHAIRMAN, LAZARD FRERES & CO. LLC
CARL FRISCHLING PARTNER, KRAMER, LEVIN, NAFTALIS, NESSEN,
KAMIN & FRANKEL
HERBERT W. GULLQUIST VICE CHAIRMAN, LAZARD FRERES & CO. LLC
WILLIAM KATZ PRESIDENT, BBDO NEW YORK
LESTER Z. LIEBERMAN PRIVATE INVESTOR
RICHARD REISS CHAIRMAN, GEORGICA ADVISORS
JOHN RUTLEDGE PRESIDENT, RUTLEDGE AND COMPANY
OFFICERS
- --------------------------
NORMAN EIG CHAIRMAN OF THE BOARD
HERBERT W. GULLQUIST PRESIDENT
WILLIAM G. BUTTERLY, III VICE PRESIDENT AND SECRETARY
GUS COUTSOUROS TREASURER
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Overview ........................................... 2
Growth Charts ....................................... 7
Performance Table .................................... 13
Portfolio of Investments
Lazard Equity Portfolio ........................... 15
Lazard Mid Cap Portfolio ........................ 18
Lazard Small Cap Portfolio ........................ 20
Lazard Bantam Value Portfolio ..................... 24
Lazard Global Equity Portfolio .................. 26
Lazard International Equity Portfolio ............ 29
Lazard International Small Cap Portfolio ......... 32
Lazard Emerging Markets Portfolio ............... 35
Lazard Bond Portfolio ........................... 38
Lazard International Fixed-Income Portfolio ...... 44
Lazard Strategic Yield Portfolio .................. 53
Notes to Portfolios of Investments ............... 66
Statements of
Assets and Liabilities ........................... 68
Operations ....................................... 70
Changes in Net Assets ........................... 72
Financial Highlights ................................. 78
Notes to Financial Highlights ........................ 84
Notes to Financial Statements ........................ 86
Report of Independent Auditors ..................... 92
Tax Information (Unaudited) ........................ 95
</TABLE>
1
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
OVERVIEW
- --------------------------------------------------------------------------------
World markets in the fourth quarter of 1997 were overshadowed by the unfolding
drama of currency devaluations, corporate bankruptcies and subsequent market
plunges across Asia during the fourth quarter. The degree to which this
snowballing financial crisis unsettled world markets illustrates just how
integrated markets have become. Just as in the 1920s, when a wave of currency
crises and devaluations surprised investors and damaged world financial systems
before the Great Depression, few expected the devaluation of the Thai baht last
July to trigger a chain reaction of market corrections around the world.
Will these events lead to a global economic crisis, as they did in both the
1920's and in the mid 1970's after the oil shock? Or will they amount, as they
did after the 1987 crash, to little more than a temporary set-back? No one
knows for sure. However, three key factors will play a significant role in
determining the vigor of world markets over the next few years: the extent to
which free market reforms are embraced by Asian markets; the success of the
European Monetary Union; and the degree to which global consolidation can
maintain top-line growth, particularly in the U.S.
FREE MARKET REFORM--SILVER LINING FOR ASIA
Southeast Asian currency devaluations spread last summer from Thailand to
Malaysia, Singapore, Indonesia and the Philippines, unnerving investors. But
world markets were not shaken dramatically until Hong Kong's Hang Seng Index,
regarded as relatively immune to the mounting turmoil, plunged in October over
fears the territory would be forced to suspend its currency's longtime peg to
the U.S. dollar.
The subsequent impact across other parts of Asia was dramatic: South Korea, a
late victim of the turmoil, has since fallen into an economic collapse from its
enviable position as the 11th largest world economy. Massive devaluation of the
won is blamed. Sweeping changes that the IMF seeks to impose on South Korea in
return for its record $57 billion bailout require painful restructuring. These
include providing tougher supervision and accountability in its financial
sector, allowing greater foreign ownership of its companies and banks,
eliminating restrictions on foreign borrowing by Korean companies and reducing
government subsidization of mammoth industrial conglomerates called CHAEBOLS.
These debt-laden, low profit oligopolies have relied for decades on government
protection and assistance, not on the competitive forces of a free economy. Not
surprisingly, such reforms are politically unpopular, threatening massive job
losses, further bankruptcies, and a possible recession.
Equally harsh financial reforms are also being prescribed by the IMF and by
western investors as necessary medicine to cure some of Japan's recent ills.
These range from severe devaluation of the yen to a credit crunch and a crisis
at banks, plagued by bad loans and shrunken asset values. Corrective steps
would include the use of public money to bail out depositors in failed
financial institutions; an unforgiving govern-
2
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
OVERVIEW (CONTINUED)
- --------------------------------------------------------------------------------
ment policy of letting managements and shareholders pay the price for their
mistakes; and immediate disclosure about each institution's financial
condition. While the government has verbally embraced a "Big Bang" plan to
liberalize financial markets, some of its actions lately have appeared to
contradict these principles. Over the short-term, harsh reforms might
destabilize weak banks and, indeed, the entire economy.
Even corporate Japan has responded inconsistently to accelerating global
competition. Over the past two years, the Japanese equity market has become
polarized: exporters, forced to change to compete with global peers, have
prospered, while most domestic companies in regulated industries have
languished.
As the impact of Southeast Asian turmoil unfolds, true financial reform and
market-savvy corporations will become even more critical in protecting Japan's
fledgling recovery. In addition to its financial crisis, this export-dependent
nation now faces intense competition from neighboring countries where
currencies have plunged and demand has slackened. Waves of Japanese investment
in Southeast Asia over this decade may lead to additional defaults.
The unprecedented loss of wealth in Asia over the past six months, combined
with indiscriminate selling, afforded investors an unusual opportunity to buy
companies for a fraction of their true value. On a price to cash flow basis,
Emerging Markets, as defined by MSCI's Emerging Markets Free Index, are now
valued at just 70% of average world valuation. According to MSCI and Lazard
Asset Management, Japanese equities, which were valued at twice the average
world valuation in 1990, have plunged to around 80%. However, while these
valuations overall are now more attractive, identifying those companies that
will emerge winners and avoiding value traps will require intense scrutiny of
corporate balance sheets, replacement values and currency exposure. Because
economic reforms and corporate restructuring are proceeding at very different
paces across Asia, bottom-up stock picking in these markets will become more
critical.
SUCCESSFUL MONETARY UNION--AMONG EUROPE'S HIGHEST HOPES
Europe is well ahead of much of Asia in embracing free market standards of
minimal government intervention, shareholder activism and stringent financial
and accounting standards. Additionally, aggressive consolidation is becoming
more common there. On one October day alone, a handful of takeovers, heavily
concentrated in the financial services sector, was announced across Europe.
Last year's Thyssen-Krupp Hoesch merger (steel), the Grand Metropolitan-Guinness
combination (spirits) and the B.A.T. Industries Zurich Insurance alliance
(finance) were driven, to a large degree, by a quest for pan-European clout as
global competition intensifies. Why is this trend quickening now? The imminent
launch of the European Monetary Union (EMU) and its common currency, booming
stock prices to fund takeovers, Europe's discovery of
3
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
OVERVIEW (CONTINUED)
- --------------------------------------------------------------------------------
shareholder value and low interest rates are among the key reasons.
If EMU succeeds, Europe will gain real economic clout. It will become a
highly-integrated market of almost 300 million consumers where business will be
carried out in one currency as easily as between California and New York.
However, to achieve this lofty end, individual countries will have to surrender
control to an independent European Central Bank over issues like foreign trade,
expansion of the money supply and even government spending.
The opportunities-and risks-for investors loom large. Since a single currency
will make costs easier to compare, manufacturers will have to smooth out
current pricing disparities between goods in different countries. Countries
with lower tax rates may gain business, while those with higher rates may lose.
Interest rates will converge across Europe, creating winners and losers. In
addition, consolidation is likely to accelerate, as economic borders melt away.
True to the tenets of the free market, not all companies will survive this huge
transition. And even the "winners" may not succeed immediately.
To compound these risks, as most of Western Europe struggles to meet the
stringent standards demanded for inclusion in the EMU next year, any reduction
in exports to Asia, limited though they currently are, could destabilize more
delicate companies. As in the unstable markets of Asia these days, the imminent
transformation of Europe will demand that investors pay particular attention to
corporate accounting, cash flow, emerging competition and other details often
ignored in top-down investing.
MOST U.S. FUNDAMENTALS REMAIN VIGOROUS
While the long-term consequences of the Asian turmoil on the U.S. are
uncertain, the impact last year was limited. Despite sharp market drops and
heightened volatility last quarter, the S&P 500 still generated a total return
of over 33% last year, its 11th best in the S&P's 72-year history. In fact,
never before the thirty-six months through December 1997 has the S&P recorded a
125% return over three years. Strong corporate profits over this period
contributed heavily to this stellar performance.
Another reason has been the accelerating decline in nominal long-term interest
rates: the yield on a 30-year Treasury bond, is currently well below 6%. As
fixed-income investors know well, a 100 basis point decline in rates from 7%
represents a significantly bigger percentage decline than 100 basis point drop
from 8%.
Rates falling off a low base disproportionately benefit share prices, which are
often calculated based on the discounted present value of future cash flows has
recently reached the lowest rate for long-term government bonds since 1977.
Lower rates prompt consumers and companies to refinance, saving millions of
dollars of interest expense annually. Equally as important, they bring U.S.
stock valuations down to more reasonable levels.
4
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
OVERVIEW (CONTINUED)
- --------------------------------------------------------------------------------
Fed Chairman Alan Greenspan suggested that the late October market sell-off
might prove to be a "salutary event" for the U.S. economy, adding that "the
existing economic expansion . . . is about as solid as any I have seen."
Indeed, productivity, a measure of America's standard of living, rose to a 4.5%
annual rate in the third quarter after remaining dormant at just over 1% for
the last 20 years. Consumer prices posted their slowest growth rate in nearly
12 years in November, even while the jobless rate fell to its lowest level in
24 years and consumer confidence hit a 28-year high in December.
Inflation-adjusted U.S. GDP is forecast by many economists at 2.5% for this
year, with 0.5% having been shaved off due to the Asian crisis. But had the
Asian predicament not occurred, there is little doubt that the Fed may have
raised interest rates to prevent over-heating in the economy, which has been
expanding now for 7 years, the third-longest stretch in history. The rate
increase could have had a more significant economic impact than repercussions
from troubled Asian nations: only 11% of U.S. GDP comes from exports and only
about a tenth of U.S. exports go to these countries.
CONSOLIDATION--DRIVER OF THE TOP LINE
Despite these seemingly rosy economic underpinnings, warning signs are mounting
that the U.S. economy and the growth of corporate profits may slow down in
1998. Flagging Asian demand may penalize corporate earnings and depress price
flexibility even further. However, Lazard does not believe that the U.S. will
be flooded by cheap Asian imports, as inflation will rapidly negate the
cost-competitiveness of falling currencies and many Asian countries' exports
depend, in turn, on the import of components from countries with stronger
currencies. U.S. lenders to Asia, exporters of heavy capital goods and many
high tech companies are expected to suffer-some have cut earnings estimates.
Ford recently announced it was considering building its vehicles in Japan both
for sale and for export, reflecting a dramatic reversal in its ability to
compete against Japan's weakened yen.
But Asia and the strong dollar cannot be blamed, as they often are lately, for
the majority of corporate setbacks. Equally damaging is pricing power
paralysis, caused by low inflation and global overcapacity in many industries.
Indeed, the bond rally early in the new year followed recent comments by Alan
Greenspan that heightened fears of deflationary pressures in the U.S. Slowing
demand by debt-burdened Americans, mounting wage pressures and the maturing of
the corporate restructuring process are other economic soft spots.
The benefits of corporate restructuring broadly encompasses cost-cutting,
corporate downsizing, the sale of weak or non-core assets, and outsourcing have
been largely absorbed in the U.S. Some companies, including R.J.R. Nabisco and
General Motors, continue to pursue significant restructuring in their overseas
operations. The sustained health of American corporations will depend
increasingly on revitalized initiatives to stimulate top-line growth. To this
end, U.S. merger & acquisition activity is currently sweeping across
5
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
OVERVIEW (CONTINUED)
- --------------------------------------------------------------------------------
industries as varied as financial services, energy refining and marketing,
specialty chemicals and utilities. Focused consolidation, in such companies as
Knight Ridder, Compaq Computer and Fleet Financial Group, is being pursued to
help companies secure market leadership in core competencies and expand their
revenue streams.
Top-line growth from consolidation can also help alleviate declining
commissions and underwriting fees in investment banking. It can determine who
wins or loses in the competitive world of utility deregulation. It can raise
new revenues and reduce volatility in current ones. And it can provide econo-
mies of scale, as margin pressure intensifies throughout Corporate America.
SHORT-TERM PAIN FOR LONG-TERM GAIN
The United States is in the forefront of the current global wave of
consolidation; it is also unusual in the extent to which it relies for capital
on unforgiving financial markets, rather than banks. According to a recent
World Bank study, total bank loans in the U.S. represent about half of the
country's GDP, compared to 150% in Japan and 170% in Germany. The U.S. bond
market, by contrast, totals 110% of annual U.S. output, compared to only 75% in
Japan and half of Korea's GDP. The rigorous standards imposed by financial
markets may have helped propel the longest bull run in U.S. history. It is
likely that outside the U.S., global financial markets will increasingly
dictate who gets capital funding-and survives-and who doesn't. In order to get
this capital funding, Asians may have to swallow politically unpopular but
therapeutic medicine to cure years of lax financial standards.
The current financial crisis could ultimately leave Asian economies in better
shape. To survive, they will be forced to dismantle elements of dysfunctional
and non-competitive systems. Given the integration of global markets these
days, such reforms, if combined with top-line invigoration across corporate
America and the success of the monetary union across a restructured Europe,
would bode well for world markets in the long-term. However, over the shorter
term, investor uncertainty and continued market volatility are likely to
dominate.
6
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
GROWTH CHARTS
- --------------------------------------------------------------------------------
LAZARD EQUITY PORTFOLIO
The Lazard Equity Portfolio seeks capital appreciation through investing
primarily in equity securities of companies with relatively large
capitalizations that the Investment Manager considers to be inexpensively
priced relative to the return on total capital or equity.
COMPARISON OF $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF THE
LAZARD EQUITY PORTFOLIO AND THE STANDARD & POOR'S 500 STOCK INDEX
[THE FOLLOWING TABLE REPRESENTS A CHART IN THE PRINTED MATERIAL]
LAZARD STANDARD & POOR'S 500
EQUITY STOCK
PORTFOLIO INDEX
Dec-87 10,000 10,000
Jan-88 10,420 10,436
Feb-88 10,847.22 10,903.53
Mar-88 10,760.44 10,570.98
Apr-88 10,954.13 10,703.11
May-88 10,888.41 10,771.61
Jun-88 11,356.61 11,269.26
Jul-88 11,208.97 11,242.21
Aug-88 10,973.58 10,844.24
Sep-88 11,478.37 11,308.37
Oct-88 11,983.42 11,635.19
Nov-88 11,755.73 11,451.35
Dec-88 12,037.87 11,655.18
Jan-89 12,796.25 12,518.83
Feb-89 12,745.07 12,194.59
Mar-89 12,910.75 12,486.05
Apr-89 13,504.65 13,147.81
May-89 14,125.86 13,647.42
Jun-89 13,913.98 13,577.82
Jul-89 14,915.78 14,814.76
Aug-89 15,214.1 15,084.39
Sep-89 15,138.03 15,027.07
Oct-89 14,638.47 14,691.96
Nov-89 14,755.58 14,976.99
Dec-89 14,873.62 15,339.43
Jan-90 13,966.33 14,330.1
Feb-90 14,245.66 14,496.33
Mar-90 14,601.8 14,890.63
Apr-90 14,076.14 14,534.74
May-90 15,089.62 15,912.63
Jun-90 15,029.26 15,817.16
Jul-90 15,014.23 15,779.2
Aug-90 13,662.95 14,341.71
Sep-90 12,938.81 13,654.74
Oct-90 12,964.69 13,608.32
Nov-90 13,820.36 14,468.36
Dec-90 14,179.69 14,872.03
Jan-91 14,746.88 15,518.96
Feb-91 15,838.15 16,628.57
Mar-91 16,012.37 17,030.98
Apr-91 15,980.34 17,071.86
May-91 16,491.71 17,807.65
Jun-91 15,733.09 16,992.06
Jul-91 16,472.55 17,783.89
Aug-91 17,164.4 18,205.37
Sep-91 16,924.09 17,901.34
Oct-91 17,127.18 18,141.22
Nov-91 16,219.44 17,410.13
Dec-91 18,068.46 19,401.85
Jan-92 18,267.21 19,040.97
Feb-92 18,742.16 19,288.51
Mar-92 18,179.9 18,912.38
Apr-92 18,089 19,468.4
May-92 18,052.82 19,563.8
Jun-92 17,330.71 19,272.3
Jul-92 17,833.3 20,060.53
Aug-92 17,333.96 19,649.29
Sep-92 17,593.97 19,881.16
Oct-92 17,893.07 19,948.75
Nov-92 18,751.94 20,629
Dec-92 19,014.46 20,882.74
Jan-93 19,375.74 21,058.16
Feb-93 19,608.25 21,344.55
Mar-93 20,451.4 21,794.92
Apr-93 20,042.38 21,267.48
May-93 20,563.48 21,835.32
Jun-93 20,686.86 21,898.64
Jul-93 20,728.23 21,811.05
Aug-93 21,495.18 22,637.69
Sep-93 21,473.68 22,463.38
Oct-93 22,354.1 22,928.37
Nov-93 22,175.27 22,710.55
Dec-93 22,574.42 22,985.35
Jan-94 23,703.15 23,766.85
Feb-94 23,395 23,122.77
Mar-94 22,365.62 22,114.62
Apr-94 22,745.84 22,397.68
May-94 23,018.79 22,765
Jun-94 22,489.36 22,207.26
Jul-94 23,276.48 22,935.66
Aug-94 24,323.93 23,876.02
Sep-94 23,934.74 23,293.45
Oct-94 24,269.88 23,875.78
Nov-94 23,396.12 23,006.7
Dec-94 23,536.49 23,347.2
Jan-95 23,936.61 23,951.9
Feb-95 24,989.82 24,886.02
Mar-95 25,689.54 25,620.16
Apr-95 26,408.85 26,373.39
May-95 27,518.02 27,428.33
Jun-95 28,371.08 28,064.66
Jul-95 29,449.18 28,996.41
Aug-95 29,890.92 29,068.9
Sep-95 30,937.1 30,295.61
Oct-95 30,720.54 30,186.54
Nov-95 32,133.68 31,511.73
Dec-95 32,422.89 32,119.91
Jan-96 33,525.26 33,211.99
Feb-96 34,463.97 33,520.86
Mar-96 34,739.68 33,842.66
Apr-96 35,469.22 34,340.15
May-96 35,894.85 35,226.12
Jun-96 35,535.9 35,359.98
Jul-96 33,616.96 33,786.46
Aug-96 34,759.94 34,506.11
Sep-96 36,011.2 36,448.81
Oct-96 36,875.57 37,465.73
Nov-96 39,346.23 40,316.87
Dec-96 38,834.73 39,530.69
Jan-97 40,698.79 41,989.5
Feb-97 41,187.18 42,329.62
Mar-97 39,650.9 40,568.7
Apr-97 40,840.42 42,982.54
May-97 43,707.42 45,617.37
Jun-97 45,141.03 47,647.35
Jul-97 48,522.09 51,440.07
Aug-97 46,823.82 48,559.43
Sep-97 48,858.78 51,220.49
Oct-97 46,064.06 49,509.72
Nov-97 47,621.02 51,797.07
Dec-97 48,597.25 55,510.92
LAZARD MID CAP PORTFOLIO
The Lazard Mid Cap Portfolio seeks capital appreciation through investing
primarily in equity securities of companies with market capitalizations in the
range of companies represented in the Russell Mid Cap Index that the Investment
Manager considers to be inexpensively priced relative to the return on total
capital or equity.
COMPARISON OF $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF THE
LAZARD MID CAP PORTFOLIO AND THE RUSSELL MID CAP STOCK INDEX
[THE FOLLOWING TABLE REPRESENTS A CHART IN THE PRINTED MATERIAL]
Lazard Midcap Russell Midcap
11-4 10,000 10,000
Nov-97 9,990 10,033
Dec-97 10,275 10,310
PAST PERFORMANCE IS NOT INDICATIVE, NOR A GUARANTEE, OF FUTURE RESULTS
7
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
GROWTH CHARTS (CONTINUED)
- --------------------------------------------------------------------------------
LAZARD SMALL CAP PORTFOLIO
The Lazard Small Cap Portfolio seeks capital appreciation through investing
primarily in equity securities of companies with market capitalizations in the
range of companies represented in the Russell 2000 Index that the Investment
Manager considers to be inexpensively priced relative to the return on total
capital or equity.
COMPARISON OF $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF THE
LAZARD SMALL CAP PORTFOLIO AND THE RUSSELL 2000 STOCK INDEX
[THE FOLLOWING TABLE REPRESENTS A CHART IN THE PRINTED MATERIAL]
LAZARD
SMALL CAP RUSSELL
PORTFOLIO 2000
10-31-91 10,000 10,000
Nov-91 9,720 9,537
Dec-91 10,449 10,305.68
Jan-92 11,316.27 11,140.44
Feb-92 11,825.5 11,465.74
Mar-92 11,825.5 11,078.2
Apr-92 11,541.69 10,690.46
May-92 11,553.23 10,832.65
Jun-92 10,952.46 10,320.26
Jul-92 11,248.18 10,679.41
Aug-92 10,921.98 10,378.25
Sep-92 10,998.43 10,617.99
Oct-92 11,526.36 10,955.64
Nov-92 12,540.68 11,793.74
Dec-92 13,017.22 12,204.17
Jan-93 13,420.76 12,616.67
Feb-93 13,541.54 12,325.22
Mar-93 14,191.54 12,724.56
Apr-93 13,865.13 12,375.91
May-93 14,502.93 12,922.92
Jun-93 14,894.51 13,003.04
Jul-93 15,013.67 13,182.49
Aug-93 15,899.47 13,751.97
Sep-93 16,201.56 14,139.78
Oct-93 16,347.38 14,503.17
Nov-93 16,134.86 14,026.01
Dec-93 16,925.47 14,505.7
Jan-94 17,551.71 14,961.18
Feb-94 17,569.26 14,907.32
Mar-94 16,743.51 14,120.22
Apr-94 16,726.76 14,203.52
May-94 16,776.94 14,044.45
Jun-94 16,592.4 13,566.93
Jul-94 16,940.84 13,789.43
Aug-94 17,923.41 14,557.5
Sep-94 17,923.41 14,509.46
Oct-94 17,636.63 14,452.88
Nov-94 16,754.8 13,868.98
Dec-94 17,307.71 14,242.06
Jan-95 17,238.48 14,062.61
Feb-95 17,979.73 14,647.61
Mar-95 18,411.25 14,899.55
Apr-95 18,797.88 15,230.32
May-95 19,361.82 15,492.28
Jun-95 20,233.1 16,296.33
Jul-95 21,163.82 17,235
Aug-95 21,269.64 17,591.76
Sep-95 21,290.91 17,906.66
Oct-95 20,077.33 17,106.23
Nov-95 20,920.58 17,824.69
Dec-95 21,067.02 18,295.26
Jan-96 21,256.62 18,275.14
Feb-96 22,043.12 18,845.32
Mar-96 22,439.9 19,229.77
Apr-96 23,315.05 20,258.56
May-96 24,084.45 21,056.75
Jun-96 23,386 20,191.31
Jul-96 21,702.21 18,434.67
Aug-96 23,112.85 19,503.88
Sep-96 23,944.91 20,264.53
Oct-96 24,160.42 19,960.56
Nov-96 25,610.04 20,778.95
Dec-96 26,096.63 21,319.2
Jan-97 26,853.44 21,745.58
Feb-97 26,746.02 21,219.34
Mar-97 25,769.79 20,217.79
Apr-97 26,519.69 20,274.4
May-97 29,110.67 22,528.91
Jun-97 30,455.58 23,495.4
Jul-97 31,972.27 24,590.29
Aug-97 32,650.08 25,153.4
Sep-97 34,138.92 26,994.63
Oct-97 32,793.85 25,809.57
Nov-97 32,938.47 25,641.81
Dec-97 33,709.23 26,090.54
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 $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF THE
LAZARD BANTAM VALUE PORTFOLIO AND THE RUSSELL 2000 STOCK INDEX
[THE FOLLOWING TABLE REPRESENTS A CHART IN THE PRINTED MATERIAL]
LAZARD
BANTAM
VALUE RUSSELL
PORTFOLIO 2000
3-4 10,000 10,000
Mar-96 10,630 10,160
Apr-96 11,448.51 10,703.56
May-96 11,883.55 11,125.28
Jun-96 11,776.6 10,668.03
Jul-96 11,164.22 9,739.91
Aug-96 11,934.55 10,304.83
Sep-96 12,209.04 10,706.72
Oct-96 12,734.03 10,546.11
Nov-96 13,319.8 10,978.51
Dec-96 13,333.12 11,263.95
Jan-97 14,079.77 11,489.23
Feb-97 14,051.61 11,211.19
Mar-97 13,521.87 10,682.02
Apr-97 13,267.66 10,711.93
May-97 14,981.84 11,903.09
Jun-97 16,014.09 12,413.74
Jul-97 17,133.47 12,990.98
Aug-97 17,851.36 13,288.47
Sep-97 19,286.61 14,261.19
Oct-97 18,493.93 13,635.12
Nov-97 18,124.05 13,546.49
Dec-97 17,855.82 13,783.55
PAST PERFORMANCE IS NOT INDICATIVE, NOR A GUARANTEE, OF FUTURE RESULTS
8
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
GROWTH CHARTS (CONTINUED)
- --------------------------------------------------------------------------------
LAZARD GLOBAL EQUITY PORTFOLIO
The Lazard Global Equity Portfolio seeks capital appreciation through investing
primarily in the equity securities of non-United States companies that the
Investment Manager considers 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 $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF THE
LAZARD GLOBAL EQUITY PORTFOLIO AND MORGAN STANLEY CAPITAL
INTERNATIONAL WORLD INDEX
[THE FOLLOWING TABLE REPRESENTS A CHART IN THE PRINTED MATERIAL]
LAZARD
GLOBAL
EQUITY
PORTFOLIO MSCI World
1-3 10,000 10,000
Jan-96 10,010 10,179
Feb-96 10,170.16 10,239.06
Mar-96 10,312.54 10,406.98
Apr-96 10,436.29 10,649.46
May-96 10,467.6 10,656.91
Jun-96 10,540.87 10,709.13
Jul-96 10,171.94 10,332.17
Aug-96 10,304.18 10,453.06
Sep-96 10,633.91 10,863.86
Oct-96 10,729.62 10,942.08
Nov-96 11,577.26 11,557.03
Dec-96 11,588.84 11,374.43
Jan-97 11,558.7 11,513.19
Feb-97 11,760.98 11,647.9
Mar-97 11,690.42 11,416.11
Apr-97 11,923.06 11,791.7
May-97 12,464.36 12,516.88
Jun-97 13,228.43 13,142.73
Jul-97 13,731.11 13,745.98
Aug-97 12,986.88 12,825
Sep-97 13,792.07 13,520.11
Oct-97 12,910.76 12,806.25
Nov-97 13,143.15 13,030.36
Dec-97 13,357.38 13,187.73
LAZARD INTERNATIONAL EQUITY PORTFOLIO
The Lazard International Equity Portfolio seeks capital appreciation through
investing primarily in the equity securities of non-United States companies
that the Investment Manager considers inexpensively priced relative to the
return on total capital or equity.
COMPARISON OF $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF THE
LAZARD INTERNATIONAL EQUITY PORTFOLIO AND THE MORGAN STANLEY CAPITAL
INTERNATIONAL EUROPE, AUSTRALIA AND FAR EAST INDEX
[THE FOLLOWING TABLE REPRESENTS A CHART IN THE PRINTED MATERIAL]
LAZARD
INTERNATIONAL
EQUITY
PORTFOLIO MSCI EAFE
10-31 10,000 10,000
Nov-91 9,990 9,533
Dec-91 10,319.67 10,025.86
Jan-92 10,464.15 9,812.31
Feb-92 10,579.25 9,460.04
Mar-92 10,325.35 8,835.68
Apr-92 10,542.18 8,877.21
May-92 11,037.66 9,471.98
Jun-92 10,827.95 9,023.01
Jul-92 10,210.76 8,792.02
Aug-92 10,088.23 9,343.28
Sep-92 9,634.26 9,158.28
Oct-92 9,460.84 8,677.47
Nov-92 9,423 8,759.04
Dec-92 9,639.72 8,804.59
Jan-93 9,562.61 8,802.83
Feb-93 9,772.98 9,068.67
Mar-93 10,046.63 9,859.46
Apr-93 10,267.65 10,795.12
May-93 10,555.15 11,022.9
Jun-93 10,428.49 10,850.94
Jul-93 10,741.34 11,230.73
Aug-93 11,536.2 11,836.06
Sep-93 11,201.65 11,569.75
Oct-93 11,795.34 11,926.1
Nov-93 11,571.23 10,883.76
Dec-93 12,624.21 11,669.57
Jan-94 13,823.51 12,655.64
Feb-94 13,394.98 12,620.21
Mar-94 12,845.78 12,076.28
Apr-94 13,333.92 12,588.31
May-94 13,253.92 12,516.56
Jun-94 12,962.33 12,693.04
Jul-94 13,610.45 12,816.16
Aug-94 14,222.92 13,119.91
Sep-94 13,526 12,706.63
Oct-94 13,769.47 13,129.76
Nov-94 12,943.3 12,498.22
Dec-94 12,658.55 12,576.96
Jan-95 12,050.94 12,094
Feb-95 12,135.29 12,060.14
Mar-95 12,293.05 12,811.49
Apr-95 12,821.65 13,293.2
May-95 12,937.05 13,135.01
Jun-95 13,156.98 12,903.83
Jul-95 13,985.87 13,707.74
Aug-95 13,734.12 13,186.85
Sep-95 14,036.27 13,443.99
Oct-95 13,811.69 13,094.45
Nov-95 13,949.81 13,458.47
Dec-95 14,326.45 14,000.85
Jan-96 14,412.41 14,058.25
Feb-96 14,614.19 14,106.05
Mar-96 14,964.93 14,405.1
Apr-96 15,339.05 14,824.29
May-96 15,231.68 14,551.52
Jun-96 15,521.08 14,633.01
Jul-96 15,102.01 14,205.73
Aug-96 15,132.21 14,236.98
Sep-96 15,495.39 14,615.68
Oct-96 15,557.37 14,466.6
Nov-96 16,381.91 15,042.37
Dec-96 16,578.49 14,848.33
Jan-97 16,147.45 14,331.61
Feb-97 16,551.14 14,569.51
Mar-97 16,953.33 14,626.33
Apr-97 16,831.26 14,706.78
May-97 17,536.49 15,667.13
Jun-97 18,627.26 16,535.09
Jul-97 19,055.69 16,769.89
Aug-97 17,855.18 15,453.45
Sep-97 19,362.16 14,367.07
Oct-97 18,161.71 12,959.1
Nov-97 18,283.39 12,505.53
Dec-97 18,537.53 11,526.35
PAST PERFORMANCE IS NOT INDICATIVE, NOR A GUARANTEE, OF FUTURE RESULTS
9
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
GROWTH CHARTS (CONTINUED)
- --------------------------------------------------------------------------------
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 the Investment Manager considers
to be inexpensively priced relative to the return on total capital or equity.
The Lazard International Small Cap Portfolio operates similarly to the Lazard
Small Cap Portfolio, except that this Portfolio, by investing primarily in the
equity securities of non-United States issuers, considers additional investment
determinations including, among other items, the effect of currency
fluctuations and the political and economic factors of other jurisdictions.
COMPARISON OF $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF THE
LAZARD INTERNATIONAL SMALL CAP PORTFOLIO AND THE SALOMON EMI INDEX EX-US
[THE FOLLOWING TABLE REPRESENTS A CHART IN THE PRINTED MATERIAL]
Lazard
International
Small Cap
Portfolio Salomon EMI Index Ex-US
12-1 10,000 10,000
Dec-93 10,870 10,644
Jan-94 12,076.6 11,707.3
Feb-94 11,871.3 11,789.3
Mar-94 11,147.1 11,595.9
Apr-94 11,024.5 11,943.8
May-94 10,969.4 11,773
Jun-94 10,695.1 12,020.3
Jul-94 10,898.4 12,157.3
Aug-94 11,334.3 12,286.2
Sep-94 10,982.9 11,934.8
Oct-94 11,070.8 12,150.8
Nov-94 10,594.7 11,392.6
Dec-94 10,361.7 11,545.2
Jan-95 10,050.8 11,170
Feb-95 9,990.5 11,006.9
Mar-95 9,760.7 11,474.7
Apr-95 9,975.5 11,819
May-95 10,244.8 11,612.1
Jun-95 10,337 11,469.3
Jul-95 10,729.8 12,138
Aug-95 10,633.2 11,830.9
Sep-95 10,941.6 11,923.2
Oct-95 10,514.9 11,579.8
Nov-95 10,483.3 11,702.5
Dec-95 10,546.2 12,150.7
Jan-96 10,715 12,367
Feb-96 10,800.7 12,559.9
Mar-96 10,941.1 12,848.8
Apr-96 11,378.7 13,524.7
May-96 11,458.4 13,415.1
Jun-96 11,492.8 13,416.5
Jul-96 11,090.5 12,909.3
Aug-96 11,445.4 13,039.7
Sep-96 11,514.1 13,112.7
Oct-96 11,606.2 13,061.6
Nov-96 12,151.7 13,275.8
Dec-96 12,176 13,031.5
Jan-97 12,334.3 12,750
Feb-97 12,568.6 12,964.2
Mar-97 12,375.1 12,791.8
Apr-97 11,937 12,601.2
May-97 12,505.2 13,409
Jun-97 13,070.4 13,712
Jul-97 12,956.7 13,504.9
Aug-97 12,566.7 12,928.3
Sep-97 13,296.9 13,158.4
Oct-97 12,658.6 12,638.7
Nov-97 12,253.5 12,075
Dec-97 12,198 11,808.1
LAZARD EMERGING MARKETS PORTFOLIO
The Lazard Emerging Markets Portfolio seeks long-term capital appreciation
through investing primarily in equity securities of non-United States issuers
who are located, or doing significant business, in emerging market countries.
Emerging market countries include countries where political and economic trends
have recently produced, or are producing, a more stable economy, or countries
that have recently developed, or are developing, financial markets and
investment liquidity. The Lazard Emerging Markets Portfolio seeks securities of
issuers whose potential is significantly enhanced by their relationship to the
emerging markets country that the Investment Manager considers to be
inexpensively priced relative to the return on total capital or equity.
COMPARISON OF $10,000 INVESTMENT IN THE
INSTITUTIONAL SHARES OF THE LAZARD EMERGING
MARKETS PORTFOLIO AND INTERNATIONAL FINANCE CORP. INVESTABLE TOTAL RETURN INDEX
[THE FOLLOWING TABLE REPRESENTS A CHART IN THE PRINTED MATERIAL]
Lazard International
Emerging Finance Corp.
Markets Investable
Portfolio Return Index
7-15 10,000 10,000
Jul-94 10,210 10,336
Aug-94 11,302.47 11,669.34
Sep-94 11,664.15 11,957.58
Oct-94 11,582.5 11,565.37
Nov-94 11,327.68 11,125.88
Dec-94 9,866.41 9,946.54
Jan-95 8,642.98 8,612.71
Feb-95 8,426.9 8,502.47
Mar-95 8,410.05 8,483.76
Apr-95 8,662.35 8,842.62
May-95 9,173.43 9,170.69
Jun-95 9,155.08 9,224.79
Jul-95 9,502.98 9,513.53
Aug-95 9,379.44 9,265.23
Sep-95 9,473.23 9,190.18
Oct-95 9,056.41 8,843.71
Nov-95 8,938.68 8,799.49
Dec-95 9,296.22 9,102.19
Jan-96 10,179.37 9,884.98
Feb-96 10,260.8 9,667.51
Mar-96 10,260.8 9,802.86
Apr-96 10,917.49 10,194.97
May-96 11,288.69 10,104.23
Jun-96 11,187.09 10,217.4
Jul-96 10,694.86 9,546.12
Aug-96 10,887.36 9,842.05
Sep-96 11,192.21 9,986.73
Oct-96 11,069.1 9,772.01
Nov-96 11,390.1 9,916.64
Dec-96 11,492.61 9,960.27
Jan-97 12,262.61 10,663.47
Feb-97 12,789.91 11,185.98
Mar-97 12,667.12 10,909.68
Apr-97 12,800.13 10,725.31
May-97 13,217.41 11,089.97
Jun-97 14,195.5 11,567.95
Jul-97 14,174.21 11,680.16
Aug-97 12,624.97 10,188.6
Sep-97 13,206.98 10,519.73
Oct-97 10,794.06 8,793.44
Nov-97 10,274.87 8,375.75
Dec-97 10,366.32 8,483.8
PAST PERFORMANCE IS NOT INDICATIVE, NOR A GUARANTEE, OF FUTURE RESULTS.
10
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
GROWTH CHARTS (CONTINUED)
- --------------------------------------------------------------------------------
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 $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF THE
LAZARD BOND PORTFOLIO AND THE LEHMAN INTERMEDIATE GOVERNMENT/CORPORATE BOND
INDEX
[THE FOLLOWING TABLE REPRESENTS A CHART IN THE PRINTED MATERIAL]
LAZARD LEHMAN INTERMEDIATE
BOND GOVERNMENT/CORPORATE
PORTFOLIO BOND INDEX
10-31 10,000 10,000
Nov-91 10,100 10,115
Dec-91 10,392.9 10,361.8
Jan-92 10,278.6 10,267.5
Feb-92 10,309.4 10,307.6
Mar-92 10,247.6 10,267.4
Apr-92 10,329.5 10,357.7
May-92 10,474.2 10,518.3
Jun-92 10,610.3 10,673.9
Jul-92 10,822.5 10,886.3
Aug-92 10,919.9 10,995.2
Sep-92 11,040 11,144.7
Oct-92 10,896.5 10,999.9
Nov-92 10,852.9 10,958.1
Dec-92 10,994 11,104.9
Jan-93 11,191.9 11,321.4
Feb-93 11,371 11,500.3
Mar-93 11,393.7 11,546.3
Apr-93 11,473.5 11,638.7
May-93 11,416.1 11,613.1
Jun-93 11,633 11,795.4
Jul-93 11,714.5 11,823.7
Aug-93 11,913.6 12,011.7
Sep-93 11,901.7 12,062.2
Oct-93 11,937.4 12,094.7
Nov-93 11,901.6 12,027
Dec-93 11,925.4 12,082.3
Jan-94 12,116.2 12,216.4
Feb-94 11,910.2 12,352
Mar-94 11,636.3 12,169.2
Apr-94 11,485 11,968.4
May-94 11,427.6 11,887.1
Jun-94 11,416.2 11,895.4
Jul-94 11,621.6 11,896.6
Aug-94 11,633.3 11,933.4
Sep-94 11,377.3 11,823.7
Oct-94 11,388.7 11,822.5
Nov-94 11,354.5 11,769.3
Dec-94 11,411.3 11,810.5
Jan-95 11,593.9 12,010.1
Feb-95 11,825.8 12,258.7
Mar-95 11,896.7 12,328.5
Apr-95 12,051.4 12,480.2
May-95 12,533.4 12,857.1
Jun-95 12,621.2 12,943.2
Jul-95 12,545.5 12,944.5
Aug-95 12,670.9 13,062.3
Sep-95 12,810.3 13,156.4
Oct-95 12,989.6 13,302.4
Nov-95 13,132.5 13,476.7
Dec-95 13,237.6 13,618.2
Jan-96 13,356.7 13,735.3
Feb-96 13,209.8 13,574.6
Mar-96 13,183.4 13,505.4
Apr-96 13,157 13,458.1
May-96 13,143.9 13,447.3
Jun-96 13,262.1 13,589.9
Jul-96 13,301.9 13,630.6
Aug-96 13,341.8 13,641.5
Sep-96 13,542 13,831.1
Oct-96 13,745.1 14,076
Nov-96 13,951.3 14,261.8
Dec-96 13,881.5 14,170.5
Jan-97 13,978.7 14,225.8
Feb-97 14,006.6 14,252.8
Mar-97 13,898.8 14,154.4
Apr-97 14,071.1 14,320
May-97 14,211.8 14,438.9
Jun-97 14,344 14,570.3
Jul-97 14,603.6 14,866.1
Aug-97 14,556.9 14,791.7
Sep-97 14,743.2 14,963.3
Oct-97 14,892.1 15,127.9
Nov-97 14,920.4 15,161.2
Dec-97 15,062.2 15,282.5
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 $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF THE
LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO AND THE
SALOMON WORLD GOVERNMENT BOND INDEX EX-US
[THE FOLLOWING TABLE REPRESENTS A CHART IN THE PRINTED MATERIAL]
LAZARD SALOMON WORLD
INTERNATIONAL GOVERNMENT
FIXED-INCOME BOND INDEX
PORTFOLIO EX-US
10-31 10,000 10,000
Nov-91 10,040 10,156
Dec-91 10,401.4 10,684.1
Jan-92 10,099.8 10,493.9
Feb-92 10,109.9 10,435.2
Mar-92 9,968.4 10,324.6
Apr-92 10,028.2 10,398.9
May-92 10,309 10,718.1
Jun-92 10,504.8 11,018.2
Jul-92 10,662.4 11,275
Aug-92 10,971.6 11,590.7
Sep-92 10,960.6 11,706.6
Oct-92 10,719.5 11,388.2
Nov-92 10,548 11,207.1
Dec-92 10,621.8 11,274.3
Jan-93 10,791.8 11,428.8
Feb-93 10,996.8 11,656.2
Mar-93 11,194.8 11,945.3
Apr-93 11,564.2 12,303.7
May-93 11,760.8 12,527.6
Jun-93 11,643.2 12,293.3
Jul-93 11,678.1 12,301.9
Aug-93 12,063.5 12,739.9
Sep-93 12,244.4 12,955.2
Oct-93 12,232.2 12,895.6
Nov-93 12,146.6 12,836.3
Dec-93 12,280.2 12,978.7
Jan-94 12,366.1 13,034.5
Feb-94 12,341.4 13,071
Mar-94 12,427.8 13,230.5
Apr-94 12,402.9 13,316.5
May-94 12,328.5 13,138.1
Jun-94 12,636.7 13,456
Jul-94 12,624.1 13,491
Aug-94 12,523.1 13,412.7
Sep-94 12,773.6 13,678.3
Oct-94 13,092.9 14,031.2
Nov-94 12,857.2 13,749.2
Dec-94 12,792.9 13,756.1
Jan-95 12,984.8 14,055.8
Feb-95 13,387.4 14,454.2
Mar-95 14,485.1 15,742.3
Apr-95 14,890.7 16,079
May-95 15,248.1 16,430
Jun-95 15,339.6 16,511.9
Jul-95 15,339.6 16,599.2
Aug-95 14,526.6 15,650.1
Sep-95 14,918.8 16,111
Oct-95 15,023.2 16,159.3
Nov-95 15,128.4 16,304.7
Dec-95 15,264.6 16,451.5
Jan-96 14,989.8 16,089.5
Feb-96 15,019.8 16,137.8
Mar-96 15,019.8 16,186.2
Apr-96 15,034.8 16,153.9
May-96 15,094.9 16,170
Jun-96 15,185.5 16,267
Jul-96 15,580.3 16,716
Aug-96 15,673.8 16,828
Sep-96 15,705.2 16,796
Oct-96 15,956.4 17,079.9
Nov-96 16,147.9 17,276.3
Dec-96 16,115.6 17,153.6
Jan-97 15,487.1 16,457.2
Feb-97 15,367.9 16,266.3
Mar-97 15,221.9 16,163.8
Apr-97 14,917.4 15,835.7
May-97 15,418.7 16,418.4
Jun-97 15,612.9 16,620.4
Jul-97 15,238.2 16,188.3
Aug-97 15,209.3 16,261.1
Sep-97 15,584.9 16,656.2
Oct-97 15,756.4 17,029.3
Nov-97 15,433.4 16,593.4
Dec-97 15,149.4 16,425.8
PAST PERFORMANCE IS NOT INDICATIVE, NOR A GUARANTEE, OF FUTURE RESULTS.
11
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
GROWTH CHARTS (CONTINUED)
- --------------------------------------------------------------------------------
LAZARD STRATEGIC YIELD PORTFOLIO
The Lazard Strategic Yield Portfolio seeks total return by placing
approximately equal emphasis on capital appreciation and current income through
investing principally in a wide variety of domestic and foreign high-yielding
fixed-income securities. The Lazard 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 $10,000 INVESTMENT IN THE INSTITUTIONAL SHARES OF THE
LAZARD STRATEGIC YIELD PORTFOLIO AND ONE MONTH LIBOR USD FIXED INDEX
[THE FOLLOWING TABLE REPRESENTS A CHART IN THE PRINTED MATERIAL]
LAZARD ONE MONTH
STRATEGIC LIBOR
YIELD USD FIXED
PORTFOLIO INDEX
10-1 10,000 10,000
Oct-91 10,360 10,042
Nov-91 10,494.7 10,084.2
Dec-91 10,211.3 10,119.5
Jan-92 10,129.6 10,153.9
Feb-92 10,291.7 10,189.4
Mar-92 10,415.2 10,225.1
Apr-92 10,415.2 10,257.8
May-92 10,529.8 10,291.6
Jun-92 10,635.1 10,324.6
Jul-92 10,837.1 10,353.5
Aug-92 10,956.3 10,383.5
Sep-92 11,076.9 10,410.5
Oct-92 10,600.6 10,438.6
Nov-92 10,600.6 10,475.2
Dec-92 10,823.2 10,503.4
Jan-93 11,104.6 10,530.7
Feb-93 11,315.6 10,558.1
Mar-93 11,496.6 10,585.6
Apr-93 11,508.1 10,613.1
May-93 11,611.7 10,641.8
Jun-93 11,925.2 10,669.4
Jul-93 12,080.2 10,697.2
Aug-93 12,176.9 10,725
Sep-93 12,164.7 10,752.9
Oct-93 12,347.2 10,780.8
Nov-93 12,384.2 10,812.1
Dec-93 12,495.7 10,841.3
Jan-94 12,745.6 10,869.5
Feb-94 12,554.4 10,901
Mar-94 12,303.3 10,933.7
Apr-94 12,131.1 10,969.8
May-94 12,131.1 11,009.3
Jun-94 12,046.1 11,050
Jul-94 12,178.6 11,090.9
Aug-94 12,349.1 11,135.2
Sep-94 12,275.1 11,180.9
Oct-94 12,250.5 11,226.7
Nov-94 12,299.5 11,281.8
Dec-94 12,201.1 11,337
Jan-95 12,188.9 11,392.6
Feb-95 12,249.9 11,449.5
Mar-95 12,311.1 11,506.8
Apr-95 12,594.3 11,563.2
May-95 12,934.3 11,619.8
Jun-95 13,011.9 11,677.9
Jul-95 13,116 11,734
Aug-95 13,260.3 11,790.3
Sep-95 13,379.6 11,846.9
Oct-95 13,473.3 11,900.9
Nov-95 13,648.4 11,957.7
Dec-95 13,853.2 12,015.3
Jan-96 14,130.2 12,068.2
Feb-96 14,073.7 12,122.5
Mar-96 14,172.2 12,175.8
Apr-96 14,299.8 12,229.4
May-96 14,442.8 12,283.2
Jun-96 14,601.6 12,337.3
Jul-96 14,689.2 12,391.6
Aug-96 14,850.8 12,446.1
Sep-96 15,177.5 12,500.8
Oct-96 15,344.5 12,555.9
Nov-96 15,574.7 12,612.4
Dec-96 15,730.4 12,669.1
Jan-97 15,919.2 12,724.9
Feb-97 16,078.4 12,780.8
Mar-97 15,994.8 12,839.6
Apr-97 16,082.7 12,898.7
May-97 16,275.7 12,958
Jun-97 16,435.2 13,017.6
Jul-97 16,547 13,078.8
Aug-97 16,464.2 13,140.3
Sep-97 16,638.8 13,202
Oct-97 16,424.1 13,264.1
Nov-97 16,519.4 13,330.4
Dec-97 16,555.7 13,394.4
PAST PERFORMANCE IS NOT INDICATIVE, NOR A GUARANTEE, OF FUTURE RESULTS.
12
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PERFORMANCE TABLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER
31,
1997
INSTITUTIONAL SHARES
----------------------------------------------------------
ONE THREE FIVE TEN SINCE
YEAR YEAR YEAR YEAR INCEPTION*
------------- ----------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C>
Lazard Equity Portfolio 25.13% 27.36% 20.63% 17.14% 14.75%
Standard & Poor's 500 Stock Index 33.36% 31.15% 20.27% 18.05% 15.42%
Lazard Mid Cap Portfolio - - - - -
Russell Mid Cap Stock Index - - - - -
Lazard Small Cap Portfolio 28.06% 24.47% 20.68% - 21.57%
Russell 2000 Stock Index 22.36% 22.33% 16.41% - 16.80%
Lazard Bantam Value Portfolio 33.94% - - - 37.32%
Russell 2000 Stock Index++ 22.36% - - - 19.60%
Lazard Global Equity Portfolio 15.26% - - - 15.57%
MSCI World Index++ 15.76% - - - 14.33%
Lazard International Equity Portfolio 11.84% 13.53% 13.96% - 10.50%
MSCI EAFE Index++ 1.78% 6.28% 11.39% - 6.91%
Lazard International Small Cap Portfolio 0.27% 5.68% - - 5.10%
Salomon EMI Index Ex-US++ ( 9.39%) 0.75% - - 4.15%
Lazard Emerging Markets Portfolio ( 9.84%) 1.61% - - 0.98%
IFC Investable Total Return Index (14.85%) (5.16%) - - (4.68%)
Lazard Bond Portfolio 8.57% 9.60% 6.48% - 6.83%
Lehman Intermediate Gov't/Corp Bond Index 7.87% 8.98% 6.67% - 7.18%
Lazard International Fixed-Income Portfolio+ ( 5.58%) 5.95% 7.46% - 7.02%
Salomon World Government Bond Index Ex-US+ ( 4.26%) 6.01% 7.77% - 8.34%
Lazard Strategic Yield Portfolio 5.31% 10.80% 8.96% - 8.46%
One Month LIBOR USD Fixed Index 5.80% 5.84% 5.09% - 4.89%
</TABLE>
NOTES TO PERFORMANCE TABLE
*Performance is measured for Lazard Equity Portfolio from: June 1,
1987-Institutional, February 5, 1997-Open; Lazard Mid Cap Portfolio from:
November 4, 1997-Institutional, November 4, 1997-Open; Lazard Small Cap
Portfolio from: October 31, 1991-Institutional, January 30, 1997-Open; Lazard
Bantam Value Portfolio from: March 4, 1996-Institutional, January 23,
1997-Open; Lazard Global Equity Portfolio from: January 3, 1996-Institutional,
January 30, 1997-Open; Lazard International Equity Portfolio from: October 31,
1991-Institutional, January 23, 1997-Open; Lazard International Small Cap
Portfolio from: December 1, 1993-Institutional, February 13, 1997-Open; Lazard
Emerging Markets Portfolio from: July 15, 1994-Institutional, January 8,
1997-Open; Lazard Bond Portfolio from: October 31, 1991-Institutional, March
5, 1997-Open; Lazard International Fixed-Income Portfolio from: October 31,
1991-Institutional, January 8, 1997-Open; Lazard Strategic Yield Portfolio
from: October 1, 1991-Institutional, January 23, 1997-Open.
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 Investment Manager, 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" is a blended return of the
index "including U.S." and the index "excluding U.S." for the applicable
periods.
++Broad market index returns are calculated from the nearest month end to the
Portfolio's inception date.
See additional footnotes on next page.
13
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PERFORMANCE TABLE (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Cumulative Total Returns for Periods Ended December 31, 1997
----------------------------------------------------------------------------
Institutional Shares
----------------------------------------------------------------------------
One Three Five Ten Since
YTD Year Year Year Year Inception*
------------- ------------- ------------ ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Lazard Equity Portfolio 25.13% 25.13% 106.59% 155.41% 386.45% 329.57%
Standard & Poor's 500 Stock Index 33.36% 33.36% 125.60% 151.63% 425.67% 356.05%
Lazard Mid Cap Portfolio 2.75% - - - - 2.75%
Russell Mid Cap Stock Index 3.10% - - - - 3.10%
Lazard Small Cap Portfolio 28.06% 28.06% 92.86% 156.00% - 233.85%
Russell 2000 Stock Index++ 22.36% 22.36% 83.06% 113.73% - 160.74%
Lazard Bantam Value Portfolio 33.94% 33.94% - - - 78.53%
Russell 2000 Stock Index++ 22.36% 22.36% - - - 38.69%
Lazard Global Equity Portfolio 15.26% 15.26% - - - 33.46%
MSCI World Index++ 15.76% 15.76% - - - 30.61%
Lazard International Equity Portfolio 11.84% 11.84% 46.33% 92.22% - 85.22%
MSCI EAFE Index++ 1.78% 1.78% 20.05% 71.49% - 51.00%
Lazard International Small Cap Portfolio 0.27% 0.27% 18.03% - - 22.54%
Salomon EMI Index Ex-US++ ( 9.39%) ( 9.39%) 2.28% - - 18.08%
Lazard Emerging Markets Portfolio ( 9.84%) ( 9.84%) 4.91% - - 3.44%
IFC Investable Total Return Index (14.85%) (14.85%) (14.70%) - - (15.30%)
Lazard Bond Portfolio 8.57% 8.57% 31.65% 36.91% - 50.37%
Lehman Intermediate Gov't/Corp Bond Index 7.87% 7.87% 29.43% 38.11% - 53.38%
Lazard International Fixed-Income Portfolio+ ( 5.58%) ( 5.58%) 18.94% 43.31% - 52.00%
Salomon World Government Bond Index Ex-US+ ( 4.26%) ( 4.26%) 19.14% 45.36% - 63.88%
Lazard Strategic Yield Portfolio 5.31% 5.31% 36.03% 53.58% - 66.17%
One Month LIBOR USD Fixed Index 5.80% 5.80% 18.57% 28.17% - 34.73%
<CAPTION>
Open
Shares
-------------
YTD
-------------
<S> <C>
Lazard Equity Portfolio 18.91%
Standard & Poor's 500 Stock Index 26.06%
Lazard Mid Cap Portfolio 2.71%
Russell Mid Cap Stock Index 3.10%
Lazard Small Cap Portfolio 25.59%
Russell 2000 Stock Index++ 6.88%
Lazard Bantam Value Portfolio 27.75%
Russell 2000 Stock Index++ 6.88%
Lazard Global Equity Portfolio 16.71%
MSCI World Index++ 14.41%
Lazard International Equity Portfolio 14.07%
MSCI EAFE Index++ 5.50%
Lazard International Small Cap Portfolio ( 3.24%)
Salomon EMI Index Ex-US++ ( 7.39%)
Lazard Emerging Markets Portfolio (11.98%)
IFC Investable Total Return Index (16.61%)
Lazard Bond Portfolio 7.21%
Lehman Intermediate Gov't/Corp Bond Index 7.35%
Lazard International Fixed-Income Portfolio+ ( 4.81%)
Salomon World Government Bond Index Ex-US+ ( 3.28%)
Lazard Strategic Yield Portfolio 3.76%
One Month LIBOR USD Fixed Index 5.78%
</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 The McGraw Hill Companies. The Russell Mid Cap Stock Index
measures the performance of the 800 smallest companies in the Russell 1000
Index. The Russell 2000 Stock Index is an index of common stocks and is a
registered trademark of the Frank Russell Company. The Morgan Stanley Capital
International (MSCI) World Index is an arithmetic, market value-weighted
average return net of dividends taxation, which is derived from equities of
Europe, Australia and Far East (EAFE) Index countries plus equities from Canada
and the United States. The Morgan Stanley Capital International (MSCI) 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 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 Lehman Intermediate Gov't/Corp. Bond
Index is an index calculated by Lehman Brothers. The London Interbank Offered
Rates (LIBOR) US Dollar Fixed Index is an average derived from sixteen
quotations provided by banks determined by the British Bankers Association.
This performance data is not authorized for distribution to prospective
investors in the Fund unless preceded or accompanied by an effective
prospectus.
14
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE
- ------------------------------------ --------- -------------
LAZARD EQUITY PORTFOLIO
COMMON STOCKS--97.0%
AEROSPACE & DEFENSE--3.7%
Allied Signal, Inc. ............... 159,100 $ 6,194,956
United Technologies Corp........... 94,700 6,895,344
-----------
13,090,300
-----------
AGRICULTURAL MACHINERY--1.5%
Deere & Co. ....................... 92,800 5,411,400
-----------
AIRLINES--1.1%
UAL Corp. (a) ..................... 41,600 3,848,000
-----------
AUTOMOTIVE--3.2%
Chrysler Corp...................... 103,100 3,627,831
General Motors Corp................ 127,600 7,735,750
-----------
11,363,581
-----------
BANKS--10.4%
BankAmerica Corp................... 86,100 6,285,300
Bankers Trust New York Corp........ 35,700 4,014,019
Chase Manhattan Corp............... 50,312 5,509,164
Fleet Financial Group, Inc......... 69,500 5,208,156
KeyCorp ........................... 72,500 5,133,906
Mellon Bank Corp................... 96,800 5,868,500
Wells Fargo & Co................... 15,200 5,159,450
-----------
37,178,495
-----------
BEVERAGES--4.8%
Cadbury Schweppes PLC (b) ......... 114,500 4,737,437
Diageo PLC (a), (b) ............... 92,500 3,503,438
Heineken NV (b) ................... 28,300 4,927,862
PepsiCo, Inc. ..................... 112,100 4,084,644
-----------
17,253,381
-----------
BROADCASTING--1.2%
Viacom, Inc., Class B (a) ......... 102,600 4,251,488
-----------
CHEMICALS & PLASTICS--1.8%
Du Pont (E.I.) De Nemours
& Co. ............................ 106,000 6,366,625
-----------
COMPUTERS & BUSINESS EQUIPMENT--7.8%
Bay Networks, Inc. (a) ............ 100,100 2,558,806
Electronic Data Systems Corp....... 122,000 5,360,375
Hewlett-Packard Co. ............... 85,800 5,362,500
International Business
Machines Corp. ................... 79,900 8,354,544
NCR Corp. (a) ..................... 163,600 4,550,125
Silicon Graphics, Inc. (a) ........ 100 1,244
Sun Microsystems, Inc. (a) ........ 40,800 1,626,900
-----------
27,814,494
-----------
CONGLOMERATES--3.0%
Philip Morris Companies, Inc....... 239,800 10,865,937
-----------
DRUGS & HEALTH CARE--7.9%
Aetna, Inc. ....................... 72,800 5,136,950
American Home Products
Corp. ............................ 115,100 8,805,150
Amgen, Inc. ....................... 70,900 3,837,462
Astra AB (b) ...................... 249,333 4,285,410
Johnson & Johnson ................. 62,400 4,110,600
St. Jude Medical, Inc. (a) ........ 74,200 2,263,100
-----------
28,438,672
-----------
ELECTRONICS--2.1%
Honeywell, Inc. ................... 80,100 5,486,850
Micron Technology, Inc. (a) ....... 76,200 1,981,200
-----------
7,468,050
-----------
ENERGY--5.3%
Atlantic Richfield Co. ............ 45,300 3,629,663
Elf Aquitaine SA (b) .............. 50,200 2,942,975
Mobil Corp. ....................... 112,000 8,085,000
Noble Affiliates, Inc. ............ 116,900 4,120,725
-----------
18,778,363
-----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
15
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE
- --------------------------------- --------- -------------
LAZARD EQUITY PORTFOLIO (CONTINUED)
FINANCIAL SERVICES--0.6%
Firstar Corp. ................... 53,800 $ 2,283,138
------------
GAS EXPLORATION--1.1%
Burlington Resources, Inc. ...... 90,400 4,051,050
------------
HOTELS & RESTAURANTS--1.9%
McDonalds Corp. ................. 138,500 6,613,375
------------
INDUSTRIAL & MACHINERY--0.7%
Ingersoll Rand, Co. ............. 62,500 2,531,250
------------
INSURANCE--6.4%
Allstate Corp. .................. 51,899 4,716,322
The Hartford Financial Services
Group, Inc. .................... 79,000 7,391,437
Travelers Group, Inc. ........... 197,649 10,648,340
------------
22,756,099
------------
LEISURE TIME--1.3%
Brunswick Corp. ................. 157,600 4,777,250
------------
MULTIMEDIA--3.7%
Gannett Company, Inc. ........... 132,000 8,159,250
Reuters Holdings PLC (b) ........ 74,500 4,935,625
------------
13,094,875
------------
OIL & GAS--1.0%
British Petroleum Company
PLC (b) ........................ 43,200 3,442,500
------------
PAPER PRODUCTS--1.9%
Georgia Pacific Corp. ........... 54,000 3,280,500
Kimberly-Clark Corp. ............ 70,212 3,462,329
------------
6,742,829
------------
PUBLISHING--2.9%
Knight Ridder, Inc. ............. 89,500 4,654,000
New York Times Co. .............. 85,500 5,653,687
------------
10,307,687
------------
RETAIL--7.2%
American Stores Co. ............. 212,900 4,377,756
Federated Department Stores,
Inc. (a) ....................... 112,400 4,840,225
Lowe's Companies, Inc. .......... 92,000 4,387,250
Safeway, Inc. (a) ............... 57,200 3,617,900
Sears Roebuck & Co. ............. 119,100 5,389,275
Wal-Mart Stores, Inc. ........... 78,200 3,084,013
------------
25,696,419
------------
SERVICES--1.5%
Cognizant Corp. ................. 117,800 5,249,463
------------
TECHNOLOGY--1.7%
Advanced Micro Devices, Inc.
(a) ............................ 161,200 2,891,525
LSI Logic Corp. (a) ............. 162,500 3,209,375
------------
6,100,900
------------
TELECOMMUNICATIONS--6.3%
Ameritech Corp. ................. 120,500 9,700,250
Bell Atlantic Corp. ............. 100,200 9,118,200
SBC Communications, Inc. ........ 49,900 3,655,175
------------
22,473,625
------------
TRUCKING & FREIGHT FORWARDING--0.8%
Federal Express Corp. (a) ....... 44,700 2,729,494
------------
UTILITIES--4.2%
Dominion Resources, Inc. ........ 18,500 787,406
Duke Energy Corp. ............... 104,000 5,759,000
Edison International ............ 259,500 7,055,156
PacifiCorp ...................... 47,000 1,283,688
------------
14,885,250
------------
TOTAL COMMON STOCKS
(Identified cost
$284,312,492) .................. 345,863,990
------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
16
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- -------------------------------- ---------- -------------
LAZARD EQUITY PORTFOLIO (CONTINUED)
REPURCHASE AGREEMENT--2.7%
State Street Bank and Trust
Company, 5.65%, 01/02/98
(Dated 12/31/97, collateral-
ized by $9,525,000 United
States Treasury Notes, 6.25%,
07/31/98, with a value of
$9,805,254) (Identified
cost $9,610,000) ................ $9,610 $ 9,610,000
------------
TOTAL INVESTMENTS
(Identified cost
$293,922,492) (d) ............... 99.7% $355,473,990
CASH AND OTHER ASSETS IN
EXCESS OF LIABILITIES ............ 0.3 912,182
------ ------------
NET ASSETS ........................ 100.0% $356,386,172
====== ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
17
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE
- ----------------------------------- ---------- ------------
LAZARD MID CAP PORTFOLIO
COMMON STOCKS--91.6%
AEROSPACE & DEFENSE--3.7%
Gulfstream Aerospace Corp.
(a) ............................. 30,600 $ 895,050
Litton Industries, Inc. (a) ...... 17,800 1,023,500
1,918,550
----------
AGRICULTURAL MACHINERY--1.7%
AGCO Corp. ....................... 30,400 889,200
AIRLINES-2.3%
USAir Group, Inc. (a) ............ 18,800 1,175,000
APPAREL & TEXTILES-1.5%
Liz Claiborne, Inc. .............. 18,200 760,988
AUTO PARTS-3.7%
Borg-Warner Automotive, Inc. ..... 20,400 1,060,800
Meritor Automotive, Inc. ......... 39,900 840,394
1,901,194
----------
BANKING--3.9%
North Fork Bancorp, Inc. ......... 30,300 1,016,944
Union Planters Corp. ............. 14,700 998,681
2,015,625
----------
BROADCASTING--2.1%
The E.W. Scripps Co., Class A .... 22,700 1,099,531
COMMERCIAL SERVICES-2.0%
Pittston Brink's Group ........... 25,100 1,010,275
COMPUTERS & BUSINESS EQUIPMENT-3.6%
NCR Corp. (a) .................... 31,800 884,438
Storage Technology Corp. (a) ..... 15,400 953,837
1,838,275
----------
CONSTRUCTION MATERIALS--1.9%
Martin Marietta Materials, Inc. .. 26,400 965,250
DRUGS & HEALTH CARE--5.4%
Mallinckrodt, Inc. ............... 25,700 976,600
Perrigo Co. (a) .................. 66,400 888,100
St. Jude Medical, Inc. (a) ....... 29,900 911,950
2,776,650
----------
ELECTRICAL EQUIPMENT--1.9%
UCAR International, Inc. (a) ..... 24,400 974,475
ELECTRONICS--5.3%
Lam Research Corp. (a) ........... 30,600 895,050
Lexmark International Group,
Inc., Class A (a) ............... 28,400 1,079,200
LSI Logic Corp. (a) .............. 37,500 740,625
2,714,875
----------
ENERGY--1.4%
Noble Affiliates, Inc. ........... 21,200 747,300
FINANCIAL SERVICES-5.6%
Beneficial Corp. ................. 11,500 955,937
Firstar Corp. .................... 24,500 1,039,719
The CIT Group, Inc., Class A(a) .. 28,500 919,125
2,914,781
----------
HOUSEHOLD APPLIANCES
& HOME FURNISHINGS--1.6%
Maytag Corp. ..................... 22,100 824,606
HOUSEHOLD PRODUCTS--1.0%
Dial Corp. ....................... 25,200 524,475
INDUSTRIAL & MACHINERY--1.7%
Briggs & Stratton Corp. .......... 17,700 859,556
INSURANCE--5.7%
Hartford Life, Inc. Class A ...... 23,900 1,082,969
Old Republic International
Corp. ........................... 24,700 918,531
Scor (b) ......................... 19,300 921,575
2,923,075
----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
18
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE
- ------------------------------------ ---------- ------------
LAZARD MID CAP PORTFOLIO (CONTINUED)
LEISURE TIME--5.4%
Brunswick Corp. .................... 26,900 $ 815,406
Galileo International, Inc. ........ 34,200 944,775
Royal Caribbean Cruises, Ltd. ...... 19,000 1,012,938
2,773,119
-----------
MANUFACTURING--3.9%
Crane Co. .......................... 23,000 997,625
Mark IV Industries, Inc. ........... 46,000 1,006,250
2,003,875
-----------
NEWSPAPERS--2.0%
Central Newspapers, Inc.,
Class A ........................... 14,300 1,057,306
OIL & GAS-1.7%
Enron Oil & Gas Co. ................ 42,600 902,588
PAPER PRODUCTS--2.0%
Temple-Inland, Inc. ................ 19,700 1,030,556
REAL ESTATE--3.7%
Boston Properties, Inc. ............ 28,300 935,669
Mack California Realty Corp. ....... 23,800 975,800
1,911,469
-----------
RETAIL--3.8%
Intimate Brands, Inc. .............. 42,100 1,013,031
Tandy Corp. ........................ 24,800 956,350
1,969,381
-----------
RETAIL TRADE-1.6%
Proffitt's, Inc. (a) ............... 29,000 824,688
STEEL--1.5%
Ispat International NV (a) ......... 37,000 800,125
SOFTWARE--1.3%
Autodesk, Inc. ..................... 18,500 684,500
TELEPHONE--1.8%
Frontier Corp. ..................... 39,300 945,656
TOYS & AMUSEMENTS--1.9%
Hasbro, Inc. ....................... 30,400 957,600
UTILITIES--5.0%
CalEnergy Company, Inc. (a) ........ 25,900 744,625
NIPSCO Industries, Inc. ............ 20,400 1,008,525
Potomac Electric Power Co. ......... 31,900 823,419
2,576,569
-----------
TOTAL COMMON STOCKS
(Identified cost
$45,985,243) ...................... 47,271,113
-----------
PRINCIPAL
AMOUNT
(000)
-----------
REPURCHASE AGREEMENT--9.9%
State Street Bank and Trust
Company, 5.65%, 01/02/98
(Dated 12/31/97, collateral-
ized by $5,030,000 United
States Treasury Notes, 6.25%,
07/31/98, with a value of
$5,177,998) (Identified cost
$5,075,000) ....................... $5,075 5,075,000
-----------
TOTAL INVESTMENTS (Identified
cost $51,060,243) (d) ............... 101.5% $52,346,113
LIABILITIES IN EXCESS OF CASH
AND OTHER ASSETS ................... (1.5) (760,624)
------ -----------
NET ASSETS .......................... 100.0% $51,585,489
====== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
19
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE
- --------------------------------------- ----------- --------------
LAZARD SMALL CAP PORTFOLIO
COMMON STOCKS--92.3%
AIRLINES--0.5%
Atlas Air, Inc. (a) .................. 337,000 $ 8,088,000
------------
AUTO PARTS--3.8%
Borg-Wagner Automotive, Inc........... 213,000 11,076,000
Exide Corp. .......................... 544,000 14,076,000
Superior Industries
International, Inc. ................. 477,100 12,792,244
Tower Automotive, Inc. (a) ........... 448,000 18,844,000
------------
56,788,244
------------
BANKING--8.4%
AMRESCO, Inc. (a) .................... 635,500 19,223,875
Coast Savings Financial,
Inc. (a) ............................ 310,000 21,254,375
Cullen/Frost Bankers, Inc. ........... 324,000 19,662,750
Hibernia Corp. Class A ............... 908,770 17,096,236
HUBCO, Inc. .......................... 145,800 5,704,425
North Fork Bancorp, Inc. ............. 688,040 23,092,342
Quick & Reilly Group, Inc. ........... 445,500 19,156,500
------------
125,190,503
------------
BUSINESS SERVICES AND SUPPLIES--1.4%
American Pad & Paper Co. (a) ......... 775,400 7,463,225
CDI Corp. (a) ........................ 145,200 6,642,900
Norrell Corp.......................... 315,900 6,278,513
------------
20,384,638
------------
CHEMICALS & PLASTICS--1.7%
Ferro Corp. .......................... 24,000 583,500
Mississippi Chemical Corp. ........... 623,845 11,385,171
Schulman (A.), Inc. .................. 517,200 12,994,650
------------
24,963,321
------------
COMMERCIAL SERVICES--0.4%
Inacom Corp. (a) ..................... 63,000 1,767,938
Metromail Corp. (a) .................. 23,200 414,700
Pittston Brink's Group ............... 101,900 4,101,475
------------
6,284,113
------------
COMPUTERS & BUSINESS EQUIPMENT--3.7%
Bell & Howell Co. (a) ................ 415,800 10,057,162
Lexmark International Group,
Inc. Class A (a) .................... 377,100 14,329,800
Stratus Computer, Inc. (a) ........... 485,100 18,342,844
Wang Laboratories, Inc. (a) .......... 565,400 12,509,475
------------
55,239,281
------------
CONGLOMERATES--0.7%
ACX Technologies, Inc. (a) ........... 440,000 10,752,500
------------
CONSTRUCTION MATERIALS--0.1%
Martin Marietta Materials, Inc. ....... 28,600 1,045,688
------------
CONTAINERS PAPER & PLASTIC--0.9%
First Brands Corp. ................... 466,900 12,577,119
------------
COSMETICS & TOILETRIES--1.0%
Alberto Culver Co. Class A ........... 553,800 14,952,600
------------
DRUGS & HEALTH CARE--4.6%
Apria Healthcare Group, Inc. (a) ..... 672,200 9,032,688
Integrated Health Services, Inc. ..... 502,130 15,660,179
Magellan Health Services, Inc.
(a) ................................. 759,160 16,321,940
Perrigo Co. (a) ...................... 1,388,020 18,564,767
Sun Healthcare Group, Inc. (a) ....... 462,000 8,951,250
------------
68,530,824
------------
ELECTRICAL EQUIPMENT--2.6%
Anixter International, Inc.(a) ....... 988,500 16,310,250
Belden, Inc. ......................... 447,520 15,775,080
Lam Research Corp. (a) ............... 247,000 7,224,750
------------
39,310,080
------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
20
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE
- ------------------------------------ ----------- -------------
LAZARD SMALL CAP PORTFOLIO (CONTINUED)
ELECTRONICS--1.5%
AMETEK, Inc. ....................... 527,900 $ 14,253,300
International Rectifier Corp. (a) .. 735,500 8,688,094
------------
22,941,394
------------
FINANCIAL SERVICES--0.0%
Enhance Financial Services
Group, Inc. ....................... 8,600 511,700
------------
GAS EXPLORATION--0.8%
Barrett Resources Corp. (a) ........ 385,100 11,649,275
------------
HOMEBUILDERS--0.9%
Kaufman & Broad Home Corp. ......... 625,000 14,023,438
------------
HOTELS & RESTAURANTS--0.9%
Lone Star Steakhouse &
Saloon, Inc. (a) .................. 270,900 4,740,750
Morton's Restaurant Group,
Inc. (a) .......................... 356,900 7,227,225
NPC International, Inc. (a) ........ 101,300 1,228,263
------------
13,196,238
------------
HOUSEHOLD APPLIANCES & HOME
FURNISHINGS--3.7%
Bassett Furniture Industries,
Inc. .............................. 283,200 8,496,000
Bush Industries, Inc. Class A ...... 257,800 6,702,800
Furniture Brands
International, Inc. (a) ........... 911,400 18,683,700
Harman International
Industries, Inc. .................. 495,300 21,019,294
------------
54,901,794
------------
INDUSTRIAL & MACHINERY--5.1%
Albany International Corp.
Class A ........................... 34,900 802,700
Briggs & Stratton Corp. ............ 264,830 12,860,807
Manitowoc Company, Inc. ............ 464,250 15,088,125
Regal-Beloit Corp. ................. 220,000 6,503,750
Roper Industries, Inc. ............. 502,300 14,189,975
Stewart & Stevenson Services,
Inc. .............................. 350,500 8,937,750
United Dominion Industries,
Ltd. .............................. 719,800 18,219,937
------------
76,603,044
------------
INSURANCE--6.8%
American Bankers Insurance
Group, Inc. ....................... 382,500 17,571,094
Amerin Corp. (a) ................... 586,900 16,433,200
Delphi Financial Group, Inc.,
Class A (a) ....................... 257,200 11,574,000
NAC Re Corp. ....................... 362,305 17,685,013
Penncorp Financial Group, Inc. ..... 519,300 18,532,518
Reliance Group Holdings, Inc. ......1,180,000 16,667,500
United Wisconsin Services,
Inc. .............................. 83,200 2,142,400
------------
100,605,725
------------
INVESTMENT COMPANIES--0.7%
Affiliated Managers Group,
Inc. (a) .......................... 285,100 8,267,900
CMAC Investment Corp. .............. 23,200 1,400,700
------------
9,668,600
------------
LEISURE TIME--2.6%
Polaris Industries, Inc. ........... 522,700 15,975,019
Regal Cinemas, Inc. (a) ............ 347,500 9,686,562
Vail Resorts, Inc. (a) ............. 486,000 12,605,625
------------
38,267,206
------------
MACHINERY--1.4%
JLG Industries, Inc. ............... 100,800 1,423,800
McDermott International, Inc. ...... 541,700 19,839,762
------------
21,263,562
------------
MANUFACTURING--7.1%
Aeroquip-Vickers, Inc. ............. 251,700 12,349,031
Alltrista Corp. (a) ................ 358,400 10,169,600
Carlisle Companies, Inc. ........... 287,200 12,277,800
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
21
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE
- ------------------------------------- ----------- -------------
LAZARD SMALL CAP PORTFOLIO (CONTINUED)
Crane Co. .......................... 515,140 $ 22,344,198
Flowserve Corp. .................... 4,985 139,268
Mark IV Industries, Inc. ........... 1,073,964 23,492,962
Modine Manufacturing Co. ........... 207,500 7,080,938
Varlen Corp. ....................... 748,455 18,348,842
------------
106,202,639
------------
MEDICAL SUPPLIES--2.5%
ADAC Laboratories (a) .............. 40,000 790,000
Datascope Corp. (a) ................ 586,200 15,167,925
Dentsply International, Inc. ....... 478,000 14,579,000
The West Company, Inc. ............. 202,900 6,036,275
------------
36,573,200
------------
OIL & GAS--1.9%
Devon Energy Corp. ................. 224,000 8,624,000
Helmerich & Payne, Inc. ............ 97,860 6,642,247
Vintage Petroleum, Inc. ............ 674,000 12,806,000
------------
28,072,247
------------
PAPER PRODUCTS--0.5%
Chesapeake Corp. ................... 220,000 7,562,500
------------
PUBLISHING--2.6%
Banta Corp. ........................ 671,350 18,126,450
Mecklermedia Corp. (a) ............. 420,000 10,447,500
World Color Press, Inc. (a) ........ 402,000 10,678,125
------------
39,252,075
------------
REAL ESTATE--4.7%
Chateau Properties, Inc. ........... 61,451 1,935,707
Entertainment Properties Trust ..... 350,000 6,781,250
FelCor Suite Hotels, Inc. .......... 468,825 16,643,287
Glenborough Realty Trust, Inc. ..... 566,600 16,785,525
Kilroy Realty Corp. ................ 511,000 14,691,250
Reckson Associates Realty
Corp. ............................. 520,000 13,195,000
------------
70,032,019
------------
RETAIL--0.9%
AnnTaylor Stores Corp. (a) ......... 31,100 415,963
Eagle Hardware & Garden, Inc.
(a) ............................... 41,000 794,375
Hughes Supply, Inc. ................ 325,000 11,354,687
------------
12,565,025
------------
RETAIL TRADE--3.0%
Carson Pirie Scott & Co. (a) ....... 485,280 24,324,660
Global DirectMail Corp. (a) ........ 16,700 289,119
Movado Group, Inc. ................. 304,800 7,010,400
Proffitt's, Inc. (a) ............... 474,400 13,490,750
------------
45,114,929
------------
SAVINGS & LOAN--0.4%
Long Island Bancorp, Inc. .......... 11,900 590,538
Queens County Bancorp, Inc. ........ 127,697 5,171,728
------------
5,762,266
------------
STEEL--2.4%
UCAR International, Inc. (a) ....... 507,000 20,248,312
WHX Corp. (a) ...................... 1,340,000 15,912,500
------------
36,160,812
------------
TECHNOLOGY--1.0%
VLSI Technology, Inc. (a) .......... 652,000 15,403,500
------------
TELECOMMUNICATIONS--2.2%
Associated Group, Inc.
Class B (a) 298,500 8,693,813
CoreComm, Inc. (a) 225,608 2,284,281
NTL, Inc. (a) 498,700 13,901,262
Vanguard Cellular Systems,
Inc. (a) 605,600 7,721,400
Verbex Voice Systems, Inc.
(a), (j) 180,501 0
------------
32,600,756
------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
22
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE
- ---------------------------------- ---------------- ---------------
LAZARD SMALL CAP PORTFOLIO (CONTINUED)
TELECOMMUNICATIONS EQUIPMENT--3.1%
Allen Group, Inc. .................. 838,365 $15,457,355
Dynatech Corp. (a) ................. 393,100 18,426,563
Oak Industries, Inc. (a) ........... 433,685 12,875,023
--------------
46,758,941
--------------
TEXTILES, SHOES AND APPAREL--1.7%
Mohawk Industries, Inc. (a) ........ 142,350 3,122,803
Oakley, Inc. (a) ................... 750,000 6,796,875
WestPoint Stevens, Inc. (a) ........ 335,000 15,828,750
--------------
25,748,428
--------------
TRANSPORTATION--1.5%
Budget Group, Inc., Class A (a) .... 216,000 7,465,500
Landstar Systems, Inc. (a) ......... 180,700 4,765,962
Pittston Burlington Group .......... 381,920 10,025,400
--------------
22,256,862
--------------
TRUCKING & FREIGHT FORWARDING--2.2%
Rollins Truck Leasing Co. .......... 733,790 13,116,496
Xtra Corp. ......................... 336,000 19,698,000
--------------
32,814,496
--------------
UTILITIES--0.4%
Calpine Corp. (a) .................. 418,200 6,220,725
--------------
TOTAL COMMON STOCKS
(Identified cost
$1,084,715,042) ................... 1,376,840,307
--------------
PRINCIPAL
AMOUNT
(000)
--------
CONVERTIBLE BONDS--0.4%
COMMUNICATIONS--0.4%
International CableTel, Inc.,
7.00%, 6/15/08 (a) ................ $ 5,589 5,449,275
--------------
RESTAURANTS, LODGING &
ENTERTAINMENT--0.0%
Interactive Light Holdings, Inc.,
8.00%, 1/25/99 (a), (j) ........... 1,000 500,000
-------------
TELECOMMUNICATIONS--0.0%
Verbex Voice Systems, Inc.,
10.00%, 12/31/98 (a), (j) ......... 100 0
-------------
TOTAL CONVERTIBLE BONDS
(Identified cost
$6,689,000) ....................... 5,949,275
-------------
SHARES
--------
PREFERRED STOCKS--0.0%
TELECOMMUNICATIONS--0.0%
Verbex Voice Systems, Inc.
(a), (j)
(Identified cost $1,500,000) ...... 687,285 0
--------------
PRINCIPAL
AMOUNT
(000)
--------
REPURCHASE AGREEMENT--9.0%
State Street Bank and Trust
Company, 5.65%, 01/02/98
(Dated 12/31/97, collateral-
ized by $132,930,000 United
States Treasury Notes, 6.25%,
07/31/98, with a value of
$136,841,199) (Identified
cost $134,156,000) ................ $134,156 134,156,000
--------------
TOTAL INVESTMENTS
(Identified cost
$1,227,060,042)
(d) .............................. 101.7% $1,516,945,582
LIABILITIES IN EXCESS OF CASH
AND OTHER ASSETS ................... (1.7) (25,773,212)
-------- --------------
NET ASSETS .......................... 100.0% $1,491,172,370
======== ==============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
23
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE
- ------------------------------------ ---------- ------------
LAZARD BANTAM VALUE PORTFOLIO
COMMON STOCKS--96.7%
AEROSPACE & DEFENSE-0.1%
DONCASTERS PLC (a), (b) ............ 4,000 $ 84,500
----------
AIRLINES--0.5%
World Airways, Inc. (a) ............ 58,800 404,250
----------
APPAREL & TEXTILES--4.9%
Candie's, Inc. (a) ................. 180,000 1,057,500
Novel Denim Holdings, Ltd. (a) ..... 80,200 1,604,000
Tefron, Ltd. (a) ................... 50,000 1,150,000
----------
3,811,500
----------
BANKS--1.6%
Southwest Bancorporation of
Texas, Inc. (a) ................... 40,000 1,245,000
----------
BUSINESS SERVICES AND SUPPLIES--4.9%
American Pad & Paper Co. (a) ....... 128,000 1,232,000
Box Hill Systems Corp. (a) ......... 142,500 1,487,344
Cellular Technical Services Co.
(a) ............................... 351,000 1,118,812
----------
3,838,156
----------
CHEMICALS & PLASTICS--1.0%
Mississippi Chemical Corp. ......... 42,000 766,500
----------
COMMERCIAL SERVICES--2.5%
BridgeStreet Accomodations,
Inc. (a) .......................... 70,000 710,937
MoneyGram Payment Systems,
Inc. (a) .......................... 117,600 1,264,200
----------
1,975,137
----------
COMPUTER SERVICES--1.6%
ADAC Laboratories (a) .............. 65,000 1,283,750
----------
DRUGS & HEALTH CARE--5.0%
CorVel Corp. (a) ................... 54,000 2,038,500
Integrated Health Services, Inc. ... 60,000 1,871,250
----------
3,909,750
----------
ELECTRONICS--1.3%
OPTEK Technology, Inc. (a) ......... 52,700 1,050,706
----------
ENGINEERING & CONSTRUCTION--2.0%
EMCOR Group, Inc. (a) .............. 75,000 1,537,500
----------
FINANCIAL SERVICES--3.6%
National Auto Credit, Inc. (a) ..... 184,250 978,828
Phoenix Duff & Phelps Corp. ........ 225,600 1,804,800
----------
2,783,628
----------
FOOD & BEVERAGE--1.6%
American Italian Pasta Co.,
Class A (a) ....................... 50,000 1,250,000
----------
HOTELS & RESTAURANTS--3.8%
Morton's Restaurant Group,
Inc. (a) .......................... 79,400 1,607,850
NPC International, Inc. (a) ........ 112,000 1,358,000
----------
2,965,850
----------
HOUSEHOLD APPLIANCES & HOME
FURNISHINGS--1.9%
Stanley Furniture, Inc. (a) ........ 54,300 1,513,613
----------
INDUSTRIAL & MACHINERY--5.4%
DT Industries, Inc. ................ 55,800 1,897,200
OmniQuip International, Inc. ....... 116,300 2,318,731
----------
4,215,931
----------
INSURANCE--8.2%
AmerUs Life Holdings, Inc. ......... 32,200 1,187,375
Delphi Financial Group,
Inc.,Class A (a) .................. 27,886 1,254,870
ESG Re Ltd. (a) .................... 101,000 2,373,500
Stirling Cooke Brown
Holdings,Ltd. (a) ................. 64,000 1,568,000
----------
6,383,745
----------
LEISURE TIME--11.1%
American Skiing Co. (a) ............ 101,400 1,508,325
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
24
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE
- ---------------------------------- ----------- -----------
LAZARD BANTAM VALUE PORTFOLIO (CONTINUED)
Carmike Cinemas, Inc., Class A
(a) ............................. 52,700 $ 1,511,831
Dover Downs Entertainment,
Inc. ............................ 87,800 2,013,913
Steinway Musical Instruments,
Inc. (a) ........................ 71,000 1,641,875
Trendwest Resorts, Inc. (a) ...... 42,000 960,750
WMS Industries, Inc. (a) ......... 50,000 1,056,250
------------
8,692,944
------------
MANUFACTURING--9.1%
Citation Corp. (a) ............... 99,000 1,608,750
EASCO, Inc. ...................... 142,000 1,881,500
Regal-Beloit Corp. ............... 65,500 1,936,344
Varlen Corp. ..................... 70,200 1,720,997
------------
7,147,591
------------
MEDICAL SUPPLIES--2.9%
The West Company, Inc. ........... 52,800 1,570,800
Young Innovations, Inc. (a) ...... 40,000 720,000
------------
2,290,800
------------
METAL FABRICATE/HARDWARE--0.9%
Special Metals Corp. (a) ......... 40,000 720,000
------------
OIL & GAS--5.6%
Bayard Drilling Technologies,
Inc. (a) ........................ 94,100 1,529,125
Cal Dive International, Inc. (a) . 63,500 1,555,750
Willbros Group, Inc. (a) ......... 85,000 1,275,000
------------
4,359,875
------------
PUBLISHING--1.5%
Mecklermedia Corp. (a) ........... 48,000 1,194,000
------------
STEEL--2.0%
WHX Corp. (a) .................... 132,000 1,567,500
------------
TELECOMMUNICATIONS EQUIPMENT--4.2%
Allen Group, Inc. ................ 104,400 1,924,875
Cidco, Inc. (a) .................. 69,000 1,345,500
------------
3,270,375
TOBACCO--2.1%
Swisher International Group,
Inc. (a) ........................ 95,500 1,623,500
------------
TOYS & AMUSEMENTS--1.3%
GT Bicycles, Inc. (a) ............ 170,600 1,012,938
------------
TRANSPORTATION--3.9%
Genesee & Wyoming, Inc.,
Class A (a) ..................... 63,000 1,472,625
Pittston Burlington Group ........ 61,600 1,617,000
------------
3,089,625
------------
TRUCKING & FREIGHT FORWARDING--2.2%
Interpool, Inc. .................. 117,000 1,733,062
------------
TOTAL COMMON STOCKS
(Identified
cost $68,717,979) ............... 75,721,726
------------
PRINCIPAL
AMOUNT
(000)
-------
REPURCHASE AGREEMENT--5.0%
State Street Bank and Trust
Company, 5.65%, 01/02/98
(Dated 12/31/97, collateral-
ized by $3,925,000 United
States Treasury Notes, 6.25%,
07/31/98, with a value of
$4,040,485) (Identified cost
$3,961,000) ..................... $3,961 3,961,000
------------
TOTAL INVESTMENTS
(Identified cost
$72,678,979) (d) ................ 101.7% $ 79,682,726
LIABILITIES IN EXCESS OF CASH AND
OTHER ASSETS ..................... (1.7) (1,362,765)
----- ----------
NET ASSETS ........................ 100.0% $ 78,319,961
===== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
25
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE
- --------------------------------- ---------- -----------
LAZARD GLOBAL EQUITY PORTFOLIO*
COMMON STOCKS--96.0%
FRANCE--6.6%
Alcatel Alsthom (Cie Generale) . 1,000 $ 127,108
Axa-UAP ........................ 1,550 119,936
Cie de Saint Gobain ............ 650 92,340
Cie Generale des Eaux .......... 920 128,404
Elf Aquitaine SA ............... 1,450 168,647
Rhone-Poulenc SA ............... 4,598 205,969
----------
TOTAL FRANCE ................... 842,404
----------
GERMANY--6.3%
Daimler-Benz AG (a) ............ 2,100 147,319
Dresdner Bank AG ............... 3,100 143,028
Hoechst AG ..................... 3,000 105,061
Mannesmann AG .................. 275 138,956
Thyssen AG ..................... 550 117,708
Viag AG ........................ 260 140,048
----------
TOTAL GERMANY .................. 792,120
----------
HONG KONG--0.6%
HSBC Holdings, Ltd. ............ 3,326 81,980
----------
ITALY--2.8%
Credito Italiano ............... 30,800 94,977
Ente Nazionale Idrocarburi
SPA (ENI) ..................... 26,900 152,519
Fiat SPA ....................... 14,190 41,271
Telecom Italia SPA (a) ......... 13,900 61,289
----------
TOTAL ITALY 350,056
----------
JAPAN--10.7%
Honda Motor Co. ................ 3,000 110,056
Ito-Yokado Company, Ltd. ....... 2,000 101,861
Matsushita Electric Industrial
Company, Ltd. ................. 9,000 131,653
Mitsubishi Heavy Industries,
Ltd. .......................... 20,000 83,327
Mitsui Marine & Fire Insurance
Co. ........................... 9,000 45,906
Nippon Telegraph &
Telephone Corp. ............... 13 111,511
Omron Corp. .................... 4,000 62,495
Promise Company, Ltd. .......... 2,090 115,889
Ricoh Company, Ltd. ............ 15,000 186,107
Sekisui Chemical Co. ........... 20,000 101,555
Sony Corp. ..................... 1,500 133,262
Sumitomo Trust & Banking ....... 27,000 140,201
Sumitomo Trust & Banking,
Ltd. (a) ...................... 1 29,390
----------
TOTAL JAPAN .................... 1,353,213
----------
NETHERLANDS--3.3%
Heineken NV .................... 650 113,161
Philips Electronics NV ......... 2,800 167,919
Royal Dutch Petroleum Co. (b) .. 2,440 132,217
----------
TOTAL NETHERLANDS .............. 413,297
----------
SPAIN--1.2%
Telefonica de Espana ........... 5,250 149,902
----------
SWEDEN--1.8%
Astra AB ....................... 6,613 111,189
Svenska Handelsbanken,
Series A ...................... 3,500 121,003
----------
TOTAL SWEDEN ................... 232,192
----------
SWITZERLAND--4.5%
Holderbank Financiere
Glarus AG ..................... 130 106,050
Nestle SA ...................... 100 149,808
Novartis AG .................... 84 136,244
SMH AG ......................... 63 34,751
Zurich
Versicherungs-Gesellschaft .... 310 147,660
----------
TOTAL SWITZERLAND 574,513
----------
UNITED KINGDOM--13.7%
B.A.T Industries PLC ........... 22,800 207,917
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
26
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE
- ------------------------------------ ---------- ------------
LAZARD GLOBAL EQUITY PORTFOLIO* (CONTINUED)
British Aerospace PLC ............ 6,100 $ 173,834
British Petroleum Company
PLC (a) ......................... 11,600 153,451
BTR PLC .......................... 30,600 92,479
Cadbury Schweppes PLC ............ 12,842 129,612
Diageo PLC ....................... 21,005 192,169
EMI Group PLC .................... 13,500 112,643
Granada Group PLC ................ 8,200 125,257
National Power PLC ............... 16,300 160,636
National Westminster Bank
PLC (a) ......................... 7,000 116,355
Prudential Corp. PLC ............. 9,800 119,338
Unilever PLC ..................... 17,520 150,703
----------
TOTAL UNITED KINGDOM 1,734,394
----------
UNITED STATES--44.5%
Advanced Micro Devices, Inc.
(a) ............................. 2,900 52,019
Aetna, Inc. ...................... 2,450 172,878
Allied Signal, Inc. .............. 6,800 264,775
American Home Products
Corp. ........................... 2,600 198,900
Ameritech Corp. .................. 2,900 233,450
BankAmerica Corp. ................ 2,590 189,070
Bell Atlantic Corp. .............. 2,150 195,650
Burlington Resources, Inc. ....... 3,100 138,919
Champion International Corp. ..... 1,980 89,719
Chase Manhattan Corp. ............ 1,900 208,050
Cognizant Corp. .................. 3,400 151,513
Deere & Co. ...................... 2,800 163,275
Du Pont (E.I.) De Nemours &
Co. ............................. 4,100 246,256
Edison International ............. 8,600 233,812
Fleet Financial Group, Inc. ...... 1,900 142,381
General Motors Corp. ............. 3,500 212,187
Georgia-Pacific Corp. ............ 2,000 121,500
Hartford Financial Services
Group, Inc. ..................... 2,060 192,739
Hewlett-Packard Co. .............. 2,900 181,250
Honeywell, Inc. .................. 2,700 184,950
International Business
Machines Corp. .................. 2,320 242,585
Johnson & Johnson ................ 2,100 138,338
Knight Ridder, Inc. .............. 3,200 166,400
McDonalds Corp. .................. 4,900 233,975
Mobil Corp. ...................... 3,200 231,000
Philip Morris Companies, Inc. .... 5,150 233,359
Sears Roebuck & Co. .............. 4,270 193,217
Travelers Group, Inc. ............ 4,650 250,519
UAL Corp. (a) .................... 1,800 166,500
United Technologies Corp. ........ 2,700 196,594
-----------
TOTAL UNITED STATES .............. 5,625,780
-----------
TOTAL COMMON STOCKS
(Identified cost $10,890,642) .... 12,149,851
-----------
PREFERRED STOCKS--0.5%
ITALY--0.5%
Fiat SPA
(Identified cost $61,701) ....... 39,900 60,899
-----------
PRINCIPAL
AMOUNT
(000)
------
REPURCHASE AGREEMENT-2.5%
State Street Bank and Trust
Company, 5.65%, 01/02/98,
(Dated 12/31/97, collateral-
ized by $315,000 United
States Treasury Notes, 6.25%,
07/31/98, with a value of
$324,268)
(Identified cost $317,000) ..... $ 317 317,000
-----------
TOTAL INVESTMENTS
(Identified cost
$11,269,343) (d) ................ 99.0% $12,527,750
CASH AND OTHER ASSETS
IN EXCESS OF LIABILITIES ......... 1.0 121,007
----- -----------
NET ASSETS ........................ 100.0% $12,648,757
===== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
27
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
LAZARD GLOBAL EQUITY PORTFOLIO* (CONTINUED)
* Percentages of common stocks and preferred stocks are presented in the
portfolio by country.
Percentages by industry are as follows:
Aerospace & Defense 5.7%, Agricultural Machinery 1.3%, Airline 1.3%,
Automotive 4.5%, Banks and Financial Services 12.9%, Beverages 3.5%,
Chemicals & Plastics 5.2%, Commercial Services 1.0%, Computers & Business
Equipment 4.8%, Conglomerates 4.0%, Construction Materials 0.9%, Drugs &
Health Care 3.5%, Electronics 3.9%, Energy 1.8%, Food & Beverage 1.2%, Gas
Exploration 1.1%, Home Building 1.4%, Insurance 4.9%, Leisure Time 0.9%,
Machinery 1.1%, Manufacturing 2.5%, Medical Supplies 1.1%, Oil & Gas 4.8%,
Paper Products 1.7%, Publishing 1.3%, Restaurants, Lodging & Entertainment
1.9%, Retail 2.3%, Services 1.2%, Steel 0.9%, Technology 0.4%,
Telecommunications 5.9%, Telecommunications Equipment 1.0%, Tobacco 3.5%,
Utilities 3.1%.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
28
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE
- --------------------------------- ----------- --------------
LAZARD INTERNATIONAL EQUITY PORTFOLIO*
COMMON STOCKS--97.4%
AUSTRALIA--1.1%
Westpac Banking Corp., Ltd. 3,595,300 $ 23,001,207
------------
DENMARK--1.3%
Unidanmark, Class A 368,800 27,073,717
------------
FINLAND--1.0%
Merita, Ltd. 2,145,400 11,728,767
UPM Kymmene OY 450,700 9,012,429
------------
TOTAL FINLAND 20,741,196
------------
FRANCE--13.2%
Alcatel Alsthom (Cie Generale) 287,600 36,556,284
Axa-UAP 455,800 35,268,931
Banque Nationale de Paris 574,522 30,537,441
Cie de Saint Gobain 174,380 24,772,767
Cie Generale des Eaux 342,892 47,857,320
Elf Aquitaine SA 417,400 48,546,980
Havas SA 129,800 9,338,440
Rhone-Poulenc SA 1,042,590 46,703,043
------------
TOTAL FRANCE 279,581,206
------------
GERMANY--12.0%
Daimler-Benz AG 478,300 33,553,717
Deutsche Bank AG 296,600 20,938,992
Dresdner Bank AG 608,700 28,084,216
Hoechst AG 1,021,000 35,755,858
Mannesmann AG (b) 66,005 33,351,667
Metallgesellschaft AG 863,300 15,788,415
Metro AG 451,820 16,199,667
Thyssen AG 91,800 19,646,460
Viag AG 94,560 50,934,512
------------
TOTAL GERMANY 254,253,504
------------
HONG KONG--2.5%
HSBC Holdings, Ltd. ............ 1,081,148 26,648,506
Swire Pacific, Ltd. ............ 2,193,000 12,027,681
Wharf (Holdings), Ltd. (a) ..... 6,270,000 13,755,323
------------
TOTAL HONG KONG 52,431,510
------------
ITALY--4.8%
Credito Italiano ............... 5,597,500 17,260,804
Ente Nazionale Idrocarburi
SPA (ENI) ..................... 5,735,000 32,516,704
Fiat SPA ....................... 3,682,030 10,708,900
Telecom Italia SPA (a) ......... 9,380,400 41,360,724
------------
TOTAL ITALY 101,847,132
------------
JAPAN--20.8%
Honda Motor Co. ................ 1,017,000 37,308,951
Ito-Yokado Company, Ltd. ....... 437,000 22,256,643
Japan Tobacco, Inc. ............ 3,881 27,523,978
Matsushita Electric Industrial
Company, Ltd. ................. 2,691,000 39,364,400
Mitsubishi Heavy Industries,
Ltd. .......................... 4,765,000 19,852,645
Mitsui Marine & Fire Insurance
Co. ........................... 1,165,000 5,942,329
Nintendo Co. ................... 352,600 34,565,978
Nippon Telegraph & Telephone
Corp. ......................... 4,644 39,835,182
Omron Corp. .................... 716,000 11,186,643
Orix Corp. ..................... 539,400 37,593,166
Promise Company, Ltd. .......... 347,500 19,268,591
Ricoh Company, Ltd. ............ 3,894,000 48,313,393
Sekisui Chemical Co. ........... 2,957,000 15,014,865
Sony Corp. ..................... 530,300 47,112,504
Sumitomo Trust & Banking,
Ltd. .......................... 6,464,000 33,565,074
------------
TOTAL JAPAN .................... 438,704,342
------------
MALAYSIA--0.2%
Genting Berhad ................. 1,463,000 3,667,374
------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
29
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE
- -------------------------------- ----------- --------------
LAZARD INTERNATIONAL
EQUITY PORTFOLIO* (CONTINUED)
NETHERLANDS--3.2%
Heineken NV .................... 111,600 $ 19,428,797
Philips Electronics NV ......... 463,500 27,796,513
Royal Dutch Petroleum Co. (c)... 377,600 20,461,200
--------------
TOTAL NETHERLANDS 67,686,510
--------------
SPAIN--1.7%
Telefonica de Espana ........... 1,236,400 35,302,526
--------------
SWEDEN--4.0%
Astra AB ....................... 1,032,166 17,354,647
Electrolux AB Series B ......... 340,000 23,594,756
Nordbanken Holding AB (a) ...... 2,001,500 11,318,449
Svenska Handelsbanken
Series A .. ................... 912,600 31,550,611
--------------
TOTAL SWEDEN ................... 83,818,463
--------------
SWITZERLAND--9.3%
Credit Suisse Group AG ......... 202,310 31,290,761
Holderbank Financiere Glarus
AG ............................ 23,760 19,382,644
Nestle SA ...................... 17,130 25,662,175
Novartis AG .................... 22,794 36,970,832
SGS Holding SA ................. 14,433 27,656,994
SMH AG ......................... 18,035 9,948,132
Zurich Versicherungs-
Gesellschaft .................. 93,030 44,312,127
--------------
TOTAL SWITZERLAND .............. 195,223,665
--------------
UNITED KINGDOM--22.3%
B.A.T Industries PLC ........... 3,523,600 32,132,273
British Aerospace PLC .......... 2,208,087 62,924,684
British Petroleum Company
PLC ........................... 1,648,700 21,809,876
BTR PLC ........................ 6,818,300 20,606,266
Cadbury Schweppes PLC .......... 3,533,931 35,667,379
Diageo PLC ..................... 3,985,410 36,461,421
EMI Group PLC .................. 1,749,700 14,599,322
General Electric Company PLC ... 2,839,500 18,399,002
Granada Group PLC .............. 1,366,200 20,869,047
Lucas Varity PLC ............... 9,987,653 35,270,148
Mirror Group PLC ............... 3,405,200 10,906,430
National Power PLC ............. 4,361,600 42,983,568
National Westminster Bank
PLC ........................... 2,204,700 36,646,744
Prudential Corp. PLC ........... 2,070,900 25,218,031
Rank Group PLC ................. 3,359,100 18,703,721
Unilever PLC ................... 4,417,800 38,000,911
--------------
TOTAL UNITED KINGDOM ........... 471,198,823
--------------
TOTAL COMMON STOCKS
(Identified cost
$1,737,433,254) ............... 2,054,531,175
--------------
PREFERRED STOCKS--0.6%
ITALY--0.6%
Fiat SPA
(Identified cost $16,142,423)... 8,244,150 12,582,931
--------------
PRINCIPAL
AMOUNT
(000)
----------
REPURCHASE AGREEMENT-0.5%
State Street Bank and Trust
Company, 5.65%, 01/02/98,
(Dated 12/31/97, collateral-
ized by $10,950,000 United
States Treasury Notes, 6.25%,
07/31/98, with a value of
$11,272,182) (Identified cost
$11,048,000) .................. $11,048 11,048,000
--------------
TOTAL INVESTMENTS
(Identified cost
$1,764,623,677) (d) 98.5% $2,078,162,106
CASH AND OTHER ASSETS IN
EXCESS OF LIABILITIES ......... 1.5 32,356,277
------- --------------
NET ASSETS ..................... 100.0% $2,110,518,383
======= ==============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
30
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
LAZARD INTERNATIONAL EQUITY PORTFOLIO* (CONTINUED)
* Percentages of common and preferred stocks are presented in the portfolio by
country.
Percentages by industry are as follows:
Advertising 0.4%, Aerospace & Defense 3.9%, Automotive 6.1%, Banking 15.8%,
Chemicals & Plastics 4.6%, Commercial Services 2.3%, Computers & Business
Equipment 2.3%, Conglomerates 8.8%, Construction Materials 1.0%, Drugs &
Health Care 2.6%, Electronics 6.8%, Financial Services 2.7%, Food &
Beverage 5.5%, Household Appliances & Home Furnishings 1.1%, Insurance
5.2%, Leisure Time 3.4%, Machinery 1.6%, Manufacturing 2.6%, Oil & Gas
5.8%, Paper Products 0.4%, Publishing 0.5%, Real Estate 0.7%, Retail 1.1%,
Telecommunications 5.5%, Telecommunications Equipment 1.7%, Tobacco 2.8%,
Utilities 2.0%, Wholesale Trade 0.8%.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
31
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE
- -------------------------------------- ----------- -------------
LAZARD INTERNATIONAL SMALL CAP PORTFOLIO*
COMMON STOCKS--93.9%
AUSTRALIA--4.6%
Bibury, Ltd. (a), (k) .............. 472,100 $ 0
Cochlear, Ltd. ..................... 894,000 2,913,322
E.R.G., Ltd. ....................... 1,982,488 1,666,791
Energy Equity Corp., Ltd. (a) ...... 3,346,200 2,028,224
-----------
TOTAL AUSTRALIA .................... 6,608,337
-----------
AUSTRIA--3.4%
Austria Mikro Systeme
International AG .................. 35,675 1,807,545
Scala Business Solutions NV (a) .... 370,160 2,461,579
Scala Business Solutions NV
3/31/99 (a), (e) .................. 54,900 60,848
Scala Business Solutions NV
3/31/01 (a), (e) .................. 54,900 47,809
Schoeller-Bleckman Oil Field
Equipment AG (a) .................. 5,500 568,222
-----------
TOTAL AUSTRIA 4,946,003
-----------
CANADA--9.7%
Club Monaco, Inc. (a), (i) ......... 353,300 3,584,794
Legacy Hotels Real Estate
Investment Trust .................. 303,000 2,056,681
Maple Leaf Foods, Inc. ............. 319,500 3,532,487
Office Specialty, Inc., Class B (a). 215,000 2,429,761
Queensway Financial Holdings,
Ltd. (a) .......................... 141,600 2,378,083
-----------
TOTAL CANADA ....................... 13,981,806
-----------
DENMARK--0.5%
Falck AS ........................... 14,194 657,715
-----------
FINLAND--8.4%
Amer Group, Ltd. ................... 154,400 2,959,998
Huhtamaki Group .................... 54,800 2,261,991
Rocla OY (a) ....................... 157,400 1,472,661
Sampo Insurance Company, Ltd. ...... 59,100 1,919,060
Santasalo-JOT ...................... 109,000 1,647,713
Vaisala OY ......................... 20,500 1,729,973
-----------
TOTAL FINLAND 11,991,396
-----------
FRANCE--2.2%
Scor SA (a), (b) ................... 31,800 1,518,450
Societe Generale d'Entreprises
SA ................................ 63,000 1,632,965
-----------
TOTAL FRANCE 3,151,415
-----------
GERMANY--5.1%
Data Modul AG ...................... 59,830 2,491,046
DIS Deutscher Industrie
Service AG (a) .................... 43,700 1,821,896
Holsten Brauerei AG ................ 337 68,376
Marseille-Kliniken AG .............. 275,000 2,980,906
-----------
TOTAL GERMANY 7,362,224
-----------
HONG KONG--3.7%
CDL Hotels International, Ltd. ..... 3,302,300 1,001,472
Esprit Asia Holdings, Ltd. ......... 5,588,000 1,820,841
Peregrine Investment Holdings,
Ltd. .............................. 2,083,400 1,478,733
Shaw Brothers (Hong Kong),
Ltd. .............................. 1,427,000 1,058,879
-----------
TOTAL HONG KONG 5,359,925
-----------
IRELAND--3.9%
Adare Printing Group PLC ........... 217,200 2,253,635
Jurys Hotel Group PLC
(Dublin) .......................... 565,259 3,314,674
-----------
TOTAL IRELAND ...................... 5,568,309
-----------
ITALY--6.0%
Banca Popolare di Brescia .......... 206,900 1,929,819
Editoriale L' Espresso SPA ......... 558,000 2,681,176
Ittierre Holdings SPA (a) .......... 497,200 1,486,822
Manuli Rubber Industries
SPA(a) ............................ 672,500 2,501,441
-----------
TOTAL ITALY ........................ 8,599,258
-----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
32
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE
- ------------------------------------ --------- -------------
LAZARD INTERNATIONAL SMALL CAP
PORTFOLIO* (CONTINUED)
JAPAN--4.5%
Aderans Company, Ltd. ............ 90,000 $ 2,171,249
Dowa Fire & Marine Insurance
Co. ............................. 301,000 896,753
Honma Golf Company, Ltd. ......... 122,100 1,009,941
Laox ............................. 154,000 1,238,416
Namco ............................ 39,000 1,132,036
------------
TOTAL JAPAN ...................... 6,448,395
------------
NETHERLANDS--1.4%
BE Semiconductor Industries
NV .............................. 81,000 798,954
Telegraff Holdings ............... 65,800 1,239,642
------------
TOTAL NETHERLANDS ................ 2,038,596
------------
NEW ZEALAND--1.3%
Tranz Rail Holdings, Ltd. (a),(b). 162,300 1,866,450
------------
NORWAY--3.4%
P4 Radio Hele Norge ASA (a) ...... 348,200 3,064,394
Smedvig ASA ...................... 86,000 1,804,815
------------
TOTAL NORWAY ..................... 4,869,209
------------
PORTUGAL--2.3%
Banco Totta & Acores SA .......... 169,300 3,324,369
------------
SINGAPORE--0.8%
Robinson & Company, Ltd. ......... 336,000 1,196,084
------------
SPAIN--3.6%
Banco Pastor SA .................. 34,800 2,935,215
Corporacion Financiera
Reunida SA (a) .................. 412,500 2,206,679
------------
TOTAL SPAIN 5,141,894
------------
SWEDEN--7.1%
Caran AB ......................... 213,200 1,382,864
Elanders AB ...................... 78,625 1,079,374
Getinge Industries AB ............ 148,598 2,358,134
Information Highway AB (a) ....... 59,000 1,211,224
Monark Stiga AB (a) .............. 334,950 2,868,626
Partnertech AB (a) ............... 166,700 1,238,718
------------
TOTAL SWEDEN ..................... 10,138,940
------------
SWITZERLAND--6.0%
Brauerei Eichhof AG .............. 1,300 3,914,591
Edipresse SA ..................... 9,800 2,843,690
Liechtenstein Global Trust AG .... 3,000 1,858,062
------------
TOTAL SWITZERLAND ................ 8,616,343
------------
UNITED KINGDOM--16.0%
Ashtead Group PLC ................ 580,200 1,810,659
Avis Europe PLC (a), (i) ......... 608,000 1,737,634
Carpetright PLC .................. 179,300 1,354,701
Denison International
PLC (a), (b) .................... 116,600 2,011,350
Filofax Group PLC ................ 457,100 1,126,180
Hogg Robinson PLC ................ 759,000 3,166,510
Hozelock Group PLC ............... 309,000 1,616,491
National Express Group PLC ....... 180,600 2,031,953
Scholl PLC ....................... 736,400 3,120,605
Signet Group PLC (a), (b) ........ 208,023 2,964,328
Victrex PLC ...................... 10,000 38,599
Westminster Health Care
Holdings PLC .................... 323,500 1,939,423
------------
TOTAL UNITED KINGDOM ............. 22,918,433
------------
TOTAL COMMON STOCKS
(Identified cost
$130,640,826) .................. 134,785,101
------------
PREFERRED STOCKS--2.9%
GERMANY--2.9%
Hornbach Holding AG .............. 42,000 2,906,695
Moebel Walther AG ................ 50,770 1,354,657
------------
TOTAL GERMANY 4,261,352
------------
TOTAL PREFERRED STOCKS
(Identified cost $4,761,985) ..... 4,261,352
------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
33
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- ----------------------------------- ---------- -------------
LAZARD INTERNATIONAL SMALL CAP
PORTFOLIO* (CONTINUED)
REPURCHASE AGREEMENT-2.8%
State Street Bank and Trust
Company, 5.65%, 01/02/98
(Dated 12/31/97, collateral-
ized by $3,920,000 United
States Treasury Notes, 6.25%,
07/31/98, with a value of
$4,035,338)
(Identified cost $3,955,000) ...... $3,955 $ 3,955,000
TOTAL INVESTMENTS
(Identified cost $139,357,811)
(d) ............................... 99.6% $143,001,453
CASH AND OTHER ASSETS IN EXCESS
OF LIABILITIES .................... 0.4 565,811
------ ------------
NET ASSETS ......................... 100.0% $143,567,264
====== ============
* Percentages of common stocks and preferred stocks are presented in the
portfolio by country.
Percentages by industry are as follows:
Advertising 2.0%, Automotive 1.3%, Banks & Financial Services 7.0%,
Broadcasting 2.1%, Building Materials 1.1%, Business Services & Supplies
0.8%, Computers & Business Equipment 1.8%, Conglomerates 4.2%, Cosmetics &
Toiletries 3.7%, Electronics 6.8%, Food & Beverage 6.8%, Hardware & Tools
1.1%, Health Care 3.4%, Hotels & Restaurants 3.0%, Insurance 4.7%,
Investment Bank/Broker 2.6%, Leisure Time 1.5%, Machinery 3.6%,
Manufacturing 5.9%, Medical Supplies 3.7%, Multi-Industry 1.6%, Newspapers
0.9%, Office Equipment 1.7%, Oil & Gas 2.6%, Publishing 2.6%, Railroad 1.3%,
Real Estate Investment Trusts 1.4%, Retail 9.4%, Retail-Jewelry 2.1%,
Services 1.7%, Software 1.8%, Transportation 2.6%.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
34
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE
- --------------------------------------- ------------ ------------
LAZARD EMERGING MARKETS PORTFOLIO*
COMMON STOCKS--80.4%
ARGENTINA--3.7%
Capex SA ............................. 258,900 $ 1,722,012
Capex SA (c), (i) .................... 68,700 927,450
Quilmes Industrial Quinsasa(b) ....... 61,900 665,425
YPF Sociedad Anonima,
Class D (b) ......................... 168,000 5,743,500
-----------
TOTAL ARGENTINA ...................... 9,058,387
-----------
BRAZIL--8.2%
BCO Bradesco SA (a), (i) ............. 24,105,111 0
Companhia Brasileira de
Distribuicao Grupo Pao de
Acucar (c) .......................... 231,600 4,487,250
Companhia Cervejaria
Brahma(b) ........................... 36,300 515,006
Companhia Paranaense de
Energia-Copel (b) ................... 117,700 1,611,019
Souza Cruz Cia (i) ................... 647,600 0
Souza Cruz SA ........................ 647,600 5,222,347
Telecomunicacoes Brasileiras
SA (b) .............................. 69,800 8,127,337
-----------
TOTAL BRAZIL ......................... 19,962,959
-----------
CANADA--0.9%
Bell Canada International, Inc.
(a), (b) ............................ 142,500 2,173,125
-----------
CHILE--3.9%
AFP Provida SA (b) ................... 253,000 4,316,813
Banco BHIF (b) ....................... 187,700 3,003,200
Santa Isabel SA (b) .................. 133,500 2,336,250
-----------
TOTAL CHILE 9,656,263
-----------
COLOMBIA--1.7%
Banco Ganadero SA (b) ................ 173,500 4,164,000
-----------
CZECH REPUBLIC--1.3%
Ceske Energeticke Zavody
AS(a) ............................... 62,800 2,060,892
Komercni Banka AS (c), (i) ........... 87,300 1,047,600
-----------
TOTAL CZECH REPUBLIC ................. 3,108,492
-----------
GREECE--2.6%
Hellenic Telecommunication
Organization SA ..................... 309,000 6,330,986
-----------
HONG KONG--7.4%
Chen Hsong Holdings .................. 5,606,000 1,700,103
Giordano International, Ltd. ......... 8,738,000 3,016,409
Guangshen Railway Company
Ltd. (a), (b) ....................... 266,800 3,585,125
Peregrine Investment Holdings,
Ltd. ................................ 2,329,000 1,653,052
Shenzhen Expressway (a) .............. 21,896,000 4,238,482
Yue Yuen Industrial Holdings ......... 1,801,300 3,812,275
-----------
TOTAL HONG KONG ...................... 18,005,446
-----------
INDIA--4.0%
Larsen & Toubro, Ltd. (c), (i) ....... 206,000 2,214,500
Larsen & Toubro, Ltd. ................ 447,000 2,311,971
State Bank of India (a), (c), (i) .... 290,700 5,159,925
-----------
TOTAL INDIA .......................... 9,686,396
-----------
INDONESIA--4.3%
Asia Pulp & Paper Co., Ltd. (a),
(b) ................................. 329,500 3,315,594
PT Astra International, Inc. ......... 2,382,000 617,155
PT Indah Kiat Pulp & Paper
Corp. ............................... 2,889,000 512,141
PT Indofood Sukses Makmur ............ 2,730,500 893,618
PT Kalbe Farma ....................... 4,860,000 861,545
PT Matahari Putra Prima .............. 15,351,000 1,255,991
PT Semen Gresik ...................... 5,083,000 2,980,486
-----------
TOTAL INDONESIA ...................... 10,436,530
-----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
35
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION SHARES VALUE
- ---------------------------------- ------------ -------------
<S> <C> <C>
LAZARD EMERGING MARKETS
PORTFOLIO* (CONTINUED)
ISRAEL--3.6%
ECI Telecom, Ltd. (b) ............ 153,900 $ 3,924,450
Supersol, Ltd. (b) ............... 355,000 4,992,188
-----------
TOTAL ISRAEL 8,916,638
-----------
MALAYSIA--1.1%
Jaya Tiasa Holdings Berhad ....... 1,429,000 2,626,906
-----------
MEXICO--10.2%
Cemex SA de CV ................... 940,800 4,260,733
Fomento Economico Mexicano
SA de CV, Series B .............. 555,500 4,439,595
Grupo Financiero Banamex
Accival SA de CV (a) ............ 2,117,000 6,334,869
Panamerican Beverages, Inc.
Class A ......................... 170,300 5,556,037
Pepsi-Gemex SA de CV (c) ......... 298,600 4,311,038
-----------
TOTAL MEXICO 24,902,272
-----------
MOROCCO--1.3%
Banque Marocaine de
Commerce (a), (c), (i) .......... 164,100 3,301,692
-----------
PERU--4.0%
Cerveceria Backus & Johnson
SA .............................. 4,587,720 4,208,918
Telefonica del Peru SA (b) ....... 233,700 5,448,131
-----------
TOTAL PERU ....................... 9,657,049
-----------
PHILIPPINES--1.0%
Benpres Holdings Corp. (a),(c),
(i) ............................. 311,900 742,322
Fil-Estate Land, Inc. ............ 12,232,000 356,389
Philippine National Bank (a) ..... 619,800 1,362,030
-----------
TOTAL PHILIPPINES 2,460,741
-----------
POLAND--1.8%
Bank Handlowy W. Warszawie
(a) ............................. 346,500 4,423,404
-----------
PORTUGAL--3.2%
Banco Totta & Acores SA .......... 212,500 4,172,643
Portugal Telecom SA (b) .......... 78,000 3,666,000
-----------
TOTAL PORTUGAL ................... 7,838,643
-----------
SOUTH AFRICA--6.3%
Amalgamated Banks of South
Africa, Ltd. .................... 866,023 4,982,769
Barlow, Ltd. ..................... 515,424 4,374,193
JD Group, Ltd. ................... 703,278 4,299,295
Rembrandt Group, Ltd. ............ 250,500 1,827,340
-----------
TOTAL SOUTH AFRICA ............... 15,483,597
-----------
SOUTH KOREA--4.1%
Kookmin Bank (c), (i) ............ 41,325 227,285
Kookmin Bank ..................... 178,416 942,079
Korea Chemical Co., Ltd. ......... 30,750 511,593
Korea Electric Power Corp. ....... 211,000 1,954,395
Korea Mobile Telecom Corp. ....... 8,246 2,381,367
Korean Air Lines (a) ............. 336,777 1,414,662
Samsung Electronics .............. 32,100 727,221
Samsung Electronics (c), (i) ..... 12,800 201,600
Shinhan Bank ..................... 345,910 1,540,779
-----------
TOTAL SOUTH KOREA ................ 9,900,981
-----------
THAILAND--1.1%
Bangkok Expressway Public
Company Ltd. (a) ................ 4,130,000 2,144,341
Industrial Finance Corporation
of Thailand ..................... 3,649,400 560,863
-----------
TOTAL THAILAND ................... 2,705,204
-----------
VENEZUELA--4.7%
Compania Anonima
NacionalTelefonos de
Venezuela (b) ................... 117,800 4,903,425
Corporacion EDC CA ............... 2,691,666 0
Electricidad de Caracas .......... 2,691,666 3,229,145
Mavesa SA (b) .................... 519,600 3,312,450
-----------
TOTAL VENEZUELA .................. 11,445,020
-----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
36
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE
- -------------------------------------- ------------- -------------
LAZARD EMERGING MARKETS
PORTFOLIO* (CONTINUED)
TOTAL COMMON STOCKS
(Identified cost $245,496,728) ... $196,244,731
------------
PREFERRED STOCKS-15.7%
ARGENTINA-1.7%
Quilmes Industrial Quinsa SA
(b) ............................. 298,350 4,083,666
------------
BRAZIL-14.0%
Banco Bradesco SA ................ 563,794,000 5,556,860
Banco Itau SA .................... 9,900,000 5,322,342
Cemig Cia Energetica de
MinasGerais ..................... 111,062,000 4,825,408
Cia Riograndense Telecom (a) 4,849,900 5,975,192
Companhia Cervejaria
Brahma(a) ....................... 7,551,100 5,074,437
Companhia Cimento Portla
Itau ............................ 13,460,000 2,592,984
Copel Paranqense de Energia ...... 236,399,000 3,209,036
Dixie Toga SA .................... 3,276,800 1,673,559
------------
TOTAL BRAZIL ..................... 34,229,818
------------
TOTAL PREFERRED STOCKS
(Identified cost $37,628,899) .... 38,313,484
------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- --------------------------------- ----------- -------------
CONVERTIBLE BONDS-0.3%
PHILIPPINES--0.3%
Bacnotan Consolidated
Industries, 5.50%,
6/21/04 (i) (Identified cost
$1,050,775) ..................... $1,112 $ 683,880
------------
REPURCHASE AGREEMENT--3.0%
State Street Bank and Trust
Company, 5.65%, 01/02/98,
(Dated 12/31/97, collateral-
ized by $7,350,000 United
States Treasury Notes, 6.25%,
07/31/98, with a value of
$7,566,259) (Identified cost
$7,416,000).. ................... 7,416 7,416,000
------------
TOTAL INVESTMENTS
(Identified cost ................
$291,592,402) (d).. 99.4% $242,658,095
CASH AND OTHER ASSETS IN
EXCESS OF LIABILITIES ........... 0.6 1,450,992
NET ASSETS ....................... 100.0% $244,109,087
====== ============
</TABLE>
* Percentages of common stocks, preferred stocks, and convertible bonds are
presented in the portfolio by country.
Percentages by industry are as follows:
Airline 0.6%, Automotive 0.3%, Banks & Financial Services 18.2%, Beverages
12.4%, Building Materials 5.4%, Chemicals & Plastics 0.2%, Commercial
Services 0.7%, Conglomerates 2.4%, Electronics 0.4%, Energy 0.7%, Financial
Services 4.4%, Food & Beverages 4.7%, Holding Company-Diversified 0.3%,
Household Appliances & Home Furnishings 1.8%, Investment Bank/Broker 0.7%,
Machinery 1.6%, Manufacturing 0.9%, Medical Supplies 0.4%, Oil & Gas 2.4%,
Paper Products 1.6%, Real Estate 0.1%, Retail 3.5%, Shoes 1.6%,
Telecommunications 17.6%, Tobacco 2.1%, Transportation 4.1%, Utilities
7.3%.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
37
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- ---------------------------------- ------------ -------------
LAZARD BOND PORTFOLIO
ASSET-BACKED SECURITIES--15.3%
Chase Credit Card Master
Trust, Series 1997-2, Class A,
6.30%, 04/15/03 ................. $ 953 $ 957,765
Chase Manhattan Grantor
Trust, Series 1996-B, Class A,
6.61%, 09/15/02 (h) ............. 924 929,516
Chemical Master Credit Card
Trust 1, Series 1995-2, Class
A, 6.23%, 06/15/03 .............. 473 475,067
Chemical Master Credit Card
Trust, Series 1995-3, Class A,
6.23%, 04/15/05 ................. 823 826,341
Citibank Credit Card Master
Trust, Series 1997-7, Class A,
6.35%, 08/15/02 ................. 393 396,325
Delta Funding Home Equity
Loan Trust, Series 1996-1,
Class A6, 7.72%, 05/25/20 ....... 394 413,121
Delta Funding Home Equity
Loan Trust, Series 1996-2,
Class A3, 7.54%, 10/25/14 ....... 37 38,385
Delta Funding Home Equity
Loan Trust, Series 1997-3,
Class A6, 6.86%, 10/25/28 ....... 1,000 1,014,844
EQCC Home Equity Loan Trust,
Series 1994-2, Class A2,
7.35%, 06/15/14 ................. 125 127,693
Equivantage Home Equity Loan
Trust, Series 1996-2, Class
A4, 8.05%, 06/25/27 ............. 201 215,246
First USA Credit Card Master
Trust, Series 1997-6, Class B,
6.58%, 03/17/05 ................. 1,461 1,477,918
Fleetwood Credit Grantor Trust,
Series 1997-B, Class A,
6.40%, 05/15/13 ................. 787 791,671
IMC Home Equity Loan Trust,
Series 1996-3, Class A2,
7.06%, 04/25/11 (h) ............. 479 485,971
MBNA Master Credit Card
Trust, Series 1997-I, Class A,
6.55%, 01/15/07 ................. 607 617,398
NationsBank Auto Owner
Trust, Series 1996-A, Class
A4, 6.625%, 12/15/00 (h) ........ 440 443,573
NationsBank Credit CardMas-
ter Trust, Series 1993-2, Class
A, 6.00%, 12/15/05 .............. 1,552 1,537,923
PNC Student Loan Trust I,
Series 1997-2, Class A7,
6.728%, 01/25/07 ................ 867 894,458
Sears Credit Account Master
Trust, Series 1996-3, Class A,
7.00%, 07/15/08 ................. 735 762,563
Sears Credit Account Master
Trust, Series 1996-4, Class A,
6.45%, 10/16/06 ................. 1,051 1,061,836
Southern Pacific Secured Assets
Corp., Series 1997-1, Class
A6, 7.15%, 04/25/27(h) .......... 1,155 1,185,619
The Money Store Home Equity
Trust, Series 1997-A, Class
A7, 7.41%, 11/15/24 (f) ......... 265 271,625
The Money Store Trust, Series
1996-B, Class A14, 7.35%,
05/15/12 ........................ 116 119,587
The Money Store Trust, Series
1996-C, Class A11, 6.635%,
09/15/14 ........................ 116 116,217
UCFC Loan Trust, Series
1997-C, Class A, 8.00%,
09/15/00 ........................ 578 115,058
----------
TOTAL ASSET-BACKED SECURITIES
(Identified cost $15,034,907)..... 15,275,720
----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
38
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- ----------------------------------- ------------ ----------
LAZARD BOND PORTFOLIO (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS--6.4%
Asset Securitization Corp.,
Series 1995-MD4, Class A1,
7.10%, 08/13/29 ................ $ 315 $327,526
Asset Securitization Corp.,
Series 1996-D2, Class ACS2,
1.581%, 02/28/26 (f) ........... 2,125 209,512
Asset Securitization Corp.,
Series 1996-D3, Class A1A,
7.01%, 10/13/26 ................ 98 99,255
Asset Securitization Corp.,
Series 1996-D3, Class A1B,
7.21%, 10/31/26 ................ 375 390,586
Asset Securitization Corp.,
Series 1996-MD6, Class A1B,
6.88%, 11/13/29 (f) ............ 248 254,781
BCF L.L.C., Series 1996-R1,
Class R2, 6.104%, 03/25/37(f) .. 411 424,649
Bear Stearns Secured Investors
Trust, Series1998, Class IO,
3.152%,10/30/18 (f) ............ 3,209 320,978
California Infrastructure, Series
1997, Class A6, 6.32%,
09/25/05 ....................... 134 134,796
California Infrastructure, Series
1997-1, Class A8, 6.48%,
12/26/09 ....................... 80 80,775
CS First Boston Mortgage,
Series 1997-C1, Class AIB,
7.15%, 08/20/06 (f) ............ 780 810,713
DLJ Mortgage Acceptance
Corp., Series 1993-MF7,
Class A1, 7.40%, 06/18/03 ...... 336 345,953
Federal National Mortgage
Association Trust, Series1992-
203, Class SA, 3.375%,
11/25/07 (f) ................... 323 28,460
Federal National Mortgage
Association Trust, Series
1992-97, Class SA, 10.00%,
4/25/21 ........................ 180 19,770
Federal National Mortgage
Association, Series 23,
Class 2, 10.00%, 09/01/17 ...... 976 270,681
GMAC Commercial Mortgage
Securities, Inc., Series
1996-C1, Class A2A, 6.79%,
09/15/03 (f) ................... 294 298,590
Headlands Mortgage
Securities, Inc., Series
1997-1, Class X1, 0.673%,
03/25/27 ....................... 8,793 166,805
Headlands Mortgage
Securities, Inc., Series
1997-4, Class X, 1.126%,
11/25/27 ....................... 4,785 173,898
LB Commercial Conduit
Mortgage Trust, Series
1996-C2, Class A,
0.00%,10/25/26 ................. 329 344,002
Merrill Lynch Mortgage
Investments, Inc., Series1996-
C1, Class IO, 0.569%,
03/25/26 (f), (i) .............. 4,686 138,384
Midland Realty Acceptance
Corp. Series 1996-C1, Class
A2, 7.475%, 12/25/05 ........... 344 365,500
Morgan Stanley Capital One
Inc., Series 1996-WF1, Class
X, 1.417%, 11/15/28 (f), (i) ... 2,770 208,638
Morgan Stanley Capital, Inc.,
Series 1997-C1, Class IO,
2.354%, 08/15/06 (f) ........... 670 44,811
Prudential Home Mortgage
Security, Series 1993-41,
Class A5, 0.867%, 10/25/00 ..... 35,178 412,642
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
39
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- ----------------------------------- ------------ ------------
LAZARD BOND PORTFOLIO (CONTINUED)
Structured Asset Securitization
Corp., Series1996-CFL, Class
X1, 1.35%, 02/25/28 (f) ....... $ 2,635 $ 137,538
Structured Asset Securitization
Corp., Series 1996-CFL, Class
X2, 1.217%, 02/25/28 (f) ...... 1,540 42,834
United States Department of
Veteran Affairs, Series 1997-1,
Class IO, 0.370%, 02/15/27 (f) 9,488 263,894
----------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS
(Identified cost $6,395,774) .. 6,315,971
----------
CORPORATE BONDS--21.6%
AEROSPACE & DEFENSE--0.4%
Lockheed Martin Corp.,
7.45%, 06/15/04 ............... 328 345,515
----------
BROADCASTING--1.1%
Cablevision Systems Corp.,
10.50%, 05/15/16 (h) .......... 258 300,570
Cox Communications, Inc.,
6.50%, 11/15/02 ............... 265 265,612
Rifkin Acquisitions Partners LP,
11.125%, 01/15/06 ............. 187 205,232
Spanish Broadcasting Systems,
Inc., 11.00%, 03/15/04 ........ 162 178,200
Sullivan Broadcasting,
10.25%, 12/15/05 .............. 170 181,263
----------
1,130,877
----------
COMMUNICATION SERVICES--0.2%
IXC Communications, Inc.,
12.50%, 10/01/05 .............. 200 229,000
----------
COMPUTERS--1.1%
Oracle Corp.,
6.72%, 02/15/04 (h) ........... 603 601,716
Unisys Corp.,
12.00%, 04/15/03 (h) .......... 465 526,612
----------
1,128,328
----------
CONTAINERS--0.1%
Amtrol Acquisition, Inc.,
10.625%, 12/31/06 ............. 82 84,460
----------
ENERGY--0.3%
Panenergy Corp.,
7.375%, 09/15/03 .............. 174 182,877
Transamerican Energy Corp.,
11.50%, 06/15/02 (i) .......... 149 149,745
----------
332,622
----------
ENTERTAINMENT--0.4%
Casino America, Inc.,
12.50%, 08/01/03 .............. 84 91,140
Trump Atlantic City Associates,
11.25%, 05/01/06 .............. 348 343,650
----------
434,790
----------
ENVIROMENTAL SERVICES--0.3%
Envirosource, Inc.,
9.75%, 06/15/03 ............... 287 292,023
----------
FINANCIAL SERVICES--8.8%
Aetna Services, Inc.,
6.75%, 08/15/01 ............... 192 193,945
Avco Financial Services, Inc.,
6.35%, 09/15/00 ............... 128 128,474
Bank of New York Co., Inc.,
6.625%, 06/15/03 .............. 235 238,010
BankAmerica Corp.,
6.875%, 06/01/03 .............. 463 473,121
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
40
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- ---------------------------------- ------------ ------------
<S> <C> <C>
LAZARD BOND PORTFOLIO (CONTINUED)
Capital One Bank,
7.15%, 09/15/06 ............... $ 268 $ 271,832
7.35%, 06/20/00 ............... 266 272,347
Chase Manhattan Corp.,
7.50%, 02/01/03 ............... 580 608,020
7.625%, 01/15/03 .............. 470 496,080
Commercial Credit Group, Inc.,
6.50%, 08/01/04 ............... 428 429,489
Countrywide Funding Corp.,
7.45%, 09/16/03 ............... 175 184,392
Fleet Financial Group,
7.25%, 09/01/99 ............... 161 163,858
Goldman Sachs Group,
8.00%, 03/01/13 ............... 485 538,471
Goldman Sachs Group L.P,
6.625%, 12/01/04 .............. 521 521,651
Heller Financial, Inc.,
6.50%, 11/01/01 ............... 279 279,608
Household Finance Corp.,
7.25%, 07/15/03 (h) ........... 495 513,340
MBNA Corp.,
6.50%, 09/15/00 ............... 196 197,905
Merrill Lynch & Co., Inc.,
6.00%, 01/15/01 ............... 333 331,605
NationsBank Corp.,
5.75%, 01/17/01 ............... 159 157,362
Norwest Financial, Inc.,
6.125%, 08/01/03 .............. 164 162,722
Republic New York Corp.,
7.25%, 07/15/02 ............... 838 872,777
Resolution Funding Coupon
Strips, 0.00%, 04/15/07 ....... 1,248 724,814
Sears Roebuck Acceptance
Corp., 7.14%, 05/02/03 ........ 149 154,668
Talton Holdings, Inc.,
11.00%, 06/30/07 (i) .......... 353 383,005
Wachovia Corp.,
6.375%, 04/15/03 .............. 519 522,778
----------
8,820,274
----------
FUNERAL SERVICES--0.4%
Service Corp. International,
6.75%, 06/01/01 ............... 377 381,392
----------
HEALTHCARE--0.7%
Dynacare, Inc.,
10.75%, 01/15/06 .............. 222 233,655
Quest Diagnostics, Inc.,
10.75%, 12/15/06 .............. 418 455,620
----------
689,275
----------
INDUSTRIAL & MACHINERY--0.6%
High Voltage Engineering
Corp., 10.50%, 08/15/04 (i) ... 374 388,025
Orbcomm Global L.P.,
14.00%, 08/15/04 .............. 196 212,660
----------
600,685
----------
MANUFACTURING--0.2%
Commonwealth Aluminum
Corp., 10.75%, 10/01/06 ....... 104 112,320
W.R. Carpenter North America
Incorporated,
10.625%, 06/15/07 ............. 54 55,890
----------
168,210
----------
MEDICAL SUPPLIES--0.6%
Wright Med Technology
Incorporated,
11.75%, 07/01/00 .............. 557 562,570
----------
OTHER--0.5%
RMOF, 2.16%, 01/31/22 .......... 5,310 532,741
----------
REAL ESTATE--0.3% ................
Simon DeBartolo Group, Inc.,
6.875%, 10/27/05 .............. 299 302,262
----------
RESTAURANTS, LODGING &
ENTERTAINMENT--0.4%
Carrols Corp.,
11.50%, 08/15/03 (h) .......... 241 257,268
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
41
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- ---------------------------------- ----------- -----------
LAZARD BOND PORTFOLIO (CONTINUED)
Courtyard by Marriott II Ltd.,
Series B,
10.75%, 02/01/08 ............. $ 140 $ 154,000
-----------
411,268
-----------
RETAIL--1.2%
May Department Stores Co.,
9.875%, 12/01/02 .............. 680 781,028
Petro Stopping Centers,
10.50%, 02/01/07 .............. 365 386,900
-----------
1,167,928
-----------
TELECOMMUNICATIONS--1.6%
Communications Instruments,
Inc., 10.00%, 09/15/04 ........ 300 300,000
Fundy Cable Ltd.,
11.00%, 11/15/05 .............. 452 483,640
GTE Corp., 6.56%, 08/14/02 ..... 253 253,754
Lodgenet Entertainment Corp.,
10.25%, 12/15/06 ............. 495 511,087
-----------
1,548,481
-----------
TRANSPORTATION--0.9%
Atlantic Express, Inc.,
10.75%, 02/01/04 (i) .......... 407 432,437
Greyhound Lines, Inc.,
11.50%, 04/15/07 .............. 428 473,475
-----------
905,912
-----------
UTILITIES--1.5%
Calpine Corp.,
10.50%, 05/15/06 .............. 175 190,750
Texas Utilities Co.,
6.375%, 10/01/04 (i) .......... 821 829,489
United States West Capital
Funding, Inc.,
6.85%, 01/15/02 .............. 476 481,360
-----------
1,501,599
-----------
TOTAL CORPORATE BONDS
(Identified cost $21,097,946) .. 21,570,212
-----------
MUNICIPALS--4.5%
Atlanta, Georgia Water &
Sewer Revenue, 5.25%,
01/01/27 ...................... 520 520,432
Houston, Texas Water & Sewer
Systems Revenue,
5.25%, 12/01/25 .............. 860 860,671
Jefferson County, Alabama
Sewer Revenue,
5.375%, 02/01/27 ............. 1,040 1,048,497
Massachusetts State Turnpike
Authority,
5.125%, 01/01/23 Series A .... 120 118,090
5.125%, 01/01/23 Series B .... 500 492,950
New York City, New York
Municipal Water Finance,
5.125%, 06/15/30 ............. 1,470 1,443,716
-----------
TOTAL MUNICIPALS
(Identified cost $4,373,176) .. 4,484,356
-----------
MORTGAGE PASS-THROUGH
SECURITIES--27.6%
Federal Home Loan Mortgage
Corp.,
6.00%, 01/01/14 .............. 283 279,544
6.097%, 09/25/36 (f) ......... 393 391,490
6.50%, 04/15/22 .............. 775 779,797
6.50%, TBA ................... 982 983,532
6.75%, 05/15/08 .............. 619 631,436
7.00%, 10/01/12 .............. 370 375,780
7.00%, TBA ................... 212 215,311
7.871%, 09/01/26 (f) ......... 261 264,326
7.913%, 11/01/26 (f) ......... 303 313,853
Federal National Mortgage
Association,
6.089%, 12/01/36 ............. 527 530,981
6.099%, 09/01/37 ............. 301 302,296
6.115%, 12/01/37 ............. 301 301,741
6.25%, 03/25/23 .............. 367 364,361
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
42
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- -------------------------------------- ---------- -------------
LAZARD BOND PORTFOLIO (CONTINUED)
6.50%, 12/25/22 ............ $ 502 $ 503,029
6.50%, 07/25/23 ............ 434 425,815
6.50%, TBA ................. 499 500,402
6.769%, 05/01/25 ........... 769 788,932
6.777%, 06/01/37 ........... 493 500,030
6.874%, 07/01/37 ........... 838 852,509
7.00%, TBA ................. 854 866,537
7.00%, TBA ................. 1,090 1,097,826
7.075%, 05/01/06 ........... 454 474,482
7.50%, TBA ................. 626 640,667
7.603%, 06/01/25 (f) ....... 239 244,561
7.606%, 08/01/27 ........... 945 987,815
7.771%, 07/01/26 ........... 520 535,356
7.783%, 05/01/25 ........... 357 368,360
7.843%, 07/01/25 (f) ....... 352 362,358
7.86%, 04/01/24 ............ 495 514,947
10.00%, 08/01/18 ........... 313 88,688
10.095%, 05/25/21 (f) ...... 227 80,406
Government National
Mortgage Association,
5.00%, 10/20/27 ............ 645 640,032
5.00%, 12/20/27 ............ 761 754,771
5.50%, 07/20/27 ............ 272 274,262
5.50%, 09/20/27 ............ 401 404,378
5.50%, 10/20/27 ............ 975 977,505
5.50%, 12/20/27 ............ 1,999 2,003,073
6.00%, 10/20/26 ............ 949 974,275
6.00%, 11/20/27 ............ 997 1,008,224
6.00%, 12/20/27 ............ 417 422,154
6.50%, 11/20/26 ............ 1,236 1,269,010
6.50%, 03/20/27 ............ 954 977,939
7.00%, 09/20/20 ............ 311 320,108
7.00%, 01/20/24 (f) ........ 371 382,013
7.00%, 09/20/26 ............ 527 540,557
7.50%, TBA ................. 908 930,128
9.00%, 09/15/25 ............ 85 91,142
-------------
TOTAL MORTGAGE PASS-THROUGH
SECURITIES
(Identified cost $27,399,676) 27,536,739
-------------
U.S. GOVERNMENT
OBLIGATIONS--24.5%
Tennessee Valley Authority
Federal,
0.00%, 11/15/29 ............ 751 689,298
United States Treasury Notes,
3.625%, 07/15/02 ............ 1,845 1,835,776
5.875%, 11/15/05 ............ 427 429,267
6.25%, 05/31/99 ............. 1,394 1,405,110
6.25%, 02/28/02 ............. 5,518 5,618,869
7.75%, 12/31/99 ............. 4,624 4,803,920
United States Treasury Strips,
0.00%, 11/15/04 ............. 3,660 2,473,135
0.00%, 05/15/07 ............. 11,386 6,604,222
0.00%, 02/15/16 ............. 800 270,488
0.00%, 02/15/25 ............. 1,500 297,135
-------------
TOTAL U.S. GOVERNMENT
OBLIGATIONS
(Identified cost $24,174,965) 24,427,220
-------------
REPURCHASE AGREEMENT--5.1%
State Street Bank and Trust
Company, 5.65%, 01/02/98
(Dated 12/31/97, collateral-
ized by $5,020,000 United
States Treasury Notes, 6.25%,
07/31/98, with a value of
$5,167,703) (Identified cost
$5,063,000) ................. 5,063 5,063,000
------------ -------------
TOTAL INVESTMENTS
(Identified cost $103,539,444)
(d) ......................... 105.0% $ 104,673,218
LIABILITIES IN EXCESS OF CASH
AND OTHER ASSETS ............ (5.0) (4,962,594)
------------ -------------
NET ASSETS ................... 100.0% $ 99,710,624
============ ==============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
43
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- ----------------------------------- ------------ -------------
LAZARD INTERNATIONAL FIXED-INCOME
PORTFOLIO*
CURRENCY DENOMINATED BONDS--95.2%
ARGENTINE PESO--0.7%
Argentina Bocon, (USD),
0.00%, 09/01/02 ............... $ 50 $ 58,440
Banco Hipotecario Nacional,
(USD), 8.50%, 11/29/03 ........ 180 154,800
Republic of Argentina,
0.00%, 04/01/07 ............... 50 44,759
0.00%, 04/01/07 ............... 405 362,544
8.75%, 07/10/02 ............... 160 132,553
-----------
TOTAL ARGENTINE PESO ........... 753,096
-----------
AUSTRALIAN DOLLAR--2.1%
Commonwealth of Australia,
10.00%, 02/15/06 .............. 2,878 2,350,372
-----------
AUSTRIAN SCHILLING--1.1%
Republic of Austria,
8.00%, 03/18/02 (h) ........... 14,670 1,294,941
-----------
BRITISH POUND--10.3%
Bayerische Landesbank
Girozentrale,
8.50%, 02/26/03 .............. 275 478,224
Birmingham Midshires
Building Society,
9.125%, 01/05/06 ............. 550 995,406
British Aerospace PLC,
11.875%, 12/29/08 (h) ......... 540 1,214,013
Finance for Residence Society
House, 11.126%, 10/05/58 (f) .. 300 730,502
Merrill Lynch & Co.,
7.375%, 12/06/01 .............. 387 639,620
North American Capital Corp.,
8.25%, 11/17/03 (h) ........... 876 1,490,988
Sutton Bridge Financing, Ltd.,
8.625%, 06/30/22 .............. 438 798,529
United Kingdom Treasury
Bonds, 7.75%, 09/08/06 ........ 2,255 4,029,079
West LB Finance Curacao NV,
8.50%, 06/02/03 (h) ........... 710 1,233,230
-----------
TOTAL BRITISH POUND ............ 11,609,591
-----------
CANADIAN DOLLAR--1.2%
Call Net Enterprises, Inc.,
8.375%, 08/15/07 .............. 761 553,822
Government of Canada,
8.00%, 06/01/23 ............... 455 403,245
Quebec Housing,
8.95%, 05/13/13 ............... 411 362,381
-----------
TOTAL CANADIAN DOLLAR .......... 1,319,448
-----------
CHILEAN PESO--0.3%
Government TEM in Salomon
Clean Note Structure,
0.00%, 01/13/98 .............. 115 115,483
0.00%, 06/26/98 ............... 200 179,326
-----------
TOTAL CHILEAN PESO ............. 294,809
-----------
CHINESE RENMINBI--0.3%
DMG CNY Linked CD, (USD),
0.00%, 01/26/98 ............... 325 321,750
-----------
CZECH KORUNA--0.3%
Komercni Banka,
11.40%, 09/28/01 .............. 10,000 257,330
Wood & Co., PN,
0.00%, 06/04/98 ............... 4,000 109,871
-----------
TOTAL CZECH KORUNA ............. 367,201
-----------
DANISH KRONE--6.7%
Kingdom of Denmark,
7.00%, 11/10/24 ............... 3,882 632,052
Kreditforeningen Denmark,
10.20%, 04/15/04 (f) .......... 5,000 820,940
Nykredit,
6.00%, 10/01/26 (h) ........... 36,944 5,254,299
Unikredit,
6.00%, 10/01/26 ............... 4,705 666,414
8.00%, 10/01/26 ............... 1,208 181,326
-----------
TOTAL DANISH KRONE ............. 7,555,031
-----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
44
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- -------------------------------- ----------- ------------
LAZARD INTERNATIONAL FIXED-INCOME
PORTFOLIO* (CONTINUED)
ESTONIAN KROON--0.1%
Merita Bank CP,
10.00%, 12/28/98 (f) .......... $ 1,000 $ 67,751
-----------
FINNISH MARKKA--0.7%
Republic of Finland,
7.25%, 04/18/06 ............... 4,000 820,716
-----------
FRENCH FRANC--4.5%
Credit Foncier de France,
7.50%, 03/29/05 ............... 18,250 3,369,208
Government of France,
0.00%, 04/25/21 ............... 29,380 1,199,901
Neopost,
5.942%, 09/30/07 (f), (i) ..... 3,300 548,309
-----------
TOTAL FRENCH FRANC ............. 5,117,418
-----------
GERMAN MARK--5.4%
Autobahn Tank & Rast,
6.00%, 10/16/00 ............... 943 539,396
Baden Wurttemberg,
6.75%, 06/22/05 ............... 914 550,752
Bank Nederlandse Gemeenten,
6.50%, 11/04/08 ............... 2,000 1,189,583
Exide Holdings,
9.125%, 04/15/04 (i) .......... 985 559,861
Federal Republic of Germany,
0.00%, 01/04/21 ............... 18,269 2,547,982
Impress Metal Pack Holding,
9.875%, 05/29/07 (i) .......... 208 119,381
Land Hessen,
6.00%, 11/29/13 (h) ........... 1,000 586,238
-----------
TOTAL GERMAN MARK .............. 6,093,193
-----------
GREEK DRACHMA--0.4%
Republic of Hellenic,
11.10%, 06/30/00 (f) .......... 30,000 105,622
11.10%, 08/14/03 (f) .......... 113,000 383,085
-----------
TOTAL GREEK DRACHMA ............ 488,707
-----------
HUNGARIAN FORINT--0.3%
Government of Hungary,
16.50%, 04/12/99 .............. 39,000 187,128
23.00%, 05/06/99 .............. 7,000 36,175
ING,
20.00%, 01/07/98 (f) .......... 7,740 37,900
ING, (USD),
0.00%, 03/18/98 ............... 75 63,375
Republic of Hungary,
19.50%, 01/12/99 .............. 12,000 59,340
-----------
TOTAL HUNGARIAN FORINT ......... 383,918
-----------
INDONESIAN RUPIAH--0.6%
Asia Investment International,
Ltd.,
0.00%, 01/16/98 ............... 725,000 130,191
0.00%, 02/04/98 ............... 370,000 64,851
Asia Investment International,
Ltd., (USD),
0.00%, 02/04/98 ............... 170 106,984
0.00%, 02/13/98 ............... 400 76,844
DMG INR Linked CD, (USD),
0.00%, 06/15/98 ............... 100 83,120
PT Davomas Abadi,
0.00%, 02/04/98 ............... 1,000,000 176,465
-----------
TOTAL INDONESIAN RUPIAH ........ 638,455
-----------
IRISH POUND--1.3%
Republic of Ireland,
6.25%, 04/01/99 ............... 714 1,031,987
8.00%, 08/18/06 ............... 262 434,993
-----------
TOTAL IRISH POUND .............. 1,466,980
-----------
ITALIAN LIRA--13.1%
Republic of Italy,
11.50%, 03/01/03 (h) .......... 8,700,000 6,263,606
12.50%, 03/01/01 (h) .......... 12,430,000 8,505,662
-----------
TOTAL ITALIAN LIRA ............. 14,769,268
-----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
45
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- ------------------------------ ----------- ------------
LAZARD INTERNATIONAL FIXED-INCOME
PORTFOLIO* (CONTINUED)
JAPANESE YEN--30.1%
Asterique,
2.48%, 01/23/02 ........... $ 191,549 $ 1,466,875
European Investment Bank,
3.00%, 09/20/06 (h) ....... 309,000 2,579,536
Export-Import Bank of Japan,
4.375%, 10/01/03 (h) ...... 205,000 1,819,283
Federal National Mortgage
Association,
2.125%, 10/09/07 ......... 690,000 5,378,586
Government of Japan,
3.10%, 09/20/17 ........... 44,700 370,383
3.30%, 09/20/05 ........... 366,000 3,119,843
6.30%, 09/20/01 ........... 1,407,300 12,836,612
International Bank for
Reconstruction and
Development,
4.75%, 12/20/04 ......... 370,500 3,419,258
Isveimer,
4.15%, 03/23/99 ........... 187,000 1,482,881
Nippon Credit Bank,
1.80%, 07/27/00 ........... 60,000 427,816
3.05%, 05/25/01 ........... 30,000 216,757
Republic of Austria,
4.50%, 09/28/05 (h) ....... 80,000 734,089
6.25%, 10/16/03 ........... 15,000 145,181
-----------
TOTAL JAPANESE YEN ......... 33,997,100
-----------
KENYAN SHILLING--0.1%
Kenyan Treasury Bill,
1.00%, 01/05/98 ........... 6,100 96,552
-----------
LEBANESE POUND--0.7%
Paribas LBP Treasury Bill,
0.00%, 04/09/98 . 200,000 126,064
0.00%, 04/30/98 ........... 65,000 40,545
0.00%, 05/28/98 ........... 360,000 222,200
0.00%, 07/09/98 ........... 550,000 332,269
0.00%, 09/24/98 ........... 80,000 46,235
-----------
TOTAL LEBANESE POUND ....... 767,313
-----------
MEXICAN PESO--0.6%
Bancomer CD,
0.00%, 06/29/98 ........... 4,000 451,216
Mexican Cetes,
0.00%, 06/04/98 ........... 968 110,676
UDI Bonos,
7.00%, 05/27/99 ........... 350 88,657
-----------
TOTAL MEXICAN PESO ......... 650,549
-----------
NETHERLANDS GUILDER--1.0%
Government of Netherlands,
8.75%, 01/15/07 ........... 1,861 1,134,874
-----------
NORWEGIAN KRONE--0.7%
Sparebanken Norway,
10.25%, 06/23/03 (f) ...... 6,000 858,269
-----------
POLISH ZLOTY--0.2%
Government of Poland,
16.00%, 10/12/98 .......... 820 216,806
-----------
RUSSIAN ROUBLE--0.5%
Cargill Delay Rus S Acct
(USD),
0.00%, 02/20/98 .......... 200 195,228
Chase Russian GKO Linked
Note, (USD),
0.00%, 06/19/98 ........... 220 225,622
Citibank GKO Linked Note,
0.00%, 01/29/98 ........... 1,285,800 209,932
-----------
TOTAL RUSSIAN ROUBLE ....... 630,782
-----------
SOUTH AFRICAN RAND--0.1%
Lesotho Water,
12.50%, 04/15/02 .......... 310 60,580
South African Roads,
11.50%, 09/30/05 .......... 500 89,633
-----------
TOTAL SOUTH AFRICAN RAND ... 150,213
-----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
46
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- --------------------------------- ----------- ------------
LAZARD INTERNATIONAL FIXED-INCOME
PORTFOLIO* (CONTINUED)
SPANISH PESETA--3.7%
Catalunya Generalitat,
9.30%, 11/24/03 .............. $ 67,000 $ 524,654
Kingdom of Spain,
8.00%, 05/30/04 (h) .......... 483,040 3,625,574
-----------
TOTAL SPANISH PESETA .......... 4,150,228
-----------
SWEDISH KRONA--1.4%
Kingdom of, Sweden
9.00%, 04/20/09 .............. 9,900 1,543,409
-----------
THAILAND BAHT--0.0%
Finance One PLC, (USD),
2.00%, 08/31/01 .............. 220 32,736
-----------
TURKISH LIRE--1.1%
Credit Suisse TRL Weekly Roll,
0.00%, 09/17/98 .............. 65,000,000 389,331
0.00%, 10/07/98 .............. 50,000,000 291,306
0.00%, 10/08/98 .............. 750,000 425,402
0.00%, 11/04/98 .............. 200,000 108,958
-----------
TOTAL TURKISH LIRE ............ 1,214,997
-----------
UNITED STATES DOLLAR--5.2%
American Rice, Inc.,
13.0%, 07/31/02 .............. 27 25,785
Americold Corp.,
12.875%, 05/01/08 ............ 69 88,320
Archibald Candy Corp.,
10.25%, 07/01/04 ............. 130 136,175
Asia Investment International,
Ltd.,
0.00%, 02/13/98 ............. 350 51,313
Atlantic Express Transportation
Corp.,
10.75%, 02/01/04 (i) ........ 100 106,250
Carrols Corp.,
11.50%, 08/15/03 (h) ......... 52 55,510
Carter (William) Co.,
10.375%, 12/01/06 ............ 100 105,000
Commodore Media, Inc.,
7.50%, 05/01/03 (f) .......... 50 56,000
Commonwealth Aluminum
Corp.,
10.75%, 10/01/06 ............ 100 108,000
Discovery Zone,
13.50%, 08/01/02 (i) ......... 209 218,927
Federal Home Loan Banks,
5.69%, 10/02/98 .............. 500 499,455
Federal National Mortgage
Association, Series 23,
Class 2,
10.00%, 09/01/17 ............ 467 129,599
Forman Petroleum Corp.,
13.50%, 06/01/04 ............. 309 312,090
Greyhound Lines, Inc.,
11.50%, 04/15/07 ............. 88 97,350
High Voltage Engineering
Corp.,
10.50%, 08/15/04 (i) ........ 274 284,275
ICF Kaiser International, Inc.,
13.00%, 12/31/03 (f) ......... 115 117,300
Intertek Finance PLC,
10.25%, 11/01/06 ............. 39 40,755
Morgan Guaranty Trust,
0.00%, 02/13/98 .............. 240 116,486
Petro Stopping Centers,
10.50%, 02/01/07 (h) ......... 106 112,360
Poindexter (J.B.) & Co.,
12.50%, 05/15/04 ............. 80 84,000
Quest Diagnostics, Inc.,
10.75%, 12/15/06 ............. 50 54,500
Reliance Industries, Ltd.,
9.375%, 06/24/26 (h), (i) .... 250 279,645
Sabreliner Corp.,
12.50%, 04/15/03 ............. 48 50,040
Salomon Brf Structured Note,
0.00%, 03/03/98 .............. 130 123,643
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
47
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- -------------------------------- ------------ -----------
LAZARD INTERNATIONAL FIXED-INCOME
PORTFOLIO* (CONTINUED)
Salomon Incorporated Medium
Term Note Book Entry,
0.00%, 03/09/98 ............... $ 169 $ 162,338
Spanish Broadcasting Systems,
Inc.,
11.00%, 03/15/04 .............. 57 62,700
Subic Power Corp.,
9.50%, 12/28/08 ................ 189 176,379
Talton Holdings, Inc.,
11.00%, 06/30/07 (h), (i) ...... 186 201,810
Transamerican Energy Corp.,
11.50%, 06/15/02 (i) ........... 52 52,260
Trump Atlantic City
Associates,
11.25%, 05/01/06 .............. 25 24,688
United States Treasury Bond,
0.00%, 11/15/24 ................ 4,658 936,677
United States Treasury Notes,
4.75%, 09/30/98 ................ 50 49,688
5.00%, 01/31/98 (h) ............ 426 425,732
5.125%, 03/31/98 ............... 74 73,942
6.25%, 06/30/98 ................ 100 100,375
W.R. Carpenter North America
Incorporated,
10.625%, 06/15/07 ............. 250 258,750
Waxman Industries, Inc.,
12.75%, 06/01/04 ............... 95 84,075
------------
TOTAL UNITED STATES DOLLAR ...... 5,862,192
------------
VENEZUELAN BOLIVAR--0.4%
Venezuela FLIRB, (USD),
6.75%, 03/31/07 (f), (g) ....... 226 202,734
Venezuela Titulos Establ
Monetaria,
20.78%, 01/09/98 (f) .......... 150,000 297,491
------------
TOTAL VENEZUELAN BOLIVAR ........ 500,225
------------
TOTAL CURRENCY DENOMINATED
BONDS
(Identified cost
$111,311,253) ................. 107,518,890
------------
PREFERRED STOCKS--0.5%
UNITED STATES DOLLAR-0.5%
Forman Petroleum Corp., (i) ..... 1,217 63,284
ICG Holdings, Inc. .............. 190 209,000
Nextel Communications,
Inc., (i) ...................... 15 17,100
Paxson Communications
Corp.,12.50% ................... 232 234,320
Silgan Holdings, Inc. ........... 1,000 1,140
------------
TOTAL PREFERRED STOCKS
(Identified cost $500,645) ..... 524,844
------------
PRINCIPAL
AMOUNT
(000)
----------
COMMERCIAL PAPER--3.4%
American Express Credit Corp.,
5.55%, 07/02/98 .............. $ 160 155,511
5.57%, 04/02/98 .............. 150 147,911
Ford Motor Credit Corp.,
5.71%, 02/20/98 .............. 140 138,890
5.71%, 03/23/98 .............. 70 69,101
5.72%, 02/04/98 .............. 100 99,460
General Electric Capital Corp.,
5.55%, 01/12/98 .............. 150 149,746
5.55%, 01/15/98 .............. 300 299,352
5.56%, 03/05/98 .............. 190 188,181
5.56%, 05/12/98 .............. 135 132,269
5.56%, 06/05/98 .............. 100 97,606
5.57%, 04/24/98 .............. 127 124,780
5.58%, 01/27/98 .............. 262 260,944
5.59%, 01/29/98 .............. 320 318,609
5.60%, 01/27/98 .............. 125 124,494
5.70%, 02/13/98 .............. 170 168,842
5.85%, 01/12/98 .............. 150 149,732
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
48
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- ---------------------------------- ---------- ----------
LAZARD INTERNATIONAL FIXED-INCOME
PORTFOLIO* (CONTINUED)
5.85%, 01/15/98 .............. $ 220 $ 219,499
5.85%, 01/20/98 .............. 175 174,460
Prudential Funding Corp.,
5.56%, 05/06/98 .............. 260 254,980
5.85%, 01/22/98 .............. 550 548,123
----------
TOTAL COMMERCIAL PAPER
(Identified cost $3,822,490) . 3,822,490
----------
DISCOUNT NOTES--0.2%
Federal National Mortgage
Association Discount Notes,
5.19%, 02/13/98 .............. 110 109,318
5.34%, 01/12/98 .............. 180 179,707
----------
TOTAL DISCOUNT NOTES
(Identified cost $289,025) ... 289,025
----------
U.S. GOVERNMENT OBLIGATIONS--0.2%
United States Treasury Bills,
0.00%, 05/28/98 .............. 200 195,750
0.00%, 08/20/98 .............. 15 14,498
0.00%, 10/15/98 .............. 50 47,930
----------
TOTAL U.S. GOVERNMENT
OBLIGATIONS
(Identified cost $258,182) ... 258,178
----------
TOTAL INVESTMENTS
(Identified cost
$116,181,595) (d) ............ 99.5% 112,413,427
CASH AND OTHER ASSETS IN
EXCESS OF LIABILITIES ........ 0.5 543,811
---------- -----------
NET ASSETS .................... 100.0% $112,957,238
========== ===========
</TABLE>
* Percentages of holdings are presented in the portfolio by currency
denomination.
Percentages by type are as follows:
Collateralized Mortgage Obligations 0.3%, Commercial Paper 3.4%, Convertible
Bonds 0.4%, Corporate Bonds 30.8%, Discount Notes 0.7%, Foreign Government
Obligations 52.6%, Mortgage Backed Securities 4.8%, Preferred Stocks 0.5%,
Step-Up Bonds 1.0%, Structured Notes 3.4%, United States Government
Obligations 1.6%.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
49
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO (CONTINUED)
Forward Foreign Currency Contracts open at December 31, 1997:
<TABLE>
<CAPTION>
U.S. $ Cost U.S. $ Unrealized
Foreign Currency Expiration Foreign on Origination Current Appreciation
Purchase Contracts Date Currency Date Value (Depreciation)
- -------------------- ------------ ------------- ---------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
ATS 3/12/98 4,051,954 $ 324,411 $ 322,066 $ (2,345)
AUD 3/12/98 454,676 329,985 296,809 (33,176)
BEL 3/12/98 97,698,298 2,643,177 2,647,884 4,707
CAD 3/12/98 6,965,703 5,082,696 4,885,113 (197,583)
CHF 3/12/98 4,479,598 3,117,096 3,091,307 (25,789)
CLP 1/28/98 103,155,624 235,000 234,568 (432)
CLP 2/4/98 59,876,544 140,000 136,059 (3,941)
CNY 1/27/98 1,048,813 125,000 125,695 695
CNY 2/19/98 209,358 25,000 24,771 (229)
CNY 5/12/98 1,184,220 135,000 133,067 (1,933)
CNY 5/29/98 1,738,020 200,000 193,268 (6,732)
CNY 9/9/98 129,737 15,000 13,717 (1,283)
CNY 10/30/98 920,000 100,000 95,204 (4,796)
COP 1/5/98 290,738,800 220,000 223,828 3,828
COP 1/12/98 196,845,000 150,000 151,133 1,133
COP 1/20/98 232,727,200 176,415 178,188 1,773
COP 1/22/98 428,970,300 330,000 328,215 (1,785)
COP 1/23/98 286,173,800 220,000 218,883 (1,117)
COP 2/5/98 289,300,000 220,000 220,000 0
COP 4/6/98 68,050,000 50,000 50,414 414
CZK 1/5/98 6,710,000 200,000 193,741 (6,259)
CZK 3/5/98 6,710,000 191,114 190,278 (836)
DEM 3/12/98 15,958,658 9,254,765 8,907,897 (346,868)
DKK 1/2/98 4,406,501 652,023 643,173 (8,850)
DKK 3/12/98 18,925,556 2,858,876 2,772,166 (86,710)
ESP 3/12/98 334,844,495 2,236,966 2,202,032 (34,934)
FIM 3/12/98 1,044,284 199,981 192,422 (7,559)
FRF 3/12/98 47,819,804 8,016,379 7,978,189 (38,190)
GBP 3/12/98 1,003,137 1,622,071 1,641,903 19,832
GRD 4/14/98 10,500,000 37,221 36,079 (1,141)
GTQ 6/9/98 219,566 35,000 34,780 (220)
HRK 1/27/98 1,645,000 262,436 259,080 (3,356)
IDR 1/21/98 358,000,000 95,569 64,732 (30,837)
IDR 2/4/98 313,000,000 80,670 56,360 (24,310)
IDR 4/24/98 490,000,000 126,943 85,837 (41,106)
IDR 10/14/98 539,000,000 140,000 90,050 (49,950)
IEP 3/12/98 1,192,998 1,754,412 1,696,920 (57,492)
INR 1/6/98 2,760,000 75,000 69,868 (5,132)
INR 1/23/98 7,742,000 200,000 193,586 (6,414)
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
50
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
U.S. $ Cost U.S. $ Unrealized
Foreign Currency Expiration Foreign on Origination Current Appreciation
Purchase Contracts Date Currency Date Value (Depreciation)
- -------------------- ------------ --------------- ---------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
INR 2/18/98 6,471,500 $ 170,000 $ 159,449 $ (10,551)
ITL 3/12/98 6,357,008,078 3,703,366 3,592,319 (111,047)
JPY 1/16/98 14,000,000 108,426 107,471 (955)
JPY 3/12/98 1,815,060,174 15,492,113 14,047,716 (1,444,397)
MXN 7/2/98 1,378,960 160,000 159,537 (463)
NLG 3/12/98 8,315,930 4,133,041 4,119,269 (13,773)
NOK 3/12/98 335,659 48,000 45,635 (2,365)
PEN 1/30/98 299,453 110,000 109,234 (766)
PEN 2/20/98 386,260 140,000 140,295 295
PEN 3/24/98 192,661 70,000 69,545 (455)
PHP 1/14/98 2,602,500 75,000 63,691 (11,309)
PHP 5/5/98 2,983,200 80,000 69,292 (10,708)
PHP 5/6/98 9,677,200 260,000 224,692 (35,308)
PHP 7/7/98 2,796,000 100,000 63,401 (36,599)
PLN 1/2/98 111,720 30,000 31,659 1,659
PLN 1/12/98 556,455 150,000 156,834 6,834
PLN 1/30/98 751,359 210,000 209,723 (277)
PLN 4/2/98 553,155 150,000 149,518 (482)
PLN 4/20/98 110,331 30,000 29,565 (435)
ROL 1/20/98 2,487,114,000 300,000 305,664 5,664
RUR 5/13/98 8,813,000,000 1,408,277 1,422,202 13,925
SEK 3/12/98 14,126,054 1,858,379 1,782,597 (75,782)
SVC 6/9/98 314,692 35,000 35,430 430
VEB 1/15/98 107,918,000 200,000 213,113 13,113
VEB 2/19/98 90,355,000 170,000 176,493 6,493
VEB 3/11/98 42,912,800 80,000 83,315 3,315
XEU 3/12/98 293,011 335,951 322,847 (13,104)
ZAR 10/5/98 4,399,058 869,321 850,276 (19,045)
ZAR 10/14/98 478,512 94,681 92,331 (2,350)
ZAR 10/16/98 252,875 50,000 48,775 (1,225)
----------- ----------- ------------
$72,499,761 $69,761,170 $ (2,738,591)
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
51
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
U.S. $ Cost U.S. $ Unrealized
Foreign Currency Expiration Foreign on Origination Current Appreciation
Sale Contracts Date Currency Date Value (Depreciation)
- ------------------ ------------ ---------------- ---------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
ATS 3/12/98 1,302,048 $ 108,000 $ 103,492 $ 4,508
AUD 3/12/98 2,147,610 1,546,412 1,401,946 144,466
CAD 3/12/98 546,905 393,893 383,550 10,343
CHF 3/12/98 1,515,000 1,058,700 1,045,480 13,220
CLP 2/4/98 81,000,000 184,426 184,058 368
CZK 1/5/98 6,710,000 194,380 193,741 639
DEM 1/27/98 456,816 258,746 254,340 4,406
DEM 1/30/98 200,011 115,500 111,379 4,121
DEM 3/12/98 15,715,632 8,934,986 8,772,243 162,743
DKK 3/12/98 38,218,283 5,704,023 5,598,114 105,909
ESP 3/12/98 194,041,150 1,301,110 1,276,069 25,041
FRF 3/12/98 9,955,626 1,692,264 1,660,983 31,281
GBP 3/12/98 1,403,417 2,290,284 2,297,069 (6,785)
IDR 1/13/98 750,000,000 130,231 135,897 (5,666)
IDR 1/16/98 1,026,000,000 190,000 185,761 4,239
IDR 1/21/98 358,000,000 101,560 64,732 36,828
IDR 1/23/98 770,000,000 145,146 139,155 5,991
IDR 2/20/98 705,900,000 195,000 126,328 68,672
IEP 1/9/98 1,037,000 1,508,835 1,475,736 33,099
IEP 3/12/98 716,000 1,064,921 1,018,439 46,482
INR 1/6/98 5,000,000 132,275 126,573 5,702
INR 2/18/98 11,467,400 293,659 282,540 11,119
INR 5/8/98 3,600,000 90,113 85,360 4,753
ITL 3/12/98 12,738,595,187 7,282,586 7,198,527 84,059
JPY 3/12/98 1,818,998,367 15,053,028 14,078,196 974,832
KRW 2/12/98 434,161,326 430,663 250,340 180,323
NLG 3/12/98 604,023 304,776 299,201 5,575
NOK 3/12/98 6,818,317 921,469 926,985 (5,516)
PHP 1/14/98 6,782,500 162,711 165,988 (3,277)
PHP 1/16/98 5,425,200 132,000 132,603 (603)
PLN 1/2/98 223,440 63,568 63,318 250
RUR 1/20/98 1,266,633,000 211,000 209,918 1,082
RUR 5/13/98 8,813,000,000 1,399,555 1,422,202 (22,647)
RUR 5/14/98 8,813,000,000 1,438,857 1,421,445 17,412
RUR 6/19/98 1,530,000,000 249,186 244,498 4,688
SEK 3/12/98 8,133,560 1,078,707 1,026,391 52,316
XEU 3/12/98 806,007 891,953 888,080 3,873
ZAR 10/5/98 650,625 125,000 125,757 (757)
----------- ----------- ----------
$57,379,523 $55,376,434 $2,003,089
----------
Net unrealized depreciation from Forward Foreign Currency Contracts $ (735,502)
==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
52
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- --------------------------------- ---------- ------------
LAZARD STRATEGIC YIELD PORTFOLIO*
CURRENCY DENOMINATED
BONDS--78.2%
ARGENTINE PESO--2.5%
Argentina Bocon, (USD),
0.00%, 09/01/02 ............... $ 4,175 $ 4,879,740
Banco Hipotecario Nacional,
(USD),
8.50%, 11/29/03 .............. 1,550 1,333,000
Republic of Argentina,
0.00%, 04/01/07 ............... 520 465,488
0.00%, 04/01/07 ............... 2,780 2,488,573
8.75%, 07/10/02 ............... 1,310 1,085,279
-----------
TOTAL ARGENTINE PESO ........... 10,252,080
-----------
AUSTRALIAN DOLLAR--4.8%
Commonwealth of Australia,
12.00%, 11/15/01 .............. 19,888 15,810,142
Credit Foncier, 8.50%,
09/09/02 ...................... 6,000 4,178,368
-----------
TOTAL AUSTRALIAN DOLLAR ........ 19,988,510
-----------
BRITISH POUND--1.7%
Birmingham Midshires
Building Society,
9.125%, 01/05/06 ............. 350 633,440
British Aerospace PLC,
11.875%, 12/29/08 ............. 400 899,269
Finance For Residence Society
House,
11.126%, 10/05/58 (f) ........ 600 1,461,004
North American Capital Corp.,
8.25%, 11/17/03 ............... 1,126 1,916,498
Sutton Bridge Financing Ltd.,
8.625%, 06/30/22 .............. 1,211 2,207,805
-----------
TOTAL BRITISH POUND ............ 7,118,016
-----------
CANADIAN DOLLAR--0.4%
Call Net Enterprises, Inc.,
8.375%, 08/15/07 .............. 1,811 1,317,966
Quebec Housing,
8.95%, 05/13/13 ............... 386 340,338
-----------
TOTAL CANADIAN DOLLAR .......... 1,658,304
-----------
CHILEAN PESO--0.1%
Salomon CLP Linked Clean
Note, (USD),
0.00%, 01/26/98 .............. 525 493,778
-----------
CHINESE RENMINBI--0.5%
DMG CNY Linked CD (USD),
0.00%, 01/26/98 ............... 2,000 1,980,000
-----------
CZECH KORUNA--0.6%
CEZ AS,
11.30%, 06/06/05 .............. 24,100 586,717
Credit Local,
10.625%, 03/12/98 ............. 6,500 184,423
Komercni Banka,
11.40%, 09/28/01 .............. 5,000 128,665
Skofin, 11.625%, 02/09/98 ...... 10,700 307,614
Wood & Co. PN,
0.00%, 06/04/98 ............... 47,000 1,290,985
-----------
TOTAL CZECH KORUNA ............. 2,498,404
-----------
DANISH KRONE--4.8%
Kreditforeningen Denmark,
10.20%, 04/15/04 (f) .......... 9,590 1,574,563
Nykredit AS, 6.00% 10/01/26 .... 103,894 14,776,150
Unikredit,
6.00%, 10/01/26 ............... 22,322 3,161,678
8.00%, 10/01/26 ............... 3,906 586,308
-----------
TOTAL DANISH KRONE ............. 20,098,699
-----------
ESTONIAN KROON--0.3%
Hansabank Leasing CP,
0.00%, 01/19/98 ............... 13,000 899,989
Merita Bank CP,
10.00%, 12/28/98 (f) .......... 7,000 474,258
-----------
TOTAL ESTONIAN KROON ........... 1,374,247
-----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
53
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- --------------------------------- ----------- -----------
LAZARD STRATEGIC YIELD PORTFOLIO* (CONTINUED)
FRENCH FRANC--2.5%
Credit Foncier de France,
7.50%, 03/29/05 (h) ......... $ 43,460 $ 8,023,329
Neopost,
5.914%, 09/30/07 (f), (i) ... 13,700 2,276,315
-----------
TOTAL FRENCH FRANC ........... 10,299,644
-----------
GERMAN MARK--2.3%
Autobahn Tank & Rast,
6.00%, 10/16/00 ............. 3,264 1,867,009
Bt & Co. Croatia Index Note,
0.00%, 03/01/99 ............. 1,500 510,297
Bt Croatia,
0.00%, 10/01/99 ............. 1,000 407,182
Exide Holdings,
9.125%, 04/15/04 (i) ........ 3,502 1,990,492
Federal Republic of Germany,
5.75%, 08/22/00 ............. 7,776 4,466,894
Impress Metal Pack Holding,
9.875%, 05/29/07 (i) ........ 669 383,970
-----------
TOTAL GERMAN MARK ............ 9,625,844
-----------
GREEK DRACHMA--0.6%
Republic of Hellenic,
11.10%, 06/30/00 (f) ........ 110,000 387,281
11.10%, 08/14/03 (f) ........ 565,000 1,915,423
-----------
TOTAL GREEK DRACHMA .......... 2,302,704
-----------
HUNGARIAN FORINT--1.1%
Government of Hungary,
23.00%, 05/06/99 ............ 110,000 568,460
ING, 20.00%, 01/07/98 ........ 268,706 1,315,660
ING, (USD), 0.00%, 03/18/98 .. 313 265,219
Republic of Hungary,
16.50%, 04/12/99 ............ 277,000 1,329,090
16.50%, 07/24/99 ............ 165,000 792,100
19.50%, 01/12/99 ............ 50,000 247,252
-----------
TOTAL HUNGARIAN FORINT ....... 4,517,781
-----------
INDONESIAN RUPIAH--0.9%
Asia Investment International
Ltd.,
0.00%, 02/04/98 ............ 1,320,000 231,362
Asia Investment International
Ltd., (USD),
0.00%, 02/04/98 ............ 200 125,863
0.00%, 02/13/98 ............. 350 51,313
0.00%, 02/13/98 ............. 2,500 480,273
DMG INR Linked CD, (USD),
0.00%, 06/15/98 ............. 1,415 1,176,148
Polysindo Eka,
0.00%, 03/16/98 ............. 1,000,000 166,128
19.00%, 04/26/99 ............ 5,000,000 545,455
PT Davomas Abadi,
0.00%, 02/04/98 ............. 1,000,000 176,465
PT Indah Kiat Pulp &
Paper Corp.,
0.00%, 06/16/98 ............ 7,581,700 964,944
-----------
TOTAL INDONESIAN RUPIAH ...... 3,917,951
-----------
IRISH POUND--2.1%
Republic of Ireland,
6.25%, 04/01/99 (h) ......... 5,942 8,588,331
-----------
JAPANESE YEN--2.5%
Asterique,
2.48%, 01/23/02 (h) ......... 262,675 2,011,555
Japan,
6.30%, 09/20/01 ............. 78,700 717,866
Japan Development Bank,
6.50%, 09/20/01 ............. 642,000 5,891,064
Nippon Credit Bank,
1.80%, 07/27/00 ............. 140,000 998,238
3.05%, 05/25/01 ............. 120,000 867,029
-----------
TOTAL JAPANESE YEN ........... 10,485,752
-----------
KENYAN SHILLING--0.3%
Kenyan Treasury Bill,
0.00%, 01/05/98 ............. 57,600 911,705
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
54
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- ------------------------------- ----------- -----------
LAZARD STRATEGIC YIELD PORTFOLIO* (CONTINUED)
Kenyan Treasury Bond,
0.00%, 06/29/98 ............... $ 34,000 $ 541,520
-----------
TOTAL KENYAN SHILLING .......... 1,453,225
-----------
LEBANESE POUND--1.3%
Paribas LBP Treasury Bill,
0.00%, 04/09/98 ............... 910,000 573,592
0.00%, 04/30/98 ............... 1,160,000 723,576
0.00%, 05/28/98 ............... 2,500,000 1,543,058
0.00%, 07/09/98 ............... 1,650,000 996,808
0.00%, 09/24/98 ............... 1,800,000 1,040,275
20.04%, 12/17/98 (f) .......... 930,000 627,308
-----------
TOTAL LEBANESE POUND ........... 5,504,617
-----------
MEXICAN PESO--1.9%
Bancomer,
0.00%, 06/29/98 ............... 27,000 3,045,706
Mexican Cetes,
0.00%, 03/05/98 ............... 840 100,596
0.00%, 05/07/98 ............... 5,000 579,569
0.00%, 06/04/98 ............... 2,525 288,597
UDI Bonos,
7.00%, 05/27/99 ............... 1,600 405,288
United Mexican States, (USD),
6.617%, 12/31/19 (f) .......... 750 693,750
6.693%, 12/31/19 (f) .......... 285 263,625
6.75%, 12/31/19 (f) ........... 2,550 2,358,750
-----------
TOTAL MEXICAN PESO ............. 7,735,881
-----------
MOROCCAN DIRHAM--0.4%
Morocco Restructuring &
Consolidation Agreement, (USD),
5.844%, 01/01/09 (f) .......... 1,750 1,509,375
-----------
NEW ZEALAND DOLLAR--2.6%
Government of New Zealand,
10.00%, 03/15/02 (h) .......... 14,936 9,492,147
Nordic Investment Bank,
6.75%, 09/16/99 ............... 2,557 1,444,634
-----------
TOTAL NEW ZEALAND DOLLAR ....... 10,936,781
-----------
NORWEGIAN KRONE--0.4%
Sparebanken Norway,
10.25%, 06/23/03 (f) .......... 12,250 1,752,298
-----------
PERUVIAN NOUVEAU SOL--0.3%
Peru Trade Finance Paper,
0.00%, 09/04/04 ............... 1,949 1,296,358
-----------
PHILIPPINE PESO--0.1%
Government of Philippines,
11.875%, 01/16/99 ............. 10,000 227,086
-----------
POLISH ZLOTY--0.9%
Government of Poland,
12.00%, 06/12/02 .............. 1,300 266,638
15.00%, 06/12/99 .............. 1,800 457,992
16.00%, 10/12/98 .............. 8,420 2,226,224
Poland Treasury Bills,
0.00%, 3/11/98 ................ 2,350 637,000
-----------
TOTAL POLISH ZLOTY ............. 3,587,854
-----------
RUSSIAN ROUBLE--1.1%
Cargill Delay Rus S Acct, (USD),
0.00%, 02/20/98 ............... 450 439,264
Chase Russian GKO Linked
Note, (USD),
0.00%, 06/19/98 .............. 1,640 1,681,107
Citibank GKO Linked Note,
0.00%, 01/29/98 ............... 6,174,300 1,008,074
Lehman GKO Structured Note,
0.00%, 05/13/98 ............... 8,813,000 1,329,995
-----------
TOTAL RUSSIAN ROUBLE ........... 4,458,440
-----------
SOUTH AFRICAN RAND--0.4%
Lesotho Water,
12.50%, 04/15/02 .............. 8,200 1,602,425
South African Roads,
11.50%, 09/30/05 .............. 975 174,785
-----------
TOTAL SOUTH AFRICAN RAND ....... 1,777,210
-----------
SOUTH KOREAN WON--0.1%
Morgan Guaranty Trust,
0.00%, 02/13/98 ............... 600 291,215
-----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
55
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- --------------------------------- ------------- ------------
LAZARD STRATEGIC YIELD PORTFOLIO* (CONTINUED)
SWITZERLAND FRANC--0.1%
Cesar Co.,
0.125%, 09/30/98 ............ $ 250 $ 123,187
0.125%, 09/30/00 ............ 300 102,655
------------
TOTAL SWITZERLAND FRANC ...... 225,842
------------
THAILAND BAHT--0.1%
Finance One PLC, (USD),
2.00%, 08/31/01 ............. 1,375 204,600
Morgan Guaranty Trust,
0.00%, 07/31/99 ............. 10,569 10,975
------------
TOTAL THAILAND BAHT .......... 215,575
------------
TURKISH LIRE--1.8%
Credit Suisse TRL Weekly Roll,
0.00%, 10/07/98 ............. 375,000,000 2,184,794
0.00%, 10/08/98 ............. 7,200,000 4,083,854
0.00%, 11/04/98 ............. 2,350,000 1,280,260
------------
TOTAL TURKISH LIRE ........... 7,548,908
------------
UNITED STATES DOLLAR--37.2%
Americold Corp.,
12.875%, 05/01/08 ........... 885 1,132,800
Amtrol, Inc.,
10.625%, 12/31/06 ........... 791 814,730
Archibald Candy Corp.,
10.25%, 07/01/04 ............ 464 486,040
Asset Securitization Corp.,
Series 1996-D2, Class ACS2,
1.581%, 02/28/26 (f) ....... 5,720 563,956
Asset Securitization Corp.,
Series 1997-D5, Class C,
1.553%, 02/14/41 (f) ....... 13,104 1,423,047
Atlantic ExpressTransportation
Corp.,
10.75%, 02/01/04 (h), (i) .. 1,672 1,776,500
BCF L.L.C., Series 1997-R1,
Class WAC,
6.104%, 03/25/37 (f) ....... 2,112 2,177,985
Bear Stearns Secured Investors
Trust, Series 1998, Class IO,
3.152%, 10/30/18 (f) ....... 12,233 1,223,384
Booth Creek Ski Holdings,
Inc.,
12.50%, 03/15/07 (h) ........ 1,750 1,715,000
Bt TRL Weekly Roll,
0.00%, 08/20/98 ............. 1,350 1,430,460
Cablevision Systems Corp.,
10.50%, 05/15/16 ............ 162 188,730
Calpine Corp.,
10.50%, 05/15/06 ............ 380 414,200
Carpenter W.R. North America
Inc.,
10.625%, 06/15/07 .......... 2,281 2,360,835
Carrols Corp.,
11.50%, 08/15/03 ............ 424 452,620
Carter (William) Co.,
10.375%, 12/01/06 ........... 1,150 1,207,500
Casino America, Inc.,
12.50%, 08/01/03 ............ 578 627,130
Ce Casecnan Water & Energy,
Inc., Series B,
11.95%, 11/15/10 (h) ....... 1,150 1,167,250
11.95%, 11/15/10 ............ 615 624,225
Chatwins Group, Inc.,
13.00%, 05/01/03 ............ 1,000 1,060,000
Climachem Inc.,
10.75%, 12/01/07 (i) ........ 1,000 1,032,500
Commodore Media, Inc.,
7.50%, 05/01/03 (f) ......... 650 728,000
Commonwealth Aluminum
Corp.,
10.75%, 10/01/06 (h) ....... 740 799,200
Communications Instruments
Inc.,
10.00%, 09/15/04 ........... 1,500 1,500,000
Community Distributors, Inc.,
10.25%, 10/15/04 (i) ........ 2,000 2,050,000
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
56
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- -------------------------------- ---------- ----------
LAZARD STRATEGIC YIELD PORTFOLIO* (CONTINUED)
Courtyard by Marriott II Ltd.,
Series B,
10.75%, 02/01/08 (h) ......... $ 1,150 $1,265,000
CSK Auto, Inc.,
11.00%, 11/01/06 .............. 500 545,000
Dade International, Inc.,
11.125%, 05/01/06 ............. 200 222,500
Dictaphone Corp.,
11.75%, 08/01/05 .............. 2,169 2,082,240
Discovery Zone, Inc.,
13.50%, 08/01/02 (i) .......... 574 601,265
Dobson Communications
Corp.,
11.75%, 04/15/07 .............. 2,095 2,215,462
Dynacare, Inc.,
10.75%, 01/15/06 .............. 1,320 1,389,300
Echostar Dbs Corporation,
12.50%, 07/01/02 .............. 1,190 1,285,200
Empire Gas Corp.,
7.00%, 07/15/04 (f) ........... 516 464,400
Envirosource, Inc.,
9.75%, 06/15/03 ............... 425 432,438
9.75%, 06/15/03 (i) ........... 105 106,313
Export-Import Bank of Japan,
8.00%, 06/04/00 ............... 235 235,125
Federal Home Loan Mortgage
Corp., Series 1974, Class VI,
0.25%, 03/15/09 ............... 22,000 222,200
Federal Home Loan Mortgage
Corp., Series T4, Class AWAC,
6.097%, 09/25/36 (f) ......... 1,735 1,725,315
Federal National Mortgage
Association,
6.874%, 07/01/37 (f) ......... 1,744 1,774,059
7.606%, 08/01/27 (f) .......... 1,773 1,852,602
7.771%, 07/01/26 (f) .......... 1,344 1,383,419
7.832%, 05/01/25 (f) .......... 1,529 1,575,613
Federal National Mortgage
Association, Series 1992-
203,Class SA,
3.375%, 11/25/07 (f) ......... 1,241 109,389
Federal National Mortgage
Association, Series 1992-
97,Class SA,
10.00%, 04/25/21 (f) ......... 1,209 132,545
Federal National Mortgage
Association, Series 23,
Class 2,
10.00%, 09/01/17 ............. 3,468 961,326
Federal National Mortgage
Association, Series 38,
Class 2,
10.00%, 08/01/18 ............. 1,197 338,809
Federal National Mortgage
Association, Series
G-13,Class L,
10.095%, 05/25/21 (f) ........ 932 330,421
Forman Petroleum Corp.,
13.50%, 06/01/04 .............. 960 969,600
Fundy Cable, Ltd.,
11.00%, 11/15/05 .............. 1,770 1,893,900
Furris Bishop, Inc.,
12.00%, 12/31/01 .............. 1,445 1,438,021
Government National
Mortgage Association,
5.50%, 10/20/27 .............. 413 414,078
5.50%, 12/20/27 .............. 1,240 1,242,504
6.00%, 10/20/26 .............. 2,104 2,159,723
6.00%, 04/20/27 (f) .......... 1,586 1,616,936
6.00%, 11/20/27 (f) .......... 284 287,776
6.50%, 11/20/26 (f) .......... 797 818,507
7.00%, 08/20/26 (f) .......... 1,869 1,914,282
7.00%, 09/20/26 (f) .......... 976 999,704
Government TEM in Salomon
Clean Note Structure,
0.00%, 02/04/98 .............. 1,000 1,024,800
0.00%, 02/04/98 ............... 1,400 1,377,040
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
57
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- ---------------------------------- ---------- ----------
LAZARD STRATEGIC YIELD PORTFOLIO* (CONTINUED)
Government TEM in Salomon
Clean Note Structure A,
0.00%, 06/26/98 .............. $ 200 $ 179,326
Government TEM in Salomon
Clean Note Structure A,
0.00%, 01/13/98 ............... 825 828,465
Grand Casinos, Inc.,
9.00%, 10/15/04 (i) ........... 700 703,500
Greyhound Lines, Inc.,
11.50%, 04/15/07 (h) .......... 1,707 1,888,369
Headlands Mortgage
Securities, Inc., Series
1997-1, Class X1,
0.673%, 03/25/27 (f) ......... 117,365 2,226,431
Headlands Mortgage
Securities, Inc., Series
1997-4, Class X,
1.126%, 11/25/27 (f) ......... 42,336 1,538,491
High Voltage Engineering
Corp.,
10.50%, 08/15/04 (i) ......... 1,369 1,420,337
Huntingdon International
Holdings Capital Ltd.,
7.50%, 09/25/06 .............. 50 40,000
7.50%, 09/25/06 (i) ........... 680 537,200
Hyperion Telecommunications
Inc.,
12.25%, 09/01/04 ............. 600 663,000
ICF Kaiser International, Inc.,
13.00%, 12/31/03 (f) .......... 1,892 1,929,840
ICO Inc.,
10.375%, 06/01/07 ............. 415 446,125
IMC Series Trust, Series
1997-A,
7.41%, 11/26/28 .............. 2,294 2,295,379
Interbank AKK Trust,
Series1995-1, Class 1,
9.00%, 02/28/01 (i) .......... 1,000 920,000
Intertek Finance Corp. PLC,
10.25%, 11/01/06 .............. 372 388,740
IXC Communications, Inc.,
12.50%, 10/01/05 (i) .......... 950 1,087,750
James Cable Partners LP,
10.75%, 08/15/04 (i) .......... 1,000 1,055,000
Lodgenet Entertainment Corp.,
10.25%, 12/15/06 (h) .......... 1,735 1,791,387
Maxxam Group Holdings, Inc.,
12.00%, 08/01/03 .............. 1,500 1,620,000
Merrill Lynch Mortgage
Investments Inc., Series
1996-C1, Class IO,
0.569%, 03/25/26 (f), (i) .... 14,994 442,801
Morgan Stanley Capital One
Inc., Series 1996-WF1, Class X,
1.417%, 11/15/28 (f), (i) .... 5,932 446,806
Morgan Stanley Capital, Inc. ...
Series 1997-C1, Class IO,
2.354%, 08/15/06 (f) ......... 2,553 170,796
Mrs. Fields Original,
10.125%, 12/01/04 (i) ......... 1,509 1,520,317
Nextel Communications, Inc.,
0.00%, 10/31/07 (i) ........... 1,508 912,340
Nextlink Communications, Inc.,
12.50%, 04/15/06 .............. 750 855,000
Orbcomm Global LP,
14.00%, 08/15/04 .............. 1,407 1,526,595
Paxson Communications
Corp.,
11.625%, 10/01/02 (h) ........ 1,600 1,728,000
Perkins Family Restaurant,
10.125%, 12/15/07 (i) ......... 1,190 1,204,875
Petro Stopping Centers,
10.50%, 02/01/07 .............. 1,965 2,082,900
Petrobras,
0.00%, 02/06/98 ............... 800 472,640
Pierce Leahy Corp.,
11.125%, 07/15/06 (h) ......... 897 1,013,610
Poindexter (J.B.) & Co.,
12.50%, 05/15/04 .............. 1,433 1,504,650
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
58
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- ---------------------------------- ---------- ------------
LAZARD STRATEGIC YIELD PORTFOLIO* (CONTINUED)
Production Resource Group,
11.50%, 01/15/08 (i) .......... $ 2,000 $2,005,000
Prudential Home Mortgage
Security, Series 1993-24,
Class A7,
0.462%, 07/25/00 .............. 105,808 718,443
Prudential Home Mortgage
Security, Series 1993-41,
Class A5
0.837%, 10/25/00 .............. 35,179 412,656
Prudential Home Mortgage
Security, Series 1993-5, Class
A9,
0.457%, 03/25/00 .............. 107,600 649,907
Quest Diagnostics, Inc.,
10.75%, 12/15/06 .............. 1,248 1,360,320
Reliance Industries Ltd.,
8.125%, 09/27/05 .............. 850 819,188
8.125%, 09/27/05 (i) .......... 100 104,087
9.375%, 06/24/26 (i) .......... 500 559,290
Republic of Croatia,
6.625%, 07/31/10 .............. 2,500 2,193,750
Residential Mortgage Funding,
2.011%, 01/03/20 .............. 12,330 1,157,886
Residential Reina Ltd.,
11.44%, 12/15/08 (f) .......... 1,000 1,022,500
Rifkin Acquisitions Partners LP,
11.125%, 01/15/06 (h) ......... 1,223 1,342,242
RMOF,
2.16%, 01/31/22 ............... 19,050 1,911,029
2.185%, 07/15/22 .............. 30,199 3,109,591
Sabreliner Corp.,
12.50%, 04/15/03 .............. 2,239 2,334,157
Salomon Brf Structure Note,
0.00%, 03/26/98 ............... 1,000 936,700
Salomon Brf Structured Note,
0.00%, 03/03/98 ............... 950 903,545
0.00%, 04/02/98 ............... 1,251 1,162,649
Salomon Incorporated Retail
Medium Term Note Bank
Ent,
0.00%, 03/10/98 ............... 210 201,816
Southwest Royalties, Inc.,
10.50%, 10/15/04 (i) .......... 1,350 1,343,250
Spanish Broadcasting Systems,
Inc.,
11.00%, 03/15/04 ............. 1,822 2,004,200
Station Casinos, Inc.,
10.125%, 03/15/06 (h) ......... 636 670,980
Structured Asset Securitization
Corp., Series 1996-CFL,
Class X1,
1.35%, 02/25/28 (f) .......... 5,630 293,854
Structured Asset Securitization
Corp., Series1996-CFL, Class
X2,
1.217%, 02/25/28 (f) ......... 3,226 89,736
Subic Power Corp.,
9.50%, 12/28/08 ............... 796 740,793
Sullivan Broadcasting,
10.25%, 12/15/05 .............. 400 426,500
Swiss Re Earthquake Fund,
10.493%, 07/16/00 ............. 1,000 1,000,902
T/SF Communications Corp.,
10.375%, 11/01/07 (h), (i) .... 2,210 2,193,425
Talton Holdings, Inc.,
11.00%, 06/30/07 (i) .......... 2,186 2,371,810
Tokheim Corp.,
11.50%, 08/01/06 (h) .......... 1,500 1,695,000
Transamerican Energy Corp.,
11.50%, 06/15/02 (i) .......... 1,068 1,073,340
Transamerican Refining Corp.,
16.00%, 06/30/03 .............. 750 765,000
Trump Atlanta,
11.25%, 05/01/06 (i) .......... 649 626,285
Trump Atlantic City
Associates,
11.25%, 05/01/06 ............. 1,474 1,455,575
UCFC Loan Trust,
8.00%, 09/15/00 ............... 2,147 427,387
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
59
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- --------------------------------- ---------- -------------
LAZARD STRATEGIC YIELD PORTFOLIO* (CONTINUED)
Unisys Corp.,
11.75%, 10/15/04 ............... $ 150 $ 171,750
12.00%, 04/15/03 (h) ........... 1,761 1,994,332
United States Department of
Veteran Affairs REMIC,
Series 1997-1, Class IO,
0.37%, 02/15/27 (f) ........... 33,995 945,495
United States Treasury Notes,
3.625%, 07/15/02 (h) ........... 3,428 3,410,860
5.00%, 01/31/98 ................ 1,356 1,355,146
5.125%, 03/31/98 ............... 604 603,529
6.125%, 03/31/98 ............... 183 183,285
6.25%, 06/30/98 ................ 100 100,375
United States Treasury Strips,
0.00%, 05/15/07 ................ 785 455,324
US Can Corp.,
10.125%, 10/15/06 .............. 2,150 2,279,000
Waxman Industries, Inc.,
0.00%, 06/01/04 ................ 220 194,700
Winstar Communications, Inc.,
0.00%, 10/15/05 (f) ............ 500 515,000
Wright Medical Technology Inc.,
11.75%, 07/01/00 ............... 2,179 2,200,790
------------
TOTAL UNITED STATES DOLLAR ...... 154,295,953
------------
VENEZUELAN BOLIVAR-1.5%
Republic of Venezuela, (USD),
6.75%, 03/31/07 (f) ............ 1,357 1,216,405
6.75%, 12/18/07 ................ 1,428 1,257,214
Salomon VEB Linked Note,
(USD),
0.00%, 01/27/98 ............... 2,200 2,143,900
Venezuela DCB, (USD),
6.875%, 12/18/07 (f) ........... 478 413,397
Venezuela FLIRB, (USD),
6.75%, 03/31/07 (f), (g) ....... 452 405,469
Venezuela TEM,
20.78%, 01/09/98 ............... 350,000 694,145
------------
TOTAL VENEZUELAN BOLIVAR ........ 6,130,530
------------
TOTAL CURRENCY DENOMINATED
BONDS
(Identified cost
$336,981,315) ................. 324,147,193
------------
PREFERRED STOCKS-2.8%
American Communications
Services Inc. (e), (i) ......... 750 450,000
American Communications
Services Inc. (i) .............. 750 832,500
Cablevision Systems Corp. ....... 156 18,525
Echostar Communications
Corp. (i) ...................... 2,006 2,066,180
Forman Petroleum Corp. (i) ...... 3,765 195,780
Geneva Steel Co. ................ 4,414 376,293
Georgetown Re Ltd. .............. 2 1,000,000
Hyperion Telecommunications,
Inc., (i) ...................... 870 876,525
ICG Holdings, Inc. .............. 629 691,900
Intermedia Communications,
Inc ............................ 1,182 1,447,950
IXC Communications Inc. ......... 618 723,060
Nextel Communications, Inc. ..... 2,968 77,168
Nextel Communications, Inc.(i) .. 302 344,280
Paxson Communications
Corp., 12.50% .................. 743 750,430
Pegasus Communications
Corp ........................... 152 164,160
Pegasus Communications
Corp ........................... 1,250 1,390,625
RSL Communications Ltd. (e) ..... 808 76,760
Spanish Broadcasting Systems,
Inc. (e), (i) .................. 750 150,094
United Mexican States,
(USD) (l) ...................... 1,840,000 0
------------
TOTAL PREFERRED STOCKS
(Identified cost $10,984,753) .. 11,632,230
------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
60
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- -------------------------------------- ----------- ------------
LAZARD STRATEGIC YIELD PORTFOLIO* (CONTINUED)
COMMERCIAL PAPER--7.4%
American Express Credit Corp.,
5.55%, 07/02/98 ................... $ 1,825 $ 1,773,794
Ford Motor Credit Corp.,
5.51%, 06/15/98 ................... 950 926,009
5.57%, 06/05/98 ................... 320 312,326
5.60%, 02/04/98 ................... 525 522,223
5.70%, 02/27/98 ................... 300 297,293
5.71%, 02/20/98 ................... 810 803,576
5.71%, 03/23/98 ................... 2,040 2,013,791
5.72%, 02/04/98 ................... 385 382,920
General Electric Capital Corp.,
5.53%, 02/18/98 ................... 100 99,263
5.53%, 02/19/98 ................... 750 744,355
5.54%, 04/06/98 ................... 275 270,980
5.55%, 01/12/98 ................... 700 698,813
5.55%, 01/15/98 ................... 2,215 2,210,219
5.56%, 03/05/98 ................... 830 822,052
5.56%, 05/12/98 ................... 725 710,332
5.56%, 06/05/98 ................... 620 605,158
5.57%, 04/24/98 ................... 782 768,328
5.58%, 01/27/98 ................... 1,969 1,961,065
5.59%, 01/29/98 ................... 3,010 2,996,913
5.60%, 01/27/98 ................... 1,160 1,155,308
5.62%, 05/12/98 ................... 333 326,190
5.63%, 05/06/98 ................... 421 412,770
5.64%, 05/12/98 ................... 940 920,708
5.70%, 02/20/98 ................... 750 744,062
5.72%, 03/10/98 ................... 350 346,218
5.73%, 02/02/98 ................... 1,335 1,328,200
5.85%, 01/12/98 ................... 2,350 2,345,799
5.85%, 01/15/98 ................... 1,500 1,496,587
5.85%, 01/20/98 ................... 175 174,460
Prudential Funding Corp.,
5.49%, 01/05/98 ................... 190 189,884
5.49%, 02/09/98 ................... 105 104,376
5.51%, 02/12/98 ................... 280 278,200
5.85%, 01/22/98 ................... 2,000 1,993,175
-----------
TOTAL COMMERCIAL PAPER
(Identified cost $30,735,347) ..... 30,735,347
-----------
DISCOUNT NOTES--2.6%
Federal Farm Credit Bank
Discount Note,
5.36%, 09/29/98 .................. 1,800 1,727,372
Federal Home Loan Bank
Consolidated Discount Note,
5.30%, 10/01/98 .................. 290 278,345
5.39%, 10/09/98 ................... 1,250 1,197,410
5.53%, 05/22/98 ................... 623 609,506
Federal National Mortgage
Association Discount Notes,
5.19%, 02/13/98 .................. 895 889,452
5.34%, 01/12/98 ................... 810 808,678
5.35%, 09/14/98 ................... 673 647,396
5.41%, 10/09/98 ................... 850 814,106
5.41%, 10/16/98 ................... 1,080 1,033,258
5.42%, 10/09/98 ................... 683 654,105
5.46%, 10/09/98 ................... 49 46,384
5.68%, 10/23/98 ................... 1,290 1,284,356
5.71%, 01/05/98 ................... 835 834,470
-----------
TOTAL DISCOUNT NOTES
(Identified cost $10,829,731) ..... 10,824,838
-----------
U.S. GOVERNMENT OBLIGATIONS--0.1%
United States Treasury Bills,
0.00%, 08/20/98
(Identified cost $535,982) ....... 555 536,419
-----------
REPURCHASE AGREEMENT--5.5%
State Street Bank and Trust Company,
5.65%, 01/02/98 (Dated
12/31/97, collateralized by
$22,705,000 United States
Treasury Notes, 6.25%,
07/31/98, with a value of
$23,373,049) (h)
(Identified cost
$22,913,000) ..................... 22,913 22,913,000
-----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
61
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DESCRIPTION (000) VALUE
- ----------------------------- ---------- -------------
LAZARD STRATEGIC YIELD PORTFOLIO* (CONTINUED)
TOTAL INVESTMENTS
(Identified cost
$412,980,128) (d) ............ 96.6% $400,789,027
CASH AND OTHER ASSETS IN
EXCESS OF LIABILITIES ......... 3.4 13,963,194
NET ASSETS ..................... 100.0% $414,752,221
===== ============
* Percentages of holdings are presented in the portfolio by currency
denomination.
Percentages by type are as follows:
Asset Backed Securities 0.1%, Collateralized Mortgage Obligations 3.6%,
Commercial Paper 7.4%, Convertible Bonds 1.1%,
Corporate Bonds 43.0%, Discount Notes 1.4%, Foreign Government Obligations
18.1%, Mortgage Backed Securities 1.3%,
Preferred Stocks 2.8%, Remics 0.2%, Step-Up Bonds 1.2%, Structured Notes 7.0%,
United States Government Obligations 3.6%, Warrants 0.3%.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
62
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED)
Forward Foreign Currency Contracts open at December 31, 1997:
<TABLE>
<CAPTION>
U.S. $ Cost U.S. $ Unrealized
Foreign Currency Expiration Foreign on Origination Current Appreciation
Purchase Contracts Date Currency Date Value (Depreciation)
- -------------------- ------------ --------------- ---------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
AUD 3/12/98 5,048,894 $ 3,505,572 $ 3,295,885 $ (209,687)
CAD 3/12/98 3,680,300 2,573,550 2,581,029 7,479
CLP 1/28/98 373,116,085 850,000 848,438 (1,562)
CLP 2/4/98 470,458,560 1,100,000 1,069,036 (30,964)
CLP 6/3/98 177,890,870 410,000 399,644 (10,356)
CLP 8/26/98 129,221,028 300,000 288,147 (11,853)
CLP 10/22/98 364,382,165 850,000 808,678 (41,322)
CNY 1/27/98 9,732,980 1,160,000 1,166,451 6,451
CNY 2/19/98 6,280,725 750,000 743,123 (6,877)
CNY 5/12/98 6,359,700 725,000 714,621 (10,379)
CNY 9/9/98 345,964 40,000 36,580 (3,420)
CNY 10/28/98 9,809,964 1,080,000 1,016,008 (63,992)
CNY 10/30/98 11,868,000 1,290,000 1,228,126 (61,874)
COP 1/5/98 1,982,310,000 1,500,000 1,526,103 26,103
COP 1/12/98 721,765,000 550,000 554,156 4,156
COP 1/20/98 241,685,900 183,206 185,048 1,842
COP 1/22/98 779,940,000 600,000 596,751 (3,249)
COP 1/23/98 1,821,106,000 1,400,000 1,392,890 (7,110)
COP 2/5/98 1,972,500,000 1,500,000 1,500,000 0
COP 4/6/98 374,275,000 275,000 277,278 2,278
COP 6/3/98 220,312,800 180,000 159,423 (20,577)
CZK 1/5/98 29,120,000 830,103 840,797 10,694
CZK 1/7/98 35,703,560 1,064,194 1,030,318 (33,876)
CZK 2/9/98 3,801,000 105,000 108,630 3,630
CZK 3/5/98 29,120,000 829,393 825,767 (3,626)
CZK 6/5/98 11,888,000 322,824 328,876 6,052
CZK 8/31/98 7,828,150 215,000 211,699 (3,301)
DEM 3/12/98 29,771,334 17,282,228 16,617,937 (664,291)
DKK 3/12/98 12,257,219 1,822,425 1,795,405 (27,020)
ESP 3/12/98 886,234,102 5,984,025 5,828,125 (155,900)
GBP 3/12/98 2,011,161 3,352,000 3,291,804 (60,196)
GRD 1/5/98 82,067,100 290,000 288,616 (1,384)
GRD 2/5/98 140,000,000 491,573 489,153 (2,420)
GRD 2/27/98 110,000,000 392,857 382,168 (10,689)
GRD 4/14/98 295,000,000 1,045,728 1,013,659 (32,070)
GTQ 6/9/98 1,944,723 310,000 308,055 (1,945)
GTQ 6/17/98 2,987,750 475,000 472,753 (2,247)
HRK 1/27/98 13,125,000 2,093,903 2,067,124 (26,779)
HRK 2/12/98 1,624,508 250,000 254,310 4,310
IDR 1/21/98 6,945,200,000 1,854,031 1,255,803 (598,228)
IDR 2/4/98 1,500,000,000 386,598 270,096 (116,502)
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
63
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
U.S. $ Cost U.S. $ Unrealized
Foreign Currency Expiration Foreign on Origination Current Appreciation
Purchase Contracts Date Currency Date Value (Depreciation)
- -------------------- ------------ ---------------- ---------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
IDR 4/24/98 3,020,000,000 $ 782,383 $ 529,034 $ (253,349)
IDR 8/5/98 1,500,000,000 424,328 254,979 (169,349)
IDR 8/6/98 1,000,000,000 281,690 169,944 (111,746)
IDR 9/22/98 2,000,000,000 600,601 335,950 (264,651)
IDR 10/2/98 2,000,000,000 546,448 335,124 (211,324)
IDR 10/14/98 4,812,500,000 1,250,000 804,021 (445,979)
IEP 3/12/98 6,145,000 9,028,849 8,740,650 (288,199)
INR 1/6/98 11,960,000 325,000 305,062 (19,938)
INR 1/23/98 20,516,300 530,000 513,004 (16,996)
INR 2/12/98 17,908,800 480,000 442,912 (37,088)
INR 2/18/98 43,738,350 1,145,000 1,114,527 (30,473)
INR 3/13/98 7,435,000 200,000 180,586 (19,414)
INR 5/8/98 27,944,400 730,000 662,590 (67,410)
ITL 3/12/98 17,218,162,795 10,062,831 9,729,912 (332,919)
JPY 3/12/98 3,093,452,677 24,262,018 23,941,876 (320,142)
JPY 12/11/98 242,727,663 1,955,746 1,954,988 (758)
MXN 7/2/98 15,728,763 1,825,000 1,819,721 (5,279)
PEN 1/30/98 2,749,523 1,010,000 1,002,963 (7,037)
PEN 2/20/98 2,234,790 810,000 811,706 1,706
PEN 3/24/98 1,926,610 700,000 695,452 (4,548)
PHP 1/14/98 38,690,500 1,115,000 946,869 (168,131)
PHP 2/20/98 27,652,500 750,000 662,265 (87,735)
PHP 5/6/98 16,000,000 421,053 371,500 (49,553)
PHP 5/12/98 47,500,000 1,275,131 1,100,395 (174,736)
PHP 7/7/98 2,796,000 100,000 63,401 (36,599)
PLN 1/12/98 2,596,790 700,000 731,892 31,892
PLN 1/30/98 7,155,800 2,000,000 1,997,360 (2,640)
PLN 4/20/98 2,739,887 745,000 734,195 (10,805)
ROL 1/20/98 18,363,191,700 2,215,000 2,256,815 41,815
SVC 6/9/98 2,787,272 310,000 313,808 3,808
SVC 6/17/98 4,268,255 475,000 480,189 5,189
VEB 1/15/98 539,590,000 1,000,000 1,065,563 65,563
VEB 2/9/98 707,883,750 1,335,000 1,386,998 51,998
VEB 3/11/98 348,666,500 650,000 676,930 26,930
VEB 3/23/98 697,738,000 1,340,000 1,349,782 9,782
XEU 3/12/98 2,246,540 2,587,405 2,475,298 (112,107)
ZAR 10/5/98 26,717,186 5,279,142 5,164,056 (115,086)
ZAR 10/6/98 1,466,240 290,000 283,350 (6,650)
ZAR 10/14/98 11,075,000 2,188,952 2,136,975 (51,976)
ZAR 10/16/98 3,843,700 760,000 741,378 (18,622)
------------ ------------ ------------
$142,705,787 $137,352,530 $ (5,353,257)
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
64
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
LAZARD STRATEGIC YIELD PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
U.S. $ Cost U.S. $ Unrealized
Foreign Currency Expiration Foreign on Origination Current Appreciation
Sale Contracts Date Currency Date Value (Depreciation)
- ------------------ ------------ ---------------- ---------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
AUD 3/12/98 21,583,787 $ 15,722,532 $ 14,089,756 $1,632,776
CAD 3/12/98 6,181,602 4,507,135 4,335,216 171,919
CHF 3/12/98 491,413 337,046 339,117 (2,071)
CLP 2/4/98 504,000,000 1,147,541 1,145,253 2,288
CNY 1/27/98 1,063,750 125,000 127,485 (2,485)
CZK 1/5/98 29,120,000 843,569 840,797 2,772
CZK 1/7/98 29,219,750 875,000 843,211 31,789
DEM 1/7/98 1,865,000 1,064,194 1,037,144 27,050
DEM 1/27/98 3,644,811 2,064,464 2,029,305 35,159
DEM 1/30/98 1,904,870 1,100,000 1,060,754 39,246
DEM 2/12/98 449,025 250,000 250,234 (234)
DEM 3/12/98 78,835,847 44,674,445 44,005,054 669,391
DKK 3/12/98 149,246,369 22,088,674 21,861,216 227,458
ESP 3/12/98 888,211,814 5,837,374 5,841,131 (3,757)
FRF 3/12/98 64,113,897 10,850,523 10,696,672 153,851
GBP 3/12/98 7,254,197 11,607,870 11,873,440 (265,570)
GRD 1/5/98 82,067,100 289,990 288,616 1,374
IDR 1/13/98 9,620,000,000 1,670,429 1,743,110 (72,681)
IDR 1/16/98 7,560,000,000 1,400,000 1,368,765 31,235
IDR 1/21/98 6,945,200,000 1,970,270 1,255,803 714,467
IDR 1/23/98 6,650,000,000 1,253,534 1,201,796 51,738
IDR 2/20/98 5,194,700,000 1,435,000 929,641 505,359
IEP 1/9/98 6,231,000 9,066,105 8,867,226 198,879
IEP 3/12/98 6,145,000 9,139,581 8,740,650 398,931
INR 1/6/98 53,038,900 1,404,836 1,352,856 51,980
INR 2/12/98 7,527,000 192,852 186,154 6,698
INR 2/18/98 41,573,350 1,068,904 1,059,360 9,544
INR 5/8/98 78,600,000 1,967,459 1,863,685 103,774
ITL 3/12/98 17,232,447,012 9,728,387 9,737,984 (9,597)
JPY 3/12/98 2,953,836,057 24,212,837 22,861,308 1,351,529
JPY 12/11/98 1,922,817,710 15,420,440 15,486,841 (66,401)
KRW 2/12/98 765,151,326 760,663 441,191 319,472
NOK 3/12/98 13,884,706 1,876,464 1,887,697 (11,233)
NZD 3/12/98 18,935,486 11,526,637 10,933,492 593,145
PHP 1/14/98 47,886,500 1,152,301 1,171,922 (19,621)
PHP 1/16/98 67,147,000 1,660,000 1,641,208 18,792
RUR 1/20/98 6,087,042,000 1,014,000 1,008,801 5,199
RUR 6/19/98 11,400,000,000 1,856,677 1,821,750 34,927
XEU 3/12/98 6,258,394 6,909,491 6,895,664 13,827
ZAR 10/5/98 13,417,186 2,577,452 2,593,354 (15,902)
ZAR 10/6/98 466,240 89,054 90,100 (1,046)
------------ ------------ ----------
$232,738,730 $225,804,759 6,933,971
----------
Net unrealized appreciation from Forward Foreign $1,580,714
==========
Currency Contracts
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
65
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
NOTES TO PORTFOLIOS OF INVESTMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
(a) Non-income producing.
(b) American Depositary Receipts.
(c) Global Depositary Receipts.
(d) For federal income tax purposes, the aggregate cost, aggregate gross
unrealized appreciation, aggregate gross unrealized depreciation and the
net unrealized appreciation (depreciation) is as follows:
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE NET
GROSS GROSS UNREALIZED
AGGREGATE UNREALIZED UNREALIZED APPRECIATION
PORTFOLIO COST APPRECIATION DEPRECIATION (DEPRECIATION)
- ------------------------------ ---------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Equity $ 294,025,517 $ 69,028,757 $ 7,580,284 $ 61,448,473
Mid Cap 51,060,243 2,736,115 1,450,245 1,285,870
Small Cap 1,227,060,042 314,297,677 24,412,137 289,885,540
Bantam Value 72,678,979 11,380,744 4,376,997 7,003,747
Global Equity 11,315,806 1,720,483 508,539 1,211,944
International Equity 1,786,314,234 416,234,434 124,386,562 291,847,872
International Small Cap 139,357,811 20,468,526 16,824,884 3,643,642
Emerging Markets 291,683,429 23,844,335 72,869,669 (49,025,334)
Bond 103,742,962 1,524,202 593,946 930,256
International Fixed-Income 116,097,920 908,301 4,592,794 (3,684,493)
Strategic Yield 411,893,796 5,733,125 16,837,894 (11,104,769)
</TABLE>
(e) Warrant.
(f) Variable rate security. Interest rate shown is the current rate.
(g) Front Loaded Interest Reduction Bond.
(h) Segregated securities for when-issued purchases and/or forward foreign
currency contracts.
(i) Pursuant to Rule 144A of the Securities Act of 1933, these securities may
only be resold in transactions exempt from registration, normally to
qualified institutional buyers. At December 31, 1997, these securities
amounted to $5,322,428, $14,506,254, $2,529,723, $2,451,102 and
$35,790,437, or 3.7%, 5.9%, 2.5%, 2.2% and 8.6% of net assets for the
Lazard International Small Cap Portfolio, Lazard Emerging Markets
Portfolio, Lazard Bond Portfolio, Lazard International Fixed-Income
Portfolio, and Lazard Strategic Yield Portfolio, respectively.
(j) At December 31, 1997, the Lazard Small Cap Portfolio held the following
securities which were private placements and therefore restricted as to
resale, and represented 0.04% (at value) of the net assets of the
Portfolio:
<TABLE>
<CAPTION>
ACQUISITION ACQUISITION
SECURITY DATE COST
- ------------------------------------------------------------- ------------- ------------
<S> <C> <C>
Interactive Light Holdings Inc. 8.00%, 1/25/99 02/04/94 $1,000,000
Verbex Voice Systems, Inc. Series F Preferred (conv.) 07/12/93 1,500,000
Verbex Voice Systems, Inc. 06/07/94 76,661
Verbex Voice Systems, Inc. 10.00%, 12/31/98 07/06/94 103,840
$2,680,501
==========
</TABLE>
Verbex Voice Systems Inc. and Interactive Light Holdings Inc. are valued as
determined in good faith and in accordance with the procedures adopted by
the Board of Directors. The Lazard Small Cap Portfolio will bear any costs,
including those involved in registration under the Securities Act of 1933,
in connection with the disposition of such securities.
(k) Bankrupt security valued at zero.
(l) Rights
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
66
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
NOTES TO PORTFOLIOS OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
Abbreviations:
TBA-Settlement is on a delayed delivery or when issued basis with final
maturity to be announced (TBA) in the future.
CURRENCY TERMS
- ----------------------------------------------
ATS-Austrian Schilling
AUD-Australian Dollar
BEL-Belgian Franc
CAD-Canadian Dollar
CHF-Swiss Franc
CLP-Chilean Peso
CNY-Chinese Yuan Renminbi
COP-Colombian Peso
CZK-Czechoslovakian Koruna
DEM-Deutsche Mark
DKK-Danish Krone
ESP-Spanish Peseta
FIM-Finnish Markka
FRF-French Franc
GBP-Pound Sterling
GTQ-Guatemalan Quetzal
GRD-Greek Drachma
HRK-Croatian Kuna
IDR-Indonesian Rupiah
IEP-Irish Pound
INR-Indian Rupee
ITL-Italian Lira
JPY-Japanese Yen
KRW-South Korean Won
MXN-Mexican Peso
NLG-Netherlands Guilder
NOK- Norwegian Krone
PEN-Peruvian Nouveau Sol
PHP-Philippine Peso
PLN-Polish Zloty
ROL-Romanian Leu
RUR-Russian Rouble
SVC-El Salvador Colon
SEK-Swedish Krona
USD-United States Dollar
VEB-Venezuelan Bolivar
XEU-European Currency Unit (ECU)
ZAR-South African Rand
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
67
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LAZARD
LAZARD LAZARD LAZARD BANTAM
EQUITY MID CAP SMALL CAP VALUE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- ---------------- ---------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Investments in securities, at value (cost $284,312,492,
$45,985,243, $1,092,904,042, $68,717,979, $10,952,343,
$1,753,575,677, $135,402,811, $284,176,402,
$98,476,444, $116,181,595, and $390,067,128,
respectively) ................................................ $345,863,990 $ 47,271,113 $1,382,789,582 $75,721,726
Repurchase Agreements, at value .............................. 9,610,000 5,075,000 134,156,000 3,961,000
Cash ......................................................... 3,794 47 9,062 1,809
Foreign currency (cost $0, $0, $0, $0, $48,994, $0, $8,547,
$1,043,484, $0, $169,432, and $1,002,488, respectively) ...... - - - -
Receivables for:
Net foreign currency contracts .............................. - - - -
Investments sold ............................................. - - 10,322,869 526,907
Dividends and interest ....................................... 652,712 38,060 1,041,329 14,069
Capital stock sold .......................................... 851,848 101,262 2,956,012 55,183
Due from Manager ............................................. - - - -
Deferred organizational expenses .............................. - 57,194 - 687
------------ ------------ -------------- ------------
Total assets ................................................... 356,982,344 52,542,676 1,531,274,854 80,281,381
------------ ------------ -------------- ------------
LIABILITIES
Payables for:
Investments purchased ....................................... - 828,134 34,915,632 1,525,791
Capital stock repurchased .................................... 244,256 - 4,030,646 24,286
Dividends payable ............................................. - - - -
Net foreign currency contracts .............................. - - - -
Investment management fees payable ........................... 260,250 25,675 910,880 361,952
Due to Custodian (cost $0, $0, $0, $0, $0, $3,927,145, $0,
$0, $0, $1,584,209, and $95,128, respectively) ............... - - - -
Due to Manager ................................................ - 64,348 - 5,951
Accrued directors' fees payable .............................. 716 503 716 716
Accrued expenses and other payables ........................... 90,950 38,527 244,610 42,724
------------ ------------ -------------- ------------
Total liabilities ............................................. 596,172 957,187 40,102,484 1,961,420
------------ ------------ -------------- ------------
Net assets ................................................... 356,386,172 51,585,489 1,491,172,370 78,319,961
============ ============ ============== ============
NET ASSETS
Paid in capital ................................................ 288,480,255 50,288,677 1,192,327,154 70,419,540
Undistributed (distributions in excess of) Investment
income-net ................................................... 19,492 12,085 681,981 -
Unrealized appreciation (depreciation) on:
Investments-net ............................................. 61,551,498 1,285,870 289,885,540 7,003,747
Foreign currency-net .......................................... - - - -
Accumulated realized gain (loss) - net ........................ 6,334,927 (1,143) 8,277,695 896,674
------------ ------------ -------------- ------------
Net assets ................................................... $356,386,172 $ 51,585,489 $1,491,172,370 $78,319,961
============ ============ ============== ============
INSTITUTIONAL SHARES
Net assets ................................................... $333,574,863 $ 49,779,125 $1,445,075,491 $69,971,591
Shares of capital stock outstanding* ........................... 16,695,862 4,851,388 72,186,366 4,887,256
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE ...... $ 19.98 $ 10.26 $ 20.02 $14.32
OPEN SHARES
Net assets ................................................... $ 22,811,309 $ 1,806,364 $ 46,096,879 $8,348,370
Shares of capital stock outstanding* ........................... 1,141,207 176,048 2,302,364 585,520
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE ...... $ 19.99 $ 10.26 $ 20.02 $14.26
</TABLE>
* $0.001 par value, 1,550,000,000 shares authorized for the Portfolios in
total.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
68
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LAZARD LAZARD LAZARD LAZARD LAZARD
GLOBAL INTERNATIONAL INTERNATIONAL EMERGING LAZARD INTERNATIONAL LAZARD
EQUITY EQUITY SMALL CAP MARKETS BOND FIXED-INCOME STRATEGIC
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO YIELD PORTFOLIO
- ---------------- ------------------- --------------- ----------------- --------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
$ 12,210,750 $ 2,067,114,106 $139,046,453 $ 235,242,095 $ 99,610,218 $ 112,413,427 $ 377,876,027
317,000 11,048,000 3,955,000 7,416,000 5,063,000 - 22,913,000
687 1,899 1,203 2,109 2,127 - -
49,459 - 8,580 1,000,320 - 167,748 999,209
- 374,970 - - - - 1,580,714
- 35,259,660 501,507 - 1,589,396 2,009,827 4,760,758
33,921 5,086,077 191,935 586,556 1,000,856 2,577,865 7,207,326
48,000 2,071,520 236,943 1,543,107 176,580 254,989 2,243,320
104,254 - - - - - -
543 - 3,214 4,678 - - -
------------ --------------- ------------ -------------- ------------ ------------- -------------
12,764,614 2,120,956,232 143,944,835 245,794,865 107,442,177 117,423,856 417,580,354
------------ --------------- ------------ -------------- ------------ ------------- -------------
72,940 4,405,824 - 550,633 7,160,354 1,230,047 862,503
- 201,260 189,079 710,688 60,000 236,448 389,019
- - - - 55,888 569,670 991,154
- - - - - 735,502 -
- 1,351,728 69,810 244,151 407,919 63,182 313,531
- 3,911,532 - - - 1,584,209 95,128
- - - 20,680 - - -
716 716 716 716 716 716 716
42,201 566,789 117,966 158,910 46,676 46,844 176,082
------------ --------------- ------------ -------------- ------------ ------------- -------------
115,857 10,437,849 377,571 1,685,778 7,731,553 4,466,618 2,828,133
------------ --------------- ------------ -------------- ------------ ------------- -------------
12,648,757 2,110,518,383 143,567,264 244,109,087 99,710,624 112,957,238 414,752,221
============ =============== ============ ============== ============ ============= =============
11,254,147 1,806,176,063 136,338,825 298,705,810 98,580,207 119,277,585 426,246,700
(30,476) (21,193,548) (18,014) 48,851 (136,318) (1,450,070) (574,424)
1,258,407 313,538,429 3,643,642 (48,934,307) 1,133,774 (3,768,168) (12,191,101)
706 (215,225) (6,512) (45,901) - (803,121) 1,363,701
165,973 12,212,664 3,609,323 (5,665,366) 132,961 (298,988) (92,655)
------------ --------------- ------------ -------------- ------------ ------------- -------------
$ 12,648,757 $ 2,110,518,383 $143,567,264 $ 244,109,087 $ 99,710,624 $ 112,957,238 $ 414,752,221
============ =============== ============ ============== ============ ============= =============
$ 10,359,026 $ 2,099,724,420 $141,694,502 $ 236,340,371 $ 92,428,087 $ 110,185,238 $ 399,451,996
870,086 150,349,803 12,122,940 25,697,597 9,217,915 11,439,832 41,370,616
$ 11.91 $ 13.97 $ 11.69 $ 9.20 $ 10.03 $ 9.63 $ 9.66
$ 2,289,731 $ 10,793,963 $ 1,872,762 $ 7,768,716 $ 7,282,537 $ 2,772,000 $ 15,300,225
192,168 773,878 160,229 844,049 726,613 287,789 1,584,672
$ 11.92 $ 13.95 $ 11.69 $ 9.20 $ 10.02 $ 9.63 $ 9.66
</TABLE>
69
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LAZARD
LAZARD LAZARD LAZARD BANTAM
EQUITY MID CAP SMALL CAP VALUE
PORTFOLIO PORTFOLIO*** PORTFOLIO PORTFOLIO
-------------- -------------- --------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
INCOME:
Interest ...................................................... $ 628,223 $ 67,326 $ 4,685,021 $ 185,729
Dividends ...................................................... 5,521,205 88,511 9,147,768 168,155
----------- ------------ ------------ ------------
Total investment income* ....................................... 6,149,428 155,837 13,832,789 353,884
----------- ------------ ------------ ------------
EXPENSES:
Management fees ................................................ 2,475,417 56,562 8,868,261 418,572
Administration fees .......................................... 110,374 8,536 262,294 55,764
Distribution fees (Open Shares) .............................. 20,313 271 34,481 8,333
Custodian fees ................................................ 101,219 9,596 181,980 54,275
Professional services .......................................... 40,856 3,705 108,906 19,782
Registration fees ............................................. 42,301 16,923 159,882 30,072
Shareholders' services ....................................... 70,151 7,102 93,923 52,055
Directors' fees and expenses ................................. 13,187 503 13,189 13,253
Shareholders' reports .......................................... 14,962 1,710 26,251 3,100
Amortization of organizational expenses ........................ - 7,155 - 5,265
Other ......................................................... 9,316 75 4,365 -
----------- ------------ ------------ ------------
Total expenses before fees waived and expenses reimbursed ...... 2,898,096 112,138 9,753,532 660,471
Management fees waived and expenses reimbursed ............... (11,054) (24,010) (11,502) (56,620)
Administration fees waived .................................... - (7,027) - (6,875)
Expense Reductions ............................................. (3,959) (1,589) (19,204) (947)
----------- ------------ ------------ ------------
Expenses-net ................................................... 2,883,083 79,512 9,722,826 596,029
----------- ------------ ------------ ------------
INVESTMENT INCOME (LOSS)-NET .................................... 3,266,345 76,325 4,109,963 (242,145)
----------- ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY-NET
Realized gain (loss) on:
Investments-net** ............................................. 58,942,717 (1,143) 180,850,768 10,157,779
Foreign currency-net .......................................... - - - -
Net unrealized appreciation (depreciation) during the
period on:
Investments-net ............................................. 9,469,216 1,285,870 111,151,369 3,977,235
Foreign currency-net ....................................... - - - -
----------- ------------ ------------ ------------
Realized and unrealized gain (loss) on investments and
foreign currency-net .......................................... 68,411,933 1,284,727 292,002,137 14,135,014
----------- ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS ................................................... $71,678,278 $ 1,361,052 $296,112,100 $ 13,892,869
=========== ============ ============ ============
* Net of foreign withholding taxes of: ........................ $ 62,448 $ - $ 27,270 $ -
=========== ============ ============ ============
</TABLE>
** Includes net gains of $36,208,012, $1,803,174 and $333,250 from in-kind
redemptions for International Equity Portfolio,
Emerging Markets Portfolio, and Strategic Yield Portfolio, respectively.
*** Commenced operations on November 4, 1997.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
70
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LAZARD LAZARD LAZARD LAZARD LAZARD
GLOBAL INTERNATIONAL INTERNATIONAL EMERGING LAZARD INTERNATIONAL LAZARD
EQUITY EQUITY SMALL CAP MARKETS BOND FIXED-INCOME STRATEGIC
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO YIELD PORTFOLIO
- ------------- ---------------- --------------- ----------------- -------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
$ 25,284 $ 4,289,908 $ 299,857 $ 1,194,145 $5,676,900 $ 6,381,768 $ 27,280,975
216,616 37,348,491 2,282,626 5,038,863 - - -
---------- -------------- ------------ --------------- ---------- --------------- -------------
241,900 41,638,399 2,582,483 6,233,008 5,676,900 6,381,768 27,280,975
---------- -------------- ------------ --------------- ---------- --------------- -------------
87,691 15,062,772 1,061,698 2,418,181 429,720 772,515 2,447,618
46,702 344,848 72,676 92,711 60,977 64,964 109,633
3,093 11,547 2,699 15,357 9,913 3,813 21,224
73,202 2,117,735 271,433 510,303 89,950 174,918 337,994
21,839 144,909 32,167 33,051 27,519 27,989 33,829
25,492 128,777 30,099 77,485 34,781 32,393 89,818
43,929 92,688 68,585 62,572 46,614 58,040 60,665
13,188 13,187 13,188 13,188 13,188 13,188 13,188
2,335 27,572 13,185 12,131 8,753 6,716 11,765
182 - 3,529 4,964 - - -
763 20,240 3,990 7,363 4,419 4,098 6,300
---------- -------------- ------------ --------------- ---------- --------------- -------------
318,416 17,964,275 1,573,249 3,247,306 725,834 1,158,634 3,132,034
(191,945) (16,852) (21,116) (19,725) (21,802) (58,602) (3,456)
- - - - - - -
- - - (24,193) (4,622) - (24,871)
---------- -------------- ------------ --------------- ---------- --------------- -------------
126,471 17,947,423 1,552,133 3,203,388 699,410 1,100,032 3,103,707
---------- -------------- ------------ --------------- ---------- --------------- -------------
115,429 23,690,976 1,030,350 3,029,620 4,977,490 5,281,736 24,177,268
---------- -------------- ------------ --------------- ---------- --------------- -------------
865,485 139,343,149 5,229,314 10,471,206 1,191,253 (2,102,944) (2,468,667)
(9,231) (4,009,467) (431,599) (772,447) - (1,959,459) 7,454,032
651,942 57,642,892 (6,494,067) (56,052,081) 976,970 (6,331,506) (16,713,326)
415 (226,037) (6,027) (46,280) - (598,574) 929,236
---------- -------------- ------------ --------------- ---------- --------------- -------------
1,508,611 192,750,537 (1,702,379) (46,399,602) 2,168,223 (10,992,483) (10,798,725)
---------- -------------- ------------ --------------- ---------- --------------- -------------
$1,624,040 $ 216,441,513 $ (672,029) $ (43,369,982) $7,145,713 $ (5,710,747) $ 13,378,543
========== ============== ============ =============== ========== =============== =============
$ 18,642 $ 5,365,808 $ 299,484 $ 376,777 $ - $ 34,062 $ 116,729
========== ============== ============ =============== ========== =============== =============
</TABLE>
71
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LAZARD EQUITY
PORTFOLIO
----------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1996
---------------- ---------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Investment income (loss)-net .......................................... $ 3,266,345 $ 4,554,663
Realized gain (loss) on investments and foreign currency-net ......... 58,942,717 13,281,290
Unrealized appreciation-net .......................................... 9,469,216 26,925,773
------------- ------------
Net increase in net assets resulting from operations .................. 71,678,278 44,761,726
------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From investment income-net
Institutional Shares ................................................ (3,202,517) (4,528,526)
Open Shares ......................................................... (70,473) -
From realized gains-net
Institutional Shares ................................................ (53,939,994) (16,346,609)
Open Shares ......................................................... (2,267,870) -
In excess of investment income-net
Institutional Shares ................................................ - -
Open Shares ......................................................... - -
In excess of realized gains-net
Institutional Shares ................................................ - -
Open Shares ......................................................... - -
------------- ------------
Net decrease in net assets resulting from distributions ............... (59,480,854) (20,875,135)
------------- ------------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from sales
Institutional Shares ................................................ 90,619,277 119,520,042
Open Shares ......................................................... 30,083,744 -
Net proceeds from reinvestment of distributions
Institutional Shares ................................................ 54,569,340 19,399,464
Open Shares ......................................................... 2,261,137 -
Cost of shares redeemed
Institutional Shares ................................................ (103,551,489) (47,987,766)
Open Shares ......................................................... (8,398,580) -
------------- ------------
Net increase in net assets from capital stock transactions ............ 65,583,429 90,931,740
------------- ------------
Total increase in net assets .......................................... 77,780,853 114,818,331
Net assets at beginning of year ....................................... 278,605,319 163,786,988
------------- ------------
Net assets at end of year* ............................................. $ 356,386,172 $278,605,319
============= ============
SHARES ISSUED AND REPURCHASED:
INSTITUTIONAL SHARES:
Shares outstanding at beginning of year .............................. 14,480,367 9,405,110
------------- ------------
Shares sold ......................................................... 4,234,980 6,564,476
Shares issued to shareholders from reinvestment of distributions ...... 2,733,379 1,026,374
Shares repurchased ................................................... (4,752,864) (2,515,593)
------------- ------------
Net increase ......................................................... 2,215,495 5,075,257
------------- ------------
Shares outstanding at end of year .................................... 16,695,862 14,480,367
============= ============
OPEN SHARES:
Shares outstanding at beginning of period ........................... - -
------------- ------------
Shares sold ......................................................... 1,390,648 -
Shares issued to shareholders from reinvestment of distributions ...... 113,384 -
Shares repurchased ................................................... (362,825) -
------------- ------------
Net increase ......................................................... 1,141,207 -
------------- ------------
Shares outstanding at end of period ................................. 1,141,207 -
============= ============
* Includes undistributed investment Income-net ........................ $ 19,492 $ 26,137
============= ============
** Commenced operations on November 4, 1997.
*** Commenced operations on March 4, 1996.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
72
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LAZARD MID CAP LAZARD SMALL CAP LAZARD BANTAM VALUE
PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------- ------------------------------------- ----------------------------------------
PERIOD ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997** 1997 1996 1997 1996***
- ---------------- ------------------ ---------------- ------------------- ------------------
<S> <C> <C> <C> <C>
$ 76,325 $ 4,109,963 $ 4,976,988 $ (242,145) $ 501,401
(1,143) 180,850,768 80,557,846 10,157,779 2,286,480
1,285,870 111,151,369 101,358,499 3,977,235 3,026,512
- -------------- -------------- ------------- ---------------- ---------------
1,361,052 296,112,100 186,893,333 13,892,869 5,814,393
- -------------- -------------- ------------- ---------------- ---------------
(69,578) (3,427,982) (4,976,988) - (501,401)
(1,235) - - - -
- (188,272,138) (59,176,170) (9,019,744) (1,351,185)
- (5,550,731) - (964,614) -
- - - - -
- - - - -
- - - - -
- - - - -
- -------------- -------------- ------------- ---------------- ---------------
(70,813) (197,250,851) (64,153,158) (9,984,358) (1,852,586)
- -------------- -------------- ------------- ---------------- ---------------
48,808,885 580,429,963 414,195,319 31,919,201 29,848,114
2,003,215 52,536,821 - 10,151,848 -
64,808 179,673,475 61,545,749 8,989,030 1,737,733
809 5,399,865 - 900,973 -
(346,699) (399,682,887) (263,446,823) (10,133,057) (998,307)
(235,768) (7,451,540) - (1,965,892) -
- -------------- -------------- ------------- ---------------- ---------------
50,295,250 410,905,697 212,294,245 39,862,103 30,587,540
- -------------- -------------- ------------- ---------------- ---------------
51,585,489 509,766,946 335,034,420 43,770,614 34,549,347
- 981,405,424 646,371,004 34,549,347 -
- -------------- -------------- ------------- ---------------- ---------------
$ 51,585,489 $1,491,172,370 $ 981,405,424 $ 78,319,961 $ 34,549,347
============== ============== ============= ================ ===============
- 53,230,190 40,536,196 2,746,889 -
- -------------- -------------- ------------- ---------------- ---------------
4,879,588 28,061,127 24,088,616 2,177,512 2,685,157
6,442 9,286,832 3,410,098 647,359 140,707
(34,642) (18,391,783) (14,804,720) (684,504) (78,975)
- -------------- -------------- ------------- ---------------- ---------------
4,851,388 18,956,176 12,693,994 2,140,367 2,746,889
- -------------- -------------- ------------- ---------------- ---------------
4,851,388 72,186,366 53,230,190 4,887,256 2,746,889
============== ============== ============= ================ ===============
- - - - -
- -------------- -------------- ------------- ---------------- ---------------
199,579 2,362,406 - 642,453 -
80 277,559 - 64,441 -
(23,611) (337,601) - (121,374) -
- -------------- -------------- ------------- ---------------- ---------------
176,048 2,302,364 - 585,520 -
- -------------- -------------- ------------- ---------------- ---------------
176,048 2,302,364 - 585,520 -
============== ============== ============= ================ ===============
$ 12,085 $ 681,981 $ - $ - $ -
============== ============== ============= ================ ===============
</TABLE>
73
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LAZARD GLOBAL EQUITY
PORTFOLIO
-------------------------------
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31,
1997 1996**
--------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Investment income-net ...................................................... $ 115,429 $ 88,254
Realized gain on investments and foreign currency-net ........................ 856,254 359,747
Unrealized appreciation (depreciation)-net ................................. 652,357 606,756
------------ ----------
Net increase (decrease) in net assets resulting from operations ...............
1,624,040 1,054,757
------------ ----------
DISTRIBUTIONS TO SHAREHOLDERS:
From investment income-net
Institutional Shares ...................................................... (105,741) (82,372)
Open Shares ............................................................... (13,063) -
From realized gains-net
Institutional Shares ...................................................... (947,173) -
Open Shares ............................................................... (128,664) -
In excess of investment income-net
Institutional Shares ...................................................... (6,344) -
Open Shares ............................................................... (830) -
In excess of realized gains-net
Institutional Shares ...................................................... - -
Open Shares ............................................................... - -
------------ ----------
Net decrease in net assets resulting from distributions ..................... (1,201,815) (82,372)
------------ ----------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from sales
Institutional Shares ...................................................... 2,036,594 9,221,560
Open Shares ............................................................... 2,834,230 -
Net proceeds from reinvestment of distributions
Institutional Shares ...................................................... 1,020,486 75,948
Open Shares ............................................................... 141,752 -
Cost of shares redeemed
Institutional Shares ...................................................... (2,916,057) (485,870)
Open Shares ............................................................... (674,496) -
------------ ----------
Net increase (decrease) in net assets from capital stock transactions ......... 2,442,509 8,811,638
------------ ----------
Total increase in net assets ................................................ 2,864,734 9,784,023
Net assets at beginning of year ............................................. 9,784,023 -
------------ ----------
Net assets at end of year* ................................................... $ 12,648,757 $9,784,023
============ ==========
SHARES ISSUED AND REPURCHASED:
INSTITUTIONAL SHARES:
Shares outstanding at beginning of year .................................... 852,071 -
------------ ----------
Shares sold .................................................................. 173,237 891,432
Shares issued to shareholders from reinvestment of distributions ............ 86,767 6,692
Shares repurchased ......................................................... (241,989) (46,053)
------------ ----------
Net increase (decrease) ...................................................... 18,015 852,071
------------ ----------
Shares outstanding at end of year .......................................... 870,086 852,071
============ ==========
OPEN SHARES:
Shares outstanding at beginning of period .................................... - -
------------ ----------
Shares sold .................................................................. 233,628 -
Shares issued to shareholders from reinvestment of distributions ............ 11,953 -
Shares repurchased ......................................................... (53,413) -
------------ ----------
Net increase ............................................................... 192,168 -
------------ ----------
Shares outstanding at end of period .......................................... 192,168 -
============ ==========
* Includes undistributed (distributions in excess of) investment Income-net $ (30,476) $ (10,696)
============ ==========
** Commenced operations on January 3, 1996.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
74
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LAZARD INTERNATIONAL LAZARD INTERNATIONAL LAZARD EMERGING
EQUITY PORTFOLIO SMALL CAP PORTFOLIO MARKETS PORTFOLIO
- ------------------------------------------ ----------------------------------- --------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996 1997 1996
- ------------------- -------------------- ---------------- ---------------- ------------------ -----------------
<S> <C> <C> <C> <C> <C>
$ 23,690,976 $ 30,155,710 $ 1,030,350 $ 1,941,413 $ 3,029,620 $ 1,378,881
135,333,682 77,886,214 4,797,715 2,550,566 9,698,759 5,813,649
57,416,855 129,031,917 (6,500,094) 12,550,118 (56,098,361) 8,058,764
--------------- ---------------- ------------- ------------- --------------- --------------
216,441,513 237,073,841 (672,029) 17,042,097 (43,369,982) 15,251,294
--------------- ---------------- ------------- ------------- --------------- --------------
(23,615,628) (24,135,758) (779,553) (725,223) (2,195,662) (1,060,033)
(75,348) - (2,605) - (50,943) -
(132,849,456) (77,796,782) (2,420,014) (1,565,580) (12,058,986) (1,656,767)
(407,971) - (20,012) - (403,361) -
(19,997,743) - - - - -
(49,197) - - - - -
- - - - (6,127,590) -
- - - - (163,296) -
--------------- ---------------- ------------- ------------- --------------- --------------
(176,995,343) (101,932,540) (3,222,184) (2,290,803) (20,999,838) (2,716,800)
--------------- ---------------- ------------- ------------- --------------- --------------
540,108,125 724,862,042 33,547,354 27,263,092 224,014,461 102,675,561
14,105,912 - 3,051,529 - 17,560,383 -
165,563,968 97,822,842 2,967,819 2,230,609 16,809,709 2,454,675
496,902 - 21,902 - 582,273 -
(461,972,317) (441,202,464) (17,963,195) (32,806,897) (88,595,351) (7,553,028)
(3,403,545) - (1,136,469) - (7,220,528) -
--------------- ---------------- ------------- ------------- --------------- --------------
254,899,045 381,482,420 20,488,940 (3,313,196) 163,150,947 97,577,208
--------------- ---------------- ------------- ------------- --------------- --------------
294,345,215 516,623,721 16,594,727 11,438,098 98,781,127 110,111,702
1,816,173,168 1,299,549,447 126,972,537 115,534,439 145,327,960 35,216,258
--------------- ---------------- ------------- ------------- --------------- --------------
$ 2,110,518,383 $ 1,816,173,168 $ 143,567,264 $ 126,972,537 $ 244,109,087 $ 145,327,960
=============== ================ ============= ============= =============== ==============
133,302,794 103,988,517 10,640,540 10,986,319 12,969,409 3,812,846
--------------- ---------------- ------------- ------------- --------------- --------------
36,635,849 55,561,307 2,689,836 2,437,042 18,858,547 9,629,141
11,731,335 7,337,457 253,037 191,087 1,776,539 220,357
(31,320,175) (33,584,487) (1,460,473) (2,973,908) (7,906,898) (692,935)
--------------- ---------------- ------------- ------------- --------------- --------------
17,047,009 29,314,277 1,482,400 (345,779) 12,728,188 9,156,563
--------------- ---------------- ------------- ------------- --------------- --------------
150,349,803 133,302,794 12,122,940 10,640,540 25,697,597 12,969,409
=============== ================ ============= ============= =============== ==============
- - - - - -
--------------- ---------------- ------------- ------------- --------------- --------------
967,597 - 251,402 - 1,447,155
35,205 - 1,866 - 62,861 -
(228,924) - (93,039) - (665,967) -
--------------- ---------------- ------------- ------------- --------------- --------------
773,878 - 160,229 - 844,049 -
--------------- ---------------- ------------- ------------- --------------- --------------
773,878 - 160,229 - 844,049 -
=============== ================ ============= ============= =============== ==============
$ (21,193,548) $ (3,305,547) $ (18,014) $ (46,947) $ 48,851 $ (105,600)
=============== ================ ============= ============= =============== ==============
</TABLE>
75
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LAZARD BOND
PORTFOLIO
----------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1996
---------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Investment income-net ...................................................... $ 4,977,490 $ 3,534,432
Realized gain (loss) on investments and foreign currency-net ............... 1,191,253 (361,558)
Unrealized appreciation (depreciation)-net ................................. 976,970 (186,850)
------------- ------------
Net increase (decrease) in net assets resulting from operations ............ 7,145,713 2,986,024
------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From investment income-net
Institutional Shares ...................................................... (4,784,961) (3,534,447)
Open Shares ............................................................... (218,630) -
From realized gains-net
Institutional Shares ...................................................... (622,871) (398,228)
Open Shares ............................................................... (47,549) -
In excess of investment income-net
Institutional Shares ...................................................... (103,346) -
Open Shares ............................................................... (6,061) -
In excess of realized gains-net
Institutional Shares ...................................................... - -
Open Shares ............................................................... - -
From Capital-Net
Institutional Shares ...................................................... - -
Open Shares ............................................................... - -
------------- ------------
Net decrease in net assets resulting from distributions ..................... (5,783,418) (3,932,675)
------------- ------------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from sales
Institutional Shares ...................................................... 30,149,655 37,705,183
Open Shares ............................................................... 7,728,016 -
Net proceeds from reinvestment of distributions
Institutional Shares ...................................................... 5,018,654 3,369,069
Open Shares ............................................................... 248,171 -
Cost of shares redeemed
Institutional Shares ...................................................... (13,915,433) (16,304,852)
Open Shares ............................................................... (786,886) -
------------- ------------
Net increase in net assets from capital stock transactions .................. 28,442,177 24,769,400
------------- ------------
Total increase in net assets ................................................ 29,804,472 23,822,749
Net assets at beginning of year ............................................. 69,906,152 46,083,403
------------- ------------
Net assets at end of year* ................................................... $ 99,710,624 $ 69,906,152
============= ============
SHARES ISSUED AND REPURCHASED:
INSTITUTIONAL SHARES:
Shares outstanding at beginning of year .................................... 7,073,035 4,560,693
------------- ------------
Shares sold ............................................................... 3,039,325 3,820,205
Shares issued to shareholders from reinvestment of distributions ............ 503,472 343,410
Shares repurchased ......................................................... (1,397,917) (1,651,273)
------------- ------------
Net increase ............................................................... 2,144,880 2,512,342
------------- ------------
Shares outstanding at end of year .......................................... 9,217,915 7,073,035
============= ============
OPEN SHARES:
Shares outstanding at beginning of period ................................. - -
------------- ------------
Shares sold ............................................................... 779,924 -
Shares issued to shareholders from reinvestment of distributions ............ 24,775 -
Shares repurchased ......................................................... (78,086) -
------------- ------------
Net increase ............................................................... 726,613 -
------------- ------------
Shares outstanding at end of period ....................................... 726,613 -
============= ============
* Includes undistributed (distributions in excess of) investment Income-net $ (136,318) $ 1,340
============= ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
76
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LAZARD INTERNATIONAL LAZARD STRATEGIC
FIXED-INCOME PORTFOLIO YIELD PORTFOLIO
- ------------------------------------- ----------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996
- ---------------- ------------------ ---------------- ---------------
<S> <C> <C> <C>
$ 5,281,736 $ 3,416,057 $ 24,177,268 $ 9,542,264
(4,062,403) (8,440) 4,985,365 2,908,999
(6,930,080) 581,859 (15,784,090) 3,741,348
- ------------- --------------- ------------- ------------
(5,710,747) 3,989,476 13,378,543 16,192,611
- ------------- --------------- ------------- ------------
(856,065) (2,820,888) (24,262,314) (9,541,005)
(4,392) - (625,698) -
(162,035) (160,803) (1,819,161) -
- - (77,090) -
(561,048) - (2,563,969) -
(8,622) - (73,087) -
(1,193,276) (734,353) - -
(18,323) - - -
(2,677,113) - - -
(41,142) - - -
- ------------- --------------- ------------- ------------
(5,522,016) (3,716,044) (29,421,319) (9,541,005)
- ------------- --------------- ------------- ------------
62,994,956 50,423,517 420,086,629 136,188,901
2,930,820 - 18,214,057 -
4,103,522 2,918,749 22,349,566 8,738,563
57,737 - 692,322 -
(34,229,843) (10,810,163) (226,654,290) (30,970,196)
(97,029) - (2,976,085) -
- ------------- --------------- ------------- ------------
35,760,163 42,532,103 231,712,199 113,957,268
- ------------- --------------- ------------- ------------
24,527,400 42,805,535 215,669,423 120,608,874
88,429,838 45,624,303 199,082,798 78,473,924
- ------------- --------------- ------------- ------------
$ 112,957,238 $ 88,429,838 $ 414,752,221 $199,082,798
============= =============== ============= ============
8,201,037 4,204,312 19,892,579 8,245,403
- ------------- --------------- ------------- ------------
6,263,605 4,741,001 41,987,849 13,957,489
410,505 274,229 2,253,081 896,358
(3,435,315) (1,018,505) (22,762,893) (3,206,671)
- ------------- --------------- ------------- ------------
3,238,795 3,996,725 21,478,037 11,647,176
- ------------- --------------- ------------- ------------
11,439,832 8,201,037 41,370,616 19,892,579
============= =============== ============= ============
- - - -
- ------------- --------------- ------------- ------------
291,721 - 1,813,716 -
5,813 - 70,193 -
(9,745) - (299,237) -
- ------------- --------------- ------------- ------------
287,789 - 1,584,672 -
- ------------- --------------- ------------- ------------
287,789 - 1,584,672 -
============= =============== ============= ============
$ (1,450,070) $ (386,092) $ (574,424) $ (10,914)
============= =============== ============= ============
</TABLE>
77
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME (LOSS) FROM INVESTMENT LESS DISTRIBUTIONS FROM
OPERATIONS: AND IN EXCESS OF:
------------------------------------------- -------------------------
REALIZED AND
NET ASSET VALUE, INVESTMENT UNREALIZED TOTAL FROM
BEGINNING INCOME GAIN (LOSS) ON INVESTMENT INVESTMENT REALIZED
PERIOD OF PERIOD (LOSS)-NET INVESTMENTS-NET OPERATIONS INCOME-NET GAINS-NET
- -------------------------- ------------------ ------------ ----------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
LAZARD EQUITY PORTFOLIO
Institutional Shares
Year ended
12/31/97 ............... $19.24 $0.220 $4.536 $4.756 $(0.220) $(3.796)
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)
Open Shares
Period from
2/5/97* to 12/31/97 ... 20.19 0.126 3.615 3.741 (0.145) (3.796)
LAZARD MID CAP PORTFOLIO
Institutional Shares
Period from
11/4/97* to 12/31/97 ... 10.00 0.017 0.257 0.274 (0.014) -
Open Shares
Period from
11/4/97* to 12/31/97 ... 10.00 0.005 0.266 0.271 (0.011) -
LAZARD SMALL CAP PORTFOLIO
Institutional Shares
Year ended
12/31/97 ............... 18.44 0.071 4.917 4.988 (0.062) (3.346)
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)
Open Shares
Period from
1/30/97* to 12/31/97 ... 18.75 0.004 4.612 4.616 - (3.346)
LAZARD BANTAM VALUE PORTFOLIO
Institutional Shares
Year ended
12/31/97 ............... 12.58 - 4.120 4.120 - (2.380)
3/4/96* to 12/31/96 ... 10.00 0.218 3.108 3.326 (0.218) (0.528)
Open Shares
Period from
1/23/97* to 12/31/97 ... 13.13 - 3.510 3.510 - (2.380)
</TABLE>
See Notes to Financial Highlights on pages 84 and 85.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
78
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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-NET+ INCOME-NET+ RATE RATE** (000'S)
- ------------ ------------ ----------------------- -------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
$19.98 25.1% 0.86%(g),(h) 1.00% 78.27% $0.0580 $ 333,575
19.24 19.9 0.89(e),(f) 1.87 65.80 0.0582 278,605
17.41 37.7 0.92(d) 1.45 80.72 163,787
13.75 4.2 1.05 1.15 66.52 89,105
13.89 18.6 1.05(a) 1.31 63.92 47,123
19.99 18.9 1.22(g) 0.60 78.27 0.0580 22,811
10.26 2.8 1.05(g),(h) 1.02 1.24 0.0476 49,779
10.26 2.7 1.35(g),(h) 0.72 1.24 0.0476 1,806
20.02 28.1 0.82(g) 0.35 55.79 0.0543 1,445,075
18.44 23.9 0.84(e),(f) 0.60 50.58 0.0575 981,405
15.95 21.5 0.84(d) 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
20.02 25.6 1.14(g) 0.12 55.79 0.0543 46,097
14.32 33.9 1.05(g) (0.42) 110.49 0.0541 69,972
12.58 33.3 1.05(e),(f) 2.80 261.60 0.0402 34,549
14.26 27.8 1.35(g) (0.69) 110.49 0.0541 8,348
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
79
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME (LOSS) FROM INVESTMENT LESS DISTRIBUTIONS FROM
OPERATIONS: AND IN EXCESS OF:
------------------------------------------- -------------------------
REALIZED AND
NET ASSET VALUE, INVESTMENT UNREALIZED TOTAL FROM
BEGINNING INCOME GAIN (LOSS) ON INVESTMENT INVESTMENT REALIZED
PERIOD OF PERIOD (LOSS)-NET INVESTMENTS-NET OPERATIONS INCOME-NET GAINS-NET
- ---------------------- ------------------ ------------ ----------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
LAZARD GLOBAL EQUITY PORTFOLIO
Institutional Shares
Year ended
12/31/97 ............ $11.48 $0.135 $1.581 $1.716 $(0.150) $(1.136)
1/3/96* to 12/31/96 10.00 0.085 1.492 1.577 (0.097) -
Open Shares
Period from
1/30/97* to 12/31/97 11.31 0.076 1.779 1.855 (0.109) (1.136)
LAZARD INTERNATIONAL EQUITY PORTFOLIO
Institutional shares
Year ended
12/31/97 ............ 13.62 0.220 1.397 1.617 (0.335) (0.932)
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)
Open Shares
Period from
1/23/97* to 12/31/97 13.29 0.165 1.709 1.874 (0.282) (0.932)
LAZARD INTERNATIONAL SMALL CAP PORTFOLIO
Institutional shares
Year ended
12/31/97 ............ 11.93 0.065 (0.033) 0.032 (0.063) (0.209)
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) -
Open Shares
Period from
2/13/97* to 12/31/97 12.32 0.021 (0.420) (0.399) (0.022) (0.209)
LAZARD EMERGING MARKETS PORTFOLIO
Institutional Shares
Year ended
12/31/97 ............ 11.21 0.103 (1.184) (1.081) (0.093) (0.836)
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) - -
Open Shares
Period from
1/8/97* to 12/31/97 11.45 0.066 (1.415) (1.349) (0.065) (0.836)
</TABLE>
See Notes to Financial Highlights on pages 84 and 85.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
80
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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-NET\^ INCOME-NET\^ RATE RATE** (000'S)
- ------------ ------------ --------------------- -------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
$11.91 15.3% 1.05%(g) 1.02% 64.29% $0.0188 $ 10,359
11.48 15.8 1.05(e),(f) 1.70 73.71 0.0422 9,784
11.92 16.7 1.35(g) 0.67 64.29 0.0188 2,290
13.97 11.8 0.89 1.18 37.48 0.0222 2,099,724
13.62 15.6 0.91(e),(f) 1.93 38.59 0.0219 1,816,173
12.50 13.1 0.95(d) 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
13.95 14.1 1.25(g) 0.37 37.48 0.0222 10,794
11.69 0.3 1.09 0.73 62.97 0.0122 141,695
11.93 15.6 1.12 1.67 100.98 0.0150 126,973
10.52 1.9 1.13(d) 1.56 117.53 115,534
10.38 (4.5) 1.05(b) 0.95 112.92 83,432
10.86 8.7 1.05(a) 1.76 0.84 13,522
11.69 (3.2) 1.43(g) 0.34 62.97 0.0122 1,873
9.20 ( 9.8) 1.32(g),(h) 1.26 39.60 0.0008 236,340
11.21 23.6 1.38(e),(f) 1.40 50.87 0.0042 145,328
9.24 ( 5.9) 1.30(c),(d) 1.22 102.22 35,216
9.86 ( 1.4) 1.30(b) 0.31 30.68 17,025
9.20 (12.0) 1.60(g),(h) 1.01 39.60 0.0008 7,769
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
81
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME (LOSS) FROM INVESTMENT LESS DISTRIBUTIONS FROM
OPERATIONS: AND IN EXCESS OF:
------------------------------------------- ---------------------------------
REALIZED AND
NET ASSET VALUE, INVESTMENT UNREALIZED TOTAL FROM
BEGINNING INCOME GAIN (LOSS) ON INVESTMENT INVESTMENT REALIZED
PERIOD OF PERIOD (LOSS)-NET INVESTMENTS-NET OPERATIONS INCOME-NET GAINS-NET CAPITAL
- ----------------------------- ------------------ ------------ ----------------- ------------ ------------ ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
LAZARD BOND PORTFOLIO
Institutional Shares
Year ended
12/31/97 .................. $9.88 $0.588 $0.232 $0.820 $(0.602) $(0.068) -
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) -
Open Shares
Period from
3/5/97* to 12/31/97 ...... 9.86 0.456 0.239 0.695 (0.467) (0.068) -
LAZARD INTERNATIONAL FIXED-INCOME PORTFOLIO
Institutional Shares
Year ended
12/31/97 .................. 10.78 0.400 (1.045) (0.645) (0.131) (0.126) (0.248)
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) -
Open Shares
Period from
1/8/97* to 12/31/97 ...... 10.64 0.432 (0.984) (0.552) (0.082) (0.116) (0.260)
LAZARD STRATEGIC YIELD PORTFOLIO
Institutional shares
Year ended
12/31/97 .................. 10.01 0.806 (0.274) 0.532 (0.819) (0.063) -
12/31/96 .................. 9.52 0.758 0.498 1.256 (0.766) - -
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) -
Open Shares
Period from
1/23/97* to 12/31/97 ...... 10.08 0.718 (0.345) 0.373 (0.730) (0.063) -
</TABLE>
See Notes to Financial Highlights on pages 84 and 85.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
82
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIOS TO AVERAGE
NET ASSETS
----------------------------------------
NET ASSETS,
NET ASSET PORTFOLIO END OF
VALUE, END TOTAL INVESTMENT TURNOVER PERIOD
OF PERIOD RETURN\^\^ EXPENSES-NET\^ INCOME-NET\^ RATE (000'S)
- ------------ ------------ ----------------------- -------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
$10.03 8.6 % 0.80%(g),(h) 5.81% 446.56% $ 92,428
9.88 4.4 0.80(e),(f) 5.77 460.29 69,906
10.10 16.2 0.80(c),(d) 6.07 244.28 46,083
9.24 (4.2) 0.80(b) 6.11 120.51 24,494
10.28 8.6 0.80(a) 5.22 174.63 13,562
10.02 7.2 1.10(g),(h) 5.46 446.56 7,283
9.63 (5.6) 1.06(g) 5.13 166.09 110,185
10.78 5.5 1.05(e) 5.54 241.85 88,430
10.85 19.4 1.05(c),(d) 5.99 189.97 45,624
10.23 4.2 1.05(b) 5.68 65.90 35,803
10.51 15.7 1.05(a) 5.50 115.84 13,546
9.63 (4.8) 1.35(g) 4.68 166.09 2,772
9.66 5.3 0.94(g),(h) 7.42 161.45 399,452
10.01 13.7 1.08(e),(f) 7.88 188.88 199,083
9.52 13.6 1.09(d) 8.02 205.33 78,474
9.10 (2.3) 1.05(b) 8.03 195.18 62,328
10.13 15.6 1.05(a) 6.36 215.60 34,943
9.66 3.8 1.39(g),(h) 6.92 161.45 15,300
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
83
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
NOTES TO FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
* 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), whose net assets were
acquired by the Small Cap Portfolio.
+ Annualized for periods of less than one year.
++ Total return represents aggregate total return for the periods indicated.
(a) 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, 2.08% ($0.119) for International Fixed-Income Portfolio, 1.76%
($0.101) for Bond Portfolio, 1.63% ($0.058) for Strategic Yield Portfolio,
and 2.87%, annualized, ($0.010) for International Small Cap Portfolio.
(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 1.51% ($0.048) for
International Fixed-Income Portfolio, 1.23% ($0.041) for Bond Portfolio,
1.15% ($0.009) for Strategic Yield Portfolio, 1.26% ($0.016) for
International Small Cap Portfolio, and 2.31%, annualized, ($0.034) for
Emerging Markets Portfolio.
(c) 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.
(d) Includes fees paid indirectly. Excluding fees paid indirectly, the ratio of
expenses to average net assets 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.
(e) 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.
(f) Includes fees paid indirectly. Excluding fees paid indirectly, the ratio of
expenses to average net assets 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.
(g) 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 0.87% ($0.220) for Equity
Portfolio - Institutional, 1.35% ($0.097) for Equity Portfolio - Open,
1.44% ($0.011) for Mid Cap Portfolio - Institutional, 4.97% ($-0.021) for
Mid Cap Portfolio - Open, 0.82% ($0.071) for Small Cap Portfolio -
Institutional, 1.23% ($0.001) for Small Cap Portfolio - Open, 1.14%
($0.000) for Bantam Value Portfolio - Institutional, and 1.88% ($0.000)
for Bantam Value Portfolio - Open, 2.55% ($-0.062) for Global Equity
Portfolio - Institutional, 4.23% ($-0.249) for Global Equity Portfolio -
Open, 1.61% ($0.004) for International Equity Portfolio - Open , 3.39%
($-0.100) for International Small Cap Portfolio - Open, 1.33% ($0.102) for
Emerging Markets Portfolio - Institutional, 1.93% ($0.045) for Emerging
Markets Portfolio - Open, 0.81% ($0.587) for Bond Portfolio -
Institutional, 1.49% ($0.423) for Bond Portfolio - Open, 1.10% ($0.397)
for International Fixed-Income Portfolio - Institutional, 2.71% ($0.306)
for International Fixed-Income Portfolio - Open, 0.95% ($0.805) for
Strategic Yield Portfolio - Institutional, 1.44%
84
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
NOTES TO FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
($0.713) for Strategic Yield Portfolio - Open.
(h) Includes fees paid indirectly. Excluding fees paid indirectly, the ratio of
expenses to average net assets would have been 0.87% for Equity Portfolio
- Institutional, 1.07% for Mid Cap Portfolio - Institutional, 1.37% for
Mid Cap Portfolio - Open, 1.33% for Emerging Markets - Institutional,
1.61% for Emerging Markets Portfolio - Open, 0.81% for Bond Portfolio -
Institutional, 1.11% for Bond Portfolio - Open, 0.95% for Strategic Yield
Portfolio - Institutional, 1.40% for Strategic Yield Portfolio - Open.
85
<PAGE>
- --------------------------------------------------------------------------------
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 is
comprised of thirteen portfolios (each referred to as a "Portfolio"), only
eleven of which are currently being offered, as follows: Lazard Equity
Portfolio, Lazard Mid Cap Portfolio, Lazard Small Cap Portfolio, Lazard Bantam
Value Portfolio, Lazard Global Equity Portfolio, Lazard International Equity
Portfolio, Lazard International Small Cap Portfolio, Lazard Emerging Markets
Portfolio, Lazard Bond Portfolio, Lazard International Fixed-Income Portfolio
and Lazard Strategic Yield Portfolio. Effective November 1, 1996, the Board of
Directors of the Fund approved the offering of two different classes of shares
for the Portfolios - Institutional Shares and Retail ("Open") Shares.
Institutional Shares and Open Shares are identical, except as to minimum
investment requirements and the services offered to and expenses borne by each
class of shares. Please refer to Note 2 for a description of allocation of
income, expenses and gains and losses between the Shares.
Offering of Open Shares commenced as follows: International Fixed-Income
Portfolio and Emerging Markets Portfolio on January 8, 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; Equity Portfolio on February 5, 1997; International Small Cap
Portfolio on February 13, 1997; and Bond Portfolio on March 5, 1997. Offering
of Institutional and Open Shares of the Mid Cap Portfolio commenced on November
4, 1997.
The Equity Portfolio is operated as a "diversified" fund 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--Market values for equity securities listed on the
New York Stock Exchange ("NYSE"), other U.S. exchanges or NASDAQ are based on
the last quoted sales prices on the principal exchange on which the security is
traded as of the close of regular trading on the NYSE (normally 4:00 p.m.
Eastern Time) on each valuation date; securities not traded on the valuation
date are valued at the closing bid price. Any securities not listed for which
current over-the-counter market quotations or bids are readily available are
valued at the last quoted bid price, or, if available, the mean of two such
prices. Securities listed on foreign exchanges are valued at the last quoted
sales price; securities not traded on the valuation date are valued at the
closing bid price. Bonds and other fixed-income securities are valued on the
basis of prices provided by a pricing service which are based primarily on
institutional size trading in similar groups of securities, or using brokers'
quotations. Mortgage-backed securities issued by certain government-related
organizations are valued using pricing services or brokers' quotations based on
a matrix system which considers such factors as other security prices, yields
and maturities. Debt securities maturing in sixty days or less are valued at
amortized cost except where to do so would not accurately reflect their fair
value, in which case such securities are valued at fair value as determined in
good faith in accordance with procedures adopted by the Board of Directors.
Options on stocks and stock indices traded on national securities exchanges are
valued as of the close of options trading on such exchanges (which is currently
4:10 p.m. Eastern Time). Securities for which market quotations are not readily
available are valued at fair value as determined in good faith using methods
approved by the Board of Directors.
86
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
The 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-dividend date. Interest income is accrued daily. The
Portfolios amortize premiums and accrete discounts on fixed income securities.
(C) FOREIGN CURRENCY TRANSLATION AND FORWARD FOREIGN CURRENCY CONTRACTS--The
books and records of the Portfolios are maintained in U.S. dollars. Foreign
currency transactions are translated into U.S. dollars at the rates of exchange
prevailing on the respective dates of such transactions. Assets and liabilities
stated in foreign currency are translated at the exchange rate at the end of
the period. The Portfolios do not isolate the portion of the results of
operations resulting from changes in foreign exchange rates on investments from
the fluctuations arising from changes in their market prices. Such fluctuations
are included in net realized and unrealized gain or loss from investments. Net
realized exchange gains (losses) from foreign currency transactions represent
net foreign exchange gains (losses) from forward foreign currency contracts,
disposition of foreign currencies, currency gains or losses realized between
the trade and settlement dates on securities transactions, and the difference
between the amount of investment income accrued on the Portfolio's books and
the U.S. dollar equivalent amounts actually received. Net unrealized foreign
exchange gains (losses) arise from changes in the value of assets and
liabilities, other than investments in securities, as a result of changes in
exchanges rates.
A forward foreign currency contract is an agreement between two parties to buy
or sell currency at a set price on a future date. Global Equity Portfolio,
International Equity Portfolio, International Small Cap Portfolio, Emerging
Markets Portfolio, International Fixed-Income Portfolio and Strategic Yield
Portfolio (the "Eligible Portfolios" ) may enter into forward foreign currency
contracts for risk management. Risk management includes hedging strategies
which serve to reduce an Eligible Portfolio's exposure to foreign currency
fluctuations. Such exposure may exist during the period that a foreign
denominated investment is held, or during the period between the trade date and
settlement date of an investment which is purchased or sold. These contracts
involve market risk in excess of the unrealized gain or loss reflected in the
Eligible Portfolio's Statement of Assets and Liabilities. The U.S. dollar value
of the currencies the Eligible Portfolio's has committed to buy or sell is
shown in the Portfolio of Investments under the caption "Forward Foreign
Currency Contracts." This amount represents the aggregate exposure to each
currency the Eligible Portfolio has acquired or hedged through currency
contracts at period end. Risks may arise upon entering into these contracts
from the potential inability of counterparties to meet the terms of their
contracts and from unanticipated movements in the value of the foreign currency
relative to the U.S. dollar.
The U.S. dollar value of forward currency contracts is determined using forward
exchange rates provided by a quotation service. Daily fluctuations in the value
of such contracts are recorded as unrealized gains or losses. When the contract
is closed, the Portfolio records a realized gain or loss equal to the
difference between the value at the time it was opened and the value at the
time it was closed. Such gains and losses are disclosed in the realized or
unrealized gain (loss) on foreign currency in the accompanying Statements of
Operations.
87
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
(D) FEDERAL INCOME TAXES--The Fund's policy is to continue to have each
Portfolio qualify as a regulated investment company under the Internal Revenue
Code and to distribute all of its taxable income, including any realized net
capital gains to shareholders. Therefore, no federal income tax provision is
required.
Under current tax law, certain capital and net foreign currency losses realized
after October 31 within the taxable year may be deferred and treated as
occurring on the first day of the following tax year. For the tax year ended
December 31, 1997, the following Portfolios have elected to defer the following
net capital and currency losses arising between November 1, 1997 and December
31, 1997 as follows:
<TABLE>
<CAPTION>
PORTFOLIO AMOUNT
- ---------------------------- -----------
<S> <C>
Mid Cap $ 1,143
Global Equity 1,815
International Equity 358,865
International Small Cap 79,638
Emerging Markets 5,655,681
International Fixed-Income 2,024,637
</TABLE>
(E) DIVIDENDS AND DISTRIBUTIONS--The Fund intends to declare dividends from net
investment income daily on shares of Bond Portfolio, International Fixed-Income
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
Mid Cap Portfolio, Small Cap Portfolio, Bantam Value Portfolio, Global Equity
Portfolio, International Equity Portfolio, International Small Cap Portfolio,
and Emerging Markets Portfolio will be declared and paid annually. During any
particular year, net realized gains from investment transactions in excess of
available capital loss carryforwards would be taxable to the Portfolio if not
distributed. The Portfolios intend to declare and distribute these amounts
annually to shareholders; however, to avoid taxation, a second distribution may
be required. Income dividends and capital gains distributions are determined in
accordance with federal income tax regulations which may differ from generally
accepted accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing treatments of
foreign currency transactions. Book and tax differences relating to shareholder
distributions will result in reclassifications and may affect the allocation
between investment income-net, 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 year ended December 31, 1997:
<TABLE>
<CAPTION>
INCREASE (DECREASE)
------------------------------------------------
UNDISTRIBUTED ACCUMULATED
INVESTMENT REALIZED
INCOME GAIN
PORTFOLIO PAID IN CAPITAL (LOSS)-NET (LOSS)-NET
- ---------------------- ----------------- --------------- --------------
<S> <C> <C> <C>
Mid Cap $ (6,573) $ 6,573 -
Bantam Value (30,103) 242,145 $ (212,042)
Global Equity - 2,987 (2,987)
International Equity - 5,354,545 (5,354,545)
International
Small Cap - (219,259) 219,259
Emerging Markets - (653,859) 653,859
Bond - (2,150) 2,150
International Fixed-
Income (2,718,255) (1,063,977) 3,782,232
Strategic Yield - 1,988,372 (1,988,372)
</TABLE>
(F) ORGANIZATIONAL EXPENSES--Costs incurred by the Fund in connection with its
organization have been deferred and are being amortized on a straight line
basis over a five-year period from the date of commencement of operations of
each Portfolio, with the exception of the initial registration costs for Mid
Cap Portfolio, Bantam Value Portfolio and Global Equity 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
88
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
reimbursed by such holder for any unamortized organizational expenses in the
same proportion as the number of shares redeemed bears to the number of initial
shares held at the time of redemption.
(G) ALLOCATION OF EXPENSES--Expenses not directly chargeable to a specific
Portfolio are allocated primarily on the basis of relative net assets. The
Portfolios will accrue distribution fees and shareholders services fees to the
respective class. Each Portfolio's income, expenses (other than the fees
mentioned above) and realized and unrealized gains and losses are allocated
proportionally each day between the classes based upon the relative net assets
of each class.
(H) EXPENSE REDUCTIONS--Portfolios leaving excess cash in demand deposit
accounts may receive credits which are available to offset custody expenses.
The Statements of Operations report gross custody expenses, and reflect the
amount of such credits as a reduction in total expenses.
(I) STRUCTURED INVESTMENTS--Certain Portfolios may invest in structured
investments whose values are linked either directly or inversely to changes in
foreign currencies, interest rates, commodities, indices, or other underlying
instruments. A Portfolio uses these securities to increase or decrease its
exposure to different underlying instruments and to gain exposure to markets
that might be difficult to invest in through conventional securities.
Structured investments may be more volatile than their underlying instruments,
but any loss is limited to the amount of the original investment.
(J) DELAYED DELIVERY COMMITMENTS--Each Portfolio may purchase or sell securities
on a when-issued or forward commitment basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of the
underlying securities and the date when the securities will be delivered and
paid for are fixed at the time the transaction is negotiated. Collateral
consisting of liquid securities or cash is maintained in an amount at least
equal to these commitments.
(K) ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires the Fund to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of income and
expense during the reporting period. Actual results could differ from those
estimates.
3. INVESTMENT MANAGEMENT AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund has entered into investment management agreements (the "Management
Agreements") with Lazard Asset Management (the "Manager"), a division of Lazard
Freres & Co. LLC, on behalf of each Portfolio. Pursuant to the Management
Agreements, the Manager will regularly provide the Portfolios with investment
research, advice and supervision and furnish continuously an investment program
for each Portfolio consistent with its investment objectives and policies,
including the purchase, retention and disposition of securities. Each of the
Portfolios pays the Manager an investment management fee at the annual rate set
forth below as a percentage of the average daily net assets of the relevant
Portfolio: Equity Portfolio, 0.75%; Mid Cap Portfolio, 0.75%; Small Cap
Portfolio, 0.75%; Bantam Value Portfolio, 0.75%; Global Equity Portfolio,
0.75%; International Equity Portfolio, 0.75%; International Small Cap
Portfolio, 0.75%; Emerging Markets Portfolio, 1.00%; Bond Portfolio, 0.50%;
International Fixed-Income Portfolio, 0.75%; and Strategic Yield Portfolio,
0.75%. The investment management fees are accrued daily and payable monthly.
89
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
The Manager has voluntarily agreed to reduce its fees and, if necessary,
reimburse the following Portfolios if annualized operating expenses exceed the
following percentages of average daily net assets for the respective shares:
<TABLE>
<CAPTION>
INSTITUTIONAL OPEN
SHARES SHARES
ANNUAL ANNUAL
OPERATING OPERATING
PORTFOLIO EXPENSES EXPENSES
- ---------------------------- --------------- ----------
<S> <C> <C>
Equity -% 1.22%
Mid Cap 1.05 1.35
Small Cap - 1.14
Bantam Value 1.05 1.35
Global Equity 1.05 1.35
International Equity - 1.25
International Small Cap - 1.43
Emerging Markets - 1.60
Bond 0.80 1.10
International Fixed-Income - 1.35
Strategic Yield - 1.39
</TABLE>
For the year ended December 31, 1997, the Manager did not impose all or part of
its management fee amounting to $11,054 for Equity Portfolio, $24,010 for the
Mid Cap Portfolio, $11,502 for Small Cap Portfolio, $56,620 for Bantam Value
Portfolio, $87,691 for Global Equity Portfolio, $16,852 for International
Equity Portfolio, $21,116 for International Small Cap Portfolio, $19,725 for
Emerging Markets Portfolio, $21,802 for Bond Portfolio, $58,602 for
International Fixed-Income Portfolio, and $3,456 for Strategic Yield Portfolio.
For the same period the Manager reimbursed expenses amounting to $104,254 for
Global Equity Portfolio.
Effective June 1, 1995, the Fund 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 $7,500
per additional class and 0.02% of average assets up to $1 billion plus 0.01% of
average assets over $1 billion. State Street has agreed to waive the $37,500
fee for the Mid Cap 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 ( the
"Distributor"). As the distributor, Lazard Freres & Co. LLC acts as distributor
for shares of each of the Portfolios and bears the cost of printing and mailing
prospectuses to potential investors and of any advertising expenses incurred in
connection with distribution of shares.
The Distributor provides the Open Shares of each Portfolio with distribution
services pursuant to a separate Distribution Plan ( the "Plan") in accordance
with Rule 12b-1 under the Act. Under the Plan, the Distributor is entitled to
distribution fees from the Open Shares. The distribution fee is an asset-based
fee to support distribution efforts and/or servicing of accounts. The Open
Shares will pay a monthly distribution fee at an annual rate of 0.25% of the
average daily net assets of the Portfolio's Open Shares for such services under
the 12b-1 plan adopted by the Fund. The distribution fee may be retained by the
Distributor if an Open Shares shareholder invests directly through the
Distributor. Usually the fees are paid to external organizations such as 401(k)
alliance sponsors, discount brokers and bank trust departments who distribute
the Fund to the public.
Certain Directors of the Fund are Managing Directors of the Manager. The Fund
pays each director who is not an officer of the Manager or an interested
Director its allocable share of a fixed fee of $20,000 per year, plus $1,000
per meeting attended for the Fund and Lazard Retirement Series, Inc., and
reimburses them for travel and out of pocket expenses.
90
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
4. SECURITIES TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
Purchases and sales of portfolio securities (excluding short-term securities),
for the year ended December 31, 1997 were as follows:
<TABLE>
<CAPTION>
PORTFOLIO PURCHASES SALES
- --------------------- -------------- -------------
<S> <C> <C>
Equity $252,314,934 $246,494,128
Mid Cap 46,356,312 369,927
Small Cap 782,616,054 621,915,203
Bantam Value 87,891,099 58,911,429
Global Equity 8,487,869 7,161,891
International 836,210,511 716,614,753
Equity
International 102,967,644 85,519,584
Small Cap
Emerging 232,777,527 85,937,074
Markets
Bond (1) 409,177,181 381,207,436
International 190,331,412 157,683,269
Fixed-
Income (2)
Strategic Yield (3) 626,416,966 441,666,279
</TABLE>
(1) INCLUDES PURCHASES AND SALES OF U.S. GOVERNMENT SECURITIES OF $345,903,593
AND $339,834,537, RESPECTIVELY.
(2) INCLUDES PURCHASES AND SALES OF U.S. GOVERNMENT SECURITIES OF $3,032,870
AND $778,903, RESPECTIVELY.
(3) INCLUDES PURCHASES AND SALES OF U.S. GOVERNMENT SECURITIES OF $120,419,414
AND $101,160,274, RESPECTIVELY.
For the year ended December 31, 1997, Global Equity Portfolio paid brokerage
commissions of $45 to Lazard Freres & Co. LLC for portfolio transactions
executed on behalf of the Portfolio.
5. 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. During the year ended December 31, 1997, the Fund had no
borrowings under this Agreement.
91
<PAGE>
- --------------------------------------------------------------------------------
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 Mid Cap Portfolio, Lazard Small
Cap Portfolio, Lazard Bantam Value Portfolio, Lazard Global Equity Portfolio,
Lazard International Equity Portfolio, Lazard International Small Cap
Portfolio, Lazard Emerging Markets Portfolio, Lazard Bond Portfolio, Lazard
International Fixed-Income Portfolio and Lazard Strategic Yield Portfolio) as
of December 31, 1997 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. 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.
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, 1997, 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 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, 1997, 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 31, 1998
92
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
- --------------------------------------------------------------------------------
[THIS PAGE LEFT BLANK INTENTIONALLY]
93
<PAGE>
- --------------------------------------------------------------------------------
THE LAZARD FUNDS, INC.
- --------------------------------------------------------------------------------
[THIS PAGE LEFT BLANK INTENTIONALLY]
94
<PAGE>
TAX INFORMATION (UNAUDITED)
THE LAZARD FUNDS, INC.
YEAR ENDED DECEMBER 31, 1997
The following tax information represents year end disclosures of various tax
benefits passed through to shareholders for 1997.
The amount of long term capital gain paid was as follows:
<TABLE>
<CAPTION>
PORTFOLIO AMOUNT
- ----------------------------------- -------------
<S> <C>
Equity $ 35,130,907
Mid Cap 0
Small Cap 140,578,828
Bantam Value 1,497,145
Global Equity 297,628
International Equity 123,783,099
International Small Cap 0
Emerging Markets 5,479,225
Bond 125,617
International Fixed-Income 733,860
Strategic Yield 1,705,437
</TABLE>
Of the distributions made by the following Portfolios, the corresponding
percentage represents the amount of each distribution which will qualify for
the dividends received deduction available to corporate shareholders.
<TABLE>
<CAPTION>
PORTFOLIO PERCENTAGE
- ----------------------------------- -----------
<S> <C>
Equity 100.00%
Mid Cap 84.50%
Small Cap 100.00%
Bantam Value 0.00%
Global Equity 64.40%
International Equity 0.00%
International Small Cap 0.00%
Emerging Markets 0.00%
Bond 0.00%
International Fixed-Income 0.00%
Strategic Yield 2.60%
</TABLE>
The above figures may differ from those cited elsewhere in this report due to
differences in the calculations of income and capital gains for Securities and
Exchange Commission (book) purposes and Internal Revenue Service (tax)
purposes.
95
<PAGE>
THE LAZARD FUNDS, INC.
30 Rockefeller Plaza
New York, New York 10112
TELEPHONE
(800) 823-6300
INVESTMENT MANAGER
Lazard Asset Management
30 Rockefeller Plaza
New York, New York 10112
Telephone: (212) 632-6400
DISTRIBUTOR
Lazard Freres & Co. LLC
30 Rockefeller Plaza
New York, New York 10112
CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Boston Financial Data Services, Inc.
2 Heritage Drive
North Quincy, Massachusetts 02171
Telephone: 1-800-986-3455
INDEPENDENT PUBLIC ACCOUNTANTS
Anchin, Block & Anchin LLP
1375 Broadway
New York, New York 10018
LEGAL COUNSEL
Stroock & Stroock & Lavan LLP
58th Floor
180 Maiden Lane
New York, New York 10038
<PAGE>
LAZARD FUNDS
30 Rockefeller Plaza
58th Floor
New York, New York 10112
Telephone (800) 823-6300
LAZARD FUNDS
ANNUAL REPORT
DECEMBER 31, 1997
This report is for the information of the
stockholders of 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 or prior delivery of the
Fund's current prospectus.
